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S. HRG. 111–354 

USAID IN THE 21ST CENTURY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INTERNATIONAL 

DEVELOPMENT AND FOREIGN 

ASSISTANCE, ECONOMIC AFFAIRS, AND 

INTERNATIONAL ENVIRONMENTAL PROTECTION 

OF THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

APRIL 1, 2009 

Printed for the use of the Committee on Foreign Relations 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

COMMITTEE ON FOREIGN RELATIONS

JOHN F. KERRY, Massachusetts, Chairman

CHRISTOPHER J. DODD, Connecticut 

RUSSELL D. FEINGOLD, Wisconsin 

BARBARA BOXER, California 

ROBERT MENENDEZ, New Jersey 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

JEANNE SHAHEEN, New Hampshire 

EDWARD E. KAUFMAN, Delaware 

KIRSTEN E. GILLIBRAND, New York 

RICHARD G. LUGAR, Indiana 

Republican Leader designee 

BOB CORKER, Tennessee 

JOHNNY ISAKSON, Georgia 

JAMES E. RISCH, Idaho 

JIM DEMINT, South Carolina 

JOHN BARRASSO, Wyoming 

ROGER F. WICKER, Mississippi 

DAVID MCKean, Staff Director

KENNETH A. MYERS, JR., Republican Staff Director

——————

SUBCOMMITTEE ON INTERNATIONAL DEVELOPMENT

AND FOREIGN ASSISTANCE, ECONOMIC AFFAIRS,

AND INTERNATIONAL ENVIRONMENTAL PROTECTION

ROBERT MENENDEZ, New Jersey, Chairman

BARBARA BOXER, California 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JEANNE SHAHEEN, New Hampshire 

KIRSTEN E. GILLIBRAND, New York 

BOB CORKER, Tennessee 

ROGER F. WICKER, Mississippi 

JIM DEMINT, South Carolina 

Republican Leader designee 

(II)

C O N T E N T S 

Page 

Corker, Hon. Bob, U.S. Senator from Tennessee, opening statement ................. 3 

Lancaster, Hon. Carol J., professor of politics, Mortara Center for International Studies, Georgetown University, Washington, DC ............................. 4 

Prepared statement .......................................................................................... 6 

Menendez, Hon. Robert, U.S. Senator from New Jersey, opening statement .... 1 

Natsios, Hon. Andrew S., distinguished professor, Edmund A. Walsh School 

of Foreign Service, Georgetown University, Washington, DC .......................... 18 

Prepared statement .......................................................................................... 22 

Responses to questions submitted by Senator Jim DeMint .......................... 43 

Radelet, Steven, senior fellow, Center for Global Development, Washington, 

DC .......................................................................................................................... 10

Prepared statement .......................................................................................... 13 

Responses to questions submitted by Senator Jim DeMint .......................... 47 

(III)

(1) 

USAID IN THE 21ST CENTURY 

WEDNESDAY, APRIL 1, 2009 

U.S. SENATE, SUBCOMMITTEE ON INTERNATIONAL DEVEL- OPMENT AND FOREIGN ASSISTANCE, ECONOMIC AF- FAIRS, AND INTERNATIONAL ENVIRONMENTAL PROTECTION, COMMITTEE ON FOREIGN RELATIONS, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 9:32 a.m., in room 

SD–419, Dirksen Senate Office Building, Hon. Robert Menendez 

(chairman of the subcommittee) presiding. 

Present: Senators Menendez, Casey, and Corker. 

OPENING STATEMENT OF HON. ROBERT MENENDEZ, 

U.S. SENATOR FROM NEW JERSEY 

Senator MENENDEZ. The hearing will come to order. Let me welcome everyone. 

Let me first start off, sort of, by saying this is the first meeting 

of the Subcommittee on International Development, Foreign Assistance, and International Environmental Protection, and Economic 

Affairs, and I want to say we can’t start with a better issue, and 

I want to acknowledge and say I look forward to working with the 

distinguished ranking Republican, Senator Corker, who we have 

the privilege of serving on a couple of committees together, and one 

of our very thoughtful members, and I look forward to working 

with you throughout, not only today, but through a series of hearings as we move forward. 

We want to welcome all of our panelists, who are here today to 

discuss ‘‘USAID in the 21st Century: What Do We Need for the 

Tasks at Hand?’’ 

Foreign assistance is something that is of, obviously, great interest to the members of this committee. While we may disagree on 

the overall resources that should be devoted to development assistance, I think we all agree that the resources we do provide should 

be used in the best, most powerful way. Congress needs to see results. The American people need to see results, and so do millions 

of people around the world whose lives literally depend on our ability to carry out these programs in the smartest way possible. 

