A later memorandum will come to you by November 30 about organizational
issues.
My own views are not recorded in the memorandum. I favor Strategy #1,
focusing concessional development aid on helping poor people in poor
countries, while using Supporting Security Assistance and such
non-concessional aid as World Bank loans to help middle-income countries;
and I favor the moderate funding option, a one-third overall increase in
concessional assistance by FY 1982. I would
make implementation of whatever decision you reach about aid funding
conditional on your being satisfied that needed improvements in aid
effectiveness have been achieved. This is at least as important as funding
levels.2
If you are pressed for time, it is not necessary to read the tabs. You may,
however, want to look at Cy’s memo at Tab F, commenting on the future of US
foreign assistance.
Attachment
Memorandum for President Carter
3
Washington, November 9, 1977
CONCESSIONAL ECONOMIC ASSISTANCE OPTIONS
This memorandum is to secure your guidance on US concessional economic
assistance strategy and longer-term (FY
1982) funding goals.
[Page 868]
That guidance will provide the basis for Executive Office review of 1979
aid budget requests and for the planning of later aid programs.
This memorandum draws on studies of alternative strategies, funding
levels, and organizational arrangements prepared by the Development
Coordination Committee and the Brookings Institution. Summaries of these
studies are at Annexes A and B. This memorandum deals only with
concessional assistance. It does not deal with the capital replenishment
of the World Bank and other hard lending agencies—a replenishment which,
although largely without impact on federal outlays, will require
substantial appropriations under present Congressional procedures. Nor
does it deal with military assistance.
I. Introduction
In the last twenty-five years, considerable progress has been made by the
developing countries. With substantial external assistance, many of
these countries have achieved sufficient growth so that they no longer
fall into the category of poor countries as defined by the World Bank,
i.e., countries with less than $520 per capita annual income in 1975
dollars. These middle-income developing countries, most of which are in
Latin America and East Asia, can now rely mainly on export earnings,
hard loans from the World Bank and other private and public lending
institutions, and private investment. Their growth rates do not depend
on further large-scale concessional aid.
Nonetheless, over a billion people in the developing world still live in
degrading poverty. Many of them are in the middle-income countries;
these countries often lack the technical expertise and resources, and
more importantly the political will, to improve the lot of their poor.
Most of the world’s poor, however, are in poor countries—largely in
South Asia and Africa. US policy should seek to help these countries
achieve faster growth with equity, so that their peoples can overcome
poverty and so that their governments can reduce their reliance on
concessional aid. In addition to the strong moral and humanitarian
considerations involved, we have a powerful interest in helping to bring
about the increased food output and the reduction in rates of population
growth that would attend more rapid growth in the developing world.
The main prerequisite to achieving these goals, apart from open markets
and expanding economies in the industrial countries, is more effective
domestic policies in the LDCs. Although external resources are only a
small part of the total resources available to LDCs, they can be
important in bringing about needed policy reforms. To secure these
external resources, the poorer LDCs need increased concessional aid;
they cannot rely wholly on export proceeds.
[Page 869]
The United States currently provides only about 30% of total OECD Official Development Assistance. The
poor countries’ needs for increased concessional aid must thus be met by
increased contributions from all donor countries. The US role will be
critical in determining whether such an aid effort is forthcoming.
Although other countries’ aid as a share of GNP is greater than ours and has been rising, while ours
has been declining as a percentage of GNP, we are still the largest single donor, and other
countries look to us for leadership.
Concessional aid is only one of several means by which the industrial
countries assist progress in the developing world. A total policy
response to economic development must include such other actions as
trade and commodity policy, which are not treated in this paper. But
bilateral and multilateral concessional aid is an essential element in
the mix.
Two contradictory trends bear on the future of concessional
assistance:
—US interdependence with the developing world is increasing. An
improvement in the economic welfare of LDCs benefits the United States,
both economically and politically. Higher LDC production of food, energy, and raw materials would
serve US interests—as would the decline in the rate of population growth
that would likely result from higher LDC levels of health and education.
