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PUBLIC POLICY UPDATE April 26, 2013 WASHINGTON UPDATE This week, congressional committees continued holding hearings about

the president’s FY2014 budget request. USAID Administrator Rajiv Shah testified before three committees – the House Foreign Affairs fairs Committee, the Senate Foreign Relations Committee, and the House Appropriations Subcommittee on State and Foreign Operations. He outlined the president’s budget priorities and reminded Congress about the importance of investing in development. See below low for our summaries of those hearings. On Monday, the Supreme Court heard oral arguments in the case United States Agency for International Development v. Alliance f for Open Society International (No. 12-10) 10), which considers whether groups receiving federal money to combat AIDS overseas may be required to adopt antiprostitution policies set by the U.S. government. The New York Times covered the case, and several media outlets and commentators argued that that the federal government cannot compel organizations to espouse its views in exchange for federal financing, including the Times and Fox News contributor and former Bush White House Press Secretary Dana Perino. InterAction CEO Sam Worthington has also written a piece in Monthly Developments Magazine that outlines the history of the case and InterAction's position on it. UPCOMING HEARINGS Congress is in recess next week. On Tuesday, May 7, the Senate Foreign Relations Committee will hold a hearing to consider the nominations of Jame James s Knight to be the Ambassador to the Republic of Chad and Deborah Kay Jones to be the Ambassador to Libya. HEARING SUMMARIES 1. House Committee on Appropriations – State, Foreign Operations Subcommittee hearing: Budget Hearing – USAID. April 24, 2013. 2. Senate Committee on Foreign Relations hearing: International Development Priorities in the FY2014 Budget. April 24, 2013. 3. House Foreign Affairs Committee hearing: The FY2014 Budget Request: U.S. Foreign Assistance Priorities and Strategy. April 25, 2013.


Budget Hearing – United States Agency for International Development House Committee on Appropriations – State and Foreign Operations Subcommittee April 24, 2013 Witness:  Rajiv Shah, administrator, USAID

Opening Statements: Chairwoman Kay Granger (R-TX)  Remarked about the funds for the subcommittee.  Requested assurance from USAID that government officials will be safe abroad.  Requested more information about food aid reform. o Committee will consider the proposal for food aid reform. o Basic education must be included in international aid. Ranking Member Nita Lowey (D-NY)  USAID has been a pillar of strength because of its people around the world.  The president is committed to eradicating extreme poverty. o The only way to achieve this is through a strong USAID.  Pleased with increase in maternal and child health. o Disappointed with low request for basic education. o Without literary skills there is no way to build countries that can lift themselves out of poverty. o It directly impacts the success of improvements of countries around the world.  Food aid program is important, but Congress should not take away funding from already existing programs because of it.  Reconstruction in Haiti has been too slow.  USAID must continue to focus on the status of women globally. o Gender-based violence, especially in the Middle East and North Africa, must be addressed.  Wants to know the impacts of the budget cuts on USAID programs. Rajiv Shah  After a decade of war, the U.S. needs to focus on development around the world as a part of its national security.  Discussed his recent trip to Somalia. o Children are dying from starvation. o U.S. has been in Somalia trying to end the hunger and has made many gains, showing there is hope in their new model of diplomacy.  Feed the Future Program o Cut funding for many countries to focus on 19 most needy countries. o Have made many gains in these countries.  Partnership to end preventable child death o Had to cut funding for some countries to focus on most needy 24, and it has made a difference. o USAID is looking to expand a similar model to other programs.  USAID has been able to hire more people, thanks to the U.S. government and taxpayers, which has been necessary. 2

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The agency’s work has been made transparent. The budget for this year’s food aid program after the president’s reform should extend to an additional 2-4 million children without additional funds. Thanked USAID staff and recognized those personnel who have died in the field. FY2014 overall budget request is 6 % lower than FY2012 request. o USAID still has big aspirations even with a cut in funding. o Ending extreme hunger and preventable child deaths are at the forefront of their focus. o o

Questions: Chairwoman Kay Granger (R-TX) 1. The administration is focused on increasing the amount of assistance provided directly to governments and local organizations, and has a policy limiting competition to local organizations. How can you justify actively excluding U.S. organizations from competing? How many times were U.S. organizations excluded during the last fiscal year?  Shah: o We look at local solutions because they often cost less and are more sustainable. In the past, we were routinely critiqued for not learning from best practices. o Noncompetitive awards are a very small percentage of our total actions – of 14,000 contract actions, fewer than 0.05% were noncompetitive.  We do about 5,000 assistance grants each year, and 2.3% were noncompetitively awarded – 84 went to U.S. organizations; 34 to local organizations.  Vast majority of our resources and processes for contracts and grant awards are not only open to, but preferentially go to, U.S. partners at a far higher rate. 2. USAID conducts risk assessments. Special Inspector General testified that USAID officials asked him not to provide assessments of Afghanistan to the U.S. government. Will you make those available?  Shah: o USAID has conducted 33 assessments around the world. o In Afghanistan the majority of assistance to the Afghan government goes to a trust fund that is run by the World Bank. o It is transparent. o Those assessments are available to the subcommittee. o USAID provides very little resources to local organizations, only after they have been assessed thoroughly. o Larger scale awards goes to the trust fund for Afghan reconstruction 3. Reforms of food assistance have been considered for years. Why did the administration decide this year to change the system and put forward the reform proposal now?  Shah: o In the most critical areas the flexibility to act differently allows USAID to assist in more dangerous places. o USAID felt that this is the appropriate time. Ranking Member Nita Lowey (D-NY) 1. This administration reprioritized basic education. FY2014 funding for basic education is less than FY2012. Why isn’t the U.S. prioritizing this sector when we know it will be beneficial for the U.S.? Why not put more money through channels like global education? 3