I have long believed that foreign assistance is a critical part of 

our overall engagement overseas, as well as our national interest, 

in the pursuit of our national interest and our national security, 

and I have been a consistent advocate of stepping up our efforts in 

this area. In recent years, I’ve focused on building USAID from the 

inside out. I’ve called for building up the staff of USAID in a coherent and strategic manner, and called for increased accountability of 

2 

programs, and clear and tangible results. We have seen some 

progress, but we need to move faster, and we need more clarity of 

purpose in Washington. 

The culture of USAID needs to better adapt to the current context in which it works. Just as our military had to undergo a period 

of transformation after the fall of the Soviet Union, we can’t have 

a development agency that is building for fighting the last war. 

Now, the USAID is working alongside the Department of Defense 

in places like Iraq and Afghanistan, immersed in complex situations, like those in Pakistan, Sudan, or Sri Lanka. We need an 

agency that is nimble, responsive, and ahead of the curve. From 

staffing, resources, and training, our development tools need to be, 

at the very least, at par, if not ahead, of our diplomatic and defensive efforts. 

First, one way to start us along this path is to focus on USAID’s 

leadership. It needs credible and high-profile leadership that can 

work in partnership with the Congress, the Department of State, 

the Department of Defense, and the National Security Council. The 

development voice in our government needs to be a heavyweight 

voice that commands respect, both in Washington and around the 

world. This voice needs to be counterpart to diplomacy, not a subset. From the senior leadership of the agency to the resources it 

controls to its key staff in the field, we need the best possible advocates for our programs on the ground. 

Second, USAID needs to take back resources and programs that 

have slowly been moved over to the Department of Defense. Having 

the Department of State or the Department of Defense control 

development strategy and resources, with USAID simply serving as 

an implementing agency, has caused confusion and ambiguity. We 

ask our military to plan and execute a lot of missions. Development 

shouldn’t be one of them. Civilian resources should be appropriated 

to civilian agencies. 

And third, the staff at USAID needs to be rebuilt; not just more 

people, but we need to make sure we have the right people, and 

make sure we are attracting and retaining the best possible candidates. 

So, how do we tackle these challenges? In terms of legislation, I 

pledge to work on any legislative components to advance a joint 

executive-branch/legislative-branch set of reforms that will help 

shape our institutions to carry out their missions. I stand ready to 

support President Obama, Secretary Clinton, and the next USAID 

Administrator in reforming and reshaping USAID in a bold and 

unprecedented way, not just for the tenure of this administration, 

but for decades to come. Such reform is clearly in the national 

security interest of the United States. 

In this spirit, I look forward to hearing a frank and open discussion and your ideas for how to shape USAID. I think most of us 

in the room today have a clear sense of the problems. I want to 

spend today talking about solutions. Let’s think about what we 

need, rather than what we think we can get. In other words, let’s 

approach this, not from what we think we are prepared to supply, 

but, rather, what we think the challenges overseas demand. 

Also in that spirit, many of us are familiar with the many questions about the future of USAID. Let’s use today to talk about 

3 

answers, regardless of whether or not these answers are ultimately 

feasible or ultimately adopted. Let’s get on record the options that 

we think are a necessary part of the debate. 

With that, let me turn to the distinguished ranking member, 

Senator Corker, for his opening remarks, and then I’ll introduce 

our panelists. 

OPENING STATEMENT OF HON. BOB CORKER, 

U.S. SENATOR FROM TENNESSEE 

Senator CORKER. Well, Leader, I want to thank you—or, Chairman—for calling this hearing. And I—we couldn’t be from more different places in the world, and yet, I know that we share the desire 

to make sure that our foreign aid works in the most appropriate 

ways. And I want to thank you, again, for calling this hearing, and 

thank our witnesses. 

I’m usually very short, to nonexistent, on opening comments, but 

I do want to say that it doesn’t take many trips abroad or to other 

countries to realize that we really do need to go through the process we’re going through right now. You look at the age of many of 

our USAID folks, and realize that a lot of them are going to be 

retiring. You look at the migration of effort that takes place. You 

look at—much of our focus, it seems, is on the urgent, and not the 

important for long-term benefit. And it seems that every administration, on both sides of the aisle, comes in with a different set of 

priorities, and we end up being whipsawed and not dealing with 

things on a long-term basis. 

The whole of the military becoming involved, I think, was very 

positive. Secretary Gates mentioned that we needed to, certainly, 

look at this in concert. Obviously, some of the missions that we perform in military zones have to be done with strong support from 

the military. At the same time, I do know, in many cases, the State 

Department, USAID plays second fiddle. I’ve seen tremendous 

migration as I look at it—it’s kind of the—I see many of our 

USAID folks pursuing a sort of where-the-money-is, OK; and so, 

changing mission, if you will, to access money, which is only natural. 

And so, Senator, I really do look forward to working with you on 

this. I think this is something that, candidly, Congress has been 

irresponsible on in not being as focused on. I think we continue to 

be, again, whipsawed by new priorities and new administrations— 

all of which are good, but it ends up layering on top of layers, 

things that cause our foreign aid to be not as effective as it should. 

