InterAction Board Statement on U.S.

Foreign Assistance Reform

Download the Report: “Seeing the Whole Picture: Building a More Secure World with Effective
Foreign Assistance”

InterAction welcomes Secretary of State Rice’s interest in reforming foreign aid. We share the desire of the
President and Secretary Rice that the U.S. has a coherent, progressive, and effective foreign assistance
program. To this end, we firmly believe that poverty reduction should remain the core element of the U.S.
foreign assistance portfolio. Since World War II, the United States has viewed foreign assistance as an
essential component of our moral responsibilities as a member of the international community. Addressing
the systemic roots of poverty and instability overseas will allow the U.S. to fulfill its obligations as a global
citizen, while advancing prosperity, freedom, and the security of our own people.

We see the reforms proposed by the Secretary as the start of what likely will be a lengthy process that
ultimately will need to involve other elements of the U.S. government, including the White House, Congress,
and additional cabinet departments. While focused primarily on the reforms announced by Secretary Rice,
this statement is intended to encourage and help shape what we hope will become the first major overhaul of
U.S. government foreign aid activities since 1961. InterAction shares the desire of the Secretary and many
others to see the U.S. government adapt its foreign aid programs to meet the priorities of the 21st century.

As the largest alliance of U.S. based non-governmental organizations providing humanitarian and
development assistance overseas, our 165 members have experience working in every developing country, in
many cases for decades. The American people contribute $3 billion annually toward the activities of
InterAction members – a remarkable sign of their interest and support. Many of our members are partners of
the U.S. Agency for International Development or the State Department in the implementation of their
foreign assistance programs.

We appreciate the importance that President Bush and Congress have attached to foreign assistance
programs in recent years. We have welcomed the significant increases in funding of these activities in the past
five years, as well as new initiatives such as the Millennium Challenge Account and the President’s
Emergency Plan for AIDS Relief. We are proud of the leading role the United States government is playing
in responding to humanitarian crises around the world. We are heartened by the significant increase in
funding for Africa, the continent most broadly affected by extreme poverty. We applaud U.S. leadership in
provision of debt relief.

For the past nine years, InterAction has advocated a fresh look at how U.S. foreign aid is being managed and
delivered. InterAction is committed to making U.S. foreign assistance more effective and will support
reforms that we believe can accomplish this goal. We believe the rich experience of our members in
implementing development programs qualifies us collectively to make a well-informed contribution to the
discussion about how our government funds and uses foreign aid to support American national interests.

Poverty reduction should be acknowledged as the primary objective of U.S. foreign assistance.

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The elimination of extreme poverty and fulfillment of the President’s commitment to achievement of the
Millennium Development Goals should be at the heart of U.S. foreign assistance policy. However, poverty
reduction was barely mentioned in the recent announcements regarding transformational diplomacy. The White
House should give its full support to all facets of its proposed foreign aid budget at every stage of the budget
process. Despite the administration’s call for increases in humanitarian and development aid in the FY 2006 budget,
Congress cut these core accounts in the final budget endgame. The just unveiled FY 2007 budget further cuts
humanitarian aid and some core development accounts.

InterAction supports working with our partners in the international community to build and sustain democratic,
well-governed states that will respond to the needs of their people and conduct themselves responsibly in the
international system. Realization of this objective will often require long-term external investments in social sectors.
As the President reminded us in his State of the Union Address, free elections do not by themselves always lead
directly or immediately to policies that promote growth and stability. Most of those countries in Asia and Latin
America that have become stable democracies were nurtured by decades of foreign assistance. South Korea is but
one example. USAID’s recently published Policy Framework for Bilateral Foreign Aid envisions roles for
development assistance in promoting transformational development, strengthening fragile states, and supporting
strategic states—three of the agency’s five core strategic goals for foreign aid.

The need for long-term investment also is evident in the challenge of achieving results for women. Our years
of development programming experience tell us that providing opportunities for girls and women is crucial if
societies are to escape poverty. Furthermore, women are often the voice of change and reform. Yet there has
been little mention in recent pronouncements about the need for more of the educational and employment
programs that have successfully addressed this challenge in countries experiencing real transformation.

With a third of the world’s population still living in extreme poverty, resources to end this situation must be
substantially increased and commitments must be sustained over lengthy timeframes. Moreover, we strongly
urge that development funding be protected from diversion to meet short-term political or military
objectives. Safeguards are needed—especially if one person is going to formulate, justify, and allocate the
resources of both USAID and the State Department.

Beyond the reforms announced by the Secretary of State, further immediate steps could be taken to make U.S.
foreign aid significantly more effective.