Shah: o Thanked Lowey for making U.S. the biggest supporter for basic education around the world. o USAID has elevated the importance of basic education. o Improving workforce training. o Getting 15 million additional kids in school. o New partnerships have been working on improving education and have been successful o Room to Learn brings together USAID funding in a leveraged way in countries for education. o The budget is not where USAID wants it to be for education. 2. Dissatisfaction in the reconstruction of Haiti. Only 50% of the funds made available for the funds for Haiti have been dispersed. U.S. must move faster. Has the Haitian government taken a leadership role? How are governance changes affecting the development process? What progress has been made in terms of education?  Shah: o There has been significant progress in Haiti.  There have been many resignations, which have raised concerns.  USAID believes there have been significant improvements and reconstruction.  Haiti resignations are troublesome. o Transparency and private investments have been brought to the Haitian government.  Food progress has been up 60% and it drives economic development.  There has been a lot of economic growth. Rep. Mario Diaz-Balart (R-FL) 1. The Syrian conflict has caused many to flee to Jordan. Is the U.S. doing anything to help with refugees in Jordan? What can this committee do to help?  Shah: o In Syria, we are providing almost $400 million in direct support of humanitarian aid. o We have provided $300 million dollars to support the burdens of having so many refugees in Jordan. o USAID has assisted with education in Jordan for refugees o Water supply has been expanded. o Longstanding investments do yield real results in crisis situations. Rep. Henry Cuellar (D-TX) 1. Would it make sense for the U.S. to spend more money in assistance to countries like Mexico? USAID funding for Latin America has been cut. U.S. knows the problems in Mexico.  Shah: o Transforming crime in Mexico would yield tens of millions of dollars for the U.S. o The FY2014 budget proposal for USAID represents a 6% decrease. o In Latin America there has been a 29% increase in funding. o Mexico shows progress when they are willing to work with USAID. Rep. Ander Crenshaw (R-FL) 1. Describe the reforms we have been hearing about and how that would impact U.S. agriculture and shippers.


Shah: o This reform is focused on Food for Peace is implemented by USAID. o It will allow us to have more flexibility in the program. o 55% would be tied to American product and distribution.

Rep. Debbie Wasserman Schultz (D-FL) 1. Pink Ribbon Red Ribbon is a partnership run in conjunction with PEPFAR and various other groups. What progress have you seen in this program since its inception?  Shah: o Pink Ribbon Red Ribbon is a great example of partnerships. o In places like Tanzania, it is greatly expanding access to screening for cancer and intervention. o Global Health has been fortunate to have some of these partnerships. 2. Through the 1,000 Days campaign, USAID emphasized the importance of food with high nutritional value. What are the implications on maternal and child nutrition reform with this campaign?  Shah: o 1,000 Days focuses on child nutrition interventions based on scientific evidence. o Around the world, there are a lot of children whose growth is stunted, leaving a permanent impact on their long-term development. o Food aid reform proposal would make more nutritious foods more available. Rep. Kevin Yoder (R-KS) 1. U.S. food aid changes: What would be the exact impact on American agriculture? Local methods are not necessarily cheaper than American agriculture.  Shah: o Thirteen independent studies have demonstrated how much more efficient it is to grow locally. In terms of reaching beneficiaries with the nutrition they need, they would receive a 50% increase in efficiency. o All major NGOs believe this is the best way to go. Rep. Barbara Lee (D-CA) 1. How many minority contractors is USAID using?  Shah: o USAID will produce that data. 2. Multiyear commitment to the Global Fund to Fight AIDS, Tuberculosis and Malaria – how important is it?  Shah: o We have put forward $1.64 million to the Global Fund. Rep. Adam Schiff (D-CA) 1. In Georgia there is a very impoverished Armenian population. Could you give us a progress report?  Shah: o USAID believes the Armenian community has been great to work with. o No immediate updates yet.


International Development Priorities in the FY2014 Budget Senate Committee on Foreign Relations April 24, 2013 Witness:  Rajiv Shah, administrator, USAID

Opening Statements Chairman Robert Menendez (D-NJ)  Benefits of investments abroad far outweigh the costs.  Hope to hear how we can maximize the effectiveness of aid and reform programs.  We want to ensure all reforms focus on best practices and results.  USAID Forward is an example of a reform that has achieved results. Ranking Member Bob Corker (R-TN)  Hope you will explain why, after so many decades, we are still providing day-to-day assistance and countries don’t have the capacity themselves to do what needs to be done.  Development is taking place in areas that are not secure. We had problems in Iraq, and will have greater problems when people look through what we did in Afghanistan. o We will be dealing with similar issues in Syria. We want to monitor these programs properly.  There is a goal that Latin American countries will graduate by 2013. Hope that there is a plan to make this happen.  Need a permanent Inspector General of USAID. Rajiv Shah  Rethinking how we project power in the world.  Want to elevate development as part of our national security and economic strategy.  Visited Somalia again a few months ago and saw a more hopeful picture, including American investments in a new government and a flourishing civil society.  New approach includes ensuring development builds self-sufficiency and dignity. It is delivering real results. o Feed the Future: We cut agricultural programs in 23 countries in order to focus in 19. In those countries, poverty has been reduced by over 5%. o Ending preventable child deaths: We cut programs in some countries so that we could focus on countries that need it most. o Citizen security efforts.  The president’s FY2014 budget includes a proposal to reform food aid. The president’s proposal should reach 4 million additional children. The approach retains and renews a partnership with the U.S. agricultural industry. Questioning: Chairman Robert Menendez (D-NJ) 1. Are we right-sizing our aid presence in Pakistan and Afghanistan to reflect our security concerns and oversight challenges? What steps are sustainable and achievable?  Shah: o The gains that have resulted have been real: 6

