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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

                           WORLD BANK AND IMF

                          ACTIVITIES IN AFRICA

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                INTERNATIONAL MONETARY POLICY AND TRADE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 15, 2001

                               __________

                    U.S. GOVERNMENT PRINTING OFFICE
72-576 PS                   WASHINGTON :  2001

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       Printed for the use of the Committee on Financial Services

                           Serial No. 107-15

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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa                 JOHN J. LaFALCE, New York
MARGE ROUKEMA, New Jersey, Vice      BARNEY FRANK, Massachusetts
    Chair                            PAUL E. KANJORSKI, Pennsylvania
DOUG BEREUTER, Nebraska              MAXINE WATERS, California
RICHARD H. BAKER, Louisiana          CAROLYN B. MALONEY, New York
SPENCER BACHUS, Alabama              LUIS V. GUTIERREZ, Illinois
MICHAEL N. CASTLE, Delaware          NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          GARY L. ACKERMAN, New York
FRANK D. LUCAS, Oklahoma             KEN BENTSEN, Texas
ROBERT W. NEY, Ohio                  JAMES H. MALONEY, Connecticut
BOB BARR, Georgia                    DARLENE HOOLEY, Oregon
SUE W. KELLY, New York               JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                MAX SANDLIN, Texas
CHRISTOPHER COX, California          GREGORY W. MEEKS, New York
DAVE WELDON, Florida                 BARBARA LEE, California
JIM RYUN, Kansas                     FRANK MASCARA, Pennsylvania
BOB RILEY, Alabama                   JAY INSLEE, Washington
STEVEN C. LaTOURETTE, Ohio           JANICE D. SCHAKOWSKY, Illinois
DONALD A. MANZULLO, Illinois         DENNIS MOORE, Kansas
WALTER B. JONES, North Carolina      CHARLES A. GONZALEZ, Texas
DOUG OSE, California                 STEPHANIE TUBBS JONES, Ohio
JUDY BIGGERT, Illinois               MICHAEL E. CAPUANO, Massachusetts
MARK GREEN, Wisconsin                HAROLD E. FORD Jr., Tennessee
PATRICK J. TOOMEY, Pennsylvania      RUBEN HINOJOSA, Texas
CHRISTOPHER SHAYS, Connecticut       KEN LUCAS, Kentucky
JOHN B. SHADEGG, Arizona             RONNIE SHOWS, Mississippi
VITO FOSSELLA, New York              JOSEPH CROWLEY, New York
GARY G. MILLER, California           WILLIAM LACY CLAY, Missouri
ERIC CANTOR, Virginia                STEVE ISRAEL, New York
FELIX J. GRUCCI, Jr., New York       MIKE ROSS, Arizona
MELISSA A. HART, Pennsylvania         
SHELLEY MOORE CAPITO, West Virginia  BERNARD SANDERS, Vermont
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
PATRICK J. TIBERI, Ohio

             Terry Haines, Chief Counsel and Staff Director

        Subcommittee on International Monetary Policy and Trade

                   DOUG BEREUTER, Nebraska, Chairman
DOUG OSE, California, Vice Chairman  BERNARD SANDERS, Vermont
MARGE ROUKEMA, New Jersey            MAXINE WATERS, California
RICHARD H. BAKER, Louisiana          BARNEY FRANK, Massachusetts
MICHAEL N. CASTLE, Delaware          MELVIN L. WATT, North Carolina
JIM RYUN, Kansas                     JULIA CARSON, Indiana
DONALD A. MANZULLO, Illinois         BARBARA LEE, California
JUDY BIGGERT, Illinois               PAUL E. KANJORSKI, Pennsylvania
MARK GREEN, Wisconsin                BRAD SHERMAN, California
PATRICK J. TOOMEY, Pennsylvania      JANICE D. SCHAKOWSKY, Illinois
CHRISTOPHER SHAYS, Connecticut       CAROLYN B. MALONEY, New York
GARY G. MILLER, California           LUIS V. GUTIERREZ, Illinois
SHELLEY MOORE CAPITO, West Virginia  KEN BENTSEN, Texas
MIKE FERGUSON, New Jersey

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 15, 2001.................................................     1
Appendix
    May 15, 2001.................................................    51

                               WITNESSES
                         Tuesday, May 15, 2001

Arhin-Tenkorang, Dr. Dyna, Senior Economist, WHO Commission on 
  Macroeconomics and Health......................................    17
Birdsall, Dr. Nancy, Senior Associate, Carnegie Endowment for 
  International Peace............................................    11
Sherry, Dr. James, M.D., Ph.D., Director, Programme Development 
  and 
  Coordination, Joint United Nations Programme on HIV/AIDS.......    13
Spencer, Revd. Dr. Leon P., Executive Director, The Washington 
  Office on Africa...............................................    19
Westin, Susan S., Managing Director, International Affairs and 
  Trade, U.S. General Accounting Office..........................     9

                                APPENDIX

Prepared statements:
    Bereuter, Hon. Doug..........................................    52
    Oxley, Hon. Michael G........................................    59
    Carson, Hon. Julia...........................................    56
    Sanders, Hon. Bernard........................................    60
    Waters, Hon. Maxine..........................................    78
    Arhin-Tenkorang, Dr. Dyna....................................   112
    Birdsall, Dr. Nancy..........................................    90
    Sherry, Dr. James............................................    98
    Spencer, Revd. Dr. Leon P....................................   106
    Westin, Susan S..............................................    79

              Additional Material Submitted for the Record

Bereuter, Hon. Doug:
    Chart: ``How Poor Countries Would Benefit with 100% Debt 
      Cancellation from the World Bank and IMF...................    55
Spencer, Revd. Dr. Leon P.:
    Jubilee USA Network, policy..................................    63

 
                          WORLD BANK AND IMF 
                          ACTIVITIES IN AFRICA

                              ----------                              

                         TUESDAY, MAY 15, 2001,

             U.S. House of Representatives,
            Subcommittee on International Monetary 
                                  Policy and Trade,
                           Committee on Financial Services,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 2:06 p.m., in 
room 2128, Rayburn House Office Building, Hon. Doug Bereuter, 
[chairman of the subcommittee], presiding.
    Present: Chairman Bereuter; Representatives Roukema, Ryun, 
Green, Shays, Capito, Sanders, Watt, Carson, Lee, Sherman, and 
Bentsen.
    Chairman Bereuter. The hearing will come to order.
    The Subcommittee on International Monetary Policy and Trade 
meets today in open session to receive testimony to conduct 
oversight of the World Bank and the International Monetary 
Funds' 
activities in Africa.
    There's much that's going on in Africa now. It's receiving 
some of the attention I think it richly deserves. And this 
subcommittee intends to play a major constructive part in that 
discussion and in proposals that are being put forth. In 
particular today, we are going to focus on poverty alleviation, 
HIV/AIDS, and the debt relief issues in Africa. Today's 
distinguished panel should provide a basis for an objective 
view on the activities of the World Bank and the IMF in Africa.
    This is the second subcommittee hearing on the subject of 
Africa. On April 25, the subcommittee conducted a hearing on 
the African Development Banking Fund, the region's multilateral 
development banks.
    With respect to today's hearing, it's well known that the 
United States was a leading founder and continues to be the 
largest contributor to both the World Bank and the 
International Monetary Fund.
    The Secretary of the Treasury and his representatives are 
responsible for implementing the U.S. policy toward these 
jurisdictions and institutions.
    As required by the fiscal year 1999 Omnibus Appropriation 
Act, Secretary of the Treasury Paul O'Neill will testify before 
the Full House Financial Services Committee on efforts to 
reform 
international financial systems and the international financial 
institutions. And that's on Tuesday, May 22nd.
    Today's hearing should provide valuable information on the 
activities of the World Bank and the IMF in preparation for the 
upcoming Full Committee hearing.
    The United States, with the urging and support of the U.S. 
Congress, has been a key supporter of reform efforts at the 
international financial institutions. Our goals have included 
increasing the transparency of the financial institutions and 
promoting greater financial disclosure by member countries.
    The U.S. has urged that the Bank and the Fund focus on 
crisis prevention and on the importance of developing strong, 
open financial systems with better debt management policies.
    Most relevant to this hearing, this hearing's primary 
topics is the fact that the U.S. has urged the international 
financial institutions to focus their resources for the world's 
poorest countries on key priorities such as education, health 
care, and economic and government reform, insisting that 
poverty reduction and economic growth be the central goals of 
these countries' economic programs.
    Moreover, this hearing on the World Bank/IMF activities in 
Africa is very timely, I think, for at least two different 
reasons.
    First, the Joint World Bank/IMS spring meetings were just 
completed in this city during the weekend of April 28th. At 
these spring meetings, members of the World Bank and the IMF 
emphasized ways to coordinate their activities, effectively 
focus their resources on helping the poorest countries, and 
combat the HIV/AIDS pandemic.
    Second, last week, yes, Friday, President George W. Bush 
pledged an initial $200 million for fiscal year 2002 for a new 
global fund to fight the HIV/AIDS pandemic, which will be 
discussed later.
    Before introducing our very distinguished panel of 
witnesses, I want to briefly mention three recent actions or 
initiatives which, among others, are important to today's 
subcommittee hearings: current World Bank and IMF activities in 
Africa; the Highly Indebted Poor Countries Initiative HIPC; and 
the HIV/AIDS initiatives.
    First, with respect to the activities in Africa, the World 
Bank's primary mission is economic development of poverty 
alleviation. The mission supports the international community's 
commitment to reduce the proportion of people living in extreme 
poverty by at least one-half between 1990 and 2015.
    In order to accomplish this goal, the World Bank's current 
Africa portfolio is just over $13 billion with the new 
commitments in fiscal year 2000 of $2.2 billion.
    With respect to the IMF, the mission of this organization 
is to promote exchange rate stability and to provide loans 
conditioned on economic reform to countries that are facing 
economic problems.
    The IMF provides concessional lending through its Poverty 
Reduction and Growth Facility, the PRGF, the IMF PRGF's program 
supports economic policy programs in some 20 Sub-Saharan 
countries, which is roughly half the countries in the region.
    I'm interested in hearing from our witnesses, particularly 
Dr. Westin, regarding the impact of the PGRF's activities in 
Africa.
    Second, the Highly Indebted Poor Countries HIPC initiative 
has provided both bilateral and multilateral debt relief to 
eighteen countries in Sub-Saharan Africa.
    The U.S. and other donor countries have pledged to provide 
100 percent bilateral debt relief to the HIPC countries.
    Furthermore, this initiative also includes World Bank and 
IMF multilateral debt relief to the HIPC countries.
    It is important to note that Congress has already fully 
authorized and appropriated funding for the U.S. bilateral debt 
relief. However, further authorization and appropriations for 
the World Bank/IMF multilateral debt is still needed to 
complete the U.S. pledge of $600 million to the HIPC Trust 
Fund.
    The Administration has requested that $224 million be 
appropriated for fiscal year 2002, with $165 million required 
to be authorized for fiscal year 2002.
    Since this subcommittee has jurisdiction over multilateral 
financial institutions, we need to authorize this additional 
$165 million figure.
    Third, with respect to HIV/AIDS, the World Bank has 
recently become more active in the fight against this deadly 
plague.
    However, obviously much more remains to be done. For 
example, UNAIDS, which is testifying today, has estimated that 
36 million people are now living with HIV/AIDS. Seventy percent 
of these people are in Sub-Saharan Africa.
    Last Friday, President Bush pledged an initial $200 million 
to a global trust fund to combat HIV/AIDS.
    In addition to the President, U.N. Secretary General and 
the President of the World Bank have called for the creation of 
International Fund. This fund will focus on prevention and 
treatment of HIV/AIDS.
    The Administration has said it will work with our allies in 
the GA and different private foundations, corporations, faith-
based groups to increase support for this global fund.
    To assist the subcommittee in examining these issues, I'm 
pleased we will have the opportunity to hear from our 
distinguished panel of witnesses which are at the suggestion of 
the majority and minority.
    First, Dr. Susan Westin will testify. She's the Managing 
Director for International Affairs and Trade for the General 
Accounting Office, GAO.
    In May 2001, at the request of Senator Helms, GAO published 
a report entitled ``International Monetary Fund: Few Changes 
Evident In Design of New Lending Programs For Poor Countries.'' 
In addition, GAO has issued a number of reports on HIPC debt 
relief initiative.
    Next, Dr. Nancy Birdsall of the Carnegie Endowment for 
International Peace will testify. Dr. Birdsall is the Senior 
Associate and Director of the Economic Reform Project at 
Carnegie.
    Dr. Birdsall has extensive experience with a wide array of 
multilateral financial institutions. She has held previous 
management positions at the World Bank, including Director of 
the Policy Research Department, where her focus included 
African poverty.
    Our third distinguished panelist is Dr. James Sherry, M.D., 
PhD, of the Joint United Nations Program On HIV/AIDS called 
UNAIDS.
    Dr. Sherry is the Director of Program Coordination of 
UNAIDS, also testified before the former House Banking 
Committee in March of 2000.
    Subsequently, Dr. Dyna Arhin-Tenkorang, a citizen of Ghana, 
will testify. She is with the Harvard Kennedy Schools Center 
for International Development and a member of the World Health 
Organization's Commission on Macroeconomics and Health. 
Additionally, she advises on issues of developing country 
public health systems.
    Lastly, the Reverend Doctor Leon Spencer, the Executive 
Director of the Washington Office on Africa will testify. Dr. 
Spencer is an Episcopal priest with extensive experience in 
Africa.
    As Executive Director, Dr. Spencer has given considerable 
attention to debt cancellation and he was an active member of 
Jubilee 2000 USA's Steering Committee.
    We absolutely welcome the distinguished panelists to our 
hearing today. As I mentioned this subcommittee I think has a 
broad consensus that we intend to be active and constructive on 
issues of poverty and HIV/AIDS relief, for example, in Africa.
    Without objection, your written statements will be included 
in their entirety in the record. And I have a request that the 
GAO testimony supporting documents accompanying the testimony 
today be entered in the subcommittee record.
    Without objection, that will be the order.
    Now I'm pleased to turn to our distinguished Ranking 
Minority Member, the gentleman from Vermont, Mr. Sanders, for 
his opening comments.
    [The prepared statement of Hon. Doug Bereuter can be found 
on page 52 in the appendix.]
    Mr. Sanders. Thank you very much, Mr. Chairman, and we're 
delighted that our guests are with us today for what I think is 
a very important hearing on arguably one of the major crises 
and issues facing humanity today.
    So I thank you very much, Mr. Chairman, for calling this 
hearing and for focusing on this issue of enormous consequence.
    Africa today, as I think all of us know, is facing many 
crises, from extreme poverty to HIV/AIDS that threaten the very 
future of that continent.
    Concentrated in Sub-Saharan Africa, the poorest, the most 
heavily indebted countries in the world, are getting even 
poorer. Twenty years ago, the average per-person real income in 
Sub-Saharan Africa was a meager $400 a year. It is tragic that 
today that average income has declined significantly. Half the 
people of the sub-continent struggle to survive on less than a 
dollar a day.
    So this is a huge crisis and it is appropriate that this 
subcommittee focus on it.
    Poverty in Africa has been compounded by the HIV/AIDS 
pandemic that is ravaging the continent. Twenty-five million 
people in Africa are living with HIV/AIDS. That disease has 
orphaned 13 million children in that continent.
    Yet, of the 25 million people in Africa who live with the 
HIV/AIDS virus, and the three-to-four million who are dying 
from AIDS, only about 10,000 have access to the anti-retroviral 
drugs they need to fight the disease.
    In my view, this subcommittee and this Congress must demand 
that the pharmaceutical industry, composed of some of the most 
profitable companies in the world, accept its moral 
responsibility to help alleviate this crisis.
    I am pleased that the pharmaceutical industry recently 
dropped its 3-year lawsuit against the South African law to 
allow that government to import affordable medicines and 
increase the use of generic drugs in its fight against the 
deadly HIV/AIDS virus.
    And recently, as you know, several foreign drug 
manufacturers have begun marketing generic versions of life-
saving AIDS drugs at fractions of the prevailing cost.
    For example, one year's supply of GloxoSmithKline's 
Combivir, a drug used to treat HIV/AIDS, costs about $7,000 in 
the United States. Cypla, Ltd., an Indian company that 
manufactures generic drugs--Mr. Chairman, as I mentioned, I 
hope at some point we can have the president of that company 
here before this subcommittee--is selling a generic version of 
that drug at $275 compared to the $7,000 that is being charged 
in the United States.
    Clearly, common sense suggests that when you have people 
living on $300 a year, they are not going to be paying $7,000 
for drugs. And we have got to work with the pharmaceutical 
industry in this country and manufacturers around the world, to 
demand that medicine is made available to people in Africa at a 
price that they can afford.
    The United States Congress, as well as the rest of the 
world, must work as hard as we can to address the HIV/AIDS 
crisis in Africa and elsewhere.
    President Bush, last Friday, committed to providing $200 
million in the fight against global HIV/AIDS. That is a step in 
the right direction, but public health experts have said Africa 
alone needs $10 billion a year to effectively address the HIV/
AIDS pandemic.
    So the President has started the effort but clearly we need 
to go a great deal further.
    Africa needs more resources to have any hope of containing 
and defeating HIV/AIDS and that is something that we, as a 
subcommittee, can do to significantly improve the ability of 
the African people to win the fight against poverty and HIV/
AIDS.
    We should call on the World Bank and the IMF to cancel the 
debts that they are owed by the impoverished countries of the 
world.
    In my view, it is unacceptable that many African countries 
today are forced to spend more on debt repayments than they 
will spend on health care for their people when they are 
suffering one of the great health care crises of our time.
    Zambia, one of the world's poorest countries, will send $89 
million in debt servicing to the IMF, $89 million, and the 
World Bank this year, while it spends only $76 million on its 
health care budget. More going to the IMF for debt payment than 
going into health care.
    Meanwhile, 14 percent of Zambia's children have been 
orphaned by AIDS. This is an unacceptable equation.
    And Zambia, Mr. Chairman, is a country that is currently 
participating in the World Bank and IMF Debt Relief Program 
known as Heavily Indebted Poor Countries, HIPC.
    Clearly, the HIPC program of debt reduction has not lived 
up to its promise. According to a recently released report by 
the U.S. GAO, which we will hear about today, the current IMF 
and World Bank debt reduction program is likely to leave the 
HIPC countries just as highly indebted as they were when that 
program was begun.
    Again, I think that this is unacceptable. We need to change 
that. We should call on the World Bank and the IMF to write off 
the debts of Africa and the world's most impoverished nations.
    Some will question whether the IMF and the World Bank can 
afford to write off these crippling debts; I believe they can.
    The United States and the world's most developed countries 
have promised to completely cancel virtually all debts owed to 
them by the most heavily indebted poor countries in Africa and 
around the world. But the IMF and the World Bank have agreed 
only to reduce, not cancel--but reduce, the debts owed to them 
by about half. They can and must be asked to do much more than 
that.
    Experts who have considered proposals to cancel the debts 
that the world's poorest countries owe to the IMF and the World 
Bank have concluded that the resources for such debt 
cancellation already exist at the World Bank and the IMF.
    Adam Lerrick, formerly with Credit Suisse First Boston, and 
the International Financial Institution Advisory Commission, 
known as the Meltzer Commission, which I know you were active 
in forming, Mr. Chairman, has said that the IMF, the World 
Bank, and the Regional Development Banks have $633 billion in 
effective capital and $60 billion in provisions for loan losses 
and reserves. This is more than enough to cover the cost of 
writing off the entire $32 billion of effective debt that the 
poorest countries owe to these institutions.
    According to Lerrick, the cost of writing off the effective 
debt held by the IMF, the World Bank, and two largest regional 
development banks is just five percent of their effective 
capital, and about half of their provisions for losses and 
reserves.
    Cancelling the debts owed by impoverished countries to the 
World Bank and the IMF would free significant resources 
available to fight poverty and disease in Africa and to allow 
African governments to provide for the health care, education, 
clean water, and other basic needs of their people.
    I believe the World Bank and the IMF have the resources to 
remove the burden of crippling debt from the world's poorest 
nations. They only lack the vision and the will. And it is our 
job to give them that vision and will.
    I look forward to hearing from our witnesses about the role 
of the IMF and the World Bank in addressing the crises of 
poverty debt and HIV/AIDS in Africa.
    And thank you again, Mr. Chairman, for calling this 
important hearing.
    [The prepared statement of Hon. Bernard Sanders can be 
found on page 60 in the appendix.]
    Chairman Bereuter. Thank you very much, Mr. Sanders.
    Under the Committee rules, any Member is allowed an opening 
statement of 3 minutes.
    Are there Members who wish to be heard?
    Ms. Lee, you are recognized.
    Ms. Lee. Thank you, Mr. Chairman.
    First I want to thank you and our Ranking Member for 
holding today's hearing. This is very timely, especially in 
light of the challenges and poverty crippling economies 
especially in Africa, which of course are exacerbating the 
crisis as it relates to HIV/AIDS.
    As we know, each day over 6,000 or 7,000 people in Africa 
die from AIDS. In many African nations, people live on less 
than $1 dollar a day. Yet, addressing the AIDS crisis through 
education and treatment will cost billions each year.
    I'm very concerned about increasing the burden of debt by 
providing additional loans as an option through the World Bank 
and the IMF.
    Last year, it's my understanding the World Bank announced a 
$500 million loan program for Africa to help mitigate the 
effects of HIV/AIDS. While I can appreciate the gesture of the 
World Bank, I really do disagree with their tactic.
    These poor countries must not be forced to incur more debt 
in order to provide lifesaving services and options for their 
people.
    Last year, as you know, Mr. Chairman, Congress Leach and I 
led a bipartisan effort to establish an international AIDS 
trust fund at the World Bank that would provide grants, not 
loans, to African nations, civil society, and non-governmental 
organizations so that they could respond to the HIV/AIDS 
crisis.
    I'm pleased to say that we are now seeing considerable 
movement on this initiative in the international community. We 
here are working with the Treasury Department, the World Bank 
and the Bush Administration, and our international HIV/AIDS 
partners, to finish the final negotiation of this fund.
    And let me just say that last year, $20 million was 
appropriated last year for this Global AIDS Trust Fund, though 
a mere drop in the bucket, it did at least initiate the concept 
and the idea in a pool of money for the trust fund as it 
relates to HIV/AIDS.
    Another aspect of this overall effort, which I hope we 
discuss today, must be actually targeted at the IMF. In many 
countries, as leaders attempt to develop and implement primary 
health and education programs, they are often forced to pay IMF 
user fees.
    These are really primary services which should be 
considered a basic human right and I think we should eliminate 
user fees.
    We introduced a bill last month, Congresswoman Waters and 
myself, HR 1567, the Debt Cancellation for HIV and AIDS 
Response Act of 2001, to provide for multilateral debt relief 
for countries which make determinations and decisions to invest 
their resources in providing for strategies that address the 
HIV/AIDS pandemic.
    So I am encouraging my colleagues to join us in co-
sponsoring this legislation, because we do want to make it a 
bipartisan effort.
    I want to thank you again, Mr. Chairman, for holding these 
hearings today. I hope that we will look at the implications of 
providing grants versus loans, as we discuss the role of the 
IMF and the World Bank in addressing the HIV/AIDS pandemic.
    Thank you very much.
    Chairman Bereuter. Thank you, Ms. Lee.
    We're on opening statements. Do other Members wish to make 
an opening statement?
    The gentleman from North Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman. I'll be very brief. I 
did not prepare an opening statement. Actually, I just came 
directly here from the airport.
    But I did want to thank the Chairman for holding this 
hearing and as I was thinking about it in North Carolina this 
morning, and trying to get back, I couldn't imagine that there 
could be a more important subject and hearing being held on the 
Hill today or any day than the one we're having in our 
subcommittee.
    The World Bank, the IMF, and the United States needs to do 
everything that is within our power to address poverty and the 
AIDS pandemic, and I'm anxious to hear the witnesses and to 
hear approaches that might be available and work with the 
Members of the subcommittee and the Full Committee to craft an 
aggressive approach to this.
    Thank you, and I yield back the balance of my time.
    Chairman Bereuter. Thank you, Mr. Watt.
    The gentlelady from Indiana, Ms. Carson, is recognized.
    Ms. Carson. I do too thank you very much, Mr. Chairman. I 
would like to thank the witnesses that are coming to speak on 
this important--I want to specifically point out, Mr. Chairman, 
how much I appreciate the focus that you're giving to Africa 
insofar as Congress.
    Clearly, the crisis facing Africa screams for attention, 
and as Members of this subcommittee, we have an enormous 
responsibility to do whatever we can do to address the 
situation.
    Countries in Sub-Saharan Africa are the poorest, most 
heavily indebted countries in the world. Their poverty is 
escalating, notwithstanding, even though many African countries 
have participated in the heavily indebted poor countries, many 
African countries continue to spend more on debt repayments 
than they can spend on health care for their people.
    We must challenge ourselves for debt reduction as a model 
for providing debt relief to poor countries. Even though the 
United States has pledged to provide full bilateral debt relief 
to HIPCs, IMF and the World Bank have agreed only to reduce the 
debt owed to them by about a half.
    We should call on the World Bank, Mr. Chairman and Members 
of the Committee and the IMF to write off the debts of Africa's 
and the world's most impoverished nations.
    I have other statements here, Mr. Chairman, that I would 
like to have included in the record, but given the brevity of 
time, I would defer back the balance of my time and ask your 
permission that this would be incorporated as a part of the 
record.
    Chairman Bereuter. Thank you, Ms. Carson.
    Without objection, that will be the order.
    [The prepared statement of Hon. Julia Carson can be found 
on page 56 in the appendix.]
    Chairman Bereuter. And now we would like to proceed with 
the panel. My intention is to complete our hearing by 4:00 
o'clock, but I think we should have time for full presentations 
and for questions from Members.
    So we will allow each of the panelists to have 7 minutes, 
and first we'll hear from Dr. Susan S. Westin, Managing 
Director for International Affairs and Trade at the GAO.
    I might say, thank you very much for the excellent work 
you've been doing for the International Relations Committee on 
the former Trust Territories, the Marshall Islands and the 
Federated States of Micronesia.
    And we welcome this recent initiative that you've done for 
the Senate Foreign Relations Committee on the IMF.
    You may proceed as you wish, and your entire statements in 
all cases will be made a part of the record.

