SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 3798 words

COMMITTEE: SENATE APPROPRIATIONS

SUBCOMMITTEE: FOREIGN OPERATIONS

HEADLINE: FISCAL 2003 APPROPRIATIONS

TESTIMONY-BY: ANDREW S. NATSIOS, ADMINISTRATOR

AFFILIATION: U.S.AGENCY FOR INTERNATIONAL DEVELOPMENT

BODY:
Andrew S. Natsios Administrator, U.S. Agency for International Development Senate Appropriations Committee's Foreign Operations Subcommittee

February 26, 2001

Chairman Leahy, Senator McConnell, members of the subcommittee: It is an honor to be here today to discuss the President's budget for the U.S. Agency for International Development for fiscal year 2003.

Our budget proposal calls for us to manage $8.47 billion in FY '03. This includes $2.74 billion for Development Assistance, including child survival and health programs; $235 million in International Disaster Assistance; $55 million for Transition Initiatives; and $586 million in Operating Expenses.

The budget also calls for $2.29 billion in Economic Support Funds; $495 million for Assistance for Eastern Europe and the Baltics; and $755 million for Assistance for the Independent States of the Former Soviet Union. We co-manage these funds with the State Department. In addition, the budget calls for USAID to manage $1.185 billion in PL 480 Title II Funds.

In a speech at the World Bank last July, President Bush cited three great goals necessary to build a better world:

-First, "America and her friends and allies must pursue policies to keep the peace and promote prosperity."

-Second, we must "ignite a new era of global economic growth through a world trading system that is dramatically more open and more free."

-And third we need "to work in true partnership with developing countries to remove huge obstacles to development; to help them fight illiteracy, disease, unsustainable debt."

The tragic events of September 11 and the ensuing war on terrorism have obviously had an impact on our plans and budget. This is only natural. We have fully supported the President's efforts in Afghanistan and the surrounding region. For example; we have led the international community by providing considerably more emergency food supplies to the Afghan people than any other nation. And now that the worst of the fighting has ended, we are starting to help the country rebuild its agriculture, schools, communities and institutions.

Despite these events, our basic mission has not changed, and we continue to look to the President's three goals for guidance.

If anything, the events since September 11 have reinforced the need for a vigorous, innovative, cost-effective approach to foreign assistance and international development. This is the best way that USAID can serve our nation's interests, fight the foes of freedom, and address the many problems of poverty, disease, corruption, and weak or dictatorial government.

As Secretary Powell said earlier this month, "over the past year... the broader tapestry of our foreign policy has become clear: to encourage the spread of democracy and market economies and to bring more nations to the understanding that the power of the individual is the power that counts."

Even before September 11, the forces of globalism and its many manifestations, both good and bad, had caused USAID to refocus its programs and priorities. As a result, we are reforming our management practices and put new emphasis on encouraging trade and free markets, improving agricultural practices, managing conflict, fighting corruption and illiteracy, promoting education, and stemming the spread of HIV/AIDS and other infectious diseases.

At the same time, we continue to maintain a strong focus on:

-Fighting hunger and poverty through agricultural development;

-Promoting democracy, good governance, and the rule of law;

-Improving health, particularly for women and children;

-Responding quickly to international disasters and delivering humanitarian assistance; and

-Promoting sustainable management of the world's natural resources.

We are also encouraging market-oriented policies in Eastern Europe, helping African nations join the World Trade Organization, financing job creation in rural Central America to help stem illegal immigration to the United States, and funding research that will increase food production in Africa.

To build a strong foundation for sustained economic growth, developing countries need peace and security, good governance, and educated, healthy workers. Where these conditions exist, countries like Thailand, and many in Latin America and Central and Eastern Europe have made substantial progress, and we are proud of having helped them.

Other countries - from Jordan and Morocco to Mozambique and the countries of Central America and the Caribbean -- are emerging from the problems of their past. While each case is different, we intend to provide sustained support for countries where progress is possible, nurturing our relationships and monitoring our programs for effectiveness.

Unfortunately, there is a third category of countries, where there is little we can do until their governments change their policies and practices. Until then, our programs with them will be limited to emergency humanitarian or transition assistance.

Our budget request for FY '03 addresses each of these fundamental issues of development in considerable detail. For the purposes of this discussion, let me highlight a few of our most important priorities.

