[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 2012 
_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                              FIRST SESSION
                                ________

     SUBCOMMITTEE ON STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS

                     KAY GRANGER, Texas, Chairwoman
 JERRY LEWIS, California                NITA M. LOWEY, New York
 FRANK R. WOLF, Virginia                JESSE L. JACKSON, Jr., Illinois
 TOM COLE, Oklahoma                     ADAM B. SCHIFF, California
 MARIO DIAZ-BALART, Florida             STEVEN R. ROTHMAN, New Jersey
 CHARLES W. DENT, Pennsylvania
 STEVE AUSTRIA, Ohio 

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
            Anne Marie Chotvacs, Craig Higgins, Alice Hogans,
                    Susan Adams, and Clelia Alvarado,
                            Staff Assistants

                                ________

                                 PART 4
                                                                   Page
 Department of State..............................................    1
 U.S. Agency for International Development........................  303
 FY 2012 Department of Treasury International Programs Budget 
Request...........................................................  441
 United Nations and Other International Organizations.............  539
 FY 2012 Global Health and HIV/AIDS Programs Budget Request.......  617
 Millennium Challenge Corporation.................................  739
 State Department and Foreign Operations Programs Oversight.......  799

                                   S

                                ________

         Printed for the use of the Committee on Appropriations
















PART 4--STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS 
                                FOR 2012
                                                                      
























STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 2012

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                              FIRST SESSION
                                ________
     SUBCOMMITTEE ON STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS
                     KAY GRANGER, Texas, Chairwoman
 JERRY LEWIS, California                NITA M. LOWEY, New York
 FRANK R. WOLF, Virginia                JESSE L. JACKSON, Jr., Illinois
 TOM COLE, Oklahoma                     ADAM B. SCHIFF, California
 MARIO DIAZ-BALART, Florida             STEVEN R. ROTHMAN, New Jersey
 CHARLES W. DENT, Pennsylvania
 STEVE AUSTRIA, Ohio        

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
            Anne Marie Chotvacs, Craig Higgins, Alice Hogans,
                    Susan Adams, and Clelia Alvarado,
                            Staff Assistants

                                ________

                                 PART 4
                                                                   Page
 Department of State..............................................    1
 U.S. Agency for International Development........................  303
 FY 2012 Department of Treasury International Programs Budget 
Request...........................................................  441
 United Nations and Other International Organizations.............  539
 FY 2012 Global Health and HIV/AIDS Programs Budget Request.......  617
 Millennium Challenge Corporation.................................  739
 State Department and Foreign Operations Programs Oversight.......  799

                                   S

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

 72-996                     WASHINGTON : 2012
                                                                      
























                         COMMITTEE ON APPROPRIATIONS
                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\        NORMAN D. DICKS, Washington
 JERRY LEWIS, California \1\          MARCY KAPTUR, Ohio
 FRANK R. WOLF, Virginia              PETER J. VISCLOSKY, Indiana
 JACK KINGSTON, Georgia               NITA M. LOWEY, New York
 RODNEY P. FRELINGHUYSEN, New Jersey  JOSE E. SERRANO, New York
 TOM LATHAM, Iowa                     ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama          JAMES P. MORAN, Virginia
 JO ANN EMERSON, Missouri             JOHN W. OLVER, Massachusetts
 KAY GRANGER, Texas                   ED PASTOR, Arizona
 MICHAEL K. SIMPSON, Idaho            DAVID E. PRICE, North Carolina
 JOHN ABNEY CULBERSON, Texas          MAURICE D. HINCHEY, New York
 ANDER CRENSHAW, Florida              LUCILLE ROYBAL-ALLARD, California
 DENNY REHBERG, Montana               SAM FARR, California
 JOHN R. CARTER, Texas                JESSE L. JACKSON, Jr., Illinois
 RODNEY ALEXANDER, Louisiana          CHAKA FATTAH, Pennsylvania
 KEN CALVERT, California              STEVEN R. ROTHMAN, New Jersey
 JO BONNER, Alabama                   SANFORD D. BISHOP, Jr., Georgia
 STEVEN C. LaTOURETTE, Ohio           BARBARA LEE, California
 TOM COLE, Oklahoma                   ADAM B. SCHIFF, California
 JEFF FLAKE, Arizona                  MICHAEL M. HONDA, California
 MARIO DIAZ-BALART, Florida           BETTY McCOLLUM, Minnesota
 CHARLES W. DENT, Pennsylvania
 STEVE AUSTRIA, Ohio
 CYNTHIA M. LUMMIS, Wyoming
 TOM GRAVES, Georgia
 KEVIN YODER, Kansas
 STEVE WOMACK, Arkansas
 ALAN NUNNELEE, Mississippi
   
 ----------
 1}}Chairman Emeritus    

               William B. Inglee, Clerk and Staff Director

                                  (ii)





















STATE, FOREIGN OPERATIONS, AND RELATED PROGRAMS APPROPRIATIONS FOR 2012

                              ----------                              

                                          Thursday, March 10, 2011.

                        U.S. DEPARTMENT OF STATE

                                WITNESS

HON. HILLARY RODHAM CLINTON, SECRETARY, DEPARTMENT OF STATE
    Ms. Granger. The Subcommittee on State, Foreign Operations, 
and Related Programs will come to order.
    I want to welcome everyone to today's subcommittee hearing.
    Madam Secretary, thank you for appearing today to testify 
on the administration's fiscal year 2012 budget request for the 
State Department and Foreign Assistance Programs. I know last 
week was very busy for you, as are all the weeks, and for this 
Committee, and I am glad that we were able to get this hearing 
back on the schedule today, and I appreciate it very much.
    The issues we will discuss are critically important for 
U.S. national security. Our efforts in Afghanistan, Pakistan, 
and in Iraq must achieve clear objectives and demonstrate 
results. At the same time, we are all anxiously watching the 
rapidly unfolding events in the Middle East and North Africa. 
We must support efforts for reform in this region. Continued 
investments in democracy promotion and military assistance will 
be critical to maintaining peace in a very difficult 
environment.
    In our own hemisphere, drugs and human trafficking remain 
grave concerns. Powerful cartels continue to push narcotics 
through South and Central America into Mexico, bringing 
violence to our own backyard. In my home State of Texas, the 
violence in Mexico is spilling across the border. We must take 
action now.
    Even with all these serious issues we are facing around the 
world, as Admiral Mullen said so well, our debt is the greatest 
threat to our national security. So we must make difficult 
choices today in order to protect the most critical diplomatic 
and development funding for the future. While it won't be easy, 
the administration and the Congress must work together to make 
wise decisions to lead this country forward and to insulate us 
from future threats.
    The State-Foreign Operations bill supports critical 
national security interests, but we can not continue to spend 
like we have in the past. I want to be clear that I remain 
committed to protecting our national security with investments 
abroad while giving appropriate attention to our economic 
recovery here at home.
    While this Congress and the administration still have a 
great deal of work to do, the State-Foreign Operations portion 
of H.R. 1--the continuing resolution passed by the House a few 
weeks ago--was a first attempt to achieve the right balance. 
This bill prioritized the frontline states of Afghanistan, 
Pakistan, and Iraq, and key allies like Israel and Jordan. At 
the same time, H.R. 1 made significant cuts to programs we 
simply can not afford. Plans to increase State and USAID staff, 
support large multi-year commitments, and boost lending by 
international banks must be reconsidered.
    The hearing today is the subcommittee's first chance to 
hear how the administration has prioritized its needs for 
fiscal year 2012. The budget request totals $59.5 billion for 
the State-Foreign Operations Subcommittee, which is almost $11 
billion above the fiscal year 2010 enacted level. This funding 
level does include for the first time a separate account for 
the extraordinary cost of operating in the frontline states.
    I would like to highlight several areas of the budget 
request that deserve the subcommittee's attention.
    The request for Iraq is billions of dollars more than the 
State Department and USAID spent in fiscal year 2010, but this 
is significantly less than the cost of keeping troops on the 
ground, and we recognize that. As the State Department prepares 
to become the lead agency in Iraq on October first, serious 
questions remain about State's capability to manage a program 
of this size and ensure the security of diplomatic and 
development staff.
    In Afghanistan, the administration continues to focus on 
providing direct assistance to the government. The subcommittee 
will continue to watch this closely. We will also be following 
how the administration monitors and evaluates projects, because 
clear goals must be achieved so that the civilian effort 
complements the military activity. It is only through an 
integrated strategy that we will ensure that terrorists do not 
have safe havens to plan attacks on the United States.
    I am concerned about security changes by the Government of 
Afghanistan that could make the operating environment even more 
difficult for U.S. Government employees and contractors. A 
reasonable agreement must be reached so that there is a 
successful transition to Afghan security forces, but 
counterinsurgency and development goals can not be put in 
jeopardy.
    In Pakistan, the United States continues to demonstrate its 
commitment to an enduring strategic partnership focused on 
economic, military, and police assistance to help root out 
extremists and support other critical investments.
    For our ally Israel, this budget includes more than $3 
billion to help maintain a strong military in an increasingly 
volatile region.
    While the budget proposal does not include planned 
reductions for Colombia and Mexico, there is a continued focus 
on these countries and their neighbors. The subcommittee needs 
to hear more about how the funding requested will sustain gains 
made in Colombia over the last decade and will help Mexico 
build the institutions it needs to forge a lasting front 
against the cartels.
    In closing, I want to thank the men and women of this 
country who are serving overseas, especially those placed in 
the most difficult circumstances. I also want to thank 
Secretary Clinton for her dedicated service to this Nation.
    I believe that, working together, we can maintain an 
effective and efficient diplomatic and development capability 
in key areas around the world. But justifying the total funding 
levels proposed in this budget simply will not be possible.
    I hope today will be the first of many conversations to 
determine how the United States can remain a leader in the 
world through a period of extraordinary political crisis and, 
at the same time, emerge quickly from our economic turmoil.
    In a moment, I would like to turn to the esteemed ranking 
member, Mrs. Nita Lowey, for her opening statement. After that, 
I will turn to Chairman Rogers and Ranking Member Dicks, if 
they have opening statements. Then I will call on Members based 
on seniority and who was in attendance when the hearing was 
called to order. I will alternate between majority and 
minority, and ask that each Member keep their questions to 
within 5 minutes. If the time permits, we will have a second 
round of questions. And we have a light in front of the 
Secretary.
    I will now turn to Mrs. Lowey for her opening remarks.

                     Opening Remarks of Mrs. Lowey

    Mrs. Lowey. Thank you.
    And I join Chairwoman Granger in welcoming you back to our 
subcommittee, Secretary Clinton. As always, it is an honor, it 
is a privilege. We thank you for your extraordinarily strong 
leadership. Your steady hand and effective representation of 
the United States of America never ceases to impress and amaze 
me, especially during crises like those we face throughout 
Northern Africa and the Middle East. We thank you.
    In this time of fiscal belt-tightening, it is important 
that we not lose sight of the fact that diplomacy and 
development are crucial to promoting stability, improving 
economies, and sustaining peace. These investments help prevent 
threats to our national security and cost far less in lives and 
treasure than the deployment of troops. We cannot let our 
current fiscal crisis create a future security crisis by 
cutting these invaluable programs.
    That is why I am particularly pleased the President 
requested $27 billion to support global development in fiscal 
year 2012. Assistance for addressing global climate change, 
food security, and health challenges helps create the 
conditions in developing countries for the growth of democracy, 
economic expansion, and, ultimately, increased stability.
    In addition, this budget request would advance our security 
imperatives by bolstering counter-drug and anti-crime programs; 
combatting transnational crime, terrorism, and the 
proliferation of weapons of mass destruction; strengthening our 
allies, including Israel, Jordan, and Egypt; and providing 
assistance to prevent conflicts in volatile regions.
    Humanitarian assistance for victims of natural disasters 
and conflict and aid to refugees and the internally displaced 
will encourage stability in vulnerable regions while meeting 
our moral obligations to help those most in need.
    However, I am troubled that this request does not 
prioritize basic education, an issue that I believe is crucial 
to the success of our efforts to promote health, economic 
development, gender equality, and long-term security.
    Over the last 10 years, I have worked to increase funding 
for basic education programs, and, over that time, we have made 
significant progress. For example, in sub-Saharan Africa, 
enrollment in primary school has increased over 50 percent. 
However, despite our successes, more than 70 million children 
remain out of school. I hope you will commit to me today to 
prioritize our efforts in support of attaining universal 
primary education for all children by 2015.
    By the way, at the amazing event that you hosted at the 
State Department in honor of International Women's Day, I was 
particularly pleased that Prime Minister of Australia Julia 
Gillard emphasized the importance of education. I do hope we 
can continue to work together, particularly focusing on girls' 
education, which is a major obstacle in so many parts of the 
world.
    Now, we know that the current fiscal situation demands 
tough decisions and this request reflects a thoughtful analysis 
of where cuts can be absorbed. I appreciate the care the 
administration took to provide Congress with a realistic 
request.
    However, we know from last week's debate on the continuing 
resolution that several programs that you have included in your 
request are going to be subject to reductions in the House. One 
area of particular concern to me is the drastic cut to 
international family planning that was accompanied by divisive 
policy changes, such as a reinstatement of the global gag rule. 
I hope that you can address what these cuts and policy changes 
would mean to the millions of women and families who depend on 
these programs, many for their basic health.
    Finally, we welcome your thoughts on the effect the 
revolutions in Tunisia and Egypt, the unrest in Libya, Yemen, 
Algeria, Bahrain, Oman, and Jordan, and the new Government in 
Lebanon will have on both our foreign policy and our aid to the 
region.
    I smile not because of the seriousness of the situation but 
the enormous challenges that you are dealing with so 
effectively. And for that we are so grateful and so very 
appreciative, Madam Secretary.
    Thank you.
    Ms. Granger. Thank you.
    Mr. Rogers, do you have any opening remarks you would like 
to make?

                   Opening Remarks of Chairman Rogers

    Mr. Rogers. Yes. Thank you, Madam Chairwoman, for the time.
    Madam Secretary, welcome to the old haunt here on the Hill. 
We are glad to have you back here. We appreciate your service.
    And I apologize to you. We have been playing phone tag 
about getting together for a breakfast meeting. And I assure 
you that is on my list.
    We want to thank you for being here today. This is truly a 
historic time for the Congress, the Nation and, indeed, the 
world. I don't have to tell you that we, I think, are at a 
crossroads here at home.
    Over the last two years, we have increased discretionary 
spending by 24 percent, including the stimulus, funding has 
increased by 84 percent--clearly unsustainable. Since 2008, 
base appropriations for State-Foreign Operations Subcommittee 
has grown by more than 33 percent. We are borrowing 40 cents on 
the dollar that we spend. And it is time that we get serious 
about reducing spending and putting a dent in our record-
setting deficit.
    It is difficult to believe that the Administration shares 
my goal to cut spending when the FY2012 State-Foreign 
Operations request of $59.5 billion is an increase of more than 
22 percent above the FY2010 bill. Even if FY2010 supplementals 
are included, the budget still represents an 8 percent 
increase.
    While I share the chairwoman's interest in supporting 
national security priorities, we simply cannot sustain the 
level of spending in this bill. We have some tough choices 
ahead for us and for you. And I look forward to hearing from 
you today about the administration's priorities, especially 
where we might be able to squeeze some spending out of the 
request. I appreciate your thoughts.
    Ms. Granger. Thank you.
    Mr. Dicks, do you have opening remarks you would like to 
make?

                      Opening Remarks of Mr. Dicks

    Mr. Dicks. Thank you.
    Secretary Clinton, I want to join with Chairwoman Granger 
and Ranking Member Lowey and welcome you today.
    Along with Defense, the State Department and USAID are 
critical components of the U.S. National Security Strategy and 
essential to making Americans safe at home and abroad. I have 
appreciated the great cooperation you and Secretary Gates have 
demonstrated to the country and to the world. That is quite 
important and somewhat unusual.
    With this budget request, the administration seeks 
diplomacy and development funding levels that will result in 
longer-term savings as we continue to transition from the 
military to civilian responsibility in Iraq and support 
counterinsurgency and stabilization programs in countries like 
Afghanistan, Pakistan, Yemen, Somalia, and Sudan.
    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 the 
unemployment rate dropping to 8.9 percent, the growing Federal 
deficit and budget deficit, the creation of jobs, and provision 
of 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. Yet, through our appropriations 
process, I am still optimistic we can balance our domestic and 
international priorities.
    But if we are to increase our assistance in these 
challenging economic times, we must ensure every dollar is 
well-spent. Our investments in diplomacy and development 
continue to yield great dividends over time, because, as we all 
know, diplomacy and development cost far less in life and 
treasure than deploying our troops and are more effective 
methods of sustaining lasting peace and stability.
    Stable democracies and prosperous communities are less 
likely to pose a threat to their neighbors or to us. With this 
in mind, Madam Secretary, I am pleased that the administration 
seeks to invest in our future by funding such critical 
activities as combatting global climate change, food security, 
and global health, which are clearly aimed at creating the 
necessary conditions in developing countries for the growth of 
democracy, economic expansion, and, ultimately, increased 
stability. These are priorities we all share.
    So I look forward to your statement. I look forward to 
hearing a little bit about how things are going in this 
transition in Iraq, where the State Department is expanding its 
operations and the Defense Department is bringing down its 
operations. I think this is a very critical moment.
    Thank you, Madam Chair.
    Ms. Granger. Madam Secretary, please feel free to summarize 
your remarks. And, without objection, your full statement will 
be submitted for the record.

                 Opening Statement of Secretary Clinton

    Secretary Clinton. Thank you very much.
    And I want to congratulate the chairwoman upon assuming 
this important post at such a critical moment in world history, 
not just American history. And I want to recognize and thank 
not only the ranking member, Congresswoman Lowey, but my 
congresswoman. So I am delighted to be here--and Chairman 
Rogers and Ranking Member Dicks, and all the members of the 
subcommittee.
    I want to say a few words about these remarkable changes 
occurring across the Middle East. Yes, it is exciting, and it 
also presents very significant challenges to America's 
position, to our security, and to our long-term interests.
    Next week, I will travel to Cairo and Tunis to speak 
directly with the Egyptian and Tunisian people. I will be 
meeting with their transitional leaders. And I intend to convey 
the strong support of the Obama Administration and the American 
people, that we wish to be a partner in the important work that 
lies ahead as they embark on a transition to a genuine 
democracy.
    We know how difficult that will be. This is the kind of 
challenge that we have seen in other parts of the world. Some 
countries, such as most of those in the former Soviet Union and 
Eastern and Central Europe, navigated those challenges 
successfully. Others have not. We have an enormous stake in 
ensuring that Egypt and Tunisia provide models for the kind of 
democracy that we want to see.
    Now, in Libya, at the same time, a dictator is denying his 
people that same path forward. And we are standing with the 
Libyan people as they brave bombs and bullets to demand that 
Qadhafi must go now without further violence or delay.
    Our diplomats are hard at work with our allies and 
partners, including in the United Nations, NATO, the African 
Union, the Arab League, the Gulf Cooperation Council, to 
isolate, sanction, and pressure Qadhafi to stop the violence 
against his own people and to send a clear message to those 
around Qadhafi who continue to enable this horrific attack on 
his own people that they, too, will be held accountable if they 
commit crimes against the Libyan people.
    We remain engaged with the Libyan Sanctions Committee at 
the United Nations to consider tougher measures as the 
situation develops. And we are reaching out to the opposition 
inside and outside of Libya. I will be meeting with some of 
those figures, both here in the United States and when I travel 
next week, to discuss what more the United States and others 
can do.
    Now, the United States, through the State Department and 
USAID, are already providing food, shelter, water, medical 
supplies, and evacuation assistance to those who are fleeing 
the violence. We have dispatched expert humanitarian teams to 
assess the needs on the borders, and we stand ready to expand 
those efforts.
    The military has positioned assets to support these 
critical humanitarian missions. And the United States military, 
I am very proud to say, has airlifted home hundreds of Egyptian 
migrants--it may be in the thousands by now--who fled from 
Libya into Tunisia. This was a direct request from the Egyptian 
Government through the Supreme Council of the Armed Forces.
    We are considering all of our options. In the years ahead, 
we know that Libya could become a stable, peaceful society on 
the way to a democracy or it could fall into chaos and 
violence. The stakes are so high, not only, although primarily, 
for the Libyan people, but for the rest of the world.
    And this is an unfolding example of how we are using the 
combined assets of diplomacy, development, and defense to 
protect our interests and advance our values. This integrated 
approach is not just how we respond to crises; it is the most 
effective and cost-effective way to sustain and advance our 
security. And it is only possible with a budget that supports 
all the tools in our national security arsenal.
    Now, I want to join my voice to those who, like the 
chairwoman, have made it very clear that the American people 
have a right to be justifiably concerned about our national 
debt. I am, too. But I know that we have so many tough 
decisions that we are facing right now that the American people 
also want us to be smart about the decisions we make and the 
investments that we are making in the future.
    Just 2 years ago, I asked that we renew our investment in 
development and diplomacy, and we are seeing tangible results: 
In Iraq, almost 100,000 of our troops have come home, and 
civilians are poised to keep the peace. In Afghanistan, 
integrated military and civilian surges have helped set the 
stage for our diplomatic surge to support Afghan-led 
reconciliation that can end the conflict and put al Qaeda on 
the run. We have imposed, with your very strong support, the 
strongest sanctions yet to reign in Iran's nuclear ambitions. 
We have reengaged as a leader in the Pacific and in our own 
hemisphere. We have signed trade deals to promote American jobs 
and nuclear-weapons treaties to protect our people. We worked 
with northern and southern Sudanese to achieve a peaceful 
referendum and prevent a return to civil war. And we are 
working to open societies and to create economies that will 
have political support to have irreversible democratic 
transitions.
    Now, the progress is significant, but the work is 
formidable that lies ahead. The fiscal year 2012 budget is a 
budget that will allow us to continue pressing forward.
    We think it is a lean budget for lean times. I launched the 
first-ever Quadrennial Diplomacy and Development Review to help 
us maximize the impact of every dollar. We scrubbed this 
budget. We made painful but responsible cuts. We cut economic 
assistance to Central and Eastern Europe, to the Caucasus, to 
Central Asia. We cut development assistance to over 20 
countries by more than half.
    This year, for the first time, our request is divided into 
two parts. Our core budget request is $47 billion for the State 
Department and USAID. That supports programs and partnerships 
in every country but North Korea, and it is essentially flat 
from 2010 levels.
    The second part of our request funds the extraordinary 
temporary portion of our war effort the same way the Pentagon's 
request is funded, in a separate overseas contingency 
operations account, known as OCO. Instead of covering war 
expenses through supplemental appropriations, we are now taking 
a more transparent approach that fully reflects the integrated 
civilian-military efforts.
    Our share of the President's $126 billion request for 
exceptional wartime costs is $8.7 billion. So, all told, we 
have a $47 billion operational account and an $8.7 billion 
overseas contingency operations account.
    Now, the 150 account, as a whole, that was referred to by 
Mr. Lewis, is $59.5 billion. Well, that is both Treasury, MCC, 
and all the other foreign aid accounts that I know that you are 
also paying attention to.
    But let me just quickly walk you through this. Because on 
this issue of our $8.7 billion overseas contingency operations, 
we have the strongest support from Secretary Gates, from 
Admiral Mullen. And next week--I was speaking with General 
Petraeus last night--he will be here on the Hill strongly 
supporting the civilian effort that goes hand-in-hand with what 
he is doing so heroically in Afghanistan.
    So we are funding vital civilian missions in Afghanistan, 
Pakistan, and Iraq with this $8.7 billion. We do have al Qaeda 
under pressure as never before. The military surge and our 
civilian surge--because when I became Secretary of State, we 
had 300 civilians in Afghanistan, and most of them were on 6-
month rotations. We were not doing our part to be a good 
partner to our military colleagues. We now have nearly 1,200 
civilians, and they are there day-in and day-out, and they are 
in some of the roughest terrain you can find anywhere. Our 
military commanders literally tell me every week that we cannot 
succeed without a strong civilian partner for our military 
efforts.
    Equally important is our assistance to Pakistan. As the 
chairwoman said, we are trying to deepen our relationship. 
There are many challenges confronting us, but we know what 
happens when we walk away from Pakistan. We did it before, and 
the results, unfortunately, were quite dire for us.
    And after so much sacrifice in Iraq, we have a chance now 
to help the Iraqi people build a stable, democratic country in 
the heart of the Middle East. Now, while we are hoping what 
happens in Egypt and Tunisia will be positive, we already have 
held elections twice in Iraq. We have a government; took a 
while to get set up, not as long as, I would add, that it has 
taken the Belgians to have a government, but it finally got set 
up. And now we have to be there with support.
    This budget also saves us money, if you look at it, because 
the military's total OCO request--and I know that Congressman 
Dicks is well-acquainted with this--worldwide will drop $45 
billion from 2010. Our costs on the civilian side will increase 
by less than $4 billion. Now, we think that is a good return on 
the investment of blood and treasure that this country has 
already made.
    Secondly, even as our civilians bring today's wars to a 
close, we are working as hard as we can to prevent tomorrow's. 
We devote $4 billion in this budget to sustaining a strong U.S. 
presence in volatile places.
    In Yemen, the headquarters of al Qaeda in the Arabian 
Peninsula, we are working to provide security, development, and 
humanitarian assistance. We are focused on the same goals in 
Somalia, the home of al-Shabaab. We are helping the northern 
and southern Sudanese chart a peaceful future. We are helping 
Haiti rebuild.
    And we propose a new global security contingency fund that 
would pool resources, for the first time, with the Defense 
Department, to have that expertise and cooperation to respond 
quickly to challenges.
    We also strengthen our allies and partners. We are training 
Mexican police to take on the violent cartels and secure our 
southern border. We provide nearly $3.1 billion for Israel. We 
support Jordan and the Palestinians. We help Egypt and Tunisia. 
We are providing security assistance to over 130 nations.
    And I would just say that we have gotten our money's worth. 
The support we have given to the Egyptian military over 30 
years made it possible for us to have an open line of 
communication between our military leadership and the Egyptian 
military leadership. And having trained a generation of 
Egyptian officers, we saw them refusing to fire on their own 
people under tremendous pressure.
    Third, we are making investments in human security, 
focusing on hunger, disease, climate change, humanitarian 
emergencies.
    Our largest investment is in global health programs, 
including those launched by President George W. Bush. These 
programs not only stabilize societies devastated by HIV, 
malaria, tuberculosis, and other illnesses, they save the lives 
of mothers and children and halt the spread of deadly disease 
toward our own country.
    Global food prices are approaching an all-time high. Three 
years ago, this led to protests and riots. We have worked now 
very closely with our agricultural experts to come up with 
proposals that will actually over time move people from being 
food recipients to food producers. And we do believe that 
strengthening countries against droughts, floods, and other 
weather disasters, promoting clean energy, and preserving 
tropical forests helps us with our own security and our own 
challenges here at home.
    Fourth, we are committed to making our foreign policy a 
force for domestic economic renewal. We work very hard on this, 
to bring jobs back to the United States, to create more 
economic growth here at home.
    To give you one example, the 8 Open Skies agreements we 
have signed over the last 2 years will open dozens of new 
markets to American carriers overseas. The Dallas-Fort Worth 
airport, Madam Chairman, which already supports 300,000 jobs, 
will see billions of dollars in new business. And I know that 
Chairwoman Granger calls that the economic engine of north 
Texas.
    Fifth and finally, this budget funds the people and 
platforms that make possible everything I have described. We 
have diplomatic relations with 190 countries. Having served in 
the Senate for 8 years, I know what it is like to get a phone 
call when an American citizen somewhere is in trouble in one of 
those 190 countries. And I know what it is like to be told, as 
Secretary of State, that somebody is in trouble in a country 
where we don't have adequate diplomatic relations. We have 
political officers defusing crises, development officers 
expanding opportunity, and economic officers working to make 
deals for American business.
    Several of you have asked the Department about the safety 
of your constituents in the Middle East. Well, this budget 
helps fund the consular officers, who evacuated over 2,600 
Americans from Egypt and Libya, nearly 17,000 from Haiti after 
the earthquake, they issued 14 million passports. They are the 
first line of defense against would-be terrorists seeking visas 
to enter our country.
    Now, I know that 2011 is a tough time. And I sent Chairman 
Rogers a letter; I have spoken to Speaker Boehner. It will be 
very difficult for us, as we are now planning our civilian 
efforts in an ongoing way in Iraq, Afghanistan, and Pakistan, 
to absorb a 16 percent cut that passed the House last month.
    We have to do our part with the military. And I know that 
what is often the case is we talk about nondefense 
discretionary. And, of course, that leaves out State and USAID. 
It includes the Department of Homeland Security, it includes 
Veterans, and includes Defense.
    But here we are. I have diplomats and development experts 
in Helmand province. I have them going in with the Marines into 
Kandahar. I have them trying to figure out how we are going to 
have a strong, robust presence in Iraq to stand against Iran 
and to support that Iraqi Government. We cannot plan what we 
are expected to do if we can't get the budget for 2011 that we 
have premised the planning on.
    Now, finally, I know how tough these decisions are. I was 
here in the 1990s, not in this capacity, and I saw the 
difficult decisions we made then, which put us on a path to 
having balanced budgets, surpluses, and, frankly, being on the 
road to actually balancing our budget. 9/11 happened, a lot of 
other things happened in the following years. We are trying to 
get ourselves back on a strong fiscal footing. Unfortunately, 
the world hasn't stopped while we do that.
    And so, as I look at the challenges for global leadership 
from the United States, I know we are tempted to try to step 
back from these obligations, but every time we have done that, 
it has come back and hit us right square between the eyes. We 
left Afghanistan after we pushed the Soviet Union out, and now 
we are paying a terrible price for that. Generations of 
Americans have grown up successful and safe because we have 
stepped up.
    We think that in the world today we have more than we can 
say grace over, but we are positioned to try to deal with it. 
And we cannot do it unless we remember that our national 
security depends not just on defense but on diplomacy and 
development, working together, unlike anything we have done 
historically, today to really deliver on America's security, 
our interests, and our values.
    Thank you.
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    Ms. Granger. Thank you, Madam Secretary.
    We will begin the questions now. I will start. We will have 
5 minutes each. Again, there is a light in front, and when it 
turns yellow, it means you have 1 minute.
    Madam Secretary, the fiscal year 2012 budget request 
includes funding for a number of global commitments the 
administration has made over just the past 2 years: a pledge 
for $3.5 million for agriculture over 3 years made at the G-8 
summit in Italy; multibillion-dollar commitments for climate 
change programs at the Copenhagen summit; almost $2 billion to 
fund capital increases at the multilateral development banks; 
and, most recently, a $4 billion pledge over 3 years to the 
Global Fund to Fight AIDS, TB, and Malaria. That is over $10 
billion in 2 years only.
    In the times we have talked, you and I both, and the 
members of this subcommittee, have talked about the high 
deficits and tight budgets. My hope is the administration will 
stop making these large new multiyear commitments, but the 
commitments I just named have already been made.
    I would ask you, in your judgment, how would you suggest 
that the subcommittee go about prioritizing those commitments?
    Secretary Clinton. That is a very fair question, and I 
would answer it in the following ways.
    First, if you take our health initiative, which is building 
on what I saw as very good work that I supported as a Senator 
in the PEPFAR initiative from President Bush, that initiative 
has given us credibility and a very positive image in many 
parts of the world, particularly in sub-Saharan Africa, that we 
believe is right down the line with what we need to be doing. 
So, on the health initiative, I would hope we would continue to 
support it strongly. We have the infrastructure in place, and 
we are really viewed very favorably there.
    On the agriculture initiative, what we did was to look at 
all the money we were paying in emergency food, most of it on a 
supplemental. You know, it would be constantly tacked on 
because people were starving and the American people are 
generous and this Congress was responsive. We looked at that 
and we said, if we got smarter about how we taught people how 
to farm, how we brought our own agricultural experts back--
because we used to do that. In the 1960s, the 1970s, and the 
1980s, our aid went to helping people actually produce their 
own food better, and then we shifted to emergency. We think 
this is a good investment that will actually lower the costs 
going forward.
    On climate change, I will give you one quick example. We 
have very strong allies in the Pacific island nations. They 
vote with us in the United Nations. They are some of our 
strongest supporters. China is making a very big pitch toward 
them. What we hear constantly is they need help dealing with 
climate change because they are actually seeing the results; 
they are having to evacuate their islands. We have a lot of 
good that we can get in our relations with a lot of these small 
nations around the world by investing, as we have in this 
budget, in trying to help them mitigate the climate change 
issue.
    So we are not just coming to say these are nice things to 
do, but we think that they fit into our overall strategy of 
keeping our friends, building more friends and stronger 
relationships that will benefit us in the future.
    Ms. Granger. Thank you. You did not prioritize, but you 
gave a very good lobbying effort for those programs. So I will 
ask you again if you will reply in writing.
    I have some time left. The committee, you know, of course, 
has supported Mexico----
    Secretary Clinton. Yes.
    Ms. Granger [continuing]. In the fight against drug 
violence. The appropriations have exceeded the $1.4 billion 
pledged for Merida. I was encouraged last week--I am sure we 
all were--with President Calderon and President Obama, but the 
violence continues.
    Last year, GAO found that performance measures for the 
Merida Initiative were lacking, and it was difficult to 
determine if efforts to stem drug violence had been successful. 
I wrote to you in July asking you to devote your attention to 
this issue. The response from the Department stated the 
Government of Mexico will be a close partner in the process. 
But, Madam Secretary, 5 months have passed since that response, 
and the GAO testified before this subcommittee last week that 
it will be at least another 4 months before we have better 
information on performance measures.
    As we put our funding together, we will say ``What works, 
and how can we prove that it works?'' And these programs are 
far too important to fund blindly. What can you tell us about 
the progress that is being made, what new goals will be set as 
efforts are expanded in Mexico, and how long will it take to 
develop these performance measures?
    Secretary Clinton. Well, we are in the midst of that, and I 
share your commitment to doing it. We have learned a lot from 
Plan Colombia. We are applying a lot of those lessons. We have 
tried to be careful about putting money out until we could hold 
Mexican Government agencies accountable, which we are 
attempting to do.
    And I will provide you with a complete report about that. 
And I so appreciate your support for this because I happen to 
think it is one of our most important national security 
challenges.
    Ms. Granger. Thank you.
    Mrs. Lowey.
    Mrs. Lowey. Thank you.
    Madam Secretary, earlier this week, the Washington Post 
reported that there has been a shift in the U.S. Strategy in 
Afghanistan and USAID will no longer be focusing on gender 
issues. The article reported that USAID has removed goals for 
promotion of women's rights from the requirements for a $140 
million land reform project and from a $600 million municipal 
government reform project. The Post quotes senior officials 
saying, and I quote, ``Gender issues are going to have to take 
a backseat to other priorities. There is no way we can be 
successful if we maintain every special interest and pet 
project.''
    Now, I know you pretty well. This is, quite frankly, 
unacceptable. Any progress we have made in Afghanistan with 
regard to women's rights will be quickly rolled back by the 
Karzai government and others if we do not continue to emphasize 
the importance of gender equality. During my career, I have 
been a strong advocate for women's rights. I know you have. So 
I don't think we can stand by and let the administration roll 
back the critical work we have done in Afghanistan.
    Is the Post report accurate? If so, what is the 
justification?
    Secretary Clinton. It is not accurate, Congresswoman. And I 
am trying to find out who that unidentified administration 
official is, because that is not administration policy.
    Like you, we believe strongly that supporting women and 
girls is essential to building democracy and security. And so 
what we have done as part of a government-wide effort is to 
develop the civilian assistance strategy for Afghan women. And 
we are currently providing more support than at any time in our 
government's history to address illiteracy, poor health, 
extreme poverty, political exclusion. We are partnering with a 
lot of very courageous Afghan women and men. You met one of 
them at the Women of Courage event. We address gender 
discrimination and inequality.
    Now, we have a lot of challenges. I don't want to sugarcoat 
this. This is really hard, and there are deep cultural 
challenges to doing this work. Long-excluded from education, 
health care, everything you can imagine, women are still not in 
any way given their rights or the opportunity to participate.
    But we have seen real progress. And I think that first the 
Bush administration, now the Obama administration--I want to 
publicly thank Mrs. Bush for her leadership in this area when 
she was First Lady. Since the fall of the Taliban, we have seen 
the return of 2.5 million girls to school. We have seen women 
in the parliament, women in the loya jirgas, the High Peace 
Council that has been set up.
    And we have more than doubled our spending on women and 
girls since 2008. We have tripled our staff on the ground, 
starting in 2009, when I got there. And we have staffed a new 
four-person gender unit in Kabul to keep a close eye on where 
the money is going, to work with the Afghan Ministry of Women's 
Affairs.
    And the final thing I would say is that, in this work we 
are now doing--because I talk about three surges: military, 
civilian, and diplomatic--the diplomatic surge on 
reconciliation and reintegration, we are absolutely clear that 
women cannot be used as pawns by the Taliban or by the Afghan 
Government; that, if the Taliban wants to reconcile, they have 
to renounce al Qaeda, renounce violence, and agree to abide by 
the Afghan constitution, which in the constitution protects the 
rights of women.
    Mrs. Lowey. Thank you.
    I am going to get in another quick question. As you know, 
our policy in Haiti--and someone you know very well has been 
very involved there--has been to move people out of Port-au-
Prince. I have been a strong advocate for a community of 
learning--putting a school in the center of a community and 
serving as the base for health services and economic 
development. Because if they don't have the jobs and they don't 
have the services, Haitians are going to go right back to Port-
au-Prince.
    There were recent reports about a South Korean textile 
manufacturer who will be a tenant outside of Port-au-Prince, 
providing 20,000 jobs.
    If we don't have enough time for you to respond, I would 
like to know what we are doing to really provide incentives for 
people to stay out of Port-au-Prince and provide all the 
necessities of life so they can have a decent life in other 
towns.
    Thank you.
    Secretary Clinton. Well, very quickly, in the time I have 
left, we have helped reopen 80 percent of Haiti's schools up 
until now. We have assessed damage to 400,000 buildings and 
allowed a lot of people to go back.
    But you are right. We believe moving people out of Port-au-
Prince will, in the long run, be very good for Haiti and the 
Haitian economy. So the very large textile plant that you 
referred to, which is going into the north, will have a whole 
community built that will include schools as well as other 
facilities.
    Mrs. Lowey. I just want to say, Madam Chair, this would 
really be an amazing opportunity, because we don't have al 
Qaeda in Haiti, you don't have the terrorists concerns. And if 
we can do this as a model, it could be replicated elsewhere.
    Thank you.
    Secretary Clinton. Well, I would just quickly add that 
Chairwoman Ileana Ros-Lehtinen went down for the announcement 
of that textile factory and, I think, you know, was really very 
positive about what she saw there.
    Mrs. Lowey. And I hope we will be going down there soon----
    Secretary Clinton. Good.
    Mrs. Lowey [continuing]. As that community is growing and 
being strengthened outside of Port-au-Prince. Thank you.
    Thank you, Madam Chair.
    Ms. Granger. Thank you.
    Chairman Rogers.
    Mr. Rogers. Thank you, Madam Chair. And, by the way, 
congratulations on your elevation to this office.
    Ms. Granger. Thank you very much.
    Mr. Rogers. Thank you for your service.
    Madam Secretary, truly, the events of recent months in 
North Africa and the Middle East have been remarkable. All of 
these events seem to have one common theme, in that it is a 
popular uprising; it is not a coup d'etat.
    Secretary Clinton. Right.
    Mr. Rogers. It is just a street-level uprising. How do you 
explain that? And is there something we are not seeing that has 
caused these revolutions to take place?
    Secretary Clinton. Mr. Chairman, that is a great question. 
I will offer you my opinion. I am sure that the experts and 
historians will come up with more significant interpretations 
in the future.
    But I think that there are a number of forces that are 
converging all at one time. You know, the United States, as you 
know so well, has always advocated democracy, freedom, giving 
people the chance to have their own lives without control from 
the state and everything that we have seen in oppressive 
regimes.
    But until the technology revolution, that information was 
very hard to have widely spread as a way to help people 
organize so that they could speak up for themselves. I really 
give tremendous credit to these social networks that young 
people use, which is why, when I first became Secretary of 
State, I said we are going to have new outreach through, you 
know, Facebook and Twitter and everything that is going on.
    And we now see the results of people themselves saying, 
what happened to that blogger in Alexandria who was beaten to 
death by the Egyptian security forces or that university 
graduate who was selling vegetables in Tunisia who set himself 
on fire because he had no opportunity? People now know about 
that. They can communicate about it, and they can organize over 
it.
    So I think what we have seen is really, as you say, 
populist, coming from the bottom up. That is the good news. The 
uncertain news is what happens next.
    Mr. Rogers. Yes.
    Secretary Clinton. We have seen governments peacefully 
toppled in Tunisia and Egypt. We see a very serious conflict 
going on in Libya. And we see governments from Yemen, Bahrain, 
Oman, everywhere else, looking at how they are going to deal 
with these challenges. And we watch as China does everything it 
can to cut off the Internet, because they have reached the same 
conclusion: that this is a tool that never existed in human 
history before.
    So part of our Internet-freedom agenda is to do everything 
we can to keep those lines of communication open so that people 
themselves can stand up and speak out for their own rights.
    Mr. Rogers. Well, it seems from afar that these 
revolutionaries are really leaderless now.
    Secretary Clinton. That is right.
    Mr. Rogers. And that is, I guess, a good thing at the 
outset. But,as you say, what do you do now that you have 
toppled the government?
    Secretary Clinton. That is right.
    Mr. Rogers. How do you put in place a democratic or any 
sort of government that has fairness involved?
    Secretary Clinton. You know, Mr. Chairman, I think this is 
a subject that we are going to have a lot of conversation 
about. And I hope maybe we can do it sometime outside the 
formality of a hearing room, and just exchange ideas and bring 
in some experts and others who have experience.
    Mr. Rogers. But we don't have a leisurely--enough time.
    Secretary Clinton. We don't. And here is what we are doing. 
We are reaching out to everybody we possibly can. You know, we 
did evacuate nonessential personnel and families from Cairo, 
but we left a solid team with a very experienced Ambassador. We 
are bringing people back in. We are talking to everybody who 
has ever been identified as a potential leader. We are talking 
on a regular basis, both--I am reaching out to the new Prime 
Minister, the new Foreign Minister in Egypt. Bob Gates and Mike 
Mullen reach out to Field Marshal Tantawi. We are constantly 
communicating.
    And it has been--I think it has been challenging for 
everyone, starting with them, because who do you negotiate 
with? Who do you bring in to sit down across the table? 
Because, by the nature of a lot of these social networks, they 
are leaderless. They are, you know, people coming together 
through technology and through the streets but not designating 
anybody to be their leaders. So the elections are going to be 
very important there.
    Mr. Rogers. A quick question: Aid to Egypt, military and 
otherwise, what can you say about that now?
    Secretary Clinton. Well, I think we have to continue and 
look for new ways to assist Egypt. They had a serious drop in 
their gross domestic product. Their tourism industry was very 
badly hit; in fact, it stopped. So their economic condition is 
quite challenging. They have not yet opened up their stock 
market because they are worried that wealthy Egyptians will 
take money out of the country.
    They have a lot of big problems. And so what we are doing 
and what I hope to be able to tell them when I get there next 
week is that we reprogrammed, with your approval, $150 million, 
$90 million of which we will put into economic assistance, $60 
million of which we will put into helping them prepare for 
elections, set up political parties, help train people to do 
their part.
    But we are going to have to look at some bigger things than 
that. Because I know from my conversations with Egyptians, both 
inside the government and outside the government, they are not 
looking to Europe, they are not looking to the Gulf, although 
they are happy to have their help; they are looking to us. And 
I think that is a good thing. And we need to be there to help 
them.
    Mr. Rogers. Thank you, Madam Secretary.
    Ms. Granger. Thank you.
    Mr. Dicks.
    Mr. Dicks. Thank you for your outstanding testimony.
    One thing I have been concerned about is the situation in 
Iraq as we draw down our military forces. Can you give us a 
picture of what the State Department is doing? I know there is 
a major increase in the number of people there and contractors. 
Can you give us an overview on this and tell us what your 
concerns are?
    Secretary Clinton. I have a lot of concerns, Congressman. 
And I want to go back to, also, the chairwoman's comments in 
her opening remarks.
    Now, we are aiming to be able to take over from our 
military as they leave. As you know very well, under the 
agreements signed in the Bush administration, the Status-of-
Forces Agreement, all of our troops will be out by the end of 
this year. In fact, most of them will be out by October. And 
there has been no decision made by the current Iraqi Government 
for any kind of request for any of our troops to stay.
    Under the Strategic Framework Agreement that was also 
signed in the Bush administration, the State Department and 
USAID are now expected to take over all those responsibilities.
    And so, here is what we are trying to do. We are trying to 
have a consulate in Basra, which we think is very important, in 
the south, where most of our oil companies are going to be 
doing business, right across from Iran.
    We want to, obviously, keep our embassy in Baghdad safe. 
And those of you who have travelled there know that we have a 
lot of alerts and we have a lot of missiles that still come in. 
And we don't know what the situation will be once our troops 
leave and take their surveillance and their intelligence 
capabilities with them.
    We want to have a consulate in Kirkuk. We want to have one 
in Irbil, in the Kurdish part of Iraq. And we want to have 
branch offices in Mosul so that we are able to stay on top of 
what is the continuing center of al Qaeda in Iraq.
    Now, all that costs money. And we are going to have to put 
in a very significant number of contract security forces in 
order to keep our diplomats safe once our military forces 
leave. The total U.S. Government population in Iraq following 
the 2011 transition will be approximately 17,000 personnel. 
That includes civilians from State, USAID, DOD, DOJ, DHS, you 
name it, plus security contractors. And it is going to be 50 
percent security.
    Then we have what are called life support contractors, you 
know----
    Mr. Dicks. Is there a number that goes with that? I mean--
--
    Secretary Clinton [continuing]. Yeah. Fifty percent of the 
17,000 would be----
    Mr. Dicks. The 17,000. Oh, I got you.
    Secretary Clinton. Yep. So we have 17,000 all together: 50 
percent security; 30 percent life support contractors, which 
are, you know, the people who prepare the food and do all of 
that support work; 10 percent management and aviation security, 
because we have to run our own aviation assets in order to be 
able to get people around Iraq; and then 10 percent 
programmatic staff.
    Now, DOD is looking, as you know, Congressman, for setting 
up Office of Security Cooperation outposts in Iraq. They will 
have about 4,000 personnel out of that 17,000.
    So it is going--you know, direct hire will be 16 percent of 
the total. Contractors will make up the other 84 percent. That 
is not an optimal situation, in my view, but it is what we have 
to do in order to meet the obligations we took on under the 
Bush administration, that we accepted in the Obama 
administration, and that we are prepared to fulfill going 
forward.
    Mr. Dicks. I had two other things I just wanted to mention.
    In the last decade, the Global Alliance for Vaccines and 
Immunisation, GAVI, has provided new access to immunization to 
almost 300 million children. In that period, GAVI has saved 
over 5 million lives in developing countries. Is the United 
States taking a leadership role in supporting GAVI and its goal 
to save the lives of children through immunization?
    Secretary Clinton. Yes, it is one of our most important 
partners in achieving our child health goals.
    And, as you know, it is a partnership. We get money from 
other countries, plus the Gates Foundation. And we have 
invested $647 million through fiscal year 2010. Our fiscal year 
2012 request is $115 million. That leverage is $7 from other 
contributors, which we think is a pretty good deal.
    And we believe we can demonstrate to you we have saved 5 
million children's lives, we are on the brink of eliminating 
polio from the world, which would be great news for everybody--
--
    Mr. Dicks. Right. Just one quick point on that.
    Secretary Clinton. Yes, sir.
    Mr. Dicks. Polio is still a problem in Afghanistan----
    Secretary Clinton. Yes.
    Mr. Dicks [continuing]. Pakistan, India, and Nigeria.
    Secretary Clinton. And northern Nigeria. That is right.
    And so, we are working with the Alliance. And, also, I sent 
a team up to northern Nigeria because we had to convince the 
religious leadership in northern Nigeria, the imams and the 
elected leadership as well, that polio vaccine was good for 
their children; it wasn't some kind of conspiracy that would 
sterilize their children. And we were successful in getting 
both religious and elected leadership to do public service 
announcements and other things.
    So we have really put a lot of effort behind this. We 
couldn't do it without the Global Alliance because they 
leverage our money.
    Mr. Dicks. Thank you.
    Thank you, Madam Chair.
    Ms. Granger. Thank you.
    Chairman Lewis.