So, I look forward to listening to our witnesses and to your question, and hopefully we’ll have a few, and I thank you very much. 

Senator MENENDEZ. Thank you, Senator Corker. 

Let me introduce our panelists. 

The Honorable Carol Lancaster is the director of the Mortara 

Center for International Studies and a professor of politics at 

Georgetown University. She is a former Deputy Administrator of 

USAID, Deputy Assistant Secretary of State for Africa, and the 

author of numerous books and articles on U.S. foreign aid and 

development. 

Steve Radelet is the senior fellow at the Center for Global Development, a former Deputy Assistant Secretary for Asia and Africa 

4 

at the U.S. Department of the Treasury. He is currently the cochair 

of the Modernizing Foreign Assistance Network, a nonpartisan 

group of experts working to modernize and strengthen our foreign 

assistance programs. Dr. Radelet has conducted extensive academic 

research on aid effectiveness, combined with many years of practical experience living in Africa and Asia, and working on aid effectiveness, debt relief, and poverty reductions. 

The Honorable Andrew Natsios is a distinguished professor at 

the Edmund Walsh School of Foreign Service at Georgetown University, former Administrator of USAID. He was chair of the U.S. 

Special Envoy for the Sudan between 2006 and 2007, and was, for 

5 years, vice president of World Vision, the largest faith-based 

NGO in the world. 

In the interest of time, we ask all of you to, basically, take about 

7 minutes. We’re going to include all of yours statements fully in 

the record. 

And with that, Professor Lancaster, if you’d like to start. 

STATEMENT OF HON. CAROL J. LANCASTER, PROFESSOR OF 

POLITICS, MORTARA CENTER FOR INTERNATIONAL STUDIES, GEORGETOWN UNIVERSITY, WASHINGTON, DC 

Ms. LANCASTER. Thank you very much, Senator Menendez and 

Senator Corker, for inviting me to come today and share some 

views with you about this important topic, the future of USAID in 

the 21st century. 

I think the hearing is both timely and fitting, because we are, 

I think, all of us in government, out of government, in the public, 

very much aware of the importance of development in U.S. foreign 

policy. We have heard a great deal about the three Ds—development, diplomacy, and defense—in the Bush administration, and 

now in the Obama administration. And I think we all probably recognize that foreign aid is one of the principal tools—the principal 

tool, in many ways—for promoting development abroad. 

USAID has long been the lead agency in this endeavor. At 

present, we need, desperately, a strong aid agency, and at no time 

has USAID been weaker in its role. And I’m not talking about the 

very qualified staff that are employed by USAID, but the situation 

of the agency itself, many conditions of which you touched on. And 

I will just touch on a few of them very, very briefly. 

We know the size of the staff is a problem. When I served in the 

Clinton administration, and even before, there was always pressure 

to do more with less, and it can become a mindless kind of a pressure that squeezes down the numbers of staff in agencies. And 

that’s certainly happened to AID, until the staff was almost in a 

death spiral. 

That’s been turned around now, and we see staff being hired, 

and being brought on, and the numbers being expanded. We still 

need to reconstitute the training programs in AID, which probably 

we can’t do for a couple of years until the new staff get to the level 

where they need the training. Under budget pressures, we got rid 

of training in the Clinton administration. That was a very shortsighted decision. 

I think there are some questions in regard to AID’s internal 

organization which relate to how AID wants to shape its future 

5 

mission and its future priorities and strategies. There have been 

some very odd organizational changes, which I don’t blame Andrew 

Natsios for, but for example, why did the democracy program end 

up in the conflict bureau, when the democracy program’s impact is 

obviously much broader than that. 

You mentioned the capacity of USAID. And I think here is one 

of the most troubling things that’s happened. We’re all familiar 

with the transformational diplomacy reforms that were implemented in the last administration. There were lots of good ideas in 

those reforms, but I think many of us have been very troubled by 

where they went and how they went there. I know you were, Senator Menendez, as well. And I think, with the departure of Randall 

Tobias, the reforms were sort of put on ice, and so, you have a sort 

of netherworld in which budget and policy capacities of USAID 

were moved to the State Department and, I think, largely remain 

there. So, the agency does not have the capacity to develop strategies and its own budget. That needs to be addressed. 

Of course, we don’t have any leadership yet, and I think that’s 

also troubling, because things happen anyway, whether there’s a 

leader of USAID or the other agencies, or not. And as they begin 

to happen, they begin to become institutionalized, other people 

start taking responsibilities for what might be, logically, in the purview of the Administrator, so obviously that is a big concern. 

And finally—you mentioned this—AID has become, I think, in 

the eyes of many, more of an implementer than a leader. And 

that’s how it’s seen abroad, from what I hear, as well as within the 

administration. 