—The difficulties of securing foreign assistance appropriations from the
Congress remain; they will grow if aid requests are increased.4 Widespread public support for aid is lacking. In
part, these difficulties reflect criticism of the effectiveness of
bilateral assistance. In part, they reflect Congressional concern over
lack of US control over multilateral aid.
These facts underline both the importance and the difficulty of securing
the increased US assistance pledged at the Downing Street Summit5 and
elsewhere. They point up the need for measures to improve the
effectiveness of our bilateral aid programs, if enlarged resources are
to be secured. They also point up the need for having a clear foreign
assistance strategy and for explaining to the Congress and the American
people the link between that strategy and our domestic and international
interests.
Against this background, three questions need to be addressed in
determining the optimum role of US economic aid to developing
nations:
[Page 870]
—What aid strategy will best achieve US objectives?
—What FY 1982 funding levels should be
envisaged as goals?
—What are the organizational prerequisites for an effective aid
program?
This memorandum addresses the first two questions. A separate report
about organizational issues will be forwarded to you by the end of
November. Decisions on the questions raised in this memorandum need not
wait on that report.
II. Present Programs
Bilateral concessional economic assistance is
immediately responsive to Presidential decisions and permits
concentration on geographic and functional areas of importance to the
United States. It has three major components:
—The development assistance program of AID, which has been running about $1 billion annually,
concentrates around 80% of its resources on meeting basic human needs of
the poor in poor countries. The rest goes for similar programs in
middle-income countries, largely in Latin America. There is a heavy
functional concentration (90% of the total program) on agriculture,
health, population, and education—by Congressional mandate.
—PL–480 food aid, which has been running at almost $1.5 billion annually,
provides food to foreign countries in the form of grants or concessional
loans. About 70% of PL–480’s total
dollar resources is allocated to poor countries for humanitarian relief,
economic development, balance of payments support, and support of US
political objectives; the rest goes to such middle-income or affluent
countries as Portugal, Korea, and Israel. The selection of recipients
among middle-income countries has been heavily influenced by foreign
policy considerations. The size of PL–480 is partly determined by domestic agricultural conditions
and objectives; these have sometimes led to its being used in ways that
reduce incentives for food production abroad. USDA has announced its
intention to place less emphasis on domestic-oriented goals in planning
future PL–480 programs.
—Security Supporting Assistance (SSA),
which has been running about $2 billion annually, is given for political
reasons and is heavily concentrated in the Middle East, particularly
Israel and Egypt. The funding levels requested for SSA have tended to vary from year to year,
depending on political events. Its size is determined by the executive
branch independently of the levels requested for development assistance;
there is a potential trade-off in the Congress between SSA and development aid, however, since
both are appropriated in the same bill.
Other components of US bilateral concessional assistance run to around
$200 million annually and include the Congressionally funded
[Page 871]
Inter-American Foundation, and
private voluntary organizations, which draw on official as well as
private funds. Such organizations have had considerable success in
reaching poor people directly through grass roots activities.
A table showing major recipients of AID
funds and PL–480 over the last several
years is attached as Annex C.6
Multilateral concessional assistance has two
major components:
—The roughly $1 billion that the US contributes annually provides about
30% of the resources of soft-loan windows of international financial
lending institutions, of which the largest is the International
Development Association (IDA). These
institutions’ aid is provided on concessional terms to poor countries.
(The middle-income countries receive loans on non-concessional terms
from the hard-loan windows of international financial institutions; the
FY 1978 US foreign aid appropriation
includes about $1 billion for callable capital for this purpose.)
—The roughly $200 million that the US contributes annually to development
programs of the United Nations is directed to all developing member
countries, both middle-income and poor.
III. Effectiveness
Measuring the relationship between aid inputs and project outputs is
complicated. Some progress has been made, however, in answering the
basic question of what does and does not work in respect of individual development projects.