                      Opening Remarks of Mr. Lewis

    Mr. Lewis. Thank you, Madam Chairman. Before turning to the 
Secretary, let me say that I would like to echo the remarks of 
our chairman and congratulate you for coming to this job. You 
are absolutely going to be a magnificent chairwoman of this 
subcommittee, and I look forward to working here.
    Ms. Granger. Thank you. And thank you for helping me get 
here, both of you.
    Mr. Lewis. Madam Secretary, you and I have had a chance to 
spend some time talking about my concerns about Pakistan, 
India, and others in the region.
    Secretary Clinton. Yes, sir.
    Mr. Lewis. And I cannot tell you the number of occasions I 
have had to discuss with people who have knowledge in the 
arena--Democrat, Republican, largely nonpartisan--the numbers 
who express great appreciation for not just your homework and 
knowledge but the articulate way you go about expressing our 
interests in that very diverse world marketplace. And thank you 
for that.
    Secretary Clinton. Thank you.
    Mr. Lewis. Having mentioned that, nonetheless, while you 
were in that former job that you mentioned earlier, you 
referred a moment ago, at a glance, relative to what occurred 
in our successful effort in dealing with Medellin in Colombia. 
Indeed, we were successful there because we were able to forge 
a coalition of partners among a number of countries in our 
hemisphere who were willing to go a long, long way to deal 
harshly and directly with the cartels and eventually broke 
their back. And Colombia has a chance, then, of being back as a 
real world country in our hemisphere.
    Then you, as an aside, referred to Mexico in connection 
with that. I know that we are making some efforts to develop 
similar coalitions. There is absolutely no question we are not 
going to deal with breaking the back of these cartels and this 
drug scourge without that kind of effort going forward 
successfully. Can you help the committee understand what is 
taking place, what progress we have made in real terms?
    Secretary Clinton. I will.
    We have, as I said, focused on Mexico with the Merida 
Initiative, which predate this administration, to try to do in 
Mexico the kind of work that was successful in Colombia. And, 
in fact, Colombia is now training some Mexican law enforcement 
officials. We have started by building up institutional support 
and training, as well as providing equipment--helicopters and 
other things that the Mexican Government wanted and needed.
    We are making progress. It is comparable, I would argue, to 
where we started with Colombia, where I think when we started--
and you, of course, were in the Congress--it looked pretty 
hopeless. I mean, it was an insurgency by the FARC, plus the 
drug cartels. I mean, what an unholy alliance it was. Hundreds 
of thousands of people were being dislocated because of the 
violence.
    So Colombia, in many ways, was a worse situation than we 
see in Mexico, where the violence is fairly--I mean, it is 
horrific, but it is fairly limited. There has not been massive 
dislocations internally. We have a president in President 
Calderon who shares the commitment that President Uribe had. 
But it is going to take time, Congressman. This is not easily 
done.
    And then the other problem we have, which we are now 
addressing, is the Central American countries. Several of them 
are very weak, very dominated by the drug cartels. So that the 
southern border of Mexico is an area that we have to help the 
Mexicans try to fortify, because a lot of the drugs are coming 
north, a lot of the guns, a lot of the other problems.
    So we are looking at how we strengthen Central America at 
the same time that we strengthen Mexico. And we are making 
progress. We have a long way to go.
    Mr. Lewis. And, Madam Secretary, in Mexico we have known 
for a long, long time that mordida seems to be always alive and 
well. When you are dealing with cartels and you are dealing 
with that history, breaking the back of these drug warlords, 
essentially, is indeed an intense, difficult task.
    I believe that both our defense people but also the 
Department of State needs to have our Members, both houses, 
better know the harsh steps we took to be successful in 
Colombia and the harsh steps--very harsh steps that may be 
necessary to identify and deal directly with these cartel 
leaders.
    Secretary Clinton. That is an excellent idea. And if I 
could take you up on your invitation, we would like to put 
together a kind of whole-of-government briefing for Members who 
are interested here in the House, and then, of course, we would 
do it in the Senate. Because I want everybody to know what we 
are doing, what we are up against.
    As you probably heard, the Attorney General announced 
arrests in the murder of our consulate employees yesterday. So 
we are making progress. We are bringing down some of the high-
value cartel leaders. But I would like you to know more, and we 
would like your help and advice about it.
    Mr. Lewis. Thank you, Madam Secretary.
    Thank you.
    Ms. Granger. And let me thank you for that commitment, 
because it is extremely important, and I believe Congress would 
respond very positively to that.
    Mr. Jackson, please.
    Mr. Jackson. Thank you, Chairwoman Granger.
    Thank you, Secretary Clinton, and welcome back to our 
subcommittee. And thank you for your testimony.
    Mom says ``hi,'' by the way.
    Secretary Clinton. Thank you.
    Mr. Jackson. Secretary Clinton, before 9/11, August 7th, 
1998, marks the first time al Qaeda attacked America, when it 
blew up our embassies in Nairobi, Kenya, and Dar es Salaam, 
Tanzania, killing hundreds, including 12 Americans at the 
Embassy in Nairobi.
    Since 1999, I, along with several bipartisan Members, have 
worked to provide compensation to these 12 Americans, who were 
bravely serving their country despite intelligence, unknown to 
the victims, that showed those embassies were likely al Qaeda 
targets for attack.
    Since the attacks, the House has passed legislation during 
three separate Congresses to address the issue, only to be held 
up in the Senate. Furthermore, this subcommittee has 
continually requested your Department provide a legislative 
proposal for compensation to State Department employees killed 
by terrorists, yet no such legislation has been brought 
forward, and the State Department has failed to provide a 
reasonable proposal since the first congressional request in 
1999. I am sure we will be including similar language again in 
the fiscal year 2012 bill.
    Will you commit to work with me to finally bring peace to 
those families who have been suffering for the last 13 years 
without compensation or closure?
    Secretary Clinton. I would work with you. I know that this 
is a passion of yours, Congressman, as it is of many of us. I 
remember meeting the families of the victims of the Cole at the 
memorial service. And we will certainly see if there is any 
way. I can't make any promises, but I will certainly work with 
you on that.
    Mr. Jackson. Thank you, Madam Secretary.
    About 3 weeks ago, the House passed H.R. 1, which 
eviscerated some accounts in the State-Foreign Operations bill. 
And yesterday the Senate rejected the bill. As you know, 
Congress and the executive branch have a fiduciary 
responsibility to ensure U.S. Tax dollars are well-spent and 
reflect the interest of the American people.
    The Function 150 budget represents less than 1.5 percent of 
the total budget. As the head of the State Department, why 
should Americans support this funding even in these tough 
economic times? And what is at stake for all Americans?
    Secretary Clinton. Well, Congressman, thank you for helping 
to set the record straight, because I know that in, you know, 
many polls the American people think that we can balance our 
budget by eliminating foreign aid and that foreign aid is 20 to 
25 percent of our budget. So thank you for saying that 
everything we do in the foreign-aid world, which is more than 
just the State Department and USAID, is less than 1.5 percent. 
Our share of that is, you know, obviously, about 1 percent, a 
little bit less.
    Now, why should a hardworking person in my State of New 
York or the chairwoman's State of Texas or your State of 
Illinois either care about or think we should support this 
foreign aid budget? And I think there are three reasons.
    I think, first of all, I really do believe this promotes 
American security. I think it gives us tools that are in 
addition to and different from our military tools. And I think 
most Americans don't want to see young Americans going to war. 
They would rather see us prevent war, work with like-minded 
nations to try to help societies resolve conflicts, which is 
what our diplomats and our development experts do every day. 
And it is a lot cheaper than sending America to war one more 
time. So it promotes our security. It doesn't substitute for 
defense, but it is an important part of our national security 
arsenal.
    Second, it supports our interests. I mean, I think the 
American people, as you see the response after the earthquake 
in Haiti or you see the concern that Americans have about 
drought in Africa or HIV-AIDS or any of the challenges that 
they see on their television screens, or if you are living 
along our border with Mexico--and there are so many ways that 
Americans are affected by what happens in the world around us. 
And so, promoting our interests is another area where we can't 
do it without what the State Department and USAID do every day.
    And, finally, it reflects our values. You know, we are a 
really generous, extraordinary country, and people know that. I 
sometimes am amused that, you know, I will go to a country 
where the leaders may be publicly, you know, criticizing us and 
then in private they, you know, want all the help they can get, 
they want us to support them. And it is because we are not a 
former colonial power, we are not an ``ism,'' like communism or 
fascism or extremism. So we really do try to help people, and 
that reflects who we are.
    So for our security, our interests, and our values, nearly 
every American has some concern that fits into one of those 
categories. And that is where it happens; it happens out of our 
budget.
    Mr. Jackson. One final and quick question. Chairwoman 
Granger, Ranking Member Lowey, and I found ourselves in a 
peculiar position late one night, defending against efforts to 
eliminate the Institute of Peace. Arguments were made on the 
floor of the Congress that the State Department and the 
Institute of Peace have duplicative functions, and, therefore, 
the Institute of Peace should be stricken from the budget.
    Would the Secretary please like to make the distinction for 
Members of Congress between what it is your mission is and what 
it is that the Institute of Peace does?
    I thank the chairlady for the time.
    Secretary Clinton. Well, you know, the Institute of Peace 
is a not-for-profit institution formed by the Congress to 
operationalize America's commitment to peace by working with 
like-minded individuals and groups around the world. You know, 
sometimes the United States Government coming in to train 
people in democracy is not as effective as seeing one of our 
expert teams from USIP or IRI or NDI.
    I think that has been one of the strengths of American 
foreign policy, is that, you know, we have faith-based groups 
who are working on all kinds of values issues, we have NGOs who 
are working on humanitarian/disaster relief and other important 
matters, and we have these organizations funded directly by our 
government, which is kind of unique but fills a real place in 
our whole arsenal of what we can do when we interact with 
people.
    Ms. Granger. Thank you very much.
    Mr. Cole.
    Mr. Cole. Thank you, Madam Chairman. And I would be remiss 
not to add my congratulations immediately, as well----
    Ms. Granger. Thank you.
    Mr. Cole. Madam Secretary, thank you for your testimony. 
And I would be remiss not to mention this. You won't recall, 
but the first time I had an opportunity to meet you and former 
President Clinton was during the Oklahoma City bombing. I was 
Secretary of state and was put in charge of liaising with the 
Federal Government. And you and President Clinton just 
performed so magnificently----
    Secretary Clinton. Thank you.
    Mr. Cole [continuing]. Not just at the moment but for 
months and months afterwards, as we continued to work through 
our issues. So thank you very, very much.
    Secretary Clinton. Thank you.
    Mr. Cole. And thank you, as well, for the role I perceive 
you to have played in developing our current Afghanistan 
policy. You know, that was a tough moment. You may not agree 
with the analogy, but it was sort of like the surge moment for 
Bush. It is when you do something that is not very popular, 
particularly within your own political ranks, perhaps, but I 
think it was very much in national interests. And I appreciate 
the additional military commitment. I have been on the ground 
in Afghanistan to see what your people in State are doing, and 
it is night-and-day different than it was in previous trips. 
So, again, thank you very much, I think it is making an 
enormous difference.
    I want to ask you--I want to go back to Libya for a minute 
and draw a comparison with Egypt and get your thoughts. In 
Egypt, we have a longstanding relationship. We have a lot of 
contacts. We have an institution to work with and through in 
the army. And so, I can see a more hopeful scenario potentially 
unfolding for us.
    Libya is so much more challenging. You know, we have very 
little in the way of civil society, very little in the way of a 
long-term relationship. We have a dictator whose back is to the 
wall and has no way out. It reminds me of Saddam Hussein, in a 
sense. So he has every reason to fight to the last bullet, so 
to speak. He has significant domestic support; it is not the 
majority, but it is enough. And we have very few ways to 
directly impact this situation.
    And I know you are getting a lot of competing advice about 
no-fly zones. I just want to know what your thinking is about 
how we should proceed step-by-step, what kind of assets you 
think we have to deploy here, and what you envision going 
forward.
    Secretary Clinton. Well, Congressman, I think that is the 
question of the day, because that is what we are really focused 
on trying to figure out how to get through.
    And thanks for your kind words on Oklahoma City. I have a 
picture of that lone tree that survived in my home.
    You are right, your analysis of Libya is right. You know, 
we didn't have diplomatic relations with Libya. We were able, 
thanks to a lot of good work that lasted over a number of 
years, to get him to give up his nuclear weapons. I was 
involved, upon becoming Secretary of State, to get the last of 
the HEU out of Libya. Imagine what we would be dealing with if 
that had not been done. He still does, as you probably know, 
have some remaining chemical weapons and some other nasty stuff 
that we are concerned about.
    So, really, we are working on three different levels 
simultaneously.
    First, we are working to create an international consensus, 
because we think that is absolutely critical to anything that 
anybody, especially us, does. You can see that there is a lot 
of ambivalence in the international community, because, for the 
reasons that you pointed out, people don't know what the 
opposition represents, they don't know the most effective way 
to try to get rid of Qadhafi. So everybody is working hard. 
NATO is working hard. We are internally, in our own government, 
looking at every option imaginable.
    At the same time, we are pushing out on humanitarian 
assistance. We really believe that getting in as much help, 
particularly for those leaving Libya, but also, increasingly, 
if we can figure out how to do it safely, assisting those on 
the ground, who are running short of medical supplies, who need 
doctors, who need, in some instances, clean water, et cetera, 
that we are able to help them when we can get a clear way to do 
that.
    And then we are trying to sanction access that he has to 
his accounts. We are trying to make it clear to the people 
around him that there will be accountability through the 
International Criminal Court and other steps taken.
    But I appreciate the tenor of your question. Because if 
this were easy, we would have already done it. But this is not 
Egypt, where we did have 30 years of relationships. It is a 
much less easily understood situation.
    But we are making progress. We are talking to a lot of the 
opposition leaders. I will, as I said, be meeting with them 
myself. We are suspending our relationships with the existing 
Libyan Embassy, so we expect them to end operating as the 
Embassy of Libya.
    And we are looking to see whether there is any willingness 
in the international community to provide any authorization for 
further steps. I am one of those who believes that, absent 
international authorization, the United States, acting alone, 
would be stepping into a situation whose consequences are 
unforeseeable. And I know that is the way our military feels. 
It is easy for people to say, do this, do that, and then they 
turn and say, okay, U.S., go do it, you use your assets, you 
use your men and women, you get out there and do it, and you 
take the consequences if something bad happened.
    And I want to remind people that, you know, we had a no-fly 
zone over Iraq. It did not prevent Saddam Hussein from 
slaughtering people on the ground, and it did not get him out 
of office. We had a no-fly zone and then we had 78 days of 
bombing in Serbia. It did not get Milosevic out of office. It 
did not get him out of Kosovo until we put troops on the ground 
with our allies.
    So I really want people to understand what we are looking 
at. And I will reiterate what the President has said and what 
our administration has consistently said. We are considering 
everything, but we think it is important that the Congress and 
the public understand as much as possible about what that 
actually means. And I can assure you that the President is not 
going to make any decision without a great deal of careful 
thought and deliberation.
    Mr. Cole. I appreciate the thoughtfulness and the caution. 
I really do. And I will reserve my questions, obviously.
    Thank you, Madam Chairman.
    Ms. Granger. Thank you very much.
    Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chairwoman.
    And, Madam Secretary, thank you for the absolutely 
extraordinary job you do. You have been a fabulous Secretary of 
State.
    Let me just pick up where my colleague left off. I concur 
completely with the idea that we need to do whatever we do with 
respect to Libya in concert with the international community. 
What has made these revolutions so powerful is they have been 
indigenous. They have not been at the tip of the American spear 
or imposed from outside.
    All that being said, I hope that we can find success, 
working with the international community, to take as aggressive 
and swift action as possible. It is just excruciating to watch 
the Libyan people attacked by their own government, with all 
the powerful machinery of the Libyan military. It is just 
devastatingly tragic to watch.
    I think this period is one of the most promising, 
potentially, that we have seen in decades, with the transition 
that is going on in the Middle East and North Africa. And what 
happens in the next couple years may be something as momentous 
as the collapse of the Soviet Union. And the legacy of this 
administration may have as much to do with this as anything 
else and maybe a lot more.
    So the success of what has begun in Tunisia and Egypt, I 
think, is such an enormous priority. In terms of undermining 
the al Qaeda narrative, what happens in those countries may 
eclipse the significance of anything that has happened in Iraq, 
at much less cost of life and treasure. So I am all in favor of 
whatever investment we can make in these people-powered 
revolutions.
    I know when the collapse of the Soviet Union took place, we 
were in an economic recession. That didn't stop us from helping 
to rebuild Eastern Europe and help these fledgling democracies. 
And our current economic circumstances cannot cripple us from 
seeing the opportunity and the necessity of a vigorous effort 
now. A lot of these revolutions have been powered by economic 
factors, not just political ones. And their success may depend 
on economic factors. If the Egyptian people don't see any 
progress in the economy, we may trade one authoritarian regime 
for another.
    So I wanted to ask you about that. There has been some 
reprogramming that you mentioned with respect to Egypt. Can we 
do some reprogramming to help the Tunisian people? There is a 
great prospect for success in Tunisia--a smaller, more 
homogeneous population.
    Do we need to look at the calibration of military and 
civilian assistance to Egypt in a finite-resourced world? I 
mean, obviously, our relationship with the military is key. We 
don't want to do anything to undermine that. At the same time, 
there is a tremendous civilian economic need. So how can we 
find the resources to help those countries economically stay on 
the path they are on?
    Secretary Clinton. Well, I think you are asking the right 
question, because I believe that if people don't see some 
improvement in their economic circumstances, they will become 
discouraged and maybe even start to turn away from democracy. 
And we can't permit that to happen. If we have any role to 
play, we need to play it.
    Again, I mean, a lot of it comes down to the money that we 
already have that we are trying to reprogram. We are going to 
be--I will be working to get up to $20 million for Tunisia to 
respond to some of their needs. When I met with the Tunisian 
Secretary of State in Geneva about a week and a half ago, he 
said, ``We want American help. We remember America was with us 
when we became independent in the 1960s,'' which goes back to, 
kind of, you know, the feelings, the attitudes, the values that 
people have.
    So I think you are absolutely right. We need to have a very 
big commitment to Tunisia that we can be ready to help them 
economically, as well as with their democratic transformation.
    Similarly, with Egypt, they have asked us to look at a lot 
of different possibilities. We are doing the best we can within 
the budget we have and that we can anticipate.
    But I underscore your point, Congressman. This is an 
amazing opportunity. When I spoke with the Egyptian officials 
just over the last couple of weeks, they kept mentioning 
Central and Eastern Europe. They kept saying, ``That is how we 
want to turn out. We don't want to get derailed. We want this 
to work.''
    So we want to help them make it work. And I think it is 
going to require that we have budgetary assistance for them, 
that we have economic assistance going to small- and medium-
sized enterprises, which could help stimulate the economy from 
the bottom up in Egypt. We are looking at all of that.
    Ms. Granger. Thank you very much.
    Mr. Schiff. Thank you, Madam Secretary.
    Ms. Granger. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you very much, Madam Chairwoman.
    And, Madam Secretary, let me first add my words of 
gratitude for your service to the United States of America.
    Secretary Clinton. Thank you.
    Mr. Diaz-Balart. Madam Secretary, in September 2010, you 
made a really impacting statement. And if I may just take a few 
seconds to quote what you said, ``Rising debt levels pose a 
national security threat in two ways. It undermines our 
capacity to act in our own interest, and it does constrain us 
where constraint may be undesirable. And it also sends a 
message of weakness internationally.''
    I share your concerns about the threat the debt poses to 
our national security. When you made that statement, the debt 
was $13.4 trillion. Now, just last month, the President 
unveiled a budget that increases the debt by $13 trillion.
    Would it be fair to say, Madam Secretary, that you have 13 
trillion more reasons to be concerned about the national 
security of the United States?
    Secretary Clinton. I don't think it increases it by $13 
trillion. I think it is, goes up to, what, $14 trillion, I 
think. But it is a big number, Congressman.
    Let me take your question very seriously because, 
obviously, you quoted me, and that is what I believe. If we are 
not strong at home, we are not going to be strong abroad. And I 
know from my own experience, both serving in this esteemed 
Congress and in being First Lady during the 1990s, that there 
is going to have to be a deal. And the deal is going to have to 
put everything on the table. And the deal is going to have to 
include revenue and entitlements, along with spending. Because 
I am just looking at this budget; you cannot get to where you 
and I would like to see us headed by cutting nondefense 
discretionary spending. So that is number one.
    Number two, I think it is important to consider what we do 
as part of the Nation's defense. So if this body is going to 
cut Defense or DHS or Veterans a smaller proportion and they 
are going to cut us a much larger proportion, that has 
implications for DHS and DOD. Because we are on the front line 
of border security, we are on literally the front lines in 
Iraq, Afghanistan, Pakistan. So we want to be treated the same 
way you treat Defense and DHS. So that would be the second 
point that I would make.
    And, thirdly, I think that the budget that we have proposed 
is a budget that, number one, puts everything into the budget. 
Because up until now, we have been funding a lot out of 
supplementals, you know, both in Defense and in USAID and in 
the Department of State. You know, we kind of ride on the back 
of DOD when they come in for these big supplementals.
    So what we have said--and, you know, maybe it was a 
political mistake, but it was an honest effort to say, let's be 
transparent, let's put everything into the budget, let us tell 
you what our core operations are, $47 billion, and let us tell 
you what our frontline State overseas contingency operations 
are, $8.7 billion.
    So what we are trying to do is to make the case that, as 
this committee, which has such an important responsibility, 
works with the Defense Subcommittee, you have to cooperate the 
same way we are cooperating. I mean, I am in touch with 
Secretary Gates and Admiral Mullen and General Austin in Iraq 
and General Petraeus in Afghanistan and General Mattis in 
CENTCOM, because we are literally joined at the hip now. But 
the Congress is still pretty stovepiped.
    So you look at the 150 account, the Defense Subcommittee 
looks at the Pentagon account. And, you know, the usual 
treatment is the Pentagon doesn't get wracked very hard, and 
then everybody comes over and decides to make it up in the 150 
account. Those days, in my opinion, Congressman, are over. And 
so I would make that strong case for your consideration.
    Mr. Diaz-Balart. Thank you.
    I have very little time, but, changing gears, so far the 
administration has announced easing of sanctions on Cuba twice. 
Between those times, there have been increased repression and 
oppression. You are aware of the case of Zapata Tamayo and 
others and the taking of an American hostage.
    The question is, what does the regime have to do to have 
any consequences from this administration? Is the 
administration willing to look at tightening of the 
regulations, a harder push for democracy assistance, at the 
very least a State Department travel warning again?
    What would be the consequences, as well, as now, this 
American citizen has been now put to a kangaroo court?
    So, again, there have been two easing of sanctions, further 
oppression. Will there be any consequences for that further 
oppression, for the death of a political prisoner in prison, 
and for the taking of an American hostage?
    And my time has run out.
    Secretary Clinton. Well, Congressman, very quickly--and I 
will be happy to get you more for the record--we share your 
commitment to freedom and democracy for the Cuban people. That 
is an absolute ironclad commitment. I have had that commitment, 
myself, personally. This administration and President share it.
    We deplore the injustice toward Alan Gross. We want him 
home. He needs to be home with his family immediately. And we 
mourn the loss of Mr. Zapata, the mistreatment of his mother, 
and all of the other abuses by this Cuban Government.
    So we share the same goals, and we share the same emotions. 
Our decision to try to engage more with the Cuban Government 
only indirectly by helping the Cuban people is intended to try 
to strengthen direct engagement and provide more support for 
grassroots initiatives. So we can certainly disagree about the 
tactics, but I think we have total agreement about what we are 
attempting to achieve in terms of goals.
    Ms. Granger. Thank you, Madam Secretary.
    Just one comment before we go to Mr. Rothman. As I said in 
my opening remarks--we absolutely recognize the part that this 
committee and H.R. 1 play in our national security. And so, in 
putting the bill together, we said, this would be the last 
place we would try to cut, recognizing that it said nondefense 
discretionary spending.
    Secretary Clinton. Thank you.
    Ms. Granger. Mr. Rothman.
    Mr. Rothman. Thank you, Madam Chairwoman.
    Madam Secretary, I could spend the entire 5 minutes and 
more just extolling your extraordinary work as Secretary of 
State. You bring an incredible energy, intelligence, command of 
the issues, and, if I may say so, your credibility as Hillary 
Rodham and as Hillary Rodham Clinton, both.
    Secretary Clinton. Thank you.
    Mr. Rothman. And the United States is much more secure and 
better off because of your service. God bless you, and Godspeed 
in your work.
    I want to thank you for your leadership in the United 
States' veto at the Security Council on that one-sided, 
ridiculous resolution that was attempting to force an agreement 
on a two-state solution that Israel so desperately wants but 
the Palestinians are resisting, by utilizing the U.N. Just to 
criticize Israel, a completely one-sided, typically one-sided, 
prejudicial action. And I am so grateful for your leadership.
    I hope this now closes the book on the Palestinians or 
anyone else who would try to use the U.N. as a substitute for 
direct negotiations between the Israelis and Palestinians. The 
Israelis desperately want a two-state solution, have put 
everything on the table. And I regret that the Palestinians 
have not come to the table. I know you do, too.
    I also want to thank you for your remarks at the Human 
Rights Commission in Geneva, where you very candidly and 
forcefully questioned why there is a separate account, a 
standing committee to criticize the state of Israel. With all 
of the slaughter and genocide and the human trafficking and all 
the other horrific things going on in the world, they have a 
standing committee only to criticize the Jewish state of 
Israel. And I want to thank you for your very candid and 
forceful remarks.
    Iran: Iran, to me, still remains the number-one threat to 
the United States' national security. Iran has a great interest 
in the instability in North Africa but, in particular, in the 
Gulf and throughout the Middle East.
    Bahrain is the gateway, perhaps, to Saudi Arabia. It is a 
banking center and our 5th Fleet is there. And a lot of people 
are worried that Iran is trying to use its influence to 
destabilize Bahrain and to take practical control of Bahrain 
and then move on to Saudi Arabia.
    Do you share those concerns? Do you see any Iranian 
involvement in the protests and demonstrations and uprising in 
Bahrain? And how can we continue to prevent Iran from 
developing nuclear weapons and destabilizing the region for its 
own hegemonic interests?
    Secretary Clinton. Thank you, Congressman. And I appreciate 
your raising the continuing threat we see from Iran. While we 
are focused on the developments in North Africa and the Middle 
East, we have to continue to keep focused on Iran. And we 
certainly are.
    What we see happening right now--and I can only give you 
that snapshot, because our assessment now is that the internal 
discord in Bahrain is a domestic phenomenon that comes from the 
demands by the 70 percent Shia population for greater political 
rights, greater economic opportunities, and it requires a 
domestic solution. So what we have been doing is working with 
Bahrainis to work with themselves to try to come up with a way 
forward.
    Now, there is, you know, no doubt, as we have publicly and 
privately expressed, all people, according to our values, have 
a universal right to express themselves, to associate, assemble 
freely. And so we have urged the Government of Bahrain to 
respect those rights.
    At the same time, we have also credited what the government 
is trying to do through a national dialogue to come up with 
some agreed-upon reforms that would be implemented. You know, 
Bahrain is a friend. They are an ally. We deeply value their 
long-time association with us. King Hamad has announced that 
Crown Prince Salman is to lead this national dialogue. And we 
are encouraged by some of the steps we have seen recently that 
this can result in a genuine dialogue. And----
    Mr. Rothman. Madam Secretary, we are keeping an eye on Iran 
and their attempts to gain----
    Secretary Clinton. Yes.
    Mr. Rothman [continuing]. Influence in that region.
    Secretary Clinton. Now, so far, we don't see it evidencing 
itself, but we keep a close look on it, because we think that 
Iran would try to influence anybody anywhere against their own 
governments and against us. So that is a very big part of what 
we are doing. And the sooner that the people themselves in 
Bahrain can move toward this national dialogue, the less 
concern we will have about Iran.
    Mr. Rothman. Thank you, Madam Secretary.
    Thank you, Madam Chairwoman.
    Ms. Granger. Thank you.
    Mr. Dent.
    Mr. Dent. Thank you, Madam Secretary, for being here. And I 
apologize for having to depart for part of this hearing.
    I was encouraged, in your testimony you said, ``We are 
standing with the Libyan people as they brave the bombs and 
bullets to demand that Qadhafi must go now without further 
violence or delay.'' I certainly agree. And I certainly 
appreciate what the Department and the administration are doing 
with respect to food, water, supplies, and other humanitarian 
support to the Libyan people.
    But on a broader level, I am a little bit concerned about 
what I would call, perhaps, a lack of clarity in terms of 
administration policy with respect to the various uprisings we 
have seen throughout the Middle East and North Africa. I am 
concerned about, repetitions of what happened in Hungary in the 
1950s and then, the Arab uprising in 1991, the Marsh Arabs and 
the Kurds after the 1991 Gulf war.
    I am just very concerned that we are seeing a lack of 
clarity in terms of maybe a failure to distinguish between 
madmen and tyrants who use terror to suppress their people and, 
perhaps, friendly autocrats who use teargas. And my fear is 
that, we are not sending the right messages, in some cases, to 
friend and foe alike. I would like to know what your reaction 
is to that type of question.
    Secretary Clinton. Well, Congressman, I don't agree with 
that. I do agree that these are very difficult situations, and 
I am not sure that there is one response that adequately 
addresses the differences that exist.
    We were just talking about Bahrain. Bahrain's a very 
different challenge, in our view, than what we are seeing in 
Libya, which is different from Yemen, which is different from 
Egypt. And in each of those places, America's interests are 
uniform, with respect that we support people's universal 
rights, their genuine aspirations. But our approach toward each 
is obviously guided by what we see on the ground and how we 
think we can influence.
    So take Libya, for example. As I was speaking earlier with 
one of your colleagues, we have very few contacts that are of 
long standing and have a trusting relationship, like we did in 
Egypt. So we were able to have an almost daily dialogue with 
Egyptian Government officials, and I think that the United 
States contributed to the decisions made about trying to have a 
peaceful resolution. We don't have that in Libya. We are 
attempting and working overtime to figure out who are the 
people that are now claiming to be the opposition, because we 
know that there are some with whom we want to be allied and 
others with whom we would not.
    So it is a painstaking process, and I think it is not a 
very satisfying one for any of us, but it is one that we think 
we have to go through.
    Mr. Dent. Might I suggest, too, that there are some active 
Libyan Americans, I know in my district, who are in leadership 
positions related to people who are part of the protest 
movement. I would encourage you--I could certainly get you 
their contacts. It might be of some help to your Department.
    Secretary Clinton. Well, we are reaching out to everyone we 
can, so we would certainly take on board those names.
    Mr. Dent. I will--and, finally, this committee has 
appropriated considerable funds over the past few years to 
build State's global diplomatic staff. We have envisioned as a 
5-year initiative to expand the number of foreign and civil 
service personnel by 25 and 13 percent, respectively. The 
current fiscal realities require that we examine whether 
continued buildup is both affordable and sustainable.
    Similarly, we have invested, in USAID's Development 
Leadership Initiative. But today I would like to focus on 
State's staffing plans.
    Do you plan to build the staffing buildup in fiscal year 
2011? And what are your plans for the 2012 budget?
    Thanks.
    Secretary Clinton. Well, Congressman, we started this in 
the Bush administration. Both President Bush and Secretary Rice 
realized that we were just not equipped to do what we were 
expected to do, particularly in the frontline states. And one 
of the reasons that I have been able to more than triple the 
presence of civilians in Afghanistan and accept the 
responsibility of what we are supposed to do in Iraq is because 
of that increase. We have been able to, you know, take our 
people and redeploy them and not leave out essential 
functions--processing visas in Mexico or China, for example.
    So it has been a considered view not only within two 
administrations but outside experts from all sides of the 
political spectrum who said that State and AID had to increase 
their personnel in order to fulfill their mission. And, you 
know, obviously, if it is in accordance with what the Congress 
decides, we are going to continue to try to do that.
    Ms. Granger. Thank you.
    Mr. Dent. I yield back. Thank you.
    Ms. Granger. Mr. Austria.
    Mr. Austria. Thank you, Madam Chairwoman.
    Madam Secretary, thank you for being here. Thank you for 
your commitment and your service to our country. We appreciate 
it very much.
    Let me, if I could, go back to Israel for just a minute, 
because it is an important issue to me. And, looking at the 
events of the recent weeks, they have highlighted the unique 
role that Israel plays in the Middle East as a reliable, 
stable, and democratic ally that shares our values and our 
interests.
    We talked a little bit about Iran, which is extremely 
important to me, that with the drama of the events in Egypt and 
Libya and throughout the Middle East, the overall unrest in the 
Middle East, I am concerned that the world's attention not be 
diverted, and could be diverted, from the dangers of Iran's 
nuclear program. I am concerned that Iran could use this time 
to speed up that nuclear program and crack down on opposition 
of human rights activists. And I think it is critical that Iran 
understand that the world is still watching, that we are 
watching them, and that there will be consequences for 
continued disrespect for international policy.
    My question is, first, the administration has yet to 
sanction any of the non-Iranian banks, despite reports that 
several Turkish, South Korea, Ukrainian, and Chinese banks 
continue to deal with Iranian financial institutions. And I am 
very concerned about the lack of sanctions on companies that 
continue to invest in Iran's energy sector in violation of U.S. 
Law. The State Department--I am not aware of any sanctions on 
any non-Iranian foreign company for its investments in Iran's 
energy sector.
    And I wanted to ask you--and I know there is legislation 
also pending that was signed, I believe, last July by the 
President, which requires the State Department to complete 
investigations within 180 days after receiving credible 
information of a violation.
    What is happening as far as sanctions toward companies that 
are still dealing with Iran, as far as the Bank of Iran? And 
what is the State Department doing to enforce this?
    Secretary Clinton. Well, thank you very much, Congressman.
    You know, last summer, we were pleased to work with the 
Congress to pass the Comprehensive Iran Sanctions 
Accountability and Divestment Act, which we call CISADA around 
the State Department. And last fall, I became the first 
Secretary of State ever to impose sanctions under the prior 
act, the Iran Sanctions Act. And you are right, it was on a 
Swiss-based Iranian-owned firm that was a major investor in oil 
and gas developments, but it became the first test case, 
because, up until then, there had not been an agreement upon 
the criteria and the willingness to impose that sanction.
    On the human rights side, we have been designating Iranians 
for human rights abuses, and we will keep that going. And I am 
very committed to that.
    We have also used CISADA to convince Shell, Statoil, ENI, 
Total, INPEX to withdraw from Iran. So the threat of the 
sanctions has produced the results we were seeking.
    And we have also been opening up investigations, monitoring 
sanctionable activities. We are going to pursue a lot of these 
leads that we have. Some of this is in a classified format, but 
we would be happy to give you and your staff a briefing so that 
you know what we are doing and how we are pursuing the leads 
that we get from our investigations.
    Mr. Austria. Thank you.
    And let me just say, I want to thank you and your staff. We 
had a situation in Egypt--and you talked about the wonderful 
job that is being done with staff. We had a situation where a 
student was over in Egypt during the uncertainty over there 
with the government, and your office did an outstanding job of 
helping that student and other students who were at the 
American university over there to ensure their safety to get 
back to the United States. And I want to thank you for your 
work and your help on that.
    And, with that, I will yield back.
    Secretary Clinton. Thank you, Congressman.
    Ms. Granger. Thank you very much.
    We promised the Secretary we would be done at noon. It is 
not noon. However, time goes fast. If we go down to 3 minutes 
each and we stay very strict----
    Secretary Clinton. Okay. I will try to talk fast.
    Ms. Granger. Right, talk fast.
    So we will start now. I will ask a question, a very short 
one. It has to do with some concerns that have been coming to 
my office about the Ambassadors Fund for Cultural Preservation. 
And the projects such as restoring mosques and other religious 
sites has been the priority.
    H.R. 1 prohibited those funds, but the administration has 
included $5.75 million in the fiscal year 2012 request for the 
Ambassadors Fund. Also, USAID funds similar programs.
    Can you provide us with how much has been spent on cultural 
preservation at both State and USAID? And, most importantly, 
why does the administration think we should continue to fund 
projects like this? Is this a program you would be willing to 
give up for higher national security priorities?
    Secretary Clinton. Well, Madam Chairwoman, over a 10-year 
period, since 2001, the Ambassadors Cultural Fund has provided 
$1,179,684 to 29 projects, mostly archaeological sites, 
including churches, mosques, and synagogues.
    And what we have used that for--what ambassadors have used 
that for is to illustrate to countries our respect for their 
culture, their history, their religion. And we think it has 
been a good tool, but, obviously, this is an area where, you 
know, we like to give some discretion to our ambassadors so 
that they are able to do things that can make people feel good 
about America, but, obviously, we will be, you know, more than 
willing to talk to you about it.
    Ms. Granger. Thank you.
    One other concern that came out in the Washington Post, and 
that has to do with--it was a criticism of the U.S. Civilian 
surge, it said, in Afghanistan, the civilian surge is hunkered 
down in the capital, removed from the front lines, where they 
are most needed.
    Can you give us an update on that?
    Secretary Clinton. Yes, that is really not fair. You know, 
our people are out there. You know, that is why, when our 
military leaders appear before you, like General Petraeus will 
next week, he talks about having our civilians right there. 
They are embedded with them. They go out with them. They come 
in with them.
    Now, we do have a staff in Kabul, because we work closely 
with the Afghan Government, which is a very important priority. 
And we also, you know, coordinate closely with General 
Petraeus, whose headquarters is also in Kabul.
    So, I mean, I think probably--don't hold me to it; I will 
try to get the exact numbers--but, you know, our percentage of 
people now out in the country not only has gone up dramatically 
in the last 2 years but is more efficient in the way that we 
are partnering. So we can get you some additional details about 
that.
    Ms. Granger. Thank you very much.
    Mrs. Lowey.
    Mrs. Lowey. Thank you again. And we do want to get you out 
on time. Two quick points.
    First of all, my colleagues have mentioned sanctions. And I 
want to congratulate you and the administration for really 
moving that agenda in the United Nations and also through State 
and Treasury.
    However, there was an expose in December 2010. It listed 
many possible clues to companies that are getting around the 
sanctions. So I want to emphasize again that this committee 
feels very strongly about continuing to tighten those 
sanctions.
    Another issue that you have been dealing with, and I know, 
having watched you talking to many governments about 
corruption, corruption, corruption. I have been very concerned, 
as have you, about the fact, and I quote, ``Fewer than 3 
million of Pakistan's 175 million citizens pay any income 
taxes, and the country's tax-to-GDP ratio is only 9 percent.'' 
This is one of the lowest tax-to-GDP ratios in the world.
    And I know that you have spoken up about this. These 
countries have a very difficult time. And we know just recently 
Zardari wanted to do something about it, and there was an 
outburst from the elites. But if there is anything that we can 
do, working with you. We understand the importance of the 
relationship and the alliance, but the fact that we are 
spending billions of our tax dollars and they are not 
contributing with regard to taxes.
    So if you have a quick comment on that, I would be most 
appreciative.
    Secretary Clinton. Well, I have a quick comment to say 
thank you, because this is a real pet peeve of mine.
    I am more than proud to have the United States help 
countries in need. But it is very hard to accept helping a 
country that won't help itself by taxing its richest citizens. 
Just start there. And we know, because I spoke out about it 
when I was in Pakistan the very first time, that the tax system 
is woefully inequitable and does not in any way reflect the 
needs that the people of Pakistan have for schools, health 
clinics, and so much else.
    So I have been very outspoken about this. You know, it has 
caused some criticism, but I feel strongly about it.
    I feel strongly, frankly, about Mexico. Mexico's percentage 
of revenue to GDP is not what it should be.
    So countries that we are helping have to face up to the 
tough political decisions. And there are many different ways to 
get the revenues you need, but I think we have to look at doing 
more to encourage them to step up and meet their own people's 
needs.
    Mrs. Lowey. And I appreciate that. I know this committee, 
because of the tremendous budget challenges, would be delighted 
to help you.
    The International Monetary Fund, not too long ago, I think 
it was 2008, froze a $11.3 billion loan that was approved for 
Pakistan until they ponied up and did something about the tax 
issues.
    So thank you for your leadership. We look forward to 
continuing to work with you. Thank you for your leadership 
everywhere.
    Secretary Clinton. Thank you.
    Mrs. Lowey. Thank you.
    Ms. Granger. Mr. Lewis.
    Mr. Lewis. Madam Secretary, I won't ask my last question, 
but, rather, will say that I look forward to having, in other 
channels, an opportunity to discuss the Pakistan military.
    Secretary Clinton. Thank you. I look forward to that.
    Ms. Granger. Mr. Rothman.
    Mr. Rothman. Thank you, Madam Chair.
    I just want to make a comment about Iraq, which I think you 
have addressed in your remarks, but it is very important.
    We have spent and will spend literally--we have spent 
thousands of American lives there, tens of thousands wounded of 
our brave young men and women. We have spent and will spend 
trillions of dollars on that war, heretofore and in the future, 
for health care for those who came home and other support.
    It would be a disaster if we did not do the follow-up after 
our troops were gone, such that Iraq became an unfriendly 
nation or, God forbid, became a satellite, like Lebanon or 
Iran. And Iran, of course, as you well know, Madam Secretary, 
is interested in just that, and has invested in the Iraqi 
elections and all kinds of other aspects of the Iraqi economy, 
et cetera.
    And so your statement that your interest in having 
consulates throughout Iraq I think is brilliant, as well as the 
work of the Pentagon and their efforts. But since we are on 
this Foreign Operations Subcommittee, Madam Chair--and I am 
also on the Defense Subcommittee, as is Mr. Cole. But I want to 
say that that is an investment we must continue to make, lest 
we throw away all of the sacrifices that this Nation has put 
in.
    Secretary Clinton. I agree with you, Congressman.
    I mean, the things that keep me up at night--which are many 
and growing. I think about, 5 or 10 years, seeing a situation 
like you are describing develop, where at least southern Iraq 
or, maybe all the way up into Kirkuk is largely under Iranian 
influence and they have lost their chance to be an independent, 
Arab, nationalistic democracy, and people say to us, ``Well, 
what were you all thinking? I mean, you had this incredible 
war. You put all this money in. You lost all these lives. You 
have all these veterans who are suffering. What were you 
thinking?''
    And, I don't want to answer that question saying, ``Well, 
you know, we decided once the military left we left.'' Because 
I think that would be a really great tragedy and unfair to all 
the sacrifice that this country and particularly our brave 
young men and women have made.
    Mr. Rothman. Thank you, Madam Secretary.
    Thank you, Madam Chair.
    Ms. Granger. Thank you.
    Mr. Cole.
    Mr. Cole. Thank you, Madam Chairman.
    Just one question, a little bit of a follow-up to Mr. 
Rothman, just that you are trying to manage a very difficult 
situation that, really, nobody anticipated. We have adversaries 
who didn't anticipate it either, but they are undoubtedly 
trying to exploit it.
    So could you go through for the committee some of the 
challenges you see, from al Qaeda, the Iranians, and what are 
they doing in Egypt, what are they doing in Libya and these 
other places?
    Secretary Clinton. That is another thing that keeps me up 
at night, Congressman Cole.
    Neither Iran nor al Qaeda had anything to do with these 
uprisings. Now, there are those who are of conspiratorially 
minded approaches, and they claim they did, but there is no 
evidence of that. But there is no doubt that they are going to 
try to take advantage of everything that is happening 
everywhere.
    We know, from our intelligence reporting, from anecdotal 
reporting, our embassies, our political officers, that 
everywhere Iran can take advantage, they are going to, either 
directly or indirectly through proxies like Hezbollah and 
Hamas.
    There is no doubt that Hezbollah--to go back to the 
question about Bahrain that Congressman Schiff asked--that 
Hezbollah is going to try to influence the outcome in Bahrain. 
They are going to try to say, ``You should be what we are. And 
look at where we now are, with such a major influence in the 
Lebanese Government.''
    You have Hamas right on the border of Egypt. You have 
absolutely every reason to believe that, with Iran now 
supporting Hamas, that they are going to be in there trying to 
figure out what they can do to influence the outcome.
    We are in a competition for influence all over the world 
right now. You know, we are the leading power. We have enormous 
assets. But in the Asia Pacific, we are competing with China. 
In Africa, we are competing with China. In Africa, we are 
competing with Iran. In Latin America, we are competing with 
China and, increasingly, Iran. You know, we are not in a static 
situation where we have the luxury to say, ``Well, give us a 
few years, and then we will get back in the game.''
    So I think your caution is a very strong one. And I would 
only add this point: Al Qaeda has a presence in what is called 
al Qaeda in the Islamic Maghreb, which is North Africa. They 
had a presence, to some extent, in Libya. They were suppressed 
like everybody else in Libya was suppressed. But there is no 
doubt in my mind that if they see an opportunity, just as they 
saw an opportunity in Somalia, as they have seen an opportunity 
in Yemen, they are going to do what they can to influence the 
outcome.
    So the United States is faced with a choice. I mean, we can 
stand on the sidelines and hope and pray for the best. We can 
get so involved that we are accused of interfering, going after 
oil, you know, trying to occupy another Islamic country. Or we 
can try to do what we are doing, which is, you know, be smart 
about how we offer assistance, how we respond, how we bring the 
international community along. And that is the toughest of the 
options, but that is what we are trying to do.
    Mr. Cole. Thank you, Madam Secretary.
    Thank you, Madam Chair.
    Ms. Granger. Thank you.
    Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair.
    I am curious about the Egyptian decision to allow the 
Iranian ships to go through the Suez. It seemed like an oddly 
out-of-step move coming on the heels of the military, I think 
very correctly and strategically, saying it would observe the 
peace treaty with Israel. It just seemed, out of the blue. Can 
you shed any light on what motivated that?
    And I also wanted to ask you about Pakistan. I was really 
discouraged to see not only that the terrible assassinations of 
the governor of Punjab and the minority cabinet member, but 
even more disturbing was the public reaction in Pakistan, which 
was to have mass celebrations of the first and maybe somewhat 
diminished in terms of the second.
    But to have tens of thousands or hundreds of thousands of 
people celebrating in favor of the assassin, to have the 
lawyers, who had been advocating for Chaudhry's return to the 
court, now advocating for the assassin is so discouraging to 
me.
    Are we losing the battle for hearts and minds if they are 
going to be celebrating assassins where the victims are people 
preaching tolerance?
    Secretary Clinton. Well, first, on Suez, I don't have any 
insight, other than that is a major source of revenue. So every 
ship that goes through pays a bunch of money. And I think that 
probably close to $200,000 came into the Egyptian coffers with 
those two ships going through. So it may be something, 
Congressman, as simple as, ``We are desperate. We need money. 
They want to go through? Make sure they pay.'' I don't have any 
other information.
    With respect to Pakistan, let me tie it to our budget, 
because I share your concern. I met Governor Taseer and his 
family when I was in Pakistan a year or so ago. And I deeply 
regretted and mourned his murder and was appalled by the 
reaction that occurred in the country.
    The reaction when Minister Bhatti was murdered was much 
more in keeping with what I would expect and hope for any 
country, that when someone who was a patriot, who stood up for 
the rights of all Pakistanis, including the minority 
communities, the minority Christian and the minority Islamic 
communities, was assassinated, people really did speak out and 
were quite upset.
    But I think that--we have a very difficult situation in 
Pakistan. I don't want to sugarcoat it. You know, this 
committee knows it.
    When I became Secretary of State, I realized that our 
public standing was the lowest in Pakistan of any country in 
the world. And there are many reasons for that. But one of the 
problems was we were not really trying to respond to a lot of 
the criticism and a lot of the accusations. So when the 
question came, I think, from this side about the increase in 
personnel, I mean, we are beefing up our public diplomacy. We 
have a great story to tell about America, and we are going to 
keep telling it. And we are telling it under very difficult 
circumstances.
    But our standing in Pakistan is very difficult because 
there is just so much going on inside the country itself. And 
when I was here the first time in 2009, I said that the 
Pakistanis needed to take on the extremists inside their own 
country. And they have done that. So there are things that are 
changing, but it is a long way to go.
    Ms. Granger. Thank you.
    Mr. Schiff. Thank you.
    Ms. Granger. Mr. Diaz-Balart.
    Mr. Diaz-Balart. I will be brief. Thank you, Madam 
Chairwoman.
    Madam Secretary, let me first thank you again for those 
behalf of the cause of a free Cuba. And I just want to make it 
very clear, there is no doubt in my mind that you want freedom 
for the Cuban people--no doubt in my mind. I don't question 
that at all.
    I just do want to bring, though, to your attention, if you 
look at at a time when Mr. Clapper was talking about--and I 
have it here. I am not going to quote him, but I have here his 
statement where he talked about how the economy on that island 
is destroyed and, frankly, the people are on the verge of 
revolt because of it. This administration has eased sanctions.
    And I will also then point out this IMF report, and I am 
not going to quote it, but it talks about how the Cuban 
authorities are poised to benefit from travel--the Cuban 
authorities--are poised to benefit from travel for U.S. 
Visitors. And then later, it goes on to say that the results 
suggest that, for Cuba, the loosening of travel restrictions in 
2009 helped offset the decline in arrivals from the global 
financial crisis. And it goes on.
    In the interest of time, Madam Secretary, I would just like 
to continue to work with you. Because it is evident that the 
loosening of the restrictions are, frankly, helping the regime, 
not hurting it. It is helping to fund the regime at a time when 
this administration has said publicly on more than one occasion 
that the situation in Cuba--the economy is in dire straits. And 
yet, according to the IMF and others, we are now being one of 
the--the United States, through travel and through the 
loosening of the restrictions, are, frankly, being one of the 
largest sources of revenue for the regime.
    So I would just like to continue to work with you on that. 
Hopefully we can sit down, look at these facts, and maybe 
reconsider or look at other options that would be more 
effective in helping to help the Cuban people in their fight 
for freedom.
    So thank you, Madam Secretary.
    Secretary Clinton. I would be very happy to do that, 
Congressman.
    Ms. Granger. Mr. Austria.
    Mr. Austria. Thank you, Madam Chairman.
    Thank you, Madam Secretary.
    Just one follow-up question on Egypt. As that situation 
evolves, I know we have talked about this, how important it is 
to protect the interests that we have right now, in having 
peace between Egypt and Israel and maintaining that the Suez 
Canal remains open and that the Egyptian Army continues to 
provide that security on the Gaza border. And you mentioned the 
threat of Hamas and Hezbollah and that Egypt continues to play 
a positive role in that region.
    My question is, who is in charge right now? What are we 
doing to protect those interests?
    And what is the administration's policy toward the Muslim 
Brotherhood? Because that issue came up, and that was an 
important factor, as we saw all this transpire in Egypt. And 
what can we do to ensure that the democratic process, the 
elections, are not used--and you mentioned there is that 
threat--not used to advance the interests of anti-democratic 
forces, such as, possibly, the Muslim Brotherhood?
    Secretary Clinton. Well, first, we are working closely with 
the so-called SCAF, the Supreme Council of the Armed Forces, 
Field Marshal Tantawi, who is the head of that organization. We 
think that the military has served as a guardian and caretaker 
of the state of Egypt and is also now leading the transition to 
democracy.
    We were very pleased when among their first acts was to 
issue a statement that they would respect the Camp David 
Accords and the peace between Israel and Egypt. We want to 
encourage that and see that continue.
    I think that the collapse of the interior department, the 
security system, and the police force inside Egypt has made a 
very difficult situation for the military even harder.
    So they are working with the information that they obtain 
about what is happening on their border with Hamas. We think 
that they are taking appropriate steps there, but we are going 
to keep a close eye on that.
    We think that they understand the need to have an electoral 
system that doesn't favor any one group, that, you know, really 
makes it a free and fair election. We have made clear our 
policy is to support those who are committed to democratic 
values, who are not involved in or endorse violence in any way, 
who wish to participate in free and fair elections.
    And, you know, it will be, ultimately, up to the Egyptian 
people to decide who their leaders will be, who they will 
elect, but we want to be sure that they are given as much 
information as possible from other countries about how to run 
elections that will produce results that keep democracy going.
    Because the last thing we want to see is one election and 
then it is over, and some organized group--you know, people 
were mentioning looking at Hungary and other places. Well, look 
at Iran. You know, Iran, at the time, didn't look like it would 
morph into the police state that it has become.
    So there are a lot of lessons. And we and others are 
certainly sharing our experiences with the Egyptians.
    Mr. Austria. Thank you, Madam Secretary.
    Thank you, Madam Chair.
    Ms. Granger. Thank you, Madam Secretary, for your attention 
today, for your responses. We appreciate your being here. We 
appreciate the job that you have done and continue to do.
    This will conclude today's hearing. Members may submit 
questions for the record.
    Madam Secretary, the committee expects prompt responses so 
that we can make informed decisions on the fiscal year 2012 
request. Thank you again.
    Secretary Clinton. Thank you very much.
    Ms. Granger. The hearing is adjourned.

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                                         Wednesday, March 30, 2011.

               U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

                                WITNESS

RAJIV SHAH, Dr., ADMINISTRATOR, U.S. AGENCY FOR INTERNATIONAL 
    DEVELOPMENT

                Opening Statement of Chairwoman Granger

    Ms. Granger. The Subcommittee on State, Foreign Operations, 
and Related Programs will come to order.
    I would like to welcome the administrator of the U.S. 
Agency for International Development, Dr. Rajiv Shah, to 
discuss the fiscal year 2012 budget request.
    Today, we have a delegation of members from parliament from 
Indonesia, Iraq, Lebanon, and Pakistan visiting Washington.
    Thank you for visiting here. Thank you for choosing our 
hearing.
    Many of them are seated in the audience, and I want to 
welcome all of them for choosing to come here.
    Dr. Shah, thank you for appearing today. The fiscal year 
2012 request for the State-Foreign Operations bill is $59.5 
billion, which is $10.7 billion, or 22 percent, above the 2010 
level.
    USAID administers a large portion of the funding in the 
bill--key programs like global health, economic growth, 
democracy and governance, and disaster assistance.
    Last week, I led a delegation of Members from this 
subcommittee and the Defense Subcommittee to Colombia, Panama, 
Guatemala, and Mexico. We saw firsthand the positive impact 
programs like these can make to transform countries. Your staff 
in the field are truly dedicated, and I thank them for their 
service.
    While I understand the value of many of these important 
programs, the funding requested for next year is truly 
unrealistic in today's budget environment. Although the 
administration characterizes this request as a lean budget, the 
truth remains that an increase of almost $10 billion is a 
significant amount for American taxpayers.
    As we all know too well, the Federal Government's debt has 
grown enormously. With debt at historic levels, the Congress 
must demonstrate an immediate commitment to restrain Federal 
spending. As this subcommittee works together to make difficult 
funding decisions, I will ask Members to look first at programs 
that support our highest-priority national-security needs. We 
must make a conscious effort to identify what is most important 
and meet those requirements within our subcommittee allocation. 
We simply cannot fund everything that has been funded in the 
past, and we certainly cannot continue to fund programs that 
are duplicative and wasteful.
    A large portion of the USAID request directly supports our 
national security, including programs for the front-line states 
in the Middle East. I will have a number of questions about 
these activities today.
    There are other requests that will require more discussion. 
Specifically, I hope you will address the large requests for 
global health, food security, and climate change. We need to 
better understand what has been achieved, what is planned, and 
what efficiencies can be identified so that the subcommittee 
can prioritize these requests accordingly.
    The subcommittee also needs to hear more about USAID's 
staffing surge--the Development Leadership Initiative. I 
understand that the goal is to increase the Agency's in-house 
staff so that they can better manage contracts and monitor and 
evaluate projects. However, doubling the number of Foreign 
Service officers--an increase of 1,200 employees above fiscal 
year 2008--is extremely ambitious. With this country facing 
such a dire fiscal situation, we need to know if this global 
staffing surge should remain a priority.
    We would also like to hear more about your efforts to 
reform the Agency through the initiative you began last year 
called USAID Forward. While the goals you have laid out are 
important, this proposal is expensive. We need to understand 
why it takes more money just to conduct business a little 
differently.
    Dr. Shah, I hope you will address all of these themes in 
your testimony and during questions, and I look forward to 
hearing from you today.
    Let me close by reiterating that I want the subcommittee to 
work closely with you to craft a bill that funds the highest-
priority programs that support our national security. But, at 
the same time, we must focus on slowing the rapid growth of 
some programs, eliminating duplicative programs and personnel, 
and increasing oversight and transparency. I know that, working 
together, we can achieve these goals.
    I will now turn to the ranking member, Mrs. Lowey.

               Opening Statement of Ranking Member Lowey

    Mrs. Lowey. Thank you.
    It is a pleasure for me to join with our distinguished 
chairwoman and recognize the delegation. Thank you for joining 
us here today, and I hope you have an interesting and 
productive visit.
    Dr. Shah, I join Chairwoman Granger in welcoming you here 
today.
    USAID makes a profound statement about what our country 
stands for. We help treat the deadliest diseases that kill 
millions each year. We educate and empower youth with skills to 
be productive adults. We address climate challenges that 
threaten food supplies and the health of our air and water. We 
respond in times of crisis and disaster. And we build strong 
governments and civil societies to sustain these efforts.
    Throughout the world, millions have the chance to live 
healthy, productive lives because of USAID's efforts. And 
because development increases global stability, it is as 
important to our Nation's national security as diplomacy and 
defense. I am very concerned that budget cuts will imperil the 
Agency's efforts to regain the expertise to be the premier 
development agency in the world.
    While we are here to discuss the President's request for 
fiscal year 2012, your perspective on the effects of the 
proposed cuts for fiscal year 2011 in H.R. 1 on USAID's 
programs and America's global leadership would also be helpful.
    One area of particular concern is the substantial cut to 
international family planning that was accompanied by the 
divisive reinstatement of the global gag rule in H.R. 1. I hope 
you will quantify how cuts and changes will compromise the 
success of our previous development investments.
    In your overview of the administration's $14.2 billion 
request for these critical programs under your direction, I 
look forward to hearing about the administration's development 
priorities, including USAID Forward, as well as activities to 
ensure every development dollar is spent wisely and 
effectively. The committee would also benefit from your 
insights on USAID staffing levels and the Agency's capacity to 
plan, implement, and oversee programs.
    While I support the priorities outlined in the President's 
request, I was discouraged that basic education funding was cut 
by $185 million. While nothing is a panacea in the development 
world, education, in my judgment, is the closest thing we have. 
It is an essential foundation for health, economic development, 
gender equality, and long-term security. Investments in 
education pay for themselves many times over in economic growth 
and increased capacity. The 9/11 Commission found that 
education was a critical weapon in the fight against terrorism. 
In light of the overwhelming evidence supporting basic 
education, I would appreciate an explanation of the proposed 
cuts.
    The argument has been made recently that, while foreign aid 
programs may be effective, they are just not worth it given our 
current economic woes. I couldn't disagree more. And I think it 
is essential that we explain to the public clearly that foreign 
aid accounts for less than 1 percent of our Nation's budget. We 
cannot balance our budget, pay down the deficit, solve our 
economic woes by attacking this 1 percent.
    I certainly join my colleagues on both sides of the aisle 
who understand and believe that we have to deal with the 
deficit. It is essential to our future. But this 1 percent 
shouldn't take a disproportionate cut. In fact, drastic cuts to 
USAID would risk a great deal in stability and security around 
the world, which could spawn the kinds of threats that cost 
this country the lives of men and women in uniform and billions 
in treasure.
    In the 1980s, when President Reagan undertook to rebuild 
the U.S. military, he said, and I quote, ``We had to make up 
for lost years of investment by moving forward with a long-term 
plan to prepare for the future.'' We now have the greatest 
military force in the world, and many in its leadership lament 
the lack of enough development professionals on the ground in 
key strategic regions. In fact, President George W. Bush 
described American power as a three-legged stool: defense, 
diplomacy, and development. We must ensure that all three legs 
remain strong.
    We have made investments that are paying off now. We cannot 
afford to backtrack on our progress. Maintaining America's 
moral leadership throughout the world, keeping our own country 
safe and secure, and saving taxpayers' money by preventing 
future crises is essential.
    I look forward to your testimony and to working with you 
toward these goals.
    Thank you.
    Ms. Granger. Administrator Shaw, please feel free to 
summarize your remarks. Without objection, your full statement 
will be submitted for the record.