     STATEMENT OF DR. SUSAN S. WESTIN, MANAGING DIRECTOR, 
   INTERNATIONAL AFFAIRS AND TRADE, GENERAL ACCOUNTING OFFICE

    Dr. Westin. Mr. Chairman, Members of the Subcommittee, I'm 
pleased to have the opportunity to discuss our assessment of 
two important multilateral programs that are intended to help 
increase economic growth and reduce poverty in poor countries.
    The first program is the Heavily Indebted Poor Countries or 
HIPC initiative, which is projected to provide about $29 
billion in debt relief to 32 potential recipients, 24 of these 
in Sub-Saharan Africa.
    The objective of the HIPC initiative is to provide 
recipients with sufficient debt relief to resolve their debt 
problems and free up resources that will be spent for poverty 
reduction.
    The second program is the IMF's concessional lending 
facility known as the Poverty Reduction and Growth Facility. 
One purpose of this facility is to foster lasting economic 
growth leading to higher living standards and a reduction in 
poverty. Both programs require recipient countries to prepare 
country-owned poverty reduction strategies which are to be 
developed with the participation of civil society.
    Today, I will highlight two major challenges confronting 
these programs. First, even with debt relief and continued 
concessional lending, many poor countries face the challenge of 
achieving strong, sustained economic growth well in excess of 
historical growth rates to resolve their debt problems and to 
graduate from the concessional lending program.
    The second challenge for these countries is in preparing 
comprehensive, country-owned poverty reduction strategies.
    Let me turn to the first challenge.
    In our review of the HIPC initiative, we found that while 
the initiative provides significant debt relief, it is not 
likely to provide a lasting exit from debt problems unless 
countries grow far faster than they have the past.
    For example, for most of the seven countries we analyzed, 
exports are projected by the World Bank and the IMF to grow at 
significantly higher rates than historically.
    We believe such growth rates are overly optimistic since 
these countries rely on primary commodities, such as coffee, 
for much of their export revenue.
    Past experience has shown that the prices of these 
commodities tend to fluctuate over time and, in fact, decline 
in certain years.
    Failure to achieve the projected levels of economic growth 
could lead, once again, to these countries having difficulty 
repaying their debt.
    Similarly, we found that most of the current recipients of 
the IMF's concessional assistance will require high, continuous 
economic growth to reach the point of graduation from such 
assistance.
    This challenge is substantial, as illustrated by our 
analysis. The 32 countries that borrowed from the IMF's 
concessional facility last year must average income growth in 
excess of six percent annually during the next 15 years in 
order to graduate. These same countries had an average growth 
rate of negative one percent over the last 15 years.
    Turning to the second challenge. We found that governments 
face challenges in preparing country-owned poverty reduction 
strategies. By linking debt relief and poverty reduction, the 
HIPC initiative has created tension between the desire for 
countries to receive quick debt relief, and the time required 
to create such comprehensive strategies.
    Preparing the strategies is complicated. In particular, it 
is difficult to develop a country-owned macroeconomic framework 
for several reasons.
    Many recipient governments have limited technical capacity 
to independently analyze and effectively negotiate 
macroeconomic policies.
    Also, the challenges to effectively engaging civil society 
in a dialogue on these very complex matters are significant.
    Furthermore, even if these challenges were overcome, a 
national dialogue on the choice of effective policies is 
constrained by the limited knowledge about how different 
policies actually affect the economy and poverty reduction.
    Let me conclude with two observations.
    First the HIPC initiative represents a step forward in the 
international community's efforts to relieve poor countries of 
their heavy debt burdens.
    However, as I have noted, the initiative will not likely 
provide recipient countries with a lasting exit from their debt 
problems. Also, the tension between quick debt relief and the 
time it takes to prepare comprehensive country-owned strategies 
is likely to continue.
    These issues should not be seen, however, as a reason to 
abandon efforts to provide debt relief to eligible countries. 
Heavily indebted poor countries continue to carry unsustainable 
debt burdens that are unlikely to be lessened without debt 
relief.
    But participants and observers need to have a more 
realistic expectation of what the initiative may actually 
achieve.
    Finally, while countries face difficulties in achieving 
ownership of their macroeconomic frameworks, efforts to involve 
civil society have potential benefit. Civil society 
participation may help improve the allocation of resources 
within the country.
    In addition, if civil society helps establish priorities 
for poverty reduction, donors may be willing to increase the 
amount of resources they provide.
    Mr. Chairman, Members of the Subcommittee, this includes my 
prepared statement. I will of course be happy to answer 
questions.
    [The prepared statement Dr. Susan S. Westin can be found on 
page 79 in the appendix.]
    Chairman Bereuter. Thank you very much, Dr. Westin.
    Next we will hear from Dr. Nancy Birdsall, Senior Associate 
and Director, Economic Reform Project, the Carnegie Endowment 
for International Peace. Dr. Birdsall, you may proceed as you 
wish.

