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[Senate Hearing 112-64]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 112-64

   INTERNATIONAL DEVELOPMENT POLICY PRIORITIES IN THE FY 2012 BUDGET

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 13, 2011

                               __________

       Printed for the use of the Committee on Foreign Relations

       Available via the World Wide Web: http://www.fdsys.gpo.gov

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                COMMITTEE ON FOREIGN RELATIONS         

             JOHN F. KERRY, Massachusetts, Chairman        
BARBARA BOXER, California            RICHARD G. LUGAR, Indiana
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland         JAMES E. RISCH, Idaho
ROBERT P. CASEY, Jr., Pennsylvania   MARCO RUBIO, Florida
JIM WEBB, Virginia                   JAMES M. INHOFE, Oklahoma
JEANNE SHAHEEN, New Hampshire        JIM DeMINT, South Carolina
CHRISTOPHER A. COONS, Delaware       JOHNNY ISAKSON, Georgia
RICHARD J. DURBIN, Illinois          JOHN BARRASSO, Wyoming
TOM UDALL, New Mexico                MIKE LEE, Utah
              Frank G. Lowenstein, Staff Director        
        Kenneth A. Myers, Jr., Republican Staff Director        

                              (ii)        

                            C O N T E N T S

                              ----------                              
                                                                   Page

Cardin, Hon. Benjamin L., U.S. Senator from Maryland, opening 
  statement......................................................     1
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     3
Yohannes, Hon. Daniel W., Chief Executive Officer, Millennium 
  Challenge Corporation, Washington, DC..........................    10
    Prepared statement...........................................    12
Shah, Hon. Rajiv J., Administrator, U.S. Agency for International 
  Development, Washington, DC....................................     4
    Prepared statement...........................................     6

              Additional Material Submitted for the Record

Webb, Hon. Jim, U.S. Senator from Virginia, prepared statement...    26
Responses to Additional Questions Submitted for the Record by 
  Members of the Committee
    Responses of Administrator Rajiv Shah to Questions Submitted 
      by Senator Richard G. Lugar................................    26
    Responses of Daniel Yohannes to Questions Submitted by 
      Senator Richard G. Lugar...................................    53
    Responses of Daniel Yohannes to Questions Submitted by 
      Senator Benjamin L. Cardin.................................    59
    Responses of Administrator Rajiv Shah to Questions Submitted 
      by Senator Benjamin L. Cardin..............................    61

                                 (iii)

  

 
   INTERNATIONAL DEVELOPMENT POLICY PRIORITIES IN THE FY 2012 BUDGET

                              ----------                              

                       WEDNESDAY, APRIL 13, 2011

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:03 p.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Benjamin L. 
Cardin, presiding.
    Present: Senators Cardin, Menendez, Lugar, Risch, and Lee.

         OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Well, let me welcome Administrator Shah and 
Mr. Yohannes to our committee.
    Today, we will be talking about the international 
development policy priorities in the FY 2012 budget. I can't 
think of a more challenging time we've had for international 
development policies than we have now. There certainly are a 
significant number of humanitarian challenges around the globe. 
Poverty and the challenges of dealing with poverty, the global 
food shortages, and the impact of climate change all have made 
it even more important for how we implement our international 
development policies.
    U.S. global development and U.S. foreign aid are critically 
important to our national security concerns, to promote 
economical and political stability throughout the world. 
They're part of what we call our ``three-D strategies''--the 
development assistance, defense, and diplomacy.
    What is, I think, surprising to most Americans is the 
amount of money America spends on its foreign assistance. There 
was, recently, a survey done by the Kaiser Foundation which 
asked Americans how much of the national budget they thought 
went for foreign assistance. And the numbers centered around 25 
percent. As you all know, it's less than 1 percent of the 
Federal budget. So, it's a relatively small part of the Federal 
budget, but a very important part of the Federal budget, that 
is used for foreign assistance. It's critically important that 
those funds be used in the most accountable way, and that is 
one of the issues that we will be talking about today, to make 
sure that all of our funds are used appropriately to advance 
our foreign interests.
    But, let me start off by quoting from General Anthony Zinni 
who said, before this committee in the past, ``From our time on 
the front lines of America's presence in the world, we know 
that the United States cannot rely on military power alone to 
keep us safe from terrorism, infectious diseases, or global 
threats that recognize no borders.''
    And what concerns me, when you take a look at the proposed 
cuts, particularly in the budget that is currently being 
considered in the House of Representatives, which is authored 
by Congressman Ryan, those cuts will have real concern. The 
FY12 budget is cut by 29 percent--29 percent, if my numbers are 
correct. And by 2016, the cuts become 44 percent.
    Well, those types of cuts are going to have real 
consequences. It would affect 5 million children, who could be 
denied treatment for malaria, 400,000 people will be turned 
away from life-saving treatment for HIV/AIDS, and farmers would 
lose access to seeds, soils, and technical assistance that make 
their farms viable in the economy.
    These individual impacts, taken collectively, will affect 
global politics and economic stability and security. These cuts 
could have real, negative ramifications for U.S. interests 
abroad, and severely damage our efforts to promote human 
rights, democracy, and free markets, which, in turn, will lead 
to more instability and, ironically, cost the taxpayers of this 
country more money. So, I think it's not only wrong from the 
point of view of what is the right policy for America, I think 
it also will jeopardize us from a financial point of view.
    But, as I said before, we need to have full accountability 
on the use of our development assistance. We need to have more 
efficient programs. And I want to applaud both of our witnesses 
today for the steps that you have taken. There have been many 
reviews that have been done and initiatives that have been 
taken. And I really do think that you're moving in the right 
direction to make sure that we have more efficient programs, 
end the duplication, establish the priorities, and make sure 
that the programs are managed as efficiently as possible.
    But, I must also point out that there are additional, I 
think, standards that we need to make sure that, wherever we 
participate in foreign aid, that certain minimum standards are 
met: minimum standards in good governance, as it relates to 
transparency, in the countries that we do business with, that 
they have active programs to fight corruption in their own 
country, that they have programs to deal with gender equity 
issues. I think all of that is important as part of our 
expectations of where we participate in foreign development.
    Recent events in the Middle East have indicated to us that 
it's critically important, in that region, that countries that 
we participate with meet minimum standards of sharing our 
vision to fight extremists and terrorists, to support our 
efforts for peace in the Middle East, and to provide basic 
human rights and basic standards to the people of their own 
country, and that we need to be tough, as we deal with these 
countries, to make sure that these standards, in fact, are met.
    I'll be interested in hearing from our witnesses the views 
on some of the new initiatives that you all have started. The 
Feed the Future Program is one that, Administrator Shah--I 
would appreciate you directing some attention, in your 
comments, to--and the Global Health Initiative.
    It's interesting, with Feed the Future, that 925 million 
people are suffering from hunger, worldwide. Now, when you look 
at that number, it's rather staggering. When you take a look at 
it by gender, you find that 60 percent are women. And then you 
start looking at the economic realities, globally, where women 
represent 66 percent of the work done in the universe and 
receive only 10 percent of the income. We need to make sure 
that if we are, in fact, going to feed the future, that it 
needs to start with equality with women in other countries.
    The Millennium Challenge Corporation has initiated many 
matters that I think can be models for us, looking at 
transparency and country ownership and looking at gender 
equity. The President has stated that he wants to see the 
United States have the premier development agency in the world. 
I share those sentiments. At this critical crossroads, it is 
essential that we continue our commitment to provide the 
strongest development assistance in the world, fulfilling both 
a moral obligation as well as strengthening our long-term 
national and global prosperity and security.
    Countries that descend into chaos and anarchy are breeding 
grounds for extremism. Our comparably small investments in 
their development will yield enormous results. I will continue 
to strongly advocate for not only adequate funding for these 
programs, but also the broader structural and organizational 
reforms that are necessary for the 21st century foreign 
assistance and development policies and delivery.
    I look forward to working with my colleagues on this 
committee to ensure that these goals, in fact, are met.
    And I want to thank both of our witnesses for their 
commitment to service in our country. We're very fortunate to 
have you in these positions, and we look forward to working 
with you in partnership.
    And with that, I would turn to Senator Lugar.

              STATEMENT OF HON. RICHARD G. LUGAR,
                   U.S. SENATOR FROM INDIANA

    Senator Lugar. Well, it's a privilege to join Chairman 
Cardin in welcoming Administrator Shah and Chief Executive 
Officer Yohannes to the committee this afternoon.
    Our hearing today takes place in the context of deep 
economic uncertainty at home, coupled with extraordinary 
upheaval overseas. These conditions necessitate that the State 
Department, USAID, and the Millennium Challenge Corporation 
prioritize initiatives that contribute to fundamental national 
security and foreign policy goals. As our country is challenged 
by a large budget deficit and an overwhelming national debt 
that exceeds $14 trillion, we must examine the value of every 
program. This is true of programs across government, including 
those dedicated to international development.
    In receiving your testimony today, I will be considering 
how your priorities and plans will satisfy a number of 
principles.
    First, our investment in development programs must 
demonstrate clear objectives that are closely connected to the 
interests of the United States.
    Second, assistance programs have to be run efficiently, 
minimizing duplication, waste, and unnecessary expense.
    Third, the work of USAID and the MCC must be measurable and 
transparent, allowing programs or approaches that are showing 
poor results to be jettisoned or revised. I am especially 
interested in lessons we can draw from the MCC's rigorous 
evaluation frameworks.
    Fourth, the United States is just one actor among many 
countries and organizations that provide various types of 
humanitarian and development assistance. The United States 
should emphasize those areas that we do best and that are most 
likely to benefit our interests over the long term.
    One such area is food. Food shortages and high prices for 
commodities have been issues in almost every Middle Eastern 
country that has experienced upheaval. This underscores, again, 
the pivotal position of the United States as the largest and 
most diverse grower and exporter of food and the leader in 
agricultural science. This role comes with both enormous 
economic opportunities and national security imperatives.
    The world will experience explosive growth in demand for 
food as large populations in China, India, and elsewhere become 
more affluent. Meanwhile, countries throughout Africa and Asia 
suffer from severe hunger and malnutrition. The United States 
must give high priority to executing a global food policy that 
both creates export opportunities for our farmers and 
agricultural businesses and addresses hunger in volatile 
regions that could negatively impact our national security. 
These circumstances require a new focus on increasing 
agricultural productivity both here in the United States and 
throughout the world. We must challenge the talents of 
America's agriculture community to improve product yields 
through new technologies, stretching beyond the achievements of 
the Green Revolution.
    Further, as with our other development investments, we must 
lead a coordinated effort across all agencies to prevent 
duplication and overlap of these programs. I applaud Dr. Shah's 
personal interest in this topic and encourage him to continue 
to work with the Congress on this issue.
    Finally, we should recognize that personnel from USAID, 
MCC, the State Department, and other agencies are on the front 
lines in many impoverished or war torn locations, including 
Afghanistan and Iraq. We appreciate the sacrifices that they 
make and the risks that they take daily on behalf of the United 
States.
    We thank you, again, for your appearance today and look 
forward to your testimony.
    Senator Cardin. Thank you, Senator Lugar.
    Administrator Shah.
    Both of your entire statements will be made part of our 
record.
    You may proceed as you see fit.

STATEMENT OF HON. RAJIV J. SHAH, ADMINISTRATOR, U.S. AGENCY FOR 
           INTERNATIONAL DEVELOPMENT, WASHINGTON, DC

    Dr. Shah. Thank you, Chairman Cardin, Ranking Member Lugar, 
members of the committee. It is an honor to be here again 
before you and have a chance to describe the great work that 
we're trying to pursue in our development portfolio under the 
Obama administration.
    Since my full remarks are in the record, I may just limit 
my opening statement to three basic points.
    The first is that USAID, the MCC, and the work we do in 
international development is fundamentally a core part of our 
national and economic security strategy. It is less costly and 
more effective to invest in agricultural development, as 
Senator Lugar just described, rather than dealing with the food 
riots, famines, and failed states that result when we fail to 
do so. We know that countries ravaged by HIV/AIDS and malaria 
and child death that is unnecessary are unable to grow and 
unable to achieve stability, as families destroy their capital 
assets and seek refuge in any manner that is possible. We know 
that today in Southern Sudan, a part of the world that is 
receiving significant influx of people from the north, a girl 
is more likely to die in childbirth than she is to complete a 
secondary education.
    It's precisely because our work is so critical to our 
national security that we have pursued a set of reforms in how 
we do our work so that we can be more efficient, more 
effective, more results-oriented, and better stewards of 
precious U.S. tax dollars. In doing so, USAID is also seeking 
to be a better partner with the U.S. military and with the 
State Department and others so that we can be effective at 
implementing these programs and bring all of the tools the U.S. 
Government has to offer to our core development objectives.
    These reforms were initiated through a Presidential Study 
Directive (PSD) on development and the Quadrennial Development 
and Diplomacy Review or QDDR, which resulted in reprioritizing 
growth in governance, science, technology, and innovation, the 
concept of mutual accountability, and an absolute and 
relentless pursuit of development results as the tenets of our 
development policy. At USAID, we have internalized both the PSD 
and the QDDR in a specific set of reforms we call USAID 
Forward. These include policy and budget reforms that have led 
to the creation of new policies at USAID so that, for example, 
our education strategy is now more focused on specific results, 
with respect to child literacy and learning all around the 
world. It's led to specific budget reforms that have allowed us 
to identify $400 million in reallocations that we've found 
because we're moving resources from less efficient programs to 
more efficient programs. It has allowed us to pursue science, 
technology, and innovation investments, such as a unique 
partnership we called Saving Lives at Birth, that will look at 
new technologies to help bring the costs down and help save the 
1.6 million women and children that die either during 
childbirth or in the first 48 hours of life. And it's allowed 
us, importantly, to really fundamentally restructure our human 
resources and our procurement strategies so we can shorten the 
cycle time between ideas and impact, work with a broader range 
of partners, and execute new accountability efforts, like the 
Accountable Assistance for Afghanistan Program, to allow us to 
better track resources, better manage subcontractors and 
private security contractors, and serve as better and more 
accountable stewards of U.S. taxpayer dollars.
    Perhaps the single program where this is most visible is in 
the Feed the Future effort, where we have selected 20 countries 
to participate, based on their willingness to increase their 
own investment in agricultural development, where the 
agricultural sector is critical to their economic success, and 
where we think we can work in a spirit of real results, in 
partnership with other donors, so we leverage our dollars 2- or 
3-to-1 as we pursue an effort of eliminating hunger in these 20 
countries. In pursuing this program, we think we will reach 18 
million people, and help them move out of a state of poverty 
and hunger in 5 years, 7.2 million of which are children who go 
to bed hungry every night, today.
    Third, and perhaps most importantly, we believe that all of 
our development investments should be focused specifically on 
achieving results. I described the results we are trying to 
achieve in Feed the Future. In our Global Health Initiative, we 
are reprioritizing those specific investments that save the 
most lives at, frankly, the least cost.
    We're reprioritizing getting diarrheal and pneumonia 
vaccines to communities that do not have them, so that we can 
save lives at $10 to $20 per life-year.
    We are trying to build on some of the incredible bipartisan 
successes of the past administration, and the first 2 years of 
this one, in the President's Malaria Initiative, where, for the 
first time, we've seen validated data that has documented a 30-
percent reduction in all-cause child mortality in countries 
that benefit from the program, which means that, by getting 
poor children in local communities a $2 or $3 bed net to sleep 
under, among other things, we're not only saving their lives, 
but, by keeping them out of the hospitals there, we're allowing 
the hospitals to save other children's lives from other 
diseases.
    And we're pursuing a results-oriented development strategy 
in very difficult-to-work areas like Afghanistan, where our 
program is part of an integrated civilian and military effort 
that is being executed in specific key terrain districts that 
are both part of current kinetic operations and part of our 
transition strategy.
    We believe these are results that will keep us safe, keep 
us secure, and improve our ability for our country to have 
viable and effective trading partners around the world. And we 
recognize that budgets are an expression of both values and 
priorities. And we appreciate the chance to be here today to 
describe our priorities.
    Thank you.
    [The prepared statement of Dr. Shah follows:]

                  Prepared Statement of Dr. Rajiv Shah

                              introduction
    Thank you very much Mr. Chairman, Ranking Member, and members of 
the committee. I am honored to join you here today in support of the 
President's fiscal year 2012 budget request.
    Before beginning my testimony, I want to briefly comment on USAID's 
response to the devastating earthquake and subsequent tsunami in Japan 
and the remarkable events taking place in the Middle East.
    In Japan, USAID is leading the U.S. Government's response, 
coordinating an interagency effort with the Nuclear Regulatory 
Commission, and the Departments of State, Energy, Defense and Health 
and Human Services. We also have deployed a Disaster Assistance 
Response Team--including urban search and rescue specialists and 
nuclear experts--to support Japanese emergency response efforts. I'd 
like to thank the brave men and women on these teams for their enormous 
courage. USAID has provided 10,000 personal protective equipment sets--
including suits, masks, gloves, decontamination bags, potassium iodide 
and other supplies--to help those working near the contaminated zone in 
Fukushima Prefecture.
    Our thoughts and prayers are with the Japanese people at this time, 
and we will continue to work closely with the Government of Japan to 
respond to their requests for assistance as quickly as possible.
    USAID also has led the humanitarian response to recent events in 
the Middle East. As we speak, USAID teams are working on the Tunisian 
border with Libya and in Egypt, helping deliver assistance to those 
affected by conflict. In eastern Libya, we have delivered health kits 
capable of providing basic care to 40,000 people, with more en route. 
We have also provided key support to the World Food Programme, which 
has moved more than 10,900 tons of food in and around Libya, enough to 
feed more than 650,000 people.
    We will work with counterparts to help the people of the region 
realize their democratic aspirations through a credible transition. 
Drawing on experience USAID has gained over decades, we will help 
countries strengthen civil society, extend the rule of law, and create 
more transparent and accountable democratic governance.
                                results
    Both the President and Secretary Clinton have emphasized that 
development is as important to our Nation's foreign policy as diplomacy 
and defense, and as a result have actively championed the goal of 
reestablishing USAID as the world's premier development Agency.
    Representing less than 1 percent of the Federal budget, the 
President's FY 2012 request balances difficult tradeoffs with a clear-
eyed assessment of where we can most effectively achieve dramatic, 
meaningful results for the American people and the developing world.
    The President's request includes significant investments in 
bipartisan initiatives promoting global health and food security, the 
foundations of which were laid by the previous administration and 
bipartisan supporters in Congress.
    Representing the largest portion of the President's budget request 
for foreign operations, the $8.7 billion USAID and State are requesting 
for the Global Health and Child Survival account will allow us to 
transform HIV/AIDS from a death sentence to a manageable disease for 
more than 4 million HIV-positive patients, reduce the burden of malaria 
by half for 450 million people and prevent hundreds of millions of 
child deaths from preventable diseases by providing them vaccines and 
bed nets.
    Our Global Health Initiative is designed to efficiently deliver 
these results. Rather than create separate facilities to treat separate 
diseases, we will save money and expand the reach of coverage by 
integrating treatments into single points-of-care. In Kenya, we worked 
with PEPFAR to couple HIV/AIDS treatment with maternal and child health 
services. As a result, we've extended the availability of reproductive 
health services from two to all eight of the country's districts, at no 
increase in cost.
    We can also help countries develop their own agricultural sectors, 
so they can feed themselves. For the $1.1 billion we are requesting for 
bilateral agricultural development programs, we will be able to help up 
to 18 million people in up to 20 countries--most of them women--grow 
enough food to feed their families and break the grips of hunger and 
poverty.
    We chose these potential countries for our Feed the Future 
Initiative selectively, based on their own willingness to invest in 
agriculture, undertake reforms, and encourage coordinated investment 
from other donors, foundations, and private companies, leveraging our 
investments several-fold. We have worked closely with these countries 
to develop rigorous agricultural strategies that will bolster the 
success of our Initiative.
    But our foreign assistance will not just assist people abroad; it 
will benefit us here at home.
           from the american people, for the american people
    Our assistance represents the spirit of our country's generosity; 
captured in USAID's motto: ``From the American People.'' Recent events 
underscore the critical importance of our humanitarian assistance 
request.
    But now more than ever, it is critical that the American people 
understand that our assistance also delivers real benefits for the 
American people: it keeps our country safe, and develops the markets of 
tomorrow.
Keeping America Safe
    By elevating the role of democracy, human rights, and governance, 
we help to consolidate freedom in new and fragile democracies and 
expand liberty in authoritarian and semiauthoritarian countries. We 
also support the rebuilding of failed and fragile states during and 
after conflict, forging new compacts between state, civil society, and 
the private sector that lead to increased stability and ultimately keep 
Americans out of harm.
    As Secretary of Defense Gates, Joint Chiefs Chairman Admiral 
Mullen, and General Petraeus have all emphasized, we need a fully 
engaged and fully funded national security presence, including the core 
components of our Nation's civilian power: the State Department and 
USAID.
    This year, for the first time, the President's budget designates 
$1.2 billion of USAID funding for Afghanistan to a separate account 
called the Overseas Contingency Operation Account. This transparent 
approach, modeled upon the Defense Department's well-established 
example, distinguishes between temporary costs and our existing budget 
in an effort to consistently budget for Defense, State, and USAID 
spending.
    In the most volatile regions of Afghanistan, USAID works side by 
side with the military, playing a critical role in stabilizing 
districts, building responsive local governance, improving the lives of 
ordinary Afghans, and--ultimately--helping to pave the way for American 
troops to return home.
    For example, we are helping to improve agricultural yields in the 
Arghandab Valley. As a result, farmers shipped the first agricultural 
exports out of Kandahar in 40 years. We have also helped rebuild the 
civil service in the southeast and helped fuel a 40-percent reduction 
in the growth of opium poppies that fund Taliban operations.
    In Northwest Pakistan--the current base of operations for al-Qaeda 
and the Pakistani Taliban--USAID staff and partners undertake enormous 
personal risk administering over 1,400 small-scale development 
projects. In the Malakand province, they have helped rebuild 150 
schools so children there can become productive members of their 
economy, instead of turning to extremist madrassas.
    Our work in promoting national security is not just limited to 
active zones of conflict. Throughout the world, USAID is deploying 
development specialists today to strengthen democracies, rebuild 
livelihoods and build strong health and educational systems so that we 
do not have to deploy our troops tomorrow. As Secretary Gates has said: 
``Development is a lot cheaper than sending soldiers.''
    In Southern Sudan, the USAID mission worked with partners to 
design, procure, and preposition ballots and supplies months before the 
recent referendum on independence. That foresight helped ensure the 
referendum, which many predicted would never occur, proceeded 
peacefully and successfully, but also left us prepared in the event it 
would not.
Developing the Markets of Tomorrow
    In addition to strengthening our national security, USAID's work 
also strengthens America's economic security.
    Today, long-time aid recipients like India, Indonesia, Poland, and 
South Korea and other emerging economies have become America's fastest 
growing markets. Exports to developing countries have grown six times 
faster than exports to major economies and today they represent roughly 
half of all U.S. exports.
    In 2009, we exported over half-a-trillion dollars in American goods 
and services to those countries, and 97 percent of those exporters were 
small- and medium-sized U.S. companies. That is why for every 10 
percent increase we see in exports, there is a 7-percent increase in 
the number of jobs here at home.
    We need to accelerate the economic growth of tomorrow's trade 
partners, ensuring those countries grow peacefully and sustainably.
    But beyond these impacts, winning the future will depend on 
reaching the 2-3 billion people currently at the bottom of the pyramid 
who will come to represent a growing global middle class. By 
establishing links to these consumers today, we can effectively 
position American companies to sell them goods tomorrow.
    Make no mistake: our success is intertwined with the progress of 
those around us. By fully funding the $2.9 billion USAID is requesting 
for its Development Assistance account, we will save lives, expand 
global freedom and opportunity, and crucially strengthen America's 
national and economic security.
                                 reform
    Because development is critical to our national security and future 
prosperity, USAID has worked tirelessly to change how we work with all 
of our partners.
    Consistent with the President's Policy Directive on Global 
Development and the Quadrennial Diplomacy and Development Review, we 
have launched a series of reforms we call USAID Forward.
Learning, Monitoring, and Evaluation
    To ensure our assistance is effective, we are taking monitoring, 
evaluation, and transparency seriously. In 1994, USAID conducted nearly 
500 independent evaluations. By the time I arrived, only 170 
evaluations were submitted to Washington, despite a threefold increase 
in programs managed. In many instances, these evaluations were 
commissioned by the same organizations that ran the programs.
    To end this practice, we introduced a new evaluation policy that is 
quickly setting a new standard in our field. We are requesting $19.7 
million to implement this policy and provide performance evaluations 
for every major project, conducted by independent third parties, not by 
the implementing party themselves. And we will release the results of 
all of our evaluations within 3 months of their completion, whether 
they tell a story of success or failure.
Combating Fraud, Waste, and Abuse
    We are fighting vigorously to prevent and respond to fraud, waste, 
and abuse, and to ensure a culture of vigilant oversight. I have 
created a new suspension and debarment task force led by our Deputy 
Administrator, Don Steinberg, and staffed with talent across our 
Agency. This task force will provide a coordinated effort to closely 
monitor, investigate, and respond to suspicious activity.
Private Sector Partnerships
    We are also placing a renewed emphasis on economic growth, driven 
by private sector investment. In all aspects of our work, we are 
relying much more on leveraging private sector investment and building 
public-private partnerships in countries committed to good governance 
and pro-business reforms.
    For example, through the Feed the Future initiative, we have 
launched groundbreaking new partnerships with Kraft, General Mills, and 
Wal-Mart in Ghana, Tanzania, El Salvador, and Guatemala to connect poor 
farmers to local and international food markets. And in Haiti, we are 
supporting Coca-Cola's initiative to promote the Haitian mango juice 
industry.
    These efforts strengthen the sustainability of our economic growth 
work, while also improving the bottom line for American companies.
Science, Technology, and Innovation
    Across our portfolio, we are seeking new ways to harness the power 
of science, technology, and innovation. For our request of $22.1 
million, we will recapture USAID's legacy as the leader in applying 
scientific and technical solutions to the challenges of development.
    We have developed a new venture capital-style investment fund--the 
Development Innovation Ventures Fund--so we can support startups, 
researchers, and nonprofits focused on the problems of the developing 
world. We are requesting $30 million to continue using this simple but 
highly competitive business model to sustainably scale innovative 
solutions to development challenges.
    By providing seed capital to incentivize the emergence of these 
innovations, we practice development with an exit strategy. This fund 
has already funded several projects, including an easy-to-use self-
administered test for preeclampsia, the leading cause of maternal 
mortality in the world.
    In Haiti, instead of rebuilding brick-and-mortar banks devastated 
by the earthquake, we are partnering with the Gates Foundation to begin 
a mobile banking revolution in the country. By allowing Haitians to 
save money and make transactions on their cell phones, we are 
encouraging local wealth creation and cutting back on corruption and 
wage-skimming.
    This approach forms the foundation of a new series of grant 
challenge partnerships USAID introduced just last month. Rather than 
building hospitals and power plants throughout the developing world, 
USAID will partner with foundations, foreign governments, inventors and 
engineers to generate new, low-cost innovations that can help countries 
skip the need for some of this physical infrastructure.
Procurement
    Fundamentally, all of the reforms I have outlined are designed to 
achieve the same result: to create the conditions where our assistance 
is no longer necessary.
    The President's budget request puts this approach into practice. It 
cuts development assistance in at least 20 countries by more than half, 
including 11 countries where all bilateral Development Assistance has 
been eliminated. It also terminates USAID missions in three countries. 
And it reallocates almost $400 million in assistance and shifts 30 
Foreign Service positions toward priority countries and initiatives.
    USAID must continue to do its work in a way that allows our efforts 
to be replaced over time by efficient local governments, thriving civil 
societies and vibrant private sectors. That is why we have launched the 
most aggressive procurement and contracting reforms our agency has ever 
seen. Instead of continuing to sign large contracts with large 
contractors, we are accelerating our funding to local partners and 
entrepreneurs, change agents who have the cultural knowledge and in-
country expertise to deliver lasting, durable growth.
    These procurement reforms are crucial to delivering assistance in a 
much more effective and evidence-based way, generating real results 
faster, more sustainably and at lower cost so more people can benefit.
    To implement the QDDR and USAID Forward, implement our procurement 
reforms and deliver development gains more cheaply and efficiently for 
the American people, it is crucial that USAID's FY 2012 operational 
request of $1.5 billion is fully funded.
    We can only make these reforms meaningful if we can bring in the 
contracting officers, controllers, and technical advisors who can 
provide accountability and oversight over our contracts and grants and 
safeguard taxpayer funds.
    As we continue the Development Leadership Initiative begun under 
President Bush, with strong support from Congress, we plan on filling 
key staffing gaps in priority countries and frontline states. By 
bringing in experts in conflict and governance, global health, 
agriculture, education, economics and engineering, we can restore the 
technical capacity our Agency has lost over time, and has had to 
contract at far greater expense.
                               conclusion
    The evidence is clear: development saves lives, strengthens 
democracies, and expands opportunity around the world. It also keeps 
our country safe and strengthens our economy. But our development 
assistance also expresses our American values.
    When we protect girls from sex trafficking in Asia, stop 
deforestation in Latin America or help Afghan girls return to school, 
we express American values.
    When Americans see a neighbor in need, or witness suffering and 
injustice abroad, we respond; we mobilize; we act. We are a generous 
people. That fact was never clearer than when 20 million American 
families donated money to Haiti relief; more than watched the Super 
Bowl.
    USAID is proud to put American values into action--distributing 
antimalarial bed nets donated by school children, supporting faith-
based organizations that help ease suffering abroad, and engaging all 
Americans in solving the greatest global challenges and generating 
results.
    Right now is a critical moment in our country's history. As a 
nation, we are making a lasting determination about the future of our 
country, and the future of our global leadership.
    Now is the time when America must decide whether it will engage and 
lead the world, actively using its tools of development, diplomacy, and 
defense to improve human welfare and freedom across the globe . . .
     . . . or whether it will retract, leaving many of its poorest, 
most fragile global partners without assistance, and leaving other 
emerging global powers like China to promote alternative economic and 
political models.
    Budgets are an expression of policy; they are an expression of 
priorities. But fundamentally, they are an expression of values.