                     Opening Statement of Dr. Shah

    Dr. Shah. Thank you.
    Thank you very much, Madam Chairwoman, Ranking Member 
Lowey, and members of the committee. I am honored to join you 
here today in support of the President's fiscal year 2012 
budget request.
    I also want to thank the international delegation for 
joining us today. It is a special honor to be with you.
    I want to briefly comment on USAID's response to the 
devastating earthquake and subsequent tsunami in Japan and the 
remarkable events taking place in the Middle East.
    In Japan, USAID is supporting a whole-of-government 
response, coordinating an interagency effort with the Nuclear 
Regulatory Commission, the Departments of State, Energy, 
Defense, and Health and Human Services. We have deployed our 
largest interagency Disaster Assistance Response Team to 
support the Japanese emergency response efforts and provide 
technical expertise on nuclear regulatory systems. We have also 
provided 10,000 personal protective equipment sets, including 
suits, masks, gloves, at the request of the Japanese 
Government, to help those working near the contaminated zone in 
Fukushima.
    USAID has also led a significant humanitarian response to 
recent events in the Middle East. As we speak, our disaster 
assistance teams are working on the Tunisian border with Libya 
and in Egypt, helping to deliver and coordinate assistance to 
those affected by conflict.
    In eastern Libya, we have delivered health kits capable of 
providing basic care to more than 40,000 people and worked with 
key partners, such as the World Food Programme, to support 
prepositioning and distribution of food and water.
    In places like Libya, Cote d'Ivoire, Darfur, and Haiti, we 
are focusing on concurrent humanitarian responses to provide 
critical assistance and care to those in crisis and those in 
need.
    Both the President and Secretary Clinton have emphasized 
that development is as important to our nation's foreign policy 
as diplomacy and defense. As a result, they have actively 
championed the goal of establishing USAID as an accountable and 
premier development enterprise.
    Representing less than 1 percent of the Federal budget, the 
President's fiscal year 2012 request balances difficult 
tradeoffs with a clear-eyed assessment of where we can achieve 
the best results, the most dramatic and meaningful results, 
around the world.
    Forming the largest part of the President's budget request 
for foreign operations, the $8.7 billion USAID and State are 
requesting for the Global Health and Child Survival account 
will allow us to achieve concrete outcomes. We will continue to 
transform HIV-AIDS from a death sentence to a manageable 
disease for more than 4 million HIV-positive patients that 
currently get anti-retroviral drugs. We will reduce the burden 
of malaria by more than half for 450 million people, helping 
countries and economies stabilize and grow. And we will prevent 
more than 4 million child deaths by providing cost-efficient 
vaccines to the farthest corners of the globe.
    We are also focused on helping countries develop their own 
agricultural sectors so they can feed themselves, an approach 
that is much more cost-effective over the long run than either 
food assistance or addressing food riots, famines, and failed 
states after the fact.
    For the $1.1 billion we are requesting for Feed the Future 
bilateral agricultural development programs, we will be able to 
help nearly 18 million people in 20 countries, each of which 
have made their own significant commitments to this project. 
And most of the people we will help are women. We will help 
them grow enough food to feed their families and break the 
grips of hunger and poverty.
    In both health and food, these new strategies are 
emblematic of a new, results-oriented approach we are trying to 
take throughout our development, democracy, governance, 
education, and water portfolios in order to get more leverage 
and better results for American taxpayers.
    But our foreign assistance will not just help people 
abroad; it will provide real, tangible benefits for those of us 
here at home. USAID's logo is a handshake, accompanied by the 
motto, ``From the American People.'' But now more than ever, we 
are also delivering real benefits for the American people.
    In the most volatile regions of Afghanistan and Pakistan, 
USAID works side-by-side with the United States military, 
playing a critical role in stabilizing districts, building 
responsive local governance, improving the lives of citizens, 
and, ultimately, paving the way for our troops to return home 
safely. As General Petraeus recently warned, inadequate 
resourcing of our civilian partners in fact could jeopardize 
the accomplishment of the overall mission.
    USAID's work also strengthens America's economic security. 
By establishing links to consumers at the bottom of the 
pyramid, we effectively position American companies to enter 
more markets and sell more goods in the economies of the 
future, promoting exports and creating American jobs.
    Because development is critical to our national security 
and our future prosperity, USAID has worked tirelessly to 
change how we work across all of our areas of activity. 
Consistent with the President's policy directive on development 
and the Quadrennial Diplomacy and Development Review, we have 
launched a set of reforms we called USAID Forward.
    To ensure our assistance is effective, we are requesting 
$19.7 million in 2012 to implement a new evaluation policy that 
is already setting the standard for the global community. This 
policy will provide performance evaluations for every major 
project, release them publicly within 3 months of their 
completion, and ensure that learnings are incorporated into 
subsequent programs as they are designed.
    To vigorously prevent and respond to fraud, waste, and 
abuse, I have created a new suspensions and debarment task 
force, led by our Deputy Administrator, Don Steinberg. This 
task force is already coordinating efforts to more closely and 
more aggressively monitor, investigate, and respond to 
suspicious activity.
    Across our portfolio, we are seeking new ways to harness 
the powers of science, technology, and innovation to 
dramatically reduce the costs of achieving the results we seek 
to achieve. For our request of $22.1 million, we will recapture 
USAID's legacy as the leader in applying scientific and 
technical solutions to the challenge of development, reducing 
the cost of conducting our activities in health, agriculture, 
and so many other parts of our portfolio.
    Fundamentally, all of the reforms I have outlined are 
designed to achieve the same result: to create the conditions 
where our assistance is no longer necessary.
    The President's budget request puts this approach into 
practice. It cuts development assistance in at least 20 
countries by more than half, including 11 countries where all 
bilateral development assistance has been eliminated. It 
terminates USAID missions in three countries. And it 
reallocates almost $400 million in assistance and shifts a 
significant number of Foreign Service positions toward priority 
countries and priority initiatives, making tough, sometimes 
gut-wrenching tradeoffs in the process.
    We understand that USAID must continue to do its work in a 
way that allows our efforts to be replaced over time by 
efficient local governments, thriving civil societies, and 
vibrant private sectors. That is why we have launched the most 
aggressive procurement reforms and contracting reforms our 
agency has ever seen. Instead of continuing to sign large 
contracts with large contractors, we are accelerating our 
funding to local partners, local entrepreneurs, and tightening 
our oversight of projects and programs.
    To implement the QDDR and these reforms and to deliver 
better results more efficiently for the American people, it is 
crucial that USAID's 2012 operational budget request of $1.5 
billion is fully funded. And I look forward to discussing the 
details of certain programs, like the Development Leadership 
Initiative and our procurement reform staffing requirements.
    At the end of the day, our assistance is not just a line in 
a budget. It is a reflection of who we are as a country and a 
core part of our national security strategy. Putting these 
values into action will deliver real results for the American 
people, making us safer, more secure, and more prosperous.
    I look forward to this discussion, and I appreciate your 
continued guidance, counsel, and support. Thank you.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Ms. Granger. Thank you, Dr. Shah. Thank you for your 
remarks.
    I thank you for quoting General Petraeus. He was very 
strong in his statements when he was here, before our time off, 
saying how important the work we do in State-Foreign Operations 
is to the work he is doing in defense. And I think everyone on 
this subcommittee understands that.
    You have your exhibit there, that it is less than 1 percent 
of the budget. I will remind you, it is 5 percent of the 
discretionary spending, so that is the figure that we are 
working on.
    I want to ask you, starting with the questions--and you 
talked about how you are approaching this. I am going to bring 
up something we have talked about before, and that is direct 
assistance. We have talked about this at previous hearings. I 
continue to be concerned about it.
    As part of your procurement reform initiative, your goal is 
to reach a level of 20 percent direct assistance in many 
countries by 2015. And for Afghanistan and Pakistan, a 50 
percent goal remains in place. I continue to be concerned about 
this because of the lack of institutional infrastructure in 
some of the countries and the continuing reports of corruption 
in countries.
    My question is how they will handle this direct assistance. 
It raises a number of questions, particularly at a time when 
foreign assistance is under such intense scrutiny. So tell me 
what specific measures USAID will take before providing direct 
assistance and throughout the life of that program.
    Dr. Shah. Thank you. I appreciate the opportunity to do so.
    Our procurement reform overall is designed to allow us to 
work with a broader range of partners and to more efficiently 
deliver development assistance resources to projects and 
programs without losing as much to middle institutions along 
the way.
    The purpose of our procurement reform, especially as it 
relates to direct assistance and to investments in local 
institutions, whether they are parts of governments or not, is 
to help build local capacity so that we have an exit strategy 
over time and we can step away from our assistance, as we have 
in a number of Latin American countries, with key long-term 
support for institutions that have become vibrant and self-
sustaining, including many of the countries that the delegation 
recently visited.
    I do believe the goal in Afghanistan and Pakistan of 
reaching 50 percent direct assistance is appropriate and can be 
implemented in a manner that ensures accountability.
    In Afghanistan, much of that assistance is provided through 
the Afghanistan Reconstruction Trust Fund. It is a program that 
is designed with the World Bank and many other partners. The 
major targets of resource use coming out of that are both 
infrastructure targets and the National Solidarity Programme, 
which recently received very strong validation from an 
independently conducted review by a United States university 
team that showed that it generates real outcomes on the ground 
efficiently.
    We are able to monitor the flow of resources from that 
trust fund through to those programs and beneficiaries using 
the same process we would use with any other independent 
contract partner. And we do not alleviate or lessen our 
controls and our accountability. In fact, we provide a greater 
degree of accountability.
    In Afghanistan, that particular project is subject to our 
new Accountable Assistance for Afghanistan, or ``A-Cubed,'' 
effort that intensifies program design, has more site visits 
and project officers visiting programs, requires reporting back 
to Washington on what percentage of dollars are reaching 
beneficiaries and how a dollar actually gets consumed in the 
process of providing assistance, and monitors more regularly 
independent audits of those projects and of those programs.
    Similarly, in Pakistan, we have been able to achieve 
already about 47 percent direct assistance. But, again, we are 
not doing that by writing checks in a blank way to the 
Pakistani Government, by no means. We establish project control 
units. We still provide assistance specific to specific 
projects and programs that allow us to track how a dollar we 
are spending in that mechanism is used to buy vaccines or train 
midwives and then report on the flow of funds in that context.
    So, in both of those examples and in so many other parts of 
the world where we are taking this approach, we are 
intensifying our oversight. And the goal is not to reduce the 
quality of our accountability, but, rather, to build the 
capacity in institutions so we have an exit strategy for our 
assistance over time.
    Ms. Granger. And I certainly understand it in countries, 
some of which we did visit, and that works, but they have a 
more mature infrastructure. When you talked about audits, my 
understanding is that you plan to contract out some of the 
assessments using local audit firms. But your own inspector 
general has raised concerns about the credibility of local 
audit firms in Pakistan. How will you make sure that those 
reviews are legitimate?
    Dr. Shah. So, all of our auditing is done through validated 
audit firms. We have looked very carefully, especially in 
Pakistan, at U.S. firms that have local affiliates. And it will 
not be enough for us to just have a PricewaterhouseCoopers or 
Deloitte or some U.S. name on a firm. We will assess each team 
individually to make sure that they are capable of conducting 
the audits.
    I would also say with respect to Afghanistan and Pakistan, 
in particular, we are intensifying as part of our A-Cubed 
effort mandatory data reporting so that we have access to a 
broader range of data and we are not subject, as we have been 
in the past in conflict and war zones, to confidentiality 
agreements that limit the data that come in to our auditors. 
And we are correcting and improving our accountability on that 
specifically.
    Ms. Granger. Would you please give us the accountability 
measures in Afghanistan, just for the record? You called it A-
Cubed?
    Dr. Shah. Yes.
    Ms. Granger. And if you would give that to us for the 
record.
    Dr. Shah. Yes.

Dr. Shah:

    Accountability in the provision of development assistance is among 
USAID's highest priorities. By providing the majority of our assistance 
in non-permissive areas in Afghanistan, one of the main challenges 
USAID faces is ensuring that USAID resources do not benefit the Taliban 
or other malign groups.
    To address this challenge, USAID established the Accountable 
Assistance for Afghanistan (A3) initiative. The purpose of 
the A3 initiative is to put in place procedures tailored to 
the challenges of insecure environments to protect assistance dollars 
from being diverted from their development purpose by extortion or 
corruption.
    Particular attention is devoted to high-risk areas in Afghanistan 
where funds are more susceptible to being diverted from development 
projects. USAID is enhancing its safeguards for development assistance 
in the following four categories:
    1. Award Mechanisms--A subcontracting clause is being included in 
new awards requiring that a certain percentage of work on a contract be 
done by the prime contractor, restricting the number of subcontract 
tiers when needed, and prohibiting subcontracts with broker/dealers who 
do not perform work themselves.
    2. Vendor Vetting--The mission established a Vetting Support Unit 
in February 2011. The unit conducts national security checks on non-
U.S. companies and non-U.S. key individuals for prime awards and 
subawards to determine whether or not they have a criminal history or 
association with known malign organizations.
    3. Financial Controls--The USAID mission and the USAID Inspector 
General have established a new program to audit 100 percent of locally 
incurred project costs.
    4. Project Oversight--The mission is devolving more project 
monitoring responsibilities to USAID personnel located in field offices 
outside of Kabul. Assigned to specific projects, USAID On-Site Monitors 
will have the authority to monitor implementation of USAID projects and 
report to the USAID Contract/Assistance Officer's Technical 
Representative.

    Ms. Granger. Mrs. Lowey.
    Mrs. Lowey. Thank you.
    And welcome again, Dr. Shah, and thank you for your 
service.
    As you well know, over the past decade, I have worked with 
USAID to put in place an innovative and groundbreaking basic 
education program. And I am disappointed that, for the second 
straight year, the Obama administration has reduced the level 
for basic education. With 67 million children in the developing 
world not in school, I cannot fathom why basic education is not 
one of the key development priorities in the budget. So I have 
a couple of brief questions.
    Can you explain why the funding levels were cut for basic 
education? What does the cut mean about the administration's 
prioritization of education? And is this a strategic decision 
by the administration to de-prioritize education?
    Dr. Shah. Thank you. I appreciate the chance to address 
this issue and very much respect your singular and important 
leadership on this issue.
    Through the presentation of our 2012 budget, we have had to 
make very difficult and very challenging tradeoffs that have 
included a 17 percent reduction in the proposal for the 
education budget.
    Most of those savings are identified in Pakistan and, to a 
lesser extent, Afghanistan, where we believe we can manage a 
transition to a new strategy in both of those countries that 
has prioritized the productive economic growth sectors and will 
maintain a commitment to the education sector but will seek 
greater investment in partnership with partners like DFID and 
other international donors for a more leveraged approach in the 
education sector.
    Our administration is strongly committed to education, and, 
in particular, girls' education. We believe that education is 
one of the most important vehicles for creating sustainable 
societies, stable societies, and productive economies over 
time. We know that a dollar invested in that space provides 
greater outcomes in terms of reductions in child mortality and 
improvement in long-term social outcomes than in almost any 
other.
    As a result, we have structured and presented a new 
education strategy that will allow us to reach 100 million 
students and improve their literacy and reading outcomes at 
grade level, particularly in primary grades. We have 
appreciated the input from yourself and your staff in 
constructing the strategy. We believe it will help us get a 
better handle on making sure every dollar we spend on education 
generates real learning outcomes.
    And we have noted that, over the last decades, as there has 
been increased attendance in schools, there has also been a 
flattening and, in some cases, a reduction in quality and 
educational attainment outcomes, in part due to overcrowding 
and other issues related to teacher effectiveness. So we are 
very focused on getting better outcomes through the strategy.
    I would also want to comment that the current situation 
with respect to H.R. 1 creates a significant difficulty with 
respect to education. It goes well beyond the 17 percent and 
almost doubles the effective cut on education programs. At that 
level, we would not be able to protect the non-Pakistan, non-
Afghanistan girls' education programs, and we think as many as 
10 million girls, in particular, might be vulnerable and, 
therefore, no longer receiving assistance through USAID's 
girls' education programs.
    We are going through a very challenging process of trying 
to understand where we can rationalize. And we have presented 
in the 2012 budget a series of rationalizations that are 
difficult tradeoffs to make. But I believe the setback 
represented for girls' education in that budget will be very, 
very hard for us to overcome, because we would be cutting back 
in a manner that wouldn't let us make the transition to the 
more outcomes-oriented strategy we are presenting.
    Mrs. Lowey. A couple of quick follow-ups. What is the 
reasoning behind deciding not to prioritize secondary 
education?
    And there have been recent reports in Afghanistan that, 
because of the extreme views by many of the people in charge in 
the villages, that girls' education is going backward rather 
than forward.
    The yellow light is on, so maybe I will just let you 
comment on those two.
    Dr. Shah. On secondary, we will continue to prioritize 
secondary education, but we have found through recent research 
and through the development of our strategy that the evidence 
shows that one of the key barriers for kids and girls, in 
particular, continuing on through secondary education are 
quality and outcomes in terms of learning and attainment in 
primary education.
    So we believe getting kids better outcomes in terms of 
learning and reading, in particular, at grade level in primary 
attainment will lead to a big bump in the number of kids that 
continue on through secondary education. The only reason we 
couldn't put more resources in secondary education were the 
tough tradeoffs we tried to make with respect to the fiscal 
year 2012 budget overall.
    In terms of Afghanistan and girls education, I perhaps will 
come back to that when I have more time on Afghanistan, but we 
have tried to very much prioritize. As you know, that has been 
a 9-year effort to now get more than 7 million kids in school 
over a third of whom are girls. And our team is working very 
hard to maintain the trend there in terms of both attendance, 
attainment, and safe spaces in schools for girls in all 
different contexts in that country.
    Mrs. Lowey. I look forward to continuing the discussion. 
Thank you.
    Ms. Granger. Mr. Lewis.

                      Opening Remarks of Mr. Lewis

    Mr. Lewis. Thank you, Madam Chairman.
    Dr. Shah, welcome. I want to take just a moment to express 
my appreciation for the very significant progress you have made 
within your career within the State Department. You have moved 
very rapidly to positions of very important responsibility, and 
I want to congratulate you relative to that.
    In connection with international education efforts on the 
part of USAID and other government agencies, I must say that I 
can't help but wonder if we are not really kidding ourselves in 
connection with the role that America might actually play in 
connection with these efforts.
    Indeed, the American public is of the view that we spend an 
awful lot more of our money than 1 percent or 5 percent on 
foreign assistance. If you asked the average person out there, 
they will say, surely about 25 percent of our national budget 
goes to foreign assistance. Those of us who care about this 
arena know that that absolutely is not the case and that our 
role in the world needs to increase in intensity.
    But to presume in places like Pakistan or Afghanistan that 
we are going to penetrate those cultures at a level to 
dramatically change their education system could very well be a 
dream world or a kid's game. The fact is that we have done a 
horrible job just using domestic money to improve our own 
education system in this country. One need only spend a few 
moments looking at the Nation's capital education system to 
know what a miserable failure we have been in connection with 
that.
    Dr. Shah, my real point is that delivering money to 
countries like Afghanistan and Pakistan and actually being 
assured that those dollars are going to flow in the direction 
that was intended in the first place is kind of fundamental if 
we really want to help those individual citizens and people in 
those countries. So I would very much like to have you help us 
be more specific regarding the safeguards that are in place to 
ensure that the money flows go where we intend them to go. And, 
indeed, I would be interested in your priorities as to how do 
we improve and strengthen those guarantees.
    Dr. Shah. Thank you. I appreciate your comments.
    I particularly appreciate your highlighting that the 
American public does sometimes believe we spend 25 percent on 
foreign assistance when we spend less than 1 percent. And I am 
encouraged by the fact that they also respond to that data when 
asked how much they think we should spend and say 10 percent, 
and believe it represents a reality that the American public 
are willing to make these investments if they believe they are 
getting real results.
    And that brings me to your question----
    Mr. Lewis. If you will, if we could join in the public's 
concern and suggest we are going to try to push it below that 
10 percent, we might very well create an atmosphere in which 
everybody thinks they got what they want.
    Dr. Shah. Sir, I will leave the political strategy to the 
honorable members of the committee, and I will do my best to 
improve the efficiency and effectiveness of this work.
    With respect to girls' education, especially in Afghanistan 
and Pakistan, you know, these are places where we have now been 
working for a number of years at real scale. In Afghanistan, we 
have more than 7 million kids in school as a result of U.S.-
supported programs. We have helped in a spirit of partnership 
with their ministry to develop standards and provide teacher 
training to improve the quality of education that takes place 
in those settings.
    And we get regular reports on both attendance, quality, and 
the Ministry of Education reforms that we have insisted upon 
and that they have worked with us in the spirit of partnership 
to put in place. So we have standardized protocols for how we 
do the work. That is critical to maintaining stable Afghan 
societies and, to go back to General Petraeus, one of the 
things he has highlighted as necessary to maintain an effective 
environment and exit strategy for U.S. troops.
    In Pakistan, the current environment in Pakistan, with the 
devolution of authority to state governments and provincial 
governments, has required us to work more directly with them. 
And we are pursuing that actively.
    I want to speak to the point about domestic education 
because what we do internationally is quite informed by the 
learnings and the observations of the education reform movement 
here in the United States.
    In fact, the new education strategy that we have proposed 
implements rigorous testing and outcomes testing, so we 
understand reading and literacy outcomes at grade level. It 
sets tougher standards for teacher training. And it puts 
accountability mechanisms in, so families can identify whether 
teachers are showing up in schools as they say they are going 
to.
    All of those things came out of data that is shared between 
the international and domestic communities on the quality of 
education outcomes.
    Ms. Granger. Mr. Jackson.
    Mr. Jackson. Madam Chair, before my time begins, may I ask 
a parliamentary inquiry?
    Ms. Granger. Yes.
    Mr. Jackson. Madam Chair, if I ask my questions up front--
and I do have three questions regarding H.R. 1--is it possible 
to allow the Administrator to use the balance of my time to 
answer the questions without taking the time away from him?
    Ms. Granger. You may.
    Mr. Jackson. That is fine? OK, thank you.
    Ms. Granger. We will depend on Dr. Shah to pay very close 
attention.
    Mr. Jackson. I appreciate that. Thank you, Madam Chair.
    Welcome back to the subcommittee, Dr. Shah. Thank you for 
your testimony.
    H.R. 1 proposes a funding level of $430 million for the 
International Disaster Assistance account, which is 50 percent 
below the President's fiscal year 2011 request and 67 percent 
below fiscal year 2010.
    For those of you who don't know, the International Disaster 
Assistance (IDA) account provides assistance to those who have 
been internally displaced as a result of conflict or natural 
disasters like famines, floods, and earthquakes. The demands on 
this account have increased substantially in recent years as 
the number of people internally displaced by conflict and the 
number of natural disasters have risen. IDA funds are used to 
meet immediate needs that result from humanitarian crises, and 
assist people with critical recovery and transition needs when 
they are able to return home.
    My first question: As many as 50 million people are 
estimated to be displaced in any given year due to tsunamis, 
earthquakes, landslides, flooding, and natural disasters. Most 
of these are unforeseen emergencies that we cannot predict, 
like the earthquake in Haiti that killed an estimated 230,000 
people in January of 2010 or the devastating effects of the 
earthquake and tsunami in Japan. I am interested in knowing, 
how will the cuts affect the IDA account and impair our ability 
to rapidly respond to on-site crisis?
    Secondly, with these cuts, will we have to prioritize which 
emergencies we respond to? Meaning the tradeoffs between 
ongoing and protracted emergencies like the DRC and unexpected 
ones like Japan--will we be making those judgments in light of 
these cuts, Administrator Shah? Where do you see these cuts 
having the deepest impact? And if we cannot respond to these 
emergencies, what will it mean in terms of lives lost?
    And my third question: The International Organization for 
Migration estimated that 810,000 Haitians are still living in 
tents and still need basic assistance, while we work to find 
lasting solutions to the displacement of the devastating 2010 
earthquake. With the cuts in H.R. 1, how will the Office of 
Foreign Disaster Assistance be able to respond to the ongoing 
needs of the people of Haiti?
    I thank the chairwoman for allowing me that latitude.
    Mr. Secretary.
    Dr. Shah. Thank you. I appreciate those questions.
    And you are absolutely right to point out that the 50 
percent cut in the IDA account would be really the most 
dramatic stepping back away from our humanitarian 
responsibilities around the world in decades. We are seeing an 
increase in the number of disasters, and we are seeing an 
increase in the need for American leadership, often to bring in 
other donors to do the cost-sharing and burden-sharing required 
to successfully see through a disaster response and a 
transition.
    Currently, there are 1.6 million people in Darfur that 
depend on food, water, other commodities that are provided by 
USAID through this account. That would have to be reduced 
approximately proportionately, so it puts 800,000 people at 
risk.
    The medium-term support programs for refugees and IDPs 
would be the ones that would perhaps take the most immediate 
consequence. The other consequence would be, we simply would 
not be able to respond to disasters like the one we saw in 
Japan, where our ability to be first and fastest with not just 
getting the traditional Disaster Assistance Response Team that 
USAID has in, but with coordinating and sending in six Nuclear 
Regulatory Commission experts, we had those guys in right away, 
and that made a big difference in terms of the arc of the 
overall partnership. And I give a lot of credit to their work.
    But that is an interagency, whole-of-government response 
capability for which we have responsibility. And this 50 
percent reduction would essentially invalidate our ability to 
conduct those kinds of operations.
    In Haiti, specifically, the numbers have varied between 
650,000 and 810,000 in terms of the number of people still 
requiring disaster assistance response because they are in 
temporary or immediate shelter and camps. And we would have to 
scale back our support for that community, as well.
    So, overall, this would lead to a significant amount of 
reduction in feeding programs, medical programs, and food and 
water programs for people who are incredibly vulnerable and in 
a political environment where they are in real conflict or have 
nowhere else to turn.
    And the United States has always been, on a bipartisan 
basis, for seven decades the leader, in bringing the world 
together to do this work. We are getting more efficient at how 
we do the work. We are getting more data-oriented. And we are 
doing a much better job of getting cost-sharing in. Even in 
this case, we put in place systems that enabled the American 
people to directly give almost $150 million to the Japanese as 
part of that response, which is much more than what we actually 
invested.
    But our ability to be first and to be in the lead for 
coordinating those efforts would be significantly reduced. And, 
you know, quite frankly, in places like Darfur, you would see a 
real humanitarian tragedy.
    Mr. Jackson. Thank you, Madam Chair.
    Thank you, Administrator.
    Ms. Granger. Thank you.
    Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Madam Chairwoman.
    Dr. Shah, good to see you, sir.
    Let me come a little bit closer to our hemisphere. You 
know, there are only four states that are on the Department of 
State list of states that sponsor terrorism. One of them 
happens to be in our hemisphere, and it is the totalitarian 
dictatorship in Cuba.
    We have heard some discussion that the administration is 
considering a new direction for at least some aspects of the 
Cuba program. However, U.S. law and Section 109 of the Cuban 
Liberty and Democratic Solidarity, known as the LIBERTAD Act of 
1996, or the Helms-Burton Act, it precisely enumerates what 
types and for what purposes the assistance is permitted in 
regard to Cuba.
    I am going to read parts of Section 109. It says, ``The 
President is authorized to furnish assistance and provide other 
support for individuals and independent nongovernmental 
organizations to support democracy-building efforts for Cuba, 
including the following: One, published and informational 
matter, such as books, videos, et cetera, on transition to 
democracy, human rights, market economies, to be made available 
to independent democratic groups in Cuba, to humanitarian 
assistance, to victims of political repression and their 
families, i.e., the families of political prisoners, support 
for democratic and human rights groups in Cuba, and for support 
for visits and permanent deployment of independent 
international human rights monitors in Cuba.''
    This authorization does not permit the administration to 
subsidize purely cultural-type exchanges, so-called economic 
reforms, or other activities that are not directly related to 
promoting democracy or human rights in Cuba. That is the law. 
Clearly, that is the law.
    Furthermore, Section 109(c) mandates that, quote, ``The 
President shall take all necessary steps to ensure that no 
funds or other assistance is provided to the Cuban 
Government.''
    Specifically--really, a few questions, if I may, Dr. Shah: 
What are your top priorities for the Cuba program in the 
upcoming year, number one? What changes, if any, do you plan to 
make to the programs as compared to previous years, 
specifically? Number three is, do you plan to continue to build 
on USAID's partnership with NGOs that have a proven track 
record of success in Cuba, which, as you know, is a closed 
society unlike, frankly, many in the world?
    So if you can answer those specific questions. Then, if I 
have time, I will get into some other questions that you and I 
have already talked about. But I would like some specific 
answers on those.
    Ms. Granger. As we did with Mr. Jackson, let's set the 
timer again, and you have 5 minutes to answer.
    Dr. Shah. Thank you. I appreciate the questions.
    In terms of our priorities, they are absolutely consistent 
with Section 109 of the law. They are defined as democracy, 
human rights, civil society investments and investments to 
support humanitarian needs related to dissidents and their 
families, which I think is incredibly consistent with that 
legislation.
    We are putting forward a request for $20 million, as you 
are aware. And we will be executing the programs in a manner 
that is competitively bid and requires and seeks partners who 
are most capable of carrying out the work in an effective way, 
given the context of a closed and authoritarian society. So I 
hope that addresses our priorities.
    In terms of the changes we are making, this will, I think, 
be seen as an evolution from prior years in a direction that is 
more focused around the areas I identified. And in terms of 
partners, I think this will be an effective way to have a 
competitive process to identify partners who are both capable 
of effective program implementation and working in challenging 
environments.
    Mr. Diaz-Balart. If I may, Dr. Shah, again, because the law 
doesn't permit it, so you are not looking at changing it for 
cultural programs, for that kind of thing? Is that correct?
    Dr. Shah. That is correct. We are not.
    Mr. Diaz-Balart. Okay. Now, when you are looking at those 
who have a track record, are you focusing on those who have a 
track record in Cuba? You know, because we have had instances 
where people may be very effective in dealing with humanitarian 
cases around the world but not with totalitarian regimes like 
Cuba. So are you looking at those who have had--emphasizing 
those who have a track record in Cuba, with Cuba, dealing with 
stuff in Cuba?
    Dr. Shah. We will be using a number of criteria to identify 
partners who are capable of implementation in Cuba. One of the 
criteria will be their experience in working in those types of 
environments--of course, working in Cuba counts as being in 
that type of environment--and also their organizational and 
management accountabilities, as is our standard process, and 
given our new increased focus on accountabilities and effective 
financial management.
    Mr. Diaz-Balart. Dr. Shah, you and I got together, and I 
guess both of us agreed that, if it wasn't such a serious 
issue, we would kind of think it was funny, which is the fact 
that the CN is still out there. And, since January, my office 
has been told that, yes, in a couple of weeks, it is coming--
and then another couple weeks and another couple weeks. I met 
with State, and I was told in another couple weeks. And you and 
I got together and we both said that, hopefully, by the time we 
were at this hearing, we weren't going to be having to talk 
about when the CN is going to be coming up.
    As we discussed, basically before last year, only $15 
million of the $20 million that was budgeted for Cuba was able 
to be used for Cuba, it was sent to other country, because, 
frankly, the delays. And now we are heading in the same 
direction, unfortunately.
    So when is the CN going to finally be done, number one? And 
how will you keep the program on track, because we are already 
delayed, so that the $20 million that was budgeted by Congress 
for Cuba will actually be used for the intended purposes?
    So it is a two-part question because we are already 
delayed.
    When is the CN going to be out? And how are you going to 
make sure that the money that is there goes to the intended 
purpose?
    Dr. Shah. On the first part of the question, we are working 
with our interagency partners to get the CN to you as soon as 
possible. I had hoped it would be up by the end of the month, 
and I still continue to be focused on that.
    On the second part of the question, we have planning and 
programmatic plans under way to ensure we are able to execute 
the program. And our team that has worked to help construct the 
CN and design this approach will be capable of implementing 
this program in the time frame we have.
    Mr. Diaz-Balart. All right, but you are not going to give 
me a time certain for the CN, though?
    Dr. Shah. I would like to, sir, but I worry that events may 
render that ineffective. So, it is my goal to get that to you 
as soon as possible. I think it is consistent with 109, it is 
consistent with the direction in which we had our discussion. 
And it will be implemented in a manner that prioritizes 
effectiveness and accountability in a difficult implementation 
environment.
    Mr. Diaz-Balart. And I appreciate that. And, again, I don't 
want to, but obviously, you understand that that doesn't give a 
lot of comfort in the whole process when we are continuously--
and, again, you have been great, but when we continue to be 
told, basically, ``Yeah, it is coming, it is coming, it is 
coming,'' and it gets to the point where the credibility of the 
administration has to be put in question. So I would urge you 
to--I know you are--but to please focus on that, as well.
    Dr. Shah. Thank you.
    Mr. Diaz-Balart. Thank you.
    Thank you, Madam Chairman.
    Ms. Granger. Thank you.
    Dr. Shah, please follow up with staff as soon as the 
notification is transmitted so that Members' questions can be 
answered.
    And I am going to go to Mr. Rothman next.
    Mr. Rothman. Dr. Shah, it is always a pleasure to be with 
you. I consider you one of the rock stars of our government. 
You just bring so many qualifications, dedication, and 
effectiveness to every job you undertake. And thank you for 
your service. And I look forward to a continued brilliant 
career. But just keep it at this level and we will be very 
happy. I have a feeling there is more and better things in 
store for you.
    But in your present role, I wanted you to comment, please, 
on the recent protests across North Africa and the Middle East, 
which demonstrate that, when the political compact between 
citizens and government falls apart, we have great disruption. 
And outside actors, who are not friends of the United States or 
even friends of the people of those various countries, can 
intervene--intervene because the protestors are not as well-
organized or don't have the skills or tools to effectuate their 
desire for greater democracy and freedom in their respective 
countries.
    Is the USAID involved at all in assisting those who are 
seeking greater democracy in, specifically, Libya, Egypt, 
Tunisia, Bahrain, Yemen, or elsewhere in that region right now?
    Dr. Shah. Yes, absolutely. I thank you for your comments.
    The President and the Secretary of State have been very 
clear about the Administration's position in supporting a 
responsible transition and understanding that this is a unique 
and historic moment when peoples in these countries are 
recognizing and demanding their democratic and human rights. 
USAID, consistent with that strategic direction, is working in 
most of the countries you identified to assess our programs and 
to ensure that they are aligned with that specific objective.
    In Libya, our role is primarily, at this point, 
humanitarian, in support of an ongoing international effort. In 
Egypt, we have prioritized and sent a notification up for a 
$150 million reprogramming of resources that will be used to 
support an effective democratic transition process. And, in 
Tunisia, we have supported efforts with specific programs, such 
as the Office of Transition Initiatives, that have provided 
insights and assessments and programmatic plans as part of a 
coordinated diplomacy and development effort in a number of 
these places.
    Mr. Rothman. I think that many Americans are not aware 
specifically that USAID is undertaking these responsibilities. 
They just assume someone in our government is working on these 
projects. So it is nice for my fellow countrymen and women to 
put a face and an agency to the work that is being done.
    I want to, in the time I have left, ask you a question. It 
has to do with the reduction in personnel at USAID, which 
resulted--this was, I believe, before your time--in increased 
amount of contracting to private contractors to oversee a 
number of the projects.
    Mr. Rothman. As traditionally happens, that is a recipe 
often for accountability and transparency and effectiveness 
problems. I understand that last year you prioritized reversing 
the contracting trend and introduced an ambitious reform agenda 
known as USAID Forward. From your perspective how will these 
reforms lead to greater efficiencies and does your budget 
request sustain this process to ensure a better return on U.S. 
development efforts.
    Dr. Shah. Thank you. I will perhaps use the opportunity to 
introduce a graph that simply delineates the 57 percent 
reduction in staffing at USAID over a many decade period and at 
the same time when especially in recent years programmatic 
responsibilities have increased, especially in difficult-to-
operate environments like Afghanistan, Iraq, Pakistan, Sudan 
and Haiti.
    In that context, we believed efforts to improve our 
accountability and squeeze more results out of taxpayer 
investments required a fundamental reform of our basic 
operating model, and so we introduced USAID Forward to reform 
our human resources and to prioritize procurement reforms that 
allow us to rein in contract partners and better manage to 
results and outcomes.
    The fiscal year 2012 request has two specific requests 
built in to support that. First, a request to hire 95 mid-
career technical officers as part of a restructured Development 
Leadership Initiative. Those mid-career technical officers are 
uniquely required to oversee and engage in contract and program 
oversight, and I can show how their allocation to our top 
initiatives and our most important hot spot countries will 
allow us to save significant taxpayer dollars over time.
    Second, we have requested 70 Office of Acquisition and 
Assistance procurement and contract specialists. They will with 
specialized skills, allow us to reintroduce certain practices 
that I consider pretty basic in terms of saving taxpayer 
dollars such as shifting from cost reimbursement contracting to 
fixed price contracting. And that may sound detailed or nuanced 
but we have seen cost escalations in reimbursement contracts 
that I think are inefficient for the American taxpayers, and I 
think if we can reinvest more up front in designing a greater 
percentage of our contracts as fixed price contracts, then we 
know what we are getting. It has a fixed price and contractors 
are responsible for cost overruns, not the American taxpayers.
    Thank you.
    Ms. Granger. Mr. Dent.
    Mr. Dent. Hello, Dr. Shah. Just a couple of quick issues. 
We are going to have a difficult budget year and a lot of tight 
budget allocations all over the place, and this subcommittee is 
looking to highlight areas of duplication within the government 
agencies as well as identify programs where funding is 
inconsistent or not coordinated with other assistance programs.
    This year, the MCC expects to enter into second contracts 
with countries, I believe Georgia and Ghana in particular, as a 
means of graduating them from U.S. development assistance. Yet 
the 22 MCC compact countries I understand also had USAID 
development and economic assistance levels that totaled $1.2 
billion for fiscal year 2010.
    So Dr. Shah--and by the way I have been to Georgia, and I 
was very impressed with what I saw going on there, and the 
strong leadership and I'm very pleased. But given the fiscal 
constraints that this Congress and this committee are now 
facing, is this an area where USAID and the committee could 
find potential savings? And what steps is the administration 
willing to take to wean second compact countries off of other 
U.S. development and economic assistance programs?
    Dr. Shah. Thank you. I respect the point that this is a 
difficult budget environment, and I also respect the need to 
find efficiencies across our entire development portfolio. I 
would recast the challenge to us as requiring us to look across 
USAID, MCC, OPIC, the Overseas Private Investment Corporation, 
and PEPFAR and any number of other development programs. Even 
within USAID we have multiple different tools that we apply, 
such as the Development Credit Authority which stimulates local 
private investment or our Global Development Alliance which 
brings in private investments. When we look across the 
development portfolio, we have been aggressive about finding 
areas of duplication, eliminating them, and finding 
efficiencies.
    Our second compact partnerships with MCC in Georgia and 
Ghana are good examples of where, through an initiative we call 
the Partnership for Growth, which does not require additional 
cost resources but allows for much deeper integration, we are 
able to make sure that second compacts are designed in a manner 
that is consistent with, complementary with, and efficient 
given the existing portfolios and make adjustment to the 
existing portfolios to integrate better and save us resources 
while getting better results.
    In terms of the fiscal constraints you identify, I think we 
have made a real effort to identify more than $400 million of 
cost reallocations in the fiscal year 2012 budget. What I worry 
about is that with the H.R. 1 budget, if that becomes a 
baseline reality for fiscal year 2012, that would be very 
problematic for some of our most important programs.
    For example, in health in particular, we have tried to 
build on President Bush's legacy with the PEPFAR program by 
introducing similar investments in very cost-efficient areas 
like malaria control, child survival, and saving women's lives 
at birth. We estimate--and I believe these are very 
conservative estimates--that H.R. 1 would lead to 70,000 kids 
dying. Of that 70,000, 30,000 would come from malaria control 
programs that would have to be scaled back specifically. The 
other 40,000 is broken out as 24,000 would die because of the 
lack of support for immunizations and other investments and 
16,000 would be because of a lack of skilled attendants at 
birth.
    And I believe there are ways to find the efficiencies we 
are all seeking through being more businesslike in how we do 
our work, reining in contract partners and doing better program 
oversight. There is a way to do this that does not have to cost 
lives, and we are very focused and very much want to work with 
the committee to identify a path forward that can allow us to 
be effective at doing so.
    Mr. Dent. Can I quickly change subjects? I saw on page 3 of 
your testimony you mentioned that you are working with farmers 
in the Arghandab Valley down in Afghanistan. I visited there in 
September in the village of Khakrez, I wouldn't expect you to 
know where that is, it is a very dangerous place. How is that 
going down there right now? I was concerned when I was there in 
September.
    Dr. Shah. The security situation there is very much 
improved. I am familiar with that village and have visited 
those programs in Arghandab. I will point out that it is a 
great example of where a Stryker brigade had suffered real 
casualties there and that is American lives and we were able 
to, with a program we called AVIPA, a voucher and agriculture 
program that supports local agriculture, help create greater 
stability in that community by helping them return to their 
roots, which in that case is local agricultural production. 
This includes tying some of that production to procurements 
that are now done by the Department of Defense that buys some 
of the higher value outputs and setting the stage for them to 
be more effective in exporting fruits and pomegranates and 
other products outside of the country and really rebuilding 
Afghanistan's proud high value agricultural history. That is a 
priority program for us, and we continue to see real progress 
in the agricultural sector in Afghanistan.
    Mr. Dent. You have not taken any casualties? The State 
Department?
    Dr. Shah. Our implementing partners who hire local Afghan 
staff have suffered casualties in that area, and I appreciate 
you asking the question because it highlights that the civilian 
partners are taking great risks to rebuild their own country. 
Thank you.
    Ms. Granger. Thank you. We are going to do a second round 
for those who want to participate.
    Dr. Shah, you recommended that our congressional delegation 
visit two food security programs in Guatemala. The first is a 
program that distributes emergency food assistance from the 
Public Law 480 program to children who are malnourished. The 
second is a program aimed at preventing emergency food needs by 
generating increased agricultural productivity that not only 
feeds the community but generates some income.
    I support the approach you are pursuing in food security 
but I question the funding levels requested at $1.4 billion. 
This is more than triple the 2008 level and as of December 10, 
USAID had a funding pipeline of over $800 million in 
agriculture and food security programs, some of which was 
appropriated in fiscal year 2007.
    So can you tell me what your justification is for the level 
of funding for fiscal year 2012 when the program has grown very 
rapidly, there are significant funding pipelines and additional 
planning work needs to be conducted in several of the 
countries?
    Dr. Shah. Thank you. I appreciate the question and will 
point out that our Feed the Future Program is really our 
signature effort to demonstrate how we are trying to make some 
tough decisions and do things very differently. Guatemala is a 
good example of how the Public Law 480 program is in the 
process of restructuring its feeding to target kids in the 
minus 9 to 24-month age category. Of course, minus 9 months is 
pregnant women. And the first 2 years of life for young kids, 
because we know if we can provide targeted high value foods 
during that period of time it has lasting and significant 
benefits for child brain development, economic potential and 
social stability in a way that does not exist if it is done for 
older kids.
    So as difficult as it is to shift feeding from kids who 
need it and who are hungry, we are making tough decisions to 
invest where we think we get the most results.
    Similarly in Guatemala, and I appreciate you had the chance 
to visit the Walmart partnership. We have expanded that 
throughout the region and it is a great example of how USAID 
working with USDA on the phytosanitary side are making targeted 
investments to help large communities of farmers produce high 
value products, sell them into global value chains, earn more 
incomes. And now when I visited the village--I am not sure 
exactly where you were--I visited a village where they told me 
that 3 years ago there were 20 kids in school and now today 
because of that partnership with USAID and Walmart, they had a 
demand for 500 kids to go to school. And that is because when 
women farmers earn income, the very first thing they do is 
invest that income in the health and education of their 
children. And it demonstrates how we can move communities from 
out of poverty to a place of stability in a way that is far 
more efficient than dealing with the consequences.
    In terms of the budget with respect to this, of the $1.4 
billion, I believe approximately $300 million is for the World 
Bank Trust Fund. We have worked aggressively to set that fund 
up and to make sure that they have--right now they are not able 
to make grants to countries that we have worked with to submit 
proposals. These are countries that worked very hard to show 
they will increase their investments and do the right things on 
the policy side, invite in real private investment and make 
tough reforms, and they are only able to send the proposals in 
if the fund is funded and able to give money. So that is number 
one.
    On the bilateral program, which is $1.1 billion, we have, 
and I did stop the original program so that there could be a 
period of developing new strategies and restructuring projects. 
I would highlight what we did in Senegal, where we essentially 
shut down programs that were helping very poor communities do 
good things in terms of producing honey and selling honey and 
thereby serve as providing livelihood support for very, very 
poor people. However through a rigorous analysis we found we 
would help more people with the same resources if we shifted 
those resources into larger value chains in maize, rice, and 
dairy. And so we have restructured the program, worked with the 
government, brought in other donors and brought in partners 
like the World Bank, and now our team is ready to accelerate 
significantly their program implementation.
    We are seeing that in Ghana, Tanzania, Bangladesh, 
Guatemala, Senegal, Ethiopia, Malawi. And without the $1.1 
billion we will simply not be able to live up to the 
commitments we have made to entice all of these other partners 
to be participants.
    I would finally conclude by just noting I had a 
conversation recently with the President who plans to use the 
upcoming G-20 to once more ask our international partners to 
live up to their commitments. We committed $3.5 billion to this 
Feed the Future initiative and the international community 
committed an additional $18 billion, bringing the total to 
almost $22 billion. In order to have the credibility to hold 
our partners to account we need to meet our own commitments.
    And so I thank you for highlighting it and for your 
support. And I can assure you that this is one area where every 
dollar that we spend will be spent incredibly efficiently and 
will generate the kind of results to inspire people to know 
that we can end hunger over time and do it in a way that helps 
American businesses and helps alleviate the national security 
pressure of countries that otherwise suffer from failed states 
and food riots.
    Ms. Granger. I am going to extend my own time a little bit 
and I will allow everybody else to do that, because one of the 
countries that you did not mention was Haiti. And in the Feed 
the Future Program one of the most important things in the 
country selection is the criteria, which is host government 
commitment, leadership, governance, and political will. And 
Haiti is one of the largest program budgets requested for 
fiscal year 2012. And there is no doubt there is need, but I 
understand that Haiti does not have a country implementation 
plan in place, yet it is slated for one of the largest 
programs. With Haiti in a state of transitional recovery from 
last year's earthquake, what can you tell us about why funding 
there is a priority?
    Dr. Shah. Well, two or three things. First, Haiti has made 
a significant commitment and has moved faster than any other 
country to go from zero to planned development in a context 
where their agricultural ministry had collapsed and they had 
lost much of their people in that ministry. And the effort they 
have made is so extraordinary in that regard.
    Second, we have had a longstanding process of getting the 
Haitian government to make some policy reforms and changes to 
allow for more effectiveness, and we are seeing the results of 
that. We facilitated a partnership request from Monsanto that 
brought improved hybrid seeds, and we saw through one of our 
programs called the WINNER Project an almost 200 percent 
improvement in agricultural production in key areas in Haiti.
    Third, Haiti is a partner where we have a large Public Law 
480 program and we are doing, I think, a very good job of 
integrating that to make sure that we are not depressing 
Haitian prices and creating the right incentives for Haitian 
farmers to produce.
    And fourth, as part of their overall strategy in Haiti, 
having strong vibrant rural communities that can provide 
employment and income and keep people out of Port au Prince, is 
a core part of their decentralization strategy. That is why we 
are supporting the industrial park in the north. It is why we 
are supporting the agricultural sector, because that is still 
where 60 or 70 percent of Haitians make their formal employment 
and earn their incomes and their food.
    So we have been working aggressively to make sure that this 
is a Feed the Future partnership that includes private sector 
partners, like the Coca-Cola Company and others, brings 
logistics and improved seed varieties and technology to bear, 
and they will be held to the same standards of accountability 
as all the other Feed the Future programs.
    Ms. Granger. Thank you. Mrs. Lowey.
    Mrs. Lowey. Thank you. That was a great segue. I would like 
to pursue further what we are doing in Haiti, because the 
feedback I am getting is that it is moving much too slowly. I 
want to pursue with you the joint venture in Haiti that was 
announced between the--that you referenced--the Haitian 
government, the U.S., and the Inter-American Development Bank 
to develop an industrial park near the north coast. This is 
perfect to get people away from Port au Prince. We know that 
the South Korean textile manufacturer will be the main tenant 
and has promised to create 20,000 jobs.
    Now, it has the possibility, the potential to create 
thousands more jobs on top of those at the textile plant, and 
there are efforts--we are hearing talk of building homes, 
roads, schools, other community necessities to allow workers 
and their families to live near the industrial park and not be 
forced to return to Port au Prince.
    I would really like to hear more about that. And this is a 
perfect opportunity to put in place a community of learning. 
You don't have the outside forces like terrorism, thank 
goodness, to derail the development plans. Without an education 
system already in place, we have the opportunity to see exactly 
how this model for schools and community development can work.
    So I would really like to hear what you are doing. What is 
the U.S.'s role in this new development? Who is responsible for 
guiding the development? I envision this economic development 
project with the school, with a health center, with literacy 
programs and food programs. Where are we? How long is it going 
to take before everyone is moving back to Port au Prince?
    Dr. Shah. Thank you for the question. I think our intention 
is that with this program people wouldn't move back to Port au 
Prince because they would have economic opportunities and 
community services co-located in and around this industrial 
park. As you point out, the target employment is 20,000. We are 
supporting housing efforts in that area, and I think in a very 
innovative way.
    Mrs. Lowey. Is it happening?
    Dr. Shah. It is happening. The housing part of our support 
is to help clear the area, provide foundational support, and we 
are partnering with Red Cross and others who might actually 
construct the homes. But it is a cost sharing arrangement to 
leverage dollars.
    Mrs. Lowey. What is the time frame?
    Dr. Shah. I can come back with the specific time frame in 
terms of how many houses when.

Dr. Shah:

    The U.S. Government is committed to working with the Government of 
Haiti and international organizations to build housing in communities 
near the Northern Industrial Park. This housing will be completed as 
part of our overall shelter and settlements work, which will focus on 
Port au Prince and the areas around the Park. USAID will support the 
construction of 4,000 new homes and provide infrastructure to 
facilitate the construction of the remaining 11,000 homes by NGO 
partners. In total, this will benefit 75,000 to 90,000 Haitians in the 
Port au Prince and Cap Haitien development corridors.
    The beneficiary selection process for newly constructed homes on 
allocated lots will prioritize Haitians who have not received 
transitional shelter, with a particular focus on households headed by 
single women. These homes will meet disaster-resistant building 
standards, and their construction will involve newly trained local 
staff wherever feasible. Through this plan, the United States will not 
only create thousands of temporary construction jobs and building 
construction capacity in the north, but will support an investment 
package that includes electricity, transportation infrastructure, 
health, and the creation of job opportunities in agriculture and 
industry.

    Mrs. Lowey. What about the schools?
    Dr. Shah. In 18 months I would expect much of this to be 
under way and the first phase to certainly be completed.
    In terms of community services, we would have schools. They 
are part of the planning and part of the effort. The 
partnership with IDB writ large includes a $10 million transfer 
to IDB to prioritize education, and we are working in an 
education partnership with them more broadly, but that includes 
at this site and in this specific area. And a lot of that will 
be around teacher training, setting standards so there are 
common educational attainment testing and standards processes 
countrywide.
    So we are hoping this will be a model priority. It is a 
high priority for us, a high priority for the IHRC commission 
and a high priority for the Haitian Government, and we believe 
that it needs to succeed.
    In terms of the overall path of progress that you alluded 
to, I want to point out that we have seen over the last few 
months a significant acceleration of activity. At the one-year 
anniversary on January 12th we had over a million people 
continuing in temporary shelters. We think that now that number 
is down to just over 600,000. We are moving much more 
aggressively on rubble removal and housing construction and 
getting people out of those living situations. We are seeing a 
significant acceleration of activity.
    We think that 20 percent of our obligations for this year 
will be made by June and we expect 50 percent to be made by 
September, and we believe we are on path to spend the 
supplemental resources across the 3-year time frame that was in 
the original proposal in the documentation with respect to the 
supplemental.
    So we are very focused on the financial management of this. 
We are, as I pointed out previously, trying to do this the 
right way and making the judgment that investing in planning, 
bringing the partners together, and in many cases investing in 
local construction firms and training them to be the providers 
of services in terms of much of the reconstruction, is the 
right way to approach this so we leave real lasting 
institutions in Haiti. But we will track and continue to report 
to this committee on our financial progress as well with 
respect to spending for results.
    Mrs. Lowey. I would like to follow up with you, Dr. Shah, 
in seeing a specific plan. This is very exciting to have this 
South Korean manufacturer there and to see the plans for the 
schools, the plans for the health center. I know Dr. Farmer is 
very actively building an institute, but not near where the 
South Korean plan is proposed. So I think this is an 
opportunity, an opportunity that we can replicate in other 
places. We talk a lot about it, but in my visits to many 
places, I always see marvelous examples of excellence. But kids 
are still walking 2 hours to go to school. You get to school 
and there is one teacher for a hundred kids. You just don't see 
it all put together. And in an area like this, with all the 
problems in the world and terrorism impeding so many actions, I 
would be most appreciative to see progress in Haiti.
    Are we going to go back again, should I ask another 
question, or how do you want to do this?
    Ms. Granger. I am going to go to Mr. Diaz-Balart and then 
if you have another question.
    Mrs. Lowey. Thank you, if we could continue that discussion 
I would be much appreciative.
    Mr. Diaz-Balart. Thank you very much, Chairwoman. Last 
summer Congress passed the supplemental appropriations act 
containing $2.8 billion for Haiti's recovery effort after that 
horrendous earthquake in January of 2010. Now while some minor 
requests for proposals dealing with Haiti have just been 
released by USAID, my understanding is to date the major RFA 
dealing with Haiti's health care rehabilitation has not been 
issued yet.
    So I don't have to tell you about the issues that Haiti has 
with their health care issues. So given the need for help, when 
will the RFA for health care rehabilitation be released?
    Dr. Shah. I will come back with a specific answer on that. 
I don't believe it will be one RFA. It is a series of projects 
and programs, and frankly our goal is not to have one single 
project that is so large that by definition it narrows the 
number of partners that could participate and the local 
institutions that could participate.
    I will say with respect to the health effort in Haiti it is 
an example of our Global Health Initiative where we are working 
hand in hand with the Centers for Disease Control and 
Prevention and the PEPFAR AIDS program. The plan includes 
nearly 30 to 40 percent investment in building a structured 
health system so that you have connectivity between hospitals 
and clinics and you have medical personnel at each stage, 
including community health workers that can get out into 
communities.
    The second thing I would say is we have currently been 
addressing a rapid and aggressive cholera outbreak, as you 
know, and I think our team's integrated response has been quite 
effective. The case fatality rates at cholera treatment centers 
has come down more than fourfold over the last 3 months. While 
cholera will be a problem in Haiti for some time, we believe we 
have a strategy that integrates the health outreach with the 
water sanitation and hygiene that can manage that. We continue 
to see Port au Prince and the communities that were provided 
support through the humanitarian relief effort continue to be 
relatively protected because their access to clean water and 
safe sanitation is actually higher today than it was pre-
earthquake. And those are all important components of the 
health sector strategy going forward.