STATEMENT OF DR. NANCY BIRDSALL, SENIOR ASSOCIATE AND DIRECTOR, 
 ECONOMIC REFORM PROJECT, CARNEGIE ENDOWMENT FOR INTERNATIONAL 
                             PEACE

    Dr. Birdsall. Thank you very much, Mr. Chairman.
    Mr. Chairman and distinguished Members of the subcommittee. 
Let me start by saying that I will concentrate on the IMF and 
the World Bank. And the fact is that these institutions have 
not been perfect. But I do want to speak strongly today in 
favor of continued strong U.S. support for their involvement in 
Sub-Saharan Africa.
    My principal message is about an idea that has not been 
discussed in the statements of subcommittee Members, and that 
is the need for more selectivity across countries in Sub-
Saharan Africa in the future lending of these two institutions.
    By that I mean a much greater focus on more lending to 
those countries that are performing well, that are managing 
their economies in reasonable fashion, have managed to avoid 
corruption, kleptocratic state and so on. This matters in 
itself for new lending and it matters all the more as a follow-
up to the HIPC debt relief initiative to ensure that the 
benefits of that initiative can be fully realized.
    As the Chairman noted, the lending of these institutions 
constitutes a relatively small part of all the transfers of all 
of the donors to Sub-Saharan Africa. So why is it important 
that they be selective in their lending? It's important because 
they are the institutions that have the broadest picture of the 
economies overall; of the sectoral activities in transport, in 
infrastructure; of the state of judicial reform; of whether 
contracts are being enforced; and of how education and health 
systems are being managed.
    So the other donors, particularly in Europe, are very much 
involved in making grants to African countries. They look to 
the IMF and the World Bank to signal which countries are in a 
position institutionally, politically, in terms of their 
economic management and their policies, to use resources well.
    I would like to make four points in the rest of what I say 
that I hope are useful for the subcommittee.
    The first is that development assistance in Africa can make 
a difference. Africa's problems should not obscure its 
potential. In particular, many countries in the last decade in 
Africa have undertaken some of the basic reforms, including 
reducing involvement of the government in banking, in 
agricultural marketing, which has been a kind of burden on poor 
people and on countries in general, getting their fiscal houses 
in order, making the kinds of changes that attract local 
private investment.
    These changes have not produced healthy growth. More needs 
to be done along the kinds of institutional lines that the 
prior speaker was referring to. But I think it's important to 
note that there has been progress, and that in the early to 
mid-nineties, the average growth rate did pick up, particularly 
in those African countries that had undertaken these sensible 
reforms--the kinds of reforms that all Americans would 
understand.
    And that the recent setbacks have a lot to do with 
conflicts, with continued problems in terms of trade. Africa's 
exports are getting lower and lower prices in the world 
economy. The only exception, of course, has been oil in the 
last few years. That's the first point.
    So there's room to be optimistic. It's not a situation of, 
you know, chaos at all in these countries.
    Second, lending should be more focused on countries that 
are performing well, the point that I made in my introduction. 
Development assistance, we know now from extensive studies, 
only works when reasonably good government is already in place. 
The idea that World Bank and IMF lending could sort of bribe 
countries that had recalcitrant or incompetent governments into 
good behavior has been shown to be absolutely wrong.
    And the point of that is that it's very difficult to do 
major lending programs, and even to make big grants to 
countries when government is incompetent and when there are 
problems. It's simply money down the drain.
    Now the fact is that the World Bank and IMF have been 
reasonable selective in the last decade especially. In 
particular in the World Bank, a performance-based allocation 
system for deciding which countries would get how much lending 
was instituted in the early nineties. And there is evidence 
that that's made a difference.
    It is the other donors as much or more than the IMF and the 
World Bank that have tended to put a lot of money into 
countries that were not performing well. That in other words 
were not selective.
    Indeed, when countries get into very high multilateral debt 
situations where they have owed the IMF and the World Bank a 
lot in debt service, that is when other donors have tended to 
``finance''--you could put it in quotation marks--the debt 
service of those countries with the high debt, getting into a 
kind of cyclical situation where more debt service was 
generating more lending to these countries.
    This does not mean that the World Bank and IMF could not 
become much more selective, and I would hope that the United 
States in particular would take a clear position on the 
selectivity issue, both in the context of the follow-up to the 
HIPC debt relief program and during discussions of the next 
replenishment of the IDA window at the World Bank.
    The U.S. can press for improvement in the country 
performance rating system for making the methods and the 
ratings more transparent and available, in particular to the 
research community, and for more public disclosure and 
monitoring of the use of this performance-based system.
    The U.S. could do other things through pressing for 
incorporation into these performance criteria of how much 
governments are spending on health and education, doing the 
kinds of things that the subcommittee is well aware of in terms 
of monitoring post-debt relief performance.
    My third point has to do with the HIPC debt relief program.
    Chairman Bereuter. If you could finish up. Your time is up.
    Dr. Birdsall. OK. It is in short that debt relief cannot be 
treated as a panacea. And to go right to the point, with due 
respect to the comments of Representative Sanders, I don't 
believe that it will make sense to insist on the World Bank and 
IMF writing off all of the debts of the countries concerned. 
This will only penalize countries that were responsible and did 
not get into debt, and it will reward countries that got into 
high debt situations.
    It also, although there is a sense in which it could be 
afforded in the short run by those institutions, in the medium 
run, it will mean that they will have lower access to the 
repayments over 30, 40 years from countries that do owe them 
money. And it is those repayments which will help finance a new 
round of health, medium-term lending programs which will 
generate development.
    I think there's more in my comments to explain my views on 
that matter.
    Finally, let me go to my fourth point. And I'll be very 
brief. It has to do with the notion that the U.S. should go far 
beyond the initial commitment that was announced by President 
Bush on the global fund for AIDS. I'm sure that the others on 
the panel will speak more to the general point.
    But I would like to just mention in this context that the 
U.S. could take leadership in finding a way to generate the 
international cooperation that is needed in order to allow the 
pharmaceutical firms, to allow them politically to charge lower 
prices, to have differential pricing, to charge less in poor 
countries and allow them to get rid of their fear of imports of 
generics from those poor countries so that they can relax a 
little bit and not resist the notion that in poor countries, 
the generic drugs can and should be manufactured.
    There's a way to do this, to generate the kind of 
international cooperation that would give comfort to the 
pharmaceuticals, honor their property rights, and bring through 
competitive pricing much more affordability of drugs along the 
lines that was mentioned throughout Africa.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Dr. Nancy Birdsall can be found 
on page 90 in the appendix.]
    Chairman Bereuter. Thank you, Dr. Birdsall.
    Next we'll hear from Dr. James Sherry, who is an M.D. as 
well as a Ph.D., and he is the Programme Development 
Coordination Office of HIV/AIDS at the United Nations called 
UNAIDS. And his statement has just been given to your folders 
here a minute or two ago.
    You may proceed as you wish, Dr. Sherry.

STATEMENT OF DR. JAMES SHERRY, M.D., Ph.D., DIRECTOR, PROGRAMME 
DEVELOPMENT AND COORDINATION, JOINT UNITED NATIONS PROGRAMME ON 
                            HIV/AIDS

    Dr. Sherry. Thank you, Mr. Chairman and distinguished 
Members for the opportunity to address your Subcommittee today. 
I would like to briefly address three sets of issues related to 
the work before the----
    Mr. Sanders. Could you pull your microphone up a little 
closer, please?
    Dr. Sherry. I'm afraid I won't be able to see my testimony 
then, but----
    I'd like to briefly address three sets of issues related to 
the work of the Committee. First, a five-point update on the 
epidemic and our collective response. Second, five essential 
elements missing from the multilateral response to the epidemic 
in Africa currently. And third, why we need this Global AIDS 
Fund and five key areas it needs to focus its investments on, 
together with the multilateral organizations.
    Mr. Chairman, with respect to the status of the epidemic 
and the global response, I would draw your attention to the 
two-page statement on the epidemic attached to my late 
testimony prepared just a week ago by a group of top experts 
from around the world in the areas of public health 
development, law, finance, medicine and community mobilization.
    The group was convened as a part of our preparation for the 
special session of the United Nations General Assembly on HIV/
AIDS which will take place at the end of next month in New 
York.
    The statement speaks for itself with respect to the cost of 
the epidemic in human terms, the continuing need for the global 
community to act, and the order of magnitude and increase in 
investments that are required.
    I'd like to expand quickly on five pints of relatively new 
consensus and potential relevance to the work of the Committee.
    First, we are still very early in the natural course of 
this epidemic. It is not maxed out by any means. The rate of 
new infections continues to exceed the number of HIV deaths. 
This is particularly the case in Asia and Eastern Europe, but 
it is also true for Africa. Despite our observing for the first 
time last year that the number of new infections did not 
increase, nevertheless, the number of AIDS deaths is still 
lagging substantially behind. And so for the next number of 
years, the total number of HIV infections will continue to 
increase.
    I don't want to give the impression that the natural course 
of the epidemic cannot be changed. Quite to the contrary, we 
have very clear proof of principle in an expanding number of 
countries to demonstrate that early investments make a lot more 
sense than late investments in responding to the epidemic.
    Second, in most places of the world, in particular in 
Africa, we are still very early, at the very beginning of the 
response to the epidemic. Investments in Africa on AIDS were 
estimated at around $165 million in 1997 up to probably around 
$400 million last year and maybe to $600 million this year. But 
this compares with the roughly $4 billion minimum that there is 
now a growing consensus is required to make a credible 
response.
    Third, there is no general acceptance of the principle, 
learned through both positive experience and neglect, that 
investing in youth remains our most effective strategy in 
altering the course of the epidemic. This is true regardless of 
country and regardless of the state of the epidemic in those 
countries.
    Fourth, it is now generally appreciated that our prevention 
and care objectives are inextricably linked. AIDS care and 
support can no longer be viewed as a private good in contrast 
to HIV prevention being viewed as a public good.
    We've learned that to slow the epidemic, we must do two 
things everywhere. We must make the epidemic visible in 
communities, and we must reduce the stigma associated with it.
    Even if we were not motivated by our humanitarian concerns, 
we would be compelled to address AIDS care and support if we 
hope to be successful in our prevention efforts.
    My fifth point, Mr. Chairman, is that antiretroviral drugs 
are an important part of the solution. We've learned that we 
need to use them in all countries. We've also learned that 
where we use them, we need to use them appropriately and 
according to rigorous guidelines. And finally, we've learned 
that even under the best of circumstances, resistance is 
inevitable probably more rapidly than we've been thinking.
    Consequently, we will require ongoing streams of new AIDS 
drugs that only the research and development-focused 
pharmaceuticals are going to be in a position to provide.
    And while I'll not get into aspects of intellectual 
property rights and their profit margins and how that relates 
to their basic business model, I would simply caution that if 
we continue a confrontational approach to their engagement in 
the response, we risk driving the R&D companies out of the 
response to the epidemic, and we will end up paying dearly for 
that in human lives.
    Mr. Chairman, I'd like to suggest to the subcommittee that 
as you continue your review and oversight of the multilateral 
institutions in Africa, that attention be given to five 
essential elements currently missing in the response to the 
epidemic. And I'll be briefer than my testimony here.
    First, a focus on accountability for HIV/AIDS-related 
results. Twenty years into this still-expanding epidemic, it's 
past time to begin holding ourselves accountable for what we're 
doing and what we're not doing. As a start, our economic 
modeling and policy advice must take AIDS fully into account. 
While there is room for debate to what extent a 7 or a 15 or a 
20 percent inflation rate affects economic growth, we should by 
now be past the stage where we can pretend that a 30 percent 
HIV prevalence rate does not.
    HIV is currently not being factored into the macroeconomic 
models we are using in any meaningful way, nor have we 
seriously looked at how our macroeconomic frameworks are 
impacting on the epidemic.
    Second, we need to get beyond the summary tables in 
ensuring that our sectoral investment strategies are 
appropriately and effectively addressing AIDS. Currently, it is 
the exception when they do. We do not have AIDS-relevant 
investment strategies for the productive sectors, including the 
manufacturing sector, which is having increasing difficulty 
with international investment in Africa because of AIDS, nor do 
we have them in the protective sectors, in particular the 
health, education and social services which are both the front 
line of societies in response to the epidemic and are 
themselves reeling under its impact. Nor do we have good 
economic analysis of the propagating sectors. And by that we 
would include the informal commercial sex sector, but also 
sectors where employment entails separation of men and women 
from their families for extended periods of time. That includes 
the uniform services, the transport sector and some parts of 
the mining industry.
    Third, the current response lacks urgency and intensity. 
Time-bound goals for institutions to complete their 
reorientation to AIDS and to incorporate it within their 
mainstream work and specific targets for how much of their 
resources should be addressing the epidemic are entirely 
appropriate in an emergency of this type, and they are largely 
absent.
    Fourth, the response lacks sufficient leverage from 
communities and governments in the response in Africa. With 
respect to governments, the HIPC process has made a good but 
incomplete start. For example, in some 13 countries where we 
have data, $43 million has been budgeted for AIDS this year 
compared with less than $2 million last year, roughly 90 
percent of that attributable to new resources provided through 
debt relief.
    The downside is with two exceptions, both in relatively low 
endemic countries, less than 10 percent of debt savings, 
actually substantially less in most cases, were reprogrammed 
into efforts directly addressing AIDS.
    Chairman Bereuter. Dr. Sherry, if you could just hit your 
last point, please.
    Dr. Sherry. Fifth, the current response lacks sufficient 
coordination among the partner organizations, and I would 
suggest very briefly that our coordination model also requires 
review. And if you'll forgive the analogy, the multilateral 
organizations could perhaps benefit from a more NATO-like 
approach, building a platform on which governments and civil 
society partners can more effectively address the epidemic, 
rather than serving themselves as the prime actors in the 
response.
    In lieu of time, Mr. Chairman, I'll be very brief to just 
share a few thoughts on why we need to urgently complete the 
work initiated here----
    Chairman Bereuter. Briefly.
    Dr. Sherry. ----by Congressman Leach and Congresswoman Lee 
and many others to establish the Global AIDS Fund to jumpstart 
our expanded response to the epidemic. The important 
undertaking came closer to reality last week with the actions 
of President Bush. However, it would have been an enormous 
mistake to simply wait for the existing multilateral mechanisms 
to kick in on this. But it would be an even larger mistake to 
undertake the scale-up in a way that duplicates the work of 
these mechanisms or gives the impression that Global AIDS and 
Health Fund would somehow obviate the need for the multilateral 
and bilateral organizations to do more and to do it more 
effectively.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. James Sherry can be found on 
page 98 in the appendix.]
    Chairman Bereuter. Thank you very much, Dr. Sherry.
    Now we'll hear from Dr. Tenkorang. She is with Harvard 
University's Kennedy School Center for International 
Development and a citizen of Ghana. You may proceed as you 
wish.

STATEMENT OF DR. DYNA ARHIN-TENKORANG, SENIOR ECONOMIST FOR AND 
ASSISTANT TO THE CHAIRMAN, WHO COMMISSION ON MACROECONOMICS AND 
HEALTH, AND VISITING FELLOW AT HARVARD UNIVERSITY'S CENTER FOR 
                   INTERNATIONAL DEVELOPMENT

    Dr. Arhin-Tenkorang. Thank you, Mr. Chairman. Thank you for 
the invitation to testify. I am honored as an African 
professional from Ghana to have the opportunity to present my 
views and recommendations. These views have been shaped by a 
decade of research and consulting experience as a health 
economist in international public health, focusing on Sub-
Saharan Africa.
    Prior to this, as a physician, I treated patients in Ghana 
and Nigeria. I later held the position of Senior Health Planner 
in the Ghana Ministry of Health.
    I would like to focus on issues that relate to the 
effectiveness of development assistance provided by the World 
Bank in particular in alleviating poverty and controlling HIV/
AIDS.
    In my statement, I wish to draw attention to the following:
    One, health investments profoundly impact on poverty 
reduction, as has been substantiated by the ongoing work of the 
Commission on Macroeconomics and Health.
    Second, the World Bank's health assistance to Africa has 
been characterized by the following:
    A. Low priority placed on investments in hospital 
facilities, and by implication, on curative care.
    B. Reluctance to support sector recurrent budgets; and
    C. Advocacy for user fees.
    Third, these characteristics have contributed to the 
unpreparedness of African health systems for the HIV/AIDS 
challenge.
    Given the urgency of the situation, I urge that a Global 
AIDS Trust Fund should be granted autonomy from these 
institutions and their policies. This will permit the Trust 
Fund to assemble Rapid AIDS Response Task Forces charged with 
the responsibility of producing detailed country control plans 
that are needed for immediate disbursement of committed donor 
funds.
    I suggest that the Task Forces be composed of professionals 
with in-depth knowledge of Africa as well as proven technical 
and managerial capacities, who are as it were on sabbatical 
from their regular positions.
    Some of my convictions have been refined by recent 
analytical work undertaken as a Senior Economist for the 
Commission on Macroeconomics and Health. This Commission is an 
ad hoc organization initiated by WHO in January 2000. As part 
of the work, an analysis of the evidence linking investment in 
health to macroeconomic growth and poverty reduction support my 
view that the components and the philosophy of HIV/AIDS control 
currently advocated by the African community, and also recently 
echoed in statements by the World Bank, are crucial for poverty 
reduction. These components are prevention, care, and 
treatment. And the philosophy is that they must all be pursued 
simultaneously and rigorously.
    Without treatment, HIV positive parents are denied the 
opportunity to make financial and social provision for their 
children who in the future will be orphaned. Particularly, some 
are prevented from contributing crucial additional years to the 
economy as teachers, doctors, nurses and managers.
    Until recently, the international donor community, 
including the World Bank, focus was on prevention, with less 
emphasis on the decisive role of treatment, thus ignoring that 
households can frequently accomplish prevention but are ill 
equipped to carry out effective treatment.
    To illustrate, in the case of malaria, a farming mother in 
a village in Ghana can augment her immunity system and that of 
her child by consuming high protein foods that she grows and by 
breastfeeding, and can take actions to repel mosquitoes. 
Therefore, from the onset of the HIV epidemic, treatment should 
have been given the appropriate priority in control strategies.
    High priority was given to treatment in Western countries, 
including the United States of America, and the results speak 
for themselves. Today it is evident that the prolongation of 
years of healthy life and years of survival of AIDS patients 
offered by antiretroviral therapy requires that the standards 
of African health systems be raised to basic minimal levels.
    The health systems of all poor African countries will 
require massive investments in infrastructure and human 
capacity to permit this. Hence, treatment of African HIV 
patients will require that the World Bank revisit its past 
position that investments in secondary and tertiary health 
facilities is a low priority in African countries.
    Second, treatments must not be offered at a fee, because 
fees will dissipate scarce household financial resources and 
prevent patients from seeking treatment. In this regard, 
another Bank measure that will have a positive impact on HIV 
and poverty is to change its long-held position on user fees, 
for example, the payment of out-of-pocket charges at the time 
of use of health care.
    Substantially positive spillover effects are associated 
with curative care. For example, the benefits to society when 
an individual receives treatment for tuberculosis is far 
greater than the benefits to the individual patients, because 
others are prevented from contracting the disease. It is 
therefore rational for a society to facilitate higher 
consumptions of such treatment by the poor than the poor 
themselves can afford, rather than to erect financial barriers 
in the form of user fees.
    Also, user fees policies do not take cognizance that out-
of-pocket payments are usually the most regressive means to pay 
for health care, and as a payment method, heavily exposes poor 
people to catastrophic financial risks.
     I have in my statement some other suggestions of how one 
might use the Global Trust Funds. Because I would like to 
submit that the fundamental problem is that there are 
insufficient numbers of personnel to engage exclusively in 
developing rigorous country and subregional AIDS response 
plans.
    African countries have few financial and human resources 
and therefore cannot produce elaborate plans nor demonstrate 
adequate absorptive capacity, for example, the ability to use 
the funds. Yet these plans and the absorptive capacities are 
the prerequisites imposed by donor regulations and conditions 
in order to secure the needed resources.
    It is my hope that the Trust Fund has been established 
recognizing that more funds are required in order to tackle the 
crisis. But it is also my hope that it be recognized that this 
is the opportunity for things to be done differently and for 
these Task Forces to be established.
    The Trust Fund is being formulated, as I say, partly in 
recognition that the HIV interventions for Africa will need to 
be funded largely from donor assistance. One hopes that it also 
will permit the use of new approaches to development assistance 
for health, an approach that is not hindered by imperfection 
inherent in possible Bank and IMF assistance policies.
    There is little time to debate endlessly on taking this 
bold step. At worst, all that may be lost is some fraction of 
the resources due to inefficiency and imperfections. And this 
is a normal occurrence in all human endeavors. And the price 
that is truly insignificant compared to the benefits. Millions 
of lives will be saved, and Africa could be given the 
opportunity to rise from its burden of disease and poverty.
    Thank you.
    [The prepared statement of Dr. Arhin-Tenkorang can be found 
on page 112 in the appendix.]
    Chairman Bereuter. Thank you very much. I realize it's 
difficult for any of you to summarize your testimony, even 
though we've allowed 7 minutes, and I know you have a number of 
very practical suggestions here. And I hope my colleagues will 
directly or through their staff look at some of the very 
practical and good suggestions that you've made.
    Next we will hear from the Reverend Dr. Leon Spencer, 
Executive Director of The Washington Office on Africa. You may 
proceed as you wish.