Measuring the impact of aid on overall development
programs is more difficult. As noted earlier, economic growth
and social progress are determined mainly by each receiving country’s
own resources and policies. Since concessional assistance usually
provides only a small part of these resources, its impact hinges on
encouraging the receiving countries to adopt improved policies. This
leverage will vary according to the size of the recipient economy and
its need for external resources. The potential for influence is thus
greater in poor than in middle-income countries, and in small than in
large countries.
Trying to estimate this critical link between aid flows and policy
reforms is difficult—not only because it requires sorting out the impact
of concessional aid from other social and economic variables, but also
because it must be attempted with inadequate data and relatively weak
analytic tools. To overcome these constraints and build solid
assessments of aid impact will take time. A few generalizations can be
made, however, about the economic effectiveness of present programs.
[Page 872]
The international financing institutions’ soft windows are generally well
managed and have a reputation for apolitical professionalism. Our
contributions to these institutions evoke larger total contributions
from other countries. The fact that these institutions are international
and disburse large resources enhances their influence on the receiving
countries’ economic policies.7
Bilateral aid has had substantial successes, e.g., in Korea and Taiwan.
These successes took place at a time when the US provided large
resources and the receiving countries needed and welcomed US advice.
Neither condition now obtains in the same degree. The opportunities for
exerting policy leverage through US bilateral assistance programs thus
hinge on an increase in its scale and a close linkage between that aid
and the policies of the international lending agencies. US willingness
to exert bilateral pressure for economic reform and the recipient
country’s ability to yield to such pressure are now sharply
constrained.
Measuring the effectiveness of US aid in promoting political objectives depends on the specific objectives
involved. If aid is given as part of a base rights negotiation, its
effectiveness can be judged by whether we do or don’t get the base, and
at what price. But the effectiveness of aid in advancing more general
objectives, such as peace in the Middle East, is more difficult to
appraise: No one can be sure whether that peace would be further removed
if we had given less aid. The effectiveness of aid in promoting good
relations with the receiving country is even more difficult to assess.
The United States probably gets more political credit from recipients
for bilateral than for multilateral aid. But it is hard to define
whether, and if so how, this credit gets translated into policies of
benefit to the US. Countries’ gratitude tends to be short-lived.8 Providing aid for generalized
political purposes is partly an act of faith—or of fear that things
would be even worse without aid.
IV. Strategies
Although the funding levels discussed later in this paper treat both
bilateral and multilateral aid, the strategies presented below focus
largely on bilateral US assistance, since US influence over the policies
of international financial institutions is limited. The question of how
best to use this influence is being examined in a separate study of
multilateral aid strategies and funding levels being conducted by the
Treasury Department, in close consultation with the Congress.
[Page 873]
All the strategies described below have four things in common:
—All would continue Security Supporting Assistance,9 as a means of
providing concessional aid to advance our political purposes.
—All would continue, in varying degree, the US policy of using bilateral
development aid and PL–480 aid to serve
basic human needs of the poor abroad.10 This means a focus on improving the lives of poor
people and helping them to gain access to such amenities as adequate
food and nutrition, health and family planning services, shelter, and
basic education. (The definition of aid for basic human needs
recommended by the PRC is given at
Annex D.)11
—All would have the US take account of the human rights performance of
countries in allocating aid.12
—All would emphasize global problems—food, population, health, and
education13—in some
degree. This emphasis could be harder to come by under a strategy that
stressed political purposes than under one that stressed helping poor
people. If the attack on global hunger was given greater emphasis as a
rationale for increased aid, we would probably elicit increased support
among the American people.
Strategy #1 would limit bilateral development
assistance to meeting the basic human needs of poor people in poor
countries (defined as those meeting the IDA eligibility of $520 or less in 1975 dollars),14 on the grounds that they need it and have no
other recourse. The proportion of PL–480
going to poor countries would rise. Bilateral development assistance and
PL–480 would be heavily concentrated
in Africa and South Asia; bilateral development aid to governments in
Latin America and the Near East would be limited to a few poor
countries. Allocation of concessional development aid among IDA eligibles would be determined
principally by the receiving country’s economic performance and
commitment to helping its poor.
