Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

120. Memorandum From the Administrator of the Agency for International Development (Bell) to President Johnson¹

Washington, April 22, 1966.

SUBJECT

• Recommendation by the President’s General Advisory Committee on Foreign Assistance Programs

At its largest meeting, on Monday and Tuesday of this week,² the General Advisory Committee approved the recommendation in the attached letter, which I am forwarding to you at their request.

Their recommendation is that we urge the Congress to delete an appropriation rider which for the last several years has prevented us from transferring foreign aid funds to the World Bank and its affiliates.

In taking this position, the Committee is supporting a stand we took with the Congress last year, and which I have repeated in testimony before Mr. Passman’s subcommittee this week.³ Mr. Passman is strongly against deleting the rider, however, and we do not yet know how the subcommittee and the full committee will end up. We will keep you informed.

The attached letter is the first formal action by the General Advisory Committee. It reflects the fact that the Committee, which you appointed a year ago (March 26, 1965),⁴ has now acquired considerable knowledge in the foreign aid field and is ready to consider specific policy questions. Earlier this year, the Committee appointed two subcommittees:

• —one headed by David Rockefeller on private enterprise;
• —a second headed by Dwayne Andreas on food and population.

Both these subcommittees are preparing reports on certain matters which will be forwarded to you soon.

At this week’s meeting three more subcommittees were established:

• —one headed by Luther Foster on aid policies in Africa;
• —a second headed by Ed Mason on future requirements for aid;
• —a third headed by Al Gruenther on military assistance.

In my opinion, the General Advisory Committee has the makings of a very strong and useful group. All the members are keenly interested— at this week’s meeting all but two of the 17 members were in attendance. Over the past year, the Committee has held five two-day sessions. In addition, 14 of the members have made visits to a total of 44 countries in which there are aid programs. Deleting duplications, this has meant that one or more members of the Committee have visited no less than 27 of the aid-receiving countries.

Looking ahead, I believe you can expect a growing number of useful suggestions and ideas from this group, and should be able to get from them an increasingly valuable sense of what needs to be done to improve the effectiveness of American assistance around the world. Furthermore, at its meeting this week, the members of the Committee, at the suggestion of David Rockefeller, offered to be of assistance in connection with the Congressional legislation in any way they could.

One problem is always important in the case of such committees of very busy and able individuals—to give them a sense that the time they are putting into their work is really regarded as important by the leaders in the Administration. Over the past year, Bill Gaud and I have been with them at all their meetings, and in addition they have met one or more times with Dean Rusk, Bob McNamara, Orville Freeman, John Gardner, George Woods, Harold Linder, Jack Vaughn, and others. They had hoped to meet with you sometime during their meeting this week, but this could not be arranged.

I know they would very much appreciate having an opportunity to meet briefly with you on the occasion of their next meeting in September or early October, and I strongly recommend you do this.

David E. Bell

Attachment

Washington, April 19, 1966.

Letter From the General Advisory Committee on Foreign Assistance Programs to President Johnson

Dear Mr. President:

The purpose of this letter is to urge Congressional deletion of a statutory prohibition on use of foreign assistance development loan funds for lending to the International Development Association (IDA). We would urge further that early consideration be given to providing development loans to IDA under the authority of Section 205 of the Foreign Assistance Act.⁵

IDA plays an important role in the economic development of many of the poorer countries in the world. IDA provides to these countries development capital at low interest rates and for long terms. However, in order to make a significant contribution to the development of these countries, IDA is in need of substantial increases in its resources.

The United States now contributes $104 million per year to IDA, which sum is 41.4% of the total provided by the developed countries. Mr. George Woods, President of the World Bank and of IDA, has advised this Committee that increasing the U.S. grant contribution beyond 50% could well have an adverse effect upon the international character of IDA.