STATEMENT OF REVD. DR. LEON P. SPENCER, EXECUTIVE DIRECTOR, THE 
                  WASHINGTON OFFICE ON AFRICA

    Dr. Spencer. Thank you, Mr. Chairman. It's been my great 
privilege to have been involved in Africa and with African 
partners throughout my adult life, first as an academic, then 
as a mission appointee of the Episcopal Church in Kenya, and 
now as Executive Director of The Washington Office on Africa, 
an ecumenical advocacy organization that embraces a broad 
spectrum of national church bodies and traces its origins to 
the struggle for liberation in Southern Africa.
    With this experience, I am naturally grateful to this 
Subcommittee and its Chairman, Congressman Bereuter, for the 
opportunity to testify today.
    What I bring to these issues and to this hearing is a deep 
conviction that we are called to speak to the common good. This 
is an ethical and faith-based perspective, and I acknowledge it 
is one that economists and some political leaders have found 
convenient to dismiss as naive. But it is not naive to suggest 
that the international financial institutions have no right to 
insist upon economic structures within African nations that 
diminish public initiatives to address the common good.
    I readily acknowledge economic mismanagement and 
misjudgment in many African countries which provide temptations 
to prescribe for Africa. But it is frankly disturbing to me 
that there continues to be a presumption that free market 
reforms are the prescription for sustained economic progress in 
Africa. Education, health care, employment training and 
opportunities, access to safe water and housing and so on--the 
list is substantial--are essential for economic development, 
and they require community-based rather than free market 
initiatives.
    Moreover, the notion that fledgling African businesses can 
compete with multinationals, that somehow the playing field in 
the global economy is level, is one that should not be 
seriously entertained.
    It is not my intent to disparage economic structures that 
may empower individual Africans in their business pursuits, but 
I do assert that an unfettered free market economy divorced 
from societal considerations of human need and human hope is 
not a moral imperative, and it is not the role of the World 
Bank and IMF to suggest that it is.
    This is for me foundational as we turn to the three issues 
this Subcommittee has rightly targeted:
    First, debt. As a member of the Steering Committee of 
Jubilee 2000/USA, I was very encouraged by the U.S.'s 100 
percent bilateral debt cancelation for HIPC nations. And yet 22 
countries that have been through the HIPC process will still be 
paying more on debt service than on health in the coming 5 
years, principally because the World Bank and IMF remain the 
biggest creditors to poor countries.
    It is my firm recommendation that the U.S. should use its 
influence to secure 100 percent cancelation of debts owed by 
African nations to the IMF and World Bank from within their own 
resources and without attaching further economic reform or 
structural adjustment measures.
    Second, poverty eradication. It's my firm recommendation 
here that the U.S. should use its influence to ensure that debt 
service payments to the IMF and World Bank including the 
accumulation of interest, be suspended as long as good faith 
efforts to develop poverty eradication programs continue.
    It is my view further that the U.S. must use its influence 
to vote against the continuation of user fees where people 
living in poverty must pay for primary education and primary 
health care. Congress has rightly recognized that this has been 
a tragic aspect of structural adjustment. The Bush 
Administration's request that this provision in law be struck 
keeps this issue alive. Our nation should not be party to such 
an injustice.
    Finally, the U.S. should use its influence to ensure that 
the continued denial of full opportunity by African civil 
society to engage in the PRSP process end.
    Third, HIV/AIDS. During my years as a missionary in Kenya, 
I had a friend, a Kenyan nurse who established a community 
center and clinic in Kibera, one of Nairobi's slums. Among 
other services, she offered women who were HIV-positive food, 
shelter and care. Most had been driven from their homes, 
rejected by their family and community. It was clear to her 
then and clearer now to African governments and civil society 
that the combination of education and prevention and of widely 
accessible treatment and culturally sensitive care are all 
essential elements to confront this pandemic.
    What is needed now are funds, large doses, thoughtfully 
provided, appropriately used. The Abuja Declaration signed by 
African leaders late last month included a target of allocating 
no less than 15 percent of African national budgets to health. 
International efforts need to complement such a commitment.
    The U.S. has taken an important lead among the 
industrialized nations in providing funds, but they are 
insufficient. It is my firm recommendation that the U.S. help 
to establish a Global AIDS Trust Fund that offers a 
participatory and transparent process capable of mobilizing 
resources quickly.
    The Fund needs to provide for bulk drug procurement and 
distribution, including medicines for both AIDS and 
opportunistic infections, not excluding any sources that are in 
accord with intellectual property rights provisions that permit 
compulsory licensing and parallel imports. It is not as crucial 
where the Fund is housed as it is that there not be competing 
funds and that the Fund be adequate to the task.
    It is further my view that the U.S. needs to provide 
significant unrestricted funds consistent with our economic 
standing among nations, accepting the estimates of up to $10 
billion required annually to address the pandemic. Two hundred 
million dollars is not adequate, though as a step toward a goal 
of at least $1 billion annually from U.S. sources to confront 
the global AIDS pandemic with more to follow, as President Bush 
said, it is useful.
    The U.S. should use its influence with international 
financial institutions to secure grants, not loans, for AIDS 
programs.
    Finally, in contributing to a Global AIDS Trust Fund, the 
U.S. should remain attentive to the interrelatedness of AIDS-
specific funding, development aid for Africa as broadly 
conceived, and development assistance for global health issues. 
One should not gain at the expense of the others.
    This Congress has an opportunity to do something meaningful 
and just for and with Africa. I pray that you will continue in 
your efforts, and I thank you for including me in this hearing.
    [The prepared statement of Revd. Dr. Leon P. Spencer can be 
found on page 106 in the appendix.]
    Chairman Bereuter. Thank you, Dr. Spencer. Thank you very 
much. We would have been poorer without the testimony of each 
of you in our deliberations.
    I'd like to begin the questioning under the 5-minute rule. 
There are so many things to pursue. I'll begin with Dr. Westin. 
I wondered first of all if GAO has conducted any analysis of 
recent proposals for 100 percent reduction of multilateral 
debt, particularly those calling for financing that additional 
debt relief under the IMF or the World Bank. Have you been 
requested to do anything? Have you completed such analysis?
    Dr. Westin. No, we haven't. We have looked at that 
suggestion and realized that there would be a cost to doing 
that under the current financial structure of both the IMF and 
the World Bank. And the cost comes about in not having the debt 
repayment flows to finance new loans.
    But we haven't looked at the proposals that talk about 
changing the financial structure of the institutions.
    Chairman Bereuter. On page 9 of your testimony, you discuss 
some of the difficulties the HIPC countries are facing in 
developing a country owned poverty reduction strategy that 
incorporates meaningful input from civil society. To what 
extent have the IMF or the World Bank provided the technical 
assistance to these countries so that they can develop that 
kind of a model, that framework? Any forthcoming at this point?
    Dr. Westin. There has been continual interaction between 
the IMF and the countries in the development of these country 
strategies. But the poverty reduction strategy papers are 
really to be developed within the country by the government 
with inclusion of civil society, which includes business 
associations, trade unions, NGOs, community groups, and so 
forth.
    Chairman Bereuter. They are complex, though.
    Dr. Westin. They are complex.
    Chairman Bereuter. And I'm wondering if they have the 
technical ability to do that, to gain the input from civil 
society.
    Dr. Westin. It is a difficulty. It's difficult to put 
together a macroeconomic framework for any country. It's 
difficult to know what's the best way for including members of 
civil society, how do you decide who should be included, how do 
you take their input into account, and how do you structure it 
so that they are really stakeholders in this process?
    But there have been some recent World Bank studies that 
show that it's likely that the frameworks and the 
implementation of the frameworks will be more successful if you 
do include civil society participation.
    Chairman Bereuter. Thank you.
    Dr. Tenkorang makes a number of interesting points. But one 
of them she makes is that low property placed on investment in 
hospital facilities and by implication on the curative care. 
I'd like to see if any of you would comment on this comment 
from her. Dr. Birdsall?
    Dr. Birdsall. Yes. You know, I'd like to comment on that 
point and on the user fee point in general.
    Chairman Bereuter. This is an interest of Ms. Lee also.
    Dr. Birdsall. Yes. You know, I think the World Bank and the 
IMF are getting a bad rap on the user fee issue. It certainly 
is the case that there was a time when the Bank and the Fund 
favored modest user fees from people who could pay.
    I mean, this is what we do in the U.S. The idea was to 
ensure that public money went to the poor. Now it maybe was a 
bad idea in terms of its implementation, and for that reason, 
both of the institutions are really rather agnostic or even 
against user fees.
    The example of Uganda is interesting. President Musevine a 
few years ago said we will abolish user fees. I think he said 
for the first four children in any household. In any event, the 
World Bank has provided substantial support to Uganda. There 
was no resistance to the idea that user fees would be dropped. 
It provided a lot of assistance. I mention it in my written 
testimony. It helped Uganda figure out a method to send the 
money straight to the schools, post at school entrances so the 
community would know.
    Chairman Bereuter. Dr. Birdsall, where does this concept 
come from?
    Dr. Birdsall. The concept comes from the notion that you 
want to spend your public money in a way that is directed to 
the needs of the poor and to, as has been mentioned, largely 
preventive care.
    Chairman Bereuter. And I guess I should have said, who's 
pushing the concept of the imposition of user fees?
    Dr. Birdsall. I think unfortunately, it's not something 
that by abolishing we're going to make any change, because I 
don't think that it's being pushed anymore. So I don't think it 
would make any difference.
    Chairman Bereuter. Rights.
    Dr. Birdsall. It's a little bit of a strawman in that 
respect.
    Chairman Bereuter. Does anybody else wish to comment on the 
first comment about the inadequate focus on facilities in the 
remainder of my nonexistent time here? Does anybody have a 
quick comment about that point that is made by Dr. Tenkorang? 
Yes, Dr. Sherry.
    Dr. Sherry. Just two very quick points. First, we have to 
keep in mind that the poor pay a disproportionate amount of 
their income out to health care services already. And the 
poorer the community, the higher that is. And most studies 
would suggest it's in excess of 10 percent, and in the family 
affect by AIDS, it is much more.
    So there is already a very substantially imposed user fee. 
The issue is, do they get any value for what very considerable 
sum they're spending on health care? And the answer in most 
cases, unfortunately, is no.
    On the issue of infrastructure, before one gets into bricks 
and mortar, one needs to really look at what is the human 
resource and what's the commodity line within the existing 
facilities? So additional bricks and mortar, additional 
centers, additional outreach when the existing ones are just 
simply not functional in many cases. I think we have to sort 
out the prioritization process there.
    Chairman Bereuter. Thank you. My time has expired.
    The gentleman from Vermont is recognized.
    Mr. Sanders. Thank you, Mr. Chairman. Last month when we 
held a subcommittee hearing on the African Development Bank, I 
asked all of the witnesses at the hearing if they supported the 
cancelation of the debts that the poorest countries owe to the 
World Bank and the IMF. So I would like to pose that question 
to you. Very simply, do you support the cancellation of the 
debts that the poorest countries owe to the World Bank and the 
IMF?
    Dr. Westin, and we can just go down the line.
    Dr. Westin. OK. We certainly support that relief effort.
    Mr. Sanders. All right. But you don't support cancellation?
    Dr. Westin. By that you are meaning total cancellation of 
all the debts?
    Mr. Sanders. Yes.
    Dr. Westin. As I briefly said before, Mr. Sanders, we 
haven't looked at how that is possible to do under the current 
financial structure and we have not assessed the proposal----
    Mr. Sanders. I'm going to have to interrupt you. I 
apologize. Please forgive me.
    Dr. Birdsall.
    Dr. Birdsall. Even if it is affordable, I wouldn't support 
full cancellation.
    Mr. Sanders. You would not support full cancellation?
    Dr. Birdsall. No. I would not support full cancellation of 
all the debt to the multilaterals.
    Mr. Sanders. Thank you.
    Dr. Sherry.
    Dr. Sherry. I can't share an institutional position on 
this. But certainly my personal sense is would be in favor, 
although that view is slightly affected by looking at where the 
resources from the last cancellation actually went.
    Mr. Sanders. Thank you.
    Dr. Arhin.
    Dr. Arhin-Tenkorang. I would certainly support that, based 
on the fact that this burden is intolerable. It doesn't make 
any sense. It will never be actually recovered from these 
countries. It just continues to be an unnecessary burden which 
is existing for no practical end.
    Mr. Sanders. OK.
    Dr. Spencer.
    Dr. Spencer. Yes. The Washington Office on Africa certainly 
does, and I think across the breadth of the Africa advocacy 
community here in the United States, the answer is yes.
    Mr. Sanders. Thank you. My next question may be briefly 
responded to--and I apologize for the time limits for your 
response. The issue of the pharmaceutical industry and drugs 
have come up. And I would like to pose this question to you.
    Year after year, the pharmaceutical industry is the most 
profitable industry in this country, last year earning over $27 
billion in profits. Meanwhile, 5,000 people per day are dying 
of AIDS in Africa, and the initial price that the 
pharmaceutical industry was proposing to charge people is 
beyond their wildest dreams of ever being able to afford.
    Given the pandemic that exists and the huge loss of life, 
do you support the ability of companies to come into Africa to 
supply drugs at the lowest possible price so that lives can be 
saved? Dr. Westin?
    Dr. Westin. Mr. Sanders, I have to admit, I don't know if 
GAO has taken a position on that.
    Mr. Sanders. OK.
    Dr. Birdsall.
    Dr. Birdsall. Well, I'm not sure I actually understood the 
premises behind your question.
    Mr. Sanders. The question is, are intellectual property 
rights more important than the lives of millions of people who 
are dying?
    Dr. Birdsall. No. Intellectual property rights are not more 
important. I think it's a problem of what is the best tactic to 
ensure that drugs are affordable in Africa. My own view--I'd be 
happy to send you, in fact with pleasure I'd send you a copy of 
a letter I sent to the Financial Times on this issue which did 
arouse the ire of the pharmaceutical industry.
    I think the best tactic, frankly, is to make it possible 
for the pharmaceutical firms to use competitive pricing. A 
competitive price in Malawi would be an affordable price. And 
so we've got to make it easier for these firms to do that. I 
don't think that we can pass the moral burden that taxpayers in 
rich countries should bear to deal with the problem to the 
pharmaceutical firms. It just won't work.
    Mr. Sanders. Dr. Sherry.
    Dr. Sherry. Well, Congressman, you've asked a very 
difficult question. I think if the question is put that way, 
I'm not sure there is an answer. Or very directly. I think it 
is not putting it in an either/or situation--is it IPR or is 
drugs to save people's lives--I don't think is the right 
approach. I genuinely think that we can achieve both. And I 
think we need to do that by first stepping away and thinking 
first, let's share the cost with the beneficiaries. And we have 
to look at who are the broad beneficiaries of the international 
trade regimes? And that's not just the pharmaceutical 
companies. That's this entire population, largely the 
industrial countries.
    And so then the issue becomes, how are we going to finance 
the best available drugs into the developing world? So I would 
certainly support, we would institutionally certainly support 
very substantially increased public financing of patent drugs. 
But I think we're going to run into a real problem if we go 
wholesale onto pressing into the generic drugs in the situation 
of those drugs where we're getting very rapid resistance. I 
think we have a real technical concern there. It's not 
ideologic.
    Mr. Sanders. Dr. Arhin.
    Dr. Arhin-Tenkorang. Yes. I also believe that it's not one 
or the other. And if we're talking about the AIDS drugs in 
particular, I think it's--my sense is at the moment, the drug 
companies have more or less accepted to provide these drugs 
under their own names, but almost at cost prices. And 
therefore, the big issue now is to be able to find the means to 
purchase these drugs and make them available.
    And when it comes to the other drug issues that patients 
might apply to, I think at the moment, it's not such a crisis 
to deal with that.
    Thank you.
    Mr. Sanders. Dr. Spencer.
    Dr. Spencer. Affordable access to medications in Africa is 
the priority. And intellectual property rights can be honored 
not necessarily by purchasing of drugs from pharmaceutical 
companies under their own terms which they have negotiated and 
about which we do not have a lot of details. It can also be 
accessed through compulsory licensing and parallel imports 
which are absolutely legitimate in terms of the World Trade 
Organization processes.
    And so the question of access is the critical question and 