Concessional aid to middle-income LDCs would be gradually phased down;
concessional aid to these countries in support of technological
collaboration (increased US support of research, development, and
training on problems of special concern to LDCs) would continue, as it
would under the other strategies discussed in this report. SSA and
[Page 874]
hard loans from international financial
institutions would continue to be used to meet other needs for aid to
middle-income countries, e.g., discouraging emigration to the US and
encouraging regional collaboration in the Caribbean.
Because the poor countries have a limited capacity to design and
implement projects, this strategy would allow only moderate increases in
AID funding levels, unless we
either moved toward a broader interpretation of current Congressional
mandates regarding the kinds of projects that can be aided or resumed
substantial aid to India. If these changes were made, this strategy
would probably result in more aid going to poor countries than any
other; as a result, US influence in seeking to improve these countries’
policies would probably be greater than under any other, and there would
probably be more progress toward meeting basic human needs in poor
countries than under other strategies.15 Important segments of the Congress, which
have been pressing for elimination of bilateral development assistance
to middle-income countries, would react favorably to the greater
emphasis on poor countries. So would many poor developing countries;
middle-income countries might well take a different view. There might be
some Congressional objection to the broader interpretation of current
Congressional mandates, which would allow AID to finance infrastructure programs in support of human
needs.
Strategy #2 would provide concessional assistance
(both bilateral development assistance and PL–480) to meet the basic human needs of poor people,
primarily in low-income countries, which would continue to receive top
priority, but also in middle-income countries if enough aid were
available.16
The dominant factor in allocating aid among countries would be where it
would do the most good to help poor people; any aid to governments of
middle-income countries would thus depend on the recipient’s commitment
to helping its poor.17
Like strategy #1, this strategy would allow a sharp sectoral focus.
In granting concessional loans to middle-income countries under this
strategy, our terms would be stiffer and we would expect the recipients
to contribute more of their own resources than low-income countries.
Because our aid would represent a smaller part of the total resources
available to middle-income countries, it would probably
[Page 875]
provide less leverage18 on the receiving countries’ overall policies than it would in poor countries.
It might have a catalytic effect, however, in stimulating middle-income
countries to carry out specific programs or
projects to help their poor.
Strategy #2 would allow more flexibility19 than strategy #1, since it would permit
more concessional assistance to reach middle-income countries that are
politically important to us and that we may want to see participate in
regional development programs—provided that these
countries are prepared to use US aid to help their poor. Since we cannot
assume that this will always be the case, this strategy would provide
less political flexibility than strategy #3, below.
The Congress might perceive this strategy as a rejection of its clearly
stated preference for concentrating foreign aid in the poorest
countries. If the Congress considered the amount going to middle-income
countries excessive, increased aid appropriations might be jeopardized.
On the other hand, we would still be serving poor people; State and
AID believe there is a good chance
that many Congressional objections could be surmounted.
Strategy #3 would be directed to multiple
purposes, under improved procedures and with differences dictated by
changing circumstances, e.g., a greater emphasis on meeting equity
concerns. This strategy would give the President greater
flexibility20 than strategies #1 or #2 in meeting
political needs. Bilateral development aid and PL–480 aid would be used to promote such foreign policy
purposes as regional cooperation and non-proliferation, even if this
required using aid in ways that were not directed toward helping the
poor.
Thus, although most bilateral development aid and most PL–480 would continue to go to helping meet
the basic human needs of poor people, more would go to advancing
political or security purposes than under strategies #1 or #2. Larger
amounts of bilateral development aid and of PL–480 would be directed to key developing countries,
regions, or problems of importance to the United States, regardless of
the recipients’ level of development, and their commitment to helping
the poor. SSA would probably be a
larger part of total concessional aid than under strategies #1 or
#2.
