U.S. plan stiffens requirements for foreign aid

By Christopher Marquis
The New York Times

	Henry Hyde
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WASHINGTON — The United States is plunging into a fundamental overhaul of its assistance to developing nations, demanding that applicants to a new centerpiece program prove their worthiness for financing. The new approach is likely to reroute the flow of aid money.

African countries that respect civil liberties, such as Senegal and Ghana, stand to benefit under the new program, according to budget analysts; the war-ravaged nations of Sudan and Somalia, however, do not.

All but five countries in Latin America are ineligible for the new Millennium Challenge Account because their per capita incomes are too high. At the same time, because of cuts proposed in overall foreign aid to the region, some of these nations, such as El Salvador and the Dominican Republic, could experience cuts of 10 percent in development aid in the fiscal year 2005, which begins Oct. 1.

In the first year, perhaps just 15 nations will win awards, but the Challenge program is ambitious. If it is fully financed by Congress at $5 billion annually by 2008, as President Bush proposes, it would reflect close to a doubling of the U.S. aid that goes primarily to promote development in poor countries. It would represent nearly a 9 percent increase in foreign aid overall.

However, the new account, like a second new program, the president's five-year, $15 billion global effort to fight AIDS, must compete for foreign-aid spending in an environment constrained by tight budgets and unusually heavy outlays on assistance to Iraq and Afghanistan.

Advocates say the Challenge and the AIDS program are prototypes in a broad administration effort to retool the foreign-aid system, which spends nearly $18 billion a year on projects ranging from feeding programs to state-to-state economic support.

Rep. Henry Hyde, R-Ill., chairman of the International Relations Committee and an important backer of the new approach, wants to place a performance-driven Republican imprint on such aid, which, until recently, was denounced by some of his colleagues as "pouring money down a rat hole."

"For too long, U.S. foreign-assistance programs have been adrift without an overall strategy and without reasonable standards of accountability," Hyde said. But some advocates for development and relief agencies accuse the administration of turning its back on some of the neediest countries to pay for the new strategy.

Mary McClymont, the chief executive officer of InterAction, the largest alliance of American-based relief groups and one that includes CARE and Save the Children, said the administration, in its new budget proposal, has cut $400 million from traditional aid and development accounts — including money for child survival and family planning — to defray its new costs.
 
"The administration's budget is robbing Peter to pay Paul," she said. "The Millennium Challenge Account will fund select, top-performing countries. That is good. But what about all the other poorer, weaker countries that could become failed states?"

Administration officials contend they have not raided the budget to pay for the new programs.

Andrew Natsios, administrator of the Agency for International Development, said his budget had nearly doubled, to $14.2 billion, since 2001. However, much of that increase reflects outlays for rebuilding Afghanistan and Iraq.

Natsios said the agency, which became a popular target of cost-cutting Republicans in the 1990s, had found a new purpose in preparing second-tier candidates to qualify for the Millennium Challenge Account.

At the same time, he said, the agency will not abandon its traditional support for failing states, but it will be more realistic in its expectations.

"Anybody who expects us to put Somalia back together again — acting alone — is foolish," he said.

The Bush administration has identified 63 countries that would be eligible to compete for the first round of Millennium Challenge funds because their per capita income levels are below $1,415 and they are not precluded from receiving aid by being on the State Department's list of terrorism sponsors.

To qualify for the funds, countries must demonstrate, in the president's words, that they are "ruling justly, investing in their people, and establishing economic freedom."

The administration will use 16 independent indicators, many of them from outside government, to measure merits of a candidate. For example, a private organization such as Transparency International could rate applicants on corruption; the World Bank Institute, on rule of law; Freedom House, on political rights; and the Heritage Foundation, on trade policy.

"It's pretty rigorous," said Alan Larson, the State Department's top economics official, who is running the account until the president's expected nominee, Paul Applegarth, is confirmed.

Larson noted that the board would use indexes that were publicly available.

Another innovation with the new program is that the United States will not dictate how money is spent.

"This would put the recipient countries much more in the driver's seat," said Steven Radelet, a former Treasury Department official who works at the Center for Global Development. Countries would sign three-year contracts with the United States and the effectiveness of their efforts would be judged by the results.

Some development specialists worry that the process may diminish accountability.

"You're putting a lot of faith in these countries to figure out how to use this money well," said Thomas Carothers, senior associate at the Carnegie Endowment for International Peace.

Some congressional Republicans concede that budget-deficit concerns will probably scale back the Challenge and AIDS initiatives. Some political analysts question whether the U.S. commitment will endure beyond the November elections and the current spending on anti-terrorist strategies.

"It remains to be seen whether this is an innovation that has staying power," said J. Brian Atwood, the Agency for International Development administrator in the Clinton administration.

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