These are all serious problems, but they need to be addressed 

after two basic issues are resolved. And one of them is the relationship of USAID to other aid programs in the U.S. Government, 

which I think we’ve all talked about a great deal. But, the second 

and really big issue is its relationship with the Department of 

State. And I think that becomes really crucial. 

As I see it, AID is partially integrated into the Department of 

State. Planning and budgeting are pretty much integrated with the 

Department of State. Personnel is not. But, in my view, that undercuts the ability of the agency to operate as an agency with its own 

mission, which is a rather different mission from the Department 

of State. And this is a very important source of concern. 

AID has lost even the small measure of autonomy that it had in 

previous administrations. When the Ambassador wanted to use 

development assistance moneys for things that may not have been 

in AID’s mission or purview, there was always the opportunity to 

appeal to Washington. When AID came under pressure from the 

Department of State, there was always the opportunity to appeal 

to the White House. And, ironically, the current Secretary of State 

was one of USAID’s key partners, if you like—quiet partners in the 

Clinton administration—and from my own observation and experience, we probably wouldn’t have a USAID right now if she hadn’t, 

on repeated occasions, stepped in and slowed the effort that was 

underway in the Clinton administration to merge the two agencies. 

She, better than any other Secretary of State I’ve observed or 

served with, understands the development issues. The only problem is that she’s a very busy person right now, and she’s not going 

6 

to be there forever. So, there is an institutional relationship here 

that needs to be sorted out. 

USAID is neither fully in, nor fully out, but it has lost its autonomy. I don’t think USAID people can appeal for help, when they’re 

under pressure, to other agencies, because it is now much more 

firmly in the State Department command structure. 

And so, that autonomy issue is one that needs to be decided, 

needs to be worked on, needs to be explored, and I’m hoping that 

Congress will do so. And it’s particularly important, in terms of the 

next USAID Administrator. 

Now, it may be that this administration does not wish to expand 

the autonomy that USAID has, but, rather, leave it partially 

merged into the State Department. If that should be the case, then 

I think we have another issue before us, and that is, How do we 

arrange a full merger, including the personnel system, of USAID 

into the Department of State? And that’s a big piece of, if you like, 

bureaucratic material to swallow. How do we do that and maintain 

the development mission of USAID? That requires a more fundamental rethinking of AID and the State Department and the relationship between the two. But, right now I fear that AID is in a 

situation where it has neither autonomy nor protection, and does 

not have the capacity to lead in the way that we all wish it to do 

so. 

To conclude, let me just say that I think the Congress has an 

enormously important role in keeping these issues on the agenda, 

where I think there may be a tendency for them to slide off, given 

all the other things that the U.S. Government and the Congress 

are facing, in terms of financial crises, and budgetary pressures, 

and the very uncertain relationship that still exists between 

USAID and the State Department. And I haven’t mentioned the 

Defense Department relationship, but I think my colleagues will 

take a look at that. 

I hope and trust that this will be in your competent hands to 

keep us attentive and moving forward. 

Thank you very much. 

[The prepared statement of Ms. Lancaster follows:] 

PREPARED STATEMENT OF CAROL LANCASTER, PROFESSOR OF POLITICS, MORTARA

CENTER FOR INTERNATIONAL STUDIES, GEORGETOWN UNIVERSITY, WASHINGTON, DC 

Chairman Menendez and committee members, thank you for the invitation to testify this morning on the future of USAID. It is a fitting and timely topic; there has 

never been a time when the U.S. has needed a strong voice and leadership in development. And, I fear, there has never been a time when that voice has been more 

uncertain. 

THE IMPORTANCE OF DEVELOPMENT IN THE 21ST CENTURY

There is more consensus today than ever before among our political leadership, 

public officials, scholars, and policy analysts and the American public that promoting development abroad should be a key element in U.S. foreign policy—along 

with diplomacy and defense. Helping the 2 billion people in the world to help themselves emerge from poverty and deprivation is not only the right thing for the U.S. 

to do—even in this time of financial crisis at home and abroad—but it is very much 

in the U.S. interest to do so. Poverty is often associated with instability, conflict, 

environmental stress, the spread of infectious disease, and other ills that in our 

globalized world can race across borders and meet us not just in our living rooms 

but in our lives and affect our well-being and our future. We need a strong U.S. 

Government development agency to lead our government’s efforts to promote development abroad, both as an end and as a means to other ends of U.S. foreign policy. 

7 

THE CHALLENGES OF DEVELOPMENT IN COMING DECADES

But helping to further development abroad is no simple task; indeed, it has never 

been more complex and changing. We have seen greater volatility in world economic 

conditions than at any time in recent memory with not just a financial crisis with 

ramifications for world production, consumption, incomes and employment but also 

an energy crisis and a food crisis in which rapidly rising and then falling prices 

greatly complicated the challenge of development. How, for example, can small 

farmers in Africa—or farmers anywhere—plan for the next planting if they see the 

prices of their inputs as well as their products rise and fall and rise again? 