Dr. Shah:

    The rehabilitation of Haiti's health care system remains a priority 
for USAID. There will not be a single RFA dedicated to this--the funds 
allocated to Haiti's health sector will be spent on a range of projects 
essential to improving Haiti's health care system. About 20 percent of 
the supplemental funds designated for the health sector will be spent 
on existing USAID health programs, such as improving service delivery, 
health system strengthening, and the purchase of commodities. The other 
80 percent will be used for new awards--particularly for health service 
delivery, rehabilitation and reintegration of persons with 
disabilities, and in health infrastructure improvements.
    USAID expects to issue a solicitation for multiple awards in 
September. Additionally, on March 15, USAID issued an RFA for a program 
to rehabilitate and reintegrate persons with disabilities. USAID 
intends to provide up to four awards for this effort. USAID held a very 
successful conference in Port au Prince on March 31, which drew over 
150 local participants, to discuss the solicitation. This RFA, 
embracing USAID Forward procurement reform principles, is expected to 
increase participation from non-traditional partners who have unique 
and locally viable program ideas.
    The US government is also moving forward on health infrastructure 
investments in the geographic areas--known as corridors--that we have 
prioritized.
    In September 2010, the U.S. Government, the Government of France 
and the Government of Haiti signed a memorandum of understanding to 
rebuild the State University Hospital (HUEH) with the U.S. and France 
each pledging $25 million towards this project, and the Government of 
Haiti pledging $3.2 million. The project is ready to proceed with the 
design and building process. In line with the new USAID Forward 
contracting goals and objectives, USAID is exploring methods through 
which it could support this project's completion with a project unit 
within the Haitian Ministry of Finance as project manager.

    Mr. Diaz-Balart. We know that Haiti has a lot of issues. 
They had a lot of issues before the earthquake and obviously 
now they have incredible health care issues that they are 
dealing with. Again, because here is an issue that is urgent, 
obviously, and yet a lot of you know, a number of RFAs or 
whatever it may be, there seems to be--how do I say this in a 
nice way--there does not seem to be the urgency that is 
required because again this is an issue of life and death.
    And so adding to what I said previously about the issue 
with the Cuban democracy, there seems to be a bit of a pattern, 
I hate to say this, where there are delays after delays after 
delays. And so the issue is it does not give me a lot of 
confidence in the case of the health care rehabilitation issue 
in Haiti that there is the realization of the urgency. And we 
already talked about the other issues. So it is a little bit, 
frankly, worrisome.
    Dr. Shah. I would like to address that directly. I believe 
I would characterize it very differently. Our Office of Foreign 
Disaster Assistance, which has been managing the health sector 
response especially to emergency needs, has from the beginning 
been aggressive about moving resources and getting support 
services out quickly.
    Our response to the cholera epidemic was so rapid and so 
broadly based in its ability to reach rural communities that 
really no one has reached for a long time--we used text 
messages to get information out to communities that otherwise 
couldn't get it. We set up 160 cholera treatment points of 
service, including mobile points of service, very, very 
rapidly. We did all of that through issuing RFAs and working 
with partners incredibly rapidly, within days and weeks.
    In terms of going forward with health system 
reconstruction, we continue to be on that path. The components 
of this that require emergency response are moving very 
quickly. The components that require more integrated planning 
we are doing that planning and will issue a broader series of 
RFAs so that many different partners can participate. And that 
is worth doing.
    In Haiti over a long time in the health sector we have 
treated everything as an emergency, and as a result you have 
had a lot of NGOs doing work that don't necessarily communicate 
with each other and don't have a system that they can plug into 
for a cohesive and strategic approach.
    With respect to our democracy and governance program, I 
would just highlight, I know you were not referring to Egypt, 
but in Egypt we have moved from reprogramming $150 million to 
getting the congressional notification up, to now completing 
the first round of RFAs to provide support to institutions 
within a matter of weeks. And I know that there was some 
challenge about whether we could do that, but we have moved 
very, very quickly. And I think that for us is becoming a model 
of how we want to work, especially in areas that require speed 
and focus with respect to these critical time sensitive 
transitions.
    Ms. Granger. Thank you, Dr. Shah. Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair. And thank you for being 
here, Administrator. I appreciate the superb work that you do, 
and I apologize if this has probably been asked earlier. If it 
has, you can certainly abbreviate your answer and I will get 
the full text of your remarks later. But I wanted to raise 
again the topic of the dramatic changes going on in the Middle 
East and North Africa.
    This is a generational opportunity for tens of millions of 
people to enjoy a better form of governance and an opportunity 
for a better future, and I think we need to seize this 
opportunity to assist them in every way. I was pleased to see 
Secretary Clinton's announcement of $150 million to support 
that effort in Egypt and a reprogramming of $20 million for 
Tunisia.
    Are part of these funds coming from USAID? Does USAID have 
the flexibility to do the reprogramming necessary to meet the 
needs in those countries? And beyond those countries, how will 
the dynamics of what is going on in the region affect USAID's 
approach to democratic and governance assistance in other 
countries that may not be in the throes of revolution but are 
candidates for it unless they move more swiftly along the pace 
for reform?
    Dr. Shah. Well, thank you. I think we fully recognize and 
appreciate that this is a unique generational opportunity. The 
President and the Secretary have been very specific and clear 
in terms of their directions to USAID to be supportive of that 
critical time bound and time sensitive opportunity.
    Our approach is very country-by-country, because each of 
our countries have a different modality of programming. In some 
places like Egypt we have had a very longstanding program with 
a lot of visibility and partnership with the government of 
Egypt. As a result reprogramming $150 million--and that was 
USAID-led reprogramming of USAID resources--requires 
consultation and negotiation with our partners and with the 
government.
    We have focused on deploying those resources rapidly for 
the purpose of supporting the current transition opportunity. 
And so that means providing support for an effective elections 
process, support for civil society organizations, defined very 
broadly, including many new institutions and organizations that 
have just been formed and created. It allows us to support 
organizations like IRI, NDI, IFES and others that are able to 
provide unique capabilities to partners in that environment and 
do that in a spirit of partnership with those on the ground.
    So I believe we are focused on moving quickly and rapidly. 
For us it is very important to do this in a manner that is 
deeply connected to the diplomatic realities and to the 
country-by-country unique characteristics that define both what 
is possible and what is responsible in terms of transition, and 
we are trying to do that in a very integrated way with the 
State Department.
    Mr. Schiff. Looking at the unique characteristics in Egypt 
and the accelerated time frame for Egyptian elections in 
September, parliamentary elections, the presidential elections 
to follow sometime thereafter, how is USAID keeping pace with 
that? Obviously there are tremendous organizational challenges 
for political parties that have been marginalized in Egypt.
    So can you talk a little bit about how we can meet that 
aggressive timetable?
    Dr. Shah. Yes. You know we are fortunate to have more than 
200 people, most of whom are Foreign Service nationals in our 
Cairo office. We have been working and have a long history 
there and have good relationships with a broad range of 
partners, both registered and unregistered. We work in 
partnership with MEPI and other State Department programs based 
out of the embassy so that we have a coordinated approach, and 
we are pursuing our work in a way that is very sensitive to the 
time scale here and the time sensitivity of needing to act 
quickly, which is why we put the $150 million notification up 
here quickly. We effectively reprogrammed resources to do that 
and we will continue to work at that pace in order to meet the 
President and the Secretary's overall objectives in terms of 
supporting transition to self-determination and democracy.
    Mr. Schiff. Thank you again for your superb work, Mr. 
Administrator. Thank you, Madam Chair.
    Ms. Granger. Mrs. Lowey.
    Mrs. Lowey. Thank you again. At the London Conference in 
2010, the United States and the international community agreed 
to work to provide up to 50 percent of donor assistance 
directly through mechanisms of the government of Afghanistan. 
This past February, when I attended the Munich Security 
Conference and had an opportunity to hear President Karzai, he 
further suggests that all funding should be channeled through 
Afghan Government mechanisms.
    Either way, sending funding to the Afghanistan Government 
carries significant risk of corruption, collusion, and 
misappropriation of assistance funds. On the other hand, if we 
are to successfully transition out of Afghanistan by 2014, we 
have to find a way to address this corruption.
    I am aware that we are working closely in an interagency 
way, especially with Treasury, to monitor those funds and to 
assist the Afghans to address the issue of corruption. I am 
also aware that the government of Germany is working 
cooperatively with us.
    So if you can explain to us, what is USAID doing to 
increase the capacity of Afghan ministries that are being 
considered for direct government-to-government support and what 
process is USAID undertaking to assess the capacity of the 
Afghan ministries to receive direct assistance?
    And another question--I might as well put them all out 
there--by moving away from large contractors, will more 
programs be implemented by local NGOs and are you working with 
local NGOs to assist them in developing satisfactory oversight 
practices?
    So let me give you the opportunity to talk about what we 
are doing to transition the money through the government 
ministries, what are we doing to provide adequate oversight for 
the NGOs, and other training programs? And do we keep tabs and 
work cooperatively with the Defense programs or are they just 
continuing to hand out cash--maybe we will have to ask them 
directly--as they move around trying to transition their 
programs as well to the Afghans?
    Maybe I should have you just address the first question. 
Our chair is a member of the Defense committee so she can deal 
with the cash that is being handed out through the Defense 
Department. Thank you.
    Dr. Shah. Well, thank you. Maybe I will address two or 
three different points. The first point on Afghan ministries 
and our support for them. We have pursued that in two tracks. 
One track has been providing them with a greater sense of 
partnership, shared program design, and in some cases like our 
AVIPA program that provides agricultural support to farmers in 
unstable environments, the ability to put the Ministry of 
Agriculture and Livestock logo on vouchers that go to farmers 
so it builds the credibility and support for the government.
    In that context, we don't directly fund through the 
government but we have a shared partnership on program design, 
on understanding the criteria we are using to implement the 
programs, and on evaluating and reassessing how that fits into 
the overall transition plan for 2015.
    The second category is where we do intend to provide direct 
resources, and in that context we have done it in two primary 
mechanisms. The biggest mechanism has been the Afghanistan 
Reconstruction Trust Fund, which is an international validated 
mechanism that provides all the controls of any other mechanism 
we have. That continues to be our main vehicle for reaching the 
50 percent target, and we will continue to hold that mechanism 
to account with our international partners, including Germany 
and some others, and linking that to the IMF program.
    The second part of direct support is directly investing 
through different line ministries. We have worked with 
Agriculture, with Education, with Health, and a number of 
others. And in cases where we do that, we embed procurement 
teams and accountability teams in the ministry. Health is a 
good example, where we have over a 6-year period really helped 
the Ministry of Public Health develop their own project 
implementation mechanisms, but we have done it by being 
embedded with them so that we can track resources and have the 
right accountability mechanisms.
    I would argue that that is worth doing and that that extra 
effort is what will present for us an exit strategy so that we 
don't just have U.S. implementers out there running health 
clinics and schools and agriculture programs outside of a 
coordinated effort with all levels of Afghan governance.
    The other part of your question spoke to how we provide 
risk assessment and capacity support for partners we want to 
invest in. As part of our procurement reform we have developed 
around the world two types of teams, risk assessment teams, and 
they have developed risk assessment tools that were just 
recently validated in multiple pilot countries to allow all of 
our practitioners in the field to have tools to do the kind of 
assessments of local institutions prior to making awards to 
those institutions.
    And then second, we have implemented a series of new local 
capacity building programs for NGOs and for government 
institutions. And the combination of those new tools really 
helps make our procurement reform real and operational for 
members of our teams around the world. And I would welcome the 
opportunity to send to the committee details on both of those 
mechanisms. But they are very important in terms of 
reintroducing a skill set at USAID that I think is core to the 
discipline of development, and that is how you spend money in a 
way that builds capacity, generates results, and gives us the 
conditions that would allow for our exit over time.
    Mrs. Lowey. Let me just close and thank you very much again 
for your leadership. Given the budget crunch, and given the 
bipartisan focus on making every dollar count, I think this 
kind of information is absolutely essential for those of us who 
believe in the important work that you and your agency are 
doing. And so I truly want to thank you, and I look forward to 
getting up-to-date reports in this area. Thank you very much.
    Ms. Granger. Thank you, Dr. Shah, for your time, and for 
your excellent answers and the work that you are doing in 
difficult times. As we talk about what to fund, and what not to 
fund, we unfortunately have limited time. And so one of the 
questions I will submit for the record and I would greatly 
appreciate your rapid response. It has to do with your top 
priorities. I will not take your time here, but give you some 
time to think about it.
    This concludes today's hearing. The record will remain open 
for members to submit questions for the record. The hearing is 
adjourned.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                        Wednesday, March 9, 2011.  

    FY 2012 BUDGET REQUEST FOR DEPARTMENT OF TREASURY INTERNATIONAL 
                                PROGRAMS

                                WITNESS

HON. TIMOTHY GEITHNER, SECRETARY, DEPARTMENT OF TREASURY

                Opening Statement of Chairwoman Granger

    Ms. Granger. The Subcommittee on State, Foreign Operations, 
and Related Programs will come to order.
    I would like to welcome Secretary Geithner and thank him 
for appearing before the subcommittee today to discuss the 
fiscal year 2012 request for the Department of 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 by the Congress 2 
years ago.
    Secretary Geithner, I know Treasury's international 
programs are ones you worked on for many years before becoming 
Secretary. I hope you will provide the committee with your 
insight so we can better understand this large request for 
fiscal year 2012.
    The President's budget includes $3.4 billion for Treasury's 
international affairs programs, which is $1.2 billion, or 58 
percent, over the enacted 2010 levels. I would also like to 
highlight that this is more than a doubling of funds since 
2009, and more than a 150 percent increase since 2008. All of 
these funds are contributions to international financial 
institutions, with the exception of the Treasury technical 
assistance and bilateral debt relief programs.
    Last year, I asked that you justify the need for such a 
large increase for multilateral assistance during an economic 
crisis here at home.
    This year, the fiscal situation is even more dire. The 
United States is facing record budget deficits. The President's 
fiscal commission released its report calling for freezing or 
cutting discretionary spending. I know I don't have to remind 
you that we are all facing a very different budget situation 
than last year.
    Support for increases to the multilateral development banks 
was already in doubt before this budget was formulated. Now 
this administration is requesting almost $2 billion in 
appropriations and putting the U.S. taxpayer on the hook for 
another $40 billion in potential liabilities.
    Mr. Secretary, this committee never consented to these 
capital increases. Authorization bills are needed for each 
bank, spelling out specific reforms and possibly withholding 
funds until reforms are met. I can't support writing a blank 
check to these institutions, and we talked about that earlier.
    Large multi-year capital increases and other global 
commitments will be extremely difficult to justify without 
convincing evidence that taxpayer dollars will be used in a 
more effective and transparent manner than they have been in 
the past.
    Mr. Secretary, I can predict that this subcommittee will 
face very difficult choices this year. We will have to look at 
each request to determine what is critical to our national 
security. We must prioritize spending by looking at what works, 
what is good oversight, and what is not duplicated elsewhere. I 
urge you to approach the subcommittee with your request in that 
context today and as the year progresses.
    Finally, I want to mention the unique role the Treasury 
Department plays in U.S. foreign policy. Your work to 
administer sanctions against countries like Iran and Libya and 
to track terrorist financing is critical. Members will want to 
hear your comments on these important matters, I am sure.
    Thank you, and I look forward to your testimony.
    After the esteemed ranking member, Mrs. Lowey, gives her 
remarks, I will call on Chairman Rogers, if he is here, or 
Ranking Member Dicks, if they have a statement. Then I will 
call on Members, based on seniority and who was in attendance 
when the hearing was called to order. I will alternate between 
majority and minority, and I ask that each Member keep their 
questions to 5 minutes.
    And I will now turn to Mrs. Lowey.
    Mrs. Lowey. Thank you.
    Secretary Geithner, I join Chairwoman Granger in welcoming 
you, my former constituent, to discuss the President's request 
for the Treasury Department's international programs.
    Thirty years ago, President Reagan affirmed that 
international financial institutions, and I quote, ``have 
contributed enormously to the spread of hope of a better life 
throughout the world community. They have been inspired by the 
ideal of a far better world in which economic growth and 
development would spread to all parts of the globe. For more 
than three decades, they have worked toward these goals and 
contributed to results that are now clearly visible to all.''
    Those words still hold true today. Multilateral development 
banks reflect our fundamental values, and support our economic 
interests by lowering trade and investment barriers, supporting 
private sector growth, opening the markets of tomorrow, and 
giving people a chance to succeed. Over the past decade, the 
World Bank has built over 73,000 miles of roads, constructed 
and renovated 23,000 health facilities, saved 13 million lives, 
immunized 310 million children, provided water to 177 million 
people, brought better education to over 100 million children 
each year, and established more transparent and open systems to 
fight corruption and build strong government institutions in 
developing countries.
    These investments both alleviate suffering and play a vital 
role in helping countries to build trade capacity and become 
reliable economic partners. I am pleased the President 
requested $3.4 billion for international financial 
institutions, climate change funds, food security initiatives, 
debt relief, and technical assistance. This request is an 
acknowledgment of the importance of these institutions in 
promoting economic growth and stability and protecting our 
national security interests.
    The continuing resolution recently passed by the House, on 
the other hand, cut their funding to fiscal year 2008 levels. I 
hope you will share with us what these substantial cuts would 
mean for economic growth, infrastructure development, 
healthcare, education, as well as the impact on frontline 
countries such as Pakistan and Afghanistan. In addition, your 
insight on the impact of scaling back the U.S. contribution to 
these institutions on our ability to influence lending 
decisions would be helpful.
    The CR also contained significant cuts to the international 
funds that address climate change and the environment, as well 
as to the Treasury Department's technical assistance and debt 
restructuring budgets. I hope you can describe the effect these 
cuts will have on developing countries and, in turn, on the 
United States.
    While I continue to support the work of the World Bank, I 
remain troubled by the bank's interaction with Iran. I would 
like to hear details about the Treasury Department's efforts to 
prevent loans to Iran and to ensure that the bank complies with 
the United Nations sanctions. The World Bank group simply 
cannot reengage with Iran if it is to maintain credibility and 
future U.S. support.
    In these tough economic times, international financial 
institutions and multilateral development funds seem like an 
easy target for budget cuts. But by supporting emerging 
economies, addressing widespread health and education 
challenges, and building infrastructure, we are creating 
business opportunities for American companies. These programs 
are directly related to our primary focus of creating jobs and 
should not be on the chopping block.
    Thank you again for your service. I look forward to your 
testimony.
    Ms. Granger. Mr. Secretary, please feel free to summarize 
your remarks. Without objection, your full statement will be 
submitted for the record.

                Opening Statement of Secretary Geithner

    Secretary Geithner. Thank you, Chairwoman Granger, Ranking 
Member Lowey, Members of the committee.
    I know this is a heavy lift. At a time when we have 
unemployment above 9 percent, I think about 1 in 8 Americans on 
food stamps, an economy still living with the scars of the 
damage caused by the crisis, this is a hard case to make. I 
want to say I appreciate the difficulty of it, and I appreciate 
the care and attention you are giving to these issues.
    I appreciate, Madam Chairman, the attention you have given 
and will continue to give to the importance of the conditions 
we attach to our investments in these institutions, because we 
all have an obligation in making sure, as you do, across the 
board, that every dollar we ask the American taxpayer to put up 
in investments has the highest possible impact on returns.
    Let me just summarize the basic cases as quickly as I can. 
I would be happy to take your questions.
    But I want to begin, as I did in my written statement, with 
just an example from 20 years ago. A little more than 20 years 
ago, Secretary James Baker came before this committee and 
requested both a general capital increase for the World Bank 
and replenishment of the International Development Association, 
IDA. And like now, that request came at a very difficult time, 
a very difficult budget environment.
    But let me just quote what he said then. He said, ``If we 
fail to support our own programs and ignore or delay meeting 
our international commitments, the damage to U.S. national and 
economic security may be vast.'' And he added, ``That harm will 
not be easily undone.''
    Now most people tend to think of these institutions in 
terms of their humanitarian mission--fighting disease, fighting 
poverty, the broad development imperative--and that is right. 
And you are right to draw attention to that. But you also need 
to think of these institutions as a vital part of any effective 
American strategy in protecting our national security interests 
and expanding opportunities for American businesses.
    Secretary Gates has spoken eloquently of this challenge, as 
has General Petraeus. I think the simplest way to say it is 
where American soldiers are now engaged in combat, our ability 
to get those governments to take on more responsibility for 
their own security will depend on their success in creating a 
functioning economy that can generate not just opportunities 
for their citizens, but the resources they need to defend their 
security. And that requires institutions that can establish and 
enforce the rule of law, protect property rights, allow 
businesses to function, provide education, et cetera.
    So, as you think about the humanitarian imperative, 
remember the national security imperative and remember that 
these institutions are some of the most effective ways we have 
available to advance that core American interest.
    But it is also important to recognize that these 
institutions are among, and have been over time, among the most 
effective export programs we have. They have been as 
instrumental in reducing trade barriers and providing a more 
level playing field, creating opportunities for American 
businesses, as the trade agreements we have negotiated.
    Congress is going to have the opportunity to vote on a very 
powerful trade agreement with Korea and other countries in the 
coming months. But remember, these institutions, the World Bank 
and others, have played an enormously effective role and in the 
future will play an enormously effective role in making sure 
that U.S. companies have more opportunities in these markets.
    Now, as you know, of course, like in the United States, 
governments around the world are reducing spending and reducing 
deficits. This is necessary, and it is difficult. It is hard. 
But the real challenge is designing ways to reduce deficits 
that do not undermine our economic and our national security 
interests.
    The real challenge in shaping effective deficit reduction 
strategies is how to do that and preserve critical investments 
in things that have the greatest impact on our core interests 
as a country. I want you to just take a moment and look to the 
example you have in what the conservative governments in the 
United Kingdom and Germany, just to cite two examples, are 
doing.
    Again, just an example. In the United Kingdom, that 
government proposed to cut their deficit by 8 percentage points 
as a share of GDP over the coming years and at the same time to 
increase the investments they make in foreign assistance by 
about 50 percent. And they do that from a base that is already 
three times, relative to the size of their economy, that we 
provide in the United States.
    Germany as well--very ambitious program for bringing fiscal 
responsibility, making sure they are living within their 
means--is also proposing to maintain and in some ways increase 
their foreign assistance investments. They are doing that for 
the same reason that we have to be careful in doing that, 
because we live in a dangerous world.
    The world is not standing still. Other countries, like 
China, are ready to fill any vacuum left by a receding America. 
And we have to take a very careful look when we are going to 
cut back on things like this to make sure we are not 
undermining our core interests.
    Now these institutions are not perfect. They have made 
mistakes in the past, and I am sure they will make mistakes in 
the future. But they are the most cost effective and are much 
better at results than almost any of the other development 
programs out there. They have a much greater impact on bringing 
about reforms in reducing corruption, improving transparency, 
and bettering property rights than we are able to do on our own 
in many cases.
    Now we are the United States, and we meet our obligations. 
We meet our commitments. And of course, this budget request 
includes commitments made by our predecessors and by your 
predecessors. If we fall behind on those commitments, we will 
lose influence, and we will deprive the institutions of the 
resources they need to carry out things that are critically 
important to Americans.
    Again, if we limit the resources available to the World 
Bank and these institutions, we will leave many governments 
with no choice but to turn to countries like China, who will 
tie their loans to conditions that help advance Chinese 
commercial interests rather than the broader interests we face 
and we enjoy with a more level playing field.
    I know many of you have the experience of traveling in 
Asia, Africa, and Latin America, if you watch carefully what is 
happening there, you are seeing a dramatic expansion in the 
scale and scope of activity on the development side by 
countries like China.
    The world is watching our budget debate in the United 
States not just to see whether Washington is going to find a 
way on a bipartisan basis to make sure we are living within our 
means. But they want to see how smart we are and how we get 
there and whether, as we reduce our deficits, we preserve the 
ability to play an active role in expanding opportunities for 
American companies on American terms.
    Now you are going to hear advice from lots of people as you 
make these choices, and I am grateful I have a chance to make 
the case myself. But as you listen to the administration, you 
listen to your colleagues, you listen to the business 
community, listen to Secretary Gates, listen to General 
Petraeus. I want to leave you with one quote from another 
Gates, from Bill Gates.
    Just give me one sec. I am going to read this to you. And 
of course, this is a man who has put a substantial fraction of 
his personal wealth behind this same basic cause you are 
debating today. And he said, ``I am a big supporter of 
development assistance because I am convinced that the 
improvement in human welfare per dollar is far higher on this 
money than on any other dollar the U.S. government spends.''
    Remember, these institutions are 5 percent of the 150 
Account, but they leverage resources that equal 1.5 times the 
entire 150 Account. And every dollar we put into a capital 
increase for the World Bank, for example, leverages $25. There 
is no more effective means, no more effective form of leverage 
at a time of limited resources than the commitments we are 
asking you to support through these institutions.
    I would be happy to take your questions.
    [The information follows:]

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    Ms. Granger. Thank you, Mr. Secretary.
    We have been joined by Ranking Member Dicks. Mr. Dicks, do 
you have opening remarks?