    Senator Cardin. Thank you very much, for your testimony.
    Mr. Yohannes.

STATEMENT OF HON. DANIEL W. YOHANNES, CHIEF EXECUTIVE OFFICER, 
        MILLENNIUM CHALLENGE CORPORATION, WASHINGTON, DC

    Mr. Yohannes. Thank you, Mr. Chairman, Senator Lugar, and 
every member of the committee, for the opportunity to discuss 
the work of the Millennium Challenge Corporation.
    I'm honored to be here and work with this committee to 
reduce poverty and to advance American interests and values 
around the world.
    Mr. Chairman, as you know, promoting stability, building 
the next generation of emerging markets, and developing strong 
and capable partners make Americans more secure. But, to be 
successful, we need a robust, effective array of development 
tools. That's why I am so pleased to be here with my good 
friend, USAID Administrator Shah.
    President Obama has called on MCC to play a distinct, 
integral role in implementing the new U.S. global development 
policy, one that complements the work of USAID. Dr. Shah and I 
coordinate closely to find ways that our agencies can work 
together and leverage our comparative advantages to help poor 
countries help themselves.
    The President's new development policy is built around core 
principles: economic growth, sustainability, country ownership, 
transparency, and results. These same principles have guided 
MCC since its creation in 2004, when Democrats and Republicans 
came together to pioneer a new vision for development that is a 
vision based on accountability, a focus on economic growth, and 
a rigorous analysis and evaluation to ensure maximum impact.
    MCC takes a businesslike approach to development, requiring 
that each investment meet meaningful economic rates of return. 
But, sustainable growth and lasting poverty reduction require 
good governance, too. That is why MCC is so selective in 
deciding where to invest. We choose to work with only those 
countries that are accountable to their people, that stand 
against corruption and that create conditions for markets to 
thrive and human dignity to flourish.
    Part of MCC's distinctiveness is our focus on results. From 
the start, we have emphasized rigorous, transparent program 
evaluation. We measure our progress by the number of girls who 
would receive an education in schools like the ones we 
established in Burkina Faso, by the growth in trade and 
business activity that flows from safe, modern roads like the 
ones we paved in Georgia, by the gains in productivity and 
health that will derive from cleaner and more efficient water 
solutions like those we are introducing in Jordan, and many 
other indicators of progress.
    But, the ultimate result we seek is higher incomes for 
citizens of our partner countries. All of the successes I have 
just described are stepping stones toward that goal.
    This is an exciting time for MCC. MCC's first compacts are 
now closing out and we are evaluating the results. In Honduras, 
for example, MCC provided agricultural productivity and 
business training to help more than 7,000 farmers boost their 
yields. We upgraded hundreds of miles of road to help farmers 
get their harvests to market. And we encouraged policy changes 
to ensure that the infrastructure improvements would endure.
    Preliminary data collected by the program implementer 
suggests that the farmers we work with saw their annual net 
income rise 88 percent on land being cultivated with new 
practices, allowing them to invest more in their families, in 
their farms, and in their futures. I want to stress that this 
is preliminary data, and we will know more when independent 
evaluations are completed, later this year.
    Looking ahead to the next fiscal year, the President has 
requested $1.125 billion to fund MCC, which would enable us to 
sign compacts with Indonesia, Georgia, and Ghana. I am 
committed to ensuring that Americans' hard-earned money 
invested in MCC will yield a return in global prosperity and 
security.
    Mr. Chairman, my own background is in banking, and I bring 
a banker's perspective to my job. But, my perspective is also 
informed by my travels in poor countries and by my faith in the 
values that make America strong: freedom, opportunity, 
responsibility, and the willingness to lend a helping hand. I 
have seen the toll that poverty takes in broken dreams and in 
wasted potential. But, I've also seen how much hardworking men 
and women can achieve when they are given the tools and the 
chance to build a better life. I am proud that our Nation 
supports those aspirations for dignity and progress. And I'm 
grateful to this committee for your leadership.
    Thank you for this opportunity to testify. I request that 
an extended version of my testimony be entered into the record. 
And I'm happy to answer any questions.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Yohannes follows:]

                Prepared Statement of Daniel W. Yohannes

    Thank you, Mr. Chairman, and every member of the committee for the 
opportunity to discuss the work of the Millennium Challenge 
Corporation. I am honored to be here and to work with the committee to 
reduce poverty and advance American interests and values, around the 
world.
    Mr. Chairman, as you know, promoting stability, building the next 
generation of emerging markets, and developing strong and capable 
partners makes Americans more secure. But to be successful, we need a 
robust, effective array of development tools. That is why I am so 
pleased to be here with my good friend, USAID Administrator Shah.
    President Obama has called on MCC to play a distinct, integral role 
in implementing the new U.S. Global Development Policy, one that 
complements the work of USAID. Dr. Shah and I coordinate closely to 
find ways our agencies can work together and leverage our comparative 
advantages to help poor countries help themselves.
    The Millennium Challenge Corporation (MCC), like other U.S. 
Government agencies, is operating in a constrained budget environment. 
MCC holds itself accountable to the American people to ensure that 
every taxpayer dollar generates the best possible return on investment. 
As good stewards of American taxpayer resources, every day we ask 
ourselves the tough, fundamental questions about the effectiveness and 
efficiency of our approach to development and our operations.
    Before discussing President Obama's fiscal year 2012 budget request 
for MCC, and highlighting issues of strategic importance to the agency 
in the coming months, I would like to address three fundamental 
questions about MCC. First, what makes us distinctive? Second, are we 
delivering results? And third, how are the American people benefiting 
from MCC's investments?
      mcc's selective, targeted approach to development assistance
    What makes MCC distinctive? One of the most distinctive features of 
MCC is our broad-based, bipartisan support. The MCC approach to 
development--with our focus on economic growth, sustainability, country 
ownership, transparency, and accountability--has been embraced by 
Democrats and Republicans in Congress; Presidents Obama and Bush; 
Secretaries Clinton, Rice, and Powell; and leading voices from the 
right and the left, from the Heritage Foundation and the American 
Enterprise Institute to the Brookings Institution and the Center for 
American Progress.
    There is good reason we have won the support of policymakers and 
analysts across the political spectrum: our innovative, reform-minded 
mission and business model. MCC's mission is to reduce poverty through 
economic growth in a select number of well-governed countries. MCC 
selects country partners carefully to ensure the highest returns on our 
investments, and creates strong incentives to advance democratic, 
market-based principles--not just in MCC countries but in emerging 
markets across the developing world.
    Part of MCC's accountability model is the ability and willingness 
to say ``no''--no to countries that do not meet MCC's high standards 
for eligibility, and no to proposed investments that do not have 
promising returns for economic growth and poverty reduction.
    In determining eligibility for funding, MCC evaluates whether a 
country has created a policy environment for sustained economic growth 
through 17 independent, transparent policy indicators that measure a 
country's commitment to ruling justly, economic freedom, and investing 
in its own people. We believe that engaging with developing countries 
in a selective, targeted way is not only fiscally responsible in the 
short term, but also is critical to poor countries attracting private 
investment and ending their reliance on aid in the long run.
    Good governance is critical for economic growth. We look for 
opportunities for reform in areas that will ensure the sustainability 
of our investments. These reforms have included changes to national 
policies, laws, regulations, and even the traditional ways of doing 
business by government institutions. For example, before investing in 
Lesotho, we worked with the government to change a law that treated 
adult women as minors, so that women could be full participants in the 
economy. In most cases, these reforms, and the domestic capacity that 
MCC's country-led programs build, not only help unlock the full 
potential of U.S. taxpayer dollars, but also help improve the broader 
conditions for continued growth and investment in our partner 
countries.
    Signing up to work with MCC means a country is committing itself to 
tackle the tough policy reforms necessary to create an environment in 
which the private sector can thrive, citizens can hold their 
governments accountable, and U.S. taxpayers can see they are getting a 
good return on their investment. Our goal is to help poor countries 
rise out of poverty and achieve self-sufficiency, as well as to create 
stable trading and investment partners for the United States, which 
will strengthen the American economy and make our Nation more secure.
                       mcc is delivering results
    The second fundamental question I confront on a daily basis is on 
MCC's impact: Are we delivering results? MCC's focus on economic 
growth, sustainability, country ownership, transparency, and 
accountability is working. All development partners, both donors and 
host countries, are interested in achieving results. What distinguishes 
MCC is our commitment to technically rigorous, systematic, and 
transparent methods of projecting, tracking, and evaluating the impact 
of our programs. MCC's results exist along a continuum--from policy 
changes countries make to become compact eligible (``the MCC Effect''), 
to interim outputs and outcomes as compacts mature, to our ultimate 
goal: income increases over the long term.
    We expect MCC's current investments to benefit more than 170 
million people in the poorest countries around the world--and we expect 
incomes to rise by over $12 billion over the life of those investments.
    Even before these income gains are achieved, MCC and our country 
partners have tangible results to show. To date, MCC investments in new 
or improved irrigation and technical assistance have facilitated the 
adoption of new agricultural practices on 82,510 hectares of land--an 
area slightly larger than Shenandoah National Park in the United 
States. Our funded programs have trained over 150,000 farmers in 
techniques that help them produce higher quality, higher value crops. 
We have provided funding for $66 million in agricultural loans, and 
have financed assistance for over 3,800 private enterprises involved in 
agriculture-related business. We have supported construction of more 
than 890 kilometers of roads that link markets and encourage trade, and 
have another 2,400 kilometers under construction. These interventions 
aim to increase incomes though market-driven agriculture. MCC tracks 
these results closely because they are the drivers of the income gains 
that we and our partners aim to achieve.
    While these results are important indicators of success, they do 
not tell the whole story. We are pleased that our program outputs are 
on track, but we hold ourselves to a higher standard: are MCC 
investments increasing incomes? That is why we are so excited about 
preliminary, promising data that is coming from Honduras, our first 
completed compact program.
    In Honduras, we have preliminary data from our agriculture program 
implementer showing that farmers who received assistance from MCC saw 
their annual net income rise 88 percent, from $1,880 per hectare of 
land cultivated using new practices to $3,550 per hectare.
    I want to stress that this is preliminary data, and we will know 
much more when the work of our independent evaluators is completed. But 
it is consistent with the output- and policy-based results that we have 
seen and the personal stories I have heard directly from farmers and 
entrepreneurs with whom I have visited.
mcc's investments are helping to build the next generation of emerging 
                 markets and make americans more secure
    The third fundamental question is: Are the American people 
benefiting from MCC's investments? President Obama's new development 
policy is building on the best ideas of the Bush administration and 
calling on U.S. development agencies to help build the next generation 
of emerging economies. By doing so, we are investing in a better future 
that offers opportunities to poor people in MCC partner countries and 
to American businesses and our own citizens.
    In a speech earlier this year, Bill Gates noted that fully half of 
current U.S. exports--more than half a trillion dollars--go to 
developing markets. Looking forward, leading economists expect the 
developing world to become the growth engine of the global economy.
    MCC investments look to remove constraints to growth so that the 
private sector will invest and flourish. These investments are helping 
to build a foundation for U.S. exports and increased business activity, 
which will mean increased growth and job opportunities here at home.
    MCC is funding more public-private approaches that can leverage our 
effort and bring in the private sector from the beginning. We are 
focusing on policy reforms, such as an initiative in Jordan that has 
attracted $90 million in private investment in the water sector.
    Our approach creates strong incentives for policies that are 
business-friendly. In Cape Verde, for example, the time required to 
register a business dropped from 54 days to as little as one day. Those 
are the kinds of changes that convert foreign assistance from a well-
intentioned contribution into a productive investment.
    Our commitment to private sector engagement is the reason we have 
taken action to prevent state-owned enterprises from bidding on MCC 
contracts. MCC's original procurement guidelines included no guidance 
on this matter, and many--including some members of this committee--
rightly expressed concern. MCC's aim is to ensure a level playing field 
for commercial firms that bid on MCC-funded contracts. Because state-
owned enterprises have built-in advantages such as access to 
preferential credit terms, we took this step to ensure private 
companies--including American companies--get a fair opportunity to 
compete for MCC-funded contracts.
    MCC also is helping to make Americans safer and more secure by 
promoting stability and developing strong partners in key regions 
around the world. Defense Secretary Robert Gates has been one of the 
most persuasive advocates for financing development work. In recent 
remarks, Secretary Gates stated:

           . . . [I]n military planning, what we call phase zero is, 
        how do you prevent conflict? How do you create conditions so we 
        don't have to send soldiers? And the way you do that is through 
        development. Development contributes to stability. It 
        contributes to better governance. And if you are able to do 
        those things and you're able to do them in a focused and 
        sustainable way, then it may be unnecessary for you to send 
        soldiers . . . Development is a lot cheaper than sending 
        soldiers.

    That is one reason why President Obama, like President Bush, has 
made development--together with defense and diplomacy--a critical 
pillar of our national security.
        the president's fiscal year 2012 budget request for mcc
    When President Obama unveiled the new U.S. Global Development 
Policy last year, he made clear that the United States is ``changing 
the way we do business'' in development assistance. Laying out a set of 
principles and practices that are at the core of MCC's model, he called 
for all U.S. Government programs to embrace a focus on results, 
selectivity, country ownership, and transparency.
    In his budget for fiscal year 2012, President Obama requested 
$1.125 billion for MCC, making the agency a central part of the U.S. 
Government's effort to promote opportunity and prosperity in poor 
countries around the world.
    President Obama's fiscal year 2012 budget request would enable MCC 
to sign compacts with Georgia and Ghana, as well as fully fund a 
compact with Indonesia.
    MCC's estimated budget requirements for these compacts are based on 
several factors, including policy performance on MCC's indicators, 
total population, population living below national poverty lines, 
absorptive capacity, and, in the case of Ghana and Georgia, performance 
in previous compact implementation. Final compact amounts will be based 
on funding availability and on the scope of agreed upon projects.
    MCC requests $912 million of the total fiscal year 2012 request for 
compact programs, divided between a second tranche of funding for 
Indonesia and subsequent compacts for Georgia (est. $100-$150 million) 
and Ghana (est. $350-$400 million). Because of its proposed size, the 
Indonesian compact would be funded over fiscal years 2011 and 2012, for 
a total compact range of $700-$770 million.
    Indonesia is the fourth most populous country and the largest 
Muslim-majority country in the world, with more than 100 million of its 
250 million people living on less than $2 per day. Given Indonesia's 
strategic importance to the United States, its economic potential, and 
the high number of people living in poverty, an MCC compact would be a 
smart investment for the American people.
    Both Ghana and Georgia were selected by the MCC Board of Directors 
as eligible to develop subsequent compacts. These countries were 
selected because of their continued strong policy performance, their 
status as important emerging markets, their strategic importance both 
globally and regionally, and their successful implementation of their 
first compact.
    The Republic of Ghana consistently performs well on MCC's indicator 
criteria and is generally viewed as one of Africa's most stable policy 
performers. Since 2004, Ghana has scored among the top low-income 
countries on the Control of Corruption indicator. In a region where 
constitutional transfers of power are often disputed, Ghana has a 
record of peaceful democratic elections and the transfer of power to 
opposition parties. In 2009, Ghana ranked better than almost two-thirds 
of all countries on Transparency International's Corruption Perceptions 
Index, and is preparing for transparent management of potential oil 
revenues.
    Georgia is recognized globally as one of the best investment 
climate reformers, even though 30 percent of its population still lives 
on less than $2 a day. Over the last 5 years, its scores on the World 
Bank's Doing Business assessment have improved more than any other 
country in the index. The country has also made significant strides to 
privatize state-owned industries and improve its Transparency 
International rank on the corruption perception index. This good 
economic policy performance is reflected by the fact that Georgia has 
seen a 55-percent increase in new businesses registered.
   mcc's subsequent compacts will focus on constraints to investments
    Entering our eighth year, MCC is beginning a new phase of 
innovation and partnership. As first compacts strengthen the foundation 
for economic growth, subsequent compacts--new MCC investments with 
countries that have successfully concluded their first compacts--are 
expected to target constraints to private investment. MCC aims to help 
countries, like newly selected Georgia and Ghana, solidify an economic 
growth path that attracts private investment, reducing the need for 
aid.
    MCC's engagement with partner countries is not open-ended. MCC 
carefully considers the appropriate nature and duration of each country 
partnership based on the country's policy and implementation 
performance, as well as the opportunities for impact on growth and 
poverty reduction. A defining characteristic of MCC's model of aid 
effectiveness is selectivity, both in the countries we work with and 
the investments we make. MCC's business model emphasizes selectivity 
and our mandate to partner with countries where investments will have 
the greatest potential returns in terms of poverty reduction and 
economic growth, and where U.S. taxpayer resources can be used most 
efficiently and effectively.
    While a single compact alone cannot address all binding constraints 
to a country's growth or transform an entire economy, a subsequent 
compact in a country that continues to perform well has the potential 
to help countries change their growth path away from aid dependence and 
toward greater reliance on private sector investment and internally 
generated revenue. For the poorest countries, even the ones with the 
right policies in place, it may take decades of sustained growth to 
lift citizens out of poverty. For low-income countries like Tanzania, 
where the annual per capita income is $500, economists estimate that it 
could take over 20 years to double per capita income even if the 
country sustains annual per capita growth of 4 percent (a historically 
high rate).
    This does not mean, however, that MCC engagement should last 
anywhere near that long. On the contrary, MCC's role is targeted and 
selective, and only the best performers will be eligible for continued, 
limited engagement. MCC's Board is particularly discerning when 
determining eligibility for follow-on partnerships. In addition to good 
policy performance, countries must show meaningful progress toward 
achieving first compact results before being considered for a 
subsequent compact. Of the 10 countries that will successfully conclude 
first compacts by the end of 2012, MCC's Board has thus far only 
selected three as eligible for a subsequent compact. Cape Verde was 
selected in fiscal year 2010 and Georgia and Ghana in fiscal year 2011.
    In our approach to subsequent compact design, MCC focuses 
increasingly on specific constraints to investment and private sector 
engagement; by removing such constraints, MCC helps to expand 
opportunities for U.S. businesses in emerging markets. This is in line 
with the President's Global Development Policy directive to foster the 
next generation of emerging markets by encouraging broad-based economic 
growth and democratic governance.
    MCC supports this effort by reaching out to the private sector, by 
grounding our investment choices in a constraints analysis that 
identifies specific obstacles to private sector-led growth, by 
introducing financial instruments designed to enhance access to 
capital, and by promoting innovative project content in areas of 
potential growth, such as alternative energy, applied technology, and 
financial inclusiveness.
    Potential to leverage MCC funding with a direct impact on 
investment growth serves as one of the screens for evaluation of second 
compact programming, in addition to MCC's mandate to promote poverty 
reduction through economic growth. By helping these countries solidify 
the progress they have made and become better integrated in the global 
market system, the United States is opening new investment 
opportunities for American firms as well.
          mcc believes corruption erodes private sector growth
    1 would like to discuss another critical topic, which is how MCC 
deals with corruption in potential or current partner countries. 
Because corruption has the power to completely undermine private sector 
growth, and any investment MCC or other donors make in developing 
countries, we take this issue extremely seriously.
    MCC's approach to fighting corruption begins before we even select 
a country for eligibility. MCC's corruption indicator is a key part of 
country eligibility decisions.
    Earlier in my testimony, I spoke of the strong results we are 
seeing from our partnership with Honduras. Honduras, however, did not 
pass MCC's control of corruption indicator at the time of country 
selection for fiscal year 2011. For me, it was difficult to not have 
Honduras selected for a second compact. But MCC tries to stick to its 
principles, and we place great emphasis on fighting corruption.
    While the State Department remains the lead on working with the 
Government of Honduras to address human rights and political issues, 
MCC has been engaged in very constructive conversations with the 
government to improve performance on accountable governance, enhanced 
management of public resources, and fiscal transparency. The Honduran 
Government has initiated a set of reforms to improve budget management 
and transparency, increase civic participation in budget preparation 
and reporting, upgrade legislative oversight, and strengthen internal 
and external audit functions.
    Our scrutiny regarding corruption does not stop after selection. 
Corruption is closely monitored as a country develops a compact and 
proceeds into compact implementation. MCC has a publicly available 
antifraud and corruption policy that outlines precautions that MCC 
takes and describes ways of responding to any instances of corruption 
in a compact program. We are currently training our local ``MCA'' 
accountable entities on how to apply this policy and develop risk 
assessments for their own work.
    In addition to protecting against corruption in our compacts and 
assessing individual cases of corruption, MCC assesses broader patterns 
of government actions that undermine institutions of accountability: 
courts, anticorruption commissions, auditors, and the media. 
Governmental actions that undermine these institutions of 
accountability make individual instances of corruption more likely, 
enable corruption to flourish, and cultivate a culture of impunity. By 
emphasizing the institutional response, MCC incentivizes governments to 
take greater responsibility for rooting out corruption.
    For example, MCC and several other donors made clear to the 
Government of Senegal that recent changes to their procurement code and 
implementing agency, in part due to legitimate national security 
concerns, were an accountability concern to us. In response, the 
government entered into discussions with donors, including MCC 
specifically, to address our concerns as they further revised the 
procurement code. Consequently, they have taken steps to amend the 
changes that would have weakened procurement procedures--including a 
January 2011 decree and a more recent draft decree under consideration 
by the Government of Senegal and various stakeholders. MCC is studying 
these amendments.
    Working with some of the poorest countries in the world means 
working with countries that struggle with policy performance including 
corruption. MCC's challenge is to find the right way to pursue poverty 
reduction while staying true to our model of selectivity and 
accountability, and this is particularly true in the case of 
corruption.
         mcc's proposed legislative changes would strengthen an
                          already strong model
    We hope to work with the committee again this year on passage of a 
package of legislative changes to MCC's current authorities, including 
allowing for concurrent compact authority and longer compacts in 
certain circumstances.
    The proposed changes are based on lessons learned since MCC's 
creation in 2004, and will provide the flexibility needed to maximize 
the impact of MCC programs through more innovative approaches to 
development assistance.
    Concurrent compact authority would allow MCC to sign separate 
compacts with a country based on the specific timing requirements of 
individual projects, rather than as part of a package driven on a 
single timeline. Concurrent compacts would improve MCC's ability to 
manage our compact pipeline with greater predictability and serve as an 
added incentive for policy reforms in partner countries.
    With concurrent compacts, the agency could move forward with 
projects that are investment-ready, instead of putting several projects 
at various stages of readiness into a single compact or delaying 
compact signing for a promising but less-developed project. As part of 
a larger, cohesive framework, concurrent compacts will allow for 
smaller, staggered agreements; speed implementation; improve project 
management by allowing countries to focus on managing fewer projects at 
a time; build management capacity with early projects; ease the current 
burden of managing large, complex compact programs; and foster 
innovation by allowing MCC to pursue new approaches and partnerships 
that could otherwise slow down the compact development process.
    Additionally, while having definite timeframes for MCC compacts is 
an important best practice for effective foreign assistance, in some 
cases projects face implementation challenges that mean they cannot be 
completed within the mandated 5-year period, particularly given MCC's 
emphasis on country-led implementation and MCC's high accountability 
standards. In these cases, MCC's options for responding to 
implementation challenges are limited by the 5-year timeframe. Allowing 
MCC, in exceptional circumstances, to extend the duration of our 5-year 
compact period for up to two additional years would allow MCC and our 
partner countries to pursue a fuller set of options for managing 
challenges and achieving compact objectives.
    MCC also has sought legislative changes aimed at ensuring that 
changes in countries' income categories do not prevent the agency from 
working with the best policy performing countries that also have 
populations living in extreme poverty. Each year, countries abruptly 
graduate from one income category to another with no transition period. 
Sudden shifts in income category, due in part to changes in exchange 
rates, pose serious issues for MCC. This impacts whether they can be 
candidates for MCC assistance at all, and changes both the policy 
performance standards against which they are measured and the levels of 
funding they can receive.
                               conclusion
    Mr. Chairman, my own background is in banking--and I bring a 
banker's perspective to my job. But my perspective is also informed by 
my travels in poor countries; by my personal experience; and by my 
faith in the values that make America strong--freedom, opportunity, 
responsibility, and the willingness to lend a helping hand.
    I have seen the toll poverty takes--in broken dreams and wasted 
potential. But I've also seen how much hardworking men and women can 
achieve when they are given the tools and the chance to build a better 
life. I am proud that our Nation supports those aspirations for dignity 
and progress, and grateful to this committee for your leadership in 
promoting the security and stability of these countries.
    Thank you for this opportunity to testify. I request that an 
extended version of my testimony be entered into the record, and am 
happy to answer your questions.

