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Issues: U.S. Foreign Assistance: Goals and Challenges

(The following interview with U. S. Agency for International Development (USAID) Administrator J. Brian Atwood is from the United States Information Agency's (USIA) Electronic Journal, "Economic Perspectives," Vol. 1, No. 11, August 1996. The interview was conducted by USIA Economics Writer Warner Rose.)

Question: What does the U.S. government hope to achieve by providing foreign assistance?

Atwood: The purpose of U.S. development cooperation at the end of the 20th century is to try to create a partnership with the foreign government that is the object of the development process. We expect that that government is committed to the political, social, and economic development of its own country, that it is interested in strengthening the institutions that will carry on the development process after the United States has left the scene. We expect that that government will be making its own investments. We expect that it will collaborate with other governments in the areas where the need is the greatest. We set forth certain strategic objectives in each country. We will discuss and even negotiate those strategic objectives with our partners in the country, primarily the government, but also non-governmental organizations. The hope is to strengthen the country's economic system so that economic growth can be achieved and sustained and to strengthen the political system so that it is accountable to the people and is transparent.

Q: What requirements does a country have to meet to merit U.S. development assistance?

Atwood: We look at the question of need -- does this country require grant assistance, as opposed to loans, or can it depend ultimately on private investments? Is this a poor country that really cannot develop on its own? Is this government committed to being a good development partner? Does it really want to reform its economic system, deregulate its economy, create free markets? Does it really want to reform its political system, to allow the people to participate in the development process through democratic institutions? We see these requirements as prerequisites to development.

Q: How do you answer critics who suggest that aid encourages countries to postpone reform, to develop dependencies on foreign assistance?

Atwood: I think that has been a problem in the past. Our aid program during the Cold War created aid dependencies. It flowed to countries that had not made the commitment to reform that we expect today, because it was primarily motivated by political interest in dealing with the Communist threat. That has changed. Today we do not work with governments that are not good development partners. We want these countries to get the message that their own development is not going to succeed unless they reform the way they do business. But if they do not get that message, we can simply no longer afford to work with them.

Q: But doesn't the United States continue to give aid for reasons other than development?

Atwood: Less so than ever before. Clearly, Israel would be an exception. That was basically a political accord -- the Camp David peace accord signed in 1979 in which the United States pledged to support the peace agreement between Israel and Egypt with aid. But our work in Egypt is development work. We would like to see the Egyptian government leaders take stronger steps, as they have indicated recently they would, to reform their economic system and their political system. We're encouraging that process.

And there may be other transitional situations where the prospects for development are not immediate but where we hope we can move beyond the recovery period, to a point where we can work with the new, viable government, in places like Bosnia.

Q: What has the aid given over the decades done to further U.S. trade and investment objectives?

Atwood: In 1995, some $170,000 million in trade and investment went into the developing world. Most of it went into emerging or emerged markets of the developing world. That is the direct benefit of years of investment in development. It helps Americans, it helps the Japanese, it helps the French, it helps the Germans to invest in development over time. We are now seeing the payoff of the development program, built over the last 50 years, which has worked to decrease infant mortality by one half, to increase the average life span of people from 44 to 62, to make people healthier and therefore more productive, and to encourage free market democratic principles.

Q: At least two-thirds of the financial flows to developing countries are private flows. Official flows are down, while private flows have increased. Is there less of a need for official bilateral aid?

Atwood: One of the objectives of the development process is to get countries to the point where they can attract trade and investment. And that is what we've achieved in the last 50 years. Every year there is an increase in the amount of private capital that is going into the developing world. It's going to the countries that have benefited from the development process, countries that are now experiencing economic growth, and that is good.

But "developing world" is a very broad term. Private capital flows are not going to the poorer countries. If you look into the amount of capital going into Africa, for example, it is very low. Or if you look at some parts of Asia, or some Caribbean countries, like Haiti, you're not seeing capital flows going into those countries. So there is still a need for a major investment in development aid. But the most recent Organization for Economic Cooperation and Development figures show a 10 percent drop-off in official aid in 1995 and an 8 percent drop-off in 1994. That is a serious trend. The consequence of countries being left behind, of not being able to compete within a global economy, will be an increase in failed states, an increase in the flow of refugees, an increase in environmental deterioration, and a disruption of the global economy.

Q: What will USAID look like in the future?

Atwood: The U.S. Congress has cut back appropriations for foreign operations nearly across the board, so USAID will be smaller. We will have only 30 full-scale missions, but we will be in some 45 other countries with a limited mission, and we will be working in others from Washington and on a regional basis. When we go to a consultative meeting chaired by the World Bank, we are still the most influential donor, even if we give less money than the other donors, because of our people on the ground and because of their expertise.

Q: What do you see as the objectives of future USAID assistance?

Atwood: We have four development objectives -- promoting democracy, promoting economic growth, stabilizing population and protecting health, and protecting the environment. In addition, we try to save lives through our humanitarian response efforts.

As you apply those development objectives to a particular country, you have to take into consideration the specific development challenge of that country. We do not want to lock ourselves into saying that we are going to pursue only a given one of these objectives. So it depends on the country situation and our analysis of how best to get the development job done. In addition, there will be significantly more and better cooperation among the industrial country donors.

Q: Does the United States still have the capacity to respond to international humanitarian emergencies?

Atwood: The United States has not reduced its budget for responding to humanitarian crises. However, today with food prices rising, we're able to provide less than we have in the past. The big worry is that, with the number of complex emergencies increasing, we will not be able to respond adequately. We're handling two dozen complex emergencies at once now, whereas, in the early 1980s, it was only three or four. As a world, we're spending a lot more money on refugees and emergency food than ever before.

Q: What is USAID doing to promote development in the Newly Independent States and Russia?