Fighting HIV/AIDS: The HIV/AIDS pandemic is devastating much of Africa, particularly in the south. In some countries, more than 30 percent of the population is infected. As the disease affects young adults in particular, countries are losing their most educated and skilled workers. Business, government, and agriculture have all been hurt. Millions of children have lost their parents, and millions more will probably do so, if present trends continue. As the pandemic grows and spreads, the economic, social and political consequences are almost beyond reckoning.

HIV/AIDS is already escalating dramatically elsewhere, particularly among prostitutes and intravenous drug users. Russia and India, to name to of the more worrisome cases, have both seen alarming increases in prevalence in just the past two years.

In response to these challenges, USAID's budget for bilateral HIV/AIDS has increased dramatically since Fiscal Year 1999. We hope to build on this, increasing our funding from $435 million in FY '02 to $540 million in FY '03. With these resources, we are now able to increase the number of our HIV/AIDS priority countries from 17 to 23, expand our regional programs to focus on "hot spots," improve our monitoring and reporting system, create a central Condum Fund and allocate more program money directly to the field, where it matters most. Overall, USAID will work in approximately 50 countries.

USAID is the lead agency in the U.S. Government's international fight against HIV/AIDS. When our resources are combined with the international health programs supported by the National Institutes of Health and the Centers for Disease Control and Prevention, our overall government funding for HIV/AIDS will be over $1.1 billion for FY '03.

Promoting Trade and Investment: The growth of international trade and investment has produced great gains in income and employment over the past generation. Many developing countries, however, have not capitalized on this, and few have seen tangible benefits from the era of global commerce. Capital flows freely in this global era, but it will only do so when the proper business environment is present. For this reason, USAID is increasingly focussing on improving countries' ability to participate in the international trading system and helping them reform their commercial laws and practices so that they can attract domestic and international investment.

For FY '03, we intend to build on these programs, improve local business environments, train farmers, government and business leaders, and continue our highly successful microenterprise programs.

Supporting Education and Attacking Illiteracy: Basic education provides children and young adults the skills they need to help themselves, their families and their communities. Despite the clear importance of education to development, over 110 million primary-school-age children in developing countries remain out of school. More than 60% of them are girls.

Our budget request includes a substantial increase in funding for basic education programs, from $102 million in Development Assistance in FY2001 to $165 million in FY 2003. This reflects our commitment to education and builds on the significant increase in international education funding that Congress voted for FY '02. The new request will help fund our new Centers for Excellence teacher training programs in the Caribbean, launch an important new multi-year basic education program in Pakistan and start rebuilding Afghanistan's shattered school system, among many other things.

Incidentally, school starts in Afghanistan next month, schools where the Taliban had prevented girls from attending and women from teaching. That has changed, and I am proud that one of USAID's quick impact programs is supplying almost 10 million textbooks - a country-wide curriculum for grades 1-12 -- to help the country's schools get started.

Mitigating Conflict: Corruption, religious and ethnic extremism and irresponsible governments have combined to make the past decade one of the bloodiest in memory. Clearly, it is in no nation's interest to see this trend continue.

Wherever the United States has been involved militarily in recent years, USAID has played a major role in the rebuilding and reconciliation process. This is never an easy task. Infrastructure can be rebuilt, but people are another matter. It takes time for the wounds of war to heal. Some institutions need to be rebuilt; others must be started up from scratch. There are immense issues of justice that must eventually be faced, but in the meantime, people must eat and work and learn to live with one another.

We have learned some important lessons in this field. One of them is the need to coordinate our humanitarian programs more closely with military programs, so that when the fighting ends, we can move more effectively from humanitarian relief to rule of law, democracy, and economic growth projects. Under our new conflict management initiative, approximately $50 million in FY '03 funds will be devoted to putting this new strategy into effect and fulfilling our other conflict management initiatives. Ultimately, we want to focus our assistance to problem countries more effectively so that their capacity for self-government and peaceful conflict resolution are strengthened.

Regional Initiatives

Stabilizing Front Line States of Central and South Asia. Even before September 11th , a broad consensus had emerged that U.S. re-engagement in South Asia was necessary to improve the region's social and economic conditions, and reduce the risk of regional and global instability. This process is now well under way.