    Senator Cardin. As I said before, your statement will be 
made part of our record.
    And again, I thank both of you for your presence here, but, 
more importantly, for your service in these extremely important 
positions.
    You mentioned the budget submitted by President Obama. Many 
of us support the initiatives that President Obama has in his 
budget, as it relates to your agencies. The reality, though, is 
that what is moving through the House of Representatives is 
substantially below those numbers. Not only do they not 
increase your funds, there are significant reductions, totaling 
approximately 29 percent for the FY12 budget.
    Can you just relate to us, if that budget became real, if 
the House-passed numbers in its budget were to be reflected in 
the final budgets you receive, what impact that would have on 
the programs that you have referred to in your testimony, but, 
as it relates to your commitments, generally?
    Dr. Shah. Certainly. And thank you for the question. We 
have been working in a spirit of bipartisanship and with the 
desire to be very efficient in how we achieve cost reductions 
in the portfolio of work, which is why the FY12 budget request 
already presents more than $400 million of USAID budget 
reallocations from programs that are good programs, achieving 
impacts, but to a range of other programs that we think buy 
more outcomes for the dollar.
    That said, a 30-percent reduction to the various accounts 
that USAID manages would effectively end our ability to pursue 
the Feed the Future Program, which has, I think, particular 
unique and timely value, because it is a program that really 
was started between FY08 and FY09, with significant budget 
increases proposed by the Bush administration, and then picked 
up by President Obama. So, if we go back to FY08 levels, that 
program essentially will not exist, and the resources will not 
exist to invest in the 20 priority countries, as we've defined 
them.
    Second, in our Global Health Initiative, we've proposed 
additional resources for precisely those areas of investment we 
think buy the most value, in terms of human life, like malaria, 
immunization, child survival in that first 48-hour period of 
life, and a number of other health priorities. Those specific 
programs would be affected and we would not only not be able to 
pursue the expansions of, say, the malaria program into the DRC 
and Nigeria, where we think they can save tens of thousands of 
lives, but we would be cutting back on those types of efforts.
    Also, we have--we recognize that the consequences in our 
international disaster assistance accounts, for example, would 
greatly limit our ability to lead international responses to 
crises from Haiti to Sudan to elsewhere around the world.
    So, they would have very significant and deleterious 
consequences to our national security.
    Senator Cardin. Thank you.
    Mr. Yohannes.
    Mr. Yohannes. Thank you very much, Mr. Chairman.
    We've been working with Indonesia, Zambia, and Cape Verde. 
And we've been working with them for the last 3 years. So, any 
cuts would have huge consequence, especially when you said 
``about 30 percent.'' And the biggest problem with a number of 
those countries is, we want to have a huge investment to 
transform those countries from aid-dependency to self-
sufficiency. So, that funding is going to be impaired. We'll 
make a decision based on which investment would yield the best 
return for the American taxpayers.
    And also, we have to scale down on some of the proposed 
projects, making sure that we only invest in those projects 
that would have the most impact in reducing poverty in our 
partner countries. We will be creative, and we're going to try 
to complement our investment with private-sector investment, as 
we have done in Jordan. We signed a compact in Jordan last year 
for $275 million. The compact was complemented with funds from 
the private sector, worth approximately $85 million.
    So, we're going to try to be creative. We're going to try 
to find every way to make sure that our program is not 
impacted, even though we understand, you know, there are some 
huge ramifications, in terms of not being able to get things 
done as we have hoped for.
    Senator Cardin. One of our more significant commitments is 
in Afghanistan. And I think this committee has been very 
supportive of the reduction of our combat costs in Afghanistan, 
recognizing that we need to build the country's economic 
future, that that will be in our economic interest and in our 
security interest. But, as I said in my introductory remarks, 
there is an expectation that our participation in any country 
depends upon that country's commitment to root out corruption 
and to have a transparent system and to deal with gender-equity 
issues.
    We're on the verge of passing the 2011 budget; and in that 
budget, there is direct language requiring that you certify, 
Mr. Shah, that certain commitments have been made to adopt 
anticorruption policies, that there have been progress made in 
gender-equity issues. And it's pretty specific in the language 
that's included in that budget document that I expect will be 
approved later this week, maybe as early as tomorrow.
    What assurances can you give us that, in making that 
judgment, you will comply not just with the spirit, but the 
letter, of what we're trying to accomplish here in making sure 
USAID promotes anticorruption and gender equity?
    Dr. Shah. Thank you. I would start by noting that, in the 
FY12 budget, we propose, across State and AID, a $4 billion 
overseas contingency account that--in Iraq and Afghanistan--
that essentially enables a $40 billion reduction in military 
spending. And that's the kind of aggregate offset that we 
believe represents the large-scale fiscal stewardship that we 
want to pursue across all accounts. That also highlights the 
integral nature of our work in Afghanistan, in particular, 
where we are part of an integrated civilian and military plan.
    And we have taken a number of specific steps to address the 
point that you raised and to address the certification 
requirements. To begin with, we've reviewed our award 
mechanisms, and actually broken contract sizes down into 
smaller award mechanisms, and collapsed the number of layers of 
subcontractors, so we have more visibility and more vetting of 
specific individuals and of the subcontract firms, themselves.
    Second, we have implemented a much more aggressive vetting 
system that allows us to track people we are potentially 
funding against a range of databases, including DOD and 
intelligence community information.
    Third, we have put in place more aggressive financial 
controls that allow us to better manage the way assistance is 
working in Afghanistan. And part of making that real was 
increasing, by more than threefold, our basic staffing in 
Afghanistan, and especially outside of Kabul, so that we could 
be more in touch with the programs, themselves.
    And finally, we have dramatically improved specific project 
oversight, where we now have, between our direct-hire staff and 
our foreign service nationals, far more contact with specific 
program managers and visits to the field to explore those 
activities.
    These all take place, of course, in a difficult security 
environment. And I would just point out that, over the last 8 
years, USAID and its partners have lost more than 300 people in 
pursuit of this mission in Afghanistan. And I want to take this 
moment to just thank our team out there for their tremendous 
service.
    Senator Cardin. And we share your thoughts on that.
    Let me just make an observation. We put a lot of 
certifications in appropriation bills here. And sometimes 
they're viewed as giving you leverage to make progress. But, 
these are meant to be more than that. And we appreciate the 
progress that you're making, but it's a rare case where you do 
not certify. And I think it's time, and I'm--Afghanistan, I 
hope everything works well. I hope all the funds can be 
allocated and the progress can be made as you have suggested. 
But, it seems to me that it's incumbent upon you to carry out 
the letter of the appropriation bill and, where the 
circumstances do not exist for the certification, that you be 
prepared to take action to block the funds, according to 
congressional intent.
    Dr. Shah. Sir, if I may respond to that. There are specific 
programs, and one very significant and central effort, that we 
have not certified, and therefore, are effectively holding 
funds against. This is part of a larger dialogue that we have 
with our partners in Afghanistan. And I can assure you that 
we're not just observing the letter or the spirit, we're using 
this as an opportunity to take actions to make sure we're 
protecting taxpayer dollars. And we are in the process of doing 
that right now.
    Senator Cardin. Well, thank you. I say that as a friend of 
your agency, but one who's going to be looking very carefully 
at the basis of your certifications, as it relates to fighting 
corruption and gender equity.
    With that, Senator Lugar.
    Senator Lugar. Administrator Shah, Congress has approved a 
significant new sum of $150 million, for the State Department 
and USAID to expend in the post-Mubarak Egypt. Let me ask, 
first of all, How are these funds being administered? Does the 
Egyptian Government presently have the capacity to absorb this 
$150 million? Finally, what impact are these funds having if 
any? How would you gauge the effect of the $150 million?
    Dr. Shah. Thank you, Senator. I would just start by 
pointing out that our approach to the program in Egypt is 
highly coordinated across the United States Government, and 
tied very specifically to our diplomatic strategy, which, as 
the President has identified, is about supporting an effective, 
peaceful, democratic transition.
    Second, the Secretary, upon her return from her trip, has 
offered a very specific direction around ensuring that we do 
everything we can to support the short-term transition, but 
also, keep our eye on the larger fiscal situation because the 
essential economic situation and fiscal situation, given 
current events, is particularly challenging.
    In those contexts, these resources have been divided into 
specific categories. Some of the projects are supporting the 
democratic training and support for basic effective election 
processes--and some of the support will be targeted to larger 
economic and fiscal assistance. And we're currently in the 
process of designing that second part of the program.
    The things I would highlight are: We have moved very 
quickly to reprogram these resources, and target them against 
opportunities. We are seeking to be, as we have been for 
decades, consultative with the Egyptian Government and with 
local civil society organizations, in how the funds are spent. 
And the team has moved very quickly on certain components of 
this so that they've already engaged with hundreds of 
individuals and groups in order to be able to be efficient and 
responsive to the opportunity and the needs.
    Senator Lugar. Well, who is the government? The military 
establishment? Just physically, who handles the money?
    Dr. Shah. There are different types of funds that we move. 
Some move directly to validated international organizations. 
Some can move directly to local civil society groups. And other 
parts of funds move through existing government-to-government 
agreements. The basic mechanisms for public administration of 
programs continues, as it has, unabated through the Minister of 
International Cooperation, with whom we had lunch earlier 
today. But, it is a process that we have worked on for years, 
and is one that allows for transparency in how resources are 
spent in the Economic Support Fund Program.
    Senator Lugar. Mr. Yohannes, looking at the MCC's 
calculations for the amount of benefits each compact provides, 
it appears Congress is appropriating more money for four MCC 
compacts than those compacts provide in benefits. These four 
compacts are with Mali, Moldova, Namibia, and Vanuatu. Now, how 
do you explain this phenomenon? Why would the costs exceed the 
benefits of these compacts? Does this indicate something about 
the MCC's criteria, forecasts, or accounting?
    Mr. Yohannes. Thank you very much, Senator. A couple of 
things. No. 1, our $8 billion investment is projected to 
generate about $12\1/2\ billion in additional income for our 
partner countries. Now, I believe, Senator, we're talking about 
the benefits. In fact, there may be some misunderstanding, in 
terms of how it's calculated.
    When we calculate the benefit, we used a standard, private 
sector approach, which is, we take the net present value over 
the next 20 years. And then, if you look at that for Mali, as 
one of the countries where we are spending about $460 million, 
and the net present value benefits, in about 20 years, is about 
$457 million. But, if you discount the $460 million for Mali, 
for example, to a 20-year's net NPV, then that amount is about 
$320 million. So, in terms of how we calculated, I'll be more 
than happy to bring my economists and then work with your 
staff.
    Senator Lugar. Well, that would be helpful----
    Mr. Yohannes. Thank you.
    Senator Lugar [continuing]. To get more clarification for 
those four countries, and for the whole process.
    Mr. Yohannes. But overall, Senator, they all expect that 
they will have very positive numbers.
    Senator Lugar. Administrator Shah, the administration has 
requested $1.1 billion for the Feed the Future Program, and an 
additional $308 million for the United States contribution to 
the World Bank Global Agriculture and Food Security Program 
trust fund. The administration has also asked for $1.69 billion 
in funding for the Food for Peace, Title II program. Now, let 
me ask, in this difficult budget climate, How can you assure us 
that these programs are working together in a nonduplicative 
manner to accomplish our foreign policy goals? In other words, 
how do you sort out the missions and the expenditures?
    Dr. Shah. Thank you, sir. The $1.69 billion for title II 
primarily funds emergency food security programs around the 
world. And that would include programs like Darfur feeding 
programs and in certain other countries where there are acute 
emergencies and where we need to respond to famine and acute 
hunger and starvation. The $1.1 billion plus the $308 million, 
that really makes up the agricultural development investments 
that support us to, over time, transition from what we believe 
is more costly and, over time, less efficient--that we don't 
want to be providing food when we can help countries provide 
for themselves, and do that in an efficient manner.
    In terms of how we coordinate those components, they are 
fully coordinated. USAID sits on the board of the World Bank 
Fund. The value of that fund is the money we put into it gets 
leveraged manifold by other donors. And we are constantly 
working aggressively, with partners from Qatar and the U.K. and 
Spain and Canada, to make sure that every dollar we put in gets 
leveraged in that capacity.
    The $1.1 billion allows us to really scale up efforts in 
the countries that have been carefully selected and have gone 
through a rigorous now-18-month process of changing their legal 
rules so that they can attract more foreign direct investment--
in many cases, from U.S. companies, like PepsiCo--so that they 
can make greater investments in agriculture, themselves, and so 
that our resources can really target small-holder farmers, most 
of whom are women, who are very much a part of the solution, 
because, we know, as they earn more incomes and produce more 
food, the first thing that happens is, they improve the 
nutrition of their children and then send their kids to school 
and begin that pathway out of poverty and hunger.
    So, that's how the program sticks together. And, country by 
country, we have developed specific country investment plans 
that detail how our money will be spent, but also align our 
resources with funds from the World Bank, from other donors, 
and from the local government and the private sector. And it's 
really the first time in decades that that kind of coordination 
has come together in the agriculture sector. And it gives us 
great hope that these programs will be highly effective, 
compared to their alternatives.
    Senator Lugar. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Cardin. Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman.
    Thank you both for your service.
    I want to follow up, on Senator Lugar's comments about 
Egypt. Those of us who have supported aid to Egypt and to the 
Middle East know our support is not, in my mind at least, 
unconditional. I would like to support a country that is making 
strides in a secular, more democratic direction--respecting the 
rights, for example, of Coptic Christians. And I agree that aid 
is an incredibly important tool of U.S. foreign diplomacy, but 
it also must elicit certain responses as part of that aid. I 
hope that we are doing that in the case of Egypt, especially as 
circumstances unfold there and hope you will give me a sense of 
some of that.
    Second, President Obama's trip to Latin America shone a 
light on the region, one that I believe has been overshadowed 
by what are seemingly more pressing issues in other parts of 
the world. And I understand that. But, I believe this constant 
march, where we see aid to Latin America and the Caribbean move 
in a downward slope, is not in the national and security 
interests of the United States. What is occurring in Latin 
America and the Caribbean affects the American people and our 
debates in Congress more than those that are occurring in other 
parts of the world.
    I mean, if you talk about undocumented immigration, 
narcotic trafficking, organized crime and gangs in the 
hemisphere, new diseases that we had largely eradicated and are 
now resurfacing--they know no boundaries; if you talk about the 
creation of opportunities for U.S. products and services to be 
sold in markets in the hemisphere, whose rate of growth in some 
countries is a GDP we'd only desire to accomplish, then you see 
the natural interests of the United States.
    And so, I look at that reality, and then I look at where 
we're going, in terms of foreign assistance based on what you 
said in a previous hearing, Mr. Administrator, that AID would 
be seeking to shift funding away from some regions to other 
areas of the world to maximize the effectiveness of AID 
dollars. But, we're going in a direction that I think is not in 
our interest.
    Based on the FY12 budget that's exactly where we're headed, 
with foreign assistance requests for Latin America and the 
Caribbean for FY12 approximately $1.89 billion, which is about 
8 percent less than FY11 requests, and 16 percent less than the 
FY10 base enacted appropriation. In the last decade, compared 
to other regions in the world, Latin America has dropped from 
14 percent of the foreign assistance budget to just 10 percent, 
at a time when all these issues I talked about at the beginning 
are rising.
    So, explain to me, in light of what we are seeing in our 
own front yard, why this makes sense. And how are we going to 
stop this slide? What is the priority that you have at AID for 
Latin America, in the context of worldwide development 
activities?
    Dr. Shah. Thank you, Senator. I'll start with the second 
point in question. We absolutely have a priority for Latin 
America. It's based on a desire to see real results in specific 
areas. Funding for USAID-managed accounts for the Latin America 
region has stayed relatively stable. The FY12 request for 
USAID-managed accounts is about $1.29 billion, which is $23-$24 
million less than FY11, but is also slightly higher, about $29 
million higher, than the similar request for FY10. And we, of 
course, made difficult tradeoffs to produce the budget, 
overall. And so, we're certainly seeing that.
    The ability to maintain the programs in Latin America, when 
we factor out many of the major initiatives, is even more 
strong, because the initiatives do tend to skew toward sub-
Saharan Africa, although we have managed to identify and make 
real specific, targeted, initiative-oriented investments in 
places like Guatemala and El Salvador. Guatemala has been 
designated both a Feed the Future country and a Global Health 
Initiative country. El Salvador is one of only four countries 
that are part of the President's new Partnership for Growth, 
where we are bringing together the entire interagency and, in a 
coordinated way, trying to explore expanding, significantly, 
growth and economic development partnerships with El Salvador.
    And we've specifically targeted increases in funding in 
both the Mexico ESF development assistance and health accounts 
and in the ESF funding for CARSI. And in CARSI, in particular, 
we have tried to be very goal-oriented in identifying, what are 
the specific security benchmarks, where are we seeing real 
progress in areas like local and community policing and 
programs that interface with high-risk youth, and our ability 
to bring local private-sector funding into those programs to 
supplement U.S. taxpayer dollars.
    So, Mark Feierstein, who's the Assistant Administrator in 
this area, has been focused on this, as have I, and we will 
continue to maintain this type of a results-oriented focus in 
Latin America programming.
    Senator Menendez. Do you expect to continue to see that, 
when you have challenges elsewhere in the world, it will be the 
Latin America and Caribbean accounts that suffer?
    Dr. Shah. I think--in the current budget environment, I 
don't feel that I'm able to really say that anything is 
protected. We believe this is an important investment. You're 
absolutely right to point out that this is both our front yard 
and the investments we make have direct consequences for our 
border, the management of our border, migration flows, as well 
as our own ability to have viable, effective safe trading 
partners.
    Senator Menendez. I appreciate your recognition of that. 
The problem is that what AID has been doing over time is taking 
from the Latin America accounts whenever it faces a challenge. 
So, while I appreciate that nothing is protected, something 
that never seems to be protected is this. And so, I am 
concerned that this is the pot by which we ultimately go to. 
And that is not acceptable. That is not acceptable.
    Last, on a third matter, I look at Congress's language, as 
it relates to the economic support funds for Cyprus, and find 
that they go to bicommunal projects aimed at reunification 
measures to reduce tensions and promote peace and cooperation 
between the two communities in Cyprus. However, according to 
the list of projects published on the AID Cyprus Web site, it 
seems to me that almost all of the work is focused heavily on 
the Turkish Cypriot programs and not bicommunal in nature.
    So, can you explain how such projects fit within the 
definition that the Congress put forth of bicommunal projects 
meant to promote cooperation and reconciliation on the island? 
And in light of congressional concern about the lack of 
transparency and advance consultation of these funds, can you 
speak about the existing bicommunal programs which follow the 
intent of the law and are focused on promoting cooperation, 
which is the purpose of these moneys, in the first place, 
between Greek and Turkish Cypriots?
    Dr. Shah. Thank you, Senator. We believe our programs do 
follow the spirit and the letter of the congressional guidance. 
I would note that we have supported, in FY10, over 140 civil 
society organizations in their efforts to build trust and 
understanding between communities. There are a number of 
different projects and programs that they pursue to do that in 
a myriad of different ways. But, in total, they have hosted 400 
events in which 17,000 people from both communities have, in 
fact, participated.
    So we have also seen, and track, media responsiveness to 
that, and, frankly, believe there have been hundreds of 
positive stories in the international press and more than 1,000 
in the local press, that really do achieve that goal.
    Senator Menendez. My time is running out, so I will follow 
up with further questions, in writing.
    The reality is that a lot of this is about tourism on the 
northern side, and attracting people from other parts of the 
world there. It isn't about bicommunal efforts. I don't know 
how you get to bicommunal efforts if you don't have 
conversations and engage the Cypriot Government, certainly on 
the Greek side, as part it.
    So, I'm concerned with your statement that, ``Yes, we 
follow congressional intent,'' because I really feel that is a 
lot lacking here.
    So, I hope to follow up with you on Latin America, and 
again, I appreciate your engagement.
    Thank you, Mr. Chairman.
    Senator Cardin. Well, thank you, Senator Menendez.
    Let me just follow up, just very briefly, on Senator 
Menendez's point. We understand that there's going to be some 
very difficult decisions that may have to be made during this 
appropriation process. Many of us would like to see your 
budgets more robust. I think that's going to be extremely 
difficult during these times. But, I would just urge you to 
work very closely with this committee and the subcommittees of 
geographical interest, as well as the subcommittee that has 
general jurisdiction over your programs, and with the 
appropriators, because I think you're going to find the point 
that Senator Menendez made about the regional equity issues 
here are going to be of great interest to the Members of 
Congress. And I understand the priorities that you are trying 
to move forward. We can always do that when we have a growing 
budget. When we don't have a growing budget, it's a little bit 
more difficult to make those judgments. And I would just urge 
you to work very closely with our committees as those decisions 
are being made.
    We want to work with you. And we want to have harmony as we 
go through this. But, if we just find out that a--some aid that 
we thought was going to be coming in a particular region, all 
of a sudden is cut back, where other regions seem to be doing 
better or other programs seem to be held harmless, that may 
cause some problems as we go forward.
    So, please work very closely with Senator Menendez, as it 
relates to our hemisphere. And we--I'm sure that there are 
other subcommittees here that are going to have equal interest 
in what is happening in their geographical area.
    Senator Lugar.
    Senator Lugar. I have no more questions.
    Senator Cardin. Senator Menendez.
    Senator Menendez. No.
    Senator Cardin. Let me thank, again, both of you very much 
for your testimony.
    Senator Webb has asked that I mention that he was 
unavoidably unable to attend. But, he has submitted a statement 
for the record which will be made part of the record.
    The record will remain open for 3 days.
    And we thank you all very much for your participation.
    [Whereupon, at 2:56 p.m., the hearing was adjourned.]
                              ----------                              

              Additional Material Submitted for the Record

    Prepared Statement of Hon. Jim Webb, U.S. Senator From Virginia

    I am presently chairing a personnel subcommittee hearing in the 
Senate Armed Services Committee, and unfortunately cannot participate 
in this hearing today. I would like to commend Senator Cardin for 
chairing this important oversight hearing on our foreign assistance 
programs and priorities.
    As the authorizing committee for foreign assistance, the Foreign 
Relations Committee bears special responsibility for examining the 
direction, policy, and levels of funding for overseas aid. This aid 
plays a critical role in our diplomacy, and nowhere is this more 
important than in East and Southeast Asia.
    This region--with 45 percent of the world's population--is the only 
place in the world where the direct interests of the United States, 
China, Russia, and Japan directly intersect. Despite the 
administration's stated attempt to engage Asia, the FY 2012 budget 
fails to provide the diplomatic funding and foreign assistance needed 
to rebalance our long-term and short-term strategic priorities. Of all 
the regions in the world except Europe, the East Asia region has the 
lowest budget for foreign assistance.
    I look forward to working with the committee to redress this 
problem and increase the committee's oversight of U.S. foreign 
assistance.
                                 ______
                                 

    Responses of Administrator Rajiv Shah to Questions Submitted by
                        Senator Richard G. Lugar

                            feed the future
    Question #1. In response to my question at today's hearing 
regarding the Feed the Future Initiative, you stated that while both 
the Feed the Future and the Food for Peace Title II programs may 
operate in some of the same countries, because they focus on different 
hunger and food issues, there is no duplication between them. In 
addition to these two food security programs, the United States also 
contributes to the World Bank Global Agriculture and Food Security 
Program (GAFSP) Trust Fund, and the administration has requested $1.69 
billion for it in FY12. I note that using FY10 data, all three of these 
programs are being funded in Bangladesh and Haiti. I would also note 
that several other programs and accounts, including the McGovern-Dole 
International Food for Education and Child Nutrition program, Migration 
and Refugee Assistance, and International Disaster Assistance, also 
address issues of food security.

   Please describe in more detail exactly how each program 
        works in these countries to address food security, where there 
        is duplication and how they may complement each other.

    Answer. The United States will continue to provide food aid during 
times of crisis, but a lasting solution to hunger requires a long-term 
commitment to agricultural growth. Agricultural growth fosters economic 
growth, reduces poverty, improves health, and is necessary to meet the 
needs of a growing world population in the face of climate change and 
other environmental challenges. The U.S. Government's Feed the Future 
(FTF) Initiative addresses the root causes of hunger that limit the 
potential of millions of people, using a combination of bilateral 
programs and multilateral mechanisms. Feed the Future promotes 
sustainable growth in the agriculture sector, facilitates local and 
regional trade, and invests in game-changing innovations and 
technologies to support productivity and income increases, so that 
countries are better able to combat hunger, feed their people, and 
contribute to stable global food supplies. Other agricultural programs, 
such as Title II Food for Peace, and the GAFSP trust fund, employ 
approaches that are complementary to FTF, thereby increasing the impact 
of USG investments in food security.
    One of the key principles of FTF is to support country-led 
agriculture and food security efforts, including the development of 
country-owned food security strategies and investment plans, with 
participation from U.S. food assistance implementing partners and their 
local counterparts. Through these country-led strategies, FTF 
collaborates with other U.S. agricultural programs, such as Food for 
Peace, to ensure efficiency and the greatest impact at the country 
level. During FTF strategy development, USG country teams analyze 
current country-specific food assistance programs in the design of 
their FTF strategy, targeting regional interventions that are 
complementary to these programs.
    In both Haiti and Bangladesh, USG-provided food assistance plays a 
critical role in supporting vulnerable populations through short-term 
humanitarian assistance as well as support to safety net mechanisms. In 
Haiti, the food assistance programs are complementary to FTF 
interventions as they support earthquake-affected populations and other 
vulnerable groups outside of the FTF growth corridors. In Bangladesh, 
the food assistance programs provide a solid basis for the FTF strategy 
and support safety net interventions for the most vulnerable groups. 
Given the magnitude of poverty and hunger in both countries, USG 
resources are not sufficient to fully solve these problems; however, 
our complementary programs combined will make great strides in reducing 
poverty and malnutrition.
    In addition, the administration's FY 2012 budget requests $109 
million in FTF economic resilience programs. Targeted toward vulnerable 
but viable rural communities, in areas with high concentrations of 
chronic hunger, these programs will bridge humanitarian and development 
objectives through expanded support for productive rural safety nets, 
livelihood diversification, microfinance and savings, and other 
programs that reduce the vulnerability to short-term production, 
income, and market disruptions. Specifically, this request will 
directly fund community development activities in lieu of monetization 
of food aid for these programs; expand the proportion of Title II Food 
for Peace resources available for emergency humanitarian needs; 
leverage the potential of the World Food Program's local and regional 
procurement of food assistance to strengthen local markets and increase 
small holder access to them; and pilot innovative, scalable mechanisms 
to reduce households' vulnerability to economic and climatic shocks.
    The Feed the Future Initiative also works to increase donor funding 
for agriculture-led growth. In line with the objectives of the 
administration's food security initiative, the USG supported the 
creation of the GAFSP trust fund which pools donor funds to provide an 
additional, unified source of financing to support sustainable food 
security strategies for those developing countries that demonstrate 
their commitment to addressing the food security needs of their 
population. The U.S. contributions to the GAFSP are leveraged by 
significant contributions from other donors. The trust fund is eligible 
to make investments in five areas that are central to food security: 
(1) improving agricultural productivity; (2) linking farmers to 
markets; (3) reducing risk and vulnerability; (4) improving nonfarm 
rural livelihoods; and (5) supporting capacity-building and technical 
assistance needs. In Haiti, the trust fund awarded $35 million for 
agricultural productivity growth through adoption of high-yielding 
technologies and research and extension. Bangladesh received $50 
million for agricultural productivity growth through technology 
generation and adoption and water management.

    Question #2. Is it the administration's intention to seek 
legislative authorization for the Feed the Future Initiative?

    Answer. At this time, the FY12 budget request does not include 
legislative authorization for the Feed the Future Initiative.
                             global health
    Question #3. I recently released a Senate Foreign Relations 
Committee Minority Staff Report on transparency and the Global Fund to 
Fight HIV/AIDS, Malaria, and Tuberculosis. The report is critical of 
the United Nations Development Program's (UNDP) refusal to make public 
its audit reports. My staff has recommended the withholding of funds to 
the UNDP until its internal policies are changed to allow for greater 
transparency and accountability.

   What are your views on this recommendation?

    Answer. We appreciate the SFRC Minority Staff Report, and the 
administration strongly supports reform of the Global Fund to ensure 
funds reach people in need and increase the impact of the Global Fund 
in saving and improving lives affected by HIV, TB, and Malaria.
    The administration has been playing a leading role in driving 
Global Fund reforms: In October 2010, Ambassador Goosby issued a call 
to action for Global Fund reform; the USG played an instrumental role 
in creating an independent panel to review the Fund's fiduciary 
controls and; we are working intensively with the Board to enact 
comprehensive reforms to improve the Fund's performance.
    The report recommends withholding all funding to the U.N. 
Development Program and U.S. contributions from the Global Fund to UNDP 
until it certifies that its internal rules and procedures have been 
sufficiently modified to allow ``any investigate[ive] arm of any 
multilateral organization to which the United States contributes FULL 
access to their audits, investigations, records and personnel.'' We 
strongly support coordinated action by the Global Fund OIG and UNDP in 
preventing, identifying, and aggressively addressing instances of fraud 
and corruption and strongly support granting the Global Fund access to 
UNDP Office of Audit and Investigation (OAI) reports on Global Fund 
grants. We understand the UNDP Executive Board will address this issue 
at its next meeting in June.
    We are working closely with the Global Fund and UNDP to urge them 
to address these issues immediately. But we are not proposing to 
withhold resources to the Global Fund and UNDP, as recommended by the 
report. Our goal is to strengthen the Global Fund's operations and 
oversight systems, while maintaining life-saving services for people 
affected by the three diseases.

    Question #4. The staff report also references a recently released 
study by the United Kingdom Department for International Development 
evaluating the effectiveness of 43 international funds to which Great 
Britain contributes for value for the investment and effectiveness in 
combating poverty. The report recommends that the United States conduct 
a similar exercise.

   As our U.S. commitments are being evaluated, do you believe 
        that the United States should conduct a similar exercise to 
        better evaluate contributions to international funds and 
        organizations?

    Answer. A broad and standardized review of agency performance, such 
as the review by the United Kingdom, is a worthwhile approach that 
merits thorough and thoughtful consideration. The Obama administration 
has made accountability for results central to our global development 
policy and indeed to our wider national security strategy. Especially 
in this budget environment, we couldn't agree more that international 
funds and organizations need to demonstrate results.
    The United States has consistently pushed for concrete improvements 
in efficiency, effectiveness, and accountability in international 
organizations and we are currently working to implement results-based 
management at the U.N. and other agencies. As a routine matter, U.S. 
funding to multilateral agencies is subject to review as part of any 
funding agreement, and, of course, we exercise oversight of assessed 
contributions through a range of governance and accountability 
mechanisms, depending on the agency.
    Previously, the United States established the U.N. Transparency and 
Accountability Initiative (UNTAI) to verify that concrete improvements 
in management and accountability are being made within the U.N. system. 
The Department of State is currently reviewing the successful UNTAI 
initiative and considering improving its usefulness and relevance with 
a follow-on effort. Nevertheless, taking a broader more standardized 
approach does merit additional consideration.
                     multilateral vs. bilateral aid
    Question #5. Should we be focusing more on bilateral assistance vs. 
multilateral programs or vice versa?

    Answer. Each one has its value and usefulness, and we need both 
bilateral and multilateral aid programs to achieve U.S. foreign policy 
and development objectives. The key is for a balanced approach, 
combining bilateral initiatives and multilateral programs to maximize 
their impact. Bilateral programs give us greater control over the 
design and delivery of aid to a specific country. Multilateral aid 
programs have some unique advantages: they can help generate 
international support and leverage donor financial resources for 
particular causes or issues. Multilateral programs can also help us 
reach places where we do not conduct bilateral programs or we do not 
have sufficient expertise or resources to meet the needs. For example, 
the U.N. played an important role in administering a multidonor trust 
fund for Iraq reconstruction and made valuable contributions helping 
Afghanistan build elections processes. Our participation in 
multilateral forums also provides us the opportunity and platform to 
help set the development agenda for the broader international community 
and to drive reform, transparency, and accountability in these bodies.
                             global health
    Question #6. In June, the Global Alliance for Vaccines and 
Immunizations (GAVI) will hold their first-ever pledging conference. 
The United States has played a huge role in the creation of GAVI. As a 
strong supporter of vaccines, I have closely followed the rollout of 
the pneumococcal vaccine.

   Should the United States make a multiyear pledge to GAVI; 
        and if so, how much should the United States commit?

    Answer. USAID is a staunch partner of GAVI. We strongly believe 
that immunization, and GAVI which supports global immunization, are 
amongst the highest impact and most cost-effective uses of U.S. 
Government investments in global health. Vaccines have the power to 
transform our global health efforts. By expanding the coverage of 
existing vaccines and introducing new immunizations, we can save the 
lives of 4 million children over the next 5 years. And future potential 
vaccines against malaria, TB, and HIV/AIDS will allow us to break the 
backs of these deadly diseases and save the lives of millions more.
    USAID has played a lead role in GAVI's creation and in its first 
successful 10 years. In addition to the $657 million in USAID funding 
to GAVI between FY 2001 and FY 2010, we play a critical leadership role 
on the GAVI Board of Directors and the GAVI Executive Committee. USAID 
also provides technical assistance to countries to strengthen national 
immunization programs so they can introduce and rapidly scale up access 
to the new vaccines that GAVI funds.
    We appreciate and share your interest in addressing GAVI's funding 
gap. USAID's FY 2011 request for GAVI was $90 million. The President's 
FY 2012 budget includes a request for GAVI of $115 million. We look 
forward to discussing future commitments to GAVI with the Congress 
prior to the pledging conference in June.
                                pakistan
    Question #7. It is my understanding that significant child and 
maternal health funds in Pakistan have been allocated, but not fully 
committed.