The impact of the financial crisis and a drastic slowing of worldwide economic 

growth are not the only challenges of supporting effective development in the world 

today. Several others are longer run and equally important. One involves the relationships between development, terrorism, drugs and crime. Many believe that stable and prosperous economies with effective states are the best insurance against 

terrorists establishing training and operations. It is clear from a look just south of 

our borders to Mexico and Guatemala that it takes especially strong states to resist 

the threats and blandishments of narcotraffickers. I fear we are moving close to the 

establishment of two narcostates very near the American heartland. These problems 

are not solely about development as traditionally conceived. But they are big and 

very threatening problems that involve development as well as the effectiveness of 

states. We need to be far better positioned to address these problems than we are 

today. An agency with not only a strong development mission but one that can connect that mission with other U.S. interests is essential. 

A further set of challenges and opportunities confronts USAID in the 21st century: There are many more agencies and organizations in the development business 

today than there were just a decade ago—NGOs which have mushroomed in number; philanthropic foundations large and small; corporate foundations; major corporate enterprises themselves; venture capitalists looking for double and triple 

bottom lines (doing good as well as doing well with their investments) and even 

internet portals that now make it possible for individuals to provide private aid directly to worthy causes abroad. 

In addition to all these new and not so new actors in the development scene, we 

are now observing new governments becoming sources of development aid. All the 

new members of the European Union are required to undertaken aid programs. Formerly (and still) poor countries like India and China—not to mention Korea, Thailand, and Turkey—are also in the aid-giving business. China has become a significant source of aid in Asia, Africa, and Latin America—though we remain unsure 

of just how large Chinese aid actually is. 

Finally, there is the technology factor, especially the spread and rapidly evolving 

uses of information and cell phone technology. We have all seen the pictures of 

Masai warriors in the African bush standing on one leg talking on their cell phone. 

That is not just something imagined by clever advertising executives. Even the poor 

are increasingly part of the global information highway. The information now available to almost everyone informs the fishermen off the coast of India or the cotton 

farmers in Mali what the daily prices are for their products and empowers them 

as never before. The Chinese have found ways to connect with one another and 

share information that allows them to organize and put pressure on their government for reforms. We can now bank, do medical consultations, organize demonstrations in support of political change with these cell phones. Ultimately, the greater 

knowledge available will empower the poor as well as others to be more productive, 

have more control over their lives and be better informed and educated. (I can imagine young people in rural areas in poor countries eventually being able to gain high 

and college degrees through distance education obtainable through cell phones.) The 

IT revolution and the cell phone that increasingly utilizes it may be the most important revolution in human history. 

We need a strong aid agency that understands the details and implications of 

these changes and is agile and flexible enough to respond to them to realize its mission of furthering development and reducing poverty in this 21st century. 

USAID: THE CURRENT STATE OF PLAY

USAID suffers from several problems that in my view prevent it from providing 

the leadership needed in U.S. development policy in the 21st century. These problems, I should emphasize, do not exist because of USAID’s staff which is committed 

and experienced but despite its excellent staff. They are structural problems that 

I very much hope will be addressed soon by the Obama administration and Secretary of State Clinton. 

8 

1. USAID’s staff has been severely reduced over the past decade and a half, with 

the training so necessary to rise as effective managers and leaders also much constrained. At the same time, the Agency has taken on the management of much 

larger amounts of assistance. This situation is not sustainable. These problems were 

recognized at the end of the Bush administration and Secretary Rice together with 

partners in Congress supported an expansion of USAID’s staff. This expansion 

should continue but should be keyed to the future organization and functions of the 

Agency. For that, we need a sense of the future direction of the Agency. I have students who ask me frequently whether it is worth working for USAID given the uncertainties facing it at present. 

2. USAID has become little more than an implementing agency for programs 

decided in the Department of State (the ‘‘F’’ Bureau and elsewhere). During the 

reforms associated with ‘‘Transformational Diplomacy’’ in the Bush administration, 

most of the policy and budgetary expertise in USAID was relocated to the F Bureau, 

taking away from the Agency the capacity to analyze and develop U.S. development 

policies and link budgets to policies. Apart from a few policy staff in the office of 

the Chief Operating Officer dealing mainly with process issues, USAID today is no 

longer the administration’s lead ‘‘thinker’’ on development. This deficiency limits 

U.S. leadership in development abroad and at home. This must change if USAID 

is to have any role in U.S. development policy in the future and if the U.S. is to 

regain its past position as a leader in the international development field. 