There have been 9% growth rates in the past few years. Eight million kids are now in school and 35% are girls – compared to no girls in school under the Taliban regime.  Launched the A3 initiative, which included a full partner vetting and local cost auditing system. o Some of these efforts will be at risk during the transition. We will be doing it with more local staff and with local protection forces. 2. Do you believe that, in the programs moving forward, you will be able to follow the criteria that the committee set out, particularly sustainability?  Shah: o Yes. We have a Mutual Accountability Framework with the government of Afghanistan requiring them to show real progress, fair and free elections, etc., for pledges to be met. 3. USAID went through a 20-year decline in personnel and dispersion of work to other entities, such as the Millennium Challenge Corporation (MCC). How would you assess your agency’s progress in restoring its capacities under USAID Forward? Describe the end goals of these efforts as you move forward.  Shah: o End goal is to be the world’s premier development enterprise. o Focus on public-private partnerships has been unique and effective. o Have been able to rebuild our budget authority and policy work, and have hired staff to support this. The FY2014 budget includes investment in our operating expenses that will allow us to continue rebuilding this agency. Ranking Member Bob Corker (R-TN) 1. What do you plan to do with the Inspector General?  Shah: o The White House is responsible for putting forth a nomination; we expect it to be soon. 2. How did you decide that 55% of emergency food aid will be procured from the U.S.?  Shah: o Over the last few years, the program has only allowed for 15% of procurement flexibility. This year, that flexibility is being absorbed in Syria.  We now have to take children off nutrition support because we are reverting from the locally-procured program to U.S.-based program; 155,000 kids will be subject to that this year in Somalia. 3. Is self-sufficiency your goal over time?  Shah: o Absolutely. Once countries are self-sufficient, they can be trading and commercial partners in the future. 4. Are you going to get it into code, or are you going to do the easy route of talking to an appropriator?  Shah: o Will be happy to work with this committee. 5. What do you think USAID can do to tip the balance more toward the moderate sector opposition groups inside Syria?  Shah: o Secretary Kerry announced a doubling of our aid and assistance to and with the Syrian Opposition Council.

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As part of that commitment to them, we will request that they protect women’s rights and human rights overall; they have made public assurances to do so. o This effort will be a critical part of the Syrian Opposition Council to provide services. A lot of this effort this already taking place. 6. Can you assure us that our delivery methods to Syria and other places with security problems are different?  Shah: o Yes: one example is Afghanistan. We have more than tripled our civilian presence and implemented data and vetting systems. We are now the primary partner of Syrian Opposition Council. o Sen. Ben Cardin (D-MD) 1. Tell us how the reforms you see in Food for Peace work with the other programs, particularly Feed the Future.  Shah: o Feed the Future is intended to be a model program, working in 19 countries that are making their own efforts to move to self-sufficiency by building their agricultural capabilities. The Walmart partnership with Guatemala is a success stories. 2. The Office of Science and Technology requested an additional $85 million in this budget. What would those additional funds be used for if appropriated?  Shah: o Engage American universities and businesses in helping new scientific to breakthroughs. o We created the Higher Education Solutions Network. o American technological breakthroughs have been at the core of many of our biggest development successes around the world. 3. We want to know that significant investment in Syria will get to its intended recipients. Sen. Marco Rubio (R-FL) 1. Concerned about cuts to PEPFAR. What is your take on the impact of this continuing reduction of spending on this program, and what it would mean to undermine the presidents goal of an AIDS-free generation.  Shah: o The U.S. spends more than $8 billion per year on global health, the majority of which is spent on HIV/AIDS. Global health is the largest category of foreign assistance and the largest single item of the 150 account in the federal budget. o The request includes roughly $1.6 billion for the Global Fund to Fight AIDS, Tuberculosis and Malaria, which went through restructuring. It is a mechanism to accelerate other donors’ commitments to this fight. o There are more, not less, resources going to HIV/AIDS in countries where we work. One example is South Africa. o Our goal is to reach 15 billion people globally. 2. So is it fair to say that even though investment in PEPFAR has been eroded, the difference is being made up locally (in countries)?  Shah: o Absolutely. Have met benchmarks earlier than the time indicates.


3. As the U.S. withdraws from Afghanistan, development projects will be impacted. Please talk about the impact of projects we have invested in that we are turning over to Afghan institutions that have little accountability, and more importantly, projects that are not going to be completed or not happen at all because of the security situation.  Shah: o American investment has already allowed tripling of energy access. o Have to work responsibly with Afghan partners. Sen. Tim Kaine (D-VA) 1. The president talked about goal of eradication of extreme poverty in world in two decades in his State of the Union speech. Please discuss hunger and preventable child deaths, as well as the metrics and partnerships that you intend to leverage (NGO and other nations) to meet this goal.  Shah: o It is the first time in human history that this goal is achievable. o The goals of ending hunger and preventing child deaths are where we can make the biggest contributions. Metrics:  Hunger: We can look at number of farm households we reach and agricultural GDP growth. We can correlate these to extreme poverty rates.  Child death and global health: the metric of under-5 child mortality is the core measure of how many children are dying. o Want to expand efforts in energy access, and believe it is possible to double energy access in Africa. o These objectives are only possible with setting big goals and working with other partners. 2. Talk about the leveraging you do with the NGO community and other partners.  Shah: o We have pursued USAID Forward, which allows us to partner with companies around the world. o USAID has been recognized as leading in public-private partnerships. Chairman Robert Menendez (D-NJ) 1. Have you discussed the need to receive credit from the Syrian people about our assistance? About not marking all aid, but still helping Syrians understand we are being supportive? Has there been any talk about changing the current approach (of going through the UN) and possibly filtering the assistance through the opposition?  Shah: o Yes, there have been conversations about that. The $385 million in humanitarian assistance provided by the U.S. goes through the UN, NGOs and private organizations. o On the services side, we are working directly with the Syrian Opposition Council. o Safety and security concerns are very real, as many people have been killed (including UN employees). 2. We have seen a continuing significant decline in our assistance to the Western Hemisphere, particularly Latin American and the Caribbean – concerned about a potential increase in undocumented immigrants because of civil unrest and dire economic circumstances. We should try to create greater economic growth in our own hemisphere, but despite these realities and the movement away from democracy in the region, we 9