   Does USAID have the authority to reprogram those funds to be 
        dedicated to polio eradication efforts in Pakistan? Is this 
        matter under consideration?

    Answer. USAID/Pakistan in FY10 programmed an additional $1.5 
million of MCH funding toward polio eradication. This was a $1.5 
million increase from previous years. This higher level of funding is 
planned for FY11. Other MCH funds have been committed to other, equally 
essential programs.
                             global health
    Question #8. With USAID being the lead agency on the 
administration's Global Health Initiative, how does it work that the 
bulk of the funding comes through the global HIV/AIDS under the 
jurisdiction of the State Department?

    Answer. With passage of the Tom Lantos and Henry J. Hyde United 
States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria 
Reauthorization Act of 2008 (Pub. Law 110-293), the U.S. Global AIDS 
Coordinator in the State Department was granted specific budgetary 
jurisdiction over all USG funding for international HIV/AIDS programs. 
Under this authority, funding for USAID's PEPFAR activities is provided 
through the State Department under the Lantos-Hyde Act. The Lantos-Hyde 
Act began in FY 2009 and continues through FY 2013. USAID does not 
believe that this funding structure, which has been in place since FY 
2009, will constraint USAID's role as the lead agency under the Global 
Health Initiative (GHI).
                            enterprise funds
    Question #9. When communism was crumbling in Eastern Europe, an 
innovative new concept of development, the Enterprise Fund, was brought 
forward through the Support for East European Democracy Act and later 
the Freedom Support Act. These Enterprise Funds were private equity 
funds which received grants from the U.S. Government. The funds were 
managed under the direction of distinguished Boards of Directors, 
serving pro bono, tasked with investing and creating businesses to aid 
in the transition from command to market economies. USAID monitored 
their activity, and for the most part, these Funds were very 
successful. For example, in Albania, one of the poorest and most 
underdeveloped countries in Europe, the Enterprise Fund invested in a 
Western-style bank which became the financial nerve center of the 
entire country, providing credit cards, loans, and other financial 
products that Albanians had not experienced before. The bank was 
eventually sold to an international financial institution for over $150 
million.

   Given these facts, and the obvious need for the goals of our 
        international development efforts to evolve, how do you view 
        the Enterprise Fund concept? Do you see a role for Enterprise 
        Funds in our country's development strategy going forward?

    Answer. An Enterprise Fund is one of a broad spectrum of USG and 
USAID assistance mechanisms that have been utilized to assist the 
former Soviet-bloc countries to successfully navigate the transition 
into free market economies. Between 1990 and 1995, USAID provided $1.2 
billion in funding to finance 10 Enterprise Funds covering 18 countries 
in the Europe and Eurasia region to assist in these transformations. 
The investment has leveraged total investments of nearly $9 billion in 
the region. Further, the use of liquidation proceeds from the 
investments of the Funds has resulted in the creation to date of nine 
legacy foundations with over $1 billion in assets, and the Funds are 
on-track to return over $430 million to the American taxpayers. The 
10th Fund is also expected to generate sufficient returns.
    The Enterprise Funds themselves, while making significant 
developmental and financial contributions, would likely not have been 
as successful, without parallel assistance from USAID and other donors 
to simultaneously provide a wide range of necessary technical 
assistance, training and capacity-building, macroeconomic policy and 
regulatory reform, development of existing rule of law and judicial 
reform, and assistance to host nations to develop and implement 
policies and practices to create functioning democracies and free 
market economies out of the former centrally planned Communist system.
    The Enterprise Funds were created as public/private partnerships 
wherein experienced private sector Boards of Directors provided 
oversight on a pro bono basis and hired full-time day-to-day investment 
managers to make investments which would promote private sector 
development and policies conducive to private sector development.
    The Enterprise Funds invested directly in thousands of private 
sector businesses throughout the Europe and Eurasia region. Further, 
the Enterprise Funds collectively have created over 30 successful 
private sector financial institutions in the region.
    These Enterprise Funds have played an important role in the 
promotion of free market economies, development of private sector 
businesses and financial markets, and have contributed significantly to 
the advancement of the USG's foreign policy objectives.
    As with any such intervention and transformation, the model has 
continued to evolve over the 20 years in which these Funds have 
operated. Many lessons have been learned, which should be carefully 
reviewed during the consideration of creating any future investment 
funds in other countries.
    Not all Enterprise Funds were equally successful and even the 
successful Funds, as might be expected in a transition economy, made 
progress unevenly.
    When the Enterprise Funds were established, the circumstances in 
the Europe and Eurasia Region were well suited to the Enterprise Fund 
approach. There was a serious shortage, almost a complete absence of 
investment capital for the private sector in the region, capital 
markets and private financial institutions were almost nonexistent, and 
institutions to provide financial regulatory oversight and enforcement 
were underdeveloped or nonexistent. In considering the establishment of 
future Enterprise Funds for countries in other parts of the developing 
world, the decision should not be based solely on the experience of 
Enterprise Funds in the Europe and Eurasia Region. The specific 
circumstances of each country should be carefully studied to ascertain 
if there is, in fact, a shortage of private sector capital and if so, 
what types of capital and/or additional financial sector institutions, 
training, technical assistance or other forms of assistance are needed, 
and whether the circumstances are conducive to the operation of an 
Enterprise Fund or a similar private equity investment entity.
    It's important to recognize that Enterprise Funds are only one of 
the possible structures that USAID has utilized to provide increased 
access to capital and investment expertise and there are other 
alternatives which should also be considered, depending on the existing 
circumstances in each country or region.
   international development policy priorities in the fy 2011 budget
    Question #10. USAID's FY12 budget request includes $322 million in 
core funding through several programs including Development Assistance, 
USAID Forward, Feed the Future, and the Global Health Initiative, for 
Science, Technology, and Innovation. Science, Technology and Innovation 
are longstanding strengths of the United States in the global economy 
and have the potential for a win-win situation for U.S. economic growth 
and for assisting developing countries. The proposal is an innovative 
one with its inclusion of other federal science agencies, the private 
sector, and philanthropic organizations.

   How do you plan to engage the private sector in this effort? 
        How can these ideas move forward in a constrained fiscal 
        climate with no new funding?

    Answer. USAID understands the importance of achieving development 
outcomes more cost-effectively. This is why cost efficiency, scale, and 
leverage are at the heart of our innovation efforts which focus on 
identifying, testing, and scaling solutions--including those based on 
science and technology--with the potential to significantly improve 
USAID's ability to address development challenges more effectively, 
more cost-effectively, and sustainably. Working with the private sector 
and leveraging the resources and capabilities of partners in the 
private-sector, the nonprofit sector, and other governments is a 
critical component of this effort. However, we do not believe that our 
science, technology, and innovation efforts will be successful if they 
rely solely on private sector support. This is why USAID is requesting 
funding to support the development of initiatives such as Grand 
Challenges, Development Innovation Ventures (DIV), and mobile banking, 
which we believe have the potential to produce cost-saving 
breakthroughs in development.
    USAID is actively engaging the private sector and other potential 
partners through a variety of outreach mechanisms, including 
roundtables, speeches, and conferences. Public-private partnerships, 
such as Global Development Alliances which have an average leverage 
ratio of over 4:1, are a key component of our efforts to achieve 
development outcomes, and the majority of the first round of DIV grants 
leveraged contributions from partners. USAID is also committed to 
working more closely with the private sector, entrepreneurs, and 
innovators outside government to help identify, source, and develop 
potential development solutions rather than viewing them purely as 
implementers or donors.
               budget cuts in foreign assistance funding
    Question #11. I note that the President's budget request cuts 
development assistance in at least 20 countries by more than half, 
including 11 countries where all bilateral Development Assistance has 
been eliminated. It also terminates USAID missions in three countries.

   Have these countries graduated from U.S. assistance?

    Answer. Given the budget restraints facing the entire country, 
USAID will focus and concentrate its efforts to have the greatest 
development impact with the resources available. The reductions 
outlined in the question target countries with rapidly expanding 
economies or those who should be graduating from assistance, as well as 
those exhibiting a weak commitment to good governance. Through USAID's 
Country Development Cooperation Strategy and other planning processes, 
we are working closely with our host country partners and other donors 
to concentrate our efforts in fewer countries and focusing our efforts 
within countries. While we are continuing health and other targeted 
funding to some of these countries, we are aiming more broadly to 
change the nature of our relationship in these and other countries from 
assistance provider to development partner, working with nonassistance 
tools to further development cooperation.

    Question #12. Are these mission closures already proceeding? What 
savings are they generating?

    Answer. The missions scheduled to close in FY 2012 are currently 
making the preparations necessary to undertake the closure. There will 
be significant savings in Development Assistance and Assistance for 
Europe, Eurasia and Central Asia from the closures of these missions in 
FY 2012 ($16.6 million below FY 2010, an 84 percent decrease). Since 
the proposed mission closings and position restructuring will not occur 
until the end of FY 2012, the budget request for Operating Expenses 
does not reflect any savings for these actions. Savings would begin to 
be realized in FY 2013.

    Question #13. How does the 50-percent cut in aid to a strategic 
partner like Djibouti--home to our CJTF-HOA--reflect the strategic 
interest in sustaining that footprint in this volatile region?

    Answer. Djibouti is an important strategic partner in supporting 
stability and combating terrorism in the Horn of Africa. The reduction 
of Development Assistance funding in FY 2012 is part of a focused 
effort concentrating on improving border and maritime security and 
providing food aid, basic health services, and education and job 
training opportunities. While Development assistance will be 
significantly reduced, other assistance will remain level or increase 
including:

   Foreign Military Financing, which will remain steady, will 
        work to modernize and maintain equipment for law enforcement 
        and border protection professionals, including procuring 
        communications equipment.
   International Military Education and Training, which will 
        increase 6.1 percent, will provide training to military 
        personnel to continue professionalization of the Djiboutian 
        military and improve their ability to monitor Djibouti's land 
        and maritime borders.
   International Narcotics Control and Law Enforcement, which 
        will begin a program for training and equipment to enhance the 
        professionalism and capacity of the national police, 
        particularly in forensics and border security.
   PEPFAR, which will provide increased funding focused on 
        addressing HIV/AIDS in the Djibouti-Ethiopia transport 
        corridor.
                usaid forward-monitoring and evaluation
    Question #14. An important component of foreign assistance 
legislation introduced in the last Congress, as well as in the 
Quadrennial Diplomacy and Development Review (QDDR) and the 
administration's budget request, is effective monitoring and evaluation 
of foreign assistance programs.

   What is the status of your agency's work in establishing a 
        rigorous system to evaluate our foreign assistance investments?

    Answer. On January 19, 2011, USAID released a new evaluation 
policy. USAID's Evaluation Policy states two primary purposes: 
accountability to stakeholders and learning to improve effectiveness. 
The renewed focus on evaluation led to an evaluation policy that 
establishes higher standards for evaluation practice across USAID.
    All large projects (defined as a project that equals or exceeds in 
dollar value the mean project size for that office or field mission) 
will be subject to evaluation. This is intended to ensure that the 
majority of resources under management will be subject to evaluation. 
Additionally, all pilot projects must, if feasible, undergo a rigorous 
impact and/or performance evaluation.
    The evaluation policy establishes firm protocols and procedures for 
ensuring that all USAID evaluations will be transparently conducted, 
unbiased, integrated into project design, relevant for decisionmaking, 
methodologically sound, and oriented toward reinforcing local capacity.
    USAID began implementing the evaluation policy earlier this year. 
To provide USAID staff with the tools and technical expertise necessary 
to make this policy a reality, USAID is offering a suite of new 
evaluation courses and training modules to project managers and program 
officers throughout the Agency. Between January and April, more than 
100 trainees completed the courses.
    In addition to committing to training staff, overseas missions are 
required to create multiyear evaluation plans that are coordinated with 
the program and project design, implementation and contracting cycles. 
To promote full transparency and disclosure of evaluation findings, 
USAID is creating an evaluation registry, which will be publicly 
accessible, and evaluation findings will be available on the USAID Web 
site.

    Question#15. Do you plan to outsource any of these evaluations?

    Answer. To ensure that evaluations are conducted in an unbiased 
manner, USAID's evaluation policy stipulates that most evaluations will 
be conducted by external third-party evaluators who are not directly 
involved in project implementation. To promote unbiased evaluation work 
at USAID missions, these evaluations will be managed by the USAID 
Program Office (which has multiple responsibilities but does not 
generally manage projects directly) rather than the offices that manage 
the projects.
    USAID expects that the majority of these evaluations will be 
conducted by externally contracted organizations that have specialized 
expertise in evaluation. Recognizing, however, that USAID 
simultaneously needs to build in-house evaluation capacity, the Agency 
is training its staff in evaluation design, methods, and management. 
USAID staff and/or implementing partners will conduct evaluations when 
this serves the evaluation purpose, is cost-effective and does not 
compromise objectivity. However, it is anticipated that all evaluation 
teams will be led by an external expert.

    Question #16. Will the system also include the ability of your 
staff to recommend the elimination of ineffective programs?

    Answer. USAID's Operating Units will use evaluation findings to 
inform budget requests, which includes focusing resources on better 
performing programs and away from those that have a smaller probability 
of success.
    There are two important caveats. First, programs may be ineffective 
for a number of reasons. For example, an ineffective or underfunded 
program that was based on faulty assumptions and was not yielding good 
results in a cost-effective manner might be eliminated. But in some 
cases, redesigning and/or fully funding might be the most effective and 
efficient approach to address that development problem in a timely way.
    Second, USAID has deliberately chosen to promote evaluation as a 
tool for agencywide learning and accountability. Building a culture of 
learning requires an environment that is willing to innovate and that 
acknowledges development as a process of continual learning. USAID does 
not intend to promote evaluation solely as a means by which to justify 
the elimination of ineffective programs. From past experience, the 
excesses of such an ``audit culture'' actively warps organizational 
incentives, and it can prevent the Agency from making evidence-based 
budgeting and programming decisions.
                           sustainable growth
    Question #17. Over the past 50 years, our notion of international 
development has evolved as problems in the world have evolved; while we 
still focus on providing clean water, disease prevention, and 
educational opportunities, we have also come to be faced with the 
challenge of spurring sustainable economic development as a means of 
allowing countries and regions to solve their own more basic 
humanitarian problems. It is clear that the same approach to 
eradicating polio or fighting cholera will not work when it is applied 
to creating sustainable economic development. So a question for 
development agencies is how to adjust to the new reality of what 
development should be.

   How are USAID and the MCC seeking to further sustainable 
        economic growth?

    Answer. USAID supports sustainable economic growth through diverse 
efforts to improve the environment for enterprise growth and 
competitiveness; strengthen economic policy and governance; create 
sound, well-governed financial systems; support business enabling 
environments; support microfinance programs and business services for 
micro and small enterprises; and build trade capacity. Other sectors 
where USAID works to promote economic growth include: agricultural 
development; infrastructure improvement, including the upgrading of 
energy, telecommunications and water and sanitation services; workforce 
development; education; the environment; and health.
    At the same time, USAID and MCC are working in parallel on many 
different fronts to wean countries off U.S. assistance and ensure the 
sustainability of development efforts by working through efficient 
local governments, thriving civil societies, and a vibrant private 
sector. In particular, USAID and MCC are collaborating in the whole-of-
government ``Partnership for Growth'' efforts in El Salvador, Ghana, 
Tanzania, and the Philippines to increase investment, strengthen 
prodevelopment policies, and leverage new capital flows in those 
countries.
    USAID and MCC are also working together to identify private sector 
investments that can sustain and enhance the investments of both 
agencies in MCC compact countries. We are pursuing private sector 
engagement to bolster the sustainability of the developing MCC compacts 
with Zambia and Indonesia, and to complement the recently signed 
compact with Malawi. Finally, USAID is implementing threshold programs 
for MCC that target reforms in key areas--such as anticorruption and 
rule of law--that can inhibit economic growth.
                              afghanistan
    Question #18. The new authorities and significant new resources 
provided the Department of Defense recently created a new Afghanistan 
Infrastructure Fund (AIF) and a Task Force for Business Stabilization 
(TFBS).

   What role does USAID have in the conduct and implementation 
        of funds associated with the Afghanistan Infrastructure Fund 
        (AIF)?

    Answer. The dual key nature of the Afghanistan Infrastructure Fund 
requires a joint formulation of the project list proposed to be funded 
from the AIF. In the field, two working groups are involved in the 
formulation and selection of the proposed projects: the Infrastructure 
Working Group (IWG) and the Executive Working Group (EWG).
    The IWG, an interagency group cochaired by USAID and the USFOR-A 
Joint Engineering-Joint Programs Integration Office, meets on a regular 
basis to discuss infrastructure project coordination and planning. The 
IWG, keeping in mind the broader infrastructure strategy and 
implementation limitations (including schedules and resources), defined 
the requirements for the 2012 AIF project nomination process. The IWG 
then vets projects proposed for funding under the AIF and develops the 
prioritized list of projects for nomination to Department of State, 
USAID, and Department of Defense (DOD) leadership. This process also 
includes a discussion of timelines and resource levels necessary for 
each proposed project as well as which agency--USAID or DOD--is best 
placed to implement the project. The projects are often complemented by 
ESF-funded activities; e.g., the completion of Kajaki Dam Hydropower 
Plant complementing the proposed AIF-funded transmission lines from 
Kajaki Dam to Kandahar City.
    The IWG presents the prioritized project list to the EWG, which is 
composed of senior leadership from the interagency group in Kabul, 
including the USAID Deputy Mission Director. After review by the EWG, 
the proposed project list is submitted to Ambassador Eikenberry and 
General Petraeus prior to being sent to Washington for approval by the 
Secretaries of Defense and State before it goes to Congress.

    Question #19. What role does USAID have in the conduct and 
implementation of funds associated with the Task Force for Business 
Stability Operations (TFBSO)?

    Answer. Although it depends on the sector in question, usually 
USAID has no role in ``the conduct or the implementation of funds 
associated with the any projects or other activities undertaken by the 
Task Force for Business Stability Operations (TFBSO).'' Over the past 
several months, USAID/Kabul through its Office of Infrastructure, 
Engineering, and Energy and TFBSO have discussed proposed USAID and 
TFBSO support for the development of the Sheberghan Gas Field in order 
to coordinate which entity is best placed to support key infrastructure 
components that will facilitate the construction of a powerplant by the 
private sector.
    Pursuant to Section 1535 of the FY 2011 National Defense Act 
Authorization, the Secretary of Defense, the Administrator of USAID and 
the Secretary of State ``shall jointly develop a plan to transition the 
activities of the [TFBSO] in Afghanistan to the Department of State.'' 
Initial discussions have begun on ways in which State, Defense, and 
USAID could collaborate to prepare this transition plan. In relation to 
the transition, USAID/Kabul and TFBSO have continued their dialogue on 
how TFBSO-supported components at Sheberghan could possibly transition 
to USAID.

    Question #20. What oversight role does USAID maintain for these 
programs? Who has the oversight function for these infrastructure and 
business development programs?

    Answer. State and USAID work jointly with DOD to develop and 
finalize AIF projects as well as determine which agency is the most 
appropriate implementer of the proposed project. Following receipt of 
the funds, each implementer, USAID or DOD, will follow its authorities, 
regulations, practices and procedures to implement its approved 
projects, including with respect to oversight, such as USAID's 
requirement for independent quality assurance and control for all 
infrastructure projects. USAID will not have oversight over USACE-
implemented projects nor will DOD have oversight of USAID-implemented 
projects. In accordance with Section 1217(i) of the FY 2011 National 
Defense Authorization Act (NDAA), the Secretary of Defense, in 
coordination with the Secretary of State, will submit a report to the 
appropriate congressional committees regarding AIF implementation that 
includes, with respect to the fiscal year, the allocation and use of 
AIF funds, and a description of each project for which funds were 
expended or transferred.
    USAID does not have an oversight role for any Task Force for 
Business Stability Operations (TFBSO) programs in Afghanistan. The 
Secretary of Defense does submit a report to the appropriate 
congressional committees regarding its activities and the plan for 
transition.

    Question #21. What Title 150 funds are associated or provided to 
support the Afghan Infrastructure Fund (AIF) or the Task Force for 
Business Stability Operations (TFBSO) in FY10, FY11, and foreseen in 
FY12?

    Answer. A concerted civil-military effort unites DOD and Function 
150 funds in the Afghanistan Infrastructure Program to achieve 
complementary objectives. Under this program, DOD resources from the 
Afghanistan Infrastructure Fund (AIF) are focused on infrastructure in 
key terrain districts that have a greater short-term counterinsurgency 
impact, by providing fuel and expanding power, transport, and water 
services in the southern and eastern provinces. ESF resources are 
focused on supporting the foundational mid- to long-term infrastructure 
needs of the nation, such as developing indigenous power production and 
expanding power transmission capability, reliability, and efficiency. 
These parallel but interlinked investments support the transition 
efforts by contributing to immediate stabilization while consolidating 
the gains to date in the more stable areas of the country. AIF and 
Function 150 funds are complementary in achieving key infrastructure 
objectives, but there are no Function 150 funds associated or provided 
to support the AIF or the TFBSO in FY10 or FY11. With respect to the 
TFBSO, initial transition planning has begun for the possible 
transition of some TFBSO activities to the Department of State and/or 
USAID for FY12. Depending on the number of, and types of, TFBSO 
projects that are determined to be desirable and feasible for transfer 
to the Department of State and/or to USAID, FY12 funding likely will be 
needed to continue implementation of those projects. USAID staff in 
Kabul initiated discussions with TFBSO staff in March, though 
discussions on gas sector development were initiated earlier.
    Projects in banking, mining, and energy appear to have some 
potential for transfer to USAID although more due diligence is needed 
before an accurate assessment can be made for transition. In banking, 
USAID is exploring the use of mobile money applications as a way to pay 
Afghan Government civil servants through mobile phone operators and 
banks, while TFBSO has prepared a design for third party payments using 
a consortium of small banks that might be useful for payments via 
mobile money. In mining, TFBSO has been assisting the Ministry of Mines 
in preparing tenders for oil, gas, and mineral exploration. USAID plans 
to work with the Ministry of Mines in a capacity-building project that 
could build upon TFBSO efforts to date. With respect to energy, USAID 
plans to support the Sheberghan gas field redevelopment project and 
could build upon TFBSO work in this sector.

    Question #22. Why does USAID support what appear to be typically 
civilian authorities and activities for the Department of Defense? 
Could USAID carry out any of these tasks and if not, why not? What 
authorities and other obstacles exist to USAID or other civilian 
agencies?

    Answer. USAID is supportive of ensuring that the activities 
currently undertaken by the Task Force for Business Stability 
Operations (TFBSO) continue. USAID, State, and DOD are working together 
to make a recommendation to Congress as to the best home for TFBSO 
activities in conflict and post-confict environments, and will work 
with Congress to effect that transition, as appropriate.
    USAID was not actively consulted when the TFBSO was set up to 
engage in operations initially in Iraq and subsequently in Afghanistan. 
USAID has just begun to gain an initial understanding of TFBSO 
operations in Afghanistan and some limited understanding of TFBSO 
projects in the mining, banking, and energy sectors. As to any 
determination of the feasibility of USAID carrying out any of the 
current or planned TFBSO projects in Afghanistan, USAID will need to 
obtain a much more detailed understanding of the TFBSO portfolio and 
the current implementation status of any projects underway, including 
financial and other contractual commitments that may have been made. 
With respect to authorities or other obstacles that USAID might 
encounter in implementing any TFBSO projects that might be transferred 
per the FY 2011 NDAA, four sets of issues must be considered:

   Security restrictions set by the Embassy's Regional Security 
        Officers that currently proscribe or limit movement throughout 
        Afghanistan for USAID staff or USAID partners often do not 
        apply to TFBSO staff and partners operating under DoD Combatant 
        Command guidance. These security constraints might limit 
        USAID's ability to engage in some TFBSO-like activities, but 
        use of implementing partners who are not subject to Diplomatic 
        Security requirements is possible.
   Potential lack of specific funding beginning in FY 2012 for 
        any TFBSO activities that may be transferred to the Department 
        of State/USAID.
   In infrastructure development, such as gas sector 
        development, TFBSO is not bound by the same environmental 
        regulations as USAID. As a result, for USAID to continue or 
        support investments made by TFBSO, USAID would likely need to 
        conduct initial environmental examinations and determine 
        whether additional environmental assessments and mitigation 
        measures are required.

    Question #23. Given Secretary Clinton and Gates statement that 
``the Departments of State and Defense are committed to close 
collaboration on the execution of an infrastructure program'' what has 
USAID done to narrow its focus to those areas of strategic importance 
to our specific goals as part of the integrated Civil-Military Campaign 
plan?

    Answer. Through its consultative strategic planning process USAID 
has prioritized its focus on infrastructure investments that achieve 
the goals of the Civil-Military Campaign plan, including the key 
transition objectives. The U.S. is committed to a policy of 
``transition'' by 2014 with GIROA taking on increasing responsibility 
for security and development. USAID's job is to support the civilian 
component of this transition, to increase stability while building 
capacity across sectors--including infrastructure. The USAID has 
proposed allocating substantial resources to Afghanistan's 
infrastructure development to consolidate U.S. counterinsurgency and 
stabilization efforts and lay the necessary foundation for economic 
growth. Over 80 percent of Afghanistan's regional highways and 30 
percent of the national highway system have been revitalized, but an 
interconnected national electricity energy grid does not yet exist. 
Asia Foundation surveys of the Afghan people reveal that access to 
electricity is one of the highest priorities of the Afghan people, 
which reflects their understanding that the lack of electricity narrows 
the range of available economic and social development opportunities 
and their perception that the Government has not been responsive to the 
needs of its people.
    Beginning in FY 2010, a strategic reorientation of USG resources to 
the power sector will help meet the more than $6.6 billion in near-term 
energy sector infrastructure investment required to serve Afghanistan's 
burgeoning power demand. While USAID is planning to prioritize 
improvements in power in the infrastructure program, we also will 
continue to support construction of key transport projects, such as the 
construction of the Bamyan-Dushi national highway and supporting roads 
operation and maintenance. Smaller investments in demand-driven water 
activities, including water supply systems, and renewable energy 
programs will support stabilization efforts by improving access to 
clean water and modest energy supplies to improve the quality of life. 
Together, these activities will result in increased opportunities for 
Afghan firms and greater local employment.

    Question #24. What programmatic consolidation has occurred that 
shows a prioritization of infrastructure in our assistance for 
Afghanistan?

    Answer. Please see the FY 2012 Congressional Budget Justification 
for further information on the prioritization of infrastructure, and 
more specifically for energy. As noted in the previous question, 
beginning in FY 2010, a strategic reorientation of USG resources to the 
power sector will help meet the more than $6.6 billion in near-term 
energy sector infrastructure investment required to serve Afghanistan's 
burgeoning power demand.

    Question #25. Describe the individuals and mechanisms for 
engagement that USAID has as it relates to the Civil-Military Campaign 
Plan and at what levels does the Mission Director in Afghanistan 
participate in the planning and monitoring of stabilization and 
development programs?

    Answer. USAID is involved in the planning efforts across horizontal 
and vertical lines of engagement as laid out in the Civil-Military 
Campaign Plan. At the national level, USAID (Deputy Mission Director 
and technical office directors (as appropriate) participates in the 
Executive Working Group, and is the lead agency on infrastructure in 
the Economic Opportunity Working Group, as well as leading, with the 
Coordinating Director for Development and Economic Affairs (CCDEA), the 
Gender Policy Working Group. USAID also participates in the Afghan-
First, Economic and Financial Policy, Governance and Rule of Law 
Working Groups.
    The USAID Stabilization Unit and the USAID Office of Program and 
Project Development (OPPD) are the primary interlocutors for the 
various Kabul based civ-mil coordination efforts. USAID also 
participates in the District Delivery Program Planners Board, 
Transition Interagency Working Group, the Governance and Sub-National 
Governance Consultative Group and the Governance Policy Working Group. 
USAID/Afghanistan also participates in the many civ-mil anticorruption 
working groups.
     At the subnational level, USAID Senior Development Officers serve 
as the lead USAID coordinator for development programs and personnel 
that fall under their Regional Command. USAID is a part of the Civ-Mil 
Fusion cells at the regional commands, and USAID personnel serve in the 
Task Forces, Provincial Reconstruction Teams and District Support 
Teams.
    USAID personnel are involved in the many military planning efforts, 
and are able to wield their stabilization and development programs to 
build on military gains. At all subnational levels, USAID officers meet 
regularly and frequently with their military counterparts to coordinate 
USAID programming. Often USAID programs are designed to dove-tail with 
military efforts. CERP projects tend to be used to build the 
infrastructure (i.e., schools and clinics), and then USAID projects 
provide the technical oversight and additional inputs (e.g., school 
curriculum, teacher training and clinic supplies). In the 
counterinsurgency effort, CERP projects tend to be used to help with 
the clearing and the initial ``hold,'' while USAID stabilization 
efforts follow in behind to provide ``hold-build'' activities. Many 
development programs are designed to link to stabilization programs and 
``build'' and then ``transition.''
    USAID Field Program Officers at the provincial and district levels 
are critical in their ability to oversee and monitor stabilization and 
development projects. Recognizing this valuable resource, the USAID 
Mission Director has issued increased authorities to engage with 
implementing partners and provide updates on progress and the impact to 
the programs' Contracting Officer's Technical Representatives.

    Question #26. Your budget request implies a reduction in assistance 
to Afghanistan for FY12 based on FY10 levels. However, I understand 
that significant funds remain in the pipeline for projects in the 
country which beg a few questions regarding the actual funding 
imperative and limited decisions to reduce in areas not imperative to 
our goals.