To the extent that this strategy emphasized political purposes, it would
evoke stronger Congressional criticism from supporters of development
aid than strategies #1 or #2. It would probably be supported by those
who view aid primarily as a foreign policy, rather than a developmental,
tool, on the other hand.
[Page 876]
Underlying the choice among these strategies are two key issues: What
should be the relative emphasis in allocating concessional aid between
poor and middle-income countries; and what should be the relative
emphasis between development/humanitarian and political purposes? The
temptation is to say that we should do all of these things: provide all
the aid that is needed for all countries and all purposes. This will be
possible if we can secure all the aid funds needed to these ends. But if
aid funds are limited, and if the limit does not vary greatly as between
strategies, hard choices will have to be faced. In this event, more aid
for middle-income countries will mean less aid for poor countries, and
more aid for political purposes will mean less aid for development
needs. The selection of a clear strategy should assist us not only in
resolving these choices but also in effectively managing our programs
and in presenting them to the Congress and to the public.
V. Long-Term (FY 1982) Funding Goals
US concessional aid totaled about $5 billion in FY 1977 and nearly $6 billion in FY 1978. The breakdown follows:
Concessional Development Assistance
(Commitments in $
billions)
|
FY 1977 |
FY 1978 |
|
Bilateral
|
|
|
| Security Supporting Assistance |
1.8 |
2.221
|
|
AID development programs |
1.1 |
1.2 |
|
PL–480 food aid |
1.2 |
1.4 |
| Other |
.2 |
.2 |
| Subtotal |
4.3 |
5.0 |
|
Multilateral
|
|
|
| Contributions to multilateral soft lending |
.7 |
1.022
|
| Voluntary contributions to UN
development-oriented programs |
.2 |
.2 |
| Subtotal |
.9 |
1.2 |
|
Total
|
5.2 |
6.2 |
These totals overstate the amount of aid allocated to development
purposes. Some bilateral development aid, a good part of PL–480, and most SSA responds to political objectives.
[Page 877]
Three broad options for the levels of US concessional assistance to be
achieved by 1982 are discussed below, two of them involving a real
increase in aid.23 The mix of
programs mentioned under each of these illustrative options is only one
of a number that might be appropriate at each funding level.24 Your selection among
these options will provide guidance for internal executive branch
planning, but not for submission of future aid projections to the
Congress at this stage.
1. Continue Present Aid Levels in Real Terms.
Total FY 1982 concessional assistance
(including SSA) would rise in current
dollars to about $7.5 billion.25 In constant dollars it would remain the
same as in FY 1978, i.e., about $6
billion. Unless there were a marked shift from bilateral to multilateral
aid, this would require us to refuse the increase in the size of the
soft-loan windows of the multilateral banks that their presidents are
likely to propose. If SSA were held
constant in nominal terms, however, this option would permit a modest
increase in US bilateral concessional development assistance. Aid levels
would decline as a proportion of GNP.
Other donor countries’ aid performance would be adversely affected.
Developing countries’ growth rates would thus be as heavily dependent as
in the past on their internal economic policies and on trends in the
world economy. Relatively rapid growth would probably continue in the
middle-income countries of East Asia and Latin America; there would be
little or no per capita income growth in many poor countries of South
Asia and Africa. US aid performance would be criticized and would have
an adverse impact on US relations with developing countries. This option
would be viewed by many as a violation of our Summit and CIEC pledges by you and Secretary
Vance to increase aid.