                     Opening Statement of Mr. Dicks

    Mr. Dicks. Yes, I just have a very brief statement. Thank 
you.
    Secretary Geithner, I join with Chairwoman Granger and 
Ranking Member Lowey in welcoming you.
    While this may be my first State, Foreign Operations 
hearing, I am not new to the issues surrounding national 
security. The international financial institution, debt relief, 
and technical assistance programs that make up the Treasury 
Department's international programs fiscal year 2012 budget 
requests are critical to supporting our national security and 
our economic stability.
    I hope today you will, and as you have, address the urgent 
global challenges facing the United States, such as food 
security, climate change, as well as support for development 
assistance for the world's forests. Working to reduce the 
enormous suffering around the globe is neither a liberal cause, 
nor a conservative cause. It is a moral cause and a human 
cause, and it is very simply the right thing to do.
    Bill Gates was in my office yesterday and pointed out that 
you can't do this all with philanthropy. You have to have these 
government programs.
    Now, invariably, when Congress is discussing budget cuts, 
the topic of foreign aid quickly rises to the forefront. It 
seems that nobody in Congress likes foreign aid, especially 
funding to multilaterals and international financial 
institutions. Generally, our constituents back home do not see 
the impact such assistance has on job production. Yet, in 
reality, U.S. involvement in international financial 
institutions significantly advances opportunities for U.S. 
companies in developing markets.
    Additionally, with the vast security concerns facing the 
U.S., especially during crises like those we face throughout 
Northern Africa, the Middle East, Afghanistan, and Pakistan, 
investments in foreign assistance in the form of multilateral 
development is crucial to addressing the root causes of 
conflict, preventing instability, improving economics, and 
sustaining peace. It serves our fundamental values, as well as 
our economic interests, by lowering trade and investment 
barriers, supporting private sector growth, opening the markets 
of tomorrow, and giving people a second chance.
    I would just say also to my colleagues on the Republican 
side, I honestly believe that the cuts we are making are too 
severe and that we need to have a compromise. I worry about the 
economic recovery. I worry about the situation we face with the 
state and local governments, with rising fuel prices, and these 
cuts in discretionary domestic spending.
    And defense, we are cutting $15 billion out of the defense 
bill this year, when I was chairman of the committee with Rep. 
Bill Young. We put this together. So I am worried about not 
only the damage that is going to be done, but also the economic 
consequences right here at home.
    My old economics teacher used to say that when you want to 
lower the deficit, you put people back to work so that you 
create jobs and businesses prosper. There is more demand, and 
that takes down the deficit. We are just doing the opposite of 
that, and I worry that it is going to have a negative economic 
impact.
    Thank you.
    Ms. Granger. Thank you, Mr. Dicks.
    I will begin this round of questions, and I am going to 
hold myself to 5 minutes. We have Jim Kolbe's hourglass that 
has 5 minutes each, and so we will watch that carefully.
    We also have two votes that are coming up any minute. They 
are 15 minutes each. I suggest, we wait as long as we possibly 
can, and then we adjourn. I know your time is very valuable. If 
you will stay, we will take our two votes, come right back, and 
finish because I know we have lots of questions.
    I want to start with following up on what Mrs. Lowey was 
talking about, about the subject of Iran and sanctions. 
President Obama, as you know, signed into law a stronger Iran 
sanctions act last July. It requires the Secretary of the 
Treasury to prohibit or impose strict conditions on the opening 
or maintaining of accounts of foreign financial institutions 
that he finds knowingly engage in certain activities.
    Why has the Treasury Department failed to sanction foreign 
banks that continue to work with sanctioned Iranian entities in 
violation of U.S. law? Is it your belief that no foreign banks 
are conducting business with sanctioned Iranian entities in 
violation of U.S. law?
    Secretary Geithner. A very important question. I am glad 
you raised it, and we talked about this the last few times I 
have come before this committee. But let me tell you what has 
happened since. Of course, you referred to one critical thing, 
which is Congress passed and the President signed a very, very 
strong additional sanctions regime.
    But in addition to that, we have been successful in getting 
the European authorities and other countries around the world 
to put in place much tougher regimes, too. As a result, 
relative to when I was here before you last time, we have made 
substantial further progress in convincing other countries to 
stop their institutions, banks and others, from doing business 
with the sanctioned entities that we have been pursuing. That 
is having a major impact, making it much harder for the 
government of Iran to do the things that we are trying to stop 
them from doing.
    But this is something you have to be relentless about. You 
can never stop because every time you stop one avenue of 
raising finance, they are going to try and find a way around 
that. So you have to relentlessly work to try to expand the 
network of constraints, and we are working very, very hard to 
do that. I have got a terrific group of colleagues, working 
closely with the intelligence community and national security 
community, with much more support internationally than we have 
had in a long period of time.
    Ms. Granger. I would support your relentlessness. I have 
one question, as long as I have got--the International Monetary 
Fund, the fiscal year 2010 omnibus included a number of 
conditions on the use of funds for the NAB, the new 
arrangements to borrow. My question is, could you give us an 
update on the NAB operation?
    Is it functional? Has it made loans? Is it serving its 
purpose?
    Secretary Geithner. Let me just step back and say, why did 
we ask Congress to do that? And it is the same reason why we 
are here before you today asking for these additional capital 
increases for the World Bank and other institutions.
    In the crisis, with our encouragement and support, these 
institutions dramatically increased the financing they were 
providing for trade finance, things like that, at a time when 
the crisis was accelerating. If you look at a graph of the 
crisis, you find that the exchange rates of emerging economies 
fell off the cliff against the dollar.
    Trade finance stopped. Export growth stopped globally. And 
of course, the world fell into a terrible recession. What this 
support did for the IMF and the World Bank and others is, and--
you can see it on a chart--is by putting resources out there, 
they helped arrest the fall in exports, bring those exchange 
rates back, and growth started.
    But because those institutions did that, they created a 
substantial hole in their financial capacity. And that is why 
we are here before you today to ask for a replenishment for 
those institutions, so that their lending capacity in the 
future doesn't fall dramatically because of the cost of the 
crisis.
    And again, what they did was hugely important. The one 
reason why U.S. exports have led the recovery in the United 
States, not just in agriculture, but in high-tech and 
manufacturing, is because of those programs. Now, in the NAB it 
is not activated until all the other countries put up their 
money. And if I am not mistaken, I will check, and we can send 
you a list of who else is signed up and who is still behind.
    But no dollar of U.S. money is on the table until the 
agreement is activated and enough countries have come forward. 
I would be happy to give you an update on that exact list. But 
what the IMF is doing is its core mission, which is for 
countries in crisis, they face some financing requirement. What 
it does is it puts loans on the table. They pay interest, but 
they come with tough conditions to help make sure the countries 
are getting their act together, not just taking advantage of 
the access to financing.
    Ms. Granger. I am going to interrupt you because you are on 
my time, and I said I would stay to 5 minutes.
    Given that, what you just said, countries that are in 
trouble, there is a fear that the NAB could be used as a 
European bailout fund. I know that the IMF has committed $40 
billion to Greece and $30 billion to Ireland, and it will pay a 
third of the cost of the $1 trillion EU.
    So address that and tell me how--is that true?
    Secretary Geithner. You are exactly right. That is part of 
those financial programs that are there as a necessary way to 
help those countries bring about their reforms. Although the 
Europeans are putting the bulk of the resources on the table, 
the IMF, which does exist to give their members access to 
financing, is providing a small share of the financing, roughly 
a third.
    But again, this is what the core IMF mission has been from 
the beginning, which is when members have financial problems, 
on tough conditions, they can access that money. But in this 
case, the Europeans are carrying the bulk of the burden, as 
they should.
    Ms. Granger. Thank you. Thank you very much.
    Mrs. Lowey.
    Mrs. Lowey. Thank you.
    Well, I will talk fast. As we strive to foster greater 
stability and security overseas, we face pressing domestic 
needs. It is critical to leverage every cent of taxpayer 
dollars and demonstrate it is spent effectively and 
efficiently.
    Can you tell the committee what would funding levels equal 
to 2008 mean for the Asian Development Fund, the International 
Development Association, the Global Environmental Facility, the 
International Fund for Agricultural Development, and how would 
2008 levels affect the ability of the United States to meet its 
commitments to global debt relief efforts?
    In the 5 minutes, just do the best you can.
    Secretary Geithner. Well, that, in fact, varies across 
institutions. But the core effect are two. In some cases, if 
Congress does not authorize and appropriate the funds, then the 
institution, the capital increase will not go forward, and it 
will have to cut its lending level very substantially. That is 
true in the case, for example, of the Inter-American 
Development Bank.
    In other cases, if we don't provide authorization and 
appropriation, but other countries go forward, then we will 
just lose influence. We could lose our veto in the World Bank, 
for example. We fall behind China and India in the Asian 
Development Bank. Let me just say it makes no sense for us to 
put ourselves in that position.
    Just, again, think about the Asian Development Bank. It is 
the most populous region in the world, growing faster than 
anywhere else, the biggest opportunities for American 
businesses, and the greatest risk that other countries are 
going to seek to take advantage of a receding United States.
    So it is very important across these institutions, again, 
that we meet the commitments we make because if we don't, we 
will lose influence, cede those markets to other countries, and 
deprive the institutions of doing things that are critically 
important to Americans.
    Ms. Granger. Thank you.
    Mr. Dent.
    Mr. Dent. Thank you, Madam Chair.
    Mr. Secretary, as you know, billions of dollars of 
assistance have been provided over the past four decades by the 
World Bank and other regional banks. Yet economic development 
has eluded many of the recipient countries.
    While there are many reasons, as you know, there are 
concerns that the governing elite in many countries benefit, 
either directly or indirectly, from much of the foreign 
assistance intended for more worthy purposes and projects. Now 
we are faced with the request to expand capital base of four of 
the banks by $2 billion over the next 5 years.
    Could you explain to the committee the plan to bring 
authorizations for these capital increases before the Congress 
so that they can be debated? And will such bills include 
reforms for the banks and benchmarks that must be met before 
these funds could be released?
    Secretary Geithner. Absolutely. And thank you for raising 
that question.
    Let me explain how we do this as a country and as the 
Government. And this is the way we have done it over time--
Republican administrations, Democratic administrations.
    So what we do is when we face a compelling need for a 
financial replenishment, we consult with the Congress. We 
determine the conditions we would attach to such a 
replenishment. We negotiate those conditions. They are, in 
effect, legislated by the institutions, and the capital 
increase does not happen until and unless those conditions are 
in place and operational. And that is the tradition that we 
adhere to, and it is very important people understand that.
    Because just like these institutions don't lend money to 
countries without conditions, we don't support these 
replenishments without conditions that require reform and 
improvement in the institutions themselves. Now, over time, 
Congress has approached the question about authorization 
language in different ways. Sometimes it is carried on 
appropriation bills. Sometimes it is done separately.
    What matters is that it happens, and we, of course, will 
work with your counterparts on the authorizing committees to 
make sure they understand the reforms we negotiated. We have 
language that reflects those reforms, and that is helpful to 
us, of course, because we want to make sure the institutions 
understand that we will not be there unless these reforms are 
operational.
    Mr. Dent. In my remaining time, I have examined the request 
before the committee for the capital increases to the 
multilateral development banks, and I can't imagine that this 
committee would support writing blank checks to any of these 
institutions.
    As you know, these banks need reforms in many areas, but 
specifically, in their internal judicial systems, which are not 
always as impartial when investigating charges of fraud, 
corruption, and waste by various whistleblowers. There was an 
example with the Inter-American Development Bank that, 
according to the press, it immediately dismissed a contract 
officer in Haiti when that person raised the issue of possible 
fraud in the IDB's Haiti reconstruction contracts. That is one 
of many examples.
    At a minimum, what is being done with the banks, including 
the IDB, to ensure that their oversight offices are impartial 
and that management does not retaliate against internal charges 
of corruption?
    Secretary Geithner. Thank you for raising that. I am very 
concerned about this same question. And let me just clarify one 
thing--we are not asking and would never ask you to write a 
blank check. Even if you were willing, we wouldn't do it.
    So, again, the resources that we are prepared to provide 
come with conditions that we negotiate and make enforceable on 
the institutions to make sure they are doing a better job, not 
just being efficient, but they have the best standards for 
internal control that we can. We are working very hard with the 
managers of those institutions to make sure that where there 
are problems, in those cases, we address them. Not just in that 
case in the IDB, but across the institutions.
    What I would try to draw your attention to--and you can 
look to other people, not just me--if you look at the standard 
those institutions set internally for internal controls and 
safeguards, they are dramatically better than they have been. 
Our reforms we negotiated will make them significantly better, 
and I would hold them against almost any other program for 
development assistance.
    And again, you can talk to--you can look to Bill Gates and 
others for evidence of this stuff. But people who spend their 
lives in this business will tell you that the standards they 
have in place in those institutions are not just much better 
than they were a decade ago or two decades ago, but they are 
dramatically better than the standard that exists for other 
development programs.
    Ms. Granger. Thank you very much.
    I misspoke. There are now going to be three votes. The 
first is 15 minutes, then two 5 minutes. We will still do the 
same thing. We will take one more question. We will do our 
votes and then come back, if that is all right with you.
    Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair.
    Mr. Secretary, the events of the last 3 months in the 
Middle East and North Africa have been extraordinary. The sight 
of millions of people, mostly young, who are taking to the 
streets to demand democracy, accountability, and a better 
future is one that should stir the hearts of every American. 
Bin Laden is not the face of the Arab world, and instead, it is 
that of Mohamed Bouazizi, a young Tunisian fruit vendor who set 
himself on fire to protest the endemic corruption of the Ben 
Ali Government and through his self-sacrifice began the 
revolution that toppled Egypt's Mubarak and threatens to sweep 
aside leaders from Yemen to Libya.
    The most important feature of this revolution is that it is 
organic. The people in these countries are organizing, 
demonstrating, and bringing change without any outside 
direction or intervention. This has both instilled genuine 
pride among Arabs worldwide, but it has also prevented the 
targeted governments and al-Qaeda from casting this as a 
foreign plot to weaken Arabs and Muslims.
    I think we need to remain mindful of this as we move 
forward, but we also cannot afford to let this moment slip by 
without doing everything in our power to help Tunisia and Egypt 
and others as they make their transition to democracy.
    The same underlying structural factors--lots of young 
people, high unemployment, a concentration of wealth in the 
hands of very few, and endemic corruption--that gave rise to 
these revolutions are still in play. And if unaddressed, they 
will give rise to greater discontent down the road.
    Yesterday, I met with a group of Tunisian business 
executives who are anxious to help their country in its moment 
of transition. They told me there are two things the U.S. can 
do to help them in the next few months if their country is to 
be reborn.
    The first is to help locate and repatriate money looted by 
the Ben Ali family and regime cronies. I hope that we are 
involved in that, and I would love to hear your thoughts on 
what we are doing to assist in that regard. This goes for Egypt 
as well.
    And the second issue they raised is that of debt 
forgiveness. As of 2009, Tunisia's external debt stood at about 
$19.6 billion. The country is classed as a lower middle income 
country by the World Bank. It is, therefore, not eligible for 
the Heavily Indebted Poor Country Initiative or the 
Multilateral Debt Relief Initiative.
    Are there other mechanisms whereby the U.S. and other 
stakeholders can work to cancel some part of Tunisia's debt in 
order to allow the new government there to redirect resources 
toward job creation and other initiatives that will help 
buttress democracy and prevent the intrusion of radical Islam?
    Secretary Geithner. Thank you for raising that. Let me just 
say briefly, yes, of course, we are very involved, closely 
involved, working with other countries in trying to make sure 
that we are aggressive and effective in making sure we can 
seize the assets we need to seize and make sure they are saved 
for the benefit of the citizens of these countries. You saw, of 
course, us move incredibly forcefully and quickly with respect 
to Libya, and we are on it, and we have the most effective 
sanctions regime of any country in the world, as we are 
demonstrating.
    Now, in Tunisia and in Egypt, and in general, of course, it 
is very important, as we think about how best to support the 
political transition underway, we recognize that those 
governments, those new governments are going to face enormous 
economic challenges, very short-term challenges because of the 
crisis they are going through and the effect on the economy, 
but also long-term development reform challenges to make sure 
there more opportunities for their citizens.
    And as part of that, of course, we will work very closely 
with other countries in the region, with the World Bank, and 
multilateral development banks to make sure that we can provide 
the support that is going to be most effective in that context. 
We will look at everything within our purview, including the 
specific things you referred to.
    But at this stage, we are still trying to assess what is 
going to be most helpful and what is going to be the most 
powerful package of assistance. But one thing I can tell you 
for sure is, like anywhere around the world, we are going to 
have to turn to institutions like the World Bank because they 
are going to have more resources in the pipeline, able to 
mobilize more quickly, again better leverage for every dollar 
that we are exposed to, and a better capacity to make sure that 
that assistance comes with the reforms that will help advance 
the objectives you are referring to.
    Mr. Schiff. Mr. Secretary, I would love to follow up with 
you on both those issues of the debt forgiveness, as well as 
the ability to track down the illicit looting of those 
countries.
    Thank you for your testimony today.
    Ms. Granger. We will be back as quickly as we can.
    [Recess.]
    Ms. Granger [presiding]. The hearing will come to order.
    Mr. Dicks.
    Mr. Dicks. Thank you.
    Almost 1 billion people suffer from chronic hunger every 
day, and world food prices are at the highest level since the 
2008 crisis, as well as the heart of recent political and 
social instability in the Middle East. It is, therefore, more 
important than ever that the U.S. engage to help long-term food 
security and assist countries to avert short-term food 
shortages.
    The budget request includes $308 million for U.S. 
contribution to the Global Agricultural and Food Security 
Program. U.S. leadership and the U.S. contribution to the fund 
are intended to leverage other donor contributions. Yet to 
date, only the United States, six other countries, and the 
Gates Foundation have made pledges and contributions. What is 
the current status of contributions by others since the launch 
of the fund last year?
    Secretary Geithner. Thank you for raising this issue. And 
thank you again for your opening statement.
    I think the simplest way to say it is the world is looking 
to us, as they always do. They want to see how much we are 
prepared to put on the table before they come and make their 
commitments clear.
    The important thing is that this has got enormous support 
around the world. You saw, as you said, the Gates Foundation 
themselves contribute alongside us. You have got a number of 
countries willing to move, but they want to see how much we do.
    But I will be happy to provide you an update in writing on 
the details of those commitments. But the important thing, 
again, is to say people are going to see. They are going to 
wait to see what we deliver.
    Mr. Dicks. As I understand it, the request in 2011 was $408 
million. And in FY10, there was no request. Is that because the 
money hadn't all been utilized, or what was the reason for 
that?
    Secretary Geithner. I think you are right, but I have to go 
back and look. Again, what we are trying to do and the reason 
why we are using a fund like this, a multilateral fund, is we 
think it is the best way to draw other commitments on the table 
so that, ultimately, we get these investments in improving 
productivity and agriculture and infrastructure with, in a 
sense, least cost to us, best leverage for our dollar.
    So, in all these cases, what we try to do is we lay out a 
broad framework. We make an initial commitment, and then we try 
to generate as much support as we can. But again, ultimately, 
it depends on what we are able to authorize and appropriate.
    Mr. Dicks. Yes, I was wrong. The request of $408 million--
--
    Secretary Geithner. Was '11.
    Mr. Dicks [continued]. Was the FY11 request.
    Secretary Geithner. Yes, it was probably the '11 request.
    Mr. Dicks. The '11 request.
    The other program that Mr. Gates raised with me was the 
Global Alliance for Vaccines and Immunizations. Launched in 
2000, the GAVI alliance is a global health partnership 
representing stakeholders in immunization from both private and 
public sectors.
    Now this is another very important program. I am told that 
needs still exist, for example, in polio. Afghanistan and 
Pakistan are two of the countries that still are vulnerable to 
polio.
    Secretary Geithner. Exactly. And what we have found is, of 
course, as you might expect, that although there is incredible 
innovation in pharmaceuticals around the world every day, 
including led by U.S. companies, they tend to under invest in 
some of the diseases that kill the most people in developing 
countries that, of course, we have no memory of in the United 
States. So they tend to under invest.
    And what this fund was designed to do originally--and it 
has been there for some time--is to put resources on the table 
to help incent development of treatments and vaccines for 
diseases that still kill millions and millions of people around 
the world every day. And Mr. Gates was a pioneer in that field, 
and the Gates Foundation has been leading the international 
effort. But the U.S. has been part of that, and that is part of 
the State Department's piece of the foreign operations, of 150 
Account request.
    Mr. Dicks. I just think when the U.S. Government shows its 
commitment, it makes it easier to get people like Bill Gates 
and Warren Buffett and others to help support.
    Thank you, Madam Chair.
    Secretary Geithner. Exactly. And again, I will just be very 
quick. One of the benefits of having the Gates Foundation with 
us is, in some ways, you have it is not quite a market test, 
but you have a sort of market test of what works.
    Because again, in the Food Security Trust Fund and in the 
vaccine initiative, in GAVI, you see another example where if 
you see institutions like him, who run major companies--you 
know, the world's iconic technology company--if they say this 
is a good return on our investment,--it helps make the case.
    Ms. Granger. Thank you very much.
    Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Madam Chairwoman.
    The chairwoman started--Mr. Secretary, good to see you 
again, sir.
    Secretary Geithner. Nice to see you.
    Mr. Diaz-Balart. Started talking about Iran, and I would 
like to go from one state sponsor of terrorism to a different 
state sponsor of terrorism. Tourism travel to Cuba is 
statutorily prohibited under U.S. law, under the Trade 
Sanctions Reform and Export Enhancement Act of 2000, Section 
908(b)(1) and also (9) and (10) in (b).
    Also, the Trading with the Enemy Act, as well as the Helms-
Burton bill. Actually, it is the Libertad Act. We all kind of 
know it as the Helms-Burton bill. So, and there is obviously a 
good reason for that. Mr. Secretary, tourism is--frankly, the 
whole industry is owned and operated by the Cuban military. It 
is one of the--if not the main revenue source for that state 
sponsor of terrorism, for that dictatorship, a state sponsor of 
terrorism that not only has murdered Americans, harbors cop 
killers, but since December of '09, actually even has an 
American held hostage, as you know.
    Recently, there have been a proliferation of attempts to 
skirt that law. My question is, is OFAC making enforcement of 
Cuba a priority?
    Secretary Geithner. Oh, absolutely. Of course, and we will. 
And of course, we are operating fully within the obligations 
set by Congress in this area. I know you are concerned about 
these things, the changes you refer to recently are really very 
modest expansions.
    Mr. Diaz-Balart. Mr. Secretary, I bring that up because I 
have got some examples here. These didn't take a lot of 
research to find them. This was just on the Internet. ``Cuba 
tours announced after Obama eases U.S.-Cuba travel 
restrictions.'' Here they talk about it on their own Web page. 
They created this whole part. And obviously, they are very well 
known as a tourism outfit.
    They talk about here, ``Adventure tour operators expect a 
significant increase in bookings.'' They talk about ``provide 
more time to relax on Cuba's famed white beaches, options to 
snorkel, walk the footsteps of pirates, including rum samplings 
and dancing lessons.'' Obviously, this is tourism.
    I have another example of ``American Tours International 
makes Cuba travel easy.'' And they go into how they can help 
people basically qualify under the law. But again, this is 
another tourism outfit.
    We have one which I believe, Mr. Secretary, and I believe 
that you all have stopped, a fishing--I believe it was a 
fishing tournament that was leaving out of Sarasota, Florida. I 
believe that you stopped one. There is also then the Hemingway 
fishing tournament in Cuba. Now, we have wonderful fishing 
tournaments in Florida. They are tourism.
    Anyways, I bring these up because what--can you give me 
assurances that you will look at these and others and make sure 
that these--these are blatant, by the way. These are blatant 
attempts, and I will get those to you. And there are others 
that may not be so blatant attempt to skirt the law and 
actually just using pretexts of other things, going there for 
what is obviously just tourism.
    Secretary Geithner. I appreciate you bringing those to my 
attention, and I will be happy--of course, I will convey them 
to my colleagues at OFAC and would be happy to ask my 
colleagues to get back to your staff exactly on where the line 
is and how we are enforcing it and what falls short of the 
line, what falls outside of the line.
    And you know, you are right. These are, as you said, a 
relaxation, but it is a very limited modification. We will 
enforce that line to the best of our ability.
    Mr. Diaz-Balart. And I appreciate that. And again, we can 
talk about whether we agree or disagree with the relaxation. 
But the issue with you today is making sure that we do not 
violate the statute. The statute is very clear.
    But there seems to be now an explosion of individuals and 
groups that are looking at ways to use any pretext to go to 
Cuba, claiming that it is something that it is not. So, again, 
I appreciate your efforts.
    Thank you, Madam Chairwoman.
    Ms. Granger. Thank you.
    Mr. Rothman? Jackson? Sorry, Mr. Jackson.
    Mr. Jackson. Madam Chair, I am prepared to ask questions, 
but I think the regular order did include Mr. Rothman before 
me.
    Ms. Granger. Thank you very much.
    Mr. Rothman.
    Mr. Rothman. Thank you, Mr. Jackson.
    Thank you, Madam Chairwoman.
    Mr. Secretary, good to see you again. Thank you for your 
readiness and willingness always to come before Members of 
Congress and the respective committees to answer all our 
questions. You have been tireless and transparent with what the 
administration is doing, and I am very grateful for your 
enthusiastic compliance with our requests to come have you meet 
with us.
    I have spoken and written in support of the things that you 
have talked about, the multiplier factor of our foreign 
assistance and our diplomacy and our participation in these 
international aid funds. But I do want to be a devil's advocate 
just for a moment.
    You did mention that because we do need to find additional 
spending cuts, not cuts that hurt middle-class jobs or 
innovation or our infrastructure in America or U.S. national 
security interests. But nonetheless, we just have to find cuts, 
and they are all going to be tough.
    The Asian Development Bank you mentioned, if we don't pony 
up with our share of money, China is going to step into the 
breach, and that will, among other things, have a national 
security implication, of course. But also they are establishing 
business relations for their own state-run companies.
    Could you flesh that out a little bit more? How exactly 
does that work? How exactly does China use those investments 
either to enhance its national profile to the detriment of the 
United States and/or its business profile?
    Secretary Geithner. You know, it is worth thinking back to 
when these institutions were created in the aftermath of World 
War II and almost 50 years ago--a little more than 50 years 
ago, 60 years ago in some cases--and think of how different the 
world was then. At that point, we were the overwhelmingly 
dominant economic power in the world.
    And in today's world, despite our strengths as a nation--
they are formidable--the balance of power has changed 
dramatically. So we are now only one-fifth of GDP. We only have 
5 percent of the world's population.
    And so, if it was important then to make sure we had 
multilateral institutions we could help use to advance our 
interests, think how much more important it is today in a world 
where our relative share of activity and, therefore, in some 
ways, our relative influence is significantly less in relative 
terms.
    Now, in these institutions, our influence comes through a 
combination of, in some cases, the veto we still hold over core 
decisions, but of course, ultimately, in our capacity to shape 
the reforms that come with the assistance the bank provides. 
And it is overwhelming in our interests, in the interests of 
American companies and, more generally, to make sure that we 
have as much capacity to shape those conditions as much as 
possible.
    Mr. Rothman. What do you mean by that, by shaping 
conditions?
    Secretary Geithner. As an example, we have led the focus on 
corruption, on reducing trade barriers, on making sure that 
property rights are protected, that the basic institutions 
allow businesses, market economies to work are established in 
those countries as they develop. And the Asian Development Bank 
and the World Bank and the IMF, in some cases, are the ones 
that play a central role in doing that, and those are things we 
cannot do on our own bilaterally.
    Mr. Rothman. But does China benefit in the absence of those 
reforms on issues such as corruption and lack of transparency?
    Secretary Geithner. Well, again, two things happen if we 
don't meet our commitments. One is that we lose our relative--
in some places our veto right. In that case, other countries, 
by definition, have more influence over shaping the conditions.
    Or in some cases, what happens is the institutions have 
less resources to lend. And what that means is institutions 
that have much more substantial capacity to provide trade 
finance or development assistance on their own than we will as 
a country, they will have more influence over the governments 
that need that assistance.
    Mr. Rothman. Mr. Secretary, what do you say to those who 
suggest that the United States is bearing an undue share or 
extra large share of the world's, free world's military 
obligations, and we spend more----
    Secretary Geithner. I would say that is unambiguously the 
case.
    Mr. Rothman [continuing]. That is the case, aside from 
serving U.S. national security interests, in instances of 
natural disasters--of the tsunami in Indonesia; in Haiti, the 
earthquakes there; the troubles there and all over the world--
as well as the U.S. being ready to airlift people in and out of 
harm's way, that has a national security as well as positive 
influence on U.S. relations with those nations.
    In an era of scarcity here at home, albeit hopefully short, 
we have to give up one or the other, and we can't do both. We 
have taken the cuts in defense. Why can't we live with some 
cuts in these other programs?
    Secretary Geithner. Well, here is one way to think about 
it. Because we have scarce resources and we are having to cut 
spending and cut deficits, that makes it even more important 
that when we spend a dollar on development assistance that we 
are spending in a way that has the maximum impact in leveraging 
change and reform that makes sense for the United States.
    And so, you would want to makes sure that, again, that is 
just you are making exactly right case, which is, again, think 
about the World Bank. A dollar of U.S.----
    Mr. Rothman. I understand.
    Secretary Geithner [continuing]. Means $25 of other 
people's----
    Mr. Rothman. I understand that multiplier, $1 to $25. But 
let's go even further, as some people at town hall meetings 
would say to me, to reduce it to the absurd, why have any 
foreign development bank involvement?
    Secretary Geithner. Because we will be less secure as a 
country. We will have less opportunities for American 
companies. We will be weaker at home. There will be less jobs 
at home. There is a direct connection.
    Again, if you look at what is leading the recovery in the 
United States today? To a substantial degree, and this is very 
encouraging, it is coming from exports across agriculture, 
high-tech manufacturing, small businesses, large businesses. 
And that is in part because we are seeing the kind of market 
opening that institutions like the World Bank and the Asian 
Development Bank have supported over time. And we want to make 
sure that is happening over time because we get a very good 
return.
    Again, not to quote Bill Gates again, but look at Bill 
Gates. This is a businessman with a remarkable record of 
innovation. And when someone like him says, as I quoted 
earlier, these are the most effective uses of the taxpayers' 
money, then we have to point to that as worth something.
    Mr. Rothman. The question is, is he referring to the saving 
of lives, which is a laudable thing, or is he referring to the 
success of American businesses? It may be both.
    I don't know if I have time for a question about----
    Unidentified Speaker. Saving lives is what he is----
    Mr. Rothman [continuing]. Right. Not necessarily national 
security.
    But Bahrain banking, do I have time for that, Madam 
Chairwoman?
    Ms. Granger. I am sorry you don't.
    Mr. Rothman. Well, next round perhaps. Thank you, Madam 
Chairwoman.
    Thank you, Mr. Secretary.
    Ms. Granger. Thank you very much.
    Mr. Austria.
    Mr. Austria. Thank you, Madam Chairwoman.
    Mr. Secretary, thank you for being here.
    I am going to change kind of the course here. Let me talk a 
little bit about the New York Stock Exchange now being owned 
and purchased by a foreign company, Deutsche Borse, who owns 
Clearstream, where there has been some controversy with 
Clearstream as far as providing significant financial services 
for the Iranian government and businesses.
    In addition, at least $2 billion in Iranian funds held by 
Clearstream have been frozen as part of an effort by families 
of our U.S. military and Marines that were killed or injured in 
the 1983 terrorist attack on the U.S. Marine barracks in 
Beirut. I would like to get your thoughts about that.
    And are you concerned that the New York Stock Exchange is 
going to be owned by a company that is allegedly, and I think 
is, conducting business with Iran?
    Secretary Geithner. Difficult for me to address that 
directly for the following reason. Under the basic protections 
Congress has established to make sure that while we run a more 
open investment environment, we are protecting our core 
national security interests, I don't have the capacity to 
comment on any individual cases.
    But what I will tell you is that we will be very careful to 
make sure that where we welcome these types of mergers, where 
we welcome foreign investment to come to the United States, we 
are going to be very careful to make sure we are protecting our 
core national security interests. So if there is any concern 
about that, we will make sure we address it.
    Mr. Austria. And I assume when you are addressing that, you 
are going to take into consideration any type of violation of 
the U.S. sanctions that are now being----
    Secretary Geithner. Again, I have got to be careful so I 
don't imply anything. But of course, that would be one of the 
things that we looked at in this case.
    Mr. Austria [continuing]. Okay. Thank you.
    Let me move on to Hezbollah. It is widely known that 
Hezbollah is a U.S.-designated terrorist group that utilizes 
the Lebanese banks to finance its activities, and these same 
Lebanese banks are accessing the U.S. financial systems and 
providing Hezbollah access to U.S. dollars.
    Is the Treasury Department looking at any of this, and are 
you investigating any of this? And if so, what can you tell me?
    Secretary Geithner. Absolutely. Very important concern. I 
would be happy to have my staff brief you in more detail, but 
we announced I think just in the last few weeks another 
important effort to try to make sure that, again, we are 
stopping exactly that kind of activity.
    But this is very important. Again, I would be happy to have 
my colleagues brief your staff in more detail on exactly what 
we are doing, where we see the risks.
    Mr. Austria. Anything specifically dealing with the 
Lebanese Canadian bank?
    Secretary Geithner. Yes, I want to be careful how I do 
this. But again, I would be happy to provide you details in 
writing, where we have acted, why, and where we think the 
remaining challenges are.
    Mr. Austria. Let me ask one last question, if I could? Just 
following up a little bit on the IMF reports, recent reports 
have suggested the possibility of using special drawing rights, 
SDRs, to replace the U.S. dollar as the world's reserve 
currency.
    Many economists believe that this would be disastrous for 
the dollar and for the American economy. Currently, nearly 70 
percent of world reserve currencies are held in dollars, and 
some of the world's most precious commodities, such as oil, are 
priced in dollars. Among other benefits, many believe its 
status as the world's reserve currency helps the dollar 
maintain its value and bolsters American competitiveness 
overall.
    In your opinion, what effect would this change have on the 
value of the dollar, the overall United States economy, and our 
position as a global economic leader?
    Secretary Geithner. I think you understand the stakes, and 
you said them well. And let me just say clearly there is no 
risk of the SDR playing that role. The SDR is not a currency. 
It is a unit of account. And it can't provide the role that 
many people aspire to it, and there is no risk of that 
happening.
    And again, and the dollar does play this unique role in the 
global financial system. I think that is likely to continue. It 
is important to recognize--and again, since I am here before 
the Appropriations Committee, I want to say this--that, of 
course, we have to make sure we are being very careful as 
Americans to make sure that we are earning the confidence of 
Americans in countries around the world, that we can run 
responsible economic policies, go back to living within our 
means.
    Those things are important to make sure that over time, we 
are sustaining the dollar's role as a major reserve asset.
    Mr. Austria. Just to expand on that question, when you say 
there is no risk, there are many concerns that have been 
brought forward and are rising about the growing Chinese 
influence and intrusion in the Asian and global economies.
    And I my question is with that happening, and you say there 
is no risk----
    Secretary Geithner. No risk that the SDR is going to play a 
role that would in any way affect the dollar's role in the 
international financial system.
    Mr. Austria [continuing]. Do you have an opinion on the 
Yuan and the SDR valuation being----
    Ms. Granger. Your time is up.
    Secretary Geithner. I could say--could I say, Madam 
Chairwoman, very quickly?
    Ms. Granger. Yes, quickly.
    Secretary Geithner. Very important that the Chinese let 
their currency appreciate over time. It is happening now. We 
would like it to go further. They also are relaxing controls on 
the use of their currency internationally, which is 
appropriate, too. And over time, it will help make sure that 
the currency moves in response to market forces, which is very 
important to us.
    Mr. Austria. Thank you.
    Ms. Granger. Mr. Jackson.
    Mr. Jackson. Thank you, Madam Chair.
    And I want to thank you, Mr. Secretary, for taking time to 
visit our subcommittee.
    I just have a couple of questions, Mr. Secretary. For most 
of my tenure in Congress, I have advocated for full employment. 
I know that Humphrey and Hawkins, when they were in Congress, 
also advocated for full employment, and through time, we have 
arrived at acceptable levels of unemployment in our own 
country.
    I truly believe that ending unemployment will solve a lot 
of the problems that our country faces, and I am sure you have 
seen, as I have, the unrest in North Africa and in the Middle 
East. One of the things that these countries appear to have 
been in common, are high levels of unemployment, which this 
committee directly addresses through our various aid programs, 
whether using bilateral assistance or multilateral assistance.
    I am wondering what role you think high levels of 
unemployment are playing with respect to instability in the 
Middle East and North Africa, and how Treasury is working with 
other governments to bring down their unemployment levels?
    Secretary Geithner. Well, I think you raise a very 
important question, and you are right to point out that in a 
country like Egypt, for example, not only is unemployment, 
overall unemployment very high, but it is very concentrated 
among people who are actually well educated and among the 
relatively young.
    And people who watch Egypt closely believe that that is 
part of what has provided so much force to the democratic 
movement now sweeping across the region. That is why, again, it 
is very important, as we watch this political transition 
unfold, that we are making sure we have the capacity, including 
through these institutions, to support reforms, develop and 
expand opportunities in those countries.
    And you know, it is going to be a big challenge for any of 
those governments, and they are going to need some help. And we 
are going to make sure that where we can provide help alongside 
these institutions, we do so in support of reforms that will 
expand those opportunities for exactly the reason you said.
    Mr. Jackson. And clearly, unemployment is a significant 
factor in people losing faith in their government. I sat 
anxiously at the President's State of the Union address. I 
heard him mention job creation, I think, 31 times. He mentioned 
innovation, I believe, 15 times. But he failed to mention 
unemployment one time. At the time he delivered that speech, 
unemployment in our country was around 9.1 percent according to 
the Labor Department.
    Is there any concern in the administration that high 
unemployment in our own country, coupled with budget cuts made 
by the Federal Government, and the States who have made similar 
cuts in similar programs, could lead to significant number of 
American people waking up one day without faith or belief in 
their Government's capacity to solve the nation's problems?
    Secretary Geithner. Well, I would agree with you and just 
say that when the President talks about jobs and the imperative 
of creating more jobs, he is saying that in recognition of the 
fact that we are still living with unacceptably high levels of 
unemployment. You are exactly right that this financial crisis 
caused not just a huge amount of damage to the basic wealth and 
economic security of Americans, but caused a huge amount of 
damage to their basic faith in the ability of Washington to 
provide the basic protections and opportunities they need.
    I think that is why it is so important we recognize that 
even though we are 18 months into a growing economy and we are 
seeing job growth start to come back, we are a long way from 
repairing the damage caused by this crisis. And everything we 
do here, as we try to reduce deficits and reduce spending, we 
have to make sure we are focusing on repairing that damage, 
getting millions of Americans back to work.
    And that is why it is so important that we are making these 
investments in public infrastructure, in education investment, 
and improving investment in the United States. Because without 
that, the risk is that it is going to take a much longer period 
of time to bring the unemployment rate back down.
    Mr. Jackson. Is there any concern in the administration 
that high levels of unemployment are discouraging the American 
people in their belief in the capacity of the Federal 
Government to solve the nation's problems, including State 
governments, given that many States are following the lead of 
the Federal Government?
    Secretary Geithner. Well, that is an interesting question. 
That is a complicated question. But again, I would agree with 
you that what you have seen is a big loss of faith among 
Americans of really just because of what the crisis did.
    But also, in some ways, you could say a recognition, 
particularly if you look at what is happening at the State 
level as governments have to cut deeply into basic services 
that all Americans--like police on the streets, teachers in the 
classroom. Then they are seeing again how important it is that 
the Government preserve some capacity to do things only 
governments know how to do, and that is going to be part of any 
effective strategy to dig our way out of this crisis.
    Mr. Jackson. And very quickly, almost 3 weeks ago, the 
House passed H.R. 1, an omnibus spending bill for fiscal year 
2011 that made huge reductions in global food security, climate 
technology funds, and MDBs, multilateral development banks. 
What would be the ramifications if H.R. 1 were enacted into 
law?
    Secretary Geithner. Well, I think they would be very 
damaging, and that is why the President said he would veto that 
legislation. And of course, I think the Senate is just at this 
moment voting on those particular--and again, our concern is 
that, as we find bipartisan solutions to reduce our spending 
and reduce deficits, we do so in a way that is carefully 
designed to make sure that where we need to do more with less, 
where we need to cut back, where we are not doing a good job at 
things, that we are preserving the capacity to invest in things 
that are hugely important to not just growth today, but growth 
in the future.
    And if we have got too much, too quickly, and too 
indiscriminately, then the risk is that we hurt the recovery, 
unemployment will stay higher longer, and we will sacrifice our 
ability to be stronger and more competitive in this more 
competitive world.
    Ms. Granger. Thank you, Mr. Jackson.
    Mr. Jackson. I understand that my time has expired.
    Ms. Granger. We will now begin a second round of questions. 
The hearing must end at 3:30 p.m. I understand the Secretary's 
schedule. He has to be out of here at 3:30 p.m., and he has 
been very patient as he waited for us.
    So we will begin the next round. Try to keep it as quick as 
you can so that everyone will get a chance.
    I am going to ask you about the budget request that 
includes $175 million for the Multilateral Debt Relief 
Initiative. I understand it is a commitment under the Bush 
administration that had the U.S. paying 20 percent of 
multilateral debt.
    However, I notice that this has not been authorized yet. 
Therefore, it wasn't debated by the Congress, and that leads me 
to a number of questions. The first one, and I will be very 
concise, given that the multilateral development banks and the 
IMF continue to provide loans after full debt relief--and I 
think Haiti is the most recent example--how can you convince 
the Members today that the impoverished people of these 
countries benefit, not the banks that need their balance sheets 
shored up so they can continue making loans?
    Secretary Geithner. Again, very good question. This is a 
question that Congress has wrestled with over about two 
decades. And the administration has tried to provide a mix of 
different forms of assistance--grants, concessional loans, and 
in some cases where it makes sense, debt relief in return for 
conditions.
    What matters is that you are improving the capacity of 
those governments to address the needs of their citizens and 
they are not left with burdens they can't afford. And what the 
mix that is appropriate for different countries will depend a 
little bit on history. But again, what we try to do is have a 
capacity, have a mix that is going to make sense given each 
country's particular needs.
    But in each of these cases, whether it is debt relief or 
loans, and sort of independent of who is providing the loans, 
we want to make sure that it comes with conditions that 
maximize the incentives and the obligation of those governments 
to do a better job of meeting the needs of their people.
    Ms. Granger. I just question the loans. When there is no 
indication they will ever be repaid, that that is a loan. It is 
a grant perhaps.
    Secretary Geithner. Well, you are exactly right. And what 
we try to do, and particularly in cases like that, we want to 
make sure that we are not providing assistance on terms they 
can't afford and can't repay. That makes no sense.
    And in Haiti, we have been very successful in making sure 
there is a package of assistance on the table that is highly 
concessional for exactly the reason you said. But again, there 
is a very good case, and Congress has supported for 20 years 
conditional debt relief as part of these financial programs 
that are, again, always in support of reforms so that the 
benefits reach the people of those countries.
    Ms. Granger. I will just refer you to the letter I wrote to 
you in July that stated the concern I have with indebtedness to 
a country whose people are suffering but have no way to pay it 
back.
    I will go next to Mrs. Lowey.
    Mrs. Lowey. Thank you.
    I have been very concerned not just with the banks, but in 
all of our foreign aid programs--and domestic programs, too on 
the whole issue of fraud, corruption, transparency. The World 
Bank has conducted various reviews, and has announced new 
policies focused on creating greater transparency and 
increasing effectiveness of its anticorruption and governance 
mechanisms.
    In fact, just the past year the World Bank debarred 45 
companies, NGOs, individuals, made 32 referrals to other 
governments for criminal action. I know you are aware of that. 
Can you tell me what reforms are still needed to inject further 
momentum and cooperation into global anticorruption efforts? 
And what more does Treasury believe the bank must do in order 
to be transparent and open?
    Look, transparency and openness starts from the top, and 
although civil society has observer status, they are not part 
of any decision-making at the bank. So, in addition, have there 
been discussions at the bank to reform bank governance 
structures to give civil society and the private sector a seat 
at the decision-making table? What can the U.S. do to ensure 
that civil society organizations' representatives are full and 
equal participants through the process?
    Secretary Geithner. I welcome your attention to this issue. 
And let me just say it is very important to everything we are 
trying to do that these institutions understand that you are 
paying attention too and you care about this, and you will hold 
them to the highest possible standards. That is necessary for 
us if we are going to have any chance of being effective.
    Now the president of the World Bank, Bob Zoellick, has done 
a very effective job in making sure that across the board, he 
is making sure the bank is better at not just measuring 
results, providing more transparency, combating corruption, 
bringing about reforms to the procurement practices, but in the 
specific case you mentioned, making sure that through 
inspection panels and other means that where you have the large 
programs that have big impact on citizens on the ground in 
these countries, that there is a chance for feedback and input 
as they shape the design ahead of the approval by the board.
    I would be happy to have my colleagues provide you more 
detail in writing on those reforms. And of course, that has 
always been at the center of our negotiations in IDA and around 
the World Bank capital increase.
    And the World Bank sets the standard for all the other 
multilaterals, and part of these other negotiations has been to 
make sure that we are pushing the rest of the regional 
development banks to adopt the higher standards set by the 
World Bank. And when the regional banks are better, we push the 
World Bank to get to the frontier of best practice.
    Mrs. Lowey. I think I have time for one more.
    Last September, the administration issued the first 
Presidential Policy Directive on Global Development, and the 
President made absolutely clear that the mission of the U.S. 
global development policy is to promote broad-based economic 
growth, democratic governance, support developing countries, et 
cetera.
    In accordance with this new policy, how is the Treasury 
Department making better investments in global development? Why 
is it in America's interest economically to do so? And I think 
it is important that we review how Treasury is working with 
other agencies, such as Trade and Development Agency, USAID, 
Millennium Challenge Corporation, to ensure that all U.S. 
policies that contribute to the fight against poverty are good 
investments--debt relief, human rights, et cetera. Perhaps you 
can answer that?
    Secretary Geithner. Well, thank you for raising that. 
Again, let me just underscore how important it is that people 
recognize that everything that matters in development, of 
course, depends on the actions of the governments in these 
countries. Ultimately, most of the resources they have 
available are going to come not from us or the World Bank, 
although they will be critical to them, but from their capacity 
to mobilize the resources of their country, and that is why the 
emphasis on growth.
    So it is very important that we are marshaling all our 
tools and instruments and programs in support of programs that 
are going to expand economic growth in these countries that 
will create more resources for those governments. And 
ultimately, those countries like Korea, for example, famously, 
will be able to graduate from these programs and work on their 
own.
    Now what this broad strategy does is force not just 
Treasury and AID, but the rest of the entities of government--
Ex-Im, OPIC, et cetera--to work much more closely together. So 
that where we are acting, we are doing so in a complementary 
fashion. And there is a pretty good, well-established division 
of labor, and the role we have, of course, is to make sure that 
through the IMF, through the World Bank, the regional banks in 
particular, and through our technical assistance programs and 
the debt relief programs, that we are getting the biggest 
impact at the least cost, mobilizing as many resources from 
other countries as we can and supporting these broad-based 
reforms.
    Those are things that are very hard for us to do 
bilaterally through AID. If you listen to the Secretary of 
State she reminds people that, as an example, you want to make 
sure where we are lending money or providing money, those 
countries have tax reforms in place to make sure that they have 
reasonable effort to make sure that their citizens are paying 
their share, being citizens of those countries as well.
    And those are things you can really only do effectively 
through the IMF and the World Bank, where you have the capacity 
to impose broad conditions on economic policy.
    Ms. Granger. Thank you.
    Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Madam Chairwoman.
    Mr. Secretary, I want to go back to two issues that you 
touched on before. One of them, going back to you mentioned 
that the changes vis-a-vis Cuba were minor. However, they have 
been credited by----
    Secretary Geithner. Modest, modest.
    Mr. Diaz-Balart [continuing]. Modest. Modest. Have been 
credited by many as, frankly, helping prop up the regime. And 
after those changes, there been further crackdowns, the 
beatings of Las Damas de Blanco, the death of a political 
prisoner, the hostage of an American, et cetera. So, you know, 
obviously, there are many of us that believe that the 
administration needs to get tougher.
    But we already talked about that, and I know that is not 
really your policy area. I just wanted to mention that because 
I think it is pretty evident that it is not working.
    Talking about jobs, you mentioned free trade, and you 
mentioned free trade with Korea, and you said others. And I 
want to just briefly talk about the Colombia free trade deal.
    For south Florida and for Florida, Colombia is a huge 
trading partner. For the United States, it is a huge trading 
partner. As a matter of fact, the United States at least was, 
and I think continues to be, the number-one trading partner, 
exporter to Colombia.
    And yet, since that free trade deal has not been sent 
forward to Congress, we have been losing market share. We have 
lost approximately--I don't have the numbers in front of me, 
but I will get those to you. I am sure you have them as well, 
about 50 percent of market share from our agricultural 
products. A lot of that loss is to Canada, and then, lo and 
behold, of course, to China. They are always present.
    And they then, subsequent to us negotiating the free trade 
deal, they have negotiated a free trade deal with the European 
Union. They are not exactly people who don't look at human 
rights and issues that also concern the United States. Canada, 
I already mentioned.
    So the question is this. I know the President has stated 
publicly that he supports it. Ambassador Valenzuela in 
Cartagena, Colombia, mentioned that the President supports it.
    When I was at the swearing in of President Santos in 
Colombia, I believe General Jones, who was then the national 
security adviser of the President, said to a group of us there 
that he thought it was a national security interest for the 
United States to pass that agreement.
    Specifically then, I keep hearing about what is holding it 
up. But specifically, what are the specific issues, not big-
term issues, and also, more importantly, what are the 
solutions? And when can we expect finally the President to move 
forward on that, to present it to Congress?
    Because that is thousands of jobs that we could create 
immediately without spending one taxpayer dollar. So, again, if 
you would please address that issue? Thank you.
    Secretary Geithner. As you know, the responsibility for 
negotiating this rests with my colleague Ambassador Kirk, and I 
can tell you, though, as he said publicly, that we are working 
very closely with the government of Colombia, at the 
President's direction, to see if we can find a way to bring 
this agreement to the Congress for support.
    But let me just put Colombia aside for a second and welcome 
everything you said about the importance of making sure that we 
are finding ways to expand more opportunity in those countries 
for American exporters. Because again, when we are not there, 
when we are not present, all we do is lose business, cede that 
opportunity to other countries.
    And we need to be able to demonstrate to the world that we 
have the capacity again to legislate agreements, good 
agreements for American businesses that protect our interest, 
but again, don't put us in the position of progressively losing 
more ground. It is very important in Latin America, it is very 
important in Asia, and we are working very hard to put 
ourselves in the position where we can bring an agreement to 
you that the Congress will pass.
    But again, our test is to get something that will pass, and 
I am sure my colleague Ambassador Kirk will have a chance to 
talk to you in more detail about the specific constraints we 
face.
    Mr. Diaz-Balart. And again, if I may, Madam Chair, I 
understand that it is not your specific area. But I think I 
just need to express frustration. I think there is strong 
bipartisan support in this House for the current free trade 
deal.
    And the reality is that every day that goes by, not only do 
we lose market share, but it is also a geopolitical issue, as 
you know. And the message that it sends to our allies, that we 
abandon one of our best allies for whatever issue it may be. 
And frankly, to our enemies, which is that we are not going to 
stick with our friends is--and I know you agree with that.
    But I just would--the term is I am not saying ``the 
messenger.'' You are not a messenger, Mr. Secretary. But just 
express our frustration that we are--I think we are, frankly, 
not acting very responsibly. I don't think the urgency has been 
on this issue. It is an urgent issue. Every day that passes----
    Secretary Geithner. I can assure you that we agree with you 
that it is very important to find a way to do this, and we are 
on it and working on it.
    Mr. Diaz-Balart [continuing]. But you don't have any idea 
of when, timetables are?
    Secretary Geithner. That is something I want to leave to my 
colleague to explain because, as you know, it is kind of 
delicate, and we are trying to find something that we can 
legislate.
    Mr. Diaz-Balart. Sure. Thank you, Mr. Secretary.
    Ms. Granger. Thank you.
    Talking about free trade, the North American Free Trade 
Agreement created--the United States created, after that time, 
the North American Development Bank. And as you know, it was 
created with the intent of helping communities along the U.S.-
Mexico border. There has never been a more difficult time for 
those communities, ever. And we all know it, and we all see it 
in the paper all the time.
    So I would ask you, as we discussed earlier, isn't it 
timely that the North American Development Bank look at ways in 
which NADBank can be more of a force for development? Because 
we have got the violence, of course, but it has been also 
devastating to the economy of Mexico and along those border 
towns, which also affects the border States.
    Secretary Geithner. I think it is the time, the right time 
to think about that. And as I told you earlier today, I would 
be happy to talk to my colleagues and come back to your staff 
on--see if we have some ideas for how to do that. But again, I 
think it underscores, again, the value of these institutions.
    And just as we think about it in an NADBank context, we 
need to think about it in Afghanistan, where we have lives at 
risk as well, and in countries around the world where we face 
this tremendous opportunity to expand opportunities for 
American businesses. But I would be happy to work with you on 
how we can make sure that the NADBank is doing as effective, 
creative job as they can in helping advance those issues.
    Ms. Granger. Thank you very much.
    Mrs. Lowey.
    Mrs. Lowey. Thank you very much.
    I know time is running out. But I don't think anyone asked 
a question about GEF, the Global Environmental Facility. I want 
to give you the opportunity.
    We know the Global Environmental Facility reduces the 
instability caused by changing environmental conditions. 
Deforestation, which, when left unchecked, leads to significant 
population displacement, declines in global food supply, and 
major shortages of water. These are the very pressures that the 
Chairman of the Joint Chiefs of Staff, Admiral Mullen, noted 
``could generate conditions that could lead to failed states 
and make populations more vulnerable to radicalization.''
    The GEF takes on environmental challenges that are 
increasingly caused by activities outside the United States, 
but which negatively impact our environment and our economy. 
The Congressional Budget Justification states that the request 
of $143.75 million is consistent with our environmental and 
climate change priorities and that the U.S. was able to achieve 
important policy reforms to improve the GEF's effectiveness 
with regard to country-owned business plans and resource 
allocations.
    So can you tell us, in your judgment, how does the GEF help 
improve the environment, reduce global instability, strengthen 
national security, enhance U.S. leadership, and create jobs in 
the United States?
    Secretary Geithner. I can't improve on what you said. I 
very much welcome the role you have played over a long period 
of time in helping make sure the U.S. can participate in those 
important international initiatives.
    What I would like to say, though, is to say that alongside 
the GEF, please take a careful look at the climate investment 
funds, these are a package of requests that, together, we think 
give us the best capacity to make sure that we are helping 
countries address the broader challenges brought by climate 
change, other environmental changes.
    And again, I will make the economic case, too, for it. You 
quoted Admiral Mullen, but let me make the economic case. The 
world is going to be making major investments in energy 
efficiency, clean technology, all sorts of other things over a 
long period of time, and we have a very strong interest as a 
country in making sure that through funds like this, we are not 
just leveraging other contributions for other countries, but 
they are supporting environmental policies that are better from 
the U.S. perspective.
    So I welcome your support for GEF, too. But look at these 
climate investments, too, and long bipartisan tradition on this 
committee in supporting those funds.
    Mrs. Lowey. As long as you answered that so quickly, I will 
take another couple of minutes because I did want to follow up 
on our discussion about aid reform.
    There is an example in Cambodia where OTA is building the 
government's capacity to effectively manage budgets through a 
multi-donor initiative to improve public financial management. 
We know this will go a long way to ensure that our aid dollars 
are effectively spent.
    However, this great work, much to my surprise, is being 
undone by your colleagues at the U.S. Trade Representative's 
Office, where they are levying Cambodia with tariffs six times 
greater than what the U.S. provides in aid. So it seems to me 
that we should be helping countries use their own economic 
growth to address their problems rather than taxing that growth 
and then replacing it with a far smaller amount in aid.
    So doesn't our failure to think strategically and take a 
whole of government approach to development mean that we are 
taxing the very poor countries that we are trying to help?
    Secretary Geithner. I hope we aren't, but I will be happy 
to take a look.
    Mrs. Lowey. And if you can check how Treasury is 
coordinating with other agencies to leverage its own efforts 
and ensure economic returns?
    Secretary Geithner. Again, very important question. Of 
course, we should be looking at what one hand of the Government 
is doing while we help support these objectives. I would be 
happy to pursue that particular question with my staff.
    But what you highlight is really one very important example 
of what we can do at very low cost, which is to put talented 
people in countries around the world who are trying to make 
sure that they can support reforms that will generate more 
resources for the countries with less risk of corruption, less 
fraud, less waste in that context. And we have tremendously 
talented people, supported by these technical assistance 
programs, you cited Cambodia, but in Afghanistan, in a whole 
range of other countries.
    And again, if you listen to our generals on the ground, 
they can tell you how much of a difference those people have 
made in trying to make sure we are advancing our interests. And 
again, what we want to make sure is all the assistance we 
provide reaches the people it is designed to support, and that 
requires that you have very tough conditions and tough reforms 
against corruption and fraud and waste, alongside the 
humanitarian assistance, the economic assistance we are 
providing.
    And Treasury's technical assistance program plays a--has a 
terrific record in many countries around the world, and we want 
to preserve the capacity to support those kind of reforms.
    Mrs. Lowey. I just want to say one other thing. Obviously, 
we are providing a lot of aid to Pakistan, and there were 
efforts recently to raise taxes on those who could easily pay 
the taxes. But it was more than the politics could bear in the 
country.
    So, on the one hand, we are trying to provide technical 
assistance, but it is pretty hard to overcome some of the 
powerful domestic forces. Let's leave it at that.
    Secretary Geithner. Exactly. People don't like to pay 
taxes. But they are more likely to pay taxes if you can make 
them more confident that they are not going to be wasted by 
their government, and that is why these reforms are a necessary 
complement to what we do even where the national security 
imperative is high and the humanitarian imperative is strong.
    Mrs. Lowey. Exactly. And thank you for your important work.
    Ms. Granger. Thank you, Mr. Secretary.
    This concludes today's hearing. The record will remain open 
for Members to submit questions for the record.
    Ms. Granger. The hearing is adjourned.

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                                         Wednesday, April 6, 2011. 

          UNITED NATIONS AND OTHER INTERNATIONAL ORGANIZATIONS

                                WITNESS

AMBASSADOR SUSAN RICE, U.S. AMBASSADOR TO THE UNITED NATIONS

                Opening Statement of Chairwoman Granger

    Ms. Granger. The Subcommittee on State, Foreign Operations, 
and Related Programs will come to order.
    I want to welcome everyone to today's subcommittee hearing. 
Ambassador Rice, thank you for appearing today to testify on 
the administration's fiscal year 2012 budget request for the 
United Nations and other international organizations. Thank you 
for changing the time. We appreciate it very much.
    I want to begin by offering my condolences to the families 
of the U.N. staff who were killed and injured in recent weeks 
in Afghanistan, in the Ivory Coast, and in the Democratic 
Republic of Congo. We appreciate on this committee the 
sacrifices made on a daily basis and the security risks that 
they endure. And so, our most sincere condolences.
    Ambassador Rice, this is the first time you have appeared 
before our subcommittee, and we thank you for your service 
during an extremely challenging time. We look forward to your 
comments on many important issues around the world, and I hope 
you will share your firsthand perspective on what is gained 
through the substantial U.S. investments in the United Nations.
    We all know that this country is facing a fiscal crisis, 
and funding for the U.N. and other international organizations 
will be scrutinized along with every program in the State, 
Foreign Operations, and Related Programs bill. The fiscal year 
2012 request for U.N. accounts is more than $3.5 billion, and 
that is only a portion of what the U.S. Government has been 
programming through the United Nations. In 2009, more than $6 
billion went to the U.N., almost double the amount directly 
appropriated.
    The House-passed fiscal year 2011 continuing resolution, 
H.R. 1, took an initial step toward re-evaluating these 
contributions. Funding was reduced by offsetting assessed costs 
with credits already on the books and by scaling back voluntary 
contributions. While the changes in H.R. 1 represent a first 
attempt to rebalance spending, much more has to be done. I hope 
it can be done working together with our colleagues on the 
other side of the aisle, the authorizing committees, and the 
administration.
    Madam Ambassador, in the past, strong U.S. actions have 
pressured the U.N. to take on reforms. I hope you will provide 
an update on the administration's efforts to push for U.N. 
reform. There are many areas that need improvement. 
International peacekeepers must be held to high standards, 
procurement processes must prevent graft and corruption, and 
whistleblowers must be protected--just to name a few.
    I also must raise my concerns about U.S. credits that exist 
at the U.N. Late last year, the committee was told that more 
than $400 million of credits had accumulated. The 
administration then directed the U.N. to use $100 million of 
those credits for perimeter security upgrades at facilities in 
New York.
    While I understand the need to address security 
vulnerabilities, I am concerned about how the administration 
went about funding this project. The requirement was never in a 
budget request, nor were funds ever appropriated for this 
purpose.
    I urge the administration to carefully examine how credits 
are used and to improve communications with this committee. I 
have several questions on this, and I will submit them for the 
record.
    In addition to all the budget and management challenges I 
have mentioned, I hope you can update the subcommittee on the 
very serious policy matters that come before you every day. In 
particular, we would like to hear your comments on Israel and 
the Palestinian territories, get a better understanding of the 
response to the crisis and next steps in Libya, and be updated 
on U.N. efforts to restrain Iran's nuclear ambitions.
    In closing, Ambassador Rice, I want to thank you and the 
U.S. delegation stationed in New York and around the world. 
Your work is extremely difficult, and we appreciate your 
service. Thank you for being here today and for being flexible 
with your schedule.
    I will now turn to ranking member, Mrs. Lowey, for her 
opening remarks.

               Opening Statement of Ranking Member Lowey

    Mrs. Lowey. Ambassador Rice, I join with Chairwoman Granger 
in welcoming you today and also expressing our deepest 
condolences on the loss of life of our U.N. workers in 
Afghanistan.
    In the 21st century, the idea that the United States can or 
should isolate itself from the international community is both 
unrealistic and shortsighted. Humanitarian crises threaten 
stability around the globe. Unstable countries are breeding 
grounds for terrorists. Environmental degradation halfway 
around the world compromises the safety of the air we take in 
and the water we drink.
    Global health crises generate diseases that reach our 
shores. Widespread poverty closes markets to U.S. products and 
impedes economic growth. And lax safety regulations overseas 
leads to tainted and dangerous food and products that injure or 
even kill Americans.
    It has often been said that if the United Nations did not 
already exist, we would have to create it. And while its 
benefit is not always obvious to the casual observer, we cannot 
lose sight of the role this organization plays in maintaining 
peace, reining in rogue actors, promoting economic and social 
development, alleviating hunger, and promoting international 
stability, all of which are in our own security interest.
    However, the U.N. is, by no means, perfect. Too often, the 
U.N. is a reflection of the lowest common denominator rather 
than the best and brightest on the international stage. Yet to 
achieve a more efficient, performance-oriented, and innovative 
U.N., the U.S. should continue to push for reform from within 
not by holding the institution hostage by cutting funds, which 
alienates our partners and reduces our ability to influence the 
process.
    In this context, I look forward to hearing from you about 
how the President's budget request will promote our national 
interests and maintain U.S. global leadership.
    Thank you for your service. I look forward to your 
testimony.
    Ms. Granger. Thank you, Mrs. Lowey.
    Ambassador Rice, please feel free to summarize your 
remarks. Without objection, your full statement will be 
submitted for the record.
    We have a hard end on this hearing today at 9:15 a.m., 
which gives us a little over an hour. And so, we will stick 
very closely to 5 minutes.
    Thank you.