   What is the level of funding that remains unspent in current 
        and prior year funds by fiscal year as well as broken out by 
        category (ESF/INCLE/GHCS/NADR, etc.)?

    Answer. As of March 31, 2011, USAID/Afghanistan has $1.99 billion 
in its pipeline which represents roughly 6 months of funding at the 
current expenditure rate of $323 million per month. An additional $1.24 
billion is appropriated, but not obligated; of which, approximately 
$908.185 million is programmed to directly or indirectly benefit the 
Government. This latter amount requires a Secretary of State 
Certification that the Government of Afghanistan (GIROA) is cooperating 
with U.S. reconstruction, taking credible steps to protect the 
internationally recognized human rights of Afghan women and 
demonstrating a commitment to accountability and facilitating active 
public engagement in governance and oversight of public resources per 
amendments to the FY 2010 supplemental. Below is the breakdown of the 
pipeline by FYs and funding accounts:

------------------------------------------------------------------------
                                                             Pipeline in
            Fiscal year                     Fund type         million $
------------------------------------------------------------------------
2007...............................  Child Survival and               11
                                      Health.
                                     Development Assistance           10
                                     Economic Support......           35
2008...............................  Development Assistance            9
                                     Economic Support......          145
                                     Global Health and                 9
                                      Child Survival.
2009...............................  Economic Support......          698
                                     Global Health and                11
                                      Child Survival.
2010...............................  Economic Support......          997
                                     Global Health and                67
                                      Child Survival.
                                                            ------------
      Total........................  ......................        1,996
------------------------------------------------------------------------

    Question #27. What is the current and projected monthly ``burn 
rate'' given historical measures?

    Answer. The current expenditure rate for the quarter ending March 
31, 2011, is $323 million per month and the projected expenditure rate 
is $370 million ($272 million disbursement + $98 million accruals). The 
expenditure rate for the FY 2010 last quarter was $240 million per 
month and for the FY 2011 first quarter was $243 million per month. 
These rates were projected to be $83 million per month greater due to 
$250 million transfers to ARTF planned for the quarters ending December 
31, 2010, and September 30, 2010.

    Question #28. How has the USAID mission through the Embassy country 
team and the reach-back offices at USAID and State sought to narrow the 
broad range of development efforts to focus on the highest priorities 
to U.S. interests?

    Answer. After conversations in February 2011 in Kabul between USAID 
Administrator Rajiv Shah, USAID/Afghanistan Mission Director Earl Gast, 
Ambassador Karl Eikenberry, and General David Petraeus about the need 
to focus development assistance in support of transition and Afghan 
ownership, USAID introduced the concept of ``foundational 
investments.'' Foundational investments are high-impact, capital-
intensive interventions made in priority sectors that will have long-
term, sustainable, and durable benefits for the Afghan people, and will 
assist the transition to Afghan self-sufficiency. Foundational 
investments are designed to be mutually reinforcing by leveraging gains 
across sectors for the overall benefit of the Afghan people. USAID/
Afghanistan has prioritized the following sectors for foundational 
investments: energy; agriculture; extractive industries; financial 
inclusion; human capacity development; and, construction. In addition, 
USAID/Afghanistan is developing work plans for the foundational 
investment priority sectors.

    Question #29. How have efforts in Pakistan development coincided 
and integrated with efforts in Afghanistan in each border area of RC 
East and RC South and RC Southwest?

    Answer. One area of coordination between USAID's development 
efforts in Afghanistan and Pakistan has been the area of trade. Thanks, 
in part, to USAID support, on July 18, Afghanistan and Pakistan signed 
a historic transit trade agreement, the Afghanistan-Pakistan Transit-
Trade Agreement (APTTA), which will update and improve the joint 
transit system to reflect current economic conditions, infrastructure, 
technology, and transport practices. The new transit regime provides 
for 10 additional transit corridors in Pakistan and eight new corridors 
in Afghanistan (the new corridors, including one in Zaranj in RC-
Southwest, will be a significant increase from two previous corridors: 
Torkham--RC-East and Spin Boldak--RC-South). This increased freedom of 
transit will link Pakistan to Central Asia and beyond and will give 
Pakistan improved access to raw materials from the region. Similarly, 
APPTA will link Afghanistan to the world via three Pakistani ports 
under designated routes. Afghan trucks will now be allowed to transport 
Afghan exports to any of the three Pakistan seaports (Karachi, Qasim, 
and Gwadar), load goods, and return with imports from other countries. 
Additionally, USAID/Pakistan's TRADE program is providing instrumental 
technical assistance to the Government of Pakistan (GOP) on APTTA. 
TRADE not only assisted the GOP in securing ratification of APTTA, it 
also helped the GOP develop a financial guarantee system that will 
ensure Pakistan collects duties and taxes owed on transiting Afghan 
goods. Assistance with the guarantee system and other issues helped 
Pakistani and Afghan officials overcome longstanding obstacles to 
APTTA's implementation at a meeting of the delegations in Kabul on May 
7.
    USAID's Trade Accession and Facilitation for Afghanistan (TAFA) 
program assisted in eliminating key policy and technical bottlenecks 
obstructing the signing of APTTA. During the final round of 
negotiations in July 2010, TAFA advisors assisted the negotiating team 
to understand the various alternatives and commitments available, 
particularly concerning the revised dispute resolution mechanism and 
measures to address cross-border issues, such as smuggling. Moving 
forward, USAID will assist both Afghanistan and Pakistan on 
implementation of the APTTA, focusing on antismuggling, customs 
modernization, trade facilitation, and other cross-border issues.

    Question #30. Describe how USAID professionals are working in an 
environment with a stabilization imperative.

    Answer. USAID professionals are working shoulder-to-shoulder with 
our military colleagues in the counterinsurgency environment throughout 
the ``shape, clear, hold and build'' phases, particularly following 
military clearing operations. USAID has expanded the definition of 
stabilization programming beyond just the counterinsurgency campaign to 
include programs that aim to reduce the social, economic, and political 
conditions that give rise to violence in a particular geographic 
setting.
    Recognizing that the closer our civilians are to the population the 
better they can respond to on-the-ground realities, we are working to 
get more of our U.S. Direct Hires (USDH) outside of Kabul at Provincial 
Reconstruction Teams (PRTs), District Support Teams (DSTs) and in 
regional platforms. Currently, 53 percent of USDH in Afghanistan are 
working outside of Kabul; with an ultimate goal of 60 percent. The 
mission is working to devolve more authorities to the field, providing 
increased oversight of programs and building stronger links between the 
field staff and our implementing partners.
    An increasing number of USAID employees have begun the use of the 
District Stability Framework (DSF). The DSF is a system developed by 
USAID and used by civilian-military teams. It allows the collection, 
analysis, prioritization, design, and assessment of local level sources 
of instability. With the use of this methodology, USAID Field Program 
Officers (are better able to align resources to drivers of local level 
instability. Further, this methodology allows for better continuity of 
effort and better synchronization of personnel and resources with our 
interagency partners, including the military.

    Question #31. What outcomes should Congress expect as the 
stabilization spend rate diminishes rapidly in conflict areas that are 
stabilized?

    Answer. As areas are stabilized, USAID will work with other donors 
and the Afghan Government to shift to a more traditional development 
role. With increased security, we will be able to build a more vibrant 
private sector, support social sector development, and develop a 
skilled workforce that is capable of servicing needs in an a growing 
economy.
    While our stabilization programs are small-scale and community-
focused, they must also have a sustainable impact. Our largest cash-
for-work program makes longer term investments by bringing together the 
district government with the community to decide on projects that 
address priority issues for the community, and then hires a 100-percent 
local workforce to implement the project. Through another stability 
program in the now stabilizing Shindand District in Herat, a $10,000 
investment in a drip-irrigation system will irrigate a pomegranate and 
almond orchard that the community elders expect will provide 
approximately 100 families with $3,000 per year. These sorts of 
investments are for the long-term.
    Of course, in some areas it may be a challenge to maintain positive 
momentum, and so to prevent insurgents from regaining a foot-hold we 
will need to make sure that some form of programming remains available 
in the near term to be targeted for areas that have moved into the 
transition phase of the counterinsurgency effort. One USAID program, 
Community Based Stabilization Grants, targets small grants to insulate 
communities that may be at risk of insurgent influence. Recognizing 
that the funding for these programs will continue to diminish over 
time, we continue to look at more efficient ways of using our funds, 
and partner with locals to understand, identify, and develop programs 
that mitigate instability.

    Question #32. What outcomes are expected by the Afghan population 
and do they coincide with Afghan Government's capacity to deliver?

    Answer. In March 2011, President Karzai announced the start to the 
Transition process, through which lead responsibility for security will 
be transferred to the Afghans by 2014. Afghans have signaled 
expectations for a ``peace dividend,'' in the form of increased 
development assistance, for transitioning provinces. The latest version 
of the July 2010 version of the Afghan National Development Strategy 
(ANDS) Prioritization and Implementation Plan (PIP) signals that 
Afghans expect donor contributions to ``core socioeconomic development 
initiatives'' would total $10 billion over the next 3 years, with 
``additional resources available to support current governance and 
security sector strengthening priorities.''
    Given these factors, USAID has embarked on a process to focus its 
assistance to Afghanistan through ``foundational investments'' in 
priority sectors--such as energy, agriculture, extractive industries, 
and human capital, to name a few--which are aligned with Afghan 
expectations as outlined in the ``Kabul Process.'' The Kabul Process, 
which began in London (January 2010) and continued through the Peace 
Jirga (May 2010) and Kabul International Conference (July 2010), is an 
Afghan-led strategic planning process, which marks beginning of a 
transition toward full Afghan ownership of the development process. 
Through the Kabul Process, the Afghan Government identified 22 National 
Priority Programs (NPPs) and subsequently the USG, along with other 
donors, committed to aligning at least 80 percent of its assistance 
against these national priority programs, as well as moving at least 50 
percent of its assistance through Afghan Government mechanisms by the 
end of 2012. To date, USAID has already exceeded the 80-percent 
alignment goal and is on track for reaching the 50-percent on-budget 
goal by the end of 2012.
    Finally, the expectations and needs of the Afghan people are being 
increasingly satisfied by the Afghan Government. According to the Asia 
Foundation's 2010 ``Survey of the Afghan People,'' satisfaction with 
the performance of the Afghan National Government has risen steadily 
over the last 3 years. In fact, 2010 saw the highest reported levels of 
satisfaction of national government performance since 2007 in almost 
all regions. Finally, compared to 2009, the 2010 survey found that 
Afghans judged government performance more positively in relation to 
the provision of basic public services such as education, health care, 
and security.

    Question #33. What specific areas has there been a need for 
reconsideration due to development professionals' guidance on best 
practices and what has been the degree of consideration by other U.S. 
actors? (i.e., poor development practices and ineffective or 
unsustainable programs)

    Answer. Stabilization is one of USAID's key areas of focus in 
Afghanistan, particularly in the conflict-stricken south and east. In 
these areas, USAID works hand in hand with the U.S. military to deliver 
quick-impact stabilization projects that help eliminate key drivers of 
conflict, such as unemployment and lack of government services. 
Stabilization efforts are also designed to support the nascent 
transition process by helping connect Afghans at the local level to 
their local governments, through the creation of district development 
councils and community-driven development projects. While stabilization 
efforts are critical to U.S. objectives in Afghanistan, they are not an 
end in and of themselves. In the past year, USAID has adapted the 
design and implementation of its stabilization programs to build 
``bridges'' between the short-term stabilization projects and the 
longer term development projects that will contribute to an Afghan-led, 
sustainable future. Similarly, USAID has worked with the Department of 
Defense (DOD) to ensure that the design and implementation of the 
Commander's Emergency Response Fund (CERP) activities are connected to 
longer term objectives. CERP projects have traditionally paid for the 
``brick and mortar'' activities, such as building schools or repairing 
small infrastructure. USAID's projects, on the other hand, often 
provide technical support and expertise needed to sustain these 
investments. To take advantage of both of these approaches, USAID and 
DOD agreed to give USAID field personnel veto authority on CERP review 
boards at Task Force and Regional Command levels. USAID field personnel 
also provide input and insight during the CERP proposal review process. 
A good example of this interagency coordination, as well as the 
linkages between short-term and long-term objectives, is the District 
Delivery Program. Through this program, individual Afghan districts 
outline their development and governance priorities and develop a 
viable district development plan. DOD then uses CERP funds to pay for 
infrastructure to support this plan, and USAID both provides support to 
line ministry staff, as well as aligns its longer term development 
projects to compliment the district plan.

    Question #34. The second round of discussions of the Strategic 
Engagement Partnership (SEP) with Afghanistan have recently concluded. 
What are the parameters of the Strategic Engagement Partnership (SEP) 
that are being considered with Afghanistan?

    Answer. On May 12, 2010, President Obama and Afghan President 
Karzai issued a joint statement in which they committed to a series of 
intensive, senior-level bilateral discussions to conclude with the 
signing of a strengthened U.S.-Afghanistan Strategic Partnership 
Declaration (SPD), updating the 2005 ``Joint Declaration of the United 
States-Afghanistan Strategic Partnership.'' The current plan is to seek 
to conclude the new SPD in the summer of 2011. To this end, the first 
rounds of negotiations were held in Kabul this past March and a second 
round will be held this summer. As negotiations have not concluded, the 
below statements about the expected parameters of the new SPD are 
subject to change.
    It is envisioned that a new SPD will provide a framework to guide 
our long-term relationship with Afghanistan. It is expected to address 
issues related to (1) security; (2) democratic development and 
institution-building; (3) economic and social development; and (4) 
regional issues. Specifically, as currently envisioned, the new SPD 
will set forth political commitments that:

   Reiterate the United States and Afghanistan's shared vision 
        and commitment to Afghanistan's future;
   Reinforce Afghan sovereignty as Afghanistan increasingly 
        takes on responsibility for its own security, justice, and 
        development; and
   Articulate how the United States plans to work with 
        Afghanistan to enhance its ability to contribute to regional 
        stability and prosperity.

    Question #35. What estimate of resources are most likely essential 
for longer term development in Afghanistan post 2014 and in what 
sectors are they essential?

    Answer. By 2014 we expect our stabilization efforts to reduce as 
Afghan security increases, while our foundational investments lay the 
groundwork for long-term economic growth. We expect to focus on sectors 
such as infrastructure, agriculture, mining, private sector enabling 
environment, health, and education to provide the means for Afghanistan 
to achieve the necessary long-term economic growth and revenues needed 
to support the government.
                                pakistan
    Question #36. The FY12 budget for Pakistan contains no OCO account 
funds for economic development assistance. This implies that recent 
economic assistance is not perceived by the administration as critical 
in the strategic calculus of our relationship and our national security 
interests.

   Why has PCCF/PCF been the only account included in the OCO 
        in this strategically sensitive country?

    Answer. The Overseas Contingency Operations (OCO) request, 
including all of the funding for the Pakistan Counterinsurgency 
Capabilities Fund (PCCF) is intended to fund the extraordinary and 
temporary costs for operations and assistance in Iraq, Afghanistan, and 
Pakistan for the Department of State and U.S. Agency for International 
Development (USAID). This is the first year State and USAID are 
requesting funds under OCO method used by the Department of Defense to 
identify funding requirements for the exceptional costs incurred in 
these three countries.
    The OCO contribution from Pakistan includes the entire amount of 
Pakistan Counterinsurgency Capabilities Fund (PCCF) funding ($1.2 
billion), which is a temporary contingency-based account related 
directly to the need to counter the insurgency within Pakistan.
    The decision to not include sources of civilian assistance was 
predicated on the establishment of the level of long-term civilian 
assistance support within the Enhanced Partnership with Pakistan Act. 
This act authorized funding for civilian assistance in the amount of 
$7.5 billion over a 5-year period (FY 2010-FY 2014) and was intended to 
demonstrate U.S. commitment to Pakistan and to help strengthen and 
build a long-term partnership between Pakistan and the United States. 
As such, the request did not include these funds in the OCO request 
which are intended for temporary extraordinary costs.

    Question #37. What priority does USAID place on economic assistance 
relative to OCO given the fiscal and geopolitical environment in 
Pakistan?

    Answer. USAID, together with the State Department, believe that the 
core, non-OCO economic assistance and the OCO assistance requested are 
both vital to achieving our national security objectives in Pakistan. 
Both serve equally important roles within the overall effort to build 
our long-term relationship with Pakistan. In the request, important 
focus was placed on balancing the amount of civilian assistance 
requested with security assistance for Pakistan. Since USAID is 
managing the bulk of the economic assistance, our focus is on ensuring 
effective and accountable implementation of this assistance in 
conjunction with the State Department's policy coordination of U.S. 
assistance efforts.

    Question #38. How does USAID characterize the recent and 
prospective environment for fiscal stability in Pakistan?

    Answer. The current fiscal stability in Pakistan is troubling. From 
2005 to 2010, Pakistan averaged 4.9 percent GDP growth proving its 
resilience in the face of multiple adverse events. In recent years the 
growth of the economy has slowed and is predicted to only grow by 2.8 
percent in 2011. Exacerbating slow growth is an underfunded government 
budget and a narrow tax base. The IMF estimates the deficit at 6.7 
percent in FY10/11, up from 6.3 percent the previous year. This is 
significantly above the IMF target of 4.7 percent. The tax-to-GDP ratio 
is only around 9 percent, one of the lowest globally.
    The government's fiscal deficits lead to heavy government borrowing 
that drives inflation. Over the past 3 years, Pakistan has experienced 
aggregate inflation of 48 percent against GDP growth of just 12.5 
percent. Prices are increasing at a rate of 15-20 percent. Food 
insecurity affected close to half the population in 2009, and is likely 
substantially higher after the 2010 floods. Combined with lack of 
power, soaring prices are beginning to create social unrest.
    Massive subsidies to the energy sector (approximately 1.4 percent 
of GDP) contribute to the fiscal crisis. The burden of energy subsidies 
has tripled in the last 3 years. The Asia Development Bank estimates 
that the energy shortfall (including load shedding) is estimated to 
have reduced GDP growth by 2.0-2.5 percent.
    Despite continued problems with the fiscal deficit and subsidies, 
the Pakistan economy shows some positive signs. Financial sector size 
and depth has improved, and the banking system is becoming more 
efficient. The booming inflow of remittances continues to support the 
financial sector, as well as consumption in the real sector of the 
economy.
    The United States and other donors realize assistance will be far 
more effective if Pakistan can reestablish macroeconomic stability and 
implement long-awaited policy reforms. USAID is working closely with 
critical stakeholders in an attempt to demonstrate progress in the 
short-term to incentive long-term reforms, and position Pakistan to 
seize opportunities for economic transformation as they emerge. 
Pakistan's recent devolution of certain fiscal authorities to its 
provinces will require closer attention to the fiscal capacities and 
budget priorities of the provinces.
    U.S. economic growth assistance is closely aligned with the 
Government of Pakistan's (GOP) ``New Development Approach/New Growth 
Strategy'' which is focused on opening markets, increasing 
productivity, and improving competitiveness. U.S. assistance also 
complements the National Poverty Reduction Strategy, which emphasizes 
agriculture as the key driver of job growth in predominantly rural 
districts and recognizes its multiplier potential in generating 
macroeconomic growth. Despite political uncertainty and turnover of 
senior GOP officials, Pakistan has well-placed people and institutions 
with significant vision and capacity for policy improvements, as well 
as substantial ongoing reform initiatives. Additionally, new technology 
is increasingly available to improve efficiency and eliminate 
opportunities for corruption. These factors create the environment 
needed to stimulate broad-based, inclusive economic growth.
    The IMF shares this positive outlook in Pakistan's economy and 
estimates GDP will reach 6 percent growth by 2015.

    Question #39. How does USAID assess the geopolitical environment 
for stability in Pakistan?

    Answer. A significant proportion of the threats to Pakistan's 
stability are the result of insurgent activities, which are primarily 
centered in the Federally Administrated Tribal Area (FATA) and Khyber 
Pakhtunkhwa (KP). The current instability in the FATA and KP owes much 
to decades of poor governance, underdevelopment, and regional conflict. 
After 9/11, insurgents were able to exploit these vulnerabilities to 
establish de facto control over much of the FATA and pose a threat to 
the Pakistani state.
    Military operations against these groups began as early as 2002, 
but their success was limited. The GOP attempted a series of negotiated 
settlements, but none proved enduring or effective at curbing violence. 
The high water mark for insurgent groups came in early 2009, when a 
branch of the Pakistani Taliban moved out of the FATA and took over 
large settled areas of the Swat Valley in KP's Malakand Division.
    U.S. stabilization activities are closely aligned with the 
objectives of the 2010 Post Crisis Needs Assessment for FATA and KP, 
which include: building responsiveness and effectiveness of the State 
to restore citizen trust; stimulating employment and livelihood 
opportunities; ensuring the delivery of basic services; and countering 
radicalization and fostering reconciliation. As FATA stabilizes, other 
donors have been coming to USAID to seek advice on how they might 
become involved in stabilization and development activities in FATA.
    Additionally, polling indicates that USAID's community-level 
programs have helped engender some community support for the political 
administration in FATA. But the complex political environment and 
security concerns argue against an aggressive branding campaign for 
most community-level U.S.-supported activities in FATA as this could 
result in threats to recipients of U.S. assistance by remaining 
insurgent elements.
    Despite the political instability and history of military coupes, 
the military has yet to have taken sides in the political crises and 
largely has both engaged (i.e., peacekeeping in FATA) and not engaged 
(i.e., conducting the census) in operations to boost its public image 
with the people. In the near term, the military seems content to exert 
influence over the civilian government without resorting to a coup. By 
Pakistani law, the next general election must be held by early 2013; it 
is currently scheduled for February 2013 but could occur at any time.

    Question #40. In a recent briefing of Congress, your staff 
indicated that greater than 50 percent of assistance was now flowing 
through the Pakistan Government.

   Why has the essential monitoring and evaluation program for 
        Pakistan still not been established and will not be in place 
        until mid-summer?

    Answer. Several factors contributed to delays in finalizing this 
program. During winter/spring 2010, USAID engaged in a lengthy 
discussion with other USG entities over the appropriateness of using 
international firms to fill this function. Following the flood, 
attention was focused on recovery and reconstruction activities. When 
the new mission and Embassy leadership arrived, there was mutual 
agreement on the importance of this project and the mission moved 
forward finalizing the documents and deciding on the most appropriate 
contracting mechanism. We anticipate the third-party monitoring system 
to be operational in July 2011.

    Question #41. What are the current methods for monitoring and 
evaluation and what is the level of confidence in this large amount of 
funding moving through suspect institutions within a weak civilian 
government?

    Answer. Ensuring that Pakistani organizations, including the 
government, act responsibly with U.S. taxpayer money begins long before 
program implementation. USAID/Pakistan carefully vets all potential 
partners for technical capacity, risks of financial misconduct, and 
terrorist financing before awarding funding. USAID also conducts 
preaward assessments of all local organizations, examining their 
organizational and management structures to determine if systems are in 
place that will lead to the transparent and accountable use of USG 
funds. When weaknesses are found in these local entities, USAID 
provides capacity-building efforts to help them meet accountability 
requirements before funds are released. USAID/Pakistan is implementing 
a robust monitoring and evaluation structure in place to monitor 
progress and measure results. The mission increased staffing levels and 
institutional support to support monitoring and evaluation, auditing, 
contracting, and financial management oversight capabilities of local 
partners.
Vetting
    USAID/Pakistan carefully reviews and vets applications for 
technical capacity, quality, cost effectiveness, and applicability to 
USG objectives. Prior to awarding a grant or contract, the grant or 
contracting officer makes a responsibility determination as to whether 
or not the recipient meets business and ethical standards. The preaward 
assessments, discussed further below, are an important part of 
responsibility determination for local awards. In addition, USAID/
Pakistan checks all contract and grant recipients issued by the mission 
against the USG Excluded Parties Listing System (EPLS) and the list of 
suspected terrorists designated as ``Specially Designated Nationals and 
Blocked Persons'' by the Office of Foreign Asset Control (OFAC) of the 
Department of Treasury. Further, certain grants and contract 
instruments provide USAID/Pakistan with the authority to approve 
subrecipient awards. Such provisions allow the mission to make 
responsibility determinations and vet the subgrantees and 
subcontractors that might ultimately be the recipient of USG funds. 
Finally, all grants and contracts include provisions that prohibit the 
funding of terrorism. In this regard, USAID/Pakistan implements the 
Guidance for State and USAID funding and the Risks of Terrorist 
Financing with respect to all of its programs in Pakistan.
Preaward Assessments
    USAID/Pakistan continues to use a number of additional tools to 
ensure proper monitoring and evaluation of USG assistance, including 
conducting preaward assessments of Pakistani organizations. The 
assessments examine organizational and management structure, 
accounting, financial management systems, internal controls, technical 
capabilities, and quality assurance capabilities, as well as the 
organizations' policies, procedures, and practices for effective and 
efficient management of USG resources. If the results of these 
assessments show that there are mitigating risk factors, 
predisbursement and post-disbursement conditions are built into the 
awards/agreements made with these organizations, to ensure 
strengthening of relevant issues and reduction of risk for USAID/
Pakistan.
    Since FY 2009, USAID/Pakistan has completed 81 preaward assessments 
of Pakistani Governmental and nongovernmental organizations, and will 
undertake additional assessments if needed for future awards. When 
needed, USAID/Pakistan also has placed staff from accounting firms with 
its implementing partners to support successful implementation of 
financial policies and procedures.
Monitoring and Evaluation
    USAID/Pakistan adheres to standard procedures in the monitoring of 
its activities to ensure proper use of U.S. foreign assistance funds:

   Implementing partners are required to maintain accurate and 
        constructive performance management plans (which identify goals 
        and targets) and report their progress toward those goals 
        quarterly.
   Activity managers and implementing partners perform spot 
        checks whenever possible of activities to monitor progress.
   By July, USAID/Pakistan will have finalized a contract for 
        third-party monitoring and evaluation services to verify 
        monitoring data reported by our implementers and Government of 
        Pakistan partner entities; monitor projects in hard-to-reach 
        remote and insecure areas; conduct baseline, midline, and end-
        line surveys to capture information on program results; conduct 
        evaluations; and train implementing partners to enter all 
        monitoring data into this system. An inventory of ongoing 
        evaluations will be maintained, used for coordinating 
        evaluation efforts, and timed to provide input into strategic 
        planning decisions.
   As exemplified by USAID's monitoring and evaluation of flood 
        relief efforts, USAID/Pakistan employs a variety of methods to 
        conduct oversight in an insecure environment. In 2010, when the 
        security environment permitted, USAID Islamabad staff visited 
        flood relief project sites monthly. USAID provincial teams in 
        Peshawar, Karachi, and Lahore visited projects and assessed 
        progress in their regions as much as security allowed. USAID 
        also used a third-party monitoring effort for flood relief, 
        working through local Pakistani firms in Sindh, Balochistan, 
        KP, and Punjab to verify, monitor, and document flood relief 
        progress. These partnerships made it possible, in a difficult 
        operating environment, for USAID to receive first-hand accounts 
        of project challenges and successes.
   In addition, USAID/Pakistan has established a Monitoring and 
        Evaluation Working Group to help institutionalize performance 
        management and use of evaluation for program design and 
        strategic planning.
   Over the past 12 months, the mission increased staff levels 
        to add activity, financial and contracts managers to meet the 
        increasing management burden and to ensure adherence to 
        standard monitoring and evaluation responsibilities. The USAID 
        Office of Inspector General established its office in Islamabad 
        in 2010 and as of February 2011, and has 12 staff. Currently, 
        61 staff members in Pakistan are involved in auditing, 
        contracting, and financial management oversight capabilities, 
        the vast majority of which have been added within the last 
        year.

    Question #42. What is the monthly spending rate for U.S. assistance 
in FY10 broken out by sector?

    Answer. USAID's monthly expenditure rates by sector throughout FY 
10 were as follows:

                                   FY 2010 MONTHLY EXPENDITURE RATES BY SECTOR
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                          Q1              Q2              Q3              Q4
----------------------------------------------------------------------------------------------------------------
Education.......................................     $8.1            $3.7            $3.5            $3.8
Governance......................................      1.5             1.8             1.4             2.0
Health..........................................      7.4             4.6             4.5             2.9
Economic Growth.................................      4.6             3.7             5.0             9.7
EQ Reconstruction...............................      2.9             4.1             3.0             2.8
FATA............................................      6.1             4.4             3.4             7.7
----------------------------------------------------------------------------------------------------------------

    USAID has increased expenditure rates since FY 2010. As of the 
first quarter of FY 11, USAID has increased its monthly expenditure 
rate by 38 percent over FY 10 Q1 monthly expenditure rate.

    Question #43. What is currently remaining in the pipeline by 
sector?

    Answer. The estimated pipeline of our assistance to Pakistan as of 
the end of December 2010 is $1.6 billion. As FY 2010 funding was not 
available for obligation until the end of the fourth quarter and FY 
2010 supplemental funding was not available until late in the first 
quarter of FY 2011, it is to be expected that most FY 2010 
appropriations remain in the pipeline.
    Funds are being expended at $66 million per month, well above the 
average USAID FY10 expenditure rate of $58 million. The slight decrease 
from FY 2010 Q4 to FY 2011 Q1 is due to the need to focus on responding 
to the August and September floods with immediate emergency accounts 
and reprogramming existing ESF to support recovery and reconstruction 
efforts. The 1st quarter of FY 2011 expenditure rate is 38 percent 
higher than 1 year prior and 128 percent higher than the end of FY 
2009, indicating the rollout of programs in Pakistan has picked up its 
pace significantly over the past year.