the means by which it is done may or may not directly involve 
relationships with pharmaceutical companies holding patents.
    Mr. Sanders. Thank you.
    Chairman Bereuter. I thank you, Mr. Sanders. We need a 
response to that.
    Now under the Committee rules, we will recognize those 
Members who were here at the beginning and then as they 
appeared on the basis of their appearance across the aisle. The 
gentleman from Texas was here. The gentleman from Texas, Mr. 
Bentsen is recognized.
    Mr. Bentsen. Thank you, Mr. Chairman.
    Dr. Westin, in your testimony, if I read this correctly, 
you paint a rather stark picture that even with the debt 
relief, and I guess even if you went to 100 percent debt 
relief, that the level of real economic growth over a long-term 
period is unreachable for most of the Sub-Saharan HIPC 
countries, and the need to reenter the debt markets, even at 
the soft loan window, would basically put these countries back 
in the hole again, which is interesting, because when we went 
through the HIPC legislation, the sort of pseudo-authorization 
that we went through in this Committee and then it was folded 
into the appropriations bill a couple of years ago, we had the 
discussion about whether or not we should keep HIPC countries 
away from either the hard window or soft window for a period of 
time to allow themselves to dig out of debt.
    And in fact, last year in the subsequent appropriation, 
there was some language that would establish a 2-year window I 
think where countries try and not add any additional debt.
    But based upon what I read in your testimony that, because 
they cannot--it's unlikely that they would achieve sufficient 
economic growth, they are going to have to go back to the 
window over and over again and may not ever get out of debt 
unless we just move in many respects completely to a total 
concession or really a grant program. Am I reading that 
correctly?
    Dr. Westin. The issue of poverty has long been faced, and 
it is not clear what is going to work for countries. You know 
in Africa there are many reasons why there hasn't been strong 
economic growth, and they include governance issues, they 
include civil internal strive, external conflicts, natural 
disasters, and a reliance on basic commodities to export.
    The issue of why we say that HIPC debt relief is unlikely 
to provide lasting debt relief is that the idea with HIPC is 
that if you relieve the debt, it frees up resources for the 
countries to spend essentially on development and poverty 
reduction.
    But I think the thing you have to realize is that it's not 
as if the countries had been paying all the debt service 
before. They had often received assistance from donors to help 
pay debt service, or they were in arrears. So it's not that 
you're freeing up resources one to one. If you relieve the debt 
so they don't have as much debt service to pay, they are still 
going to have to borrow the resources to put into poverty 
reduction.
    And that's why we say that--looking at those growth rates 
that are projected for them to graduate from concessional 
lending--it's a huge change. In the last 15 years, they had a 
negative growth rate of 1 percent. To be able to graduate from 
the concessional lending in 15 years, they would have to move 
to a positive 6 percent annual growth rate per year. We think 
that's overly optimistic, given the way that they are able to 
raise revenue with the basic commodities that they export.
    Mr. Bentsen. And Dr. Birdsall, in your testimony, you talk 
about the need for--I think you talk about the need for 
continued economic reforms, and I know there is a dispute among 
the panel over whether free market reforms will have any 
impact. I think there is some legitimacy in that debate. But I 
do think that you have to move in that direction.
    But does anyone on the panel believe that those rates of 
growth can be achieved? Obviously the empirical evidence 
doesn't indicate that it would, particularly if it's a 
commodity-driven or export-driven economies, that it's unlikely 
that they could achieve a 6 percent average growth rate over a 
20-year period or even a 10-year period.
    Dr. Birdsall. Well, it's hard to--you know, I mean it's 
possible. Uganda and Mozambique and Botswana have all grown at 
rates above 5 percent a year for, you know, 3 or 4 or 5 years 
at a time.
    I don't think that there's any way in which the initial 
round of reforms that you--we might call them free market 
reforms. I would call them just basic good economic 
management--can alone deliver that rate of growth.
    The problem is that relieving the debt of these countries 
is not going to do that much either. They will, as Dr. Westin 
said, absolutely have to have access to new lending.
    And of course my point is that--and this goes to the issue 
of relieving everybody's debt completely--that won't solve the 
problem either. And indeed, it simply rewards governments which 
are not in a position to deliver the goods to their people.
    I think that the new lending should be carefully focused on 
countries that are doing health and education, that are 
creating opportunities for the poor, and that are managing the 
AIDS problem.
    So we have to recognize that debt relief is a good thing. 
It can have benefits. But it is not a panacea. It does not 
solve the poverty or development problem. It certainly doesn't 
solve it if countries fail to grow. And for them to grow, they 
need a lot more than debt relief.
    Mr. Bentsen. Thank you, Mr. Chairman.
    Chairman Bereuter. Thank you.
    The gentleman from Connecticut, Mr. Shays, and then Ms. 
Lee.
    Mr. Shays. I'm happy to wait.
    Chairman Bereuter. Ms. Lee, you're recognized.
    Ms. Lee. Thank you, Mr. Chairman. I want to apologize for 
not being her during the majority of the testimony, but I'm in 
two hearings at the same time. So I will definitely read your 
full testimony, and if I ask a question that's redundant, 
please accept my apologies.
    But, I wanted to just mention a couple of things. First of 
all, I for one understand and know that debt relief or debt 
cancellation is not a panacea. However, freeing up millions of 
dollars in a given country that's struggling with HIV and AIDS 
could help set that country on course in terms of the 
development of an infrastructure, in terms of HIV prevention, 
education initiatives. It could just provide the foundation to 
begin to move forward.
    So I want to make sure that we are clear that--I don't 
think--well, many of us believe that it's a panacea. But I do 
think that debt cancellation will provide an opportunity for 
countries given now the enormous crises they are being faced 
with.
    I wanted to ask you about the concept of the bill that 
Congresswoman Waters and I introduced that links debt 
cancellation to HIV and AIDS initiatives as it relates to 
multilateral debt cancellation by the World Bank and the IMF. 
What is your take on that? And do you think it's a good idea or 
not?
    Any of you, Dr. Sherry is it, and Dr. Birdsall, I would 
especially like to hear from you on that
    Dr. Sherry. I'll go first, and let Nancy collect her 
thoughts.
    Well, first some context. In terms of the first round of 
relief, the book value was around $1.4 billion; the real value 
was around $800 million or so in terms of what was actually 
being paid back. So that's the immediate impact that it would 
have in terms of reprogrammable resource.
    And of that, in terms of AIDS direct investments, we 
probably got about ten percent of the return focused on AIDS 
direct, and maybe another ten or 15 or maybe even 20 percent 
focused on other extremely important things, which have a major 
impact on AIDS, but which aren't thought of as AIDS 
investments, such as keeping girls in school, you know, 
advancing access in secondary school.
    So just to put in perspective, the total amount of real 
resource that came out of that is about half of what we would 
be looking toward the antiretroviral drug cost alone 5 years 
from now. So just to put it in a little bit of context.
    However, the suggestion being let's take the second 
tranche, let's do the second half and get that debt released, 
and to get it focused very specifically in these high endemic 
countries on AIDS, I think we would applaud such a move.
    Ms. Lee. Thank you.
    Dr. Birdsall.
    Dr. Birdsall. Yes. Well, I think the concept of some sort 
of link is a healthy one, a link of either debt relief or new 
lending, new transfers, new grants, to commitments within 
countries to address their own problems. That concept is very 
important.
    Of course one of the difficulties that we face is that that 
doesn't work by bribing countries. It only works when the 
commitment is already there within each country.
    So debt relief for everybody will not necessarily produce 
linking except in countries that are already committed.
    Ms. Lee. And we see more countries now beginning to be more 
committed to making this a national priority and developing 
strategies.
    Dr. Birdsall. Right, that's absolutely key.
    Ms. Lee. So I think as long as we make sure that that's the 
case.
    Dr. Birdsall. I would also just like to repeat something 
that Dr. Westin said, which is the other problem we face, those 
of us who are concerned with ensuring medium-term development 
in Africa, and concerned to ensure that the development 
assistance business that is carried on by the United States, by 
the European donors, and by these multi-lateral institutions, 
is done well.
    My concern, frankly, is that full debt relief will not, in 
itself, bring us progress in some of the countries of Africa. 
That will lead to more fatigue on the part of Americans who are 
fundamentally very generous.
    And I believe it will undermine our future ability to 
garner the new resources that are so badly needed.
    So I like the idea of linking, because it can hook into the 
commitments of countries, but I'm nervous about, you know, a 
kind of across-the-board linking that ties the hands of the IMF 
and the World Bank to do certain things no matter what. And not 
to be measured in the way that they respond to good performance 
and real commitments in the different countries.
    Chairman Bereuter. The time of the gentlelady has expired. 
We'll try to get back for another round.
    Ms. Lee. OK. Thank you, Mr. Chairman.
    Chairman Bereuter. The gentleman from Connecticut, Mr. 
Shays, is recognized.
    Mr. Shays. I thank you all for being here. We've had two 
people that have returned recently from Africa congressional 
trips, and the Members who have gone on those trips have 
described an Africa that I can't even comprehend.
    I'd like to know what country has the ability to pay its 
debt of any African country? I'm mystified in some ways by the 
dialogue, because I don't know any country that seems to have 
it's head above water in Africa.
    What country should I focus in on with its head above 
water?
    I'm asking the question. You can respond. I'm asking any 
one of you.
    Dr. Arhin-Tenkorang. I think you're right in saying truly 
there are no countries which would meet the kind of criteria 
that Dr. Birdsall suggested we should use for selectivity.
    And when she says you reward countries, you penalize 
countries who have been performing well, I would like to say, 
you're not, by refusing to cancel the debts, you are penalizing 
people who have not had any involvement in real practical terms 
in their current debts that exist.
    Those debts have come about through the actions of their 
leaders in conjunction with the international leaders, such as 
the advice given by the World Bank. So I think to say that 
you're rewarding governments by allowing----
    Mr. Shays. You're away somewhere where I'm not. I am so 
basic, I'm not even up to your level.
    Dr. Arhin-Tenkorang. No, I'm sorry, I apologize. It is not 
in response to your question.
    Mr. Shays. You don't need to apologize.
    Dr. Arhin-Tenkorang. It's a response to the number of 
comments the doctor has made. I'm sorry.
    Mr. Shays. Let's start over again. Tell me one country that 
has an economy that has the ability to pay back its debt in 
Africa?
    Voice. Botswana.
    Dr. Birdsall. I think with the enhanced HIPC initiative, 
there are countries. Botswana is an obvious one. But there are 
other countries where, with the enhanced HIPC initiative, and 
continued support from the World Bank, the IMF, the European 
donors, the U.S., Uganda's doing reasonably well, Senegal is 
doing reasonably well.
    These countries are growing.
    Mr. Shays. Describe to me Uganda and how it's doing 
reasonably well. That's news to me.
    Dr. Birdsall. Well, primary school enrollment has doubled 
in the last several years in Uganda.
    Mr. Shays. So how many people, so it's doubled, doubled on 
what base?
    Dr. Birdsall. The poverty rate has been reduced from about 
60 percent of the population to an estimated 30 percent of the 
population. It's still outrageously high. But it has been 
reduced dramatically.
    That's a rate of reduction in one small country in Africa 
that is as fast as was accomplished in the miracle economies of 
East Asia.
    Mr. Shays. And this is over the last how many years?
    Dr. Birdsall. Five, six, seven years in the 1990s.
    Mr. Shays. What would be another country?
    Dr. Birdsall. Mozambique has been growing at 7 percent a 
year for the last few years. I mean, we have to recognize that 
these countries that are so poor----
    Mr. Shays. Ma'am, Nancy, I mean, excuse me, Dr. Birdsall, 
just answer the questions. I just want to know. Tell me, we've 
got two countries that are doing reasonably well. Who else?
    I find this an astounding dialogue, because I find my mind 
must be somewhere totally different than where everyone else's 
is. We have two countries.
    Name me another country?
    Dr. Birdsall. Senegal.
    Mr. Shays. OK.
    Dr. Birdsall. Mr. Davis, you're right. The problems are 
deep seated.
    Mr. Shays. Just keep going. Tell me another. We've got 
three. We've got a lot of countries in Africa.
    Dr. Birdsall. I'm sorry, I'm not enough of an expert on the 
growth rates.
    Mr. Shays. Now that we've got three, I just, I just, it 
strikes me that the condition----
    Dr. Birdsall. Ghana.
    Mr. Shays. ----of our African countries are in a pathetic 
state, and so we are just kind of moving along and somehow 
we're trying to imply someday they're going to be able to pay 
off their debt.
    Dr. Birdsall. I think that my concern, and if you don't 
mind my having a dialogue with my colleague on the panel 
indirectly through you, my concern is that debt relief can 
help, but we cannot assume that it will solve the problem.
    Mr. Shays. I am not even at the point of solving the 
problem. I'm just, I just see people who can't swim drowning 
and where we loaded them down with debt, their governments took 
it. I see----
    Tell me a model government, tell me a government I can 
respect in Africa?
    Dr. Birdsall. In terms of----
    Mr. Shays. I'm not saying there aren't, I'm just asking for 
the answer to the question. And there's such hesitation in 
responding to the question. You should be able to go one, two, 
three, four. You should be able to tell me who these are.
    Dr. Birdsall. Well, but I can't, we can't, because it's not 
a simple, there is no simple answer.
    Mr. Shays. Why?
    Dr. Birdsall. Could I go back to----
    Mr. Shays. No. You can't go back.
    [Laughter.]
    Dr. Birdsall. I'd like----
    Mr. Shays. I've got three questions.
    Dr. Birdsall. I'd like to make the point----
    Mr. Shays. No, I'm sorry, you can just wait. We've got 
three so far that you've been able to name.
    Dr. Birdsall. OK, I'm sorry.
    Mr. Shays. I would like to know of a country in Africa that 
I can turn to, a government that I can turn to, a government I 
can respect.
    Dr. Arhin-Tenkorang. Ghana.
    Mr. Shays. Ghana will be one.
    Dr. Westin. Mr. Shays, can I say, can I add one thing about 
Uganda?
    Mr. Shays. Yes.
    Dr. Westin. Uganda has instituted, in the last several 
years, a plan to involve citizens. Uganda was one of the first 
countries to have participatory poverty assessments, which in 
some sense is considered the model for the poverty reduction 
strategy papers, which are now part of the new concessional 
lending facility.
    And I know in my testimony, I talked about how that is 
difficult to do, but Uganda has made the effort and it seems to 
be paying off there.
    Mr. Shays. I know some countries are making the effort. I'm 
just wondering where they end up. And I understand that a few 
countries are making the effort so we can say, if we forgive 
the ones who aren't, we are punishing the ones who are.
    I just really wonder if we have to take a very drastic look 
at Africa and acknowledge that we have too much AIDS, we have 
too much poverty, we have governments that simply don't know 
how to run themselves, and so my problem is, I feel this is an 
academic conversation. I feel in the end they're not going to 
pay their debt anyway.
    Chairman Bereuter. Mr. Shays, we need to move on, but Dr. 
Sherry's been trying to give you some response, if you want to 
take it?
    Dr. Sherry. I just wouldn't be able to not respond to the 
question or give the implication, somehow by not responding, 
that there aren't a large number of governments in Africa whom 
you can respect.
    I think there are a large number of governments in Africa 
who are wrestling with enormous problems. I think the answer to 
your first question, who can repay these things?
    Well, it's a shrinking number. And even if we look at some 
of the non-HIPC countries, Botswana, Zimbabwe, South Africa, 
and we factor in what's happening in AIDS, we're going to be in 
a different situation. We're going to, if we continue like 
this, we're going to actually grow down those economies as we 
start to get the full implication of the AIDS epidemic with a 
30 percent prevalence rate.
    Mr. Shays. That's my point.
    Chairman Bereuter. Thank you.
    We need to move on to Mr. Watt. The gentleman is 
recognized.
    Mr. Watt. Thank you, Mr. Chairman.
    I want to ask a pretty basic question too that I'm not 
clear on. Which is, we're engaged in a debate in the Congress 
about the provision of financial assistance to other countries 
for family planning, and that debate has gotten tied up into 
heavy political rhetorical discussion about contraception and 
abortion and so forth.
    The question I want to ask is, what impact is that having 
on the ability to confront and deal with the prevention of HIV 
and AIDS, if any?
    I don't want to presume this having any impact, but if it 
is having some, then I think we need to know that, because 
we're operating again in one of these Shays situations. We may 
be operating in a never, never land here where we think we're 
engaging in some intellectual discussion, yet we're having some 
real practical impact.
    Can anybody address that for me?
    Yes, Dr. Sherry.
    Dr. Sherry. I can take a shot at one part of it, and give 
you a couple of examples.