2. Moderate Increase in Assistance. Under this
option, FY 1982 concessional development
assistance (including SSA), in FY 1982 dollars, would be over $10
billion.26 In constant 1977 dollars, it would range
around $8 billion, or an increase of about one-third over FY 1978 levels. This could mean:
[Page 878]
—about a 50% increase in real terms over the FY 1978 contributions to the soft-loan windows of the
multilateral banks, which is what the heads of these banks will likely
propose;
—about a 100% increase in real terms in bilateral development aid over
FY 1978 levels;
—SSA remaining about where it is
now;
—a moderate increase in PL–480
sales.27
Assistance at this level, if carefully programmed, might well induce
important policy reforms in some poor countries. In resource terms, it
could have significant impact on LDC
growth rates if it were focused on countries where such reforms were
being undertaken. Under this option, you could more readily carry out
the proposal made to you in a recent report of the National Academy of
Sciences for providing increased support for private and public
agricultural research and development, in the US and the developing
countries,28 and you could provide for increasing technological
collaboration with developing countries in other fields, as well. US aid
as a proportion of GNP would be about
the same as now, given the projected increase in GNP. Other donors would welcome our
absolute aid increase, as would the LDCs. There would, however, continue
to be LDC pressure for US concessions
in other areas. There would be significant Congressional resistance,
mitigated by the fact of the increase being spread over five years; a
large investment of political capital and a close working relation with
the Congress would be required to overcome this resistance.
3. Large Increase in Assistance. Levels of US
concessional assistance (including SSA)
in FY 1982 would go up to around $13
billion in 1982 dollars. In constant 1977 dollars, aid levels would
range around $10 billion. This could mean not only the 50% increase in
multilateral aid described above (which is probably the most that the
donor countries would agree to), but almost a doubling of PL–480 over FY 1978 and a tripling in real terms and quadrupling in
nominal terms of bilateral development assistance. If concentrated in a
relatively small number of countries’ with growth potential, this aid
level might have a significant impact on the recipients’ economic growth
and their progress in meeting basic human needs—although here, too,
policy reforms would be more important than the resource transfer. The
US would be providing about the same proportion of GNP as aid as the other OECD countries. This option would thus
place you in a good position to call for increased international effort
by all countries in attacking such
[Page 879]
global problems as hunger and disease. It would go
a long way toward meeting the developing countries’ aid demands,
although they would still press for initiatives in such other areas as
trade and commodities. Obtaining Congressional support for an increase
of this magnitude would be extremely difficult.
VI. Your Decisions
Your Decision on Strategy for Concessional
Assistance
Strategy #1: Concentrate bilateral concessional
aid on helping poor countries—with SSA,
non-concessional aid, and concessional aid for technological
collaboration going to middle-income countries. (Favored by Treasury,
OMB, and the Brookings study on the
grounds that it would concentrate aid on (i) the people who need it
most, because they live in countries that have less recourse to such
outside resources as World Bank loans than middle-income countries; (ii)
the countries where it could have the most beneficial leverage on the
recipients’ policies, because it will constitute a larger share of the
total resources than it would in middle-income countries.)29
Strategy #2: Concentrate on helping poor people
in poor LDCs with the flexibility to reach poor people in middle-income
nations as well. (Favored by State, AID, and the NSC staff on the
grounds that this strategy might reach the largest number of poor
people, would give the US the opportunity to develop cooperative
relationships with the largest number of LDCs, and would provide
substantial flexibility to meet varied objectives including regional
programs, as in the Caribbean, while allowing us to balance our
interests between poor countries and middle-income countries, as well as
between economic and political purposes, provided
that these purposes could be served by programs that would help the
poor.)30
Strategy #3: Follow multi-purpose strategy, with
substantial attention to the political purposes of bilateral development
aid, on the grounds that this will afford us greater flexibility than
either strategies #1 or #2, since aid would not be limited to helping
poor people. Since this strategy would place more emphasis than
strategies #1 or #2 on political and security factors in programming
bilateral development aid, it would make it easier to use bilateral
development aid to advance such political goals as non-proliferation and
regional collaboration.31
[Page 880]
Your Decision on FY 1982 Concessional Aid Funding Goals
Low Option: Maintain FY 1978 aid levels in real terms.32
Moderate Option: An increase of one-third in
total concessional aid over FY 1978 in
real terms. (Supported by Treasury, the NSC staff, and OMB as the
most appropriate target, in view of likely relevant circumstances at
home and abroad. Supported by State, subject to upward revision if it is
demonstrated that increased aid can be used effectively.)33
High Option: A rough doubling of total
concessional aid over FY 1978, in real
terms. (Supported by AID, which
believes it essential that the President approve a planning figure
consistent with the enormous political and economic stakes that the US
has in the future growth of the developing world. The Brookings study
recommends a large increase in concessional aid, and notes that various
estimates of future aid needs converge around this high option.)34
Whatever your choice among these strategies and funding levels, we face a
difficult task in carrying it out—in making needed improvements in
bilateral development aid, and in selling both bilateral and
multilateral aid to the Congress. But we can address both these tasks
more effectively if we have a clear sense of your long-range goals.35
Tab B
Summary of Interim Report Prepared by the Brookings
Institution37
Brookings Interim Report: An Assessment of Development
Assistance Strategies
Summary
The study is based on the premise that although development must occur
primarily through self-help, increased concessional aid for the poorest
and non-concessional aid for the middle-income countries is needed and
can play an important role in hastening growth with equity. Furthermore,
the continuous development of new knowledge is critical to development
and is a field where the US has a unique capacity, drawing extensively
on the US private sector, to build indigenous LDC capabilities.
