Washington - As the State Department undertakes a reform of its foreign assistance process and as foreign assistance programs undergo a leadership change, the Senate Subcommittee on International Development and Foreign Assistance, Economic Affairs, and International Environmental Protection today examined U.S. foreign assistance. U.S. Senator Robert Menendez (D-NJ), chairman of the subcommittee, lead the proceedings questioning Henrietta Fore, President Bush's nominee to be USAID Administrator.

"Let me be clear: if USAID and State simply move full speed ahead with this reform process, and make only minor changes around the edges, then the Administration will have serious problems with Congress," said Menendez. "I'm not saying that we may not actually agree with the way this Administration wants to run this reform process. In fact, we may agree in many areas, but I am officially putting the Administration on notice that you simply cannot go forward with this process in the non-transparent, top-down way it was handled in the past."

Menendez discussed various issues surrounding U.S. foreign assistance, including the recent power shifts from USAID to the State Department and the Department of Defense, problems with the Millennium Challenge Corporation, and the proposed idea of a cabinet level position to head development programs.

Chairman Menendez's opening statement as prepared for delivery:

A Time for Change


Secretary Fore, the foreign assistance reform process has been in place a little over a year. But, I believe this new foreign assistance process is seriously flawed and may be in serious trouble.

That is where you come in. You have just been nominated for this job and made both acting USAID Administrator and Director of U.S. foreign assistance. You have the ability to reassess the situation, to bring a new perspective, and, if confirmed, to make real change.

Secretary Fore, you have the opportunity today to come before this committee and tell us what you believe needs to be done to fix the foreign assistance reform process, or, as it is often called, the "F" process. You have the opportunity to start fresh, with USAID employees, with State Department, with the NGO community, and with Members of Congress.

Let me be clear: if USAID and State simply move full speed ahead with this reform process, and make only minor changes around the edges, then the Administration will have serious problems with Congress.

I'm not saying that we may not actually agree with the way this Administration wants to run this reform process. In fact, we may agree in many areas, but I am officially putting the Administration on notice that you simply cannot go forward with this process in the non-transparent, top-down way it was handled in the past.

I believe, and I certainly hope, that the foreign assistance reform process was started with the best of intentions. Clearly, we needed more transparency in our work. We needed to know exactly how we were spending our money, and on what. We needed to eliminate overlap between programs in different areas. We needed cohesion and coherence.

And I commend everyone who has worked so hard to create this new transparency and to force disparate parts of the U.S. government to work together.

Problems with Foreign Assistance Reform

But, after the first year of reform, I have serious questions about both the design and implementation of the reform. Let's look at the problems we face now:

The foreign aid reform process was carried out in an exclusive, secretive manner. People refer to the F process as a black box without any real input or consultation, except for post-facto briefings, with Congress, with the NGO community, or others inside the government.

The process was top-down and excluded valuable input from the people in the field who know the most about what is happening on the ground.

The foreign assistance reform was supposed to coordinate all of US foreign assistance, but left the Millennium Challenge Account and President's Emergency Plan for AIDS Relief (PEPFAR), among others, out of the F umbrella.

USAID is in the process of being decimated as its funding, role, and mission are reduced

As a result, USAID faces serious moral problems and questions about its future.

The promise the Administration made on MCC was false. MCC is not additive and instead is appears to be taking funds away from USAID and core development.

The Administration's decision to shift funds from the traditional core development assistance account into an account with much more flexibility raises serious concerns and has, thus far, been rejected by the House appropriators.

I would like to address a few of these issues now and then discuss specific items in more detail during the question period. I understand that the Administration has carried out an after-action review and I look forward to hearing how you plan to take those results and make significant changes.

Decimation of USAID

I am deeply concerned that by moving decision making power from USAID to the State department, the Administration is continuing the decimation of USAID that started with the creation of the Millennium Challenge Corporation and may end with the new development attaches you may be creating. I, for one, do not intend to preside over the slow death of USAID.

Let me be clear, USAID is not a perfect agency, and I am not against reform. But I am against taking money, power, control, and expertise away from the one agency inside the U.S. government that was designed with development, and fighting poverty around the world, as its core mission.