    For instance, if we look at the number of condoms that are 
currently distributed in Sub-Saharan Africa per sexually active 
male, it's about three per year.
    So in terms of not even a full range of family planning 
options, but just a condom which I think just about everybody 
agrees is essential to have out there in terms our HIV 
objectives, we're actually talking a lot about it but we're 
just not doing it.
    And if we look at even what the basic services are out 
there in terms of basic anti-natal care, and I mean extremely 
basic anti-natal care, we're talking about perhaps 40 percent 
access.
    So we are still faced with a situation where half the 
population of the continent doesn't have access to even the 
most basic of services.
    And so the debate does become a little bit theoretical. I 
mean the bottom line, sir, is that we're just not moving the 
money that's required to deal with the problem.
    We didn't make these numbers up. We've got a $10 billion 
problem.
    Mr. Watt. But with the money we are moving is the conflict 
we're having here in Congress about contraception and abortion. 
Is it having an impact on the money that is out there to be 
moved?
    Dr. Birdsall. You know, I think, if I can comment on that, 
probably in financial terms, not much of an impact but I think 
it's a great shame--I would say this as an American--that we're 
coping with the policy which restricts information to people 
about sexual relations, that restricts the capacity of women in 
particular to get information about the full range of options. 
And then in the end is restricting the capacity of America's 
very many excellent civil society non-profit groups to engage 
in partnerships with comparable groups in the countries of 
Africa to bring family planning services to more Africans.
    So it's impossible to pin down the amounts, the cost in 
financial terms, but I think frankly that it's a shame that we 
have to be in this position where we seem in a world where 
information is key to improving public health in Africa, that 
we're in effect on the side of restricting information.
    Mr. Watt. Well, maybe I should ask this question before I 
run out--well, the light came on, but let me ask the question 
anyway, Mr. Chairman.
    And maybe if we don't have time to answer it, we can come 
back to it.
    How do we get ourselves out of this box? I mean, if this 
debate, if this conflict within ourselves about abortion and 
family planning and all of this is having an impact on our 
ability worldwide to deal with the AIDS pandemic, how do we get 
ourselves out of this box?
    Chairman Bereuter. Mr. Watt, may I regard that as a 
rhetorical question that we've all struggled with?
    [Laughter.]
    Mr. Watt. Well, I want to hear the experts, at some point, 
tell me how to get out of it.
    Chairman Bereuter. I have a dilemma here in that I need to 
adjourn the hearing in about 6 minutes.
    Mr. Watt. OK, I'll yield back.
    Chairman Bereuter. What I'm going to suggest is I'll let 
Mr. Sanders share the remaining six time among his three 
Members there, including himself, and 2 minutes for Mr. Shay.
    Mr. Watt. I'll yield back and get my answer----
    Chairman Bereuter. It's your option.
    Mr. Sanders. OK, I'll split it.
    Mr. Watt. Ms. Lee says she'll tell me the answer to it.
    Mr. Sanders. And I'll give it to my colleagues.
    Mr. Chairman, put me down for two.
    I think Chris Shays, as he often does, put his finger on 
the issue here. And that is you have a crisis of unimaginable 
degrees, which is consuming the lives of millions and millions 
of people.
    And I think after all is said and done today, the question 
is, do we continue to do business as usual and worry about 
whether children will die depending upon the price of coffee or 
not?
    Or do we say that there is a moral obligation, not only for 
the United States, but for the rest of the industrialized world 
to move and move quickly to cancel the debts so that African 
resources can be used for AIDS prevention and treatment, for 
health care, for other basic needs.
    Do we move aggressively so that the United States and other 
wealthy countries fill the huge gap in trying to save a 
continent which is, in many ways, dying.
    And I think that the moral imperative is that we have got 
to see the enormity of this problem and go forward in a bold 
way.
    Chairman Bereuter. Mr. Sanders, would you yield for an 
announcement.
    Mr. Sanders. Sure.
    Chairman Bereuter. Mr. Shays is willing to take the Chair, 
and so we'll go to the normal 5-minute rule for another round, 
and so if you wish to continue, you may for another 3 minutes 
or so, Mr. Sanders.
    Mr. Sanders. You've ruined my whole style here. That was a 
speech and now I----
    [Laughter.]
    Chairman Bereuter. And I thank the panel, since I need to 
leave, and I thank you very much for your testimony. We would 
like to follow up, but of course we can't ask you to, to our 
written questions, but if you're willing to, I'm certain we 
have a few more, I'm sure.
    Mr. Shays. [Presiding]. Thank you.
    Mr. Sanders.
    Mr. Sanders. Let me take a few more minutes and my 
colleagues will have their 5 minutes.
    There was some discussion and perhaps difference of opinion 
a few moments ago on the issue of user fees.
    And I think, as I understood, Dr. Birdsall seemed to think 
that was a straw man case, that that really wasn't going on in 
Africa now.
    Dr. Arhin, or Dr. Spencer, are you in agreement with her 
that it is not an issue?
    Dr. Spencer. It is an issue. It is an issue, yes.
    Dr. Birdsall. Sorry. Just can I clarify. I don't think that 
the IMF and the World Bank are pushing, insisting, or even 
encouraging user fees in Africa.
    Mr. Sanders. OK.
    Dr. Spencer.
    Dr. Spencer. I'd simply say that as recently as 2 weeks ago 
here in Washington at a meeting dealing with structural 
adjustment, seven persons from the World Bank Staff came and 
defended user fees for health. They do concede over education, 
but continue to advocate the value of user fees for health.
    So this is not an issue that it set aside, there's still an 
issue with user fees. So it's an issue that remains.
    Mr. Sanders. Dr. Arhin.
    Dr. Arhin-Tenkorang. Yes. I also agree that it is an issue, 
and I think there's the current draft policy of the World Bank 
actually refers to user fees in health, and suggests that we 
should try to excuse or extend it. But it means that it is 
still in favor of it, but it's an option for exemption.
    And I'm saying that everybody in that situation is poor, so 
there's no point in having it in the first place.
    Mr. Sanders. Dr. Birdsall, there appears to be a difference 
of opinion with your assertion that it is a straw man regarding 
the IMF.
    Do you want to respond to that?
    Dr. Birdsall. Yes--no. I mean, if I'm wrong terrific, then 
let's press it. I don't believe--my view frankly is that if the 
World Bank, in specific cases, is talking about user fees, it 
is to ensure that there are transfers from the rich to the 
poor, not to soak the poor.
    Mr. Sanders. Dr. Arhin was suggesting that there may not be 
too many rich in Africa to transfer money.
    Dr. Birdsall. Then we could talk about that too, I suppose.
    Mr. Sanders. OK, Mr. Chairman, thank you. I think my 5 
minutes are up.
    Dr. Birdsall. Mr. Chairman, could I make one comment in 
response to just Mr. Sanders point?
    I think, on the issue of AIDS in Africa, I would hope that 
this subcommittee would strongly recommend that the U.S. make 
an important contribution to the Global Fund for AIDS. To 
follow up the initial indication with a very strong 
contribution.
    That, to me, is what is the moral challenge we face. I'd 
just like to repeat that unfortunately, canceling the debt of 
all the countries in Africa will not help us meet that moral 
challenge, and it is simply passing on to other poor countries 
the cost of dealing with HIV in Africa. It's passing it on 
them, rather than taking it on by U.S. taxpayers.
    Mr. Sanders. Thank you.
    Mr. Shays. I thank you.
    Ms. Lee, you have the floor for 5 minutes.
    Ms. Lee. Thank you, Mr. Chairman.
    Let me just say, I think we should cancel the debt in 
addition to a significant contribution to the Global AIDS Fund 
in addition to providing for a development assistance in 
countries which deserve this development assistance, primarily 
because of what our previous witness mentioned.
    And that is that people in these countries did not incur 
these debts and it makes no sense that they have to pay for 
them. Because in fact, they were not parties to these and now 
they're suffering from malaria, tuberculosis, HIV and AIDS, and 
I think we should allow the countries to get on a decent 
footing by canceling the debt.
    The International Global AIDS Funds, as I mentioned 
earlier, we passed the World Bank AIDS Trust Fund last year, 
and a measly $20 million was appropriated, which was that was 
last I think December, which was unbelievably low, if you ask 
me, and I think most of us would agree to that.
    And I hope that this year, we can move forward and complete 
the negotiations of the World Bank AIDS Trust Fund and at least 
step up to the plate with a billion dollars. And a billion 
dollars is again nothing given the surplus we have in this 
country, and the fact that we should take the lead, the moral 
leadership for one, and the financial leadership in the world 
to be able to leverage this money, because it's my 
understanding that through the World Bank Trust Fund, we could 
leverage one to nine.
    So if we did a billion dollars, hopefully we'd be able to 
leverage at least $8 or $9 billion. And I think that's an 
excellent first start.
    So let me finally answer my colleague's question with 
regard to the whole family planning issue. The way we address 
that is by not taking out of the Foreign Assistance 
Authorization Act, the State Department Authorization Act, the 
family planning amendment that we put in last year, which would 
allow family planning services to be provided, while at the 
same time, sticking to our U.S. law with regard to abortions.
    No U.S. taxpayer money has been allowed for abortion since 
1973, so hopefully tomorrow, we'll be able to keep that 
amendment in the State Department Authorization Act.
    Let me just ask any of you, probably Dr. Birdsall, because 
you kept mentioning new lending. And I'm concerned about new 
lending in Africa especially.
    Aren't there ways to provide African countries and 
developing countries financial assistance without forcing them 
to go into additional debt in the future, given what they're 
dealing with, because this could be a vicious cycle if we talk 
about canceling debt and providing for new lending.
    Dr. Birdsall. Yes, I think it's a very important question.
    You know, the first thing to bear in mind is that most 
World Bank lending in Africa, and even IMF lending now, is 
equivalent, 80 percent of the size of the loan is, in effect, a 
grant.
    Why? Because countries have 40 years to pay back and they 
don't start repaying the debt for 10 years. So the first thing 
to understand it that it's kind of already grants.
    On the other hand, it does generate reflows in the future 
which can be used for poor countries in the future.
    So my concern, as I noted before, is that if all the debt 
is canceled, the reflows are gone, and then the countries in 
the future won't have the new lending that they need.
    I'm not sure I answered your question. I apologize.
    Ms. Lee. So you think new lending, though, is a strategy 
that would help rather than hurt?
    Dr. Birdsall. Absolutely. New lending is absolutely 
critical. And we also have to recognize that in the past, most 
of the debt service, indeed in most countries, all of the debt 
service was financed by new lending.
    Ms. Lee. New lending with conditions or new lending based 
on new terms?
    Dr. Birdsall. New lending that should go to countries that 
are addressing the needs of their people, including dealing 
with the HIV/AIDS problem, that are directing more of their 
public expenditures to education and health that are clearly 
committed to poverty reduction; that are not wasting money. 
That don't have corrupt leadership and so on
    New lending for those countries. That's what will be 
better, in my view, for the poor in Africa than anything else 
we can provide.
    The problem with new lending, if there's debt cancellation 
is that this subcommittee would have to recommend to this 
Congress very large increases in foreign aid.
    Ms. Lee. Which is what we should do.
    Dr. Birdsall. Which is what you should do. But as my long 
experience leads me to worry, that there might not be the 
equivalent new appropriations that would cover the needs in a 
continent like Africa as adequately as some reflows from some 
countries over the next 20 years.
    Ms. Lee. Thank you, Mr. Chairman.
    Chairman Bereuter. Thank the gentlelady.
    The Chair intends to ask Mr. Bentsen and myself, Mr. 
Sherman and Mr. Watt. Mr. Bentsen, do you have a question?
    Mr. Bentsen. Thank you, Mr. Chairman. I want to back to the 
issue here that you're talking about. Because again, we went 
through this a couple of years ago and I raised this issue and 
I didn't want to be the hard-hearted one on the panel. But it 
just seemed to me that all we were doing was forestalling the 
inevitable when we say, well, we're going to forgive your 
debt--which I am in favor of--but we're going to let you go 
back to the window and borrow again.
    And you're right. If you're borrowing at a concessional 
rate of .5 percent over 40 years, a 40-year amortization that, 
you know, you're getting in effect a negative interest rate, 
but still paying back a portion of the principle, and still 
becomes a liability.
    And it seems to me that we are almost doing more damage, or 
the world lending organizations are doing more damage, the 
Fund, the Bank and the banking community, when we are allowing 
lending for debt service payment purposes on a regular basis. 
It's like opening the day loan window to poor countries and 
really only making them poorer.
    And I concur with what you're saying that if we moved away 
from that we would have to greatly enhance our level of foreign 
aid, which arguably would be politically difficult. But I think 
that probably is the only thing that works, and I think 
ultimately we would patch that together.
    But I also have to say I concur that--and I'd like to get 
the viewpoint of the other members of the panel on this--and I 
appreciate the fact that a lot of this debt was incurred by 
prior governments without involvement of either NGOs or civil 
society or anyone else, and that the people are being forced to 
pick up the tab for this. And I think that is a legitimate 
argument.
    But I think there is also a legitimate case to be made that 
if we are just--that if we have no--and I don't know if it's 
``we'', but if there is no real long-term economic development 
strategy; that all it's going to be is either through forgiven 
debt, grants, loans, whatever, that this is a problem that will 
go on for another 50 years or another 100 years. And there has 
to be some strategy tied to grants, to loans. And since there 
is no real marketplace that would determine the price of loans 
or grants, then we have to develop an arbitrary means by which 
to do that to ensure that mechanisms are made.
    Because I do think, Dr. Birdsall, you are correct that 
ultimately if you do not create the economic environment, 
you're never going to create the growth.
    At the same time, you can't have strong worker productivity 
if you don't have a trained workforce and you don't have 
adequate health care and health delivery services.
    And the other thing I would just say is in the naive amount 
of knowledge that I have on the subject, that it would seem to 
me in countries with the per capita income that it's highly 
unlikely--or it's highly likely that most the people that 
access the public health facilities are at or below the poverty 
level. And the idea that they would be charged anything when we 
don't really do that in the United States since we generally 
don't charge people at or below the poverty level for health 
care service if they're enrolled in the Medicaid program, the 
same would be there.
    I understand the idea of wanting to transfer wealth. But I 
think Mr. Sanders is right. There's not a lot of wealth to 
transfer.
    But I'd be interested in your comments. What do we do? We 
can't just shower money. There needs to be some strategy, and 
how do we develop that strategy? From anyone.
    Dr. Arhin-Tenkorang. I feel strongly that you've described 
a vicious cycle which I mentioned in my testimony. I believe 
that the Bank and the IMF and other donors have been trying for 
many years to break the cycle.
    I think to me the problem is they just do not have that in-
depth knowledge of the social-economic situation of African 
countries to be able to come up with that strategy. And I 
strongly believe at this present time there is the possibility 
to get together strong teams of people who have in-depth 
knowledge of African situations who if you'll give them the 
time and the resources can come up with these strategies.
    And I think we should separate the AIDS crisis from the 
continuing problems that we've had with development assistance. 
Those ones Africa could limp with for a long time to come, 
moving forward and slowing coming back a couple of steps and 
going forward. But the AIDS crisis must be solved today. 
Otherwise in 20 years, there will not be any poor countries 
that will need to have access to the inflows that Dr. Nancy is 
talking about.
    Mr. Bentsen. And I know my time is up. But would you think 
it is fair that the, whether it's the Fund or the Bank or 
whoever, that part of that strategy should be the 
implementation of some fundamental economic principles that 
would foster growth?
    Dr. Arhin-Tenkorang. They have attempted to do this. And, 
because of lack of real understanding of what the issues are, 
they are not the same as what are in the U.S. or what you learn 
in your economics classes at Harvard or anywhere else.
    And, because of that lack of understanding and real 
appreciation of the practicalities, they have failed to make 
that impact. And so I say today there are African talents all 
over this world who if are brought together and allowed to have 
that freedom will help to come up with a strategy.
    I really believe that the problem is there has to be a new 
approach. And where it is not the same old policies which are 
used to underpin strategies that development assistance is 
allowed to support.
    Thank you.
    Dr. Sherry. I think we're mixing sometimes objective with 
mechanism. I think absolutely clearly that if a poor family was 
given the choice between paying nothing and getting a good 
service as option one, paying nothing and not getting a service 
at all, or paying something and getting a service, they would 
choose option one. I mean, they would obviously like to get the 