continue to cut Western Hemisphere programs. We need to do the right thing now instead of waiting for something huge to happen. How will we use the funding for FY2014, and how to do we create policy reforms that will sustain this going forward?  Shah: o The budget has a 6% reduction. There have been critical areas like Central America Regional Security Initiative (CARSI) (29% increase for that). o Our efforts have delivered real results, for example in Mexico and Peru. o Latin America has been the most successful for public-private partnerships. Ranking Member Bob Corker (R-TN) 1. The move toward self-sufficiency is a good one, but can create political risk and require us to deal with governments involved in corruption. Talk about your concerns and plans to alleviate those. Will you move ahead with this effort if you see countries with corruption? Will you withdraw due to their lack of accountability and responsibility?  Shah: o USAID Forward has been the agency's signature reform effort. o We want to create institutional strength to sustain results after we leave. We have moved more resources to local partners. In all cases, we have conducted country assessments to see if countries have the capacity to be transparent. If they aren’t transparent, we do not partner with them. o Local solutions are different everywhere. 2. Would you consider putting effort into a coordinated trade effort so that we can help leverage self-sufficiency?  Shah: o Absolutely. This will be an increased focus, specifically in Africa, as well as in Jordan, Afghanistan and Haiti.  In Afghanistan, we can help clean up process by which customs are collected to improve revenue collection. We have seen this done in Jordan. o In East Africa, we are expanding the focus on regional trade. Tanzania has forgone export bans on agriculture. Sen. Bob Casey (D-PA) 1. Food aid reform would allow us to reach an additional 2-4 million people with the same funds. How do you ensure that the potential recipients of this aid get the nutritious foods they need even if they can’t be bought in local markets?  Shah: o Local and regional procurement has been recorded in a database and shows that we can use such tools as local foods, new food formulations and vouchers that empower people in settings where we can’t physically reach them for security reasons.  When we buy food locally, it has the same brand value as anything else. Each packet is labeled as “American.” Evidence strongly indicates that this kind of flexibility will achieve the 4 million additional children. 2. How will you make sure food aid gets to civilians in areas controlled by the Syrian government, or refugees in places like Turkey?  Shah: o $4 million in humanitarian support has already been provided. We are providing food and clean water inside of Syria. 10



We are providing aid through a range of partners. We have provided direct support to Jordan to help them absorb 42,000 children who are joining the public schools. Access inside Syria is the biggest challenge. Secretary Kerry noted an additional $250 million commitment to the Syrian Opposition Council this weekend. The Syrian opposition has worked with us to make commitments to respect women’s rights, gender considerations, and promote openness in their approach to governance.

Sen. Marco Rubio (R-FL) 1. Cuban democracy programs have taken a disproportionate (25%) cut over the past few years. Cuba hates democracy programs and our colleagues held this program up with endless questions about it. It is important we be clear this money will be spent on democracy, not on grassroots movements, etc. 2. I believe in foreign aid. It gives us influence, allows us to impact events around the world, and is an important tool in furthering our national interest. I am concerned about Egypt. Our foreign aid should be conditioned on our national interest and values, particularly in supporting governments in their economic programs. It’s not a charity. It’s not paying tribute to another government. What are your thoughts on what we can do to ensure our foreign aid is an incentive for governments to move their societies in a direction that is good for them and more importantly good for us?  Shah: o We would be eager to work with you to articulate forms of conditionality. o Egypt is a good example. We have focused on a handful of issues and have conditioned particular efforts. We’ve focused on youth employment, leading to 7.9 million loans to small-scale businesses that create jobs for youth. We’ve focused on women and minorities as well by ensuring space remains open for civil society organizations. Sen. Chris Coons (D-DE) 1. How can African trade hubs be expanded to create more interregional trade? How can we create more trade in Africa?  Shah: o Trade hubs in West Africa, Southern Africa, and Eastern Africa have improved in interregional trade. o Core ways the trade hubs can be improved (currently pursuing these) are tying these closely to agricultural programs and trade efforts, linking these to efforts to fight corruption, and tying them to efforts to expand access to energy. 2. Discuss reforms to Food for Peace programs included in Senate version of last year’s farm bill. What proposals are in the president’s budget, and how do you deal with inefficiencies in programs and protect Americans as well?  Shah: o This budget gives us more flexibility. We have a strong database that shows recipeients of local food assistance have the same appreciation of it as aid coming from the U.S. o Majority of food will still be bought from Americans. o Traditional commodity gifts are less useful. o Pipeline of 10-12 new products and technologies, which will be the future of a science-based food program. 11


Shipping – concentration in this industry. Our use of a few firms. We designed that to be able to ensure that these partners receive support during transition and retain jobs.