3. Somewhat related to the previous point USAID is now one of three major bilateral aid programs that also include the Millennium Challenge Corporation and 

PEPFAR. There is a notional division of labor between them but also some overlap 

regarding what they work on and where they work. There are many more U.S. Government agencies with their own (mostly relatively small) bilateral aid programs 

and responsibility for U.S. contributions and policies vis-a-vis the international 

financial institutions located in the Treasury Department. There is no reason why 

all aid should be managed in the same place—indeed, there are arguments against 

such an arrangement. But the many U.S. Government aid programs makes the U.S. 

the world leader in fragmented aid programs—even surpassing the French Government (and probably the Chinese) which are also highly fragmented. There needs not 

only to be greater coherence and collaboration among all these programs but a clear 

division of labor among them. USAID should be the leader in shaping development 

policies with input and collaboration with other programs; it should also identify its 

particular functions—including but not limited to taking an overview of development needs in recipient countries and providing advice on economic and political 

reforms to willing governments; working directly with poor communities and civil 

society organizations on projects and programs involving education, health (not including HIV/AIDS, TB and malaria which are addressed by PEPFAR and not including infrastructure which is part of MCC’s remit); working on food security and 

agricultural development—essential to economic progress in many poor countries; 

providing humanitarian assistance and post-conflict reconstruction; and developing 

an expertise on helping to strengthen weak governments with potential security 

problems (in collaboration with the Department of Defense). 

4. If USAID is to be a truly 21st century development agency, it needs the funding 

and the staff to permit it to be agile and flexible in collaborating with other development agencies and programs, private and public alike. It is no longer possible for 

the U.S. Government to lead by fiat; it must lead by finding the opportunities to 

collaborate, sometimes to follow others’ initiatives, to innovate and leverage where 

possible resources to address common problems. The Global Development Alliance 

created by the Bush administration was an admirable effort in this direction. That 

effort needs to be extended into other innovative directions. The Agency needs flexible funding to be the innovator and leader it must become, either from fewer earmarks on its development assistance moneys or an earmark for flexible funding. It 

also needs funding to support research in areas important to development but not 

funded by private enterprises—for example, in agriculture. The pressures within 

USAID, from other parts of the administration and the Congress are to allocate 

funding to service delivery abroad, preferably with visible, direct impacts on people. 

This is an important function for an aid agency. But expenditures on research can 

make enormous differences in growth, poverty reduction, and the quality of lives for 

everyone—the Green Revolution in agriculture is but one example. However, the results of investment in research are often long term and uncertain; it is thus important but often very hard to preserve funding such expenditures. I hate to recommend another earmark—there are too many already—but I wonder if funding for 

research might not warrant one. 

5. My greatest concern about the future of USAID is not about any of these internal challenges or about interagency collaboration. It is about where USAID is now 

9 

located—integrated into the Department of State in most essential ways (planning 

and budgeting) except for its personnel service. Secretary Clinton understands the 

nature and importance of development better than any other Secretary of State I 

have observed or worked with. But Secretary Clinton is only one person and she 

will not be Secretary of State forever. The pressures within the Department of 

State—where I have served as a Deputy Assistant Secretary of State for Africa— 

are on dealing with immediate issues and crises, usually in U.S. relations with other 

governments. There is seldom the luxury of taking the long view, of withholding 

development aid from governments whose cooperation we need but who are 

incompetent, corrupt, or uncommitted to the betterment of their populations, or of 

working with pesky NGOs who can drive our allies abroad to distraction by their 

criticisms. These latter functions are all part of USAID’s work abroad with development assistance. (USAID also implements other aid programs for State—for example, Economic Support Funds—which are intended to support U.S. diplomatic efforts 

and are very important in that regard.) The danger is that the more USAID is 

drawn into the State Department orbit, the more its development assistance programs and the more all U.S. aid programs become tools primarily of diplomacy. One 

key reason for this tendency is that not only USAID’s autonomy but its development 

voice will be lost. Indeed, its autonomy is already lost. When I served in the Agency, 

we could always appeal to the White House for help when State wanted U.S. to do 

something we thought ill advised. Ironically, we avoided being merged into State 

during the Clinton administration because we were able to appeal to then-First 

Lady Hillary Clinton for help. And I have every reason to think we got that help. 

That channel of appeal to others outside of State is now extinguished. The USAID 

administrator reports directly and only to the Secretary of State. (The Administrator 

reported both to the Secretary of State and the White House in the past.) USAID 

directors in missions abroad report to ambassadors and these arrangements, I fear, 

are a recipe for the eventual loss of USAID’s development mission in the 21st century. There is at present a letter circulating urging the administration to create a 

seat on the National Security Council for the USAID Administrator. But how long 

will it be before someone points out that at present that will likely give the Secretary of State two votes on the NSC—for what USAID administrator will openly 

oppose and even vote against policies favored by the Secretary of State in such a 

body? 

There is considerable support for combining MCC, PEPFAR, and USAID in some 

form in the Obama administration. This makes a lot of sense—but not until 

USAID’s relationship with State is clarified. If USAID gains control over these other 

agencies but has no autonomy of its own, these agencies will also be moved into 

State’s orbit. And this decision—whether made consciously or as a result of other 

decisions—will be potentially momentous for the future of U.S. development aid. 