                               Q1 FY 2011
------------------------------------------------------------------------
                                        Monthly
                                   expenditure rate        Pipeline
------------------------------------------------------------------------
Education.......................  $6.4 million......  $364.8 million.
Governance......................  $3.9 million......  $233.5 million.
Health..........................  $6.5 million......  $272.8 million.
Economic Growth.................  $42.8 million.....  $685.9 million.
Social/Humanitarian Assistance..  $6.397 million....  $62.64 million.
                                 ---------------------------------------
      Total.....................  $66 million.......  $1.6 billion.
------------------------------------------------------------------------

    Question #44. What are the primary obstacles and challenges that 
remain before U.S. assistance can flow more effectively and 
transparently?

    Answer. Despite the devastating impact of the 2010 floods and our 
requirement for assessments of all partner institutions to ensure that 
U.S. taxpayer funding is used for the purposes intended, USAID has 
increased its expenditure rate by 38 percent over the past year. 
However, given the level of resources being committed to the Pakistan 
program and the importance to our national security, we are aware that 
we must further increase our expenditure rate and continue to achieve 
results.
    The 18th amendment to the Pakistani Constitution passed by 
Parliament in April 2010 calls for a fundamental decentralization of 
government services to the provinces. Given the uncertainty about what 
functions will be devolved to the provinces, how to do it, and how to 
finance these changes, an important challenge is trying to keep the 
momentum going and ensuring successful transition of services. There 
are several significant risks to effective devolution including lack of 
capacity at the provincial level, political infighting, and corruption.
    A significant implementation challenge is the work we need to do 
with Pakistani institutions to strengthen their management and 
implementation capabilities. These are important components of the 
evolving partnership we are developing with the Pakistanis. We continue 
to assess what is necessary to speed up implementation, and to develop 
new mechanisms and approaches that will help us to achieve our overall 
objectives. Our recent refocusing of the program into four key sectors, 
our reduction of management units to help streamline operations, and 
our provision of direct assistance to overcome critical program-
specific hurdles, all are examples
of the ways in which we are adapting program implementation to meet 
these challenges.

    Question #45. Consulates in Peshawar, Lahore, and Karachi are now 
up and operating.

   List the staff levels and agency for each U.S. consulate, 
        including the percentage of time the staff is actually posted 
        to the consulate site.

    Answer. All employees in the consulate spend approximately 82 
percent of their time posted to the site. Their remaining time away 
from the consulate accounts for R&R and/or Regional Rest Break travel. 
The staff level for each consulate site is as follows:

   Peshawar *--26 total USAID staff
        7 U.S. staff
        19 FSN staff
   Lahore--10 total USAID staff
        U.S.
        7 FSN
   Karachi--8 total USAID staff
        2 U.S.
        6 FSN

*All Peshawar staff currently located in Islamabad due to security 
concerns

    Question #46. How important is the consulate staff to the planning, 
implementation, and monitoring of U.S. assistance?

    Answer. The USAID field office operations add to total oversight 
personnel available per dollar of program funding. Monitoring program 
work would be more difficult and program vulnerabilities would increase 
if the consulate staff were not in place. Each USAID consulate staff 
member is of great importance in these regards. This includes all phase 
of the development lifecycle: planning, implementing, and monitoring of 
programs in each region of Pakistan.

    Question #47. Southern Punjab and Sindh have proven to be volatile 
regions of the country that also harbor threats to the Pakistan 
Government, threats to the region, and threats to United States.

   What are the priority areas for U.S. assistance and how does 
        the U.S. partner with Pakistan in addressing these threats?

    Answer. USAID/Pakistan is focusing its activities in northern 
Sindh, southern Punjab, Khyber Pakhtunkhwa (KP), and the Federally 
Administered Tribal Areas (FATA). These are shown to have among the 
worst socioeconomic indicators in the country and are some of the most 
vulnerable areas to extremist recruitment.
    In Punjab and in Sindh, USAID's primary objective is to support the 
provincial governments to deliver basic education, health, and 
municipal services to the local population. As the GOP prepares to 
begin implementing devolution policy established by the 18th amendment 
on July 1, 2011, the provincial governments need to quickly build the 
capacity to provide social services. USAID/Pakistan will provide 
technical assistance in resource management and program planning, 
commodities provision, and construction of community infrastructure.

    Question #48. What are the primary development programs in these 
areas and what are the essential parallel programs of others (donors 
and Pak Federal and Provincial government), including our own security 
assistance programs?

    Answer. USAID/Pakistan is working in five priority sectors: energy, 
economic growth, stabilization, health, and education. We engage our 
Government of Pakistan counterparts at the federal and provincial level 
to identify individual programs and projects within these sectors.
Sindh
    While several of our national programs are working in Sindh (e.g., 
health, economic growth), we are also targeting programs to address 
particular needs in the priority areas in those provinces. The programs 
focus in the areas of energy, stabilization, education, and health. In 
energy, we are renovating two thermal powerplants in Sindh (Jamshoro 
and Guddu) to increase the power generation capacity of the national 
grid and alleviate electricity shortages. We are also replacing 
inefficient tubewell motor sets with more energy efficient models, 
which will save farmers money on their electricity bills. In education, 
we are finalizing a Sindh education program that will increase basic 
education enrollment and retention rates for children in target 
districts of Sindh, primarily girls.
    USAID/Pakistan has also entered into a 5-year agreement with the 
Government of Sindh for a Municipal Services Delivery Program, which 
will improve the quality of municipal infrastructure and public service 
delivery by instituting necessary policy reforms in underserved and 
vulnerable parts of the province. We hope this will have a stabilizing 
effect by increasing the provincial government's capacity to deliver 
critical public services, thus demonstrating responsiveness to their 
constituents. More than two-thirds of the budget for this program will 
be spent on improving and expanding drinking water supply, water 
quality, sanitation/sewerage, hygiene, and other municipal services in 
14 out of 23-three districts of Sindh.
    Finally, USAID/Pakistan is constructing a 60-bed obstetric and 
gynecological ward at Jinnah Postgraduate Medical College in Karachi, 
as well as renovating the Karachi Central Contraceptive Warehouse and 
the Jacobabad Civil Hospital. These projects will improve the tertiary 
and primary health care services for over 1 million underserved 
Pakistanis in Sindh and neighboring districts of Balochistan, as well 
as provide a consistent supply of contraceptives throughout the 
country.
    In terms of donor and Government of Sindh engagement, in education, 
the World Bank and European Union are the primary donors working in 
Sindh, while the DFID is considering expanding its education 
programming. We coordinate very closely with donor counterparts to 
share lessons and ensure complementarity of actions to support 
important education sector reforms as well as no duplication of effort.
    For example, the Asian Development Bank is now implementing a $300 
million loan for the Sindh Cities Improvement Investment Program ($300 
million from ADB and $100 million Government of Sindh contribution) 
that seeks to improve water, wastewater and solid waste management in 
six of the provinces secondary cities in the north (Sukkur, New Sukkur, 
Rohri, Larkana, Khairpur, and Shikarpur). This project seeks to 
mobilize strong private sector participation to improve health, quality 
of life, and economic competitiveness for an estimated 4 million 
residents. This complements MSDP, which works in small- to medium-size 
towns in the same region. USAID and the ADB project are and will 
continue to coordinate their activities by dividing up geographical 
areas of work and responsibilities between the two projects in order to 
avoid duplication and waste.
    The Government of Sindh's efforts in education have been focused on 
important and long overdue reforms. They are transitioning to a merit-
based hiring system for teachers, and are currently only recruiting 
female teachers, which will in turn support increased girls' 
enrollment. They are also implementing a policy of consolidating 
schools so that a single compound comprises a single school 
administered by a single body, not three or four as is the current 
norm. USAID's education program in Sindh will support this effort.
    The health donors are still determining geographic locations and 
have not made any formal commitments to Sindh at this time.
Punjab
    USAID/Pakistan activities in Punjab aim to improve basic service 
delivery while addressing the widespread corruption and poor governance 
issues that drive extremism. USAID/Pakistan and the Government of 
Punjab have signed agreements to support the delivery of municipal 
services and education with FY 2009 and FY 2010 resources, with a focus 
on southern districts with high poverty rates. The municipal services 
delivery program will focus on two components: capacity-building of the 
Punjab Government and the provision of infrastructure and equipment 
upgrades focused on a few essential urban services; i.e., safe water, 
sanitation, streets improvements and street lighting. Specific inputs 
will be prioritized by the provincial government with inputs from 
districts and community engagement activities. The education program is 
focusing on new school construction with a particular focus on schools 
damaged by the floods, supporting school councils, and building the 
capacity of the Punjab Department of Education to manage resources, and 
continue to provide operations and maintenance on new buildings. An 
ongoing USAID program supporting teacher training will complement these 
provincial activities.
    USAID/Pakistan is also planning to use FY 2010 funds to support the 
Punjab Government to address three key health needs --birth spacing 
using family planning and maternal and child health including 
immunizations. A Technical Advisory Unit supported by USAID is 
currently working with the federal and provincial governments to help 
determine policies related to the devolution of the health sector, 
which are critical to further developing this activity.
    In addition to these activities to be implemented through the 
provincial government, USAID is also supporting high impact, highly 
visible projects in Punjab. USAID/Pakistan is rehabilitating the 
Muzzaffargarh Thermal power Plant Rehabilitation, located 45km 
southwest of Multan, which will increase generation capacity to the 
power station by 95 MW. In a cost-sharing arrangement with farmers in 
Punjab, approximately 250 inefficient tubewell pump sets have been 
replaced with energy efficiency models, greatly reducing farmers' 
electric bills. In addition, USAID/Pakistan is renovating Lady 
Willingdon hospital in Lahore, the largest maternity hospital in the 
country, to improve the capacity and quality of maternal services for 
low-income women.
    USAID/Pakistan is coordinating closely with other donors in Punjab 
to avoid duplication of efforts, to ensure the international community 
has consistent messages on policy reform, and to align our government-
to-government assistance mechanisms to avoid over complicating the 
government's efforts to manage donor resources. For example, the World 
Bank and DFID provide direct support to the Punjab Government, working 
through a project management unit created within the Punjab Department 
of Education. U.S. assistance will continue to be provided through the 
same project management unit to ensure U.S. assistance is value added 
and not duplicative to ongoing work. Other major donors in include DFID 
(budget support), GTZ (teacher development, library facilities), CIDA 
(debt swap teacher college renovations), World Bank (stipends, teacher 
development, school construction and upgrades), and JICA (school 
upgrades).
    The Southern Punjab Basic Urban Services Program is another Asian 
Development Bank-funded program that was initiated in 2004. The program 
cost is estimated at $128.6 million with ADB funding $90 million and 
the rest being provided by the Government of Pakistan. The projects 
geographical focus is in 21 towns in Southern Punjab, including towns 
in Multan and Bahawalpur Districts. This complements similar efforts by 
MSDP in Punjab.
    USAID is also taking the lead in coordinating donor health funding 
and is fostering agreement on Pakistan's health priorities and a 
division of labor based on the strength of each partner. Primary donors 
in the health field in Pakistan are DFID (health sector support and TA 
for maternal and child health) and the World Bank (reproductive health 
and infectious diseases).
                                 egypt
    Question #49. I asked in the hearing about USAID efforts in Egypt, 
with respect to the reprogrammed $150 million. Specifically, I asked 
what impact are our programs having, and more importantly, with whom 
are we working.
    Please provide more specific answers for the record to these two 
questions.

    Answer.
What impact are our programs having?
    At the brink of the revolution, USAID moved rapidly to provide 
urgent assistance for the transition in Egypt by reprogramming $150 
million in funds for economic growth and democracy and governance to 
support a peaceful, equitable transition. The Egyptian people's 
response to our democracy and governance and economic growth grants 
opportunities has been tremendous:

   Approximately 2,500 people representing more than 1,000 
        organizations lined up to participate in information sessions 
        and proposal writing workshops throughout the country. USAID 
        has received over 200 proposals to date, primarily from 
        Egyptian organizations that have not worked with USAID before, 
        with more coming in weekly.
   In less than 4 months, USAID has committed $55 million in 
        transition assistance funding. Of this, we have obligated $32.5 
        million to Egyptian and U.S. partners to support democracy and 
        governance transition initiatives and $2.5 million in economic 
        growth transition initiatives. USAID also transferred $20.5 
        million to the Department of State's Democracy, Human Rights 
        and Labor (DRL) Bureau and Middle East Partnership Initiative.
   In addition, USAID is currently negotiating the details of 
        $55 million in grants (including $37 million to support 
        economic growth) with U.S.- and Egyptian-based organizations.

    As USAID is in the early stages of implementing the transition 
program, it is too soon to assess direct impact. However, the strong 
interest among Egyptian civil society organizations and entrepreneurs 
in the USAID transition program is an important indication that the 
people of Egypt stand ready to work with the United States through 
Egypt's transition to democracy.
With whom are we working?
    With funding to support the transition process, USAID is engaging 
directly with a wide range of critical actors, including civil society 
organizations, youth, political party representatives, labor, and 
others who have been mobilized by recent events and are working to 
support their country's historic transition.

Specifically:

   As noted above, nearly 2,500 attendees representing more 
        than 1,000 organizations have attended USAID grants information 
        sessions throughout Egypt. To date, USAID has received a total 
        of 236 proposals, 70 percent of which are from Egyptian 
        organizations.
   USAID has obligated $25 million to U.S. organizations that 
        support democracy and governance activities worldwide, 
        including the National Democratic Institute (NDI), 
        International Republican Institute (IRI), and the International 
        Foundation for Electoral Systems (IFES).

In general:

   To widen contact with youth organizations and encourage 
        youth engagement in the political process, USAID, working with 
        an Egyptian grantee, has held a series of meetings with youth 
        in Sinai and Qena to identify their priorities for democratic 
        change and gauge their opinion of the current situation.
   To broaden engagement away from elites and established 
        political leaders, USAID is providing training for members of 
        newly formed political parties on methods, and mechanisms for 
        political participation, including communication and public 
        speaking skills, election campaigns, and working with 
        traditional and new media modes. USAID is also working with IRI 
        to develop skills of women candidates, in existing and emerging 
        political parties.
   To widen engagement with new Egyptian organizations, USAID 
        is working with partners to expand training efforts and share 
        civic education materials, including video spots, brochures, 
        manuals and games. One Egyptian USAID partner has already 
        trained 900 facilitators from other organizations on how to use 
        media and outreach materials.
   When appropriate, USAID is also working with government-
        related institutions that have a role in supporting the 
        organization and implementation of democratic elections for 
        other purposes related to a democratic transition. In addition, 
        USAID is providing funds to help address economic grievances 
        expressed in the protests.

    Questions #50, 51, 52. Presumably during the Mubarak era, there 
were a number of initiatives that were stymied by the government and 
their policies--for instance prohibiting NGOs and effectively barring 
the NED institutes.

   Are you aggressively pursuing these items now? Please be 
        specific.
   How many grants have you issued and to whom?
   Is USAID/Egypt able to get out of Cairo and solicit grant 
        proposals from civil companies and small and medium enterprises 
        from around the country?

    Answer. Since 2005, the USG has provided continuous support to a 
wide range of civil society organizations, including the National 
Democratic Institute (NDI) and the International Republican Institute 
(IRI). Local and U.S. recipients of USAID grants faced issues from time 
to time regarding holding events or bringing consultants into the 
country. The USG continually raised with the GOE these and other issues 
related to the freedom of association and civil society operation.
    To support the political transition, USAID increased the amount of 
funding allocated for democracy programs to $65 million and issued an 
open call for proposals in March. The call for proposals was based on a 
series of listening sessions with Egyptian organizations, and it 
reflects identified priorities to increase civic engagement, support 
the upcoming elections and political party development, promote 
transparency and accountability, improve access to justice and protect 
human rights, and develop mechanisms for sustained citizen 
participation. USAID is moving quickly to support new Egyptian 
initiatives in these areas, and to continue and expand the work of 
organizations such as NDI and IRI.
    In addition to the call for proposals, USAID has mobilized its 
network of existing civil society grants to respond rapidly to new 
opportunities. For example, Egyptian and U.S. organizations have 
changed their programs to provide direct medical assistance and legal 
advice to those injured or detained in the protests, to share 
transition experiences from other countries, to evaluate options for 
administering elections, to consider the role of women in the 
transition, and to host debates and conferences on constitutional 
reforms.

    Question #53. Is USAID reviewing other Egyptian programs that are 
either less relevant in the new context or underperforming, in order to 
potentially free up additional resources?

    Answer. USAID is reviewing its programs constantly to ensure they 
are relevant to the evolving situation. Immediately after the 
revolution, USAID conducted a detailed review of each program to 
identify areas for adjustment, expansion, or discontinuation.
    USAID redirected funds to support the Annual Program Statements 
(APS) issued to address needs related to the transition, focusing on 
short-term efforts in areas such as job creation, civic participation, 
media, and preparation for the coming elections. It is also making an 
effort to do more work directly with NGOs. However, it should be noted 
that performance has been on target and efforts have continued 
throughout the transition. Nonetheless, USAID has delayed start of new 
programs, such as activities addressing health, education, youth, 
education activities, and trade to free up resources for Washington 
priorities such as debt relief, OPIC engagement, and the proposed 
Enterprise Fund.
    USAID will continue to pursue interventions with the Egyptians that 
address economic growth challenges such as job creation, efforts to 
promote decentralization, community development, small and medium 
enterprise business development, business lending, job skills and 
vocational training, entrepreneurship, and youth participation. It will 
also continue to address needs to ensure equitable participation by 
NGOs, and free and fair elections. Though at times, difficult tradeoffs 
may have to be made, USAID will continue to pursue activities that are 
relevant for the Egyptian context.

    Question #54. During the hearing, you mentioned that you were 
working with Minister Fayza Abul Naga, who was in town, and that we 
have been working with her for years.

   Does she represent a new way of thinking in the current 
        government? Is she bringing forth new ideas that will help put 
        the powerful Egyptian economy back on track?

    Answer. Minister Abul Naga served in the Mubarak administration 
from 2001 until Mubarak recently left office, first as the Minister of 
Foreign Affairs, then as the Minister of Planning, and finally, as the 
Minister of International Cooperation. As a high-level official 
throughout the latter part of the Mubarak era, she does not represent a 
new way of thinking. The Minister supports donor assistance that is 
planned and managed bilaterally at the government level, and her 
objection to USAID's direct engagement with NGOs and the private sector 
clearly represents an old way of thinking. She also opposes USAID 
assistance to unregistered NGOs. The Minister considers that the 
Egyptian Government is in the best position to prioritize the needs and 
improve the lives of the Egyptian people. In this light, the GOE has 
identified, among other priorities, promoting low-cost housing 
construction, developing small- and medium-sized enterprises, 
increasing youth employment opportunities, and bilateral debt 
forgiveness. USAID is consulting with the GOE on these government-led 
priorities, and will also continue direct engagement with, and direct 
assistance to, civil society organizations.

    Questions #55, 56, 57. During the hearing, you mentioned that you 
were working with Minister Fayza Abul Naga, who was in town, and that 
we have been working with her for years.

   Mrs. Abul Naga was appealing for debt relief. Please provide 
        the latest Paris Club figures on the Egyptian debt situation.
   What percent of Egypt's debt is to the United States and 
        what is their debt to reserve ratio?
   How does Egypt's debt situation compare to other countries 
        globally with similar per capita GDP?

    Answer. Paris Club claims in Egypt amounted to $16.8 billion as of 
December 31, 2010, and include previously rescheduled and new bilateral 
loans from Paris Club members.
    Egypt's total external debt at the end of 2010 was $35 billion, 
around 14.7 percent of GDP. Net International Reserves fell to $28.0 
billion at the end of April 2011. The ratio of short-term external debt 
to international reserves is still low, just over 10 percent. The total 
debt to reserve ratio is roughly $35 billion/$28 billion. Short-term 
external debt is around $3 billion to reserves of $ 28 billion.
    The United States holds 9.4 percent of Egypt's total external debt. 
Japan (12 percent), France (11 percent), and Germany (10.7 percent) are 
the only countries that hold more. Arab countries hold 4.4 percent 
(mainly Kuwait, Saudi Arabia, and UAE).
    Countries with similar per capita incomes to Egypt have a wide 
range of indebtedness. Egypt's $35 billion in external debt is in the 
medium to low range compared to others with similar per capita incomes.

    Questions #58, 59. What impact will relieving Egypt's debt have on 
their economic recovery at this point in time? What would providing 
debt relief to Egypt cost the U.S. taxpayer, and how would it be 
funded?

    Answer. Through the interagency process, we are discussing a 
variety of
short-, medium-, and long-term economic reforms and interventions, of 
which debt relief or a debt swap are possibilities. No final decisions 
have been made. Debt relief would ease some long-term budgetary 
pressures, and reduce the costs of borrowing for Egypt in the near 
term. However, other more targeted programs are necessary to address 
the short-term needs of Egyptians confronting the negative impacts of 
the recent economic downturn. A debt swap could include programs 
jointly funded by the United States and the GOE to address economic 
growth issues.
    Depending on what option is selected, we will discuss with the 
Congress the costs and implications of that intervention.

    Question #60. What other options are there to outright forgiveness, 
such as deferment, and what would that cost in terms of ESF?

    Answer. USAID is working with the interagency to identify the most 
appropriate interventions for Egypt, including debt forgiveness, 
deferment, debt swapping, or loan guarantees. Fiscal stability in Egypt 
is a critical need during the transition, and as we discuss 
intervention options within the administration, we will continue to 
work closely with the World Bank and International Monetary Fund about 
ways the debt issues can be addressed.
    The cost of each option varies depending on its scope and timeline. 
Full debt forgiveness would cost nearly $1 billion. A 1-year deferment 
would cost approximately $20 million. Given the range, and limits of 
USAID's budget, we believe that coordinating with international 
partners gives the administration the greatest leverage.

    Question #61. Tourism makes up some 16 percent of the Egyptian 
economy, what can be done to get that back up and running quickly?

    Answer. Tourism, a vital sector in Egypt's economy, has been hard 
hit since the revolution. Tourist arrivals dropped by over 80 percent 
in February from the previous February. The economy has lost around $1 
billion each month due to low tourism revenues, and is expected to lose 
between $4-$7 billion in total. Air carriers have cancelled routes to 
Egypt, leaving about 40 percent fewer flights available.
    Given the size of the sector, USAID is reviewing potential 
interventions related to international and regional marketing, training 
in tourism services; and diversifying tourism options in cultural, 
volunteer, vacation and eco-tourism. In addition, economic growth 
proposals related to tourism have been solicited under the Annual 
Program Statement and are under review.
    USAID continues to support improvements in the business regulatory 
environment, including in the tourism sector. The reprogrammed $100 
million Annual Program Statement for economic growth encourages 
proposals from businesses and NGOs in the tourism sector and will 
support innovative and promising ideas for rapid recovery in the 
sector.

    Questions #62, 63. Some, including the Secretary of State have 
suggested that Egypt is ripe for an Enterprise Fund. Do you agree?
    What specifics can you share about liquidity in the Egyptian 
economy, and what would encourage investment in this period prior to 
elections slated for the fall?

    Answer. The Obama administration is working with a bipartisan group 
of Members of Congress to establish an Egypt-American Enterprise Fund 
that will stimulate private sector investment, support competitive 
markets, encourage public-private partnerships, and provide businesses 
with access to low-cost capital.
    As a private nonprofit entity, the fund would have wide latitude in 
the types of investments it undertakes. This flexibility is important 
because it will allow Fund managers to target the most appropriate 
segments of the Egyptian market for investment. The amount of capital 
available in Egypt is not the issue--a large number of local and 
international investment firms are active there, and banks tend to have 
sufficient liquid capital. The loan to deposit ratios of banks is below 
50 percent, meaning banks have room to expand lending significantly.
    Pending congressional approval, the Egyptian-American Enterprise 
Fund will be a not-for-profit, privately managed corporation launched 
with U.S. grant assistance and governed by a joint American-Egyptian 
board of directors. The United States plans to capitalize the Fund with 
up to $60 million of Egypt ESF funding. The Overseas Private Investment 
Corporation (OPIC) through separate funding streams would then be able 
to partner with the fund to offer cofinancing downstream for OPIC-
eligible investments.
    Investors are generally hesitant about making new commitments in 
Egypt, although several U.S. firms with long-term Egyptian operations 
such as Apache Corporation, Coca-Cola, and G.M. have told us that they 
are continuing with previously planned investments. Many, especially 
potential new investors, are taking a ``wait and see'' approach before 
making commitments and it will take time to fully restore investors' 
confidence in Egypt.
    For their part, the Egyptian Government has said that they will not 
roll back the series of market-based economic reforms which began in 
2004, and they are cognizant of the positive role international 
investors can play in their economic recovery. At the same time, the 
new government will need to make sure that any new economic policies 
address the concerns of Egypt's citizens and ensure that the benefits 
of economic development are enjoyed by all segments of Egyptian 
society.
    The Obama administration is taking steps to address the private 
sector's concerns about doing business in Egypt, and is working closely 
with the U.S. Chamber of Commerce to coordinate our efforts. In early 
June, a delegation from the Chamber's U.S.-Egypt Business Council will 
travel to Cairo to meet with government and business leaders. In late 
June, the U.S. Trade and Development Agency is hosting a
2-day Egypt trade and investment forum in Washington, DC, which will 
immediately be followed by four reverse trade missions of Egyptian 
company representatives to different cities in the United States. The 
Department of Commerce is also considering sending trade delegations to 
Egypt later this year.

    Question #64. Is your economic development strategy long term or 
short term? What is the view of the World Bank on this, I understand 
they have had a $300 million offer on the table for some 2 years with 
no takers.

    Answer. USAID's economic development strategy combines long-term 
programming with short-term steps to meet immediate technical 
assistance needs of the GOE during this period of democratic transition 
and economic stress. The World Bank's strategy is similar as it is 
providing development policy loans that are fast moving but require 
reforms to promote long-term stability and growth.
    The World Bank has provided two $300 million loans to the GOE; one 
in the area of finance to SMEs, and the other providing targeted 
subsidies to expand affordable housing and mortgages. The SME finance 
loan is moving ahead, albeit at a slower rate than planned. The first 
$100 million of the housing loan has been disbursed but the remainder 
is in question due to diminished GOE support in this area.

    Question #65. I understand that the coming elections in Egypt will 
be open to observers. What plans is USAID initiating to participate?

    Answer. Previously, USAID has supported extensive domestic election 
observation programs in Egypt, fielding more than 5,000 formal 
observers in the 2010 parliamentary elections and providing other more 
informal observation efforts, including citizen journalists, bloggers, 
and direct voter reporting of conditions inside polling stations.
    USAID plans to support both domestic and international observation 
for the parliamentary and Presidential elections, and is currently 
reviewing a number of applications for these activities.
                    foreign assistance transparency

    Question #66. The International Aid Transparency Initiative (IATI) 
aims to make information about aid spending easier to access, use, and 
understand.

   What is your assessment of IATI? Is it useful?

    Answer. The United States welcomes the efforts of IATI to provide a 
framework for aid donors to be more transparent and to develop a common 
international standard for the publication of aid information. Yes, the 
United States has found IATI to be a useful point of reference as the 
USG develops a standard process for collecting and disseminating data 
on international aid flows across U.S. agencies in fulfillment of our 
aid transparency commitments under the Paris Declaration on Aid 
Effectiveness, the Accra Agenda for Action, the President's commitments 
at the Pittsburgh G20 Conference, and the Open Government and 
Transparency initiative.

    Question #67. How does the information disseminated through IATI 
differ from that of the USAID dashboard?

    Answer. As a point of clarification, the Foreign Assistance 
Dashboard Version 1.0 was launched in December 2010 by both State and 
USAID and is maintained by the Office of the Director of U.S. Foreign 
Assistance at the Department of State. Most of the information fields 
in the IATI standard are similar to the data fields being developed for 
future versions of the Dashboard.
    One difference is the scope of aid information. IATI centers on 
Official Development Assistance (ODA) from donor countries, and 
facilitates other official flows and those of private philanthropic 
organizations (e.g., the Hewlett Foundation, which recently began 
reporting in the IATI format). The Foreign Assistance Dashboard covers 
only USG foreign assistance (including ODA, other official flows, and 
military grant flows) and excludes both USG foreign credit flows and 
aid flows from private U.S. philanthropic organizations.
    Another difference lies in the reporting of forward aid budget/
spending levels. IATI requests levels in detail for 3 years out from 
the current operating year. The USG does not plan multiyear requests, 
so the Dashboard will only include information for 1 year out from the 
current operating year.

    Question #68. Is the administration planning to sign up for IATI? 
Why or why not?

    Answer. The United States does not currently plan to sign up for 
IATI in light of the forward spending requirement and the opened-end 
financial commitment to implement and maintain the IATI Secretariat.
    However, the United States has participated in the IATI Technical 
Advisory Group (TAG) from its inception. The TAG developed the IATI 
standards and formats that were adopted by the signatories in June 
2010. The United States does plan to enable a cross-walk of the Foreign 
Assistance Dashboard information to the IATI format in the future, 
where consistent with U.S. law and policy.
                             budget support
    Question #69. Which countries receive budget support from the U.S. 
Government? How much do we provide and how much is the administration 
requesting to provide (FY11 and FY12)?

    Answer. The below FY 2011 and FY 2012 levels reflect the 
President's requests; actual allocations may change depending on need 
and consistent with legislative authorities.