Sen. Chris Murphy (D-CT) 1. Disappointed to see new Russian disposition on USAID and American NGOs. What do you see as our future disposition with that nation?  Shah: o We have been focused on maintaining space for civil society organizations. Our ambassador and State Department team in Russia are focused on this element of the partnership with that country. There are a range of mechanisms they can use to continue to provide support through international organizations. o Concerned about continued restrictions of these organizations. o State Department will continue, but USAID will not. 2. Afghanistan has transportation issues that cause difficulty getting products to markets. Talk about this problem and how that gets better or worse as we decrease our military presence in Afghanistan?  Shah: o The central challenge is sustaining the huge gains that have already been made and replacing international aid with private activity and investment. Private investment can’t thrive in an environment that has so many erratic points of engagement. o Have implemented the Tokyo Mutual Accountability Framework. Future aid commitments will be contingent on this. One of these focuses on transportation. o We work with them on trying to implement programs that address these things. o We make sustainable agricultural investments. Sen. Ben Cardin (D-MD) 1. How does your budget compliment the president’s initiative on rebalanced Asia? You opened an office in August of last year in Burma. Can you update us as to the progress being made in that country?  Shah: o The FY2014 request reflects a 7% increase to Asia. o President Obama went to Burma and opened an office and created a partnership while he was there. o Focuses:  Improving the economic climate and supporting public-private partnerships that were recently launched.  Health, education and agriculture.  Peace process and ethnic conflict. 2. PEPFAR accounts for more than half of the U.S. aid programs in Vietnam. The HIV/AIDS rate in Vietnam is less than .05%. Is that the best use of our foreign aid resources?  Shah: o The president’s budget reflects some of those tough tradeoffs. The actual budget committed to that will decrease by 20%. We wanted to increase resources in other areas of investment.



One of the top priorities we do want to capture is Vietnamese participation in the Trans-Pacific Partnership (TPP). Our investment reflects that.

Sen. Tim Kaine (D-VA) 1. Honduras is a democracy today and it’s less safe now than it was before it was a democracy. We pulled the Peace Corps out of Honduras because it has the highest murder rate in the world. U.S. demand for drugs is a huge part of the security situation. China is rebalancing toward the Americas. They see it as an opportunity area. This is an area we need to be very concerned about.  Shah: o We have worked hard to have a dramatic investment in the CARSI program and to enhance public-private partnerships, specifically for El Salvador, Guatemala and Honduras. o There is a close tie between what happens in this country and citizen security in that region. The number one constraint to growth is citizen security. o We have attempted to do this in a coordinated way with the military. Chairman Robert Menendez (D-NJ) 1. On CARSI, what are you going to use the additional 2014 funding for? What are we doing about helping or engaging the Central American governments in their fiscal and policy forms that are necessary to sustain the results of USAID programs?  Shah: o Our funding goes to specific elements of CARSI. Some of the things we’ve supported include mapping and community crime prevention strategies. 2. Are you focusing more on the activities you are already doing or is there something new?  Shah: o The areas we are most effective in are the areas where we will pursue increased resources. Sen. Chris Murphy (D-CT) 1. Talk about the tools at our disposal at USAID over the next few years to help Ukraine make the decision of which way they orient (turning toward the West or East).  Shah: o Have expanded Peace Corps presence and supported governance programming. o Have longstanding relationships with organizations in that community, many of which have matriculated into government. o Traditionally, we’ve had a larger health investment (focus on TB). More recently, we have focused on trying to attract private investment.

The FY2014 Budget Request: U.S. Foreign Assistance Priorities and Strategy House Foreign Affairs Committee April 25, 2013 Witnesses:   Rajiv Shah, administrator, USAID Daniel Yohannes, CEO, Millennium Challenge Corporation (MCC) 13

Opening Statements Chairman Ed Royce (R-CA)  Aid must support our national security, be implemented in a way that breaks cycle of dependency.  This is a challenging time for aid.  MCC was created by former President Bush as way to break with the old way of giving aid, but it’s had challenges, too.  Getting pulled into countries where it doesn’t belong has ruined MCC’s recipe for success.  MCC has gotten countries on the path to graduation from aid; many new initiatives are borrowing from its ideas.  Food aid reform – buying food closer to humanitarian crisis is faster, cheaper, saves more lives: o 25-50% cheaper. o 11-14 weeks faster. o Administration proposal would end monetization, too. Rep. Brad Sherman (D-CA)  Development aid is the “right thing to do … that is reason enough to pay for it.”  It is disturbing that in Syria we’re obscuring the fact that aid comes from U.S.  Will ask witnesses what we’re doing to let recipients know aid from U.S., when we need to obscure.  Food aid – American agriculture is part of coalition supporting this; do we give up their support to become more efficient? Rep. Ami Bera (D-CA)  Food for Peace is a wonderful program, has built goodwill for U.S.  Looks forward to looking at how to make it as efficient as possible. Rep. Chris Smith (R-NJ)  Thanks USAID for emphasis on nutrition for young children.  Data shows first 1,000 days of life “once in a lifetime opportunity for better health.”  UNICEF issued landmark report on child nutrition, called for further action.  This is one of the most important contributions U.S. foreign assistance can make to global health. Rep. David Cicilline (D-RI)  American people benefit when foreign assistance develops a more stable, democratic world.  Opportunity to reinforce our responsibility to make these investments around world. Rajiv Shah  Thanks for continued partnership on foreign assistance.  Drawing down from decade of war; chance to rethink how the U.S. projects its values around world.  Secretary of State Kerry and others have talked repeatedly about elevating development as part of foreign policy.


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Visited Mogadishu, where things are looking more hopeful: replacing piracy, helping people leave IDP and refugee camps to return to communities and agriculture. This path from dependency to self-sufficiency is what aid assistance should be about; believe it’s delivering results. Feed the Future – cut back on investments in 23 countries to focus on 19 – reaching millions of households, reducing extreme poverty. Working with private partners to raise money as well. Shows how modern, results-oriented methods can work. USAID Forward: o Have rebuilt staff – 1,100 new Foreign Service officers hired since his tenure began. o Implemented new evaluation process – can download apps that show how programs work. o Expanded investment in local solutions – less costly, more sustainable way to get results. Food aid reform – can reach additional 4 million children without spending more.