                 Opening Statement of Ambasssador Rice

    Ambassador Rice. Thank you very much.
    Madam Chairwoman, Ranking Member Lowey, Members of the 
committee, I thank you for the opportunity and for including my 
full statement in the record. I also want to thank you both for 
your kind words of sympathy for the losses that the United 
Nations has experienced over the last week in Afghanistan, the 
Democratic Republic of Congo, as well as in Cote d'Ivoire.
    I want to begin just briefly with the U.N.'s response to 
the crisis in Libya, which further reminds us of its value in 
the age of 21st century challenges. With U.S. leadership, the 
Security Council swiftly authorized the use of force to save 
lives at risk of mass slaughter, established a no-fly zone, and 
imposed strong sanctions on the Gaddafi regime.
    With broad international support, we also suspended Libya 
from the U.N. Human Rights Council by consensus, a historic 
first.
    As we well know, America's resources and influence are not 
limitless, and that is why the United Nations is so important 
to our national security. It allows us to share the costs and 
the burdens of tackling global problems rather than leaving 
those problems to fester or the world to look to America alone.
    I, therefore, ask for the committee's continued support and 
support this year for the President's budget request for the 
CIO and CIPA accounts to help us advance U.S. national 
interests. Our leadership at the U.N. makes us more secure in 
at least five fundamental ways.
    First, the U.N. prevents conflicts and keeps nations from 
slipping back into war. More than 120,000 military police and 
civilian peacekeepers are now deployed in 14 operations in 
places such as Haiti, Sudan, and Liberia. Just 98 of them are 
Americans in uniform.
    U.N. missions in Iraq and Afghanistan are promoting 
stability so that American troops can come home faster. This 
is, indeed, burden sharing at its best.
    Second, the U.N. helps halt the proliferation of nuclear 
weapons. Over the past 2 years, the United States led efforts 
that imposed the toughest Security Council sanctions to date on 
Iran and North Korea.
    Third, the U.N. helps isolate terrorists and human rights 
abusers by sanctioning individuals and companies associated 
with terrorism atrocities and cross-border crime.
    Fourth, U.N. humanitarian and development agencies often go 
where nobody else will to provide desperately needed 
assistance. U.N. agencies deliver food, water, and medicine to 
those who need it most, from Darfur to Pakistan and elsewhere.
    Fifth, U.N. political efforts help promote universal values 
that Americans hold dear, including human rights, democracy, 
and equality, whether it is spotlighting abuses in Iran, North 
Korea, and Burma or offering support to interim governments in 
Egypt and Tunisia.
    Let me turn now briefly to our efforts to reform the United 
Nations and improve its management practices. Our agenda, 
broadly speaking, focuses on seven priorities.
    First, U.N. managers must enforce greater budget 
discipline. Secretary General Ban Ki-moon recently instructed 
senior managers to cut 3 percent from current budget levels, 
the first proposed reduction compared to the previous year of 
spending in 10 years.
    Second, we continue to demand a culture of transparency and 
accountability for resources and results. We aggressively 
promote a strengthened independent Office of Internal Oversight 
Services and an improved ethics framework, including protection 
for whistleblowers.
    Third, we are pushing for a more mobile, meritocratic U.N. 
civilian workforce that incentivizes service in tough field 
assignments that rewards top performers and removes dead wood.
    Fourth, we are improving protection of civilians by 
combating sexual violence in conflict zones, demanding 
accountability for war crimes, and strengthening U.N. field 
missions.
    Fifth, we are insisting on reasonable, achievable mandates 
for peacekeeping missions. Not a single new U.N. peacekeeping 
operation has been created in the last 2 years. And in 2010, 
for the first time in 6 consecutive years, we closed missions 
and reduced the U.N. peacekeeping budget.
    Sixth, we are working to restructure the U.N.'s 
administrative and logistical support systems for peacekeeping 
missions to make them more efficient, cost effective, and 
responsive to realities in the field.
    And finally, we are pressing the U.N. to finish overhauling 
the way it does day-to-day business, including upgrading its IT 
platforms, procurement practices, and accounting procedures.
    But the U.N. clearly must do more to live up to its 
founding principles. We have taken the Human Rights Council in 
a better direction, including by creating a new special 
rapporteur on Iran. But much more still needs to be done. The 
council must deal with human rights emergencies wherever they 
occur, and its membership should reflect those who respect 
human rights, not abuse them.
    We also continue to fight for fair and normal treatment for 
Israel throughout the U.N. system. The tough issues between 
Israelis and Palestinians can only be resolved by direct 
negotiations between the parties, not in New York. And that is 
why we vetoed a Security Council resolution in February that 
risked hardening both sides' positions. We consistently oppose 
any Israel resolutions in the Human Rights Council and the 
General Assembly and elsewhere.
    It goes without saying that the U.N. is very far from 
perfect, but it delivers real results for every American by 
advancing U.S. security through genuine burden sharing. That 
burden sharing is more important than ever at a time when 
threats don't stop at borders, when Americans are hurting and 
cutting back, and when American troops are still in harm's way.
    Thank you, Madam Chairwoman. I look forward to answering 
the committee's questions.
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    Ms. Granger. Thank you so much.
    I am going to start with a question, and again, because I 
know everyone has questions and would like to be heard, we will 
move as succinctly as we can and limit that time.
    You talked about Israel and what is happening there. And 
this past February, you cast a negative vote against a Security 
Council resolution condemning all Israeli settlements, stating 
the resolution would harm the peace talks. And we are glad 
about that. I commend you for standing firm on that issue.
    But the ability of certain nations to use the U.N. to 
further their own anti-Israel agenda is very troubling. What 
can the administration do to keep issues like this off the U.N. 
agenda, when they are more appropriately addressed at the 
negotiating table? And what can the Congress do to support you 
in those efforts?
    Ambassador Rice. Thank you very much, Madam Chairwoman.
    Well, first of all, let me underscore that we are deeply 
and durably committed to countering the anti-Israel bias in the 
United Nations, attacks on Israel's legitimacy and security. 
And I spend a good deal of time every day, along with my 
colleagues, doing just that.
    Having said that, our tools differ depending on the forum. 
Obviously, in the Security Council, we are a veto-wielding 
member, and we have not hesitated, as we recently demonstrated, 
to use that veto when we think our interests necessitate it.
    In the General Assembly, where every nation has a vote, we, 
frankly, have a harder time. And while we have made some 
progress in bringing other countries along to our position and, 
when necessary, joining with us in opposing offending draft 
resolutions, we are, more often than not, outnumbered on a 
number of issues.
    But nonetheless, we have had important successes in the 
Human Rights Council and in New York in advancing our interests 
and Israel's interests. We have managed to get Israel 
increasingly included in Western and like-minded groups that 
allows Israel's voice to be amplified.
    I don't want to get into minutiae, but there are groups 
known as JUSCANZ. These are groups of Western countries that 
come together to coordinate and consolidate policy positions on 
various issues. And we have them in Geneva, and we have them in 
New York. And Israel has been seeking for quite some time 
membership in these groups, and we have had success in helping 
Israel obtain membership in recent years.
    We stand up and vocally defend our interests and values and 
Israel's where we think warranted and have no compunction about 
being the only vote, if necessary, whether in Geneva or at 
Paris in UNESCO, in fighting to counter anti-Israel sentiment. 
And we have had success as recently as in the IAEA last year in 
preventing an anti-Israel resolution from passing.
    So we don't have 100 percent or 1,000 batting average, but 
we have a good one. We are fighting relentlessly, and we will 
continue to do so.
    Ms. Granger. Thank you very much.
    I will save another question for if we have another round.
    Mrs. Lowey.
    Mrs. Lowey. I will go on to another question. But I just 
wanted to, frankly, express my concern about the anti-Israel 
bias, and I am very concerned that in the General Assembly, we 
don't have a veto.
    So if 100 states declare the Palestinian Authority a state, 
that is it, I gather, unless there is something else we can do. 
It is my understanding that if 100 individual actors declare 
the Palestinian area a state, that is it.
    Ambassador Rice. This is a complicated issue, and it 
depends what we mean by declaring it a state. If we are talking 
about membership in the United Nations, that has to also go 
through the Security Council. If we are talking about a 
political declaration of some sort that doesn't, in fact, 
establish a new state acknowledged at the U.N. as a member, 
that is a more difficult issue.
    Mrs. Lowey. To be continued.
    Okay. On another issue, in July 2010, the U.N. General 
Assembly established a new entity for women because existing 
U.N. efforts to address women were incoherent, under resourced, 
and fragmented. As you know, you, my colleagues, and I, many of 
us have spent our career focusing on the advancement of women.
    Do you think U.N. Women is an improvement over previous 
efforts to address these issues and why? In what ways is there 
an improvement?
    Ambassador Rice. Well, thank you.
    Yes, I do think it is an improvement, and I am hopeful 
about the potential for U.N. Women not only to streamline, but 
also to strengthen the U.N.'s previously disparate mechanisms 
for supporting women's advancement and women's rights and 
progress internationally.
    Before U.N. Women, there were at least four significant 
entities within the United Nations system that had a piece of 
the pie on women's issues, and they were often duplicative and 
not mutually reinforcing and disjointed. What has occurred now, 
after a long and difficult negotiation, which the United States 
played an important leadership role, is that these entities 
have been streamlined, consolidated, and now we will have not 
only a more energized and effective presence in New York, where 
all of the issues related to women come together in one place, 
but also action in the field in a manner not on the same scale, 
but not dissimilar to the role that UNICEF plays at the country 
level for children.
    We are also very encouraged that Michelle Bachelet, the 
former president of Chile, who is an incredibly dynamic and 
talented woman, is bringing her strong leadership skills to 
head U.N. Women. And she is off to an important and strong 
start, and we spend a good deal of effort in support of her 
work.
    So for those reasons, I am optimistic. I think it is an 
important reform that has been accomplished. It should make the 
operations related to women in New York more efficient and give 
it a more credible and effective presence in the field.
    But resources are going to be a challenge. Most of the 
resources for U.N. Women will come from voluntary 
contributions, and Mrs. Bachelet is looking at very innovative 
ways of trying to rely on more than simply government 
donations, including perhaps foundations, private sector, and 
the like to augment U.N. Women's budget.
    Mrs. Lowey. I understand President Obama has requested $8 
million for U.N. Women for fiscal year 2012. Does this $8 
million include contributions for the U.N. Trust Fund to End 
Violence Against Women?
    Ambassador Rice. No, ma'am. It doesn't. And there is not a 
separate line item in our request for that this year.
    Last year, I think as you recall, we had requested--we had 
$6 million for UNIFEM, one of the precursors, predecessors to 
U.N. Women. In a better budget climate, we would have liked to 
have been able to make our first year request for support for 
U.N. Women larger than $8 million. That was not possible, given 
the constraints that we are all wrestling with. But it is an 
increase, and it is meant to demonstrate, as the United States 
is a member of the Board of U.N. Women, that we are and we 
intend to try to remain a major donor, pursuant to the seat 
which we occupy.
    Mrs. Lowey. Thank you.
    Thank you, Madam Chair.
    Ms. Granger. Thank you.
    Mr. Austria.
    Mr. Austria. Thank you, Chairwoman Granger.
    And Ambassador, thank you for being here. I appreciate your 
testimony.
    And I want to follow up just very quickly, if I could, on 
the Israel issue, and I think we all agree that there is an 
issue there as the Palestinian leadership is refusing to resume 
negotiations with Israel and instead seems to be mounting an 
effort to bypass the peace process to gain international 
recognition and statehood.
    And I thank you. I want to also go on record to thank you 
for the U.S. veto of that resolution and for the statement that 
the best path to peace is through direct negotiations.
    My question, just to follow up on this specifically, there 
has been speculation that the Palestinians will use Resolution 
377, the Uniting for Peace Resolution, to hold a special 
session and to pass a resolution recognizing an independent 
Palestinian state.
    What is your evaluation of the potential impact of the use 
of the Uniting for Peace mechanism, and how would the United 
States react if the Palestinians ultimately decide to use the 
strategy?
    Ambassador Rice. Well, I want to be careful both about 
speculating about what mechanisms they might use and what 
tactics we would employ in response.
    Mr. Austria. I understand.
    Ambassador Rice. Particularly as I wouldn't want to give 
them----
    Mr. Austria. I understand. Whatever you are able to share 
with this committee.
    Ambassador Rice [continuing]. Insight into our approach. 
But as I said, there are multiple ways that this could come 
with differing impacts. They could come first to the Security 
Council and then go to the General Assembly. They could bypass 
the Security Council and go straight to the General Assembly, 
but not if they are seeking membership of the United Nations, 
which is, I understand that in all likelihood, their 
preference.
    And what form this may take will, in substantial part, 
dictate our response accordingly. But we have maintained and 
will continue to maintain that, you know, you can pass a 
resolution, but that does not a viable state create.
    A viable state of Palestine and a two-state solution can 
only be accomplished through direct negotiations between the 
parties in which the crucial final status issues that we all 
are familiar with can be resolved. Otherwise, you have at best 
a theory on a piece of paper.
    And so, our strong view is, and the enduring effort of the 
administration remains, to urge and press the parties to return 
to the table and engage in the direct negotiations, which are 
the only viable vehicle for achieving the goal that both sides 
say they seek and, of course, is in our interest to be 
accomplished.
    Mr. Austria. I again thank you for your efforts, and I also 
want to thank you because largely to your presence and 
leadership at the United Nations, the U.N. Security Council 
passed the toughest yet mandatory sanctions against Iran and 
its nuclear program last summer.
    Now, of course, the key to it is implementing that plan and 
enforcing those sanctions I think is what matters. And my 
question is what is the United States doing working with the 
U.N. to ensure that these sanctions are enforced uniformly and 
globally, and what are the consequences for countries that 
violate those sanctions specifically on those countries that 
continue to import Iranian arms in violation of the ban on all 
Iranian arms exports?
    Ambassador Rice. Well, first of all, thank you for your 
supportive comments about Resolution 1929. It, indeed, was a 
broad and tough resolution that substantially expanded the 
global regime of pressure on Iran, both from a financial point 
of view, an arms point of view, a trade point of view, 
ballistic missiles. It covered a broad range of concerns that 
we are intent upon legitimately addressing, and I want to thank 
Congress for following that effort in the Security Council with 
the very, very impactful sanctions that you subsequently 
passed.
    And I think, as I have said in other contexts, we have, 
together, built what I like to call a three-layer cake with the 
global regime as strengthened by 1929 and being binding on 
everybody. Then the subsequent important steps that the 
European Union, Canada, South Korea, Japan, a number of others 
took on their behalf to strengthen their own national efforts. 
And then the third layer being the very powerful domestic 
legislation that you passed and that the President signed.
    We are at the United Nations involved very actively in the 
enforcement of these sanctions. We have a strong and active 
sanctions committee, which monitors all reported violations. We 
have established now in this last Resolution 1929 a panel of 
experts, which has an investigative function and that advises 
the sanctions committee and the Security Council on ways to 
strengthen enforcement.
    That panel is now up and running. And if it is like other 
panels, we expect it to provide very useful insight and 
information about how to strengthen the regime.
    There have been a number of instances where countries have 
interdicted weapons shipments, including most recently one that 
Israel interdicted. But in Nigeria and South Asia and 
elsewhere, we have seen very aggressive sanctions interdiction 
and enforcement, and those violations get reported to the 
Security Council and are publicly acknowledged.
    We don't have yet and I think it will be very difficult to 
obtain in the Security Council the equivalent of secondary 
sanctions so that countries that might be receiving arms 
shipments from Iran also face a penalty. Our focus is 
principally on detection, interdiction, and then destruction or 
disposition of any weapons that have been discovered.
    And one of the enhancements to this 1929 sanctions regime 
similar to the one we passed a year before on North Korea is 
cargo inspection regime, including on the high seas, which 
strengthens nations' ability to interdict any suspect cargo.
    Ms. Granger. Thank you.
    Mr. Austria. Thank you, Ambassador.
    Thank you, Chairwoman.
    Ms. Granger. Mr. Schiff.
    Mr. Schiff. Thank you, Madam Chair.
    Ambassador, I have heard reports that the U.N.-backed 
Cambodian War Crimes Tribunal has been hindered by scarce 
resources. This was a genocide of monstrous depravity. It is 
deeply distressing to me that a war crimes tribunal prosecuting 
people responsible for that genocide should be stymied for lack 
of resources.
    What is the United Nations and U.S. U.N. doing to try to 
support that effort?
    Ambassador Rice. Thank you very much for your concern and 
your question.
    Let me give you a general answer, and we will get back to 
you with more specifics for the record. But as you know, we 
were instrumental in leading the effort to establish a viable 
mechanism for accountability for the crimes and genocide that 
were committed in Cambodia.
    It is an unusual structure for such a tribunal, unique in 
its composition and, therefore, its funding mechanisms. If I am 
not mistaken, contributions come both from bilaterally on a 
national basis, as well as partially through the United 
Nations. I can't give you exactly at this point detail on the 
shortfalls, but I am happy to get back to you on that.
    Mr. Schiff. Well, thank you, and I will follow up with you 
on this. And I know it is always perilous to make analogies to 
the Holocaust. But it would be as if the Nuremberg War Crimes 
Tribunals couldn't go forward for lack of resources, and I look 
forward to working with you on that issue.
    We have lacked really for two decades a policy with respect 
to Somalia, a very difficult place to figure out what to do. 
Can you share any thoughts on what the U.N. is doing or on what 
we should be doing? Is there any way forward in terms of 
Somalia?
    Ambassador Rice. Yes. I appreciate the question because I 
share your view that this is an issue that is of critical 
importance to our national security and to the security of the 
region, given the presence of extremist groups, including al-
Shabaab and other al-Qaeda affiliates. And it is a vexing 
problem that has, for 20 years, festered without sustainable 
solution.
    There are different aspects to the challenge in Somalia. 
There is a governance challenge. There is an economic 
development challenge. There is, first and foremost, as related 
to both of those, a security challenge.
    Most of Somalia in the central and southern portion remains 
in conflict and without effective governance. The Transitional 
Federal Government, TFG, is a weak and disparate governing 
entity that really only as a practical matter controls a 
portion of Mogadishu.
    We have worked very hard and invested substantial resources 
with support from Congress in bolstering the African Union 
force in Somalia, known as AMISOM. It is principally comprised 
of troops from Uganda and Burundi. There are now roughly 8,000 
on the ground. We recently in the United Nations authorized an 
increase of an additional 4,000 troops, which will come over 
the course of this year, to a force strength of 12,000.
    We, through the United Nations, support the logistical and 
support package for AMISOM. We have offered bilateral 
assistance to Uganda and Burundi to bolster their presence. And 
but for AMISOM, the security situation in Mogadishu and beyond 
would be absolutely untenable. They are securing the port, the 
airport, the key government buildings. And in an offensive that 
has made some progress over the last few months, they have 
expanded the area of security and control in Mogadishu and 
taken ground back from al-Shabaab.
    So that security component, it is the only game in town, 
and it has been our judgment to date that, given history and 
past experience in Somalia, that having an African-based force 
willing to fight and take losses with external support through 
this U.N. logistical support package is the best vehicle we 
have to help enhance security in Mogadishu.
    There is also the piracy problem, which we could spend time 
on, which is another very serious concern from our point of 
view. But it is essentially a function of insecurity and lack 
of governance and development on the mainland.
    With respect to the political process, we have worked to 
press the Somali parties to form a more durable and viable 
government. We have also tried to strengthen governance in 
areas where there is more effective local governance in 
Puntland and Somaliland, for example, and tried to shrink the 
space in which the insecurity and extremism can flourish. So--
--
    Ms. Granger. We are going to have to interrupt you and go 
to the next question.
    I am sorry. I am going to remind everybody we have a hard 
finish, at 10:15 a.m. And so, for everyone to get to their 
questions, we will have to stick very closely to 5 minutes.
    Mr. Schiff. Thank you.
    Ms. Granger. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you very much, Madam Chairwoman.
    Ambassador, good morning. Great to have you here.
    Ambassador, I wasn't going to really bring this up, but you 
mentioned a little while ago that you do not hesitate to use 
the veto regarding the Palestinian Authority's--leadership's 
resolution condemning Israel. I don't know if maybe U.N. 
diplomacy dictates that you say one thing and kind of do 
another, but you did hesitate.
    Ambassador, it took weeks, it took weeks for this 
administration to finally commit to veto the U.N. resolution, 
number one. Number two the State Department was saying that, it 
was repeated here today, that the Security Council is not the 
place for this issue. But then you offered behind the scenes a 
resolution that also condemned Israel. It was a watered-down 
condemnation of Israel.
    I am not quite sure--Maybe I don't understand what 
hesitation is. When it took weeks, and it was even covered by 
the media. It took weeks. When our Israelis friends were, 
frankly, very concerned because it took weeks to commit to that 
veto. If that is not a hesitation, if you could please explain 
to me what hesitation would be?
    Ambassador Rice. Thank you for your question, and I would 
like to clarify the record.
    First of all, when the resolution was brought to a vote, 
which it was not until the day of the vote, we made our 
decision and cast our veto accordingly. It would have been our 
preference, and we have been clear about that, that the issue 
not be brought to the vote, that the resolution not be brought 
to the Security Council for final decision.
    And we examined--well, first of all, we refused to engage 
at all with any of the hundred-plus sponsors of the resolution 
for weeks in an effort to signal that they should not bring it 
because they wouldn't like the outcome. When in the final week 
it was clear that they were intent upon bringing it, I followed 
my instructions to try to discourage the confrontation and the 
necessity of having a vote.
    Once it was clear that there would be a vote, our position 
was clear, and we did not hesitate to make it clear. I did not 
offer, and I was not instructed to offer, an alternative 
resolution. We explored other forms of Security Council 
products that did not have the weight of international law, as 
a resolution does, as expressions of U.S. policy, not as 
expressions of other nations' or interests' policies.
    That proved not to be a viable means of avoiding a vote, 
which we thought was not in the best interests of the United 
States or of Israel. But having been faced with the prospect 
and the reality that that vote would occur, the United States 
cast its vote and its veto without hesitation, and I am proud 
of what we did.
    Mr. Diaz-Balart. Ambassador, again, yes. When the vote 
came, and we appreciate that, you did vote to veto. But the 
statement was not made, this was not an issue that all of a 
sudden popped up 13 seconds before for a vote. This was out 
there for weeks. And----
    Ambassador Rice. Sir, I think----
    Mr. Diaz-Balart [continuing]. There was great hesitation. 
And it was covered extensively by the media.
    Ambassador Rice. No, no. Look, let me be clear. There are 
resolutions that are introduced all the time, every day at the 
United Nations on all kinds of subjects, and they sometimes 
never come to a vote. They sometimes end up being negotiated 
interminably, or sometimes, as in the case of Libya, they get 
voted very quickly.
    This resolution that you are referring to on settlements 
was first floated among council members in December. It was 
never discussed in the council. It was never debated in the 
council. It was never a hot topic until February. So I don't 
think, frankly, that your characterization is accurate.
    Mr. Diaz-Balart. Well, again, we will respectfully disagree 
on that one.
    Let me talk about another issue. One of the reasons we are 
here in the Appropriations Committee is to talk about U.N. 
budget. How are we supposed to take the U.N. seriously when, 
frankly, they don't?
    And let me go a little bit, you mentioned about the Human 
Rights Council. In the Human Rights Council, you have China, 
Cuba, Russia, until very recently Libya with a dictatorship of 
four decades. And that is, again, the Human Rights Council, 
dedicated to human rights.
    So, and yet, we are supposed to pretend that it is normal, 
that is okay that you can have an organization that has a 
council to deal with human rights made up of some of the most 
egregious human rights violators on the planet, and yet we are 
supposed to get hard-earned taxpayers' money, send to this 
organization that has a council like this, and pretend that it 
is serious, that it is real?
    Ms. Granger. Mr. Diaz-Balart, your time is up. Do you have 
a question?
    Mr. Diaz-Balart. My question is, how do we explain to the 
American people, whose money we are supposed to send to the 
U.N., that we can take them seriously when they have a council 
that has that kind of makeup dealing with human rights?
    Thank you, Madam.
    Ambassador Rice. Well, first of all--may I? Does time 
permit?
    Ms. Granger. Yes. Yes.
    Ambassador Rice. We are not pretending anything. We are 
very clear-eyed, and we are very critical of much of the 
performance of the Human Rights Council. We joined in 2009 
because our view is that we would rather be in there and call 
foul when that is appropriate, stand up for the principles and 
values that Americans hold dear, and make important progress 
where progress can be made.
    Now the record is mixed, but we feel that very important 
progress has been made. The first time ever we have created a 
special rapporteur for Iran. That will put the spotlight on 
Iran's human rights abuses in a way that their civil society 
and human rights activists have been begging for and wouldn't 
have happened without U.S. leadership just this past month in 
Geneva.
    We have set up important commissions of inquiry for places 
like Cote d'Ivoire, where human rights abuses are of grave 
concern. We have ensured by one vote in our presence the 
continuation of a special expert on Sudan, where we remain 
deeply concerned about abuses.
    We did set up a commission of inquiry as well for Libya. 
We, for the first time ever, got a strong statement on lesbian, 
gay, bisexual, and transgender rights, which we are quite proud 
of. We have had progress and strong statements on Sudan, Burma, 
and North Korea just in the last little while.
    We have a special rapporteur for the first time on freedom 
of association and assembly. We have important progress in 
combating discrimination against women and for the first time 
doing away with this bogus concept of defamation of religions.
    Now that, all of that has happened in the last 2 years with 
U.S. participation and U.S. leadership, and we think it is 
important and valuable. But we have no illusions that the 
composition of this council remains very worrisome from our 
point of view. We share the view that the Human Rights Council, 
per its charter, ought to be comprised of nations that 
exemplify the best practices of human rights rather than abuse 
them.
    And we have made some progress in that regard. We managed 
to keep Iran off the Human Rights Council last year. But it is 
far from perfect, and we are very concerned about the enduring 
anti-Israel bias in the Human Rights Council, and we stand up 
and fight at every opportunity to combat it.
    Mr. Diaz-Balart. Thank you.
    Ms. Granger. Thank you, Madam Ambassador.
    Mr. Rothman.
    Mr. Rothman. Thank you, Madam Chairman.
    I am going to speak as quickly as possible to get as much 
in my 5 minutes as I can.
    Welcome, Madam Ambassador. It is a pleasure to have you 
here.
    First, I want to thank the Obama administration for being 
such a stalwart supporter of the Jewish state of Israel. You 
may know recently that Defense Secretary Gates, as well as the 
head of the Joint Chiefs of Staff, Admiral Mullen, testified in 
open session just a few weeks ago that Israel's relationship 
with the United States militarily, intelligence wise, is 
critically important to America's national security because of 
Israel's capability, its position in the Mediterranean and at 
the Suez Canal and with access to all parts of a very dangerous 
region.
    Israel is America's aircraft carrier, so to speak, our 
friendly partner aircraft carrier of democracy and freedom and 
strength to stop common enemies, like Iran, who threaten U.S. 
forces and threaten the U.S. interests. And it is Israel, 
working with the United States, that, according to Secretary 
Gates, is critically important to America's national security.
    So, again, congratulations and thank you to President Obama 
and to you for your efforts in vetoing various resolutions at 
the U.N., including the Goldstone report and the most recent 
resolution.
    And I note the comment in your testimony that New York is 
not the place for final resolution of all outstanding issues 
between the Israelis and Palestinians. But it is important to 
note that Israel has been begging the Palestinians to come to 
the table to negotiate without preconditions for years. And the 
Palestinians refuse. The Palestinians propose precondition 
after precondition after precondition, and they simply won't 
come to the negotiating table to take yes for an answer when 
the Israelis say we are ready for a two-state solution with the 
Palestinians.
    What disturbs me, and Ambassador Ross recently reiterated 
the same position that the U.N. is not the place for this, is, 
frankly, the efforts of the administration to work on 
``Security Council products,'' to use words you just used, that 
would in any way criticize our most important strategic ally 
and friend of over 60 years in the region.
    Without the state of Israel, America would be far less 
safe. So I can't imagine why the United States would even 
participate in producing any Security Council product, and I 
hope it doesn't happen again, frankly. And I will be 
extraordinarily critical if those efforts occur again, for what 
it is worth. I am just one guy from Jersey.
    But I do serve with the chairwoman on the Defense 
Appropriations Subcommittee, as well as this subcommittee, and 
I know of Israel's importance to the United States national 
security. And why, on God's good Earth, we would criticize such 
an important ally in any product at the U.N. is unacceptable.
    Having said all that, I do note all of the good things you 
have said about the parties getting back to the negotiating 
table. But it is important to note who is refusing to come to 
the negotiating table without preconditions. And that, 
unfortunately, are the Palestinians.
    The Israelis want, have been saying for years, please, join 
us at the negotiating table and let's resolve all issues. The 
Palestinians refuse to come to the negotiating table to settle 
all issues without preconditions.
    So can I get a word from you, A, that this administration 
will not pursue any additional or any Security Council products 
that criticize the state of Israel, especially at this 
difficult time? And that if, for some reason, the Palestinians 
are successful in getting totalitarian regimes and others to 
support their wanting to have a Palestinian state without 
negotiating with Israel, that the U.S. will veto it if it ever 
gets to the Security Council.
    Will the U.S. veto that if that gets to the Security 
Council?
    Ambassador Rice. Well, thank you, Mr. Rothman, for your 
question and your comments. And thank you for noting that not 
only is Israel essential to our national security, and as the 
President has said on a number of occasions, and you quoted 
Secretary Gates and Admiral Mullen. But I think you also know 
and would agree that the strength of our security relationship 
has never been better or stronger, and that reflects the United 
States----
    Mr. Rothman. Absolutely. Never been stronger.
    Ambassador Rice [continuing]. And the administration's 
enduring and unshakeable commitment to Israel's security.
    In the context of the Security Council and what transpires 
in New York, I don't know how to be clearer than to say that we 
will not and have not agreed to any effort to resolve or 
address final status issues in the context of Security Council 
products. And that is my standing instruction, and I don't 
expect that to change. And I don't expect that it would change 
if the Palestinians were to bring such a resolution to the 
council. I am not going to----
    Mr. Rothman. But to follow up on--pardon me?
    Ms. Granger. Mr. Rothman, your time is up.
    Mr. Rothman. My time is up. Thank you.
    Ms. Granger. Thank you.
    Mr. Dent.
    Mr. Dent. Thank you, Madam Chair.
    And thank you, Ambassador Rice, for being here today.
    Madam Ambassador, in September of 2009, the U.N. Human 
Rights Council issued a report falsely accusing Israel of 
committing war crimes during Operation Cast Lead. The U.N. 
Human Rights Council used this report to condemn Israel, while 
Israel's enemies have used it to legitimize their aggression.
    This incendiary report has become known as the Goldstone 
report, as you know, named after its author, Richard Goldstone. 
Now Justice Goldstone, Mr. Goldstone has changed his tune. And 
in a recent op-ed in the Washington Post, I should note on 
April Fool's Day, Mr. Goldstone has expressed regret over the 
published findings.
    He states in the op-ed, ``If I had known then what I know 
now, the Goldstone report would have been a different 
document.'' That is really quite a statement from a man who 
earlier accused Israel of intentionally targeting civilians 
during the Gaza operations.
    And needless to say, this report has caused tremendous 
damage to Israel's standing in the international community. The 
damage is going to continue if the U.N. continues to act on the 
mandates contained within the report, including asking the 
General Assembly to submit a report to the Security Council for 
further actions and potentially going to the International 
Criminal Court.
    Ambassador Rice, what specifically does the U.S. intend to 
do to prevent these follow-up actions from moving forward?
    Ambassador Rice. Thank you for your question, and it is an 
important and timely one.
    I think, as you know, but let me reiterate, the United 
States was very, very plain at the time and every day since 
that the Goldstone report was deeply flawed, and we objected to 
its findings and conclusions. We never saw at the time, and as 
I said in my written testimony--although I didn't have a chance 
to say it out loud here--that we didn't see any evidence at the 
time that the Israeli government had intentionally targeted 
civilians or intentionally committed war crimes.
    And so, we have been very plain about that, and we have 
stood up in the Human Rights Council, in the General Assembly, 
and every subsequent opportunity in opposition to Goldstone 
report. Now if it comes----
    Mr. Dent. What can we do to amend that report? What can you 
do to help?
    Ambassador Rice. Well, I am not sure it can be amended. 
What we want to see is for it to disappear and no longer be a 
subject of discussion and debate in the Human Rights Council or 
the General Assembly or beyond. That has been our view from the 
outset.
    Israel has demonstrated, quite in contrast to Hamas, an 
ability to investigate these concerns and allegations 
domestically. We respect that process. We see no need, given 
complementarity, for Goldstone report to be considered. And now 
that its principal author has said what he said, frankly, our 
view is reinforced that this should go away, and that is what 
we will work to do in all the bodies where that is relevant.
    Mr. Dent. Well, then if we are not going to amend it, then 
maybe we could repudiate the report and then perhaps insist----
    Ambassador Rice. We have repudiated it.
    Mr. Dent. But insist that the U.N. do so and formally say 
so to Secretary General Ban Ki-moon. And they should probably 
issue an apology because it really is quite a scandalous 
statement.
    Ambassador Rice. Well, I think, first of all, we will 
continue to be plain about our view and repudiate it. These 
reports are not authored by the U.N. as an entity. They are 
authored by the people like Goldstone, who have been given a 
mandate to go out and write a so-called independent report.
    So I think we have and we will continue to encourage all 
responsible actors to say what we have said, which is that this 
report doesn't merit serious consideration, given its findings, 
its flaws, and now what Goldstone himself has said.
    Mr. Dent. Thank you. I yield back.
    Ms. Granger. Thank you very much.
    The subcommittee has done such a good job I think we can 
have a round for just some quick questions. Mine has to do with 
the Office of International Oversight Services, the U.N.'s 
primary oversight body.
    I am talking about the Office of Oversight Services, and 
there are a number of vacancies. Can you tell us why there is 
such a high vacancy rate? What is the status of the 150 cases 
transferred to the OIOS in 2009, and what are you doing with 
efforts to address that?
    Ambassador Rice. Well, the Office of Internal Oversight 
Services, known as OIOS, is an important vehicle within the 
U.N. to investigate and hold accountable staff and U.N. 
entities for any abuse of resources, any lack of transparency, 
any corruption. It was founded at a U.S. initiative, as you 
know, in 1994.
    It has, since its inception, saved the United Nations an 
estimated $200 million, and we think it is a very important 
vehicle for rooting out waste, fraud, and abuse. It now has, as 
of last summer, a dynamic new leader, a Canadian woman named 
Carman Lapointe, who I know well and we work very closely with. 
She is a very credible, very serious, very experienced auditor 
who is shaking up OIOS.
    It had, frankly, been allowed to atrophy to a certain 
extent under a difficult leader who did not effectively fill 
vacancies. There is a long story behind that, and if we had 
infinite time, I could tell you. It is not a happy one.
    But I think the good news is that Mrs. Lapointe has 
prioritized filling these vacancies as urgently as possible. 
She has put out a blanket process for expediting the hiring 
process at all levels within the investigative division, but 
also in her own front office, and I am very encouraged by her 
seriousness and her leadership. And we spend a great deal of 
time at the U.S. mission supporting her efforts to accomplish 
these goals.
    Ms. Granger. Would you keep the subcommittee informed about 
those issues?
    Mrs. Lowey.
    Mrs. Lowey. As we know, the Iranian leadership is dominated 
by hardliners whose pursuit of nuclear weapons, support of 
terrorism through their Hamas and Hezbollah proxies, and 
assistance to armed groups in Iraq, Afghanistan continue to 
make Iran a threat to the United States and the world. And the 
need for action is compounded by the fact that Iran continues 
to accumulate uranium. It will begin producing high-grade 
enriched uranium, material clearly intended for military 
weapons.
    And just recently, Israel's defense minister, Ehud Barak, 
said in an interview with CNN that Iran is gradually overcoming 
problems in its nuclear program and could still detonate a 
nuclear device within a year. Obviously, this is very 
troubling.
    I have been committed and I think all of us around this 
table are committed to enforcing tough sanctions, both 
bilateral and multilateral, to stop Iran in its tracks. But we 
need assurances that the administration is doing all it can to 
put pressure on Iran and those countries that are not fully 
cooperating with the sanction efforts.
    If you could explain your role, the U.N.'s role ensuring 
that EU member nations as well as India, China, and Russia are 
enforcing sanctions on Iran, and what steps is the 
administration taking with U.N. member states to enforce the 
sanctions currently in place?
    And again, we applaud your aggressive activity in getting 
that resolution through the council.
    Ambassador Rice. Thank you, Mrs. Lowey.
    We are actively enforcing both bilateral and multilateral 
sanctions in a variety of ways throughout the administration. 
My role at the U.N. is one piece, and we discussed the role of 
the sanctions committee and the panel of experts and our 
aggressive efforts to ensure enforcement across the globe and 
to highlight where there have been violations and to ensure 
that those violations are investigated and exposed.
    We also have, as you know, Robert Einhorn, who is leading 
the administration's broader efforts at sanctions enforcement, 
both for Iran and North Korea. We have the very aggressive, 
heroic efforts of our Treasury Department as well, which 
seemingly find no end of creative ways to strengthen our 
sanctions enforcement.
    And as a result, our judgment is that these sanctions are 
serious and are biting. And they are substantially constraining 
Iran's ability to acquire the resources, the insurance, the 
materials that they seek to pursue their nuclear activities.
    We are constantly, as the President's senior national 
security team, reviewing our efforts to prevent Iran from 
acquiring a nuclear capacity. We are constantly looking at ways 
to strengthen and increase the pressure. And I can say with 
confidence that we are doing so and will continue to do so.
    Mrs. Lowey. Thank you very much.
    Ms. Granger. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you very much, Madam Chairwoman.
    I want to go back to the U.N. for a second and their 
Security Council. And by the way, I appreciate what you stated. 
I clearly know that your intentions are to try to make that 
council be less of a farce, and you mentioned some of the 
things that you have succeeded in doing. However, it is really 
kind of like akin to blocking the sun with your thumb.
    Israel is the only country listed on the council's 
permanent agenda, to my understanding. The Human Rights Council 
has passed over 30 resolutions criticizing Israel. My 
understanding is not even Iran, not Cuba, not North Korea is on 
the permanent agenda of the Human Rights Council. Only Israel.
    So my question is this. Shouldn't the U.S. finally walk 
away from and stop paying, we continue to pay billions of 
dollars over the years to the U.N. that has an organization 
like this Human Rights Council, which obviously is a total 
farce. Shouldn't we just stop, walk away, and look for other 
alternatives?
    There are other alternatives. I mention, for example, the 
Community of Democracies. Now, clearly, it could be 
strengthened. So isn't there a point when just for, frankly, 
our own credibility's sake we should walk away, have other 
alternatives, strengthen other alternatives--I mentioned one, 
the Community of Democracies--and not continue to pretend that 
the U.N. is anything else than an anti-American, anti-Israeli, 
anti-democratic organization that spends all its time trying to 
figure out ways to delegitimize Israel, to hurt U.S. interests.
    And by the way, we are using all of our time trying to 
fight these horrible resolutions. Why not walk away and 
strengthen other already-existing organizations that could be 
pro democratic, pro Israeli, and pro American?
    Ambassador Rice. Let me answer that in two parts. There is 
a distinction between the Human Rights Council, which you have 
focused your comments on, and the United Nations as a whole. I 
would like to address both pieces.
    First of all, with respect to the Human Rights Council, I 
have been very plain that our view is that it is a flawed 
entity, and it has many aspects to it that we disagree with. 
And one of them you highlighted, which is the permanent agenda 
item number 7 on Israel, which we abhor and continue to work to 
eliminate.
    But we also think that the answer, when we disagree with 
some aspects and elements of an entity like the Human Rights 
Council and some of its members, for example, is not simply to 
turn our back and walk away. And this is a fundamental 
difference of philosophy.
    Our view is let's get in there, let's get the good things 
out of it that we can, and I listed many of them. And I think 
for those of us, and I know you are one of them, who care about 
Iran, who care about Burma, who care about North Korea, care 
about Cote d'Ivoire and Congo and Sudan and other places, we 
have made substantial progress and gotten things accomplished 
that wouldn't have happened without our membership.
    Now, our judgment, therefore, is better to be engaged, get 
out of it what we can, stand up and fight for what we disagree 
with, rather than simply turn our backs. You might take a 
different view, but I think our approach has proven itself in 
its results. And while we are far from satisfied, we are 
pleased with many of the accomplishments that I have listed.
    With respect to the larger U.N., of which the Human Rights 
Council is a very, very small portion, as I said at length in 
my written testimony and tried to highlight briefly in my oral 
testimony, our view is that on balance, despite its flaws, the 
United Nations advances U.S. national security interests and 
does so in a way that is far less costly and more effective 
than if we were to not be part of it at all or act alone.
    Whether we are talking about peace and security, 
humanitarian assistance, and even important efforts to promote 
democracy and human rights. For example, the United Nations has 
been--not the United States, not any of our other partners--
invited by Egypt and Tunisia to support the electoral process 
there. We think that is value added.
    We think that where UNICEF can be there to vaccinate 
children, to provide for health and education services, that is 
a good thing. When the World Food Program can deliver food to 
those who otherwise wouldn't have it, that is a good thing. 
When U.N. peacekeepers are helping to prevent genocide in 
places like Darfur or help with the elections and transition in 
Haiti, that is a good thing.
    And we pay a fraction of the cost compared to if we were to 
do it alone or to suffer the consequences----
    Mr. Diaz-Balart. But there are other alternatives.
    Ms. Granger. Mr. Diaz-Balart, your time has expired.
    Mr. Rothman.
    Mr. Rothman. Thank you, Madam Chairman.
    Dr. Rice, I want to thank you, in particular following up 
on what some of my colleague said, on your particularly 
brilliant work on the Libyan resolution. It was quite a 
remarkable act of statecraft, and congratulations. And that 
helped the United States, and it helped the people of Libya. 
Thank you for your leadership on that.
    I did want to make clear that according to U.S. military 
and intelligence leaders on the record, this administration, 
the Obama administration, has been the most supportive, 
militarily and intelligence wise, with the Jewish state of 
Israel than any other President in history. And I am quoting, 
or paraphrasing at least, Secretary of Defense Gates, who was 
Secretary of Defense under George W. Bush, as well as President 
Obama.
    So I appreciate that very much. And as you may know, 
amongst the many areas of cooperation, there was just an 
article in the Defense News--so it is now a general 
publication--about a special coordinated effort called 
``Austere Challenge 2012'' with U.S. and Israeli specialists 
planning a massive exercise of defense, common defense of 
United States interests and Israeli interests.
    Rocket attack, missile attack, and air attack from various 
sources, common enemies to both the United States and Israel, 
underlying Israel's critically important role in the U.S.'s 
national security. But I want to reiterate, finally, that with 
all of the litany of wonderfully important things that are 
accomplished at the U.N. and with Israel's critical role to 
U.S. national security, it makes no sense, in my opinion, for 
the U.S. to participate anymore in creating any Security 
Council product criticizing Israel.
    We can criticize our friends privately. We can, as we do 
with our friends and family, we talk about it. But we don't air 
our dirty laundry in public. They are, in fact, tremendously, 
hugely important to the national security of the United States 
and our dear friend. So why would we ever want to publicly 
criticize them when, if we have differences, we can do it in 
private?
    The key is to get the Palestinians to do what the Israelis 
have been begging them to do, come to the negotiating table 
with the Israelis with no preconditions and take yes for an 
answer. Get a Palestinian state, contiguous Palestinian state 
next to the Jewish state of Israel and live in peace and 
prosperity with the Israelis as their neighbors.
    I believe the ball is in the Palestinians' court, and any 
Security Council products criticizing Israel on something of 
miniscule importance or that is important to some dictator, 
some totalitarian is not in the U.S. national interests.
    Ms. Granger. Thank you.
    Mr. Dent.
    Mr. Dent. Thanks, Madam Chair.
    Ambassador Rice, I understand that the U.N. has had a 
significant role in the elections process in Afghanistan. 
Supporting the development of a democratic and credible 
government there has always been a priority. But as you know, 
elections in Afghanistan have faced extraordinary 
controversies.
    As the U.N. Development Program concludes its work in 
Afghanistan this month, have they reported on any lessons 
learned from 2009-2010 parliamentary elections, and what 
changes will the U.N. mission in Afghanistan make to address 
concerns raised about those election processes?
    Ambassador Rice. Well, Mr. Dent, let me answer your 
question as best I can. And if you want more information, we 
will certainly get it to you.
    The principal U.N. organ for supporting the electoral 
processes in Afghanistan has been the U.N. Assistance Mission, 
UNAMA, which is a mission mandated and authorized by the 
Security Council. And it was UNAMA personnel who are among the 
seven who were murdered last week in Mazar-i-Sharif.
    The UNAMA, the U.N. Assistance Mission, has played a very 
important role in trying to strengthen the international and 
domestic oversight functions of the electoral processes in 
Afghanistan, particularly in the wake of the disappointing 2009 
electoral process. And it has been UNAMA, under the leadership 
of Special Representative Staffan de Mistura, who is a first-
class diplomat, that has pressed the government and the parties 
to ensure that the electoral processes are managed in a fair 
and transparent fashion.
    There is a body called the Independent Electoral Commission 
and the Electoral Complaints Commission, both of which at 
various times were under threat of being manipulated in such a 
fashion that they couldn't perform their roles independently. 
It was the U.N. and Staffan de Mistura, working with the larger 
diplomatic community, that played an instrumental role in 
keeping those two organs on track and able to perform their 
role under the constitutionally mandated electoral process.
    So this process is still dragging out in terms of efforts 
to review certain aspects of the 2010 polling parliamentary 
electoral process, and I think the United Nations has been the 
sort of focal point of the international community's efforts to 
hold feet to the fire and ensure that the processes are not 
manipulated for the political interests of any actor.
    Mr. Dent. The U.N. has not been spared from the 
consequences of operating in very dangerous environments. The 
attacks last week on the U.N. are a harsh reminder of that.
    And just after--planning continues for us, winding down our 
U.S. military involvement in Iraq, Afghanistan. The civilian 
efforts, including those of the U.N., will certainly be faced 
with significant security challenges. How will the role of the 
U.N. missions in Iraq and Afghanistan change as the military 
begins to withdraw? And I am expecting real severe security 
challenges for our U.N. staff and our State Department staff. 
What are your thoughts?
    Ambassador Rice. Well, thank you for that question and for 
your concern.
    There are two different circumstances. In Iraq, in the wake 
of the 2003 bombing of the U.N. headquarters, which forced the 
U.N. out, when it returned some years later at the U.S. 
request, the U.S. and coalition forces have played an important 
role in protecting U.N. personnel and facilities. They are co-
located and protected, particularly out in the provinces.
    And we have all been very focused on transitioning security 
responsibility as the U.S. forces withdraw at the end of this 
year to ensure that our diplomatic presence and the 
international component of the U.N., which is doing important 
work that benefits our interests and the interests of the 
Iraqis, are protected.
    So we are working with the U.N. in the field and elsewhere 
on a transition plan so that we can have some degree of 
confidence that both the U.N. and our diplomatic facilities 
will have adequate security.
    In Afghanistan, it has not been the role of ISAF to protect 
U.N. personnel. The situation evolved differently, and there 
isn't the same arrangement. And while in extremis, when there 
are attacks, as there were last Friday or as there were 
tragically in Kabul some while back, ISAF endeavors to be among 
the first responders in extremis, along with the Afghan 
national security forces themselves.
    It is a different arrangement, and the U.N. has invested 
very heavily in increasing its security in places throughout 
Afghanistan. We have been encouraging the U.N. to get out into 
more provinces and districts in Afghanistan, and to do so, they 
have had to strengthen substantially their security.
    Obviously, you know, they are now more protected against 
terrorist attacks. This mob thing that we saw in Mazar-i-Sharif 
is a different dynamic, and they are in the process of 
reviewing whether they are configured to deal with that kind of 
contingency as well.
    So I appreciate your focus on this, and it is one we share.
    Mr. Dent. Is this the larger----
    Ms. Granger. I am sorry. Literally, we have run out of 
time. That concludes today's hearing.
    Thank you so much, Madam Ambassador, for being with us.
    The record will remain open for Members to submit questions 
for the record.
    Ms. Granger. And the hearing is adjourned.

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                                          Thursday, March 31, 2011.

    FISCAL YEAR 2012 REQUEST FOR GLOBAL HEALTH AND HIV/AIDS PROGRAMS

                               WITNESSES 

AMBASSADOR ERIC GOOSBY, U.S. GLOBAL AIDS COORDINATOR, U.S. DEPARTMENT 
    OF STATE
AMIE BATSON, DEPUTY ASSISTANT ADMINISTRATOR FOR GLOBAL HEALTH, U.S. 
    AGENCY FOR INTERNATIONAL DEVELOPMENT

                Opening Statement of Chairwoman Granger

    Ms. Granger. The Subcommittee on State, Foreign Operations 
will come to order.
    I would like to welcome Ambassador Goosby and Ms. Batson 
before the subcommittee today to discuss the fiscal year 2012 
request for global health programs.
    The President's Global Health Initiative was announced 
almost 2 years ago, and will encompass all global health 
funding under the subcommittee's jurisdiction. It totals $8.7 
billion in fiscal year 2012, an increase of $887 million from 
the enacted fiscal year 2010 levels. Almost 70 percent of the 
Global Health Initiative, or $5.9 billion, is for HIV/AIDS 
programs under Ambassador Goosby's office. Therefore, I hope 
both witnesses will be able to comment on the implementation of 
the GHI.
    First, let me state that I support the goals of the 
President's Global Health Initiative. If GHI will achieve 
better health for adults and children in the developing world 
and provide a long-term plan for delivery of health services 
led by the countries themselves, then I can support the 
administration's efforts. However, given that there is no 
authorization for this program and no clear goals, I must admit 
that I am skeptical.
    To date, your track record is not very good. In the fiscal 
year 2010 House report, the committee included language at my 
request directing the administration to provide a report on 
global health programs so the subcommittee knows how effective 
they have been at meeting their objectives and their goals. 
Here we are 2 years later, and we have nothing.
    In addition, it is still unclear who is providing the 
leadership for GHI. In the last week I learned that there is a 
new Executive Director, and while the QDDR states that GHI will 
fall under USAID after certain benchmarks are met, it is 
unclear what this means in the interim. I will be raising a 
number of questions today that I hope our witnesses can answer.
    I also have concerns about the operations of the Global 
Fund, specifically the administration's large, multi-year 
commitment, something that, if fulfilled, would most likely 
have to come from offsets to your bilateral HIV/AIDS programs.
    I know this is not your intention, Ambassador Goosby, but 
it could well be the reality of today's budget climate.
    Let me close by saying that while I have concerns about the 
direction this budget request takes us, Americans should be 
proud of the many milestones U.S. global health assistance has 
achieved in the past 10 years. Many Americans enter careers in 
global health to provide care that otherwise would not be 
available to the poorest of the poor. But more money alone is 
not the answer.
    In the current fiscal environment, our government will have 
to deliver services more efficiently without destructive 
competition between agencies and with open books to ensure 
ample auditing and transparency.
    Additionally, both USAID and the Global AIDS Coordinator 
have large pipelines of previously appropriated funds that are 
unobligated and unexpended. I hope you can provide more details 
about those funds for the record.
    Thank you both for appearing before us today. I look 
forward to hearing more about your work.
    I turn now to the ranking member, Mrs. Lowey.

                    Opening Statement of Mrs. Lowey

    Mrs. Lowey. Thank you, Madam Chair, and welcome, Ambassador 
Goosby and Ms. Batson. We appreciate your appearing here today.
    Over the past 6 years, this committee has made global 
health a top priority, providing over $38 billion for 
innovative programs to prevent the spread of disease, treat the 
sick, and strengthen local health systems to sustain advances. 
We have had impressive results: HIV/AIDS treatment for more 
than 4 million people, bed nets to prevent malaria for over 19 
million families, and voluntary family planning services for 19 
million women. Along with saving lives, these programs help to 
free developing countries from the burden of disease, allowing 
economic growth and increased stability as more children can 
attend school and more adults can maintain jobs and care for 
their families.
    The $8.7 billion request for the Global Health Initiative 
supports a whole-of-government approach, helping partner 
countries improve health outcomes with a particular focus on 
women, newborns, and children by addressing infectious disease, 
nutrition, maternal and child health, and family planning.
    I am pleased the budget request focuses on better 
coordination of our efforts and look forward to hearing how 
U.S. Government supported health programs will become more 
effective and efficient in target countries.
    I almost feel like reading that small paragraph again, 
Madam Chair, because I agree with so much of what you said, and 
I can remember particular trips, I won't mention the countries, 
where when I have asked the ambassador to bring everyone 
together working on these issues, they didn't even know each 
other. Now, that is not to say that they are not doing good 
work, they are operating in their own stovepipes of excellence. 
But, at this time of limited resources, our chair is absolutely 
right, and I know from my discussions with the Secretary of 
State as well, coordination, coordination. And if the Brits are 
doing one thing, we can do something else. But it is so 
important that we use our resources as effectively as we can. 
So I just wanted to emphasize that point because I know the 
chair and I are in agreement, and you are, too, that we can 
operate these programs more effectively with better 
coordination.
    Each year more than 500,000 women, 99 percent of them in 
developing countries, die from pregnancy and childbirth-related 
complications. An additional 15 to 20 million women suffer 
debilitating injuries as a result of pregnancy. In addition, 
1.6 million children die in the first 48 hours of birth, and 
8.1 million die before age 5. The administration's request 
includes $1.6 billion for maternal health, child survival, 
family planning, and nutrition, and sets a goal to reduce 
maternal mortality by 30 percent and under 5 mortality by 35 
percent. I hope you will describe for the committee how the 
administration plans to improve access to and quality of health 
services to reach these goals.
    For many years, I have championed family planning, which 
saves the lives of mothers and children by educating women on 
healthy pregnancies. These programs not only empower women to 
decide if and when to have children, they also reduce 
unintended pregnancies, which lead to an estimated 35 million 
abortions each year in the developing world. When we cannot 
even meet demand, I find it unconscionable that the House voted 
such dramatic reductions to these life saving efforts earlier 
this year. The committee and Congress as a whole would benefit 
from your insight about the effect of these reductions on 
maternal health and child mortality rates as well as the 
greater societal implications.
    It is also vital that we continue to make investments in 
the fight against infectious diseases. We are at a critical 
juncture for several debilitating and deadly diseases. The 
eradication of polio is within reach, microbicide technology 
that prevents the spread of HIV has been successfully tested. A 
malaria vaccine is in its final stage of clinical trials, and 
significant strides are being made in the development of 
interventions for neglected tropical diseases. Scaling back our 
commitment to global health programs now risks sacrificing our 
progress in recent years.
    Global health programs save lives and reduce suffering at a 
very basic level. The U.S. contribution to these efforts speaks 
volumes about our moral conviction. But these programs also 
have far-reaching consequences for the developing world. 
Healthy populations form the basis of secure societies where 
economic growth and political stability are possible. With that 
in mind, I look forward to your testimony.
    Thank you, Madam chair.
    Ms. Granger. To our witnesses, please feel free to 
summarize your remarks. Without objection, your full statements 
will be submitted for the record.

                 Opening Statement of Ambassador Goosby

    Ambassador Goosby. Madam Chair, Ranking Member Lowey, it 
gives me pleasure to speak before you today. Thank you for 
inviting me to speak to discuss the President's 2012 budget 
request for PEPFAR. You have my written testimony, so I will be 
brief.
    In my travels to the field, I have been struck by the deep 
gratitude for PEPFAR's life-saving mission. Simply put, America 
has brought hope back to countless people across the globe. On 
a personal level, I am constantly humbled by the number of 
lives we have touched, by the number of people whose lives we 
have saved and whose families we have kept together.
    This subcommittee has been a key partner in this effort. 
All of you who were in Congress in 2008 supported 
reauthorization. All of you have a right to be proud of the 
investment you have made in saving lives and promoting 
security. Thanks to your efforts, last year PEPFAR directly 
supported life-saving treatment for more than 3.2 million men, 
women, and children. We supported programs that helped nearly 
3.8 million orphans and vulnerable children move towards a 
better life.
    The President's request for PEPFAR reflects the fact that 
while much has been accomplished, much remains to be done. As 
Secretary Clinton has noted, global health programs not only 
save the lives of mothers and children, they stabilize 
societies and, importantly, halt the spread of deadly disease 
to our own country.
    Now is the time to keep moving forward and build on our 
successes. We must continue our investments and make sure they 
are smart investments. This means using each dollar to save as 
many lives as we can, using less expensive generic drugs, and 
moving these drugs by land and sea instead of by air.
    We recognize that economic times are tough. But we also 
recognize that our mission is critical. So every day we learn 
more and get smarter about our work and how to do it more 
effectively. Getting smarter means achieving greater efficiency 
and impact in our programs. Our work to prevent mother-to-child 
transmission of HIV is an example. It has a triple benefit: 
saving the life of the mother, protecting her newborn from 
acquiring HIV, and keeping her other children from becoming 
orphans, thus keeping the family intact. In the last year 
alone, your investments through PEPFAR led to more than 114,000 
children being born HIV free.
    America is truly leading the global effort to end pediatric 
AIDS worldwide, and to ensure new generations are born HIV 
free.
    Since its inception, PEPFAR has used coordination as a tool 
to maximize our investments and our impact. As we are seeing 
with the President's Global Health Initiative, the health 
systems we have established are now helping us combat other 
health threats while strengthening our focus on PEPFAR's HIV/
AIDS mission. There is a shared global responsibility to make 
smart investments to save lives. This committee should know 
that thanks to its investments, we are at a pivotal movement in 
making a shared response a reality. Partnership frameworks have 
helped to secure partner-government commitments to heightened 
efforts, and we have used these frameworks to ensure 
participation of the full range of partners, including faith-
based partners, which often play a critical role as part of 
country health systems, and other members of civil society.
    To be clear, this work of country ownership is not yet 
complete, and the timeline of these efforts will vary from 
country to country. But it is well underway, and we are on the 
precipice of securing these gains for the long term.
    Finally, shared responsibility also means that no one 
country alone can win the fight against AIDS. That is why we 
must support the Global Fund as an essential and critical 
partner. Last year, the Obama administration pledged to request 
$4 billion for the fund over a 3-year period. Equally 
important, we issued a call to attention for reform, launching 
a process to improve its operations, especially at the country 
level.
    We are also strengthening the fund's effort to protect both 
U.S. taxpayers' investment and the people who rely upon these 
programs. Simply put, we must all support a strong Global Fund.
    Madam Chairwoman and members of the committee, I spoke 
earlier about hope. I say to you today that we cannot 
underestimate the power of hope. Hope is the power to save 
lives, and we are now bringing hope to millions who once could 
only see despair. It is this hope that is bringing and building 
stronger families and communities, and it is the hope you 
committed to, and we thank you for that.
    I look forward to your questions.
    [The statement of Dr. Goosby follows:]

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    Ms. Granger. Thank you.
    Ms. Batson.

                    Opening Statement of Ms. Batson

    Ms. Batson. Chairwoman Granger, Ranking Member Lowey, 
distinguished members, thank you for inviting me to testify on 
the fiscal year 2012 global health and child survival budget 
request.
    Foreign assistance for global health is very important to 
our national security. We have seen that poverty and disease 
can lead to bitterness and political instability. No parent 
should have to watch their child die needlessly of a 
preventable or treatable disease. Diseases do not respect 
borders. Preventing the transmission of measles, polio and 
tuberculosis in developing countries limits the number of cases 
that enter the U.S. As a state health commissioner recently 
noted, preventing diseases abroad is not only good public 
health, it saves money here. It prevents what she referred to 
as the million dollar case; or perhaps more to the point, the 
million-dollar budget line needed to track down all of the 
contacts that the one infected person had upon arriving in the 
United States.
    There is nothing parents value more than the health of 
their children and families. Across the countries, through 
schools, churches and other community organizations, American 
families support global health programs such as immunizations 
for children, HIV/AIDS prevention and treatment, and malaria 
control.
    Our health programs not only show America at her best, but 
also deliver results. Just 5 years ago, malaria killed nearly a 
million children annually in sub-Saharan Africa alone. The cost 
to the continent was $30 billion a year in lost productivity. 
In less than 5 years, malaria cases have been cut in half in 
over 40 countries. And by expanding vaccine coverage, we have 
reached more than 250 million children, saving more than 5 
million lives and shielding millions more from the long-term 
effects of illness.
    But despite these successes, urgent challenges remain. This 
year, more than 350,000 women will die in pregnancy or 
childbirth, and 8 million children will die of preventable 
diseases before their fifth birthday.
    For fiscal year 2012, we have prioritized three areas that 
have maximum impact on the health of women and children: 
maternal and child health, malaria, and family planning. We are 
concentrating our financial, technical, and human resources 
where we will achieve dramatic, meaningful results for the 
American people and the developing world. Nearly two-thirds of 
the fiscal year 2012 request is focused in 24 developing 
countries where approximately three-quarters of maternal and 
child deaths occur. Let me explain why. Whereas in the U.S., we 
talk of it as being the happiest day in a woman or family's 
life, the day a woman gives birth in many developing countries 
is the deadliest day of her life.
    With fiscal year 2012 funding, USAID will focus on highly 
cost-effective interventions that target complications and 
pregnancies, and ensure women have quality care at the time of 
delivery.
    In child health, we will expand the high-impact, cost-
effective interventions that we know save lives. For example, 
through both our bilateral work and our partnership with the 
Global Alliance for Vaccines and Immunizations, or GAVI, we 
will strengthen the reach of immunization programs and the 
access to new vaccines such as pneumococcal and rotavirus 
vaccines, which parents like me value so highly, allowing us to 
save the lives of 4 million children over the next 5 years and 
leveraging our funds with every $1 contributed by the U.S. 
Government matched by nearly $7 from other donors. Indeed, this 
is good value for money. We can prevent the deaths of up to 
two-thirds of the 3.7 million newborns who will die this year 
within the first 4 weeks of their life.
    With funding in fiscal year 2012, USAID will introduce and 
scale up the simple, low-cost approaches that can prevent death 
from asphyxia and infection, reaching the women and infants in 
rural communities who do not have access to the fixed health 
facilities.
    With fiscal year 2012 funding, the President's Malaria 
Initiative will continue to strengthen the capacity of local 
partners to deliver highly effective malaria prevention and 
treatment measures, and we will expand malaria control into two 
critical countries, the Democratic Republic of Congo and 
Nigeria, which have a combined population of 200 million and 
where 50 percent of the Africa malaria burden lies.
    Family planning and its promotion of healthy timing and 
spacing of pregnancies prevents both maternal and newborn 
deaths, and by reducing the number of unintended pregnancies, 
it also reduces the number of women who may seek abortions.
    Between 2008 and 2012, USAID is graduating eight countries 
where our family planning assistance is no longer needed. This 
is the goal for all of our development assistance.
    As the lead U.S. development agency, we are integrating 
HIV/AIDS with other health and development sectors, and 
building host country capacity in order to have a more 
sustainable response to the epidemic.
    In fiscal year 2012, USAID will concentrate its TB programs 
from 40 down to 28 priority countries who have the highest 
burden of TB and multi-drug resistant TB, and investing in the 
technology and new drug breakthroughs that we require.
    Nutrition is a priority objective of both the Global Health 
and the Feed the Future Initiative. We are leveraging our 
health and agricultural assistance to focus on that critical 
thousand-day window from when a woman is first pregnant to when 
the child is 18 months old, when the child's brain is forming 
and determining their ability to learn, grow, and become a 
contributing member to society.
    USAID will continue to strengthen the delivery of NTD, 
neglected tropical disease, medicines, particularly at the 
community level. The NTD program benefits from an extraordinary 
public-private partnership with pharmaceutical firms who have 
donated nearly $600 million in drugs last year alone, 
dramatically leveraging our investment of $65 million.
    The Global Health Initiative provides an umbrella for the 
U.S. Government's efforts to increase the efficiency and the 
impact of our investments. Building on the successes of PEPFAR 
and TMI and the lessons from other health programs, we are 
focusing increasingly on the person, not the disease, making it 
easier for a woman to obtain all of the services she needs so 
that a woman that we save with ARVs does not die in childbirth 
6 months later.
    We are also using our resources more effectively. In Mali, 
we have integrated five separate annual health campaigns. This 
integration not only resulted in increased coverage for each of 
the services, but it did so while cutting the total cost in 
half.
    At USAID, we are reforming our systems to ensure that our 
assistance is evidence based and as efficient and effective as 
possible. Through our procurement reforms, we are expanding 
partners to deliver health services more sustainably and at 
lower cost. We are reinvigorating our capacity for evaluation, 
research and knowledge sharing, recognizing we need to not only 
communicate our successes but, perhaps more importantly, to 
learn and communicate from our failures.
    Across our portfolio, we are seeking new ways to harness 
the power of science, technology, and innovation to deliver 
health better and at lower cost. We are investing in the game 
changers that will dramatically improve health for the poorest. 
New vaccines, point-of-care diagnostics, and e-health that use 
mobile phone technologies, all have the opportunity for 
dramatic improvements in quality of life for people around the 
world. We will focus on scientific, technical, and operational 
breakthroughs to bend the curve of global health progress for 
women and children, families and communities.
    Across all of our health programs, USAID is working to 
empower efficient local governments, thriving civil societies, 
and vibrant private sectors so that they may take full 
responsibility for providing basic health services to their 
citizens.
    Thank you.
    [The statement of Ms. Batson follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                                  QDDR

    Ms. Granger. Thank you very much. I will be calling on 
members based on seniority of the members who were present when 
the hearing was called, and I will alternate between majority 
and minority, keeping to the 5-minute rule.
    I will begin my questions with Ms. Batson. I have several 
questions about the Global Health Initiative.
    The QDDR states that USAID will assume leadership of the 
Global Health Initiative if certain benchmarks are met. Can you 
give us details about what must be achieved before USAID 
assumes the lead of the Global Health Initiative? Who in the 
administration will decide if USAID has met these goals, and 
who will lead the GHI in the interim?
    Ms. Batson. Thank you, Chairwoman Granger.
    The GHI is providing an opportunity for a transition. As 
you noted, there are a number of USG agencies that are very 
important to our global health efforts and bring a great deal 
of expertise to the table. Through this time period for 
transition, it is allowing USAID to position itself as the 
development platform with inclusive leadership which will 
ensure that we can have better coordination and better leverage 
the comparative strengths of what each USG agency brings; for 
example, CDC with its strong public health capacity in 
epidemiology surveillance and labs, or the NIH with its supreme 
research and development capacity.

                               BENCHMARKS

    The benchmarks are metrics or measures toward that end of 
that development platform and that inclusive leadership. It 
includes things like ensuring more transparent and rigorous 
review of our various programs. We have already begun this 
program with these portfolio reviews where we are inviting not 
only experts across the USG, but experts from academia and 
various development partners to review our plans for the coming 
years, some of the key questions and tradeoffs that we are 
working to resolve, and get the perspectives of all of the 
experts so that we are ensuring we are using these funds to 
best impact.
    Similarly, where the benchmarks call for more transparent 
and rigorous country planning, we have already initiated an 
effort in 28 high-priority countries to be both integrating our 
MCH family planning and nutrition programs, but also preparing 
those plans with input from experts, again across the U.S. 
Government, as well as from other partners. Those plans are 
then submitted to Washington where we have another expert 
review to ensure that these programs are the cutting edge, most 
efficient, and effective use of U.S. Resources to have an 
impact in the countries.
    The benchmarks include issues like ensuring proper 
evaluation that we are learning, and we have the transparency 
on that learning. And we are implementing the evaluation policy 
that USAID has recently designed, and already have two evidence 
summits planned for this summer where we will be bringing 
together experts around a specific topic to get the best 
thinking, the pros, the cons, what does the world know about a 
given topic so that we can ensure that the policies and 
strategies we take forward are based on that full thinking 
around all of the evidence on the table.
    So this is a sample of some of these benchmarks, and we are 
very confident that we will be able to achieve them and toward 
that end have a stronger development platform for health.
    As you may have seen in the Quadrennial Development and 
Diplomacy Review, the Secretary has brought in an Executive 
Director into the Department of State, Ms. Lois Quam, who we 
are very delighted to have. Her role is both in terms of 
managing the day-to-day coordination and work in GHI so that 
each of us are able to do our work more efficiently and 
effectively and build those bonds between our agencies. She 
will be providing input to the Secretary and to the Operations 
Committee which is led by the leaders of the three agencies, 
USAID, CDC and Ambassador Goosby. And based on that, the 
Secretary will make a decision.
    In the interim, as I noted, Lois Quam will be providing 
this day to day and helping to manage that transition process.

                         STRATEGIC RESERVE FUND

    Ms. Granger. The President's request includes $200 million, 
the global health request for a Strategic Reserve Fund, but the 
specific investments aren't defined. Who will decide that, and 
how do you justify to the committee the need for this reserve 
fund?
    Ms. Batson. GHI is dedicated to increasing the transparency 
and the degree of monitoring and evaluation, as well as the 
innovation of how do we do work better. What works, what 
doesn't, and how can we move forward in more efficient and 
effective ways.
    Unfortunately, what often happens in country programs is 
that the teams are so busy doing that they don't invest as much 
time as is necessary in doing that kind of evaluation and 
ensuring that we are capturing all the lessons that we need. 
What we are very excited with in GHI is we are given that 
greater prominence, and the Strategic Reserve Fund is dedicated 
to helping ensure that we are getting those innovations, we are 
getting the learning, and we are sharing that learning across 
all programs and across the U.S. Government; in fact, across 
the world.
    The country teams have been working with Washington to look 
within their own country plans: What are the really critical 
learning issues that are very prominent in that country or have 
big implications for other countries. So for example, in 
Ethiopia you have a country which has led the way with 
community-based delivery, where they are able to reach their 
population which is largely 80 percent rural with services 
where the fixed health facilities are not currently able to go. 
Learning from that program----
    Ms. Granger. I think I am understanding it far less by your 
answer. I am going to stop you because we caught the red light 
but I will come back to you. Now I really don't understand it.
    Mrs. Lowey.

                            FAMILY PLANNING

    Mrs. Lowey. Ms. Batson, the CR passed by the House caps 
family planning and reproductive health funding at $440 
million, which is a cut $185.5 million from the 2012 request. 
What effect would a similar reduction in funding in 2012 mean 
to basic and often life-saving health care for millions of 
women? And what would a commensurate cut do to maternal and 
infant mortality?
    Ms. Batson. The proposed cuts would have a very dramatic 
impact on the lives of women, children and newborns around the 
world. It would deny, for example, family planning services to 
8 million women, resulting in 4,000 additional maternal deaths, 
28,000 additional newborn deaths, and 2.5 million unintended 
pregnancies, creating the risk of over a million abortions.
    These cuts would also have dramatic impacts on our ability 
to provide life-saving child health services, resulting in an 
additional 40,000 children under the age of 5 dying, including 
16,000 newborns.
    One last example is in the domain of malaria. It would have 
the impact of reducing the access of treatments to 3 million 
children.