----------------------------------------------------------------------------------------------------------------
               Country                       FY10 Actual              FY11 Request             FY12 Request
----------------------------------------------------------------------------------------------------------------
Afghanistan..........................  $1.0 billion *.........  $1.1 billion...........  $1.2 billion
Egypt................................  $60 million............  $0.....................  $0
Haiti................................  $7.5 million...........  $0.....................  $0
Jordan...............................  $194 million...........  $162 million...........  $162 million
Pakistan.............................  $860 million **........  $763 million ***.......  $749 million 
West Bank/Gaza.......................  $150 million...........  $200 million ........  $200 million
Zambia...............................  $2 million.............  $0.....................  $0
----------------------------------------------------------------------------------------------------------------
* Figure reflects planned on-budget assistance for Afghanistan. Legislative restrictions have prevented the use
  of FY 2010 funds for government-to-government assistance and assistance that supports the Government of the
  Islamic Republic of Afghanistan until certain Secretary of State certification requirements were met. With the
  recent Secretary of State certification that the legislative requirements have been met, USAID will obligate
  FY 2010 funds for on-budget assistance programs.
** Approximately $860 million of FY 2010 is on-budget based on the current budget, taking into account changes
  notified in CN #62 (flood reprogramming)
*** Approximately $763 million is on-budget based on a 55% on-budget level of the FY 11 CBJ Request of $1.388
  billion (USAID-managed funds).
 Approximately $749 million is on-budget based on a 55% on-budget level of the CBJ request level of $1.361
  billion (USAID-managed funds).
 Of the $200 million FY 2011 requested for budget support for the West Bank/Gaza, the USG has already provided
  $150 million, as notified by USAID on October 7, 2010.

    Question #70. Do all countries that receive budget support from the 
U.S. publish their budgets and make their budget information accessible 
and understandable? If not, which countries do not provide such 
information?

    Answer. U.S. foreign assistance is prohibited to the central 
government of any country that fails to make its national budget 
publicly available on an annual basis barring a transparency waiver 
from the Deputy Secretary for Management and Resources. The Department 
of State conducts an annual fiscal transparency review to process to 
comply with the legislation and effect positive change toward better 
fiscal transparency in the countries that need it. In FY 2010, of the 
countries that received budget support, Egypt and Afghanistan required 
waivers in order to continue to receive USG assistance. We continue to 
work closely with those governments in order to improve the credibility 
and completeness of the budgetary information that they make available 
to the public.
                                 ______
                                 

         Responses of Daniel Yohannes to Questions Submitted by
                        Senator Richard G. Lugar

                                results
    Mr. Yohannes, you have previously noted that MCC is distinguished 
by its ``commitment to technically rigorous, systematic, and 
transparent methods of projecting, tracking, and evaluating the impact 
of our programs.''

    Question. What have you learned from MCC's evaluations?

    Answer. We will have independent third-party evaluations on almost 
every one of our projects. Most evaluations require substantial efforts 
to collect end-line data that can begin only after investments have 
been completed, and this often happens close to the end of a compact. 
More time is required for data analysis and discussions around draft 
findings. As a result, most evaluations are expected approximately a 
year after a compact's completion. The first compacts with Honduras and 
Cape Verde were completed last September and October, respectively, and 
as a result, the first evaluation results are expected later this year.
    It is important to focus on results throughout the compact's life, 
however. In the beginning, targets help us and our partners set our 
sights on the results that matter. During implementation, monitoring 
results helps us identify trends that can lead us to make mid-course 
corrections, and at the end help us be accountable to taxpayers and 
other stakeholders. Not all the results will be positive, but 
communicating even negative results is a fundamental part of MCC's 
commitment to transparency and learning.
    We have closed our first two compacts in Honduras and Cape Verde, 
where positive income gains are being reported by the respective MCAs. 
Preliminary data from the project implementer shows that Honduran 
farmers assisted by the compact have seen their annual net income per 
hectare planted rise from a baseline of approximately $1,880 to $3,550 
on average after 2 years of assistance, a gain of 88 percent. We look 
forward to the impact evaluation findings later this year to verify 
these and other effects of MCC's investments in Honduras and Cape 
Verde.
    MCC has significant implementation results to report, which matter 
because they are the drivers of the income gains we aim to achieve and 
what we track. For example, MCC funded projects have:

   Placed over 88,500 hectares under improved agricultural 
        production;
   Completed 517 educational facilities; and
   Formalized land tenure for almost 40,000 hectares.

    On policy results, many MCC compacts support policy reforms that 
help maximize the impact and sustainability of MCC's investments, and 
create conditions for continued growth. For example, the Honduras 
Compact supported a reform in the financial sector to significantly 
expand access to credit by letting borrowers use new and different 
kinds of collateral. This law, the first of its kind in Central 
America, has now become a model for the region.

    Question. Have MCC compacts achieved their expected economic rate 
of return?

    Answer. MCC makes long-term investments in economic growth and 
poverty reduction, and our due-diligence process includes estimating 
the expected impact. These estimates are based on models, data, and 
assumptions that follow standard procedures but that vary by country 
and activity, often depending on the specific design of the activity 
and the data available. These economic rates of return are calculated 
based on a 20-year investment horizon, so we do not expect that 
compacts will achieve their expected rates of return immediately upon 
completion. However, about a year after compact closure we receive 
results of independent impact evaluations that use real monitoring data 
from the compact programs to reestimate ERRs for every compact project, 
based on what was actually achieved during the compact. We anticipate 
that some of our projects will meet or exceed the preinvestment 
estimates, but some will not achieve the expected rates of return.
    We already know, for example, that a number of our earliest 
infrastructure investments experienced higher than anticipated costs 
during implementation. In such cases, we work together with our country 
partners to decide which activities go forward, and the result of 
higher costs and fewer activities usually implied lower than 
anticipated returns. However, in many cases, it is possible to shift 
funds to those activities with the highest returns which, even given 
the higher costs, are still expected to generate positive net returns 
on investment.

    Question. What should be done differently to increase the impact of 
MCC programs?

    Answer. MCC is a learning institution, and our results framework 
actually serves as a direct feedback loop for taking information from 
past programs and using it in the design of future programs. This 
mechanism ensures that we will use the results of impact evaluations to 
inform how we design investments for greater impact. We are already 
doing a lot to improve our programs, based on our first years of 
implementation experience.
    For example, we are increasingly recognizing that policy reforms 
can be an essential part of increasing impact and sustainability of 
investments. For this reason we are making policy reform a bigger and 
more explicit part of compacts. The recently signed Malawi Compact is a 
great example--it includes a $25 million project to support policy 
reforms and institutional capacity-building in the energy sector. We 
are also seeking more private sector partnerships that bring additional 
resources and talent to MCC investments, as a way to increase impact 
and sustainability.
                compact costs appear to exceed benefits
    Question. Following up on my question about MCC's calculation for 
the amount of benefits each compact provides, it appears Congress has 
appropriated for four MCC compacts more than those compacts provide in 
benefits. The four compacts are with Mali, Moldova, Namibia, and 
Vanuatu compacts. Specifically, the NPV of the $460 million Mali 
compact is $457 million; the NPV of the $262 Moldova compact is $260 
million; the NPV of the $304 million Namibia compact is $240 million 
and the NPV of the $65 million Vanuatu compact is $54 million.

   How do you explain this phenomenon?
   Why would the costs exceed the benefits of these compacts?
   Does this indicate something about the MCC criteria, 
        forecasts, or analysis?

    Answer. The figures cited above are for total (undiscounted) 
compact costs and discounted benefits, and therefore do not reflect an 
apples-to-apples comparison of costs and benefits. As described below, 
it is useful to compare compact costs, discounted over 5 years (the 
implementation period of the compact), with projected compact benefits, 
discounted over 20 years. With this comparison, the benefits of these 
four compacts exceed their costs.

    MCC is making long-term investments in poverty reduction. When 
making an investment decision, MCC starts with the basic question--do 
the expected returns on investment, in terms of increased incomes for 
people in our partner countries, justify the costs of the program? Like 
any investor, we expect the benefits of our programs to accrue for 
years after the initial investment is made. For this reason, we 
estimate the total benefits--increased incomes--of our compacts over a 
20-year period. Also, like any responsible investor estimating a return 
on an investment, we discount gains to reflect the idea that future 
dollars have lower value the farther out in time they are. MCC publicly 
reports these discounted total benefits as the estimated impacts of our 
compact programs. We also routinely report total compact amounts, but 
have not typically presented them in their discounted form. We are 
certainly willing to do so in an effort to present an apples-to-apples 
comparison that discounts both the dollars and the estimated benefits.
    Indeed, when MCC makes an investment decision, we do that apples-
to-apples comparison through a benefit-costs analysis. Our current 
practice is to look for investments where ex ante analyses indicate 
that the Estimated Rate of Return (ERR) is expected to meet or exceed 
10 percent. MCC also sometimes reports net present values (NPVs) or 
Present Value of Benefits, as they can be easier to interpret than 
ERRs. These NPV calculations compare total benefits, discounted over 
the life of the project (usually 20 years), with the total compact 
costs, discounted when they are incurred (all MCC costs are incurred 
during the 5-year implementation period). The practice of discounting 
costs and benefits when they occur is consistent with OMB Circular No. 
A-94, ``Guidelines and Discount Rates for Benefit-Cost Analysis of 
Federal Programs.''

    Question. While one could argue that the disbursements of the 
compact could be discounted over the term of their disbursement/compact 
term, it would be inappropriate for the costs of the compact to be 
discounted during the 20-year period that you referenced at the 
hearing. If the benefits of the compact only slightly exceed the 
discounted costs, a financier would argue that the country could be 
better off investing the compact funds in the risk-free asset.

   How can these four compacts be justified?
   Did the expectation of benefits from these four compacts 
        change during implementation?

    Answer. MCC agrees that costs should be discounted over 5 years 
and, indeed, the discounted costs cited at the hearing were actually 
discounted over 5 years rather than 20, while discounted benefits cited 
were discounted over 20 years. The four compacts in question can be 
justified based on the comparison of discounted costs and discounted 
benefits, as described above.
                            second compacts
    Question. Though MCC was not intended to provide perpetual 
development aid, the MCC Board has declared that three countries are 
eligible for second compacts--Cape Verde, Georgia, and Ghana. In these 
difficult fiscal times, how do you balance offering a country a second 
compact with trying to affect change in a new country with a first 
compact?

    Answer. MCC's mandate is to partner with countries where 
investments will have the greatest potential returns in terms of 
poverty reduction and economic growth, and where U.S. taxpayer 
resources can be used most effectively. In some cases the greatest 
opportunity for impact may be in deepening partnerships with existing 
MCC partner countries. MCC's authorizing legislation specifically 
allows for MCC to pursue subsequent compacts.
    MCC does not have an inherent preference for working with new or 
existing partners. The MCC Board of Directors makes decisions on which 
countries are eligible for MCC assistance. The Board's determination of 
eligible countries is based primarily on country performance on MCC 
selection indicators. In determining country eligibility, the Board 
also considers the opportunity to reduce poverty and generate economic 
growth within a country, and the availability of MCC funds.
    MCC's Board is extremely selective when determining eligibility for 
subsequent compacts. Of the eight countries that will conclude compacts 
by the end of 2011 (Armenia, Benin, Cape Verde, Honduras, Ghana, 
Georgia, Nicaragua, and Vanuatu), MCC's Board has only selected three 
as eligible for a second compact--Cape Verde in FY10 and Georgia and 
Ghana in FY11.
    MCC's engagement with partner countries is not open-ended. MCC 
carefully considers the appropriate nature and duration of each country 
partnership based on the country's policy and implementation 
performance, as well as the opportunities to have an impact on growth 
and poverty reduction. This includes consideration of the potential 
sustainability of MCC's investments, and on the country's ability to 
attract and leverage public and private resources in support of 
development. MCC's targeted, selective engagements are critical to 
ending the cycle of aid dependency, ensuring sustainability, and 
promoting country ownership.
                              legislation
    Question. Is MCC seeking any legislative authority changes? If yes, 
what are they and why is MCC seeking those changes?

    Answer. Yes, MCC is seeking legislative authority changes. One such 
change is concurrent compact authority, which would allow MCC to have 
multiple compacts with a country at once, and to start projects at 
staggered times to improve project management and allow for more 
innovation and creativity in program design. MCC would be able to start 
projects when ready rather than holding the entire package until all 
projects are ready--and disbursements on average should begin sooner.
    In exceptional circumstances, an authorization change could allow 
MCC to extend compacts for up to 2 years (e.g., natural disaster, 
termination of a nonperforming contractor, or other events outside the 
recipient's control).
    MCC has also sought legislative changes aimed at ensuring that 
changes in countries' income categories do not prevent the agency from 
working with the best policy performing countries that also have 
populations living in extreme poverty. Sudden shifts in income 
category, due in part to changes in global inflation and exchange 
rates, pose serious policy and structural issues for MCC. These and 
other economic trends mean a substantial number of compact-eligible 
countries are now in the Low Middle Incoming Country (LMIC) category.
    Each year, countries abruptly graduate from one income category to 
another with no transition period. This impacts whether they can be 
candidates for MCC assistance at all, and changes both the policy 
performance standards against which they are measured and the levels of 
funding that they can receive.
    MCC will work with members of your committee, the House authorizing 
committee, and others in the Congress to make these important 
legislative adjustments.
                               indonesia
    Question. Please describe the process that determined the climate 
change focus of the Indonesia compact. What other types of projects 
were considered? How does the efficiency of the current Indonesia 
compact focus compare to alternative projects that were considered? Is 
there a tradeoff between MCC's core goal of promoting economic growth 
with other political goals?

    Answer. Indonesia has been developing its compact since it was 
selected by MCC's Board of Directors as eligible for compact assistance 
in December 2008 (FY09). When the Board takes such a decision, it not 
only declares that the country in question is eligible for assistance, 
but it invites that country to submit a proposal, and directs MCC to 
``seek to negotiate a compact'' with the country. Since that decision, 
MCC has undertaken compact development activities in partnership with 
the Government of Indonesia.
    Indonesia underwent a rigorous analysis to identify economic 
constraints in 2009, which was followed by an extensive consultative 
process that the government conducted. While the government considered 
a broad range of themes, including a microfinance apex institution to 
building infrastructure for universities, that were submitted to MCC in 
13 concept papers, these and other ideas were dropped following an 
initial screening against MCC investment criteria which included some 
comparison of efficiencies between projects as well as preliminary 
analysis of economic returns and potential beneficiaries.
    In September 2010, the Government of Indonesia decided to move 
forward with three investment themes: (1) green prosperity to support a 
low-carbon sustainable growth strategy; (2) procurement modernization 
to streamline and professionalize public procurement in order to reduce 
corruption and increase efficiency and effectiveness; and (3) access to 
basic services for economic growth--to address workforce development 
and early childhood stunting, two significant issues in Indonesia.
                               engagement
    Question. Over the years, I have encouraged the MCC to engage with 
the private sector, foundations, nongovernmental organizations, and 
other donors to develop new funding and implementation partnerships and 
am pleased that the MCC is now doing so. How is MCC working to leverage 
its investments?

    Answer. MCC is working with other donors, often expanding the 
projects of other donors (e.g., the World Bank's Kalahi-CIDSS project 
in the Philippines), building on foundational project work (e.g., the 
Asian Development Bank (AsDB) on vocational education in Mongolia) and 
designs (e.g., the AsDB in Mongolia on roads) by other donors, 
developing coordinated implementation (e.g., the European Bank for 
Reconstruction and Development, the World Bank, and MCC on the Regional 
Infrastructure Project in Georgia), and working to extend MCC project 
impact (e.g., New Zealand Aid Programme and AusAid in Vanuatu). A 
standard feature of MCC compact development is holding information and 
coordination meetings with donors in-country to maximize the 
opportunities to build on and supplement one another's work. 
Increasingly, MCC is proactively seeking opportunities to divide 
efforts along lines of cost-effectiveness and skill sets. Other donors 
are also interested in this approach. Both AusAid and the New Zealand 
Aid Programme have been actively expressing interest in working with 
MCC to design a cost-effective strategy for coordinated efforts in the 
Pacific region.
    We are also working to develop a more proactive partnership 
outreach to the private and nongovernmental sectors. During compact 
development, MCC solicits input from the private and nongovernmental 
sector, and representatives of these interests are included in the 
countrywide consultations. More directly, many MCC programs are 
specifically designed to promote private sector activity (e.g., credit 
lines, grants to farmers, training to improve skills and productivity). 
In addition, there are already a number of examples of engagement with 
the private sector in investment and management, as opposed to 
procurement (e.g., El Salvador, Ghana, Jordan, Mali). The Agricultural 
Business Initiative in Ghana, Mali, and Morocco was designed as a pilot 
in attracting private sector investment to extend the impact of MCC-
funded projects. MCC has recently introduced an Annual Partnership 
Solicitation, on grants.gov, which is intended--as the name suggests--
to solicit interest from the private and nongovernmental sectors in 
partnership and investment in MCC countries.
    MCC is also working with other USG agencies, including OPIC, USTR, 
and USAID, to capitalize on opportunities to bring together our 
respective programs fostering private sector engagement in development. 
Finally, there have been outreach events focused on diaspora 
communities, including the Armenian and Salvadoran communities. 
Engagement with the private and nongovernmental sector, as well as 
donors and other potential partners, has been identified as among key 
priorities for MCC now and in coming years.
    Last, MCC's new ``Invitation to Innovate (I to I)'' plan is a 
framework designed to facilitate the development of partnerships with 
the private sector and nongovernmental organizations (NGOs).
                           early terminations
    Question. Before you joined the MCC, compacts were terminated early 
or suspended in Madagascar, Nicaragua, Honduras, Armenia. Since your 
arrival, none have been terminated. What caused the early terminations 
and was done to prevent them?

    Answer. MCC terminated the Madagascar compact in full, and 
suspended or terminated parts of the compacts in Nicaragua and Honduras 
and placed part of the Armenia compact under operational hold. In all 
cases, MCC's Board made these decisions in response to a pattern of 
actions inconsistent with MCC's eligibility criteria. The Board has 
shown its willingness to make difficult decisions and hold countries 
accountable.
    MCC selects partners where conditions are best for growth, poverty 
reduction, and effective use of scare development resources. But 
development is an inherently risky business, and many countries' 
democratic institutions are more vulnerable than we would like.
    MCC communicates very clearly to our partners that we expect them 
to adhere to our high standards for governance and that we will hold 
countries accountable for sustaining good policy performance. MCC 
maintains an active policy dialogue with countries during compact 
implementation, and makes it clear that countries are expected to 
maintain or improve policy performance.
    MCC's indicators are good at measuring current policy performance, 
but no one can predict with certainty the future behavior of our 
partner country governments.
                               technology
    Question. How has MCC used technology in its compacts? What more 
can MCC do to utilize technology to increase the amount of benefits 
each compact generates?

    Answer. Technology adoption has been employed across a range of 
compact investments. For example, information technology systems have 
been employed widely for the performance, procurement, and financial 
management systems that our partner countries have employed to 
effectively manage compact resources.
    As part of its partnership with MCC, Cape Verde will expand upon 
its e-government system to elevate efficiency and transparency of its 
procurement system to world class standards. MCC will support NOSi 
(Operational Nucleus for the Information Society), the Cape Verdean 
agency responsible for e-government, by providing equipment, software, 
and technical expertise. Roughly $1 million in compact funds have been 
allotted to strengthening Cape Verde's e-government system.
    The Cape Verdean e-procurement system will serve as the backbone of 
compact procurements in the areas of infrastructure, agriculture 
support, and private sector development. The system will standardize 
purchasing procedures and terms and conditions. For the average 
citizen, this translates into the guarantee of a less corrupt, more 
transparent and efficient use of government resources.
    Compacts in Lesotho, Nicaragua, and Benin have employed IT to 
modernize their land registries and implement land tenure policy 
reforms supported by MCC. The design and construction of major road, 
water, irrigation, and other public works has, where appropriate, 
employed advanced technologies to ensure that compact investments are 
durable and of quality. The Honduras Compact also includes two main 
subactivities surrounding the implementation of a movable property 
registry--hiring a consulting firm to provide legal technical 
assistance to implement a secured transaction law to allow for the use 
of movable property guarantees and technical design/implementation of a 
movable property registry system--authorized by the aforementioned law.
    MCC is funding the Automated Clearing House which will connect 
Lesotho's major commercial banks to a provider in South Africa to speed 
the clearing of checks. MCC is also funding a debit smart card activity 
being implemented by the Lesotho Post Bank, which will facilitate 
deposits, withdrawals, and retail transactions in fairly remote areas 
to holders of biometrically secured smart cards.
    In Ghana, MCC has funded the computerization and automation of the 
entire network of 120 plus rural banks and their more that 500 branches 
including modern banking software, LANs, and satellite dishes for each 
branch to connect to its HQ office and to connect all of the banks to 
the national payments system thus enable transfers such as government 
payments and remittances. MCC is also funding the computerized data 
center at the ARB Apex bank, the regulator of the rural banking network 
to support the newly automated transaction capacity using the satellite 
technology.
    Millennium Challenge Account-Armenia, in collaboration with ACDI/
VOCA, VISTAA and the Federation of Agricultural Associations found an 
innovative way to address the lack of reliable information about 
current market prices by taking advantage of widespread cell phone use 
in Armenia. The innovation is the Armenian Agricultural Market 
Information System (ARMIS), which sends out daily fruit and vegetable 
prices from large markets in the Yerevan, Armavir, Lori, and Shirak 
regions upon text message request. Farmers pay a small fee per text 
message, ensuring that there is demand for this service and long-term 
sustainability of its operations. Farmers text message using a 4-digit 
crop- and market-specific number, which triggers an automated response 
via text message from the ARMIS system. With this information, farmers 
can bargain and negotiate with potential produce buyers from a stronger 
competitive position.
    Cell phones are also used in Honduras to improved communication 
between growers with other growers, technicians, buyers, input 
suppliers, and transport and services providers. What used to take days 
to find out before can now be obtained in minutes, better decisions can 
be taken which save or earn money (e.g., market conditions/prices, 
buyer volume needs, pickup and delivery dates, input costs, 
coordinating logistics). Market prices are sent automatically to cell 
phones or accessed by calling a number. This knowledge of actual market 
prices (and tendencies) assists growers in negotiating farm gate prices 
for those who sell to intermediaries at farm gate.
    MCC also takes the sustainability of its investments seriously, and 
examines the capacity of its partners to sustain such technologies once 
compact investments are complete.
                               innovation
    Question. What innovative development programs has MCC supported? 
Which ones seem promising? What have you learned from the innovations 
that have not succeeded?

    Answer. One of MCC's greatest innovations is its model--MCC's 
ability to respond to partner countries' long-term development 
priorities, to base investment indecision on rigorous economic 
analysis, to put countries in the driver's seat when implementing 
programs, to be transparent in projection and achievement of results, 
and to hold firm on policy performance are innovations in and of 
themselves.
    MCC has worked on a wide range of projects, from traditional 
infrastructure projects, to agriculture, irrigation, water and 
sanitation, land tenure, and various microenterprise and small business 
support projects. The innovation of our model, which emphasizes country 
ownership, ensures that the countries themselves identify their project 
priorities.
    Last month, I launched a new initiative called ``Invitation to 
Innovate (I to I).'' Through this program, we will seek innovative 
ideas from the private and nongovernmental sectors to support MCC's 
mission. Partnerships solicited through the Annual Program Statement 
are expected to provide new funding opportunities, introduce new 
technologies and approaches for development, increase the 
sustainability of MCC investments, and enhance training and expertise 
in the implementation of MCC compacts. Partners may include private 
sector companies, nongovernmental organizations, social responsibility 
funds, foundations, other donors, and development-oriented investment 
funds.
                                 ______
                                 

         Responses of Daniel Yohannes to Questions Submitted by
                       Senator Benjamin L. Cardin

    Question. In working with well-governed, accountable partner 
countries, the administration has prioritized country ownership as a 
key component of its development policy, which follows a founding 
principle of the MCC.

   How are you helping to build local capacity in-country so 
        that partner countries can eventually assume full 
        responsibility for their development?

    Answer. Partner country Millennium Challenge Account (MCA) 
``accountable entities'' are primarily responsible for the management 
and implementation of a compact agreement, including the conduct and 
oversight of procurements. These entities are entirely staffed by host 
country citizens. MCC helps build the capacity of the accountable 
entities to execute this responsibility by providing training and 
continuous technical assistance on responsible procurement, financial 
management, and technical practices and by facilitating the exchange of 
best practices among MCAs.
    In Cape Verde, for example, MCC's compact helped to facilitate a 
new electronic procurement system designed to standardize procurement 
procedures and provide government officials, suppliers, and the public 
information on procurement rules, opportunities, and transactions 
records. This small investment, together with MCC-supported training of 
450 officials from across the government, as well as the government's 
own investments in broadband access and accounting systems, allowed 
Cape Verde to put into practice its new procurement law. The law, 
modeled on international procurement standards such as those used by 
the World Bank and MCC, is designed to increase transparency and 
efficiency across the public sector.
    MCC's compact with Ghana includes a procurement capacity project 
developing a cadre of procurement professionals and improving the 
public procurement capacity of the Ghanaian Government. A complementary 
key to this program's success is the establishment of a professional 
designation, certification, and career path for procurement 
professionals in the Ghanaian civil service.

    Question. Under your leadership, the MCC has made several 
groundbreaking improvements to gender integration, such as including a 
focus on gender as one of five corporate strategic priorities of the 
agency, developing operational guidance for how to integrate gender 
throughout the MCA process, and providing incentive awards for 
exemplary staff performance in gender integration.

   In the context of the FY12 budget, how can the MCC ensure 
        that resources are available to support these innovative 
        improvements, which stand not only to improve the lives of 
        beneficiaries but also to improve the effectiveness of MCA 
        projects overall?

    Answer. One of my top priorities is to ensure gender integration 
throughout the lifecycle of MCC compact activities--design, 
implementation, and evaluation. For example, integrating gender 
assessment into the project design and tracking is one MCC's corporate 
goals and MCC staff is trained on and encouraged to incorporate gender 
considerations into their work. As such, MCC is working to mainstream 
gender into its business operations and the work of all MCC staff. With 
regards to MCC's Social and Gender Assessment team specifically, MCC 
management will continue to review staffing needs.

    Question. Experience has shown that gender integration is most 
successful when staff is held accountable to incorporating gender work 
into their portfolios. Over the past year, the MCC has made remarkable 
improvements in holding MCC staff accountable for gender integration.

   Under your leadership, how can you ensure to hold MCA staff 
        and implementing agencies accountable for their performance on 
        gender integration?

    Answer. MCC has increased the number of staff focused on gender, 
and, this year, we have adopted and begun to implement new gender 
integration milestones and operational procedures in all of our 
compacts. These milestones and operational procedures set the stage for 
holding both MCC and our partner countries accountable for gender 
integration. For example, MCC is requiring that each new MCA 
accountable entity include a staff member with gender expertise and 
gender assessment and monitoring is required for all relevant 
activities.

    Question. Two of the countries for which compact funding has been 
requested in FY 2012--Ghana and Georgia--have already been awarded MCC 
compacts.

   If multiple compacts become a common occurrence, do you 
        believe this alters the fundamental concept of MCC providing 
        targeted, time-limited support?
   How would a succession of MCC compacts in a country be 
        different from the long-term USAID development model?

    Answer. Engaging in subsequent compacts is consistent with MCC's 
model. MCC's authorizing statute specifically authorizes subsequent 
compacts. MCC's mandate is to partner with countries where investments 
will have the greatest potential returns in terms of poverty reduction 
and economic growth, and where U.S. taxpayer resources can be used most 
effectively. In some cases the greatest opportunity for impact may be 
in deepening partnerships with existing MCC partner countries.
    Second compacts may indeed present some of the best opportunities 
to reinforce the key elements of the MCC model. By being very selective 
in choosing second compact partners, MCC creates a strong incentive for 
ongoing policy and implementation performance among partner countries. 
By building on lessons and experience in first compacts, second 
compacts provide good opportunities to drive deeper policy reforms and 
for innovation and new partnerships with private sector and civil 
society. Continued engagement with a well-performing country gives MCC 
the opportunity to help countries establish a firm path toward growth 
and greater private sector investment and away from dependence on aid.
    A subsequent compact, or even two, in a country would be different 
from the USAID development model in several ways, the most significant 
of which is MCC's approach to selectivity. MCC's Board has been very 
selective in choosing second compact partners. Second compacts are not 
an entitlement, or an assumed follow-on to a first compact. Eligibility 
for a second compact depends on countries maintaining good performance 
on MCC's indicators, and on first compact implementation. In second 
compacts will not be the norm because not all current MCC partners will 
have second compacts. MCC will continue to look for country 
partnerships where opportunities are greatest to support economic 
growth, make investments with good returns for poverty reduction, and 
use scare U.S. development resources effectively. In this regard, and 
as MCC's authorizing statute envisioned, second compacts will be a part 
of MCC's toolkit to pursue poverty reduction in well-performing 
countries.
    However, MCC's engagement with partner countries is not open-ended. 
MCC carefully considers the appropriate nature and duration of each 
country partnership based on the country's policy and implementation 
performance, as well as the opportunities to have an impact on growth 
and poverty reduction. This includes consideration of the potential 
sustainability of MCC's investments, and on the country's ability to 
attract and leverage public and private resources in support of 
development. MCC's targeted, selective engagements are critical to 
ending the cycle of aid dependency, ensuring sustainability, and 
promoting country ownership.
    In addition, the elements of MCC's model that distinguish it in a 
first compact--focus on economic growth, transparency in projected 
impact and independent evaluation, and commitment to supporting 
countries' own priorities for growth and poverty reduction--will 
continue to distinguish MCC in subsequent compacts.
                                 ______
                                 

    Responses of Administrator Rajiv Shah to Questions Submitted by
                       Senator Benjamin L. Cardin

    Question. Administrator Shah, the President's development policy 
called for your inclusion in meetings of the National Security Council 
``as appropriate.'' Can you attest to your level of involvement on the 
NSC as the development voice at the policymaking table, and do you 
expect a more formalized role for USAID in the future as the U.S. 
Government's lead development agency?

