The meeting of the Undersecretaries Economic Policy group on April 11
will take up some of the problems in administering foreign assistance
programs that are of interest to several of the Departments. Background
material for this discussion is provided in the preliminary version of
the Proposed Mutual Defense and Assistance Programs
for FY 1964 (attached). The
basic framework for aid administration is outlined [Typeset Page 1723] in the introductory
section. The Clay Committee report is also attached for reference.
Some possible specific topics for discussion are summarized in the
attached memorandum.
Attachment
April 3,
1963
[Facsimile Page 2]
Some Elements of A.I.D. Programs of Particular
Relevance to the Interdepartmental Committee of Undersecretaries on
Foreign Economic Policy
1. More effective
promotion of U.S. private investment in the less developed
countries
There is general agreement that for many specific purposes private
U.S. investment is the most effective form of assistance, carrying
with it not only capital contributions but also technical assistance
of a highly relevant sort. The importance of foreign investment has
been re-emphasized by the recent Clay Committee report.
The main question has always been one of how to stimulate private
foreign investment more effectively; private investment by its
nature cannot be “programmed.” The A.I.D. investment guarantee
program is making a major contribution. Congress is being requested
to enlarge this program by almost doubling the dollar amount of
guarantees that can be outstanding at one time. In addition, it is
being proposed that the Internal Revenue Code be amended to provide
tax incentives for further investment in less developed countries.
Are there further efforts that could be made by other Departments of
the U.S. Government to contribute to stimulating U.S. private
investment in less developed countries? Other private investment in
these countries?
2. More effective
utilization of all available resources in supplying technical
assistance personnel
Here again the Clay Committee report has highlighted a continuing
problem. The importance of technical assistance is well understood
and generally accepted. The most critical limitation to its
effective use is the availability of highly qualified personnel. A
number of further approaches recently have been and now are being
explored.
The Association of State Universities and Land Grant Colleges
established in November, 1962 an Executive Secretariat and a
supporting committee to work with A.I.D. and the Assistant Secretary
of Agriculture for International Affairs to channel more qualified
agricultural specialists into technical assistance.
Among the sources of personnel utilized in A.I.D. missions during the
past year were the Department of Agriculture, the Bureau of Public
[Typeset Page 1724]
Roads, the Department of the Interior, the Bureau of the Census, the
Public Health Service and the Housing and Home Finance Agency. Under
the Humphrey Amendment to
the Foreign Assistance Act, A.I.D. in 1962 signed interagency
agreements with the Housing and Home Finance Agency and the
Department of Labor under which experts from these agencies might
[Facsimile Page 3] be
loaned to A.I.D. on a reimbursable basis, without break in the
expert’s career record with his agency. An interagency agreement
with the Federal Home Loan Bank Board is expected to be signed early
in 1963 and several other agreements are in preparation.
A.I.D. is presently undertaking a review of its implementation
procedures and, as part of this process, we are examining present
methods for drawing upon outside communities for the skilled people
needed for effective foreign assistance. Increased attention will be
given in the development of our new procedures to facilitating the
use of outside resources. In addition to increased efforts on the
part of A.I.D. this will require efforts by the communities to
organize themselves so that skilled members of their staffs can be
released for foreign assignment on a regular basis without loss of
rights or status. Training programs and staffing patterns will need
to be designed so that people who have a basic understanding of the
relationship of their own profession or discipline to the
development process can become increasingly familiar with and
available for assignments in underdeveloped countries.
3. A.I.D. and Commodity
Trade
A.I.D. relies on PL 480, usually Title I foreign currency sales, to
provide all grain, cotton and edible oil imports needed by
recipients of non-project assistance which can be supplied by the
U.S. This is particularly important in Korea, Taiwan, Vietnam,
India, Pakistan, Egypt, Israel, Turkey, Greece, Tunisia, and Brazil.
Diminution of availability of surplus commodities in these instances
would increase A.I.D. requirements.
A.I.D. will in the future generally finance petroleum fuel and crude
oil, rubber, wool, sugar, tin and other U.S. net imports only on a
basis of release from the stockpile or barter for surplus
agricultural commodities under usual USDA procedures. In this way the burden of the larger
remaining part of A.I.D. offshore procurement on the balance of
payments will be relieved.
A.I.D. encouragement of other exports from less developed countries
through continued procurement on a basis competitive with the U.S.,
but not with the 19 industrial countries, will continue. Close
consultation on this with State/E and other interested agencies is
desirable. We feel it would be very shortsighted to debar
industrializing [Typeset Page 1725] countries from competing for A.I.D. orders at
the same time that we are focussing on increasing their export
potential as a key element in the transition to self-sustaining
growth.
4. How much further
concentration on the best developmental prospects should be
introduced into the foreign assistance program by reductions of
present limited programs?
The foreign assistance program is already a highly concentrated one.
The two largest elements are development lending, including Alliance
for Progress loans, and military assistance. Of development loans,
nearly [Facsimile Page 4]
two-thirds in FY 1964 is expected to
go to six countries that are showing favorable development efforts
and prospects. The increases in the total program proposed for
FY 1964 are almost entirely in
these same programs. (In military assistance, about two-thirds is
planned for the eight major programs to countries on the periphery
of the Communist bloc.)
Further concentration along these lines would be largely at the
expense of the programs designed particularly to achieve short-term
political purposes such as a U.S. presence or some sort of holding
action. Some further concentration is in order, but this is a matter
of degree. This kind of question cannot appropriately be answered
with finality other than on a case-by-case basis. But the general
views of other interested departments on the desirability of a rapid
reduction of assistance programs largely related to short-run
political objectives would be of interest.
5. Should an increasing
portion of the foreign assistance program be through multi-lateral
institutions?
Substantial shifts in this direction were proposed in the Clay
Committee report. Advantages of having some portion of the
assistance program on a multi-lateral basis are clear. On the other
hand, there is a real question of the degree to which specifically
U.S. objectives could be equally well achieved if a larger portion
of assistance were channeled through such institutions as IDA. Another aspect of the same
question is the degree to which the Congress would believe that
larger appropriations for international institutions were in the
U.S. interest.
6. Other donor
countries—the DAC forum
Economic assistance from other developed countries is of large and
growing importance. One issue of major importance is that of
improved terms of aid from the DAC
members. A DAC meeting on this
subject is taking place in Paris at the present time (April 3) the
results of which, if significant, will be discussed with the ICFEP.