Atwood: Institution-building will be a priority for the next five years or so. Many of these countries -- not all -- do not have human-capacity problems. They have well-educated people. They have professional work forces. What they need to do is reorient their political and economic institutions. We're trying to help them transform their societies, to teach them the techniques of market economics, and to teach them the techniques of democratic politics.

Q: Is this working in Russia?

Atwood: Reasonably well. Russia is a very large society, and our aid program is not the reason exclusively for why it is working. We have made a very important contribution because the Russians tend to want to deal with the other superpower. We have had more influence than the resources we have invested would indicate. But there are serious problems. They had a bankrupt society caused by a system that ran contrary to human nature called communism. They need to privatize their economy, they need to learn that the market should set prices and that supply and demand should prevail. One of the legacies of the old system's corruption is that there are people with political and economic power who are exploiting the new system, running around making millions, while others suffer. That is a real challenge for the new Russia. I think it will take another 20 years, but they will eventually become an economic and political superpower.

Q: What are the U.S. aid priorities in Africa?

Atwood: In South Africa, there is an intense three-year, $600 million program, and our efforts there will go on for another decade at least. South Africa is a potentially rich country, but the majority population has been undereducated and impoverished. So we're trying to help the government make a very important transformation there.

We have a Southern Africa initiative, operating from our regional mission in Botswana, that seeks to try to bring all of the countries in the region together. We have important bilateral programs in Mozambique, Namibia, and Zimbabwe. In addition, there is the Southern African Development Community (SADC), and we are trying to work with SADC and with each of the countries on a bilateral basis to see whether we can build an economic marketplace that will eventually benefit other parts of Africa. We have a Greater Horn Initiative, which is in the East Africa region, the poorest part of Africa, designed to ensure food security in this troubled region. We have other programs in West Africa as well. A lot of the strategies in Africa revolve around trying to increase agricultural production. We are trying to encourage trade of agricultural products.

In addition, we have the Leland initiative, which is introducing the Internet to 20 African countries. We believe that is going to give us a major boost in terms of development. We will be able to share information much more cheaply.

Q: What are U.S. priorities in Latin America?

Atwood: We have to deepen the roots of democracy there; they are still fragile. We have benefited greatly by the opening of Latin American countries to democratic practices. The major thrust in that area is to encourage decentralization and local autonomy and to make sure the local governments can function properly and that people can access those governments by various means. Furthermore, investments made in the administration of justice, which deals with the biggest problem that Latin America faces -- corruption -- are showing results. That is a key issue in Latin America.

We are also working on alternative development, so areas that have depended on growing coca, which ended up as cocaine, are now producing other crops. In some cases, these programs are succeeding extraordinarily well, such as in the Chapare of Bolivia, in which 70 percent of the land there is now planted with cash crops other than coca. That's a major improvement, and it took a 10-year investment first to determine what crops would grow and be exported, and then to create a transport system so they could be shipped out. Now it is working, and it is working extraordinarily well.

Q: What about Central America, the recipient of so much aid during the 1980s?

Atwood: We are dealing with fundamental issues that have been at the core of civil unrest in several of these countries for years, issues such as land tenure. USAID has been giving people economic opportunity through micro-enterprise programs, through agricultural cooperatives that enable people to own their own land, and through a cooperative to export their crops like coffee. That has done a lot to bring peace to Central America. There is a long way to go, but it's working.

Q: And in Asia?

Atwood: There are some economies that are doing extraordinarily well but that remain very fragile. Indonesia is an example. It has an 8 percent growth rate, but it is still weak structurally, and we are working very closely with the Indonesian government to make sure that its macroeconomic policy is correct and that it has a stock market that works, that is resistant to corrupt practices.

We're doing the same kind of work in the Philippines, where we have a huge pipeline of projects because of prior investments. We helped construct a major airport in Mindanao. That investment, which was financed mostly by the United States, although others -- such as the Asian Development Bank and the World Bank -- are now coming on board, has really stimulated trade and investment between Malaysia, Indonesia, and that part of the Philippines. Those are major accomplishments. We want to continue to consolidate that and believe that, in doing so, we are also indirectly helping American business interests. Of course, we are also sponsoring significant programs throughout the region to stabilize population growth rates and prevent HIV/AIDS transmission.

Q: In the Middle East, if there is a Golan Heights agreement or an agreement in Lebanon, will the United States begin new aid programs in that region?

Atwood: We have already had a major aid program. The largest one that we've had in the world is in Egypt. We have a smaller one in Jordan and a small non-presence program in Lebanon. We had one in Syria for several years until the government crossed several lines and we had to end it, back in the 1970s.

The major thrust in the Middle East will be to try to use American leadership to encourage integration as much as possible. There are serious development challenges that all of those countries face, for example, the water issue. We need to encourage those governments to look beyond their own borders and to deal with regional issues such as the shortage of water for agricultural production. In addition, we'd like to see them integrating their economies more. There has been some minimal exchange in the case of Israeli investment in Egypt. We would like to encourage a lot more of that.

Q: Do you foresee greater aid requirements in the Middle East?

Atwood: We've already seen some. Since the Palestinians signed the agreement with the Israelis, we have been running about a $75 million-a-year program on the West Bank and Gaza. That's an indication of what is likely to follow if we see peace throughout the region. It is possible at some point that the Israeli government itself will look at the aid it receives from the United States and say "we'd rather see some of this invested in the region." The whole purpose of the aid is to protect Israel in what had been and what still is a hostile region. I think you would see some modification when a comprehensive peace comes to the region. But I don't think that the aid burden is going to lessen for the United States. We have really important interests in that region. And we should maintain those interests through a comprehensive aid program that encourages regional integration.