Finally, should USAID remain partially merged with State in the future, is there 

anything that can be done to preserve the development mission and ensure that it 

is truly a strong element in U.S. foreign policy generally? This is an issue that the 

development community has avoided tackling but it is time to consider it now. If 

USAID is not to have a measure of autonomy from State, it must have a measure 

of protection for its mission within State. Its personnel system should become a new 

cone for State Department officers with appropriate training, rotation, promotion 

and other elements of an effective career system. There should be a new Deputy 

Secretary of State in charge of development—the post of Administrator of USAID 

is at the Deputy Secretary level and needs to have that degree of status and clout 

if development is to be an important pillar of U.S. foreign policy. Ideally, there 

should be legislation that preserves the development mission of U.S. aid and oversight that ensures the mission is followed and realized. 

The current relationship between USAID and state is confused and unsustainable 

if USAID and the U.S. Government generally are to be leaders in development in 

this century. The most urgent task facing the administration in the area of development is to clarify this relationship and strengthen USAID itself. I hope this committee will keep this issue on its agenda until we have the strong development 

agency we need, the strong voice for development within the administration, and the 

expertise to back up that voice. We are in great danger of losing it at present. 

Senator MENENDEZ. Thank you, Professor. 

Dr. Radelet. 

10 

STATEMENT OF STEVEN RADELET, SENIOR FELLOW, CENTER 

FOR GLOBAL DEVELOPMENT, WASHINGTON, DC 

Mr. RADELET. Good morning. Thank you, Chairman Menendez 

and Ranking Member Corker, for holding this hearing and for 

inviting me to participate. 

With all of the challenges that we face in the world today in the 

immediate issues that we have to confront, it may seem a little odd 

to spend time thinking about the rather, what might seem, the 

mundane issue of USAID reform. But, actually it’s directly because 

of those challenges that it is so important that we get the foundation correct and strong, in terms of how we engage with countries 

around the world. We face many issues around the world, from 

hunger to disease, to instability in Pakistan and Afghanistan, to 

piracy off the coast of East Africa, and many other issues, and we 

cannot achieve our objectives of our own strong national security 

and in encouraging and stimulating prosperity around the world 

and stable governments around the world, without a strong and robust development agency that can lead the way in how we engage 

with these countries. 

People around the world, especially because of the crisis, are 

looking to the United States for leadership. Whether we like it or 

not, whether it’s accurate or not, they blame the United States for 

the crisis. And whether it’s accurate doesn’t matter; they do. And 

they’re looking for us to step up and to help out. And we need to 

do so, for our own good, but also because if we don’t, someone else 

will. There are lots of others that are willing to step up and take 

the lead if we’re not willing to do it. So, we’re at a very critical 

time. 

As we think about AID reform, it’s important to put that in the 

context of broader development capacity. Foreign assistance is only 

one tool, and only one approach, in how we engage in supporting 

development. Our trade policies, our migration policies, our policies 

on international finance, remittances, many other things, relate to 

the development challenge. 

And, more broadly, before I speak about AID reform, it’s important to think about the steps we need to strengthen our broader 

development capacity. And I think there are four broad ones that 

we need to think about: 

First, we need a development strategy to work in parallel with 

our national security strategy and other strategies. We don’t really 

have a strategy for this important tool of how we engage. So, first 

we need a strategy, led by NSC, an interagency process to 

strengthen the way that we engage to support the development 

process. 

The second piece is legislative reform, the Foreign Assistance 

Act, relative to USAID, but others, as well. We need the legislative 

basis to think about our development, not just foreign assistance, 

but development process. 

Third is funding. Not only the amount of funding, which is crucial, but how we allocate that funding to our bilateral programs, to 

our multilateral programs, and across the different agencies, and 

to which countries do we allocate. 

And fourth is the organizational piece. AID, which is the focus 

of our attention today, but also the MCC, PEPFAR, and also the 

11 

relationships between these agencies and the Department of 

Defense. 

So, we have this broader set of issues that we need to keep in 

the back of our mind as we talk about one specific issue here, 

which is strengthening USAID. 

Let me focus now specifically on USAID. We all know that, over 

the last many years, it has become increasingly weakened and does 

not have the capacity, at the moment, to really step up and take 

the lead on development issues. Let me suggest five steps that can 

be taken to rebuild USAID in the coming years: 

No. 1, put someone strong in charge. We want to urge the administration to name a new, strong leader at USAID as quickly as possible. As Carol Lancaster pointed out, things happen. We have our 

strategy, going forward, on Pakistan and Afghanistan, and we do 

not have someone at USAID, at this moment in time. We need a 

strong leader that can lead the charge, not only on the day-to-day 

issues for USAID, but to lead the reform issues, going forward. And 

that person needs to have a seat at the NSC. It needs to be part 

of those broader debates of government policy and how we engage 

with developing countries. Senator Menendez pointed out that 

development is not a subset of diplomacy. We need a separate person at the NSC to give that input with the professional development perspective. So, No. 1 is strong leadership. 