Daniel Yohannes  $898 million request for FY2014 would allow MCC to keep doing its work.  MCC partner countries have sound track records; selective about where MCC invests.  Sign compacts spelling out terms of assistance: o Monitoring and evaluation. o Programs must be completed in five years. o Countries must support democratic values. o Committed to transparency; make findings public.  El Salvador – dairy farmers doubled their income there.  Ghana has seen great improvement, too.  Even when findings about MCC compacts are not good, it helps us learn.  Five newly eligible countries are home to 100 million of world’s poorest people: o These countries have taken concrete steps to reform, improve government to qualify for MCC compact. o This is the “MCC effect.”  MCC effect needs sufficient resources – its impacts are diminished if funding is cut. Questioning: Rep. Ileana Ros-Lehtinen (R-FL) 1. Must be responsible stewards of money. $370 million is recommended in the budget for West Bank/Gaza, but corruption there is rampant. Does the Palestinian Authority (PA) possess internal controls to deliver U.S. aid? How do we know money will not be diverted to Hamas, etc.?  Shah: o Goals in West Bank are about supporting social services, helping peace process. We have been able to supply food, water, core humanitarian priorities. There are strict controls on transfers to PA. 2. Concerned about attempts to cut democracy programs to Cuba.  Shah: o Goals around Cuba are support for civil society/democracy. Believe the president’s budget represents an appropriate investment they have the capacity to implement.


3. MCC – must ensure founding principles are upheld – don’t try to provide “more and more assistance without an end in sight.” Jordan compact ending this year – comment? 4. Concerned about second compact with El Salvador – corruption there is still endemic. MCC should wait till after elections there.  Yohannes: o Will reply in writing to MCC questions. Rep. Brad Sherman (D-CA) 1. How do you coordinate with the State Department to have foreign policy objectives affect what you do?  Shah: o Country assistance strategies developed jointly; define priorities together. o Foreign Assistance Dashboard meets our international transparency commitments. o Have worked “hand-in-glove” on Syria with State Department. 2. What regulation is there for USAID employees in field when they must or must not emphasize whether food aid is coming from the U.S.? This is a great concern in Syria. 3. What’s the difference in cost between U.S. and local sourcing? 4. We’ve provided Pakistan with $2.8 billion since 2009 in nonmilitary assistance – to what degree does Islamabad determine where our aid is focused? Does USAID or the Pakistani government pick projects, locations?  Shah: o These are designed together with Pakistan, but we maintain control of projects. o Invested in comprehensive branding strategy throughout the world. o Awareness of U.S. efforts in Pakistan have increased threefold. 5. Administration request cuts in aid to Armenia – we should increase instead. Could cut aid to Azerbaijan, whose threatening to shoot down civilian airport. 6. We provide substantial aid to Georgia. What’s the status of our second compact with them?  Yohannes: o This proposal is going well. It will be submitted to the MCC board this year. Rep. Chris Smith (R-NJ) 1. Antimicrobial resistance is a problem – can you speak about TB? There is a cut of $45 million to TB in budget; hope it can be restored.  Shah: o Focused on multidrug resistant TB. Three different accounts actually support TB; while some has been limited in this account, expanded support in Global Fund to Fight AIDS, Tuberculosis and Malaria, and HIV-related TB. 2. Malaria – disturbing possibility of resistance in Southeast Asia expanding to Africa.  Shah: o Big success story thanks to your leadership – less than $700 million per year has saved 200,000 children per year in Africa. 3. Child survival – can you speak to experiences in India? There are 200 million “missing girls” due to sex-selective abortions. China and India are the worst countries in this respect. This represents gender crimes. It has led to more sex trafficking, especially in these countries.  Shah: o Last year, we pulled together partner countries to end preventable child deaths worldwide – 150 countries are tracking progress, producing report cards on this. We are trying to get as close to zero as possible in two decades. 16


In India, they are tracking data, and reporting on outcomes – these efforts are generating results. It is correlated with sex-selection problem.

Rep. David Cicilline (D-RI) 1. There has been a decline in personnel at USAID the last several years, and ongoing use of contracting has been detrimental to our efforts around the world. What is the end goal? What are things Congress can do to protect the budget and help rebuild USAID’s personnel roster?  Shah: o This is accurate. Staffing at USAID had fallen by 40%. There was lots of contracting with no oversight, often in war zones. o Launched USAID Forward in response to this, to help USAID rebuild. o Have been able to hire 1,100 new officers in my tenure. Cut from 800 to 520 programs to deliver better results. Closed some missions. o Three major components to USAID Forward:  Partnership (to create situation where aid is no longer needed). Released USAID Forward progress report last month – increased local partnerships by 50%.  Innovation.  Delivering real results. Produce reports on Feed the Future, child survival, etc. o Important to be transparent with American people – now they can see results clearly. 2. Progress for equality for women and girls? How is it helping reduce poverty? Want to hear about reducing violence against women? Please give written response. 3. Thank you for compact with Cape Verde – having great success there. Rep. Steve Chabot (R-OH) 1. U.S. is the most generous aid donor country in the world. It is annoying that we have to hide this because we might offend some who hate America. We should trumpet the goodness of American people; if some don’t want it, aid can go to someone else. 2. MCC – this is how all our aid should be modeled. It’s more effective than USAID. Indonesia’s ranking on corruption index fell last year. How has MCC helped fight corruption there? What are challenges?  Yohannes: o Zero tolerance for corruption. All countries selected for MCC passed corruption indicators. 3. USAID requested support for China, but China owns $1.7 trillion of U.S. debt. How do you justify this, given our debt level?  Shah: o No support goes to Chinese government – it’s to help Tibetan communities. 4. Vietnam – did a staff CODEL there last month. Human rights record is poor. $18 million increase requested – how do you justify this?  Shah: o FY2014 request is actually a 12% reduction in our investment there. It’s to support civil society and people with disabilities or HIV/AIDs. Ranking Member Eliot Engel (D-NY) 1. In this difficult fiscal environment, some think foreign assistance is the best place to make cuts. 17

