303. Memorandum From Gerald Kames of the Council on International Economic Policy Staff to the President’s Deputy Assistant for Economic Affairs (Gorog)1

SUBJECT

  • Presidential approval of a number of FY 1978 International Development Assistance Issues

OMB staff informed me that the President made several decisions yesterday on a number of proposals which will affect the FY 1978 budget for international development assistance.2 Following is a very brief rundown on the issues posed and the decisions made (including in a few instances, decisions to defer judgment until this fall’s budget review). We can supply further details if you wish.

1.

Initiatives to be announced during Secretary Kissinger’s trip to Africa and the UNCTAD Conference.

State was anxious to get Presidential approval on three new items in connection with the Secretary’s current trip.3 Concerned with the tight 1978 budget situation, OMB questioned the need to propose additional programs—with or without specific funding commitments—so soon after the many U.S. initiatives proposed at the September 1975 UN Seventh Special Session.

  • International Resources Bank: State proposed, with Treasury and NSC concurrences, the creation of an International Resources Bank—to be presented by Secretary Kissinger in his speech at the UNCTAD (United Nations Committee on Trade and Development) Conference in Nairobi, Kenya, which convenes this week.4 Final details on this proposal are still being worked on in State. However, as it now stands, the Bank would, under World Bank auspices, provide incentives to potential private investors interested in extracting mineral resources (including oil and gas) in the developing countries. The proposal calls for [Page 1040]a total of up to $1 billion in paid-in capital and $5 billion in loan guarantees. It also envisages, in a limited fashion, using some of the fund to finance buffer stocks of certain commodities.

    Originally, State wanted to make a pitch for a large OPEC contribution to the Bank. However, this was dropped in the face of OPEC reluctance to contribute, in amounts desired by the developed countries, to existing international financial institutions. Despite strong OMB opposition, the President agreed to the Bank in principle prior to Secretary Kissinger’s departure for Africa. Last night the President formally approved, but did not agree to Kissinger’s announcing, at this time, any specific U.S. contribution. State had wanted to pledge at Nairobi one-fifth of the total capital—or up to $200 million in paid-in capital and $1 billion in loan guarantees.

  • Sahel Development: State wanted to announce support for a multinational program of development for the Sahelian African countries (Chad, Mali, Mauritania, Niger, Senegal, and Upper Volta), perhaps the world’s poorest area, which suffered extensive damage in the recent great drought there (1967–73). The President approved announcement of this proposal during the Secretary’s trip, but decisions on the actual amounts to be made available by the U.S. (AID proposes up to $100 million in 1978 and up to $200 million in 1979) will be made in the fall budget process.
  • African Development Fund: The President approved an additional $10 million U.S. contribution for the special ("soft loan") fund of the African Development Bank.
2.
Other Multilateral and Bilateral Aid Proposals
  • World Bank Capital Increase: The President approved Secretary Simon’s proposed $1.5 billion subscription to a World Bank selective capital increase for the next three years. Our pledge is expected to be made at today’s meeting of the World Bank’s Board of Directors.
  • Asian Development Bank Capital Increase: The President approved for negotiating purposes a $600–900 million U.S. contribution to an increase in the Asian Development Bank’s Ordinary Capital Resources, which provide loans for the economically stronger Asian LDCs. State, AID, and Treasury wanted up to $135 million of our contribution to be paid-in capital, but the President chose OMB’s option whereby all our contribution would be callable capital, which does not represent a budget increase.
  • AID Bilateral and UN Programs: Because of the May 15 congressional deadline for 1978 authorizing legislation, AID and State submitted proposals for: (a) additional bilateral aid funds of $300 million above the budget planning level (about $1 billion) for 1978 and $500 million above the same planning level for 1979; and (b) additional voluntary UN contributions of $60 million in 1978 and $90 million in [Page 1041]1979. The President accepted OMB’s recommendation to defer until fall the decision on funding levels for these activities. Indefinite authorizing legislation will be transmitted to the Congress for the bilateral aid and UN programs.
  1. Source: Ford Library, L. William Seidman Papers, Box 184, Name Files, Gorog, William, F., 5/1–16/76. Confidential. Copies were sent to several CIEP staff members. William Gorog served as the President’s Deputy Assistant for Economic Affairs from March to November 1976.
  2. The April 22 memorandum from Lynn to President Ford that contains the President’s approval of these decisions is ibid., President’s Handwriting File, Subject File, Box 22, Foreign Affairs—Foreign Aid (7). Background material on the issues is ibid., Foreign Affairs—Foreign Aid (6).
  3. Kissinger traveled to Kenya, Tanzania, Zambia, Zaire, Liberia, Senegal, and Kenya from April 24 to May 6.
  4. See footnote 3, Document 302.