*EPF309 06/11/2003
Bush Administration Presses Congress For Foreign Aid Increase
(Lawmakers to begin review of Millennium Challenge Account (MCA) (680)

By Berta Gomez
Washington File Staff Writer

Washington -- The Bush administration is pressing Congress to approve its proposed Millennium Challenge Account (MCA), a program that would significantly increase U.S. foreign aid and make the new funds available to countries that govern justly, invest in their own people and promote economic freedom.

"For the first time, we have the opportunity to articulate and implement a U.S. strategy that clearly and accurately defines our different challenges and matches the right tools to address them," U.S. Agency for International Development (USAID) Administrator Andrew Natsios said in June 11 testimony before a panel of the House of Representatives' Financial Services Committee.

Natsios described the MCA proposal as a "dramatic turning point" that puts into action the lessons learned by USAID and other development organizations over the past 50 years.

"Put simply, economic development assistance in poor countries works best when you are pursuing good policies that are conducive to growth. ... And we know that performance must be measured using rigorous and unbiased indicators," he said.

Natsios was one of three senior Bush administration officials who appeared before the Subcommittee on Domestic and International Monetary Policy, Trade and Technology, one of the congressional panels that will review the MCA legislation as it makes its way to the House and Senate floors.

The administration proposal received warm praise from the subcommittee members, with Republicans in particular voicing support for an aid program that links funding to pro-development practices on the part of recipient governments, as well as to measurable results. "It's a way of sharing the recipe for success and prosperity," New York Republican John Feeney said.

The Bush administration's initial funding request for the MCA is $1,300 million, in the first stage of a ramp-up that will increase to $5,000 million by 2006, Under Secretary of State Alan Larson told the subcommittee. The 2006 figure would be a 50-percent increase in core U.S. development assistance over 2001 levels, and "represents an unprecedented effort to reduce poverty," Larson said.

He added that administration officials deliberately chose to increase MCA funding requests over a period of time "to ensure funds would match but not exceed our ability to use them well."

Larson said that the MCA is part of an overall U.S. effort to address poverty and development that also includes existing programs to provide humanitarian assistance and famine relief, fight HIV/AIDS, build trade capacity, and provide for economic stability and defense of key partners.

In response to lawmakers' questions, Treasury Under Secretary John Taylor made clear that the MCA would not take funds away from U.S. commitments to multilateral institutions such as the World Bank. "President Bush has always made clear that the MCA would be an increase" in U.S. foreign aid spending, he said.

He said the MCA would initially target the world's poorest countries, with the eligibility pool expanding as the program becomes established.

In fiscal year 2004, which begins in October, the 74 countries that are eligible to borrow from the World Bank's International Development Association (IDA) and that have per capita incomes below $1,435 will be considered. In fiscal year 2005 all countries with incomes below $1,435 will be considered -- adding another 13 countries. In fiscal year 2006 all countries with incomes between $1,435 and $2,975 will be eligible to compete as a separate pool. This group currently consists of 29 countries, Taylor said.

As envisioned by administration officials, eligible countries would compete for MCA grants for projects supporting agriculture, education, health, trade, and investment capacity. The agreements would require a contract between the recipient country and the United States that identifies objectives, the responsibilities of the MCA country, and benchmarks to measure progress.

"The success of any foreign aid program requires that we measure results," Taylor said.

The House International Relations Committee was scheduled to begin consideration of a draft MCA bill on June 12.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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