2. Commend the administration for food aid reform proposal. Can Dr. Shah comment on these plans? 3. Global Health – pleased to see increases, especially to PEPFAR. 4. Congress has appropriated unprecedented sums to Palestinians. Needed for humanitarian reasons, but it’s happened during Prime Minister Salam Fayyad’s term with increased transparency. We should urge Abbas to appoint a successor who will continue budget transparency. 5. Support food aid restructuring. Can you elaborate on taxpayer savings? Impact on farming? Has the Department of Defense signaled concerns?  Shah: o Food aid reform is an urgent issue – because of commitment to Syria, other parts of world are suffering because of lack of flexibility, being reverted to Title II program, reducing services. o Need the flexibility that’s embedded in the new proposal. o There will only be a decrease of from 85-55% of U.S. commodities share under the new proposal. o Will help renew partnership between agriculture and humanitarian communities. 6. Agree with Rep. Smith’s comments on TB: we shouldn’t cut funding. Chairman Ed Royce (R-CA) 1. Food aid reform – talked w/former USAID Administrator Andrew Natsios about challenges. He felt both his hands were tied behind his back on food aid and that it often arrives after everyone is dead. “People can’t eat shipping costs,” Natsios said. When it takes months for food to arrive, or selling our food undermines local markets, it gives us pause around how we operate. The administration’s food aid proposal promises to reduce deficit and save lives. Is it true that requirements recently delayed food shipment to Syria?  Shah: o The Syria crisis has precipitated urgency around reform. Had to use limited flexibility around Syria; effective in that context, but can’t then use same flexibility in Somalia, DRC, etc. o Your points are the core rationale for food reform proposal. o Care, World Vision, Catholic Relief Services are great partners, we want to support them someplace like DRC – but with monetization, we lose 50% of value. There is consensus around a data-driven approach here. 2. MCC compact with the Philippines – I appreciate your raising the land seizure issue there. Is the issue of rule of law central to the MCC mission?  Yohannes: o Yes: we have shared concerns with the Philippine government. They’re continuing to fight corruption. Rep. Ami Bera (D-CA) 1. Global Health Initiative, PEPFAR are important; I recognize this as a doctor. Goals of MCC, USAID are to help countries become self-sufficient. 2. Astonished how much food is “lost” in India under current system. Cold storage, lack of infrastructure. Any efforts to address these issues w/Indian government?  Shah: o Obama launched partnership for evergreen revolution with India, partnering along technical lines, rather than U.S. making investments. o Indian government is trying to pass legislation to professionalize the food chain.


Yohannes: o Goal of the MCC is to help communities become self-sufficient. Example: building roads, helps with transporting food. We are seeing results.

Rep. Dana Rohrabacher (R-CA) 1. The U.S. has been expending more money than we have taken in for five years. If this doesn’t stop, we can’t do any of these noble things in future. We need to confront that basic truth, and to ask if it’s “worth the U.S. borrowing this money from China” in order to give it to someone else. 2. Great that MCC is insisting on changes in status quo. 3. “Developmental aid no longer our responsibility; we can’t afford it.” We should just do emergency humanitarian aid in cases of disaster. 4. We shouldn’t give aid to countries hostile to U.S., or those supporting terrorism. I will offer an amendment to any foreign aid bill on floor saying Pakistan should get no aid until the man who helped track Osama Bin Laden is freed from prison there. 5. Giving aid to China when we’re borrowing from them – are we continuing this?  Shah: o China request is solely for Tibet. Rep. Lois Frankel (D-FL) 1. Foreign aid has good purpose when it is spent correctly. 2. Afghanistan – much aid there has been wasteful, used for bribery, etc. This has made citizens more reliant on the U.S. How do we avoid this waste in future?  Shah: o Yes, foreign aid does much good with 1% of budget. o Afghanistan – there have been great decreases in child deaths, etc. Fighting corruption, sustaining these gains are priorities. If Afghanistan doesn’t meet goals on democracy, women’s rights, etc., the U.S. will pull back our aid – this is accountability. Rep. Ted Poe (R-TX) 1. After sequestration, military tuition aid was cut, but scholarship aid will be given to Pakistani students. We don’t have money to help our military go to school, but we can help Pakistanis?  Shah: o Appreciate your leadership on transparency. o Sequestration has affected U.S. aid as severely as any other part of budget. There has been a $400 million reduction to economic assistance, $70 million cut to food aid, etc. o Would have to get specific answer about Pakistan, but the FY2013 budget was reduced significantly there. This program was probably before FY2013. 2. Last year, I introduced the Foreign Aid Transparency and Accountability Act evaluating aid to see if it’s working. The bill passed the House, didn’t a get Senate vote. Can you weigh in on concept of transparency? Americans want to see if money we send overseas is working.  Shah: o Transparency is essential. There is strong support for this bill. o USAID is leading charge for transparency – for example, the agency is publishing all USAID data to the Foreign Assistance Dashboard and adjusted 50% of programs based on evaluation data. 19