service, the essential health service without paying it out of 
pocket if that option is available.
    And of course in many cases, that option isn't available. 
And so you only get into this next issue of choosing between a 
user fee with a service or no fee and no service, you get into 
that situation only when there isn't the first option that we 
would all like to have.
    Now it's the same thing at the country level. I think if we 
go up to the country level and say would a government like to 
get increased development assistant grants without any 
conditionality, I think the answer is absolutely they would 
prefer that.
    But I think that's not a real possibility. If there's 
another possibility that they can get grant assistance with 
conditionality or loan assistance with conditionality, I'm 
certain that most would choose the grant assistance with 
conditionality. So it's just a question of being practical. If 
there is much more resource made available through a 
conditional grant window, I think countries will line up there 
instead of at a conditional loan window. But the issue is, does 
that window exist? And I think currently it doesn't.
    Mr. Shays. The gentleman's time has expired but we can keep 
going for a bit. I appreciate the patience of the panel. And I 
didn't get out of the wrong side of the bed.
    But what I'm frustrated by, and I use that word very 
infrequently, is the people who have traveled to Africa 
described to me conditions that are beyond my comprehension. 
Peace Corps volunteers that have gone back to visit the 
countries they used to serve in come back and weep. And I was 
thinking that this is, in some way it's almost an inherently 
dishonest conversation.
    Because we're trying to I think justify a system that is 
totally broken down, but we don't want to look each other in 
the eye and say it's broken down.
    I believe that if you tell Members of Congress the blatant, 
outright truth that ultimately they do the right thing. Because 
when we tell the American people the truth, they ultimately 
want us to do the right thing.
    If I were where you are, I think my testimony would be the 
following. I'd like to know how you would disagree. I would 
basically say that most of Africa's governments have fallen 
apart; that they don't sustain economic growth. That they are 
frankly inherently corrupt. That they are weighted down by 
extraordinary debt. And that the only way they survive is that 
they get additional money by suggesting that they can pay back 
something, and they get further in debt. And that there is a 
big day reckoning; that the middle class has been decimated by 
AIDS. That there are schools with no teachers, and there are 
kids with no parents. And that the culture of the tribes have 
broken down.
    And that we better face up to this, recognize the system is 
just going to collapse, and decide to do something different. 
Tell me which one of you would disagree with what I've said and 
tell me why. Yes, sir?
    Dr. Spencer. Yes, sir. I do disagree with what you said. I 
think that we can itemize any number of problems and crises, 
and I can match those with you easily. But I think we are 
looking at a situation in which there are a complex range of 
factors that have led to these crises, and there are pieces we 
can address.
    Debt cancelation is a recognition that one aspect of the 
realities of Africa's relationship with the rest of the world.
    Mr. Shays. I didn't even mention debt cancelation. I didn't 
even mention it. That wasn't my testimony. What I said was that 
the system is just collapsing.
    Dr. Spencer. And I'm saying that part of the system 
involved overburdening debt that African nations could not 
address. And until that is addressed, they will be unable to 
have the resources to address health care and education and any 
range of numbers of--safe water, and the list goes on--that 
would provide a framework by which economic development and 
political stability can emerge and can be sustained.
    I also do not share your view that we can look at an entire 
continent with corrupt leaders and incompetent government and 
people who do not have the resources and drive and hope to 
address their own needs. That is happening all over the 
continent. And I think you're seriously mistaken in that 
analysis.
    Mr. Shays. OK. Anyone else? I'd like you to come back, Dr. 
Spencer, and give me ten countries that you can give--and I'm 
going to give you a chance--that you can tell me the 
governments aren't corrupt, that they aren't losing, their 
economies are growing, and that they aren't ravished by AIDS. 
Give me ten countries, if you would.
    Dr. Sherry. I would just state it just a little bit 
different. I think that it is a continent for which there are a 
large number of fledgling democracies struggling without the 
benefit of long democratic traditions. That many of those 
governments are populated by brave and noble people who are 
working against relatively insurmountable odds to try to make a 
process which is often inherently corrupted by poverty work.
    And in spite of all of that, their infrastructure, in 
particular their health and their social service 
infrastructure, is collapsing under the weight of the AIDS 
epidemic. And that in order to be able to respond in a 
meaningful way to that, the international community has got to 
reach into their pockets and come up with some very significant 
resources, through whichever mechanism they're prepared to get 
it there, to put stiff conditionalities, if that's what's 
required in terms of how that money is used transparently, how 
it's used effectively, how the waste, fraud and abuse are drawn 
out of it.
    But it does very little good for us to stand back and to 
look at people in their misery doing the absolute best that 
they can under the situation.
    Mr. Shays. That's another issue, though. You said it very 
eloquently, but it's another issue. You said there are good 
people who are trying their hardest to survive. And you say it 
doesn't do any good to look at it and say what I said. But the 
fact is, that's the reality. And they're good people in a 
country where their government systems literally hardly exist; 
where they have a hard time getting food from day to day.
    So, you know, I'm in a whole different world.
    Dr. Birdsall. OK. I have a list of nine countries.
    Mr. Shays. Good.
    Dr. Birdsall. These nine countries--I talked to a colleague 
who is the Regional Chief Economist at the World Bank, asking 
him what are the countries where it's worth ratcheting up 
assistance, because performance has been adequate.
    Mr. Shays. No. Define ``adequate'' for me.
    Dr. Birdsall. It means that their governments are not 
wholly corrupt. That they are managing----
    Mr. Shays. ``Wholly corrupt'' is an interesting term.
    Dr. Birdsall. That in some--exactly. I mean----
    Mr. Shays. So payoffs aren't required.
    Dr. Birdsall. Well, I can't--I shouldn't try to interpret 
what was their analysis. It means that in the performance 
ratings that World Bank staff do, they rated these countries as 
reasonably able to manage.
    Mr. Shays. No. But I'm just trying to--see, my frustration 
is, your word ``reasonable.'' Maybe you worked so long that 
your level of expectation is so low that ``reasonable''--is 
there a government where you don't have to have payoffs? Is 
there a government when they grant that the grant actually goes 
to where it's supposed to and doesn't go into someone's pocket?
    Dr. Birdsall. Yes. I'm sure there are.
    Mr. Shays. OK. Why don't you give me those nine countries?
    Dr. Birdsall. The nine countries are Senegal, Uganda, 
Tanzania, Mozambique, Madagascar, Ghana, Burkina Faso, Mali. 
There is a tenth country, Zambia, which has been having a lot 
of difficulty. But in the last year or two, they finally 
undertook an extremely difficult----
    Mr. Shays. Now of those ten countries, how many of their 
economies are growing?
    Dr. Birdsall. Senegal, Uganda, Tanzania, Mozambique--I'm 
sorry, I don't--and Ghana, Burkina, all of them.
    Mr. Sherman. Mr. Chair.
    Mr. Shays. All of them are growing?
    Yes, Mr. Sherman, you can have the floor if you'd like.
    Mr. Sherman. OK. I'll try to stay within 5 minutes.
    Mr. Shays. No, you can have the floor.
    Mr. Sherman. Two issues seems to have emerged. The first is 
whether we should simply forgive all debt. And forgiving debt 
or making new loans or giving money is something we should do 
only to good governments that are doing a good job. And we can 
differ on which governments deserve that kind of help.
    But the idea that every time you have poor, honest people 
in a country who have suffered, that that means you should make 
a gift to their government assumes that helping their 
government helps the people. Living in this country, we tend to 
think that that's the way things work. I would hope that we 
don't look at these loans as a way to help the United States. 
That is to say, the loans that are repaid, I don't think that 
money is coming back to the U.S. Treasury.
    Money that is paid back to the World Bank, the IMF, and so 
forth, is available to loan to the most needy and to the most 
worthy countries.
    You're preaching to the choir here. I mean, the only people 
who are going to show up for a Subcommittee meeting like this 
are people who are very concerned about AIDS in Africa and very 
supportive of foreign aid in general. One of my proudest 
moments this year is when our Secretary of State praised my 
amendment which passed last year increasing U.S.-authorized, or 
actually appropriated funds, for fighting AIDS in Africa.
    Now the other part. It took the money away from the World 
Bank and gave it to USAID to be used to fight AIDS in Africa.
    And that's really the question before us. It's not whether 
we support doing more and even more beyond that to fight AIDS 
in Africa. The question is, do we do it through USAID or do we 
do it through these multinational institutions? I have come to 
Congress to fight for more foreign aid. But our participation 
in some of these international institutions is dramatically 
undermining my ability to do that and I think risks whether 
we'll have foreign aid at all 4 or 5 years from now.
    I'll give you an example. Just last year, over American 
opposition, the World Bank loaned money to Iran. Now they're 
considering doing $750 million to Iran. I know it's a different 
window. But you would think that maybe if foreign aid is going 
to be safe from the political backlash, we had better pull much 
of our money out of institutions that are giving money to the 
Islamic Republic of Iran. Is there anyone who would like to 
raise their hands who could be certain that if we provide money 
to the World Bank or to the U.N. Fund that you can guarantee 
that not a penny will go to the government of Khartoum?
    [No response.]
    Mr. Sherman. I don't see anybody able to make that 
guarantee. So you ask us to come to the floor----
    Dr. Birdsall. There is a peculiar technicality which in 
fact might allow us to make that guarantee, which is that the 
resources used to lend to Iran are not generated by annual or 
every 3 years----
    Mr. Sherman. The request was about Sudan. Can you 
guarantee----
    Dr. Birdsall. I'm sorry? Sudan?
    Mr. Sherman. Sudan. I talked about my disappointments about 
Iran, my fears about Iran in the future, and then I shifted to 
Sudan. I was a little fast on that.
    Dr. Birdsall. I don't know if Sudan would be a beneficiary 
of a debt, of a complete debt writeoff either.
    Mr. Sherman. Well, can you guarantee that efforts to have 
the World Bank fight AIDS in Africa will not provide a penny of 
money or debt relief to the government in Khartoum? So what 
you're asking us to do--there are two ways we can go.
    We can fight AIDS in Africa by appropriating money, 
authorizing money for USAID. We can't do it here in this 
Subcommittee, but we can do it in the International Relations 
Committee and in the Appropriations Committee. And then we can 
go back to our constituents and say that the money was under 
the control of the United States, that it did not go--and that 
we didn't have the kind of situation where we're kicked off the 
Human Rights Panel and the government of Sudan is installed in 
our stead.
    Or you can instead tell us that we ought to put the money 
in the U.N., put the money in the World Bank, and then go back 
to our constituents and say, oh, yes, your tax dollars are 
being used for foreign aid. And, oh, by the way, just a little 
bit of it is going to the government in Teheran and just a 
little bit of it is going to the government in Khartoum.
    I think that the World Bank has disqualified itself as a 
politically viable avenue at this time for U.S. foreign aid, 
because it puts us in a situation where we not only have to 
defend the idea of giving our money to poor countries who will 
use it well. We have to defend the idea of giving it to a 
slave-trading regime.
    I know you folks have never faced a town hall talking about 
foreign aid. It is not an easy thing to do. Can you provide a 
reason--I know you can talk about leveraging, but of course 
USAID is leveraged since we shamed the Europeans or they shame 
us into doing more. If we put $1 million into USAID, I would 
expect the Europeans to do the equivalent one way or another.
    Other than the leverage issue, is there any reason why we 
should imperil the tenuous support for U.S. foreign aid by 
going through these organizations that could hijack our money 
to Teheran or Khartoum? Sir?
    Dr. Spencer. Sir, I think the real question for the Sudan, 
which is a country for which I would certainly not want the 
U.S. to be supporting, the real question is whether or not we 
are supporting a U.N. AIDS Trust Fund that was dealing with 
those funds responsibly in confronting AIDS anywhere in the 
world. And the question therefore is, if we are saving the 
lives of ordinary Sudanese who are suffering from AIDS, that is 
not a support for the Sudanese government.
    Mr. Sherman. I couldn't agree with you more except for one 
thing. Once you give the money to the U.N., they can do 
something as obscene as kicking us off the U.N. Human Rights 
Panel and installing Sudan in effect in our seat. And if they 
can do something that obscene now, couldn't--is there any--
that's why I asked the question. Is there any absolute legal 
guarantee that the money would be used to help people in Sudan 
and that not a penny would go to the government of Sudan?
    Dr. Spencer. There are some very detailed proposals 
floating around with regard to the independence of a potential 
trust fund, and I think that we look at those criteria and how 
we can apply those. This does not become a U.N. agency. This 
becomes a trust fund that can be administered by criteria that 
are established by all parties to it.
    Mr. Sherman. But trust funds are administered by human 
beings. Human beings are selected by votes, and we can get 
outvoted. And I haven't seen a trust fund that couldn't be used 
to in effect funnel the money to the government of Sudan if 
only the trustees wanted to do that. You can, even if you 
prohibit money from going to that government, trustees who wish 
to have that money go to the government. By the way, they 
wanted them to sit on the U.N. Human Rights Board, so it's 
quite possible this could certainly happen.
    I think my time has more than expired, and I thank the 
Chairman for his indulgence.
    Mr. Shays. Dr. Sherry, did you want to say something?
    Dr. Sherry. Just a couple of quick points of clarification. 
The U.N. did not kick the United States off of the Human Rights 
Commission. It was a set of member states of free-standing 
governments including your Western European allies who voted 
their representation in terms of who would represent whom in 
that Commission. And unfortunately, some people didn't do their 
homework in the lobbies in terms of negotiating that. So it was 
Austria that was elected to the Commission and not the U.S.
    But there's a lesson there in terms of doing your homework.
    The second point is is that I don't think that there is 
anyone in the U.N. system organizations, including the Bretton 
Woods organizations, who would make the argument that a country 
should put its money into a multilateral system instead of a 
bilateral system. I think one has to be a clever investor. When 
it suits--when you get best value for your resource in Channel 
A, you do best value, Channel B you do, but very often, you try 
to work the synergies between those two. There is a fundamental 
synergy, but it's not automatic. It's investor decision, and 
you're one of the investors.
    And then just finally, you do raise a profound dilemma for 
all of us. And the profound dilemma relates to, there is the 
adage that in democracies, people generally get the type of 
leadership that they deserve. But in extraordinarily poor 
countries, that's not the case. And so I think one has to step 
back and look at the difference between--on two points. One, is 
there a way in terms of basic humanitarian needs that one can 
find a way to service the needs of the people of Sudan, the 
people of Cuba, the people of Iraq, without those humanitarian 
resources going to their governments? Number one. And number 
two, one has to ask the question, can you tackle an infectious 
disease like AIDS in East Africa without doing it throughout 
East Africa? Does the virus respect the border? Do the people 
who don't see the borders respect the border?
    Mr. Sherman. Sir, I have to leave. I just want to say that 
if you think that it wasn't the U.N. that voted who would be on 
that board but the member states, it's obvious that the U.N. is 
its member states. U.N. decisionmaking was exemplified for us. 
But you're right. We have to decide between multilateral and 
bilateral organizations. But defending the multilateral has 
become untenable. And I thank the Chairman for his time.
    Mr. Shays. Thank the gentleman. I'd like all of you to be 
able to make whatever comments you would like to make. But Rev. 
Spencer, would your list of nine basically be what Dr. 
Birdsall's was?
    Dr. Spencer. Not exactly, no. I'd list Botswana, South 
Africa, Mozambique, Namibia, Zambia, Uganda, Tanzania, Ghana, 
Nigeria and Senegal.
    Mr. Shays. OK.
    Dr. Spencer. And I would think that by your analysis you 
could look at various places where they were weaker in one of 
your criteria and stronger on the others.
    Mr. Shays. Rev. Spencer, you realize you gave those names 
so quickly that I couldn't keep up with you. But you were 
trying to make the point that you had your list, and it's on 
the record and I can go back and read it. And I appreciate 
that.
    I'm not uncomfortable asking you for the list. I didn't 
hear that list come quickly when I asked the first time. I 
heard three in the course of my 5 minutes of asking the 
question. So if Africa has some defenders in both of you in 
those ten communities, I think that's good. And it's on the 
record and we can see about it.
    What I wrestle with are basic issues. I have a, like some, 