Last month, I visited Afghanistan again, where I was proud to announce that USAID is reopening the mission we were forced to close in 1979. This follows directly on Secretary Powell's announcement that we are reopening our mission in Pakistan, which had been closed for nearly a decade.

These two missions will play a major role in our efforts to the respond to pressing needs of the Afghan and Pakistani people. As elsewhere in South Asia, our focus will be on basic education, health, agriculture, rural development, and good governance programs. And we will continue to give special emphasis to improving the status of women.

We have been present in the Central Asian Republics since shortly after the collapse of the Soviet Union. But clearly, the events of the past few months suggest that our relations with those nations are in the process of change. USAID's budget request reflects this, and we are asking, therefore, for increased funding for our infectious disease, conflict mitigation, economic reform, and democracy programs.

African Initiatives: USAID is requesting increases in funding to pursue four African initiatives in FY' 03. Each will expand upon programs managed by our field missions.

-The first is in agriculture. A large percentage of Africa's population depends on agriculture and livestock for their livelihood. And yet one-third of the people go to bed hungry. Given the impact of HIV/AIDS on agriculture in certain regions, the situation may well get worse. Indeed, it is estimated that by 2015, Africa will account for 73% of the world's undernourished, if present trends continue.

But there is hope. Research suggests that investments in agriculture have a stronger impact on poverty than in any other sector. Consequently, we are asking for an additional $27 million, of which $20 million will be devoted to cutting hunger in half by the year 2015. This will be done in conjunction with the Partnership to Cut Hunger and Poverty in Africa. This initiative will target seven to nine countries where we can have the most impact and concentrate our initial efforts on training and new technology.

-Our second African initiative is in trade, where we are asking for $15 million in the coming Fiscal Year to help African countries take full advantage of the African Growth and Opportunity Act (AGOA). This means helping businesses export and understand the global trading system and encouraging governments to revise their commercial laws and policies.

-Our third African initiative is in education, where we are asking for $22 million for FY '03. This initiative has four components: providing scholarships so that children, especially girls, can attend school; helping schools use information and communications technology; training new teachers, in part to compensate for those who have contracted HIV/AIDS; and helping communities establish and maintain their own schools, when the government is no position to help. This latter policy, by the way, has proven highly successful in countries like Mali.

-And fourth is our African anti-corruption initiative for which we are asking $7.5 million in the coming fiscal year. Our objective here is to improve transparency and accountability and thereby help overcome the endemic corruption that contributes to instability and holds back economic progress in the region.

Central America: Given the importance of Mexico and Central America to our economy and the well-being of our hemisphere, we are planning a new initiative for Mexico and Central America in FY '03 that we call the Partnership for Prosperity. This is a new kind of initiative, one that seeks to create alliances between our own border states and the countries of the region and that works in conjunction with the American Hispanic community, businesses, international financial institutions and foundations.

This initiative will serve several purposes, in addition to building an alliance whose resources and capabilities go far beyond any single organization. One of the most important is to build upon the excellent relations between Presidents Bush and Fox and engage the Mexican government on trade, environment, health, safety and immigration issues. The initiative also seeks to further the Summit of the Americas goals in democracy, development, and trade. Among the issues this $30 million initiative will focus on directly are illegal immigration, the severe decline in coffee prices, the drought that is affecting many parts of the region, and the growing incidence of malnutrition there and in parts of Guatemala.

Andean Regional Initiative: Now in its second year, the Andean Regional Initiative (ARI) is a 7-country regional initiative that is, in some ways, the successor of Plan Colombia. While Colombia remains the most important aspect of the ARI, the country's direct neighbors -- Bolivia, Brazil, Ecuador, Panama, Peru and Venezuela - are included in it, too. For FY '03, the USAID- administered portion of the ARI request from all accounts will total $428 million, $151 million of which is destined for Colombia.

While the fight against narcotics trafficking is the central focus of the ARI, each country has different needs and thus a different program mix. In Colombia, for example, our economic growth and infrastructure projects are designed to encourage people to stop growing drugs and find decent alternatives. We are also devoting considerable resources to rule of law and human rights programs as well supporting many who have been displaced by the fighting and instability.

Changing to Meet the Challenge - Management and Organization

Helping people amidst the considerable complexity of the developing world requires a transparent, agile, and skillful organization, and one that has adequate safeguards for employees, many of whom work in difficult if not dangerous circumstances.