The General Advisory Committee on Foreign Assistance Programs feels that the best alternative to increasing the U.S. grant contribution would be to make dollar repayable loans to IDA under the authority of the Foreign Assistance Act of 1961, as amended.

This method of increasing IDA resources would have several advantages. As a loan which would have to be repaid, it would not have the adverse effect upon the international character of IDA which might result from a substantial increase in the U.S. grant contribution. Furthermore, it could well serve as a precedent to encourage other advanced nations to make resources available to IDA over and above what they would otherwise be willing to contribute.

Section 205 of the Foreign Assistance Act specifically authorizes the President to make available to IDA up to 15% of the development loan funds appropriated for the purposes of that Act. Section 205 also provides that these funds may be made available without regard to the requirements of the Foreign Assistance Act or of any other Act. This provision would permit loans to be made to IDA on terms softer than those prescribed for development loans, would permit IDA to administer the funds without a requirement for U.S. approval of plans, specifications and contracts, and would not require loans to IDA to be tied. Thus, Section 205 is designed to permit IDA to utilize these funds on a truly multilateral basis.

Unfortunately, it is now impossible to implement Section 205 by lending development loan funds to IDA. The Foreign Assistance and Related Agency Appropriation Act, 1966,⁶ provides that no part of the appropriation for development loans may be used to carry out the provisions of Section 205. The appropriation acts for 1964⁷ and 1965⁸ contained a similar provision. This prohibition was originally inserted by the House Appropriations Committee. The Senate Appropriations Committee deleted the prohibition from the FY 1966 appropriation bill and was upheld on the Senate floor. However, the House prevailed in Conference.

We believe that the prohibition in the Appropriation Act is an unfortunate restriction on the ability of the Executive Branch to participate more fully in the multilateral lending activities of IDA. Therefore, we urge that every effort be made to persuade the House Committee on Appropriations that the prohibition not be re-enacted this year.

Should this move be successful in this regard, this Committee would recommend that development loan funds be made available to IDA at the earliest possible time.

Sincerely yours,

James A. Perkins ⁹
Chairman

1. Source: Washington National Records Center, RG 286, Advisory Committees on Foreign Aid: FRC 73 A 159, Rpt. #1—Re IDA 4/19/67 (GAC Memo 58 4/22), Mr. Bell’s Memo to Pres., 4/22. No classification marking. Transmitted under cover of an April 22 memorandum from C. Tyler Wood to Committee members briefly indicating the contents of the attachments. One attachment, not printed here, is a letter from Senator Jacob Javits (R.-NY) to Bell, April 19, enclosing a copy of his proposed amendment to Section 205 of the pending Foreign Assistance Act of 1966. His amendment provided for an additional $100 million of appropriated funds for FY 1967 to be made available for lending to IDA under specified conditions. Copies were sent to Secretaries Rusk, Fowler, and McNamara, and Walt Rostow.
2. April 18 and 19.
3. Reference is to Bell’s testimony before the Subcommittee on Foreign Operations of the House Appropriations Committee on April 20. See Foreign Assistance and Related Agencies Appropriations for 1967: Hearings Before a Subcommittee of the Committee on Appropriations, House of Representatives, Eighty-ninth Congress, Second Session (Washington, 1966), Part 2, pp. 1–218.
4. Regarding the origins of and other documentation on this Committee, see Documents 32 ff.
5. The Foreign Assistance and Related Agencies Appropriations Act, 1967, approved October 15, 1966 (P.L. 89–691; 80 Stat. 1018), amended the Foreign Assistance Act by dropping the prohibition on the use of Section 205 authority and allowing the transfer of up to 10 percent of Development Loan funds to the World Bank family.
6. P.L. 89–273, approved October 20, 1965. (79 Stat. 1002)
7. P.L. 88–258, approved January 6, 1964. (77 Stat. 857)
8. P.L. 88–634, approved October 7, 1964. (78 Stat. 1015)
9. The names of the 16 Committee members are listed below Perkins’ signature.