Consolidating responsibility for policy, budgets, and implementation of the foreign aid programs undertaken
by the Department of State and USAID should improve coherence in the employment of these resources.
The joint State/USAID staff supporting the new Administrator in his additional role as Director for Foreign
Assistance should give the USAID Administrator the ability to reduce redundancy and cover critical gaps in
the USAID and State Department programs for which he is responsible. However, the new Administrator
will have no formal authority for the conduct of those foreign aid programs beyond his expanded
jurisdiction, including, for example, those of the Millennium Challenge Corporation, the President’s
Emergency Plan for AIDS Relief, or those administered by other cabinet departments, including Agriculture,

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Defense, Health and Human Services, and Treasury. Pending consideration of further consolidation, the
cabinet officers and others responsible for these programs could meet with the President once or twice a year
to review major issues and trends and take steps necessary to limit duplication and close gaps in foreign aid
coverage.

Secretary Rice’s pledge to USAID’s staff that they will remain the primary mechanism for hands-on delivery of
U.S. foreign assistance is reassuring. But we are concerned that the continuing shortfalls in appropriations to
meet USAID’s operating costs are crippling an agency that already has lost much of the technical expertise for
which it once was admired by development professionals around the world. This underfunding of USAID
capacity should be addressed immediately by increasing the agency’s operating budget.

Implementation of U.S. foreign assistance programs should remain under civilian control in all but the most
exceptional cases.

The U.S. military has provided life-saving assistance in recent natural disasters because it had assets not
available from the civilian economy in the required timeframe. We are grateful for this assistance and proud
of the performance of the U.S. military. There may be circumstances when active hostilities in which U.S.
armed forces are involved exclude most civilian relief activities. Under the Geneva Conventions the U.S.
government may actually be obliged to use its military forces to feed and otherwise ensure the welfare of local
people in territory occupied by the American military. But relief activities by the U.S. armed forces in these
exceptional circumstances do not justify the Pentagon’s recently announced plans to engage in stabilization
operations across the spectrum from peace to conflict. The lack of capacity within the U.S. government to
undertake non-combat stabilization operations should be cured by providing civilian departments with the
required additional mandates and resources. The key role assigned to the Secretary of State in stability
operations by National Security Presidential Directive 44 should be reinforced by appropriation of funds
requested by State for the Office of the Coordinator for Rehabilitation and Stabilization.

A bolder approach will better serve American interests.

We reaffirm our agreement that a full-scale reform of U.S. foreign assistance management and programs is
long overdue. The steps currently under consideration can at best result in incremental and partial
improvements in the ability of the government to coordinate its resources to better serve essential U.S.
interests. While the legislative climate may not be propitious for more ambitious proposals at present,
fundamental reform is a long process that merits active consideration now.

The next step in this process could be to add to the portfolio of the Director for Foreign Assistance/USAID
Administrator authority for management of the Millennium Challenge Corporation, the President’s
Emergency Plan for AIDS Relief, and the State Department’s Office for the Coordination of Rehabilitation
and Stabilization. A more ambitious option, or a subsequent phase in an iterative reform agenda, would be to
expand further the responsibilities of the Director/Administrator to include all of the foreign aid programs
run by other cabinet departments and federal agencies. While this further consolidation would promote even

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greater coherence, it could also make foreign assistance accounts more vulnerable to pressure to subordinate
the long-term goal of poverty reduction to shorter-term political and military objectives.

InterAction advocates the eventual establishment of a cabinet level department charged with the mandate of
managing all U.S. foreign aid activities. The fragmentation of authorities and programs that currently has
government agencies sometimes working at cross-purposes to the confusion of our partners and detriment
of effective delivery would be ended. Within the cabinet there would be a leader charged with forewarning
colleagues of the humanitarian consequences of strategic decisions, taking the lead in mobilizing responses to
foreign disasters, and advocating for a budget share for foreign aid consistent with those of other advanced
industrial countries, which have committed themselves to devoting 0.7% of their GDP to official
development assistance. Our partners in the developed and developing world would have a single
authoritative U.S. spokesperson with whom to discuss and negotiate foreign aid issues. As a full cabinet
member, the leader of the foreign aid department would be less vulnerable to pressure to divert funds from
development programs to activities intended only to serve political or military objectives.

Conclusion

In responding to Secretary Rice’s reform initiative with this statement of its appreciation and of its concerns
and recommendations, InterAction looks forward to the continuing engagement of the NGO community in
a national discussion on the future of U.S. foreign assistance.

Download the Report: “Seeing the Whole Picture: Building a More Secure World with Effective
Foreign Assistance”