    Answer. USAID plays a very active role in formally convened NSC-led 
discussions on development. The Agency is a core participant in the 
Global Development Interagency Policy Committee (IPC), which is the 
forum for implementation of the President's policy directive on global 
development and has been responsible for drafting discussion papers and 
leading discussion of critical development topics in that forum. 
USAID's leadership participates regularly in a variety of other IPCs, 
including both country and region-specific issues as well as sectoral 
issues. As Administrator, I participate regularly in Deputies' and 
Principals' Committee meetings
on a variety of issue areas, including national security and other 
administration priorities.

    Question. To what extent does USAID actually have sole control over 
its core accounts? What role does the State Department play in 
determining where these funds should be directed and for what purposes? 
And please discuss your plans for USAID to design its own budget.

    Answer. The Quadrennial Diplomacy and Development Review (QDDR) 
recognizes the establishment of the Office of Budget and Resource 
Management (BRM) at USAID in September 2010, and charges it with 
significant budget responsibilities. Specifically, the QDDR states that 
USAID will propose a comprehensive development and humanitarian 
assistance budget for USAID-managed programs to the Secretary and 
Deputy Secretary of State, and be responsible for executing its budget 
within country and strategic objective levels. This will allow the 
Administrator to ensure that overall priorities and country and sector 
strategies drive resource requests and deployment. State will continue 
to be responsible for integrating all foreign assistance budget 
proposals for the Secretary's approval, and the Secretary will continue 
to submit an integrated State/USAID Congressional Budget Justification 
that includes integrated country justifications, while clearly 
identifying which agency will implement which resources.

    Question. Accountability has been an explicit focus of the Feed the 
Future Initiative and USAID should be commended for their work on the 
Feed the Future Results Framework. However, it remains unclear how 
USAID country missions will be accountable for integrating gender 
throughout their implementation plans. How is Feed the Future holding 
missions accountable for integrating gender throughout all stages of 
planning and implementation in the field?

    Answer. Strengthening human rights and fueling sustainable economic 
growth in developing countries both depend on empowering women and 
working toward gender equality. According to the FAO, women comprise, 
on average, 43 percent of the agricultural labor force in developing 
countries, ranging from 20 percent in Latin America to 50 percent in 
Eastern Asia and sub-Saharan Africa. Eliminating poverty and hunger 
cannot occur without bolstering the role women play in their societies 
and economies.
    The Feed the Future (FTF) Initiative attacks the root causes of 
global hunger through accelerated agricultural development and improved 
nutrition. This commitment to catalyze agricultural-led growth will 
raise the incomes of the poor, increase the availability of food, and 
reduce undernutrition through sustained, long-term development 
progress. Because of their prominent role in agriculture and the 
persistent economic constraints they face, women are the main focus of 
many FTF programs.
    USAID has taken important steps to address gender issues. The 
administration's Feed the Future Initiative reflects a dedication to 
increasingly include women and girls as leaders, implementers, and 
beneficiaries of our programs.
    Prior to investing a high level of resources in the implementation 
of Feed the Future strategies, USAID coordinates multistakeholder 
reviews of the technical quality of the country's food security 
multiyear strategy for integration of gender concerns in all 
investments. Each Multi-Year Strategy is thoroughly reviewed for gender 
integration and is not approved without first ensuring that gender 
issues are addressed throughout the plan. Moving forward, USAID will 
work with missions to develop Gender Action Plans to accompany each 
Multi-Year Strategy. The status of each Feed the Future focus country 
and the overall investment portfolio will also be reviewed every year 
to:

   Ensure the incorporation of gender best practices in all 
        Feed the Future investments. We will provide technical 
        assistance, where necessary, and up-to-date information on best 
        practices through promotion and dissemination of resources. 
        Training is also a critical component, and the Agency will work 
        with missions to engender FTF-related solicitation and 
        procurement documents through
        in-country trainings, technical assistance and the delivery of 
        training resources including the ``Tips for Integrating Gender 
        into Agricultural Solicitations'' document.
   Assess the quality and content of a Feed the Future focus 
        country's consultative process on gender integration as one 
        criterion for deeper investments. USAID will assess how the 
        country uses social/gender analysis to involve and help ensure 
        meaningful participation of women and men, and how the country 
        involves organizations representing their respective interests 
        in the development and implementation of the Feed the Future 
        activities.

    USAID is establishing a rigorous monitoring and evaluation (M&E) 
system that will monitor performance and measure progress toward Feed 
the Future goals at the country, regional, and initiative level. Feed 
the Future M&E system development requires that all USAID missions 
define the development hypotheses behind their strategies, develop a 
country-specific results framework, clearly identify beneficiaries, and 
undertake baseline studies. Gender equality and women's empowerment 
are, by requirement, considerations that are integrated into all of 
those steps.
    The Feed the Future M&E system will measure gender results by 
collecting sex-disaggregated data, tracking the impacts of our 
investments on women and men, and measuring the progress of women's 
achievements relative to men's. All Feed the Future standard (people-
specific) indicators collected at a household or individual level are 
either disaggregated by sex or specific to women.
    Additionally, impact evaluations will examine critical questions 
related to gender equality, gender integration, and women's 
empowerment. Missions are strongly encouraged to set impact evaluation 
agendas that include questions on gender impacts.
    Finally, under Feed the Future, USAID is developing an index--the 
Women's Empowerment in Agriculture Index--to measure changes in women's 
empowerment in the agriculture sector. The concept of Women's 
Empowerment or Inclusion in Agriculture is broad and multidimensional 
and measures change in the following: women's role in household 
decisionmaking around agricultural production, women's access to 
productive capital (such as loans or land), the adequacy of women's 
income to feed family, women's access to leadership roles within the 
community, and women's labor time allocations.

    Question. One of the problems that has plagued USAID over the years 
is the lack of accountability of any particular officials for the 
performance of the programs under their purview. Partly as a result, 
Congress has created a large number of special coordinators who report 
through other departments and agencies. USAID is sometimes left with 
minimal control over its programs, yet is still held responsible when 
the programs fail to achieve their objectives. What is being done to 
change the dynamic so that USAID has the ability to design and manage 
for results?

    Answer. The Presidential Policy Directive on Development and the 
Quadrennial Diplomacy and Development Review (QDDR) have reiterated the 
importance of USAID as the lead development agency for the United 
States Government. With Congress' support for the Development 
Leadership Initiative, USAID has significantly expanded the ranks of 
development professionals at the Agency and therefore its capabilities 
to design and implement effective development programs and manage these 
for results. The QDDR establishes USAID as the lead agency for the Feed 
the Future Initiative, and anticipates that the Agency will assume 
leadership of the Global Health Initiative soon. USAID is also a core 
agency implementing the Global Climate Change Initiatives and our staff 
participates actively in many other interagency processes as the 
administration pursues a whole of government approach to development. 
Through these efforts USAID is drawing on the expertise of all federal 
agencies to tackle the priority development challenges facing the world 
and coordinating efforts to provide the most development impact.
    USAID has instituted a variety of reforms through USAID Forward, 
including more rigorous evaluation, procurement mechanisms that promote 
increasing local capacity and partnering, where appropriate, with host 
countries, and emphasis on science, technology, and innovation. These 
reforms, coupled with the increases in staff, will continue to improve 
USAID's ability to design and manage for results.

    Question. In the most recent strategy document, the Global Health 
Initiative principle of ``a woman- and girl-centered approach'' has 
been expanded to a ``focus on women, girls, and gender equality.'' Can 
you describe how USAID programs are addressing the question of gender 
equity by addressing gender-related power dynamics between partners and 
in families, gender-related barriers to access and demand for services, 
and factors such as mobility, access to education, control over 
resources, and the link between poverty and gender?

    Answer. USAID's global health programs consider gender equality a 
key determinant of women's and girls' health and well-being and 
recognize that the lower status that women and girls often have 
relative to male counterparts in their homes and communities requires a 
concerted effort to transform unequal gender norms and power relations.
    USAID continues to invest in cutting edge data collection through 
the Demographic and Health Surveys (DHS), which includes modules on 
domestic violence, female genital cutting/mutilation (FGC/M) and 
women's status. Thirty-three countries have used the DHS domestic 
violence module (10 more than once); 27 countries have implemented the 
FGC/M module (of which 16 have collected the data more than once); and 
3 countries have implemented the women's status module (of which 2 have 
collected the data more than once). These data were instrumental in 
bringing about legislative changes on domestic violence in Kenya, and 
the development of new legislation in Uganda that protects women from 
domestic violence, promotes gender equality in the home and prohibits 
FGC/M.
    In rural Yemen, USAID is raising awareness of child and adolescent 
health needs and girls' rights and challenging local beliefs that 
support the common practice of child marriage. As a result, the age of 
marriage has increased from 14 to 17 in project sites; 53 girl-child 
and 26 boy-child marriages have been averted; and the first-ever female 
school principal was appointed, encouraging parents to enroll and keep 
their daughters in school. The intervention is being replicated in two 
new districts.
    In Namibia, Ethiopia and Tanzania, USAID programming is engaging 
older and younger men to identify and address harmful attitudes toward 
gender norms and relationships. Program participants have reported 
positive changes in behavior, including increased discussion about 
sexuality, the treatment of women with more respect, and increased 
awareness about HIV or feeling less negative toward HIV-positive 
people.
    In Malawi, Rwanda and Swaziland, USAID is working to explicitly 
engage men in health services, such as the prevention of mother-to-
child transmission of HIV, as a way of increasing their support of 
women's health needs and access to services, and increase couple family 
planning and HIV counseling.
    A recent USAID-supported analysis in health care facilities around 
the world revealed widespread humiliation and abuse of women during 
childbirth, a time of intense vulnerability for women. The study found 
that such disrespect of women has become ``normalized,'' negatively 
affecting women's use of facility-based skilled care. USAID is 
supporting global advocacy, additional research, and maternal health 
programming to tackle this problem.
    In Northeast Bangladesh, which has the country's lowest health 
indicators and where women live in seclusion, USAID is supporting an 
integrated family planning--maternal, neonatal, and child health 
program to improve access to services, through trained community health 
workers who reach women in their homes to provide culturally 
appropriate newborn care and reproductive health to mothers. As a 
result, family planning in intervention sites has increased to 42 
percent, compared with 27 percent in control sites.
    In Kenya, USAID is providing microfinancing to disadvantaged women 
and families in the lowest wealth quintiles (including young women) who 
are living with or are affected by HIV/AIDS. This program incorporates 
family planning and reproductive health information, and refers women 
to local service providers to help them delay, space, or prevent 
pregnancy.

    Question. Violence against women is a horrific and widespread human 
rights crisis that undermines the effectiveness of existing U.S. 
investments in global development and stability, such as increasing 
basic education or creating stability in Afghanistan and Pakistan. 
Given the pervasiveness of sexual and gender-based violence and the 
inherent links between violence and the various sectors in which USAID 
is engaged, how can USAID utilize a more comprehensive approach to 
ending violence against women and girls internationally?

    Answer. USAID has adopted a comprehensive approach to gender-based 
violence (GBV) in all its programming by: (a) mobilizing women/girls 
and men/boys to prevent and mitigate violence; (b) working with 
communities to address norms that perpetuate gender-based violence; (c) 
supporting policies and programs to prevent and respond to GBV in 
various settings, such as schools, workplace, and home; (d) supporting 
policies and activities that protect the rights of women and children 
and strengthen sanctions against violence; (e) increasing access to 
psychosocial, legal, and health services; (d) supporting special 
protections for women and children in conflict and humanitarian 
emergencies; (e) supporting policies and activities that protect the 
rights of transgender persons and strengthens sanctions against 
violence directed at those who evidence variant gender expression; and 
(f) providing original research and analysis of the prevalence of 
gender-based violence and its effect on development objectives.
    USAID's commitment to combating gender-based violence has also been 
elevated by the Agency's most senior leadership, who are positioning 
the Agency to advance the implementation of United Nation Security 
Council Resolution 1325 and four related United Nations resolutions, 
1820, 1888, 1889, and 1960, which call for the protection of women and 
girls from sexual and gender-based violence in situations of armed 
conflict. To protect women and girls in conflict-affected countries, 
USAID assistance will combine targeted prevention and response 
activities with an overall focus on the safe and equitable delivery of 
relief and recovery assistance, and the active engagement of women in 
peace-building and reconstruction efforts.
    Further, in February, the Agency launched a Counter Trafficking in 
Persons Code of Conduct, holding USAID personnel and implementing 
partners accountable to a high level of ethical conduct and committing 
the Agency to provide training and tools to identify trafficking and 
implement appropriate programs. The Agency is developing a new Counter 
Trafficking strategy, finalizing a Field Guide to Combat TIP as a 
programming resource for missions, and developing a survey tool to 
identify evidence-based practices in anti-TIP programming.

    Question. As you know, the QDDR incorporates an unprecedented 
emphasis on gender integration, recognizing it as a key approach for 
effective development. As the QDDR reaches the stage of implementation, 
how can you ensure that USAID employs gender integration as a 
crosscutting approach for diplomacy and development rather than relying 
on separate women's projects? The FY12 budget request does reference 
this. But can you now tell me what that will actually look like? Can 
you please share what concrete steps you view are necessary for USAID 
to fully achieve this vision of addressing both women's and girl's 
needs effectively throughout project outcomes, both in Washington and 
abroad? What structures are being built at USAID? What requirements 
will you have of contractors and programming? What will the Monitoring 
and Evaluation on gender look like?

    Answer. We have taken a number of steps throughout the Agency to 
ensure that women's and girl's needs are met throughout project 
outcomes in Washington and abroad. Last year, we updated our gender 
programming requirements to reflect the administration's core 
commitment to gender equality and women's empowerment. This guidance 
reinforces the importance of gender analysis in informing the design of 
strategies and programs to deliver better results, and makes it a 
mandatory component of strategic planning and project design at every 
level for all USAID staff and implementing partners (e.g., 
contractors).
    Furthermore, all USAID officers now have at their disposal a strong 
set of tools from which to implement and strengthen the integration of 
gender into their projects. For example, we have complemented the above 
guidance with additional documents on the subject matter, such as the 
Tips for Conducting a Gender Analysis at the Activity Level, the USAID 
Gender Integration Matrix: Individual Opportunities and 
Responsibilities, and Sample Scopes of Work for Gender-Related Analyses 
and Training.
    We have increased our technical assistance to the field, with more 
than 35 missions carrying out country gender assessments last year 
alone to incorporate into planning and programming. And finally, we 
have provided gender integration training to approximately 600 USAID 
staff and implementing partners worldwide.
    Last month, USAID established a Policy Task Team to craft a new 
policy on gender equality and women's empowerment--our first in nearly 
30 years. As with our other policy task teams, the Gender Policy Task 
Team will consult widely with stakeholders, including USAID staff, 
beneficiaries, and others in the development community and on Capitol 
Hill on, among other things, the best way to achieve our gender 
integration goals.
    We recently restructured the former Women in Development Office 
into a new Office of Gender Equality and Women's Empowerment focused on 
building partnerships. This office will also give greater support to 
female entrepreneurship, scaleup initiatives designed to enhance 
women's ownership of key assets like land and housing, and work to 
reduce gender gaps in access to new technology and infrastructure.
    To assist the Agency in meeting its gender goals, we recently 
welcomed Carla Koppell as our new Senior Coordinator for Gender 
Equality and Women's Empowerment. Carla will accelerate our efforts to 
integrate gender equality as cross-cutting throughout the agency. Carla 
most recently served as director of the Institute for Inclusive 
Security of the Hunt Alternatives Fund, and has worked extensively with 
women and civil society leaders from conflict areas around the world 
including Afghanistan, Colombia, Iraq, the Middle East, and Sudan.
    Carla joins a growing number of gender experts in USAID including 
Dr. Caren Grown, whom we welcomed as our Senior Gender Advisor in our 
Policy, Planning & Learning Bureau earlier this year. Caren is 
currently coleading the Task Team in charge of drafting the new policy 
on gender equality and women's empowerment programming.
    The Agency has placed a significant emphasis on evaluation, 
measuring, and documenting program achievements and shortcomings, and 
generating data on what works to drive decisionmaking. These processes 
will be applied to our approach to gender integration. The new 
Evaluation Policy establishes consistent terminology; requires at least 
one performance evaluation for each major program and any untested and 
innovative interventions, and encourages impact evaluation for each 
major development objective in a country program, especially for 
innovative or untested approaches and interventions. The policy calls 
for evaluation to be integrated into programs at the design stage and 
requires sufficient resources be dedicated to evaluation, estimated at 
approximately 3 percent of total program dollars. To avoid bias and 
situations where implementing partners evaluate themselves, it is 
expected that external experts will lead evaluation teams, and requires 
that evaluations use methods, whether qualitative or quantitative, that 
generate the highest quality, reproducible evidence linked to the 
evaluation questions. The policy also builds local capacity by 
including local evaluators on evaluation teams and supporting partner 
government and civil society capacity to undertake evaluations. 
Finally, the new policy insists on transparency of findings with a 
commitment to full and active disclosure.
    Taken together, we believe these steps will reaffirm our commitment 
to gender equality and help harness the power, creativity, and energy 
of women and girls to deliver meaningful results for the developing 
world today and into the future.

    Question. Five days after being sworn in, Haiti experienced a 
devastating earthquake. You led a swift, aggressive and coordinated 
response to the devastation that they experienced. Now that we have 
transitioned from emergency response and onto reconstructing and 
rebuilding Haiti, what are some of the new initiatives that USAID is 
engaged in? And, what is USAID doing to enhance civil society's 
capacity to advocate for reform?

    Answer. New Initiatives: USAID is doing business differently in 
Haiti. In every sector, we are seeking to build local capacity at the 
national and municipal levels so the Government of Haiti can meet the 
people's needs and become less dependent on foreign aid. We are also 
achieving greater focus and more effective use of our resources by 
working primarily in three geographic corridors--north of Port-au-
Prince, the St. Marc area, and Cap Haitien--and in four primary 
sectors: infrastructure and energy, economic security, health, and 
governance.
    USAID is also trying to promote sustainable development and promote 
innovation by engaging the private sector through Public-Private 
Partnerships, such as Haiti Hope, a $9.5 million partnership with Coca-
Cola and others, that aims to double income of 25,000 mango farmers in 
5 years; or a partnership with CHF & Haytrac (Caterpillar's Haiti 
dealer), that trains Haitian men and women to use heavy equipment for 
rubble removal and demolition of damaged structures. USAID has also 
partnered with the Gates Foundation, Digicel and Voila cell phone 
providers to provide basic banking services and money transfers. The 
project has 14,000 users thus far. The following is a summary of our 
activities in the four sectors referenced above.

   Infrastructure/Energy: USAID aims to improve infrastructure 
        that supports communities as well as commercial development in 
        Port-au-Prince and the development corridors of St. Marc and 
        Cap Haitien. USAID's goals are to improve access to and the 
        reliability of electricity; reduce the use of charcoal and 
        firewood for cooking; increase access to international markets 
        through new ports; and increase access to housing.
   Food and Economic Security: USAID is investing in 
        agricultural development for competitive commodities; raising 
        rural income and increase food security; and creating a robust 
        formal micro-, small-, and medium-sized enterprise sector 
        resulting in improved performance of the agricultural sector, 
        improved nutritional status of women and children and increased 
        employment.
   Health and other basic services: USAID is working to improve 
        the health care system with better infrastructure and 
        widespread access to good care; improve and expand the capacity 
        of the Haitian Government (GOH) to provide health services; 
        enable the GOH to govern and set standards for education; 
        enhance opportunities for at-risk youth; and provide services 
        for persons with disabilities.
   Government/Rule of Law: USAID's programs aim to create a 
        more stable state, characterized by credible elections; support 
        a more inclusive, transparent, and accountable public 
        administration, and a government capable of delivering basic 
        services; and strengthen the rule of law and adherence to human 
        rights.

    With regard to civil society, USAID is working to enhance 
participation in relief and recovery through dialogue between citizens 
and the GOH. We currently have programs with Haitian NGOs to:

   Support oversight of the executive branch;
   Strengthen capacity to identify and advocate for local 
        development priorities, and provide oversight of reconstruction 
        spending;
   Support civic education;
   Strengthen capacity to advocate for and monitor justice 
        service delivery; and
   Support public information campaigns on the prevention of 
        violence against women, children, and other vulnerable groups.

    We also continue to support the GOH's decision to include a civil 
society representative on the board of the Interim Haiti Reconstruction 
Commission. In so doing, we also anticipate that the IHRC, in its role 
as a coordinating body, will facilitate dialogue among civil society, 
government, and other actors.

    Question. Do you have an estimate of what the overall humanitarian 
response in Haiti is likely to cost the U.S. Government?

    Answer. In FY 2010 and to date in FY 2011, the U.S. Government 
(USG) has provided nearly $1.3 billion for humanitarian response 
activities in Haiti, including $1,219,298,717 toward the January 2010 
earthquake and $62,533,934 toward the October 2011 cholera outbreak. 
All of USAID's Office of U.S. Foreign Disaster Assistance (USAID/OFDA) 
earthquake and cholera humanitarian response programs in Haiti are 
currently scheduled to conclude by the close of calendar year 2011 in 
recognition of the evolution of both responses from the immediate, 
life-saving phase to a longer term situation requiring development 
interventions.

    Question. Will the FY 2010 supplemental funding be sufficient for 
the humanitarian response?

    Answer. Though current conditions on the ground indicate that FY 
2010 supplemental funding will be sufficient for the humanitarian 
assistance portion of the Haiti response, USAID continues to closely 
monitor needs in Haiti. In particular, the effects of continued 
displacement from the earthquake, cholera, Hurricane Tomas, and high 
prices for staple foods are being analyzed and may lead to requests for 
additional emergency food assistance.

    Question. In your view, how well is the humanitarian operation 
being coordinated?

    Answer. International humanitarian coordination mechanisms in Haiti 
were stronger than in many recent crises due to the speed and quantity 
of cluster activation, as the U.N. and Government of Haiti (GOH) 
activated 12 clusters, or sectoral coordinating bodies, within the 
first 10 days of the crisis to identify and prioritize relief needs. 
Later in the response, however, staffing challenges hindered the 
ability of the U.N. Office for the Coordination for Humanitarian 
Affairs (OCHA) to robustly manage information on the response, leading 
other relief organizations to assume a heightened coordination role 
within their sectors.
    As the lead federal agency for international disaster response, 
USAID coordinated an unprecedented number of USG agencies in the 
aftermath of the Haiti earthquake. With USAID leadership, the USG 
humanitarian response accomplished the following:

   Within hours of the earthquake, USAID established a 24-hour 
        interagency Response Management Team (RMT) with 20 interagency 
        liaison officers, including staff from the U.S. Department of 
        Homeland Security, U.S. Department of Health and Human 
        Services, and U.S. Department of Defense (DOD), working in 
        close coordination at the USAID Operations Center.
   USAID grantees were part of an international effort that 
        accomplished the largest emergency shelter distribution in 
        history and increased piped fresh water to Port-au-Prince above 
        preearthquake levels.
   The U.S. Military elevated operations at the damaged Port-
        au-Prince airport to levels that were three times greater than 
        preearthquake capacity and coordinated with USAID for flight 
        prioritization. Through interagency coordination, the U.S. 
        Department of Energy and DOD helped restore the fuel supply to 
        Haiti, allowing the transport of relief commodities to 
        drastically affected communities.
   USAID met regularly with representatives of other donor 
        nations to avoid gaps or redundancies in assistance. Strong 
        humanitarian donor coordination enabled common messaging, joint 
        donor missions to the field, and joint efforts to streamline 
        requests and expedite response activities.

    Question. Please discuss ways that the humanitarian relief 
operation has begun to transition toward early recovery and some of the 
main obstacles that exist with regard to funding, resources on the 
ground, and absorptive capacity.

    Answer. Since mid-2010, USAID has been working on ways to integrate 
emergency earthquake-response programming into USAID/Haiti's four-
pillar, post-earthquake renewal and economic opportunity strategy. 
Specifically, USAID's Office of Foreign Disaster Assistance (USAID/
OFDA) and our mission in Port-Au-Prince outlined ways the mission might 
provide follow-on funding for programs initiated by USAID/OFDA to 
repair moderately damaged structures, rendering them safe to inhabit, 
and to provide technical expertise to GOH housing and urban planning 
officials.
    USAID's food assistance helped meet the immediate food needs of 
nearly 4 million in the first 4 months after the earthquake. Since 
then, USAID's response has evolved to support early recovery while 
ensuring that vulnerable people are able to meet their basic food 
needs. In addition, as the cholera outbreak stabilized--with declining 
overall case fatality rates, a decreasing rate of new cholera cases, 
and establishment of cholera treatment facilities and cholera-related 
commodities in-country sufficient to meet current needs--USAID began 
planning to transition emergency response programs to longer term 
programming, integrating cholera treatment into development health 
activities.

    Question. What are some of the key lessons USAID has learned so far 
in the U.S. response to the earthquake? Do these lessons apply to other 
situations or are they unique to Haiti?

    Answer. An independent team commissioned by USAID to review the 
first 6 months of the USG humanitarian response to Haiti's earthquake 
issued the following recommendations: structurally strengthen USAID as 
the lead federal agency for international disaster response, more 
effectively bridge the divide between diplomatic response and 
humanitarian relief, establish a USG International Disaster Response 
Framework, clarify the role of DOD in humanitarian crises, and more 
stringently monitor the impact of assistance funding. The majority of 
the recommendations can be broadly applied to USG disaster response 
activities worldwide, although the different country contexts will 
naturally necessitate different balances of appropriate USAID, U.S. 
Department of State, and DOD levels of involvement in each response.

    Question. The President's new global development policy seeks a 
shared, cooperative approach among donors so that the United States is 
not shouldering an overwhelming majority of bilateral assistance to 
poor countries. How are you achieving this division of labor and 
coordinating effectively with other donors? Similarly, how are you 
leveraging partnerships with the private sector, NGOs, foundations, and 
diaspora communities to maximize our investments?

    Answer. Under the implementation plan for the Presidential Policy 
Directive on U.S. Global Development Policy, USAID's role with respect 
to division of labor among donors is to:

   Track and participate on behalf of the USG in the ongoing 
        international dialogue on cross-country division of labor; 
        negotiate for commitment to concrete action in the Busan 
        (Fourth High Level Forum on Aid Effectiveness) outcome 
        document;
   Create a work plan based on mainstreaming division of labor, 
        accountability and transparency into the work of the three 
        technical working groups related to the U.S.-EU summit outcome 
        on aid effectiveness; and
   Provide guidance to the field on participation in joint 
        assistance strategies and similar framework agreements that 
        codify country-level division of labor.

    In addition, USAID is using its Country Development Cooperation 
Strategy drafting and review process to collect information on existing 
donor division of labor in-country.
    Regarding partnerships, USAID is the recognized leader in 
cultivating public-private alliances for development. Since 2001, 
through the use of Global Development Alliances and other partnership 
models, USAID has generated more than 1,000 alliances with over 3,000 
individual partners. USAID has formed alliances with corporations, 
private foundations, other donors, philanthropists, NGOs, social 
entrepreneurs and diaspora communities.
    Partnerships currently leverage approximately $4.20 for each $1.00 
of USAID funding, in both cash and in-kind contributions. USAID 
currently has 283 active partnerships with a total value of $8.8 
billion.
    Private sector companies and organizations have proven to be 
valuable partners. For example, the Water and Development Alliance 
(WADA) is a global partnership between the Coca Cola Company and USAID. 
Launched in 2005, WADA addresses a broad range of water sector 
challenges in 22 countries around the globe. The WADA partnership 
supports customized responses to community water-related challenges in 
each country through activities jointly designed and funded by local 
USAID missions and Coca Cola system partners.
    Similarly, throughout Asia, USAID's innovative public-private 
partnership with MTV (through their EXIT Foundation) has leveraged over 
$65 million in cash and in-kind resources. The partnership raises 
awareness and increases prevention of trafficking in persons across 
Asia through a wide-reaching social marketing media campaign. USAID put 
$5.48 million into the partnership, which means the partnership 
resulted in a match of more than $10 in private resources for every $1 
from USAID.
    Other donors have also worked in partnership with us. For example, 
in Cambodia, USAID leveraged nearly $12 million from DfID, the U.K 
Department for International Development, for a social marketing and 
behavior change project focused on addressing the needs of vulnerable, 
at-risk populations in HIV/AIDS, as well as reproductive health and 
child survival. When added to USAID's initial $12.5 million commitment, 
this resulted in a $24.4 commitment to the health of the Cambodian 
people. Under the partnership, DfID channels resources to USAID and 
provides in-kind contributions through commodities. The program has 
exceeded targets ahead of schedule, achieving much more than USAID 
could have done alone.
    In addition, USAID has also forged partnerships with U.S.-based 
diaspora communities. In 2010, USAID partnered with Western Union to 
jointly fund the pilot African Diaspora Marketplace business plan 
competition that awarded matching grants of up to $100,000 to African 
diaspora entrepreneurs who had launched small and medium enterprises in 
their country of origin.

                                  
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