Let me remind everyone - our foreign policy agenda is not identical, and should not be identical, to our development agenda.

Development should not be about the short-term strategic goals that State Department must often be focused on. Development is about long-term goals that don't always coincide with who we are friends with at the moment. For example, we're not giving $3 billion to Pakistan over a 5 year period because Pakistan is the country most in need of development assistance. No, we're providing those funds because this Administration sees Pakistan as a key ally that is helping with central foreign policy goals like stopping the war on terror. And we all know and understand that.

I am also deeply concerned about whether the F process is really focusing on poverty alleviation. I know that the Administration included the goal of reducing widespread poverty into the foreign assistant framework only after the persistent insistence of the NGO community and Members of Congress. I believe that reducing poverty should have been at the center of any foreign assistance reform from the beginning. And, as we move forward, I expect to see poverty alleviation front and center in the on-the-ground implementation of reform.

Just as I will not stand by and watch the decimation of USAID, I will not stand by and watch our core development agenda, and our poverty alleviation agenda, be swallowed by immediate foreign policy needs.

ESF to DA

That is why so many people are concerned about the decision to shift money from the development assistance account to the economic support fund account. This is not about semantics, or a name change. ESF funds were designed to be used in our national interests, to help our friends for strategic purposes, and to provide economic assistance. Let me quote from the language that authorized ESF, "The Congress recognizes that, under special economic, political, or security conditions, the national interests of the United States may require economic support for countries or in amount which could not be solely justified [for standard development purposes]." These funds have always been a strategic fund used by State and the Secretary of State.

Meanwhile, our development assistance accounts have been used to fund true development, for the purpose of development itself. I see no reason to change that system. And I am deeply concerned that the Administration's decision to move these funds isn't simply about matching accounts to countries needs, but is designed to subsume development goals into short-term foreign policy goals.

And I find the results of the shift in these funds disturbing.

In the FY08 budget, the Administration proposed shifting funds from the development assistance account to the ESF account. In addition to cutting the development assistance funding by 31% and shifting those funds to ESF, the budget also cuts total Child Survival and Health by 9 percent, International Disaster and Famine Assistance by 18 percent while increasing funding to the MCC, counter-narcotics and law enforcement, among others. And while I certainly support significant increases in good governance, rule of law, and counter-terrorism, I don't believe that justifies the proposed cuts in the Administration's FY08 budget to human rights, maternal and child health, family planning/reproductive health, agriculture, and environment.

DOD and Foreign Aid

I am also disturbed by the recent trend with the Department of Defense stepping into role that USAID or the State Department has traditionally performed. DOD's disastrous record in Iraq reconstruction certainly speaks for itself. DOD's role has dramatically increased. In 2001, DOD had just 7 percent of total disbursements of development assistance. In 2006, DOD took 20 percent.

And there are serous risks with DOD continuing to take on these tasks. As Gordon Adams said during a Senate budget Committee hearing on Iraq, "the more we ask DOD and the military to do, the more they become responsible for our overseas relationships. The more we expand DOD authorities, and underfund State and USAID for such activities, the less State and USAID have the credibility and retain the competence to carry out policy leadership and program administration in these areas. This trend risks becoming a self-fulfilling prophecy."

Conclusion- The Future of Foreign Aid Reform

I have just laid out some of the challenges we face as we move forward over the next year and a half.

But I also believe we need to look toward the long-term. In January 2009, we will have a new President. We need to start talking about how we can work with that new President on real, long-term foreign assistance reform. I know that a number of our witnesses will suggest that we create a cabinet level position to head our development programs and I look forward to discussing this idea today.

For right now, however, we have a lot to do between now and January 2009. Secretary Fore, on our second panel we have three very distinguished witnesses who have dedicated countless hours of research and writing to the issue of US Foreign Assistance. They are leaders in the field and I hope you will take their recommendations seriously.

Let me be clear - I expect the Administration to make significant changes in the reform process. I expect the Administration to work with Congress, both authorizers and appropriators. I expect real transparency and inclusion in the process. I expect real change.

And the Administration should expect significant and detailed oversight of foreign assistance reform from this Subcommittee and from Congress.

Thank you. And I now recognize Senator Hagel for any opening statement he may make.

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