In its consideration of the effectiveness of current programs, the report
concludes that most bilateral foreign aid vehicles need substantial
improvement.
1.
AID:
AID has over-narrowly interpreted the
New Directions mandate,38 thereby missing areas
important to development—such as regional development and research.
Managerially, it has been hobbled by unnecessary paperwork, overly
restrictive legislation, and insufficiently qualified personnel.
2.
PL–480: With insufficient
stress on promoting economic development, PL–480 aid has not fulfilled its potential, and has
occasionally acted as a disincentive to LDC agricultural production.
3. Security Supporting Assistance does not go to
the countries that most need development aid, and cannot be readily used
to influence the receiving countries’ economic policies; has little
development impact, and detracts from the amounts otherwise available
for development assistance. Its benefits are largely political.
The report expresses a different view on multilateral assistance: The
International Financial Institutions, particularly the World Bank Group,
have been effective and efficient, have mobilized other donor
[Page 884]
countries’ resources, and have
exerted substantial influence on the receiving countries’ policies.
The Brookings report includes the following recommendations:
1. Program Direction: US development assistance
should focus on meeting basic human needs, by expanding productive
employment, as well as by the direct provision of services and
commodities to the poor. This would entail:
—concentration of bilateral concessional assistance on the poor countries
and the use of concessional aid to support technological collaboration
in the middle-income countries and non-concessional aid to meet their
other needs;
—greater reliance on the recipient country’s responsibility for project
design and administration;
—a larger effort to mobilize the resources of the private sector, in both
the US and developing countries, to promote research, development, and
training on problems of direct concern to developing countries;
—a PL–480 food aid program directed
largely to development and humanitarian goals;
—continued support for expansion of multilateral hard lending to
middle-income countries.
2. Institutional Arrangements: To improve the US
capacity to implement an effective development assistance program:
—AID should be replaced by (i) a
Development Cooperation Agency (DCA) to carry out existing AID functions, whose creation could be the
occasion for needed legislative, procedural, and personnel changes; and
(ii) an International Development Foundation (IDF), guided by a board of
public and private members, to define and support research, development
and training programs on problems of concern to LDCs.
—SSA should be administered by the DCA;
its funds would be appropriated to, and justified to the Congress by,
the State Department.
—A Coordinator for International Development Policy should be appointed
to ensure that the different types of assistance (bilateral development
aid, IFIs, PL–480, etc.) fit together
into a coherent program.
3. Funding Levels
—The Brookings Study presents alternative funding levels. Under the high
option, concessional assistance would double in real terms between 1977
and 1982—from $5.04 billion to $9.9 billion in 1977 dollars. Under the
lower options, FY 1982 aid levels would
be $7.5 and $8.8 billion respectively.
The report suggests only a modest increase in bilateral development
assistance for next year; larger increases would only be requested the
following year, after the proposed changes in aid
procedures and organization had taken effect.