Rep. Brad Schneider (D-IL) 1. With Palestinian Prime Minister Salam Fayyad moving on, what’s our plan?  Shah: o Have lots of confidence in him, but these have been institutional efforts. His replacement must abide by these principles. 2. MCC – emphasis on accountability; what’s been the impact of this emphasis?  Yohannes: o MCC approach is like a business. Once investments made, rigorous monitoring to make sure they’re getting desired results. Thorough impact evaluation. We are seeing what needs to be changed. Rep. Tom Marino (R-PA) 1. Can you explain how you “follow the money” so taxpayers understand?  Shah: o Money given to local entities has gone from 9% to 14%. If assessments show we can’t move forward, we don’t. Countries must implement, invoice programs. o Misperception we give lots of direct investment to Afghanistan, Pakistan. Most Afghanistan aid goes to international development bank.  Yohannes: o No MCC money is given to governments; it goes to vendors. MCC is very careful with American tax dollars. 2. Is it true that you tell countries aid will stop if things don’t improve?  Yohannes: o MCC’s commitments are made for five years. During this time, partner countries are expected to be committed to democratic governance and other criteria. MCC can suspend projects if this is not happening.  Shah: o USAID has increased suspensions, too; focused on accountability. Rep. Ted Deutch (D-FL) 1. Thank you for aid to Syrian people. Concern about extremist organizations growing there; Syrians don’t always feel the U.S. is with them. The U.S. feeds 210,000 people there every day. We should be proud of this. How are we working to strengthen our relationship, enhance our reputation?  Shah: o Worked with the Syrian Opposition Council to highlight efforts. o Trying to avoid attacks on our humanitarian partners. People are being targeted – medical personnel, etc. We are doing all we can in this context. o Additional investment just announced by Secretary Kerry will help. 2. The idea that we can either invest here or abroad is a false choice. The entire foreign aid budget less than 1%. Why does it matter so much for us to be engaged?  Shah: o It’s in our national security interests. Example: Pakistan, Afghanistan, Africa.  Yohannes: o Agree. South Korea, Taiwan, etc., got U.S. aid, and are now major U.S. trading partners. Will be case with other countries we aid now in future.


Rep. Ted Yoho (R-FL) 1. Foreign aid is only 1% of budget. I need to sell this to my district. People are struggling there, and it’s hard to explain $41 million going to Pakistan. Foreign aid policies have been going on for decades. There’s been some improvement, but there’s also been lots that’s gone in the wrong direction. It’s a problem that we don’t want to tell where aid is coming from. Branding should be on all aid we send. What direction do you see U.S. foreign aid going – economic development, or more like welfare?  Shah: o Tough times – the budget is 6% lower. Foreign assistance should be about creating pathways to self-sufficiency. Food aid reform is the best example in the budget. Want to work with you on reform.  Yohannes: o MCC works with poor but well-governed countries who’ve embraced American values. These are future trading partners. Rep. Karen Bass (D-CA) 1. Disagree that we should only use tax money for emergency aid. I see a great future in Africa. Can you talk about Feed the Future, and Africa’s long-term goals? Can you both give examples of how your agencies’ work leads to us not needing to give aid in future?  Shah: o Feed the Future has been implemented in 19 countries. Last year, Obama looked at how to get the private sector involved, got $3.5 billion in agricultural investment from them.  Yohannes: o Investments in Ghana, Benin, Senegal (roads, water, schools, etc.) have been beneficial. Building infrastructure of these countries, helping create good environments for investments, getting them off aid. Rep. Paul Cook (R-CA) 1. Afghanistan – corruption, drugs are a big problem. Can you address the poppy issue?  Shah: o We are trying to establish stability in Afghanistan. Poppy issue is a huge challenge. The core drivers to do this are to make opportunities in a legitimate economy more rewarding. We are investing in agriculture. Rep. Gerry Connolly (D-VA) 1. The Foreign Assistance Act was written in 1961. Goals that were relevant half a century ago are less so today. Assume you’d be amenable to rewrite of Act?  Shah: o Absolutely. Secretary Kerry and I are enthusiastic, and want to work with Congress on that. 2. Are you familiar with Berman bill from previous Congress? Are you committing USAID to working with Congress on reintroducing it?  Shah: o Yes. 3. Good. Want to partner with you on legislative end to help agency move forward. I’m getting ready to reintroduce this bill, and hope to have hearings on some parts of it. 4. Can you explain differences in mission between your agencies, how you coordinate?  Shah:


As Secretary Kerry says, it’s the same mission, to elevate role of development and humanitarian assistance. Need broad range of tools to apply.  Yohannes: o Specific mission, working with countries that have embraced U.S. values – those who want to be the next emerging markets. Scorecard system they have to pass. Working not to duplicate, but to complement each other. 5. Coalition support for foreign aid is fragile. Carefully vet that before moving forward. Need better narrative on success; do you have more to talk about than just Taiwan, South Korea after all these decades? Give us better success stories. We need to be able to point to efficacy. o ARTICLES AND REPORTS New York Times April 22: Justices Weigh Conditions in Awarding U.S. Grants The Court considered whether groups receiving federal money to combat AIDS abroad may be required to adopt policies opposing prostitution. April 22: Free Speech and an Anti-Prostitution Pledge The New York Times’ editorial board argues that the First Amendment should prohibit the federal government from compelling groups to have a policy explicitly opposing prostitution in order to receive federal funding. Fox News April 22: The Supreme Court, the 'anti-prostitution pledge' and free speech The author argues that “No group, whether it's Republican, Democratic, religious, libertarian, or independent should have to adopt the government’s ideology as a condition of accepting federal funds.” Global Post April 24: USAID Administrator testifies on Capitol Hill Shah appeared before the U.S. Senate Committee on Foreign Relations to address the agency’s priorities in the 2014 fiscal year. Devex April 25: USAID chief defends budget in Congress USAID Administrator Shah defended plans set out in President Obama’s budget to cut the U.S. foreign aid budget by 6 percent. Appearing before Congress, Shah said proposed food aid reform would provide greater flexibility and efficiency in the agency’s overall activities.
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