                           MEXICO CITY POLICY

    Mrs. Lowey. The CR also contains language codifying the 
Mexico City Policy, also known as the global gag rule, which 
would force eligible health providers to choose between 
receiving U.S. funds or providing comprehensive, truthful 
health care to their patients and interfering with the doctor-
patient relationship. As you know, international family 
planning programs reduce abortions by preventing unintended 
pregnancies.
    What effect does the global gag rule have on the 
President's integrated global health strategy, and what would 
be the effect on high-need countries in Africa and South Asia?
    Ms. Batson. The reimposition of the Mexico City rule would 
prevent USAID from working with some of the most experienced 
and qualified family planning providers and organizations who 
are working at grassroots to meet the growing demand for 
voluntary, safe family planning.
    Our support is now ensuring the greatest impact and 
promotes the sustainability of the program. So it is the 
poorest and the most remote populations that would be affected 
the most.
    Mrs. Lowey. I know we may not all agree on the issues 
surrounding reproductive health, but I believe that people who 
disagree on this issue can and should do more to prevent 
unintended pregnancies. Women in developing countries should be 
able to plan the number and spacing of their children, a goal 
that leads to healthier mothers and children.
    I just want to make one observation because I remember a 
visit to Cambodia not that long ago where it is legal, and you 
would meet women, one after another with nine children because 
they just don't have access to family planning even though it 
is legal. You see these thin mothers with just gaunt children 
who don't have access. So if you could share with us what 
effect does the global gag rule have on preventing unintended 
pregnancies and reduce the need for abortions by ensuring that 
women in the developing world have better access to birth 
control?
    Ms. Batson. Family planning services, the access to 
contraceptive supplies allows women and families to make 
choices around the healthy timing and spacing of their 
pregnancies. We have a great deal of data that shows by having 
this healthy timing and spacing, that both the mother's health 
and the newborn's health are greatly improved.
    As you noted, when a woman has had seven children, is 
malnourished, anemic and is finding herself pregnant yet again, 
she is at very high risk in her delivery, as is her newborn at 
very high risk.
    We have data that shows we have made great strides in women 
being able to space for 3 years or longer, for example, as well 
as having great advances in having later pregnancies so that 
young women, over the age of 18, more women over the age of 18, 
are having their first pregnancies as opposed to the very young 
girls that have been having pregnancies.
    Mrs. Lowey. Thank you. Thank you, Madam Chair.
    Ms. Granger. Mr. Lewis.

                      Opening Remarks by Mr. Lewis

    Mr. Lewis. Thank you, Madam Chairwoman.
    I don't know when I have attended a hearing before where I 
was more discouraged by what I heard relative to what we can 
really do about these challenges. It was in 1995 when we almost 
discovered a thing called AIDS in one of our subcommittees here 
in Congress. At the time, we asked for some money for research 
concerning this subject. We wandered around on both sides of 
the aisle, and people said you want to do what because people 
did not know what the thing called AIDS was.
    Julie Gerberding, who ran the CDC, came to my office not so 
long ago to specifically interact about the fact a fellow by 
the name of Bono, a new name to me, Madam Chair, was going to 
be meeting with the President in the next couple of days. He 
was there. His purpose was to talk about HIV/AIDS and its 
impact especially in Africa. She was urging me to have him talk 
further with the President beyond HIV/AIDS to talk about 
malaria and the reality that DDT was an insecticide that had a 
staying life on the walls of huts and the need for netting to 
save millions of lives.
    I started by saying I was very discouraged by what I have 
heard so far, that the data you both provided regarding the 
numbers of children who die, the lack of sensible application 
of the dollars that we provide, certainly doesn't suggest that 
we are making a very big impact in this arena. Indeed, you 
can't throw money at problems and expect to find solutions.
    If we in turn have countries like China, that is the 
largest recipient of funds from our planning process, not 
energized to actively move forward with programs at the village 
level that make certain those moneys are spent well, then I 
think we are kidding ourselves.
    So help me really understand where progress, Ambassador 
Goosby, is really being made in terms of improving lives and 
encourage us that our purpose here is really producing some 
result.

                                 PEPFAR

    Ambassador Goosby. Thank you, Congressman. Those are fair 
and legitimate questions.
    I think that the attempt to move into effective 
programmatic impacts with countries has been really what PEPFAR 
has tried to be all about. An emergency response that engaged 
with an epidemic that impacts 33 million people on the planet, 
it continues to have 2.6 million people newly identified with 
HIV annually. It is the leading cause of death for women who 
are in their child-bearing years, and we have the continued 
production of hundreds of thousands of orphans because of this 
disease.
    PEPFAR has engaged with 30 countries in a large way and 80 
countries in smaller ways to work in a partnership with them to 
develop responses for care, prevention and treatment that 
initially started as an emergency response but then quickly 
moved to a strategy that tried to develop capacity in country 
to manage and oversee, monitor and evaluate these programs.
    We are at that pivotal point in the evolution of our 
relationship with partner countries in working with them 
through our partnership framework process to develop strong, 
highly impactful and sustainable programs.
    Our prevention of mother-to-child transmission, we have to 
do millions of tests to find HIV-positive women who are 
pregnant and then initiate anti-retroviral therapy, put a 
medical delivery system together that can deliver anti-
retrovirals with the appropriate laboratory monitoring, to 
continue that through their pregnancy and delivery through the 
breast feeding period to allow the transmission that can range 
from 20 to 40 percent of the deliveries, the child being born 
HIV positive down to less than 2 percent if we give them anti-
retrovirals, virtually giving us an opportunity to eliminate 
pediatric HIV.
    We have engaged this in every country we are working in and 
are optimistic that we will be able over the next few years to 
have an extraordinary impact on the number of children being 
born who are HIV positive and, in keeping their mothers alive, 
allow them to continue to care and nurture their children, the 
children that have already been born in the family, keeping 
that family unit together, all three, mother, child and the 
other children in the family, allowing that family to remain 
stable, the community in which they reside to remain stable, 
and increase the likelihood of a security issue not really 
presenting itself.
    In terms of adults, 3.2 million people who would have died 
otherwise have benefited from our programs and initiative anti-
retroviral therapy and now remain alive, well, continue to 
work, can continue to care for their families, and continue to 
offer that kind of stability to the societies in which they 
work.
    I can think of very few programs in the history of the 
human response that have had a larger impact than the PEPFAR 
program has on the spread and containment of HIV.
    Ms. Granger. Mr. Dent.

                      Opening Remarks by Mr. Dent

    Mr. Dent. Thank you, Madam Chair.
    Ambassador Goosby, a few things, and sort of following up 
on Mr. Lewis' questions, your $4 billion multi-year commitment 
puts this subcommittee in a difficult position by making this 
large of a commitment to the Global Fund but not for the 
bilateral health programs or other health organizations for 
that matter. The Global Fund is highlighted at the expense of 
other programs during these very tight budget allocations.
    How do you expect this subcommittee to balance all of these 
competing priorities just in the global health arena?
    Ambassador Goosby. I think, Mr. Dent, that is a question 
that we struggle with as well. Our dependency on the Global 
Fund is a real one. It was conceived of as a bilateral attempt 
through the activity of PEPFAR, matched with a multilateral 
effort through the Global Fund. The Global Fund creates a 
platform and conduit for other countries who do not have 
bilateral programs to contribute to the care and prevention and 
treatment dollars for HIV/AIDS as well as TB and malaria. So it 
allows us, for every dollar we give to Global Fund, we are able 
to increase that in the donation of 2\1/2\ dollars. So we have 
leveraged with our contribution the ability to bring in 
resources from countries that would not have any bilateral 
activity.
    The second part of that, however, in your question is how 
do we partner with and combine our planning and implementation 
effort in any given country at the country level with the 
activity of the partner country's resources and medical 
delivery systems and the Global Fund. We plan together and look 
at how we can converge in any given country to where Global 
Fund is doing one thing, we are doing something that is 
complementary or expansive or other than they are doing so our 
programmatic imprint is amplified in our ability to impact the 
diseases that both the Global Fund focuses on, as well as the 
HIV/AIDS and TB. Without them, our footprint and impact would 
diminish.
    Mr. Dent. With respect to China, too, I understand they are 
one of the largest recipients of the Global Fund grants at $1.9 
billion; is that correct?
    Ambassador Goosby. They have about a billion dollars. They 
are not one of the largest recipients, but they have about a 
billion dollars in grants over the 10 years.
    Mr. Dent. And they contributed about $14 million; is that 
correct?
    Ambassador Goosby. That is correct.
    Mr. Dent. That is troublesome, in my view.
    In response to Mr. Lewis, you started talking about HIV 
testing, and I want to thank you for your work as the AIDS 
coordinator in that regard. Orasure Technology is a company 
that is headquartered in my district. They revolutionized HIV/
AIDS testing with these rapid oral tests and I am interested in 
the programs that identify and treat those with HIV/AIDS. They 
have done terrific work with this. How does PEPFAR and Global 
Fund support HIV testing specifically?
    Ambassador Goosby. Well, first of all, your China question, 
I will briefly say that we have been in our role as a board 
member on the Global Fund aggressive in leading the reforms 
that are now being implemented through an oversight committee 
with Michael Leavitt, who was the Secretary of HHS, and the ex-
President of Botswana, Mogae, who are convening a process of 
looking at the fiduciary as well as the planning and 
implementations oversight at the country level. This review 
will address many of the issues you have raised, including the 
eligibility issue, the China grant making that was of concern 
to you.
    Our ability to have a country apply for resources comes 
from who is eligible to apply. It goes through, in the Global 
Fund, a process that identifies the rigor, technical rigor of 
the proposal, and its ability to impact, and then its ability 
to integrate into the existing services that are already in the 
country.
    China has moved through all of those hoops, but we are now, 
and the board is united in this effort, relooking at the 
ability to make sure that the resources that go through the 
Global Fund meet and touch the people who need them most. That 
will be a process of reforming eligibility. It is on for the 
May meeting that the Global Fund will have, the eligibility 
issue.
    So I assure you that we are following that closely and 
pushing the discussion on the board to correct these issues.
    In terms of counseling and testing, in 2010 we actually had 
33 million counseling and testing encounters. Many of those 
were done with rapid testing strategies and formulations that 
included both saliva, urine, and blood. This is a critical tool 
for us in reaching out and receiving immediate information 
about a person's status in HIV, and not having to wait for 2 
weeks or 6 weeks for a lab test to come back and having lost 
the patient in that interim.
    The Orasure is a product that has played a critical role in 
allowing us to reach difficult-to-reach populations who are not 
willing to come to medical delivery systems to be tested, and 
continue to play a core function for us.
    Mr. Dent. Thank you. My time is up. I yield back.
    Ms. Granger. Mrs. Lowey.

                              MICROBICIDES

    Mrs. Lowey. Thank you, Madam Chair.
    I wanted to ask you about microbicides. Proof of concept 
that a tropical anti-retroviral-based microbicide can prevent 
HIV infection in women was established in a USAID-funded study 
in 2010. Microbicides promise to make a significant difference 
for women worldwide, and in helping to reverse the AIDS 
epidemic over time. Sadly, funding rather than science remains 
the primary obstacle in the ability to provide these life-
saving products to women who need them the most. Despite this 
historic breakthrough, the President's budget did not request 
additional resources to conduct trials and make microbicides 
available to women who need them. PEPFAR will need to be far 
more engaged than it has to date, both in terms of leadership 
and providing funding.
    Ambassador Goosby, what is your office doing to mobilize 
the necessary funding, expertise, cross-agency cooperation to 
ensure that women will have access to microbicides? Can you 
provide this committee with a plan for how the Office of Global 
AIDS Coordinator is prioritizing and coordinating microbicide 
development and access efforts across the U.S. Government?
    Ambassador Goosby. Thank you for your question. We also in 
the announcement in June at the last international AIDS meeting 
in Vienna were also very gratified at the Caprisa study's 
results that showed efficacy with the Tenofovir gel in 
preventing/diminishing the transmission of HIV. It was a 
PEPFAR-funded study, and it was done through USAID. And we are 
very proud and excited about how these results have now raised 
the real possibility that women will have an ability to choose 
and control whether or not they are at risk in their sexual 
encounters. This is a major step in the right direction.
    This is one of many ongoing trials that are going on 
globally, many of which are being done and continued through 
the Caprisa site that the NIH and other foundations are 
running. There is a NIH microbicides research working group 
that most all of the stakeholders who are actively involved in 
research, including our USG colleagues, are participating in 
that look at what research is needed, what research is 
duplicative, what research is actually adding to the questions.
    We have been closely involved in that for years, in 
thinking and thinking through how we can best take the findings 
of a scientific discovery and translate that into an 
implementation plan.
    Over the next few years, as the microbicide question is 
further refined and dosing and intervals of exposure to the 
microbicide and efficacy are defined, we will be in a position 
to have already look at the clinical trials as well as new 
preparations with microbicides. And I think, most importantly, 
we will also have done work with looking at how the community 
will accept this introduction of a microbicide gel in getting 
to the women who need it and distributing it, the social 
acceptance of it, whether or not we are creating 
vulnerabilities for the woman in her use of it. All of those 
things are ongoing.
    We couldn't agree with you more that this is something that 
needs an orchestrated plan. We, with USAID and NIH, are in 
close dialogue around all of this, and I believe we will not be 
in a position where the research that needs to be done will be 
done and we will be in a position to mobilize and implement it 
as soon as it gets approved.
    Ms. Batson. Just to confirm that the confirmatory study is 
likely to be ongoing in the Republic of South Africa with some 
additional support coming from the Gates Foundation to be 
supplementing what the U.S. Government is putting on the table.
    As Ambassador Goosby noted, the science, there is a lot of 
work and coordination going around, and there is also a plan 
being put together to look more at the downstream steps because 
we have to start the downstream, the issues of production and 
supply and demand and, as Ambassador Goosby was saying, the 
introductory issues required at the same time we are doing the 
science. So that plan is being pulled together to ensure that 
we accelerate the whole process to go from a piece of science 
to something that is actually accessible to the women who need 
it.
    Mrs. Lowey. I just would add that I have recently talked to 
people who are very involved with Radio Free Europe, and all of 
our work in Africa and throughout the world, and I think it is 
public relations that is pretty important, just letting people 
know what is available to them.
    So I look forward to continuing the dialogue. Thank you.
    Ms. Granger. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you very much, Madam Chair.
    Let me first apologize, I was at another hearing right 
across the hall. I guess we all know that is part of the 
process here.
    Ms. Granger. Mrs. Lowey has to go to the exact same place.

                         PARTNERSHIP FRAMEWORK

    Mr. Diaz-Balart. Obviously the U.S. and other donor 
governments have supported the concept of country individual 
ownership to promote sustainability, et cetera. It is my 
understanding there have been a number of these partnership 
programs, partnership frameworks, that are in place.
    What is the status of those partnership frameworks? What 
kind of results have been obtained? Can we have any assurances 
that some of those countries will be able to move forward on 
them?
    Ambassador Goosby. Thank you for the question.
    As we move from an emergency response to one that is more 
sustainable, we needed to have an instrument, a tool, that 
allowed us to engage in a different dialogue with country 
leadership. The partnership framework is that tool, and it 
facilitates a sit-at-the-table discussion where the government 
and civil society of the country define what they are going to 
do in the care, prevention, and treatment arena in HIV/AIDS 
specifically, and the U.S. Government the same, prevention, 
care and treatment, over a 5-year time frame, explicitly define 
what the relative contributions of each would be, sharing 
vulnerabilities, sharing issues around resource availability, 
but it is mainly an attempt to move on multiple fronts the 
acquisition of real oversight, management, monitoring and 
evaluation that is not based in USG or in our implementing 
partners who we bring into country, expatriates, but in actual 
country leadership, both within the government and civil 
society.
    We have been very gratified, having completed now 31 of 
them, to have a situation where we have seen countries that had 
not been willing to put forth resources, just to get right to 
the last part of your question, such as Nigeria, going from up 
to 33 percent over that 5-year period that they hoped to be 
able to achieve with us.
    Now, the partnership framework also moves into the 
partnership implementation plan, and the implementation plan is 
where the specifics of how that will actually occur get 
hammered out. Those will all start coming in throughout the 
summer, and we will be able to tell you and this committee in 
great detail exactly where we are in all of the countries.
    Mr. Diaz-Balart. I would assume there are some countries 
who are more able to move forward, and some who are more 
willing to move forward. What kind of obstacles are you 
finding? Are some not that willing to do, obviously we 
understand they have some challenges, we have some challenges 
here as well. But are there some that are just frankly not 
willing to move forward because they either expect us to 
continuously be there or just for other reasons?
    Ambassador Goosby. What the partnership framework 
discussion has created for me has been a gratification around 
the gratitude that the countries have for the work that we have 
done in their countries. So it has created a platform where 
that has been able to be expressed from senior leadership, 
ministers of health, and presidents.
    The willingness to engage is there everywhere. The ability 
to engage, as I think you astutely alluded to, is not. We, as 
the United States, and reflecting the compassion of the 
American people, are partners in this effort and we will work 
with the countries to define what and when their ability to 
take over management and oversight and resources will occur.
    We have been candid with the countries in expressing to 
them the expectation that this committee has made clear to us, 
and in reflecting the will of the American people that this 
dialogue be a real dialogue around what you can do and when you 
can do it. I have been gratified at the quality of the exchange 
and the sincerity in the exchange, and I think it is going to 
move this dialogue in the right direction in all the countries.
    South Africa, Namibia, Botswana, Angola, and Nigeria are 
the countries that we expect to be able to move into actual 
resource sharing in a big way over the next 5-year period.
    Mr. Diaz-Balart. Is it fair to say that you are relatively 
optimistic, your expectations are that most of those that you 
are moving forward with are going to be able to eventually be 
self-governed or self-sustainable?
    Ambassador Goosby. I am optimistic that most of the 
countries we are engaged with will be able to manage these 
programs. And they, indeed, will become part of their medical 
delivery systems, both public as well as in the private sector, 
where they are indeed running and deciding on unmet need, 
prioritizing the unmet need, and making the allocation 
decisions.
    But I also realistically do not feel that many of the 
countries that we are working in will ever be able to carry the 
whole brunt of the resource deficit that is needed, and it is 
for that reason that functions like the Global Fund allow us to 
share that responsibility with other countries.
    Ms. Granger. Everybody please watch the time, both in 
asking questions and in answering the questions.
    Ms. Batson, going back to my question, if you can concisely 
tell me, there is a request for $200 million of the Global Fund 
for strategic reserve funds. What is this going to be used for 
and who decides how this funding will be spent?
    Ms. Batson. Thank you, Madam Chair.
    These will be used to fund in the GHI-plus countries, a set 
of eight countries that have been identified, the learning 
agendas that have been defined by these country teams. These 
learning agendas are the strategies, the strategic questions 
that they believe answers to which will give them the greatest 
impact on their country programs. So it is designed around how 
can we improve how we do business in these countries, what are 
the key questions we need answers to, what are the type of 
innovations we need to learn about.
    The country teams will design them and submit these 
programs with expert consultation from Washington, and then 
they would be approved by the operating committee comprised of 
the heads of the three agencies.
    Ms. Granger. There was an Associated Press article in 
February that made a number of statements about corruption in 
Global Fund programs. This outcry seems to have pushed the 
Global Fund into action, which included setting up additional 
oversight mechanisms, but reading the State Department IG 
reports, it seems as if U.S. health officers overseas have 
complained about accountability of the Global Fund for years. 
My two questions: Why shouldn't the U.S. play more of an 
oversight role in global health programs? And is the State 
Department satisfied with the U.N. Development programs, which 
is a major implementer of Global Fund programs in its 
cooperation with the Global Fund IG?
    Ambassador Goosby. If I can start the answer to that, thank 
you for the question.
    We have zero tolerance for corruption. The Global Fund has 
zero tolerance for corruption. From the earliest time, U.S. 
involvement in the development of the structures, 
administrative structures of the Global Fund, as you remember, 
we were the first chair of that, with Tommy Thompson being the 
chairman of the Global Fund board, a lot of work went into 
developing oversight mechanisms and created, through U.S. 
leadership, the Office of the Inspector General. That office 
has grown. We have argued successfully for more resources, 
staff and money to get them out in the field to allow them to 
investigate all of the movement of money from the Global Fund 
Geneva office through the country coordinating mechanism. That 
is a complicated process that requires real study and real 
careful analysis. An IG is a critical component of that. They 
are playing the role they should. The board is receiving the 
information coming back from the Inspector General and acting 
on it.
    In addition to that, since over the last few months with 
the press releases that have occurred, we have come back with 
our call of action that we presented in October to the Global 
Fund to create an oversight capability that is strengthened and 
now moves more toward looking at how the country at the country 
level moves these resources to program.
    I am very gratified now with Secretary Leavitt, Michael 
Leavitt, and with the President from Botswana, Mogae, being in 
a position to now look at the fiduciary movement of money going 
down to country level very specifically and making 
recommendations back to the board in the next board meeting in 
May to make corrective actions.
    This will not be a small investigation. This will be a 
full-time effort to look at and understand where the weak areas 
are and what needs to be strengthened. I believe that our 
ability to oversee and to monitor our resources from PEPFAR's 
perspective is also tied to how well the Global Fund's programs 
are delivered. So we have a clear interest in making sure that 
those resources meet the programmatic need, but also have the 
impact that they are supposed to.
    Ms. Granger. Thank you.
    Mr. Lewis.
    Mr. Lewis. Thank you, Madam Chairwoman.
    I believe you both understand that the American public 
thinks that we spend an awful lot more on foreign assistance 
than we actually do. Some would suggest that at least 20 
percent of every dollar spent is going to foreign assistance.
    One could argue it may be as high as 5 percent; others 
would say 1 percent. Nonetheless, we all know that the United 
States is going deeply into debt and we are very close to going 
over a cliff of bankruptcy. I think most people in the State 
Department do not believe that, but the public certainly does 
believe it. So when we find ourselves in a circumstance of 
going into serious debt, people are beginning to ask this 
question: When China, one of the countries that is buying our 
debt, on the one hand we are obligated to them, thereby they 
dominate our policies, how can we possibly explain the 
dichotomy here to the American taxpaying public? On the one 
hand we are going into debt, the other hand we are giving 
foreign aid to China, and in turn China is buying our debt. How 
you explain this to our taxpayers?
    Ambassador Goosby. I think that the need for a Global Fund 
reevaluation of the eligibility criteria that has allowed 
midlevel income countries to have access to these resources is 
being relooked at by the Global Fund. It is a legitimate 
challenge.
    I also think that the resources that were put into the 
Global Fund were put there so they would be available to those 
most in need, and that still remains the goal, I believe, of 
the American people to have a coordination of shared 
responsibility that is just not on the United States, but that 
there is a mechanism to allow other countries that do not have 
bilateral programs to contribute to services that are needed in 
HIV, TB, and malaria.
    The Global Fund affords that platform and mechanism. It is 
something that is largely efficient and effective at moving 
resources to those with the largest unmet need, but the need to 
retool and look at that is I think a legitimate challenge, 
Congressman.
    Ms. Batson. I would also note in the USAID budget there is 
$4 million for China. That money is very specifically going to 
support the civil society and more community-based development 
in certain of the poorest areas of China. So the focus is not 
giving money to the government of China, but the expectation is 
obviously that the government of China runs its own health 
program. We are really targeting areas of how do we build up 
the civil society capacity, how do we help them reach some of 
the poorest, how do we share that kind of expertise that we 
have learned.
    Mr. Lewis. Let me suggest that it is really important that 
you all know that this committee is extremely supportive of 
moving forward with programs that really will save lives and 
positively impact the developing world. In turn, our public 
plain just does not believe it. And they wonder why, for God's 
sake, we are spending this money when we do not actually sense 
there is any positive result for the American taxpayer. We are 
living with that frustration every day.
    Ms. Granger. I could not agree more. It absolutely is the 
question we face every time we go home in front of every 
audience, and there has to be reality on both sides that that 
is where we are. It is just extremely important.
    We want to thank our witnesses for appearing today, and 
that concludes today's hearing. The record will remain open for 
the members to submit questions for the record. The hearing is 
adjourned. Thank you.

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                                           Tuesday, March 15, 2011.

                    MILLENNIUM CHALLENGE CORPORATION

                                WITNESS

DANIEL W. YOHANNES, CHIEF EXECUTIVE OFFICER, MILLENNIUM CHALLENGE 
    CORPORATION

                Opening Statement of Chairwoman Granger

    Ms. Granger. The Subcommittee on State, Foreign Operations, 
and Related Programs will come to order.
    I would like to welcome the Chief Executive Officer of the 
Millennium Challenge Corporation, Mr. Daniel Yohannes, and 
thank him for appearing before the subcommittee today to 
discuss the fiscal year 2012 request for MCC.
    The administration's request of $1.1 billion is $20 million 
above the fiscal year 2010 appropriations. Since the first 
compact was signed in 2005, MCC has programmed almost $8 
billion for compacts in 22 countries.
    The MCC is a unique agency, and one I support because the 
model is focused on generating income in developing countries, 
which I expect will have a lasting impact. MCC recognizes that 
the private sector is the real engine of growth. If the history 
of foreign assistance has taught us anything, it is that money 
alone can't force a country to develop. Countries need good 
institutions, the right policies in place, and a commitment to 
fight corruption and mismanagement.
    MCC is in a position to prove how foreign assistance can be 
effective. It must be devoted to building capacity at the local 
level so that governments are more effective. It must measure 
results to determine what works and steer funds away from what 
does not work; and it must treat compact countries as partners 
to establish a sense of trust with the United States.
    Now that two compacts are complete and several more are 
closing soon, I hope you can share with us both the outputs and 
the outcomes of these investments. The Congress needs to know 
if MCC funding has actually generated income in these 
countries.
    Mr. Yohannes, I do not have to tell you that this country 
is facing fiscal pressures never faced before. During these 
times of constrained budgets, our development and economic 
assistance must be focused on helping and encouraging 
sustainability. The MCC should be a catalyst for partner 
countries to graduate from U.S. development and economic 
assistance. We must encourage these countries to break the 
cycle of dependence and begin to raise their own funds on the 
capital markets and through private investments. This 
subcommittee will face constrained budgets this year and into 
the future, and we must accelerate graduation of countries, 
where feasible, and examine where duplication exists.
    Let me point out that MCC compact countries received almost 
$1.2 billion in other U.S. development and economic assistance 
in 2010. As MCC begins to look at second compacts, countries 
must be selected on the basis of who can graduate from other 
U.S. development and economic aid. I hope you can discuss this 
proposal with the committee today.
    I thank you for appearing. I look forward to your 
testimony.
    And I will now turn to the ranking member, Mrs. Lowey.

               Opening Statement of Ranking Member Lowey

    Mrs. Lowey. Thank you, Madam Chair.
    Mr. Yohannes, I join with Chairwoman Granger in welcoming 
you here today.
    In 2004, Congress created the Millennium Challenge 
Corporation to provide assistance in a manner that promotes 
economic growth and the elimination of extreme poverty as well 
as strengthening good governance, economic freedom, and 
investments in people. Seven years later, as some of the first 
compacts draw to a close, and in this tough budget environment, 
we must assess whether MCC is cost-effective in meeting those 
goals.
    Last year, both Honduras and Cape Verde completed compacts 
focused on agricultural productivity and infrastructure 
development. I look forward to hearing your report on 
accomplishments, shortfalls, and lessons learned for future 
compacts.
    The MCC model holds great potential to bring transformative 
change, reduce poverty, and support sustainable economic 
development. In particular, the focus on partnership with 
developing nations and host government buy-in is critical to 
achieving long-term results.
    In addition, MCC's reliance on internationally accepted 
evaluations of a country's readiness to be a full partner, with 
particular emphasis on a government's ability to control 
corruption, provides assurance that a partner country is 
capable of participating in and later maintaining MCC 
investments. These external evaluations provide a measure of 
confidence as we work to ensure that each and every taxpayer 
dollar is spent wisely.
    Finally, MCC's threshold programs provide important 
assistance for countries working toward eligibility for full 
compacts.
    Last week, I spoke at an MCC event focused on the impact of 
gender on the effectiveness of international development 
efforts. I was inspired to hear about the success of MCC's 
threshold program in Burkina Faso to construct or expand 132 
girl-friendly schools and to meet two students from those 
schools who are learning the skills to make positive 
contributions to their communities, economies, and governments.
    However, in these tough economic times, I question the size 
and scope of MCC compacts. Since the program was created, we 
have provided over $7.9 billion for 22 compacts in 21 threshold 
programs. This year, you seek $1.125 billion, of which $912 
million is for new compacts in Indonesia, Georgia, and Ghana. I 
hope you will explain why we should make this particular 
investment in a year when many programs will face significant 
cuts.
    I also have some concerns about plans to award second 
compacts in Georgia and Ghana. This appears to be a departure 
from the original MCC model, which is based on a specific 
duration of time and focused objectives. And more justification 
is needed for MCC to pursue second compacts rather than enter 
new countries.
    Additionally, I hope you will also address the impact that 
the lack of concurrent compact authority will have on the 
proposed compact in Indonesia.
    And, finally, MCC was design to improve development 
effectiveness by utilizing only the most effective, efficient, 
responsible methods. This model is predicated on establishing a 
fair and transparent contracting mechanism. The committee would 
benefit from your insight on MCC's current procurement 
mechanisms as well as information about quality-control 
mechanisms.
    Thank you again. I look forward to your testimony.

                   Opening Statement of Mr. Yohannes

    Ms. Granger. Mr. Yohannes, please feel free to summarize 
your remarks. Without objection, your full statement will be 
submitted for the record.
    Mr. Yohannes. Thank you.
    Thank you, Chairwoman Granger, Congresswoman Lowey, and 
other members of the subcommittee, for the opportunity to 
discuss President Obama's fiscal year 2012 budget request of 
$1.125 billion for the Millennium Challenge Corporation. This 
amount would enable MCC to sign compacts with Indonesia, 
Georgia, and Ghana.
    If there are no objections, I would like to submit my full 
testimony for the record and summarize it for you now.
    Ms. Granger. Thank you.
    Mr. Yohannes. We are obviously operating in a budget-
constrained environment. MCC holds itself accountable to ensure 
that every taxpayer dollar generates the best possible return 
on investment. Every day, we ask ourselves the tough questions 
about the effectiveness and efficiency of our approach to 
development and our operations.
    Let me offer my view of what makes the MCC approach so 
effective and distinctive. Republicans and Democrats, including 
some of you, worked together to create MCC in 2004. You 
outlined a new vision for development, one based on 
accountability and a businesslike approach.
    My own background is in banking. I bring a banker's 
perspective to my role as CEO of MCC. I have a client: the U.S. 
taxpayer. I have a partner: the countries receiving MCC 
assistance and the citizens they represent. And I have a goal: 
to get the best return on America's investment.
    MCC's business strategy is based on 50 years of lessons 
learned and best practices. We focus on economic growth, 
sustainability, country ownership, transparency, and results.
    I am very pleased that the principles that MCC was founded 
on and has implemented for the past 7 years are central to the 
administration's new Global Development Policy and to the 
priorities that we have heard from Congress.
    In deciding where to invest, MCC measures whether a country 
has created a policy environment for sustained economic growth. 
This focus on economic growth and a transparent selection 
process allow us to say ``no'' to those countries that are not 
accountable to their people and not pursuing policies that 
promote markets and economic growth.
    We believe that engaging with developing countries in a 
targeted, selective way is a good way to achieve development 
impact, is fiscally responsible, and is critical to helping 
poor countries attract private-sector investment, which I 
believe is the only path to ending reliance on assistance.
    MCC also puts a laser focus on results. All donors and host 
countries are interested in achieving results. What sets MCC 
apart are our rigorous, systematic, and transparent methods of 
evaluating the impact of our programs. From the beginning, our 
projects are subjected to a thorough analysis to ensure that 
there will be an economic rate of return.
    For MCC's current investments, we expect more than 170 
million people in the poorest countries will benefit. And we 
expect incomes to rise by over $12 billion over the life of 
those investments. Those projects are under way and on track.
    We do have early data that is extremely promising. Let me 
give you an example. In Honduras, early data collected by 
program implementers of our agriculture program suggest that 
farmers receiving assistance from MCC saw their annual net 
income rise 88 percent on land being cultivated with new 
practices, from $1,880 per hectare to $3,550 per hectare.
    I want to stress that this is early data, and we will know 
much more when independent evaluations are complete. But this 
is the kind of strong return on the U.S. taxpayers' investment 
that MCC is working to deliver.
    With that, Madam Chairwoman, I would like to state my 
appreciation for your support and this subcommittee's support 
for MCC. I will be very happy to take your questions.
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    Ms. Granger. Thank you very much.
    I will be calling all Members based on seniority and by 
those that were present at the start, and then I will alternate 
between majority and minority, sticking with our 5 minutes. And 
I will hold myself to 5 minutes.
    And, again, thank you, first of all, for responding with 
specific examples of successes. As I said, I am supportive of 
MCC.
    Mrs. Lowey talked about the second compacts, and I know she 
is going to ask some questions about that. What we are very 
aware of is that MCC has always put the compacts together as a 
catalyst for change, laying the groundwork for a future where 
the private sector could increase investments and, therefore, 
provide jobs and long-term economic growth.
    I would ask, in selecting the three countries for a second 
compact, how will MCC ensure that it has the results of the 
first compacts, and how will MCC apply the lessons learned from 
them?
    Mr. Yohannes. Thank you, Madam Chairwoman.
    Number one, when we consider a compact, we have absolutely 
no plan to stay in that country for a long time. Those 
countries were selected primarily, number one, based on how 
well they implemented the first compact; two, because of the 
policy environment they created, to make sure that they are 
ready to replace aid with private-sector investments; and based 
on the results they have accomplished, which is extremely 
promising, as I indicated about the results from Honduras.
    And we believe that particularly with Cape Verde and 
Georgia this is going to be probably the last compact they 
would ever see from the Millennium Challenge Corporation 
because we believe that they have created conditions in their 
countries, they are on the path to replace aid and development 
programs with investments from the private sector.
    So we are extremely satisfied, and we are very hopeful. 
Both have been great partners, not only in getting the projects 
complete on time and on budget, but they are also both 
strategic partners of the United States.
    Ms. Granger. Thank you.
    As a follow-up--I have a little bit of time--in fiscal year 
2010, the 22 countries that received MCC compact funding also 
received $1.2 billion in assistance from USAID's Development 
Assistance Program and the Economic Support Fund.
    Given the fiscal constraints this Congress is facing, what 
steps is the administration willing to take to wean second-
compact countries off of other U.S. development and economic 
assistance?
    Mr. Yohannes. I very much understand the conditions we are 
in. I mean, having come from the business environment, where I 
cut millions and billions in my previous organizations, it is 
real.
    And I just want to say that MCC is one of the tools that is 
available to the U.S. Government. USAID and others also serve a 
different purpose for our government. I am not sure what kind 
of commitment we made or is made. I think the key is to make 
sure that we don't duplicate our efforts, that, whatever we do, 
we complement each other, and do it in the most efficient way 
to get the best return for the American taxpayers.
    Ms. Granger. I understand what you are saying--the way I 
understood it, the MCC compact said, we will--in putting our 
funds there for economic development, but, also, another goal 
was to wean those countries off of foreign aid from this 
government.
    And so I know what you are saying about duplicating, but 
you didn't address eliminating.
    Mr. Yohannes. Well, I think it is very difficult because, 
A, even though the intent and the goal is to make sure that, 
you know, especially after a second compact, these countries 
will replace aid dollars with investment from the private 
sector, there may be some needs, some unanticipated need, that 
must be served by U.S. Government interests.
    So that is why I can't tell you what may be needed. And it 
could be an emergency like we have seen in Japan, where we need 
to respond to those countries.
    But I will say that I think the key is to make sure that we 
continue to coordinate with all of the agencies that exist in 
our government to make sure that we do not duplicate our 
efforts. Ideally, yeah, you want to make sure that this would 
be the only compact they would ever see.
    Ms. Granger. Thank you.
    Mrs. Lowey.
    Mrs. Lowey. I have additional questions about second 
compacts, but, given limited time, we will probably have an 
opportunity at another time to discuss it. So I want to focus 
on corruption. Because, during last year's hearing, we had a 
discussion regarding corruption and how it fundamentally 
undermines economic growth.
    Corruption is a serious problem, as we know, in most 
developing countries. And, as you may recall from our 
discussion, there were reports in several compact countries 
that businesses were facing unreasonable regulation and 
extortionate practices by members of the government.
    I know that you have made progress on corruption since last 
year. Can you discuss with us, number one, what indicators you 
use to measure if a country's pattern of action warrants a 
suspension or termination of compact assistance because of 
corruption; what guidance is provided to MCC's staff on methods 
and strategies to prevent fraud and corruption; and what steps 
are you taking to ensure the compacts are implemented free from 
corrupt practices?
    So what are you doing about corruption?
    Mr. Yohannes. A lot, Congresswoman Lowey.
    Number one, corruption is a major hindrance to economic 
growth, and, to that extent, we take it very seriously. And 
countries must qualify and pass the corruption indicators 
before they could even be considered for our program. And that 
is number one.
    Having said that, I can tell you that corruption exists in 
poor countries, corruption exists in rich countries. I think 
the key is to make sure that we have a system to make sure it 
is detected, it is prevented.
    And what we have done is, working with your office, in the 
last year, we are looking in terms of institutional processes. 
In other words, we look at countries, if they have, you know, 
anti-corruption commissions, if they are free from government 
control. We look at judges, if they are free from government 
control and influence. We look at the media, if they are free 
from government control so they could report corruption 
incidents or what they find in terms of that area. We look to 
make sure that they have auditors that are independent and 
responsible that could expose corruption problems----
    Mrs. Lowey. May I interrupt you for a moment?
    Mr. Yohannes. Yes, ma'am.
    Mrs. Lowey. Because I would really like to know if all 
these indicators and all these efforts are successful. And if 
corruption is pass/fail, why have countries that failed in the 
years following their selection been permitted to maintain 
their eligibility? I think it is a terrible signal for the 
country and for other countries who want to be part of the 
program.
    Mr. Yohannes. Madam Lowey, I agree with you, but here is 
the thing. I mean, you are going to hear certain things that 
happen here and there. Again, the key is to make sure that it 
is not institutionalized.
    And for those countries that we suspected were having some 
problems in corruption--like, I will give you an example, in 
Senegal. I mean, last year we found in Senegal that the 
government proposed exempting certain ministries from 
procurement processes. And we teamed up with the State 
Department and other multilateral institutions. We responded to 
their exemptions with very strong demand that, if they don't 
change it, that we would terminate or suspend our compact. The 
government responded; they changed what was proposed. And none 
of the ministries are today exempted from fiscal procurement.
    So when we find issues like that, we respond, we threaten 
to hold or suspend, and we ask them to make some significant 
changes. So we have had some luck and progress that have been 
made in this area.
    So we do take it very seriously. And when countries do not 
pass, we are engaged with them in a policy dialogue to make 
sure that is corrected. But the key is to make sure that 
corruption is not institutionalized.
    Mrs. Lowey. Well, let me just say--because the sand is 
running through, and I want to get in one other question--I 
would like to continue this discussion. Because unless we are 
sending a strong message, we are kidding ourselves and we are 
kidding the country. Maybe we should just make it clear, ``You 
are out of the program.'' I think ``business as usual'' is a 
bad lesson to send.
    I wanted to focus for a minute on gender integration, in 
the context of the 2012 budget, can you share with us how 
resources will be dedicated to ensure that the MCC will 
consistently follow through on implementing the gender policy 
at every stage of compact development and implementation and 
that staff and countries will be held accountable if the gender 
policy is not adhered to?
    Mr. Yohannes. Okay. Gender is one of the top agency 
priorities, and it is considered at every level of our 
operation, from constraint analysis to project design to 
project development.
    And, in fact, I had the opportunity to travel to 7 
different countries in the last 14 months, and I have met many 
of the women farmers and a lot of the small-business 
entrepreneurs in El Salvador, Honduras, Cape Verde, Georgia. 
And I came away with a commitment and with belief that our 
model is working, it is showing some results.
    In fact, in the last year, I had doubled the number of 
people that work in the gender department. And now, gender 
expertise at every single compact is a requirement, to make 
sure that both men and women are equal champions of the 
development.
    Mrs. Lowey. My time is completed, but I would like you to 
share with us in writing the number of women who are compact 
beneficiaries in countries and what special efforts are in 
place to ensure that all programs reach women and girls.
    Thank you.
    Mr. Yohannes. Thank you.
    Mrs. Lowey. Thank you, Madam Chair.
    Ms. Granger. Mr. Cole.
    Mr. Cole. Thank you, Madam Chair.
    It is good to see you again, Director, and have you here.
    Mr. Yohannes. It is good to see you, Congressman.
    Mr. Cole. I really do like this program, and I like it for 
a lot of reasons: first, because it has been bipartisan in a 
place and at a time when that has been hard to achieve, and I 
appreciate very much your references to President Bush and his 
role in your testimony; second, because you have had very 
rigorous standards of accountability, and it is a lot easier to 
track the aid; and, third, because, like Chairwoman Granger, I 
serve on the Defense Appropriations Subcommittee. I like this a 
lot better. And I think this really mitigates the need for hard 
power, when we can do things in a cooperative and a peaceful 
way.
    It is unusual to me that your program has gotten such high 
praise by a lot of conservative groups like The Heritage 
Foundation that usually are somewhat critical of aid programs. 
And they like to contrast you, in a very favorable way, with 
USAID, which they don't see as quite as effective.
    This probably puts you in an unfair position, but what do 
you do differently than USAID? And why shouldn't we apply the 
principles that you are operating by, if indeed they are 
successful, across the board in other sorts of foreign 
assistance programs?
    Mr. Yohannes. Thank you.
    Number one, when Congress created MCC 7 years ago, it was 
based on many of the best practices learned from other 
development agencies worldwide. And you gave us a vision and 
the responsibility to be accountable and to approach 
development like a real business. That is the key. And almost 
every single project that is submitted, we fund it only if we 
are sure that it is going to have the best return for the 
American taxpayer. So our approach is just like a business.
    And it is country-owned, which means there is another 
powerful tool because the countries, themselves, determine what 
the constraints are to their economic development, and they are 
responsible from design to implementation, with an expectation 
that they will deliver results in 5 years, because all of our 
compacts are for 5 years.
    So I think it is the approach, it is the expectations, it 
is the country-ownership model.
    And we have seen results. We have seen results in Honduras. 
Honduras compact survived three different administrations and a 
major political crisis. But the project was completed on time, 
on budget, achieving all of the, you know, objectives.
    Cape Verde was also completed on time. We have five 
countries that will complete their program this year. It is 
going to be done on time, on budget, and they will also achieve 
all of the desired results.
    So I think the expectations that we have, it is the 
accountability; it is the countries we are working with. You 
know, we only work with countries that are well-governed. But 
those that have good governance, those that have good economic 
policies, those countries that have made a demonstrated 
commitment to invest in their people.
    So, again, it is accountability also. When you hold these 
countries accountable, they are going to produce the desired 
results.
    Mr. Cole. Why shouldn't we do that with USAID, then?
    Mr. Yohannes. In fact, Congressman, the President's new 
Global Development Policy combines many of the principles that 
have been practiced by MCC for the last 7 years. And we have 
being providing lessons learned to USAID and other development 
agencies within our government.
    It is a tool that is available to them. How they would use 
it is up to them, but, nevertheless, we are providing the 
lessons learned to USAID and others.
    Mr. Cole. Well, you are very diplomatic. I am sure your 
colleagues at USAID appreciate it. But I would like to ask them 
why they are not having the same kind of success rate that you 
appear to have here.
    Now, let me ask just one other question. I only have 
limited time. I am very interested in the selection process 
itself, how you actually choose individual countries that you 
are interested in compacting with. Can you go through some of 
the factors that you particularly look for in partners, as you 
put it, when you are investing the funds of U.S. Taxpayers?
    Mr. Yohannes. I think, number one, the key is to select the 
best partner. Like any investment, for any investment to be 
very successful, you really have to do a very thorough 
background check on the investor, and then you have to 
thoroughly review the proposed investment, and, third, you just 
make sure that you get the best return on the investment.
    When we look at a country, we look at 17 different 
indicators, categorized in 3 different areas. One is in ruling 
justly. For example, we look at the political rights, civil 
liberties, control of corruption, government effectiveness, 
rule of law, and voice and accountability. That is primarily in 
the ``ruling justly category.'' And a country must pass at 
least three areas in that category, including corruption, the 
fight against corruption.
    The other one is investing in people. We look in terms of 
immunization rates, health expenditures, primary education 
expenditures, girls' primary education completion, and natural 
resource management. Again, countries must pass at least three 
areas in this category.
    The last one is economic freedom. We look at regulatory 
quality, land rights and access, business startup, trade 
policy, inflation, and fiscal policy. And a candidate must pass 
at least three of these indicators before they could even be 
considered a candidate for our program.
    Mr. Cole. You didn't mention--and I am sure it is in there 
someplace, although I am glad you didn't mention it--U.S. 
strategic interests. In other words, this is not necessarily 
driven by what is in the immediate and direct interest of the 
United States. You are just simply looking for a partner where 
we can be helpful.
    Mr. Yohannes. Well, I think, when we do that, also, we are 
looking, number one, which are the best candidates? You know, 
keep in mind that, when we speak about development assistance, 
we are thinking about our own security, we are thinking about 
our own prosperity. We are looking in terms of, how could we 
create jobs here at home?
    To that extent, we are also looking for countries that are 
poised to become the next set of emerging markets, countries 
that could create a lot of investment and business 
opportunities for American businesses and countries that are 
extremely strategic partners for U.S.
    Georgia, in addition to having done an outstanding job, 
they are also a strategic partner in the area. Ghana is also a 
strategic partner in their region. Cape Verde, they are very 
much involved with us in fighting drugs. Philippine is a 
strategic partner. Indonesia is a strategic partner that we are 
working with right now.
    So, for the most part, these are countries that share the 
same values and countries that ultimately will be, you know, 
one of the best trading partners for the U.S. in the future.
    Mr. Cole. Thank you, Madam Chairman.
    Ms. Granger. Thank you.
    Obviously, we are asking a lot of questions about criteria 
for selection and lessons learned. And so, as we move through 
this, I agree that is very important.
    You mentioned Honduras, and let me be specific about 
Honduras. The compact closed out last year, and my 
understanding is that part of the funding was to build a main 
road. In addition to MCC, the Inter-American Development Bank 
and the World Bank committed to building portions of that same 
road. It is my understanding that everyone started at the same 
time but MCC finished its section, while the other donors are 
still in the implementation process.
    So my questions are: Could you tell me what MCC did 
differently? Did IDB and the World Bank, did they report they 
learned anything, or, what the situation there was? And are 
there lessons for other U.S. assistance from this example?
    So we are going to put you on the spot a little bit, but 
more so about your partners.
    Mr. Yohannes. Well, thank you very much, Madam Chairman.
    I can't speak why they did not get the projects done. But I 
could tell that you the projects that were completed by us were 
also the most difficult road in that part of the country. In 
fact, I have driven on that road from Tegucigalpa to San Pedro 
Sula.
    Now, I think the success of the program could speak to our 
model of country ownership. These were projects that were 
previously identified by the Hondurans as a major priority for 
them. They designed the programs themselves, and they were 
responsible in getting it completed. And our compact is usually 
for 5 years, and they must be completed within 5 years. So we 
made it very clear, so, A, it must be completed on time, on 
budget, and it was a requirement. And, also, their 
constituencies were holding them accountable for that. And 
probably those are the reasons why they were able to get it 
done on a timely basis.
    Having said that, we are continuing to provide lessons 
learned to other agencies. To the extent they want to use it, 
implement it, I think it is up to them. But, definitely, this 
has been one of the most successful programs in that country.
    Additionally, I must mention that we wanted our investment 
to be sustainable. To that extent, the Government of Honduras, 
for example, has increased their road maintenance fee from $37 
million to $67 million as part of our program to make sure that 
the roads that have been built by MCC are sustainable in the 
long term, as is our practice with every single country, to 
make sure that they set aside an additional road maintenance 
fee in order to make sure that the roads that have been built 
are sustainable for a very long time.
    Ms. Granger. Thank you.
    You have mentioned it some, but could you talk about the 
policy reforms that countries have enacted that they wouldn't 
have made in order to attract the MCC funding? One example I am 
particularly interested in is the time it takes a country to 
start a business. I am a former mayor, just as you are a former 
banker, so I am very aware of the need to slash impediments to 
entrepreneurship. We have done this and been very successful in 
understanding what we can do to help create new businesses.
    Would you talk about that for a minute?
    Mr. Yohannes. Thank you.
    Every single compact has a component of policy reform, 
because that is the only way we can make our investments 
sustainable for a long time.
    In Cape Verde, it used to take 57 days to get a license to 
start a new business. Today, in Cape Verde, you can get a new 
business license in less than 1 hour----
    Ms. Granger. Oh, my goodness.
    Mr. Yohannes [continuing]. Which creates tremendous 
opportunities for businesses in that country to prosper.
    In El Salvador, it used to take 137 days to get a license 
to start a new business. Today, in El Salvador, you could get 
it in less than 22 days.
    In Honduras, for example, you could only get a loan if you 
had land. But we worked with them, and they had major policy 
reforms in the financial-sector area. Today, you do not have to 
be a landowner to get a loan from the bank. You could get it 
using your tractors or car or motorcycle or seeds or 
fertilizer. And that also creates a lot of opportunities for 
their constituencies in terms of, you know, getting a loan from 
financial institutions.
    So we could provide very detailed results, particularly 
from policy reforms in many of our countries. But that is how 
we create the conditions for these countries to help them to be 
on the path to replace aid dollars with investment from the 
private sector.
    Ms. Granger. Thank you. And thank you for being so specific 
in your examples.
    Mr. Diaz-Balart, we are on our second round. I am going to 
call on Mrs. Lowey, and then I am going to call on you.
    Mrs. Lowey.
    Mrs. Lowey. Thank you, Madam Chair.
    And thank you again.
    I just want to say that I think my colleague, Mr. Cole, 
asked a very important question, and it is one that we should 
pursue. And that is, what do you do differently from Dr. Shah 
at USAID?
    I think Dr. Shah has brought such strong leadership and 
demanded more accountability to USAID. Even though our foreign 
aid program is just 1 percent of the whole budget, I think we 
have to look at it very carefully.
    One of the points that I have made continuously is that we 
need better coordination. I remember going to Ghana, one of 
your countries, and asking the Ambassador--I don't remember if 
you were--maybe it was before Kay--I asked the Ambassador to 
bring everyone who was working in the region--there were about 
50 people there. I want to make it clear they didn't know each 
other. They were all operating in their stovepipes of 
excellence, but I think knowing who does what and how we can 
coordinate better in this time of shrinking resources is 
absolutely essential.
    So, in light of that, I just want to ask a couple of other 
relevant questions. I hope you have examples of increased 
incomes, economic growth in the countries where the compacts 
are concluding. I would like you to share that with us.
    What are the tangible results you use to measure success? 
What mechanisms are involved to determine if a compact has been 
successful? If you could share some of those examples with us.
    And I just want to say also, regarding Mr. Cole's comments, 
many of the programs that USAID is involved in are long-term, 
for example, dealing with HIV-AIDS, dealing with malaria. And 
you may not see immediate results in terms of economic growth, 
as you well know. But I think it is so important that we 
constantly evaluate who is doing what and whether they are 
coordinating as effectively as they could.
    So if you could respond, that would be great.
    Mr. Yohannes. Okay, thank you.
    Mrs. Lowey. You have probably forgotten my questions.
    Mr. Yohannes. I will try to remember. If I miss, just 
remind me.
    First, in terms of results, we do have results from almost 
every country we work with. But when we talk about results, 
what matters to us is the investment's ability to generate 
additional income for our partner countries.
    As I indicated, Honduras and Cape Verde were the first two 
countries to complete their programs last year. We do have 
great results from Honduras; also, some early data results from 
Cape Verde.
    To give you an example, in Cape Verde, for example, they 
had the worst rain they ever had in that country in the last 20 
years. And in Santo Antao island, this is where we trained 
farmers. Those farmers that were trained by MCC lost their 
income only by 18 percent versus those farmers that were not 
trained, they had lost their income by almost 90 percent.
    Now, again, this is early data, and we should get the final 
details of both countries from independent evaluators sometime 
this year, as we will get for the next five countries next 
year.
    Now, having spent time in banking and finance, I think--I 
just want to make it very clear--that the return you are going 
to get at the end of 5 years is small. A lot of the income 
increases would happen the sixth, the seventh, the eighth, the 
ninth and tenth years, which we do have plans to follow through 
the investment cycle and will continue to report to Congress.
    Now, we also have interim results. And what we consider 
interim results, for others, is final results. To give you an 
example, we have completed over 200 newly constructed schools 
within our compact countries. We have trained over 155,000 in 
the use of modern technology.
    In addition to modern technology training, we also provide 
them marketing skills, business skills. We want to make those 
farmers small-business entrepreneurs. And many of these 
countries also have chosen to invest their development dollars 
in infrastructure and in agriculture, which are key and vital 
for trade and investment-related activities.
    We are helping a number of them, also, to become food-
secure. I have a great example for you, Congresswoman Lowey. In 
Ghana, for the first time, MCC-trained farmers sold $300,000 
worth of extra crops to the World Food Programme last year. 
Here is a country that we are trying to help to become food-
secure. Not only are they producing to help themselves, feed 
their family and their country, but they are selling extra 
crops to the World Food Programme.
    And the program was so successful, we have added an 
additional four countries to that pilot program. We have added 
Mozambique, we have added Mali, we have added Burkina Faso, and 
we have added Senegal. And we have over 80,000 hectares of land 
under cultivation. We have assisted over 4,000 small-business 
entrepreneurs.
    And, like I said, I could provide you very detailed results 
country by country, but, also, what is even more impressive is 
the fact that many of the results are complemented with policy 
reforms, whether it be land policy reforms or, in the case of 
Lesotho, where previously women were not allowed to do binding 
business transactions--they needed to get the signature of 
their spouse or they needed to get a signature of a male figure 
within their family. But the parliament changed that law, and 
women are able to do the same transactions as their male 
counterparts.
    So we have a lot of policy reforms that are taking place in 
many of our countries.
    Mrs. Lowey. Thank you.
    Ms. Granger. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Madam Chairwoman. Let me first 
apologize for being late, but two other hearings at the same 
time.
    Ms. Granger. We understand.
    Mr. Diaz-Balart. You know that is.
    How are you, sir?
    Mr. Yohannes. Pretty good. How about you, Congressman.
    Mr. Diaz-Balart. Let me again first apologize beforehand if 
you have already gone over this. And if you have, I will----
    Mr. Yohannes. No problem.
    Mr. Diaz-Balart [continuing]. Get it later from the staff. 
But you were talking about Honduras when I walked in. And----
    Mr. Yohannes. Yes.
    Mr. Diaz-Balart [continuing]. It is pretty evident that 
that has been a pretty large success. Net income increased from 
approximately $1,800 to $3,500 after 2 years of assistance per 
hectare? That is an 88 percent increase. That is pretty 
dramatic.
    How does that compare to other programs? Is that average? 
Is that pretty dramatic?
    Mr. Yohannes. I think every program is different. I think, 
again, this is an early data. The question becomes, what would 
have happened if those farmers were not trained by MCC? I think 
the answer might be, their incomes might have gone up by maybe 
10 or 15 percent. But I think when you see this kind of return, 
it is dramatic and, by far, it is very powerful.
    Again, this is early data. The numbers could go up 
dramatically or the numbers could go down, once we get the 
final evaluations.
    But these are people that were previously growing, you 
know, corn but now are growing herbs, vegetables, and fruits, 
selling to Wal-Mart and earning a better life for themselves 
and their families. And a lot of their produce is sold 
domestically as well as internationally.
    Mr. Diaz-Balart. So, again, you can't expect that kind of 
result everywhere, obviously.
    Mr. Yohannes. It is our intent.
    Mr. Diaz-Balart. It is your intent, and that is good; that 
is a good goal. But if you were to venture to guess why--with 
the caveat that this could change, but if those numbers are 
somewhat close to becoming the real numbers, any idea why that 
is so dramatic, in the case of Honduras?
    Mr. Yohannes. I think, again, it is--you know, I will give 
you an example, also another example when I was in Ghana. And I 
met with a number of farmers when I was in Ghana. In fact, I 
remember meeting this woman, her name was Mavis. She is a very 
petite but very strong woman farmer. So she told me, ``Mr. 
Yohannes, I used to get only 9 bags of rice from about 10 acres 
of land. Today, after you gave us the training program, I am 
producing about 150 bags of rice per year,'' which is dramatic.
    Okay? So that may be the exception, but I have cases like 
that. It is because they are growing different kinds of crops. 
Also, they have access to markets. Because, like in Honduras' 
case, not only have we trained about 7,500 farmers in the use 
of modern technology, but we also provided them with 510 
kilometers of new roads. That provides many of those farmers 
access to markets, so a lot of the produce is in markets on 
time, commanding a better price for their produce.
    So it is a combination of all. It is what they grow. It is 
also making sure that they have access to markets. And, again, 
previously those farmers farmed corn, which was saturated in 
those countries, and there were not enough markets. But today 
they know exactly what is expected; they are planning and 
producing. In fact, many of the them are taking orders, instead 
of just farming.
    Mr. Diaz-Balart. That is amazing.
    And, Madam Chairwoman, if I may, a last question. I think I 
have a couple minutes left.
    The key is, you want to make sure that that progress is 
sustainable over the long term. And how confident are you, at 
least in the case of Honduras, that those changes and that 
increase in efficiency, et cetera, is sustainable for the long 
term, once we are out of the way?
    Mr. Yohannes. Based on what we know and based on 
discussions we have had with the government, the government, 
having seen the results of the first compacts, have made a 
commitment that all future development programs will be used--
you know, they will use the MCC model to do that.
    Also, the government also has created conditions in that 
country to make sure that those investments are sustainable. 
Like I said, I talked about how they have set aside some 
additional funds to maintain the roads.
    But, also, they have created or are continuing to create 
the conditions, the environment in Honduras to make sure that 
the private sector is flourishing and is the biggest player in 
the economy.
    So, again, we will continue to follow through, but, you 
know, given the success we have had in the program, which is 
supported by the entire constituency of that country, we 
believe that they will follow through with making sure that 
they are sustainable.
    Mr. Diaz-Balart. Thank you.
    And, Madam Chairwoman, as you very well know, that small, 
heroic country, they are a pro-American democracy, and we need 
to make sure that we treat them that way.
    Ms. Granger. Absolutely.
    Mr. Diaz-Balart. Thank you.
    Ms. Granger. Mr. Dent.
    Mr. Dent. I have no questions. Thank you, Madam Chairwoman.
    Ms. Granger. I have one short question. As you aware, the 
President's fiscal commission recommended that U.S. Government 
agencies reduce their employee travel costs by 20 percent. 
Other groups have called for a 50 percent reduction. There was 
an amendment that was filed but not offered to the House 
version of H.R. 1 that tried to accomplish this, government-
wide.
    Can you discuss the MCC's efforts at cutting travel costs 
and any future plans to do so in the next fiscal year?
    Mr. Yohannes. Thank you, Madam Chairman.
    We watch every penny. I come from a business where I had to 
watch every penny, and we have implemented the same principles 
and discipline at MCC.
    To give you an example, even though we have more countries 
today than we ever had in the past, our programs, at this 
stage, require a lot of visits from people here from MCC. We 
have cut down our travel budget by almost 20 percent compared 
to 2 years ago. We are spending this year the same amount as we 
did last year. And next year we are going to be spending the 
same amount as we did this year, despite, you know, the 
expenses that have been added to travel by carriers and even 
though we had a lot of activity.
    But it is being controlled. We watch every penny to make 
sure that we are not spending taxpayers' dollars wastefully.
    Ms. Granger. Thank you very much.
    Mr. Cole.
    Mr. Cole. I just wanted to go back to my friend, Mr. Diaz-
Balart, and just add for historical accuracy that, in Honduras, 
you are working mostly with Native American farmers. Sixty 
percent of the food crops we now eat were developed by Native 
Americans before Columbus. You are working with the best. So 
you are going to get very good results.
    Mr. Diaz-Balart. Touche.
    Mr. Cole. On a more serious note, we have focused a lot on 
the partnerships we have forged with other countries and how 
you choose those. I would like to ask you two related 
questions. One, how carefully or often do you interact with 
NGOs that are active in the same areas? Do you forge 
partnerships between them and countries?
    Second--maybe three questions. Second, how about other 
countries? Do we partner in a development sense with other 
countries that are busy and have their own aid programs? We are 
obviously not the only people in the world that do that, and 
other people have interest.
    And, third, I would just like your observations or the 
observations cumulative of your agency, looking at other 
countries who also are involved in the business of dispensing 
aid and trying to spark economic development, what lessons do 
we need to learn? What are their best practices, if you will? 
And what things do you think that maybe we do a little bit 
better than them, just to sort of balance the comparison or 
assessment?
    Mr. Yohannes. First point, in terms of NGOs, they are very 
much involved from beginning to the end. NGOs are included 
during the constraint analysis in every country, they are 
included during project design, and they are also included 
during implementation.
    Many of them have seats on the local boards that manages 
and implements our program in our partner countries. And some 
of them also are consultants and implementers of our program. 
So they are very much involved in our processes from the 
beginning to the end.
    In terms of others, we constantly are speaking to other 
development agencies around the world. We have had several 
meetings with DIFD in the U.K., and we had different meetings 
with Australians and, you know, the Danish and the Swedes and 
so forth, just trying to see if there are areas in our partner 
countries where we might be able to coordinate our efforts.
    So we are constantly looking to see, you know, what might 
be available to take advantage of the opportunities that exist.
    Mr. Cole. Do you have any specific examples where that 
cooperation has borne fruit?
    Mr. Yohannes. We could provide a couple projects that we 
have done with DIFD in Africa. So I would be more than happy to 
provide that in writing, Mr. Congressman.
    Mr. Cole. Great. Thank you.
    Mr. Yohannes. But a lot of them do budget support. And we 
don't do any budget support. We don't transfer any cash to our 
partner countries. We pay for those projects that are complete.
    And, probably, we are the only one that approaches 
development from a business perspective, where we don't fund 
unless the proposed projects have a very good economic rate of 
return. Our approach is all about the return.
    Mr. Cole. So you are different that any other program, than 
any other country operates, to your knowledge?
    Mr. Yohannes. We are. We approach it like a business. We 
don't fund it if the projects do not have a very good economic 
rate of return.
    There are some projects that are suggested by our partner 
countries that are very popular by the citizens, but if they 
don't meet our standards, we don't fund them.
    Mr. Cole. Thank you, Madam Chair.
    Ms. Granger. Thank you.
    Mr. Diaz-Balart, do you have another question?
    Mr. Diaz-Balart. No questions.
    Ms. Granger. This concludes today's hearing. The record 
will remain open for Members to submit questions for the 
record.
    The hearing is adjourned.