But we are also focused on performance and we are working to improve in every aspect of our work. To this purpose, I have made performance-based management a fundamental priority of our agency, for we recognize our obligations to the Administration, the Congress and the taxpayers to spend our money wisely.

Reforming USAID's business systems is one of the most important keys to improving our performance. For that reason, we have established a Business Transformation Executive Committee (BTEC), based on best commercial management practices, to oversee our management initiatives and investments. The BTEC is chaired by USAID's Deputy Administrator and comprised of senior executives from each of our bureaus. Its goal is to set an aggressive pace in developing plans to overhaul and modernize the agency's core business systems.

In the area of Financial Management, USAID plans to enhance the core accounting system, installed last year in Washington, to provide more accurate and timely financial information, and improve accountability and regulatory compliance. In FY'01, we were able for the first time in five years to produce an audited financial statement. Our work in FY '03 will build on this and support expansion of our accounting system overseas.

In Human Resources Management, we will expand the agency's talent pool by expanding recruitment of junior-level Foreign Service professionals and focusing on key skill areas in the Civil Service, such as procurement and information technology. We will also use recruitment and retention incentives to increase and stabilize on-board staff levels.

In Information Technology, we will improve our systems security in order to reduce the likelihood of unauthorized access. Upgrades in IT software and hardware will support the expansion of the Phoenix Accounting System overseas and ensure that the benefits of e-government reach all parts of the agency.

In procurement, in addition to the new, automated contract writing system we implemented last year, we are preparing a competition plan to facilitate outsourcing of selected functions currently carried out by USAID staff. Procurement training for both USAID employees and partner organizations will be expanded to improve the quality and consistency of our procurements.

In Strategic Budgeting, we have consolidated the budgeting function into the Policy and Program Coordination Bureau to link resources more closely with policy priorities.

In the area of performance measurement and reporting, we are streamlining, simplifying, and improving our annual reporting process beginning with our field missions and operating units through to our Agency-level reporting. The result will be an improved ability to collect and report on performance and relate it to budget requests and future allocations.

Agency Reorganization: As part of the management reforms that I discussed at length with this Subcommittee last May, we have reorganized our internal structure, creating three technical pillar bureaus. These are:

-The Bureau for Economic Growth, Agriculture and Trade allows us to concentrate our programs on the economic issues of globalization, trade capacity building, and agriculture. The bureau also has central responsibility for our environmental protection, women in development, and education programs.

-The Bureau for Global Health gives greater focus to evolving health issues, especially HIV/AIDS and other infectious diseases. This bureau will be our technical leader for all of our traditional health, nutrition and family planning programs including those

that address maternal and child health and infectious diseases.

-The Bureau for Democracy, Conflict and Humanitarian Assistance allows us to maintain our focus on democracy, while tightening the links between these related issues, as the number of collapsed states, violent internal conflicts and complex humanitarian emergencies grows. Our current conflict prevention task force, which leads the conflict prevention, management and resolution initiative announced last year, will be folded into this bureau later this year.

At the same time, we have also initiated a new business model, called the Global Development Alliance (GDA). When USAID was founded 40 years ago, Official Development Assistance (ODA) comprised 70% of all U.S. financial flows (foundation grants, university programs, diaspora remittances, and private capital) to developing countries. Today, they comprise 20%. This means that we have had to change, as well. With the formation of the GDA last year, we have now begun that process.

The GDA should improve our effectiveness, through better and increased collaboration with private sector, government, and non- governmental organization (NGO) partners. It signals a new era of cooperation where we work together to get projects accomplished on a larger scale than USAID could do with only its own resources.

You will note that this budget requests a streamlining and simplification of the rather complex 150 account. This merges Development Assistance with Child Survival and Health into one unified account. Let me emphasize that this does not imply any decrease in interest or funding for our global health programs. Indeed, we will continue to report on our Child Survival and Health programs as part of our Global Health pillar.

In conclusion, Mr. Chairman, I would like to assure the Congress that USAID's budget request for Fiscal Year 2003 rests on a solid foundation of professional analysis and a strong commitment to performance and management reform. We know it is impossible to satisfy everyone who looks to us or to address every problem that arises. We have spent many hours trying to determine the best use for our resources and have had to make many painful choices. I hope my remarks today have been helpful in explaining our priorities.



LOAD-DATE: February 27, 2002