I have an equity loan on my house, and it proves useful when 
I'm sending my daughter to college. The funny thing for me is I 
get a statement every week and it says I can send, you know, I 
have to send them on $15,000 of debt, I have to send them $120 
or something that month to service the loan. I do that, and 
then I write out a $2,000 check to my daughter's college, and I 
made the loan deeper. And it's just a puzzling process for me.
    So it proves--I guess they want to know I haven't forgotten 
that I owe them money, but in a way, I'm struck with the fact 
that we want to help countries because we want to help the 
people in those countries. So we are extending more loans. And 
we are doing it by saying if you pay off some of the loan, you 
will get a larger amount. And I'm just asking if this just 
doesn't ultimately just slap us in the face? And maybe you all 
won't be before us at this table, but someone 5 years from now 
will take a look at your list and they'll say that was a list, 
but it was a superficial list.
    There are too many other things that we weren't taking note 
of. We weren't taking note of the fact that they're losing 
their middle class. We're not taking note of the fact that too 
many are dying of AIDS and so on. And I just wanted just an 
outright picture of what we're faced with, that's all. And what 
you're telling me is--and you're saying it because you believe 
it, and I'm happy that you do, and you may be right. But it 
flies in the face of everything else I'm being told.
    So let's get some more good stories out. What else do you 
want me to know that is contrary to what I read in U.S. News & 
World Report, what I hear my colleagues say, what I read in 
other magazines? What are these good stories out there that I'm 
missing?
    Dr. Birdsall. Could I extend your metaphor a little to try 
and answer your question?
    Mr. Shays. Sure.
    Dr. Birdsall. Suppose that you live in a bad neighborhood. 
You're paying your $120 a month and you're keeping up your 
house.
    Mr. Shays. Right.
    Dr. Birdsall. But you live in a neighborhood in which 
several of the other homeowners are trashing their house.
    Mr. Shays. Right.
    Dr. Birdsall. Somebody has been sending them the $120 a 
month so that they could pay the bank, and the bank hasn't 
figured out what the problem is, and that goes on for 10 years.
    Mr. Shays. Right.
    Dr. Birdsall. But now the situation has changed. Now your 
bank is coming around and seeing what's going on in each house. 
And they're deciding that in the case of the homeowners who are 
trashing their house, they're going to slow down. They're not 
going to send them new money. They're gong to forgive some of 
the debt so that they don't owe $120 every month, they only owe 
$40 every month, in the hope that some of those additional 
resources will be used by these homeowners to maintain their 
house. But they're not going to do it all, because if they do 
it all, there's a chance that the homeowners will simply take 
whatever is left, they'll carve it up and walk away.
    Should we punish you also if you're--let's ensure that if 
you're in trouble with your $120 a month, you can have access 
to increasing your home equity loan if you need the resources 
to invest in education of your daughter or your son, let's 
ensure that we can provide them to you, while ensuring at the 
same time that we don't keep providing additional resources to 
your neighbors, who will simply strip their home of its value 
and walk away.
    We can at the same time, if the neighbor has children who 
are sick, let us find other ways, including through the Global 
Fund for AIDS, to directly help those children without mucking 
around in the debt of their parents. Let's keep their parents 
accountable for the debt on the house that they're trashing. 
But let's find a way to directly ensure that those children can 
have access to schooling, to health care.
    That's the way I see this problem in Africa. There's a role 
for the World Bank and the IMF, and it should be to deal with 
the homeowners that are taking care of their homes. And there's 
a role for more money from the U.S. to a Global Fund for AIDS 
to ensure that children, whether they're in a good home or a 
bad home, can be helped.
    Mr. Shays. The only change in the analogy I'd make is that 
we keep giving them loans to expand their house. And that's 
where I have my problem.
    Dr. Birdsall. Well, if you're a good homeowner, you ought 
to----
    Mr. Shays. We're not just carrying the loan, and they're 
not just paying it. We are putting new money in. And I'm not 
sure how that new money is being used.
    Dr. Birdsall. Right.
    Mr. Shays. Do you want to say something, Dr. Westin?
    Dr. Westin. Yes.
    Dr. Westin. Yes. I just wanted to go back to the point of 
what is the new emphasis in the concessional lending facility, 
the poverty reduction and growth facility. The new emphasis in 
there, Mr. Shays, is that countries have to develop a country-
owned poverty reduction strategy.
    And as we said, this involves civil society. There are 
challenges to doing this. Both the World Bank and the IMF have 
suggested that bilateral donors may wish to help with 
assistance in creating these strategies.
    But the point is that there needs to be buy-in from all 
segments of the society, not just the government.
    And my further point is that debt relief is a first step, 
the HIPC initiative is a first step, but I think it's important 
to not have unrealistic expectations that freeing up countries 
from paying debt service is automatically going to lead to 
higher growth rates.
    The point is that they are going to need assistance, they 
are going to need access to further borrowing in order to 
invest in the poverty reduction strategies that these papers 
lay out, and that really is their only hope for growing.
    We don't know yet really if this is going to work. I think 
there are 22 countries that are projected to finish their 
poverty reduction strategy papers by the end of this year, and 
in fact that is something that we propose to look at to see, 
once they have been completed, to do an assessment of them, and 
what we think the outcome will be.
    But the point remains that debt relief is not going to 
solve the problem, because they haven't been paying their debt 
service with their own resources as much as they have with 
bilateral assistance and from other borrowings.
    Mr. Shays. I never thought that really solves the problem. 
I just don't know how people pay their debt. That's my problem.
    And making an assumption they pay their debt, because they 
basically take what we give them and use some of it to pay 
their debt, I mean it seems like a strange game. They get more 
than they pay, but in actual fact, they are in a sense taking 
what we gave them and giving us a little of what we gave them, 
and giving us the impression they're paying their debt.
    And that's the way it strikes me.
    Yes, ma'am, doctor, do you want to say something?
    Dr. Arhin-Tenkorang. Yes. I would like to say that what you 
have described, you're doing this because you have hope that 
your total life cycle of earnings and borrowing that at point 
you will come out of school and you will be able to repay the 
debt. It's over a whole life cycle.
    I think you should also accept that the countries have a 
very long life cycle. It's not the life cycle of the current 
administrations, and therefore if they are getting into bigger 
debt, that shouldn't be a reason to say not to give them more 
assistance.
    What I would say that debt cancellation, true, it is true 
that it's not sufficient to help solve all the economic crises 
that African countries have. But certainly, that is not a 
reason not to do it. It is rather a reason to do it, and then 
to do something in addition. But when you don't do it, it makes 
it even harder for these people to, in the end, come to the end 
of the life cycle business of borrowing and lending, and then 
come out of debt.
    Mr. Shays. I'm finally getting a sense of why you've 
reacted to the way I've reacted.
    Because I had heard you use the word, Dr. Birdsall, 
``punish.'' We're not going to punish anyone. And you've talked 
about not giving them something. And I've never suggested that 
we shouldn't. That's the irony to this whole conversation.
    That's why I say, I'm not even at that level you're at. I 
just want to know what reality is, and then from reality, of 
course we have to do so much.
    I mean, my shame is that, as a former Peace Corps 
volunteer, I think of what we've done with foreign aid, and 
feel like we have just done nothing. That's my shame.
    And my kind of desire is to say, well what do we do now? I 
don't know what we do. I just don't--I do know this; we don't 
know, we don't do what we've been doing. That's the one thing I 
know.
    And so, when I ask about corrupt governments, it's not 
because I say, well therefore we're not going to provide 
assistance. But I then wonder if it has to go through the 
private sector, and just totally bypass government.
    Dr. Arhin-Tenkorang. It has to go through the mission, 
faith-related groups in Africa who've been looking after poor 
patients for many, many decades--well, not many, many decades, 
but at least two or three decades, and who, since the AIDS 
crisis started, have continued to do their best under very 
difficult circumstances.
    They represent a lot of the people of these countries. The 
people of these countries have faith in them that they are not 
going to, that they are not tarnished by corruption, and they 
are part, they work with the governments and if they were given 
the assistance, they could actually make a big difference in 
making sure these governments do things which are not corrupt.
    And I think we have to look at these options as well as 
other options.
    Thank you.
    Mr. Shays. Thank you.
    Dr. Sherry.
    Dr. Sherry. Well, you wanted a little good news. I'll try 
to give you some good news. I think the good news is, is that 
where the international community has made investments in AIDS 
in Africa, that there's been significant substantial 
reductions.
    That there was a 50 percent reduction in HIV in girls from 
15 to 19 years old in Uganda in a period of less than 5 years. 
And combining that with a 2-year average increase in the age of 
first sexual intercourse, most people could not have predicted 
that to be possible, and it happened.
    Now if we were to go back and try to say exactly how that 
happened and precisely how that happened, it would be a little 
bit difficult. Our objective, of course, is to try to be able 
to repeat that in other places, and each time to do it a little 
more efficiently, a little more effectively, to try to move 
that forward.
    So we've got two challenges here. One to get some more 
Ugandans, to get some more resources into countries to address 
this terrible problem to get the successes that we need, so we 
get out of this downward spiral.
    The other challenge we have is to try to do it efficiently, 
to try to do it effectively, to try to do it without dealing 
with corruption, but also try to get a broad group of people to 
do it.
    Because the amount of resources that are required to deal 
with this task need to be American resources and European 
resources and Japanese resources and most importantly, it needs 
to be African resources.
    And how should those resources flow? There are even more 
channels than that.
    There's a variety of options which are U.S.-based NGOs, 
there are faith-based organizations, there are multi-lateral 
organizations, each which has a different comparative 
advantage.
    You wouldn't use UNICEF to move resources the same way you 
would use the bank to move resources. And sometimes it makes 
very good sense to use UNICEF, and sometimes it makes good 
sense to use the bank.
    Now, when people aren't discerning, that's when we get a 
problem. I mean, if you UNICEF to do what the bank was set up 
to do, it's going to do a miserable job.
    Similarly, if you try to use the bank to do what UNICEF was 
set up to do, it's going to do a miserable job.
    If you add it all up, there is no question that parts of it 
don't work well. There has to be on-going reform as a part of 
this process. There's no question about it.
    And you are completely right to do it, because unless there 
are strong pressure for reform and efficiency in these 
organizations, they will lose support, they will atrophy, and 
there will be a loss as a consequence.
    But we've got to accept some inefficiencies in the short 
run. We can't possibly do the scale up on the magnitude that's 
required to try to get out ahead of this problem. And at the 
same time, optimize all of the efficiencies, which we would 
only get after relatively profound institutional reform 
processes.
    So in some ways, it's a bit of an act of faith. It's let's 
move the money and let's increase the oversight process, and 
let's try to do that simultaneously.
    Mr. Shays. Reverend Spencer, did you want to say something?
    Dr. Spencer. I certainly would endorse Dr. Sherry's 
comments a moment ago, that we do recognize that this is a 
process with some incredible challenges that are not merely 
African-based.
    You had raised the question of where you see hope, and I 
would just--I think perhaps one of our hesitancies with your 
initial question was that these impressions, and the evidence 
more than just impressions, are very nuanced in various 
settings, and where we see very encouraging signs and very 
discouraging aspects of a heritage, it is difficult to confront 
all of these criteria at the same time.
    I would see in AIDS not only the international concern that 
Dr. Sherry just spoke about, but I think we are seeing now in 
this last year even, but certainly in the last couple of years, 
a political will within Africa to speak about and to confront 
AIDS that simply was not present a few years ago. We can 
certainly turn around and say well, that should have been 
something spoken about some time ago. The fact was that it 
wasn't. It was not spoken about.
    And now we are seeing that, we are seeing the will on the 
part of faith-based communities to address AIDS. Uganda is an 
excellent example of that.
    We're seeing the community well beyond the faith 
communities, while recognizing that my colleague next to me is 
quite right, that the religious structures in Africa are 
pervasive and they are crucial avenues for effective education, 
prevention, treatment, and care. We're seeing strong NGO 
communities, and even in places that are as difficult these 
days as Kenya, we are seeing an extraordinarily strong grass 
roots, women-based, NGO structures that are confronting a 
variety of issues in local settings.
    We're seeing much stronger planning throughout the 
continent with regard to poverty reduction and human 
development. Some of that has been imposed under World Bank and 
IMF strictures, and some of those pieces we might be critical 
of. But nevertheless, they have stimulated a more long-range 
view of poverty reduction and human development that is going 
to allow us to confront some of the systems of which you are 
talking about that have been so negative in the past, and make 
some meaningful changes.
    We've seen some meaningful transitions in democracy. I'm 
still encouraged by what has been happening in Nigeria. It has 
a long way to go, certainly in the area of corruption, but they 
are a major actor for good at this stage in the West African 
scene.
    We've seen some moves very hesitant, very tentative, with 
regard to Congo. I'm surprised that that is true, but it is 
true, and that we may be bringing them from a regional war and 
moving on to a community-based confrontation of that past that 
will lead them to a meaningful society and government.
    We are confronting child soldiers, by African initiatives, 
around the continent. And if we address conflict diamonds, 
including this Congress addressing it, then we will perhaps be 
moving forward on the tenacious tragedy of Sierra Leone.
    These are some positive features that I think we can hold 
up.
    Mr. Shays. Thank you. Anybody else before we adjourn? 
Anybody else that would like to make a comment?
    Dr. Birdsall. I would just like to say how pleased I am, 
both at the eloquence of Dr. Sherry on the need for multiple 
channels, and the eloquence of Reverend Spencer on the fact 
that there is potential to do a lot of good, to build on 
progress in Africa despite the problems that are there.
    The basic line I think that you're hearing from all the 
members of the panel is the need for substantial ratcheting up 
of U.S. leadership in the multilateral institutions and U.S. 
willingness to provide financial support.
    Dr. Arhin-Tenkorang. I would like to focus again on the 
AIDS crisis, as opposed to the general development problems 
that we are facing.
    I really think that there should be a separation of the 
functions and modalities that the Global Trust Fund for AIDS 
operates. It should be separated from that and the multilateral 
policies and conditionalities, and so forth.
    And whatever funds are made available, some of that funds 
should initially be invested in coming up with a very sound, 
well thought out relevant plan that will work in Africa.
    I think that is the first step that must be taken, because 
if we have this trust fund and it's going to work in exactly 
the same way, using the same principles and policies that the 
multilaterals have been doing for the last 20 years, is not 
going to be effective.
    And I think what Africa needs today, it needs to solve this 
AIDS crisis, and then it will be in a position to look at 
generally the other crises and problems we have been dealing 
with for many years.
    But if we don't solve this AIDS crisis first, there'll not 
be that opportunity.
    Thank you.
    Mr. Shays. Thank you very much.
    Anybody else before we adjourn?
    [No response.]
    Mr. Shays. Well, you've all been very patient. I thank you 
for being here and this hearing is--oh, excuse me, I just need 
to put in the record, at the request of the Chairman, a chart 
entitled ``How Poor Countries Would Benefit With 100 Percent 
Cancellation From the World Bank and IMF'', and I'll put that 
in the record.
    [The information referred to can be found on page 55 in the 
appendix.]
    Mr. Shays. Yes, sir?
    Dr. Spencer. Mr. Chairman, I would also request that you 
put in the record a brief letter from Jubilee USA Network, 
which is addressing precisely these issues. Your Staff already 
has the copies.
    Mr. Shays. OK, without objection, we'll do that.
    [The material referred to can be found on page 63 in the 
appendix.]
    Mr. Shays. Is there anything else that we need to put in 
the record?
    [No response.]
    Mr. Shays. Thank you. The hearing is adjourned.
    [Whereupon, at 4:54 p.m., the hearing was adjourned.]

                            A P P E N D I X

                              May 15, 2001

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