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                                           Thursday, March 3, 2011.

   OVERSIGHT OF THE STATE DEPARTMENT AND FOREIGN OPERATIONS PROGRAMS

                                WITNESS

JACQUELYN WILLIAMS-BRIDGERS, GOVERNMENT ACCOUNTABILITY OFFICE

                 Opening Statement of Chairman Granger

    Ms. Granger. I want to thank everyone for coming to the 
first hearing of this subcommittee. I appreciate it very much. 
And I look forward to working with you. We understand that we 
are going to have votes probably in the middle of this hearing, 
so we are going to move quickly.
    Today's hearing is focused on oversight of the Department 
of State's foreign operations programs. Ms. Williams-Bridgers, 
I hope you will address four main issues about programs in this 
subcommittee's jurisdiction: strategic planning and performance 
measurement; contracting and oversight; management capability 
and capacity; and partner nation capability. I also hope you 
can update us on your work in Iraq, Afghanistan, Pakistan, 
Mexico, and Central America.
    After Mrs. Lowey gives brief remarks, I will call on 
members based on seniority and who was in attendance when the 
hearing was called to order. I will alternate between the 
majority and minority and I will ask that each member keeps 
their questions as brief as possible so we can get through 
everyone in a full round of questions before the votes begin. 
And I will now turn to the ranking member, Mrs. Lowey.

               Opening Statement of Ranking Member Lowey

    Mrs. Lowey. I thank the chairwoman.
    My friend, it is a pleasure to welcome you, Jacquie 
Williams-Bridgers, and I am going to be very short. I have very 
brief remarks and I ask unanimous consent that my full 
statement be placed in the record. Because U.S. diplomacy and 
development are crucial to our national security, vigorous 
oversight to ensure these taxpayer dollars are spent wisely, 
efficiently, and effectively is vital, especially as we 
consider major budget cuts in Congress. And I am hoping you 
will address key points that were already stressed. Your 
insight on barriers to making necessary changes be they 
structural, cultural, or resource-driven and any steps we in 
Congress can take to expedite this process would be welcomed.
    So because we want to get you in before the bells go off, I 
will leave it at that and I thank you very much.
    Ms. Granger. Thank you, Mrs. Lowey.
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    Ms. Granger. Ms. Williams-Bridgers, please summarize your 
remarks. Without objection, your full statement will be 
submitted for the record.

               Opening Statement of Ms. Williams-Bridgers

    Ms. Williams-Bridgers. Thank you very much, Madam Chair and 
Mrs. Lowey. We appreciate your having us here today to speak 
about our oversight of foreign operations and some of the key 
strategic national security and foreign policy interests facing 
this Nation today.
    The U.S. foreign affairs agencies, as you well know, are 
being asked to undertake missions in some of the key hot spots 
in the world right now. They are being asked to undertake some 
of the most complex, most expansive missions, and most 
expensive missions at a time when our Nation is facing a 
financial crisis, all in a period where there have to be trade-
offs made. And we would like to address some of those very 
trade-offs and opportunities to mitigate against the risk of 
exposure of U.S. investment in countries overseas.
    The U.S. has already provided over $58 billion for 
reconstruction and security stabilization in Iraq. Last year we 
reported that Iraq was generating a surplus, and had been for a 
period of time. What that means is that because Iraq has 
generated a surplus in their security budget, a surplus that 
they did not necessarily use, we have to continue to look for 
cost-sharing arrangements with Iraq to better leverage our 
investment moving forward.
    In Afghanistan and Pakistan, we have provided, similarly, 
billions of dollars to reconstruct and stabilize those 
countries. The State Department and USAID are engaged with our 
partner nations to mitigate the risks as well as build the 
capacity in those countries. We have in our work identified a 
number of areas where risk mitigation strategies can be 
enhanced and where we can double-up our efforts to build the 
capacity to safeguard U.S. investment in those countries.
    All that said, the U.S. agencies need to better build their 
own capacity to manage overseas. According to the 2010 QDDR 
issued by State Department and USAID, they are trying to build 
a workforce to match the challenges of the 21st century. We 
have identified in our own high-risk report that GAO just 
issued last week, that human capital challenges are pervasive 
across the U.S. Government. State and USAID are no exceptions 
to that rule. And the difficulties State Department has faced 
in its workforce raise serious questions about its readiness to 
efficiently manage the upcoming transition to a civilian-led 
presence in Iraq, a presence that is expected to double in size 
within the next year. The Bureau of Diplomatic Security, 
specifically, will be expected to assume full responsibility 
for security of civilian personnel by this fall. We have 
concerns about their readiness to do that.
    During fiscal year 2009 and the first half of 2010, State 
and USAID collectively obligated over $6 billion in contracts 
for Iraq and Afghanistan to support personnel and to implement 
operations. We have found that both agencies need to improve 
their oversight of contractors' performance, some of which 
closely supports inherently governmental functions. Absent 
improved management oversight, there is vulnerability for 
fraud, waste, and abuse. We acknowledge that our diplomats and 
our military personnel are working in a high-threat 
environment, and there is high staff turnover that, by their 
own admissions, hampers the agency oversight of development 
assistance implemented by contractors and grantees. However, 
the use of Pakistani and Afghan firms is expected to grow in 
the future, which only heightens existing concerns about the 
risk of U.S. dollars being diverted to terrorists and other 
insurgent groups.
    Attending to strategic planning and performance management, 
sound planning and measurement are critical to managing funds 
responsibly. For instance, we have provided various types of 
training and equipment to over 4,000 police officers through a 
$1.5 billion effort to enhance law enforcement capacity in 
Mexico, the Merida Initiative. Last summer we reported that 
State generally lacked outcome-based measures for Merida, 
making it very difficult to determine the program's 
effectiveness and leaving unclear whether or not our goals had 
been met. State also told us last month that it would take 
another 4 months before performance measures are completed for 
Merida.
    Given the brevity of time, this concludes the summary of my 
statement.
    Madam Chair, Mrs. Lowey, I am joined by three of my 
directors who are directly responsible for our oversight in 
Iraq, Afghanistan, and Pakistan and our work on foreign 
operations. And with your permission, I would like to call on 
them so that we might have a more in-depth discussion and make 
best use of this time. Thank you. I am open to any questions 
you may have.
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    Ms. Granger. I will start with what you finished with, and 
that is Mexico. We know that this committee has strongly 
supported Mexico in its fight against drug violence. 
Appropriations have exceeded the original $1.4 billion pledge 
for the Merida Initiative. But as we watch it, it seems to 
literally be imploding.
    I was encouraged by the meeting today of President Calderon 
with President Obama. I hope we will have shed more light on 
what is happening there.
    But my question to you is, what is your assessment of U.S. 
assistance programs with Mexico? You said, 4 months before we 
will have the performance measures, and I would ask you, why is 
it taking so long for the State Department to develop a system 
to track whether our U.S. assistance is really stopping drug 
violence?
    Ms. Williams-Bridgers. The area of performance measurement 
has been a very difficult one for the State Department. 
Effective performance measurement involves understanding what 
needs to be measured and collecting the necessary data from all 
parties, be it the government; working with the government to 
collect data that is meaningful to develop the types of 
performance metrics that are necessary in order to determine 
whether or not we are achieving our outcomes; and having the 
personnel who know what resources we have to apply in order to 
measure those goals. So it is a matter of data collection, 
working with partner governments to collect the necessary 
information, and then articulating those into meaningful 
indicators.
    Ms. Granger. In the most recent funding, we have been 
funding equipment to Mexico.
    Ms. Williams-Bridgers. Yes.
    Ms. Granger. So can you give us an update on that 
equipment? What has been delivered to Mexico? Or more 
importantly, what has not been delivered yet? And are there any 
recent problems? I know there were problems in the past as far 
as delivery of that equipment. Are there problems that this 
committee should be addressing?
    Ms. Williams-Bridgers. Madam Chair, with your permission, I 
would like to call on Jess Ford, who has been to Mexico and has 
been working closely not only with U.S. Government officials, 
but has also interviewed some officials in the Mexican 
Government, to be able to provide you with some of those 
statistics. Jess Ford.
    Mr. Ford. We recently were briefed by the State Department, 
2 weeks ago. They have now delivered approximately 25 percent 
on a dollar basis of the equipment and assistance that Congress 
has appropriated, somewhere--I believe it is around $360 
million of the $1.5 billion. They have a plan in place for 
these deliveries which they have shared with us recently. We 
haven't had a chance to analyze it in detail, but it does have 
a schedule of what their plans are over the next year and a 
half. That is something that we recommended last summer from 
our work, so they have taken that step.
    We have not had a chance yet to get a briefing from them on 
when exactly they will have the preponderance of the aid 
delivered. Some of the equipment items that they are going to 
deliver are helicopters that are in the procurement process now 
of being produced and shipped to Mexico, and that takes a 
little more time than the typical type of technical assistance. 
So at this point, about 25 percent has been delivered.
    They have a plan that they have shared with us that details 
the types of assistance they hope to provide over the next 
year. But we don't yet know exactly what the bottom line will 
be by the end of the year in terms of how much will be 
delivered.
    Ms. Granger. The subcommittee will be taking a trip to 
Mexico in 2 weeks, and so if you could give us some of the 
information for that, we will need that.
    Mrs. Lowey.
    Mrs. Lowey. Thank you for your hard work. I am very 
concerned, however, about the current staffing levels and 
training of personnel. In your statement, you said that the 
Department has had persistent shortages of staff with critical 
language skills--gaps that jeopardize diplomatic readiness and 
continued overseas operations.
    Two follow-ups: Is it your assessment as a result of the 
gutting of staff at the State Department and USAID in the 1990s 
and in the early 2000s, that State and USAID do not have the 
ability to deploy the right people to the right place at the 
right time and, therefore, the Obama administration and the 
Bush administration before it have been forced to rely too 
heavily on contractors? And in your opinion, what impact did 
the growing staffing demands for civilians in Iraq and 
Afghanistan have on diplomatic readiness? Did such a 
redirection of additional global personnel to those strategic 
posts lead to understaffing in Africa, Latin America and South 
Asia?
    And also in your review, have you discovered if the urgent 
need for staff to fill positions worldwide led to gaps in 
knowledge and skills by State and USAID personnel?
    And lastly, with regard to personnel, you can just answer 
it all together, does the system of bidding on assignments 
contribute to staffing and knowledge gaps? And have you done a 
review of the current incentives provided at State and USAID to 
fill positions? Have you looked at the effect of direct 
staffing versus the current bid system to address staffing 
gaps?
    Ms. Williams-Bridgers. Thank you very much for your 
questions, Mrs. Lowey. The short answer is yes, there are 
critical staffing gaps. We have reported that given the surge 
needs in Iraq and Afghanistan, and most recently in Pakistan, 
there have been compromises in our ability to adequately staff 
other posts. It also is reflected in the lack of language 
capabilities and technical expertise that we see in our foreign 
service personnel currently.
    For example, in Nigeria, our teams that were recently there 
found that junior officers are filling positions often one and 
two grade levels above that which they should be expected to 
fill. In China, similarly, we found not only language gaps but 
also skills gaps and experience gaps. What this ultimately 
leads to is reporting that is not sufficient, reporting on key 
strategic issues such as terrorism, economic crisis, and 
situations in countries that have ripple effects across the 
world.
    With regard to the bidding process, we have not 
specifically looked at the bidding process, but we have looked 
at incentives in the past that were created by the State 
Department to lure people to bid on certain posts. We have not 
looked at that recently, but that is something that we 
definitely need to follow up on.
    With regard to the overall staffing situation, what are 
State Department and USAID doing to address this? They are 
relying on contractor personnel. That has benefits and it also 
has disadvantages. The agencies have told us that they are 
looking to contractor personnel to fill gaps where there are 
personnel shortages, where there are skills gaps, where there 
is a need for flexibility in order to surge the attention to 
critical areas in critical posts, where there are security or 
logistical needs that the private sector can readily fill or 
nongovernmental organizations can readily fill.
    What are the inherent risks? What we have often seen is 
that contractors are filling positions that closely support 
inherently governmental functions. And we also want to ensure 
that we mitigate against placing contractors in positions that 
are inherently governmental functions where they are making 
policy and program decisions that direct-hire personnel should 
ultimately make.
    We know that we must rely on contractors, but we must also 
take responsible steps to mitigate against those risks. And 
that includes ensuring that we have the proper numbers of 
properly skilled personnel to oversight the contractors. There 
are particular challenges with doing this. In Afghanistan, 
Pakistan, you have high-threat, high-security situations. Our 
personnel may not have the language skills and may not be able 
to get out into some of those places. I have been to 
Afghanistan and Pakistan myself. We rely not only on local 
nationals but also on contractors to get out to these places, 
but we have also said that we have got to ensure that we have 
processes and readily trained direct-hire personnel to properly 
oversee what contractors are doing and to make sure that they 
are not supplanting the type of decisionmaking and policymaking 
that our officers should be making in the field.
    Mrs. Lowey. Thank you.
    Ms. Granger. Thank you. Mr. Dent.
    Mr. Dent. I have no questions, thank you.
    Ms. Granger. Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Madam Chairwoman. How are you? 
Thanks for being here.
    Ms. Williams-Bridgers. I am doing okay. Thank you.
    Mr. Diaz-Balart. The recently released GAO report has a lot 
of interesting findings. One, it talks about the efforts, the 
lack of information sharing between U.S. agencies involved in 
development work in Afghanistan. And the report states--and I 
quote--it says, ``USAID and DOD have not adopted a centralized 
data system that tracks all U.S. Government-funded Afghan 
development efforts and is accessible by all relevant agencies. 
My understanding is that previous GAO reports recommended that 
both USAID--at least USAID maintain an accessible database.
    So the question is: Why haven't they done so? This is not a 
new issue that you all have been bringing up. Is there a reason 
why they haven't done it? What is holding them up from doing 
that?
    Ms. Williams-Bridgers. There have been fits and starts to 
this effort of developing the centralized database. DOD had a 
database. In part, it was classified. They did not allow USAID 
to access certain data. USAID has since developed an 
unclassified database. It has gone through a couple of 
iterations. I believe it is called Afghan Info System now.
    Mr. Diaz-Balart. Catchy name.
    Ms. Williams-Bridgers. Yes, very catchy name. However, the 
database as currently used does not provide a complete picture 
of U.S. development efforts in Afghanistan. In part, it is an 
inability to really collect the kind of information that is 
necessary and to reach agreement to put it into the common 
format that allows for ease of sharing. But we intend to follow 
up on this. We have been making these recommendations, as you 
have said, for a number of years. There is no reason why we 
can't move to a place where all agencies that are working 
toward the same end, with the same U.S. dollars, have a common 
language and lexicon and put that information into----
    Mr. Diaz-Balart. Do you see any movement in the right 
direction so far?
    Ms. Williams-Bridgers. I see movement in that USAID has 
acknowledged, and both the agencies acknowledge the need to do 
this. It is unnecessary duplication of effort if they end up 
investing resources in building the same projects. But USAID 
says, Look, we have developed this new iteration of a system. 
It is unclassified. Let's develop a common lexicon.
    So we will continue to oversight that and see.
    Mr. Diaz-Balart. Switching subjects entirely. There was a 
story in The Wall Street Journal and it didn't surprise a lot 
of us who have been following what is going on in Colombia, 
that some of the funding that goes to Colombia, a lot of it 
goes to NGOs. And there was a person who was a former FARC 
terrorist guerrilla who came forward. And he spoke of--and The 
Wall Street Journal quoted him--that a lot of these NGOs were 
used as staging grounds, as places to keep arms for the 
terrorist groups, that were used to create stories and try to 
discredit the democratically elected Government of Colombia, et 
cetera.
    And my question is, we are spending a lot of money that is 
going to NGOs. As a matter of fact, that ratio has changed a 
few years ago, but we are spending more money on NGOs than we 
used to in the past years. The question is: Are we tracking 
that money that is going to NGOs to make sure that we are not 
sending U.S. taxpayer money to NGOs that are frankly not 
exactly on our side, that are not, you know, that do not 
believe in the same principles and the same policy that we do, 
again, that are actually assisting the terrorist groups in 
Colombia?
    Ms. Williams-Bridgers. I am not familiar with exactly what 
we are doing in Colombia to track the assistance that we 
provide through NGOs there, but we know that this is a 
persistent problem across governments. So I will definitely 
follow up on that issue for you.
    Mr. Diaz-Balart. Yes. And the reason, if I may, Madam 
Chairwoman, just very briefly, is because there seems to be--
supposedly there have been reports that USAID has previously 
distributed money to groups that are Hamas-linked and others. 
So I think we just need to make sure that if there is any way 
to track that down, I would love to continue to pursue that and 
continue to talk about that.
    Ms. Williams-Bridgers. We will follow up, Mr. Diaz-Balart. 
Thank you very much for that question.
    Mr. Cole [presiding]. I guess I am now running the meeting, 
and I will call on myself.
    Thank you very much for being here. Thanks for your 
testimony. I have actually got several things I would like to 
ask you. Obviously we are in a very different world since 9/11 
than we were before.
    At GAO, you have the ability to look at things over time. 
So if you were making a broad judgment about--we talked 
specifically about gaps in personnel and skill sets and 
experience. But have we broadly moved in the right direction 
over the last 8 or 9 years? Are we further behind in what we 
need today than we might have been a number of years ago?
    I am just trying to get a sense of where the trend lies. 
The problems seem to be recurring, and kind of the same thing. 
Are we, broadly, better off or worse off than we were before?
    Ms. Williams-Bridgers. That is a very good question. Thank 
you for it.
    Looking over time--the nature of our business operation has 
changed necessarily, given the environments that we are working 
in now. We are working in much more difficult environments. We 
are expanding our mission in ways that we haven't in the past. 
We have taken on the role of moving in many places, from 
providing hardware, to providing technical assistance, to 
building the capacity of governments to rule responsibly to 
provide essential services to their people. And that is a more 
difficult, longer-term undertaking than simply provisioning 
equipment to armies and to military forces.
    So I think that over time, given the change in our mission, 
we have to change our workforce and our cadre and our skill 
sets to be able to address the changed nature not only of the 
threat but of the environment that we are working in overseas.
    Are we doing a better job of it? We are recognizing the 
need to address security at the same time that we address 
economic development to provide long-term, sustainable means 
for these countries, so that we can extract ourselves from 
these very difficult environments. We have built our workforce 
in the foreign affairs community. And one of the dangers right 
now, of course, in this fiscal environment is--and State is 
presenting a budget that we believe provides more transparency 
so that policymakers can see exactly what we are spending on 
these types of operations through this OCO account that they 
have here--but at the same time we don't want to compromise the 
base. And we are going to have to make some very difficult 
trade-offs in that base of operations that must be sustained in 
order to ensure that we have that skill set to sustain programs 
over the long term after we have completed the surge-type 
activities that are associated with security stabilization in 
the short term in a number of these countries.
    So I think it is a very complicated answer to say that we 
are trying to keep pace. The numbers of people have grown in 
the foreign affairs community in recognition of the skill sets 
that are needed. We also have to do a better job of ensuring 
that augmented staff and contractor staff do a better job of 
developing the type of performance measures that will enable us 
to see whether or not we are making a difference. Regarding the 
latter area, we are not doing a very good job of getting the 
kind of information that we need in order to discern whether or 
not we are making the type of progress and achieving the 
outcomes that we have set for ourselves.
    Mr. Cole. Let me ask you this. As I recall, and I may be 
wrong on this, so please correct me if I am. In most of the 
spots--and let's just take Afghanistan. These are volunteer. 
You volunteer to go if you are in USAID. Or you volunteer to go 
in State. They are not mandatory. They can't be assigned; is 
that correct?
    Ms. Williams-Bridgers. It is a bid process, not a directed 
assignment process. There has been much discussion about having 
directed assignments. There have been a number of incentives 
created in the past.
    Mr. Cole. If you were going to recommend to them, that has 
got to make it extraordinarily difficult. Clearly those are 
dangerous places to go and there is quite a lot of hardship 
involved. But it is going to make it very tough to get the 
skill sets you need in the critical area. Have you got a 
recommendation? Should we move toward giving the Secretary and 
the appropriate directors the ability to sign personnel up?
    Ms. Williams-Bridgers. Good question. I am not sure if 
there would be legislation required in order to authorize the 
Secretary to direct assignments of foreign service personnel. I 
don't know that answer. Should the State Department and the 
foreign affairs apparatus be encouraged to look for options of 
using direct-hire personnel to better meet the needs that we 
have to address in these hot spots? Absolutely.
    Mr. Cole. Let me ask you one other question on Afghanistan. 
And then, Mr. Austria, we will go to you next. I won't 
monopolize the time here.
    In Afghanistan, last time I visited, we were in the midst 
of this, which was a few months ago. We have really augmented 
the number of people there dramatically in the military since, 
obviously, we have tripled the number of forces we have had 
there since 2009, and with an accompanying really remarkable 
civilian surge at the same time. It is actually pretty 
impressive, a lot of highly motivated people.
    Have you looked to see whether or not the civilian 
component of this is working well? What kind of judgment would 
you make? Would you triple, quadruple, the number of people? A 
lot of commissions were assigned that were governance-related, 
infrastructure, all sorts of things. So how is that working?
    Ms. Williams-Bridgers. We actually have two teams on the 
ground in Afghanistan right now. One is looking at the U.S. 
capacity to manage and oversee that significant increase in 
assistance that we are providing to Afghanistan. And the other 
team is looking at the Afghan Government's capacity to absorb 
and responsibly manage the U.S. funds that have been provided 
to them. So I will be able to give you a better answer to that 
in a few months.
    Mr. Cole. Mr. Dent.
    Mr. Dent. I have a quick question. Just following up on 
Congressman Cole's comments on what you have noticed in 
Afghanistan. I understand provincial reconstruction teams that 
we have seen in Iraq, and I guess also in Afghanistan, they 
seem to be very heavily dependent upon DOD efforts. There was a 
shortage of USAID folks.
    What is your sense now? Do we have a better balance? Is 
there more USAID involvement with the PRTs in both countries, 
particularly in Afghanistan? What is your sense? Has the 
Defense Department's role been mitigated at all?
    Ms. Williams-Bridgers. What I would like to do is call on 
my two directors that are responsible directly for Iraq and for 
Afghanistan and Pakistan to speak about that. Joe Christoff is 
responsible for Iraq.
    Mr. Christoff. Sure. In Iraq, you are seeing the 
dissolution of PRTs. They are going down. Without a doubt, they 
had to have military support in order to provide the CERP 
funding and the quick reaction forces to interact with a 
provincial government. They are now being dissolved and 
hopefully we are retaining a lot of the excellent contacts 
those PRTs established and that will be continued in the 
consulates and the enduring branch offices.
    Mr. Johnson. There are obviously no PRTs in Pakistan, but 
in Afghanistan we have another job looking at the civilian 
surge. We have seen an indication that there is an increase in 
the number of civilians, and in particular civilians on the 
PRTs. One shortage that was pointed out previously was ag 
experts in particular. We are seeing an increase in USDA ag 
experts along with AID experts in that particular area to 
address some of the unique development issues in Afghanistan. 
But along the lines of security governance and development, 
there is a serious uplift that you noted in the governance and 
development areas and in terms of civilians for some of the 
issues.
    Ms. Granger. Thank you. Mr. Austria.
    Mr. Austria. Thank you, Chairwoman Granger. I apologize for 
walking in late. I was at another subcommittee meeting. I think 
Mr. Cole hit on some of the areas that I was interested in and 
that is some of the challenges that you are going to be faced 
with here as we move forward, and some of the obstacles.
    You talk about the number of people growing as far as the 
skill sets and the challenges we face. And I guess part of my 
question was, How are you monitoring or measuring that right 
now as far as success? I think the question was asked as far as 
the success levels, whether it be on the civilian side or--when 
you are looking at security, the economy and so forth. And 
again, what do you feel are the biggest challenges or 
obstacles, whether it be Afghanistan, whether it be Pakistan or 
Iraq?
    Ms. Williams-Bridgers. How are we monitoring the 
capabilities of our workforces in order to----
    Mr. Austria. When you are increasing the number of people 
to make sure we are going to be successful.
    Ms. Williams-Bridgers. We begin by looking at what the 
goals are, what the stated goals are for any particular program 
or activity that we undertake. Then we begin looking at the 
various strategies and approaches that the U.S. Government is 
developing. Do they reflect the priorities of the country? Are 
we bringing together from all the various agencies involved the 
type of skills and information that are necessary in order to 
address the particular goal that we have in mind? Do we have 
performance metrics that seem reasonable and that can be 
measured over time? Oftentimes we don't see outcome-based 
measures; what we see are output measures. And this is 
pervasive across the various agencies involved here.
    The second part of your question about--could you repeat 
that please, the second part of your question?
    Mr. Austria. The challenges you see and the obstacles that 
you see us facing as far as moving into the future. Yesterday 
we had General Mattis come in to MILCON and talk about 2016, 
pointing out withdrawing from Afghanistan--are you going to be 
able to meet those goals; what challenges you have; what 
obstacles you have?
    Ms. Williams-Bridgers. In large part, this depends on what 
assumptions we make given the goals that we set. In Iraq, for 
example, our assumptions about drawdown had to do with the 
capacity of the government, the political situation, and 
whether or not they had addressed some of the intrinsic 
political issues in their newly formed Constitution and that 
their newly elected government was facing. We also have to look 
at the capacity of the military and the police forces to be 
able to secure Iraq, to achieve the very goals and conditions 
that we have established in partnership with the government.
    Similarly in Afghanistan, we are looking not only at the 
ability of the government to govern but also to generate the 
types of revenues that are necessary for them to sustain 
themselves over time. So we look at the various assumptions, 
underlying assumptions that form the basis for our goals and 
for the time frames that we have established for ourselves in 
order to meet those goals. And we look to see whether or not we 
have been able to rely on security forces to secure and 
stabilize. We look to see whether or not the governments have 
been able to execute the types of essential services that are 
expected of a government to deliver to their people, both in 
Iraq and Afghanistan.
    So we constantly examine these goals, these outcomes, these 
short-term outcomes, the long-term outcomes, and then assess 
whether or not we are applying the types of resources that the 
U.S. Government has indicated it would like to apply to see if 
we are achieving those goals.
    Mr. Austria. Thank you, Chairwoman. Thank you very much, 
Ms. Williams-Bridgers.
    Ms. Granger. In Iraq, the State Department will take over 
October 1 when the military draws down.
    Ms. Williams-Bridgers. Yes.
    Ms. Granger. And I continue to be concerned about whether 
we have enough people there. And as we talked about before, 
about the problems we have with oversight, or with that 
government, then how do you see that transition happening? Do 
we have enough people? What challenges are you seeing in that 
takeover or that change?
    Ms. Williams-Bridgers. Sure. Do we have enough people right 
now? We would say no. Do we have the equipment that is 
necessary in order for State Department to exercise its mission 
of protecting people and facilities there? Right now we would 
say no. By State Department's own admission, they are still in 
the process of having discussions with the Department of 
Defense as to what equipment State Department believes it needs 
and what equipment has been delivered. So we do not believe 
that we are in a ready state right now.
    Will we be by October? In large part that depends on 
whether or not State Department can procure the types of assets 
that they need to support their mission there and whether or 
not they can acquire the types of skills and expertise that 
will largely come from contractors in order to be able to 
provide the types of services they are expected to provide to 
support our mission in Iraq.
    So right now I think that we need to continue to monitor 
very closely the ongoing discussions, interagency discussions, 
the interagency agreements that will be necessary in order to 
support our presence there.
    Ms. Granger. And when you say ``if we have the right 
equipment,'' I assume you mean if we have the funds to buy the 
right equipment.
    Ms. Williams-Bridgers. Absolutely. Yes. Perhaps it is 
acquisition of new equipment, or perhaps it is equipment that 
DOD would leave behind.
    Ms. Granger. Of course, the other thing has to do with 
security and will we have the security to protect those people 
that are there.
    Ms. Williams-Bridgers. That is right. And we have also 
heard varying statements from the Department of State as well 
as DOD as to whether or not State Department has the necessary 
authorities and flexibilities to make best use of resources 
that might be provided to them to execute the mission. We have 
not come to any conclusions about that because we haven't 
gotten very clear statements as to what those flexibilities or 
authorities might be.
    We do know that State Department operates under different 
security standards for its own personnel than does DOD. There 
are issues of site protection, for example. State Department 
has a setback requirement. DOD does not. State Department 
requires that there be hardened roofs for the residences and 
working facilities of its employees. DOD does not have that 
same sort of requirement. So we need to look at what these 
requirements are and also see whether or not Congress needs to 
provide some authorities or whether or not State Department and 
USAID need to effect some change in policy or their own rules 
and regulations.
    Ms. Granger. That is supposed to be accomplished October 1.
    Ms. Williams-Bridgers. October 1. It is a very short time 
away.
    Ms. Granger. It is a very short time away.
    Let me return to Afghanistan for something that has come 
up, and that is the approach of delivering half of the 
development aid directly to the Afghan Government. And that has 
been discussed. That is the plan. I want to know what you see 
as the potential risk to that approach and particularly whether 
the Afghan Government has the capacity to oversee this 
assistance.
    Ms. Williams-Bridgers. Excellent question. USAID, as you 
well know, has undertaken a number of risk mitigation 
strategies and has imposed certain conditions on its direct 
assistance, direct assistance taking two forms: one, direct 
assistance through the World Bank-administered Afghanistan 
Reconstruction Trust Fund; and two, direct assistance that 
USAID provides directly to Afghan ministries.
    With regard to the direct assistance to the Afghanistan 
Reconstruction Trust Fund, there was agreement reached between 
the World Bank and donors, including the United States, in 2002 
on terms of agreement as to what the World Bank would do to 
ensure, safeguard, and guarantee intended uses of moneys that 
donors provided. And those agreements included provisions such 
as maintaining separate accounting and records of all moneys 
provided by donors, establishing a monitoring agent, conducting 
financial audits, and reporting to the donors regularly. But it 
falls short of what the U.S. Government today believes is 
needed in order to properly safeguard those moneys.
    Not long after agreement was reached in January 2010 with 
all other donors to provide 50 percent of development aid 
directly to the Afghan Government, USAID approached World Bank 
and asked that additional safeguards be put in place 
specifically allowing the U.S. Government to obtain records and 
information from the World Bank's audits of these Afghan 
recipients. And World Bank denied USAID's request. So we 
believe that USAID and our State Department perhaps need to be 
encouraged to work with other donors to see if they can obtain 
better assurances and procedures in place to properly safeguard 
those moneys.
    With regard to moneys that are given directly to the 
Government of Afghanistan, we know that this is a country with 
a 70 percent illiteracy rate. We know that they have a very 
senior civil service workforce. We know that there is not 
necessarily the attention to financial management principles or 
internal controls that we would expect to see when we are 
delivering billions of dollars directly to a government.
    USAID has taken certain steps, including pre-award 
assessments, looking at ministries' financial management and 
internal controls environment. And for those ministries that 
would be directly responsible for procuring goods and services 
with U.S. dollars, we go one step further and we certify these 
ministries as to their capabilities. These certifications are 
done, I believe through USAID's mission director for 
Afghanistan. But these pre-award assessments give a very good 
indication of the capabilities of these government ministries. 
I believe USAID may have looked at six ministries but has 
certified only two--the Public Health Ministry as well as the 
Communications and Information Technology Ministry.
    There are also certain conditions that USAID will put in 
place before awarding money to any ministries, conditions that 
require them to acquire separate bank accounts, maintain 
accounting books, develop a monitoring and evaluation plan, and 
report to USAID regularly. But this is a high-risk proposition, 
as we well know, and is something that deserves and will 
require continued oversight and evaluation by USAID.
    Ms. Granger. I understand the goal. I am just concerned 
about the timeline and turning over that much, 50 percent. I 
wish it would have been eased in, in a way. I would have had a 
much more reassured understanding of it. That concerns me.
    Let's go to Pakistan. And your statement mentioned the 
administration's efforts to provide assistance to Pakistani 
organizations. It says that those efforts would increase the 
vulnerability of U.S. assistance to waste, mismanagement, and 
corruption, given the limited capacity and the weak internal 
controls of the Pakistani entities involved. The most recent 
report made several recommendations to the Department of State 
and USAID. Can you describe the most significant weaknesses the 
GAO found, the most time-sensitive problems that need to be 
addressed, and whether the Committee should reconsider 
providing certain types of funding because of the issues that 
GAO identified?
    Ms. Williams-Bridgers. Similarly to Afghanistan, there is 
this pre-award assessment process. But we are dealing with a 
government that is slightly more sophisticated in that the pre-
award assessments have been conducted by USAID-approved 
Pakistani CPA firms. But nonetheless, you are quite right. Any 
direct assistance involves inherent risks that need to be 
closely safeguarded against. And so it is going to be a 
challenge for USAID to exercise the proper oversight even in 
Pakistan.
    Ms. Granger. Thank you. We are watching to see what 
happens.
    Let me go to--the State Department and USAID have been 
focused on increasing their staff in order to strike the right 
balance between defense, diplomacy, and development efforts. 
Mrs. Lowey talks about the three legs of a stool often. With 
the budget environment we are now facing, new hiring will have 
to be reconsidered.
    So can you discuss GAO's work related to the workforce 
challenges facing each agency and what steps are necessary to 
ensure that staff are best utilized around the world?
    Ms. Williams-Bridgers. State Department is often faced with 
the pressure of putting a body in a particular post. I worked 
for State Department many years ago and I remember the calls, 
the urgent calls of chiefs of missions saying, Please send a 
body, man our consular post, we need people to adjudicate 
visas.
    Nigeria is a notable example. Often this comes--not 
necessarily in Nigeria, being English speaking, but in other 
countries where you need language. You need staff with language 
skills. So we cannot compromise on the need to ensure that our 
staff have the prerequisite skills to function and do the job 
they are expected to do. When consular officers are faced with 
hundreds, literally hundreds of applications to adjudicate in a 
matter of seconds in some of our highest threat, most critical 
frontlines of defense for our own homeland security, we must 
ensure they are properly equipped. So ensuring the proper 
training before deploying the staff is imperative. That means 
not only language, but also the types of technical expertise 
that are needed to oversee our missions.
    Let's talk about facilities. State Department has built 
more than 52 new embassy compounds, moving more than 20,000 
personnel into more secure, safer embassies. But these are 
highly complex state-of-the-art embassies. We don't necessarily 
have the technical expertise, and State has faced extreme 
difficulty in hiring the type of technical experts that know 
how to maintain these state-of-the-art facilities now.
    So we are not only talking about having a human capital 
cadre of skilled expert personnel, foreign service officers, 
and highly talented people. As our mission changes, so does the 
necessary equipment for our personnel have to change along with 
it. The same is true on the facilities side, as we are 
negotiating increased acreage and expanding our presence in 
Afghanistan.
    Ambassador Eikenberry, looking back on his time there many 
years ago, has said Who would have expected 5 or 6 years ago 
for us to have this magnitude of a presence in Afghanistan now?
    And the same in Iraq. We have so many facilities. The 
question becomes, can we expand as quickly as is desired right 
now? In Iraq we are talking about expanding multiple sites, 
including aviation and life support facilities; opening 
consulates; and opening other support offices throughout the 
country. Perhaps we need to rethink that footprint, given what 
is realistically going to be available in terms of direct-hire 
personnel--not contractors but direct-hire personnel--to be 
able to responsibly execute that.
    Ms. Granger. I think that is a consideration that we have 
all wrestled with. And it is, can we get the right people with 
the right skills, the right training, the right equipment, all 
there? And if we do, then from where are we taking them? 
Because if we are talking about experienced, well-trained 
people, then we are moving them from other places where they 
are also needed.
    So I, like you, wonder if we have set up a plan for a 
footprint we can't accomplish at this time and particularly 
under these budget constraints.
    Let me ask you about the QDDR and the management reforms. 
You had concern--GAO had concerns about strategic planning and 
performance measurements. Have they been addressed sufficiently 
in the administration is initiatives, in the Presidential 
Policy Directive on Global Development, the Quadrennial 
Diplomacy and Development Review, and USAID Forward? Have you 
identified any particular areas that were overlooked and what 
new initiatives require significant investments that you are 
not seeing now?
    Ms. Williams-Bridgers. Notably, the QDDR did not address 
what we had called for, the need for effective strategic 
planning by Diplomatic Security, the bureau that is going to be 
on the frontline in providing protection for our personnel. It 
was absent in the QDDR. That was a particular concern to us, 
because just last year we had identified the need for more 
rigorous strategic planning, anticipation of what the future 
mission is, and how we are going to go about deploying our 
diplomatic security personnel around the globe. We are 
currently looking at training of diplomatic security personnel 
as well.
    So that was a notable omission, we believe, from the QDDR. 
There were a number of other areas, though, that I thought that 
the QDDR mentioned, that we have not looked at quite yet, but 
were quite interesting. One was the call for an establishment 
of a chief economist, one that would recognize and pull 
together economic development, security, and diplomacy in ways 
I believe have not necessarily been looked at in the past. 
Another area of note was for USAID and the overall training and 
expertise and deployment of personnel there.
    So in total I think there are a number of areas where the 
QDDR addressed the need to build capacity of the foreign 
service corps, and the diplomatic corps as a whole. But at the 
same time, I think it is quite ambitious.
    The other area that I must note that I was a little 
concerned about with the QDDR was the initiative to streamline 
performance indicators. While we think that there is room for 
streamlining performance indicators to focus on the salient 
few, because we have noted this as an area of weakness across 
the agencies, I am concerned that strategic planning and 
training are oftentimes the first areas in discretionary 
spending in agencies' budgets that are cut in tough fiscal 
times. Now is not the time necessarily to compromise on some of 
that. Particularly, as we are talking about, is the footprint 
is planned too large, given available resources right now? That 
requires some strategic planning. It requires interagency 
collaboration and coordination.
    There was a question earlier about what kinds of 
information all the agencies pool together into common 
databases to see who can most effectively execute a particular 
program or activity. We need to do more of that as well.
    Ms. Granger. USAID Foreword focused on organizational 
management changes. It requires creating new offices for 
budgeting and monitoring evaluation and reforming procurement 
processes. We are looking at a CR right now that has 
significant changes. We are looking at an appropriations 
process that begins--well, it has actually already begun-- that 
will probably have even deeper cuts. So what happens in a 
situation like that? And how can we oversee that, given the 
limited resources we have?
    Ms. Williams-Bridgers. One of our teams at GAO that focuses 
on acquisition management and sourcing has looked at this new 
monitoring evaluation and procurement oversight shop that has 
been recently set up, and is encouraged that there is this 
doubled attention on the need for contracting oversight because 
this is going to be one of our areas of greatest exposure and 
highest risk--the reliance on contractors to do this work. 
Whether or not it is the appropriate level, whether or not that 
is a trade-off that can be made with other areas, that is 
something that will be left to be decided by the Congress and 
policymakers. But as you move forward, we urge the Congress to 
consider the need for attention on monitoring and evaluation. 
It is one of the most efficient ways of making decisions about 
what we need to focus our attention and our resources on, and 
identifying realistic outcomes that can be achieved given 
assumptions that we make. I think that is just critical.
    Now, the level of resources that need to be committed, that 
is something that we will leave to others to decide.
    Ms. Granger. I would like to talk about the whole issue of 
contracting--and I would note that I also serve on the Defense 
Appropriations Subcommittee. Today we had Secretary Gates, and 
we talked about the issue of contracting and how many 
contractors are involved. And it was explained again--because 
Members have to be reminded of that--that we may know how many 
contractors that we have on the books but not how many 
contractors those contractors hire.
    Ms. Williams-Bridgers. Absolutely.
    Ms. Granger. And given the situation we are talking about 
with State, the same thing I am sure will occur.
    Ms. Williams-Bridgers. That is correct.
    Ms. Granger. So we had--I don't know for how many months we 
asked the question how many contractors there were, we could 
never get an answer. I am concerned about the oversight of the 
contractors whether we have adequate reporting on 
Subcontractors.
    Ms. Williams-Bridgers. That is right. And what needs to be 
looked at is, particularly with regard to the subcontractors to 
the contractors. This is something that that newly formed unit 
within USAID is looking at, recognizing that the exposure 
increases exponentially with the number of subcontractors--and 
it is not that GAO says that we shouldn't have so many tiers of 
subcontractors, but you have to be able to apply the resources 
to reach and see and have access to what those subcontractors 
are doing. But I would argue that we don't have a very good 
handle on how many contractors we have.
    You know, there is this SPOT database, that the 
Synchronized Redeployment and Operational Tracker database into 
which all the agencies agree to input data on numbers of 
contractors and the value of the contracts. That is still not 
complete. That was agreed upon as a common database in 2008, 
and GAO was still reporting that we are not seeing sufficient 
input into that database.
    Ms. Granger. Thank you. I was pleased to read in your 
report last year on new embassy compounds that the Department 
of State is making progress locating staff in more secure and 
functional facilities. However, I am concerned about your 
findings that in over half of the facilities GAO reviewed, 
there were not enough desks for current staffing levels.
    So what are the factors when constructing new embassy 
compounds that prevent the accommodation of staff requirements 
at the time of occupancy, and why is it so difficult for State 
to build new compounds that adapt to future staffing 
requirements?
    Ms. Williams-Bridgers. One of the primary reasons is the 
ability or the lack of ability to readily project years in 
advance what the requirements are going to be. In the case of 
Afghanistan, even Ambassador Eikenberry, outside the embassy, 
was saying, Who would have anticipated an embassy that large 5 
years ago?
    So it is the inability to be able to project exactly what 
the needs are going to be, given the changed mission. Again, 
that harkens back to performance planning, strategic planning, 
underlying assumptions, having good information from officers 
who are skilled to be able to report back on what we see as 
occurring in terms of emerging events and trends in country.
    So it is an inability to effectively anticipate, project, 
and strategically plan for the needs and the requirements of 
the mission several years in advance.
    Ms. Granger. If it is several years in advance, then it has 
to be also that we should be able to do something like that in 
a shorter period of time so that we are closer to what the real 
needs are, I would think.
    Ms. Williams-Bridgers. Absolutely. Yes.
    Ms. Granger. Going back to the security, and that is 
something that so many Members of Congress who have not sat on 
the committee that deals with that, are really not aware of the 
huge security needs for us, unless we are going to have State 
Department and those civilians in a very small Green Zone. But 
if they are going to be out where they need to be, then the 
security needs are still there.
    Ms. Williams-Bridgers. Absolutely. The Bureau of Diplomatic 
Security has said that if they don't have all the assets that 
they need, it is going to limit their ability to make 
movements. And that means the diplomatic corps is going to be 
similarly limited in their ability to move out and to actually 
engage with the host government.
    Ms. Granger. Do you see that in their bidding process, of 
saying this is where we want to go? Is it limiting that because 
of the security issues?
    Ms. Williams-Bridgers. Are personal decisions affecting 
bidding? Absolutely. You have a changed workforce as well. We 
have tandem couples. We have families now that are moving 
about. So that complicates the ability to move, or their desire 
perhaps to move to some of these hot spots.
    Ms. Granger. The report also noted that NEC building 
systems are more costly to operate and maintain. What accounts 
for this increased cost?
    Ms. Williams-Bridgers. The increased protection and 
sophistication of some of our systems to guard against 
terrorism, and the need to procure safer, more secure land 
space in order to accommodate the setbacks, which involves 
negotiated agreements with countries. So I think it is in large 
part the security that is built into these new complexes.
    Ms. Granger. Is there something the Department can be doing 
to mitigate these costs or to reduce problems? Are they looking 
at what was needed before? Is there a forward looking--or how 
can we provide that kind of secure facility at a lower cost?
    Ms. Williams-Bridgers. Madam Chair, may I call on Jess 
Ford, who has been responsible for our new embassy compound 
oversight?
    Ms. Granger. Yes.
    As we are building these new facilities, then the cost is 
extraordinarily high. And I said, What kind of outside-the-box 
look are we seeing to say we can mitigate those costs but still 
provide security?
    Mr. Ford. The first thing they are trying to come up with 
is standard embassy design so that they can standardize the 
construction process. That is one of the tools they are using 
to try to reduce the overall cost of construction.
    One of the points we made in the report you referred to is 
on the operation and maintenance side, in which they 
underestimated the cost of what it is going to take to operate 
and maintain the new embassies, because they are putting in 
modern HVAC systems and putting in modern water systems. Some 
of these systems have to run 24/7. They don't have the skill 
sets amongst their staff to operate and maintain them, so they 
have to rely on contractors. So what has happened is they have 
come to Congress and asked for more money to operate and 
maintain these new facilities.
    On the security side of it, they are looking for standard 
embassy design. They are trying to, as Jacquie mentioned 
earlier, right-size the embassies properly so they have the 
right number of people and they are not building excess space. 
They are also trying to consolidate agencies into one compound 
to provide security. So part of their program is to take the 
major agencies operating outside of a particular compound--
primarily USAID--and move them into a safe, secure building. 
That requires them to have a good design of what they are going 
to build and make sure they have the right numbers of people 
moving in there.
    That has been an area that they need to improve on. That is 
something we recommended in our report you just referred to 
from last year.
    Ms. Granger. Good. Thank you.
    We are into our second and last vote. Without objection, 
Mrs. Lowey's statement shall be placed in the record.
    This concludes today's hearing on Oversight of the State, 
Foreign Operations, and Related Programs Subcommittee. Members 
may submit additional questions for the record. The hearing is 
adjourned. Thank you very much for being here.
    Ms. Williams-Bridgers. Thank you very much, Madam Chair.

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                           W I T N E S S E S

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Batson, Amie.....................................................   617
Clinton, Hon. H. R...............................................     1
Geithner, Hon. Timothy...........................................   441
Goosby, Ambassador Eric..........................................   617
Rice, Ambassador Susan...........................................   539
Shah, Dr. Rajiv..................................................   303
Williams-Bridgers, Jacquelyn.....................................   799
Yohannes, D. W...................................................   739
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