No. 2 is that smart power requires a smart division of labor 

between State and USAID, in particular. Over the last few years, 

more and more of the responsibilities have moved toward State. 

And, while our development programs need to be aligned with 

diplomacy efforts at State, they are separate from and require a 

degree of autonomy and a distinct set of skills. The skills and 

expertise required at State for diplomacy, foreign policy, and communications are quite different from the economic development, 

poverty reduction, and long-term program management skills that 

are needed at USAID. And if that relationship is too close, with too 

much of the responsibility and authority at State, it actually undermines, over time, the strength and credibility and capacity at 

USAID. While it might make sense on an organizational chart, it 

actually does undermine and weaken our development capacity 

over time. 

The F process is a good example of that. While well intentioned, 

in that there were some good parts to it, in the end it further 

weakened USAID by further taking away some of its responsibilities. 

A couple of things in particular, I think, that need to move back 

to AID. One is the budget responsibility. You can’t have a strong 

USAID unless the direct reporting relationship from USAID to 

OMB is restored, and that USAID actually has direct responsibility 

over its budget. 

In addition, the capacity for developing strategies for strategic 

thinking and policy formulation on development issues need to 

reside at USAID, not at State. That’s where the capacity should be. 

It should be done in cooperation and consultation with State, but 

those main responsibilities need to be at USAID. In recent years, 

they’ve moved to State, and they need to move back. So, that division of responsibilities is key. 

12 

Three, you need to build the right team. The professional capacity at USAID has been weakened considerably, and we need both 

the right numbers and the right technical skills for USAID to function as a premier development agency. The goal should be for 

USAID to be the premier development agency in the world. And it 

used to be that. And it’s not anymore. But, you need more staff— 

a lot more staff—and you need staff with the right skills—in economics, in finance, in agriculture, in agronomy, in education, in 

health—skills that, again, are not going to be found in Foreign 

Service officers, who have wonderful and specific skills in other 

areas, but they don’t have the specific development skills. 

Fortunately, in the last couple of years, this has begun to turn 

around, and there is the beginnings of bringing back that capacity 

to AID, but that needs to be supported and stimulating, going forward. So, that’s the third piece. 

Fourth is the legislative foundation. The Foreign Assistance Act 

is weak and largely out of date. It was meant for a different set 

of challenges that we faced nearly 50 years ago, at the beginning 

of the cold war. And over the years, it’s been burdened with more 

restrictions, earmarks, and multiple objectives that really make 

USAID’s job much more difficult. It is really a burden on the 

agency, and it undermines its ability to respond effectively in the 

field to the most important issues that it faces at hand. So, if we’re 

going to strengthen AID, we need a strong legislative foundation 

for that, which would rebuild the relationship between the executive branch and the legislative branch, providing the executive 

branch with the authorities it needs, but, at the same time, giving 

a rightful oversight and effective oversight role to Congress. So, 

that relationship needs to be rebuilt. 

Fifth, and finally, is more money, better spent. More money, by 

itself, will not solve these problems. But, more money, better spent, 

is a big part of the challenge, going forward. These steps that I’ve 

outlined earlier, and others that my colleagues will lay out, are 

important steps to making sure that every dollar we spend is spent 

as effectively as possible. And we need to focus, as much as possible, on doing that. But, it’s also a matter of more money. There’s 

been increases in the last few years, and those are welcome, but 

they’re off a small base, and they are not sufficient to address the 

big challenges that we face around the world. 

In terms of making sure that we spend our money more effectively, two specific steps. One is that we need to strengthen our 

monitoring and evaluation capacity. It’s far too weak. We don’t 

have a good handle on what activities are effective and what activities are not effective. And if we’re going to be serious about spending our money more effectively, we need a much stronger monitoring and evaluation capacity. And second, we need to streamline 

and reform USAID’s procurement process, which adds to the 

bureaucracy and ensures the money is not spent as well as it could 

be. 

Taking on these reforms is not going to be easy, particularly in 

today’s context of building USAID into a modern development 

agency is going take time, resources, and effort. But, the challenges 

we face require a strong development agency. It’s time to take 

advantage of the opportunity that we have and the consensus that 

13 

is formed around the importance of development to modernize and 

strengthen our U.S. foreign assistance programs, particularly 

USAID, so that it can serve as a critical pillar of our foreign policy 

and our national security. 

Thank you very much. 

[The prepared statement of Mr. Radelet follows:] 

PREPARED STATEMENT OF STEVEN RADELET, SENIOR FELLOW, CENTER FOR GLOBAL

DEVELOPMENT, WASHINGTON, DC 

Thank you, Chairman Menendez, Ranking Member Corker, and other members 

of the subcommittee. I am honored that you have invited me to offer some perspectives on the role of USAID in the 21st century. 

I. INTRODUCTION: WHAT HAPPENS THERE, MATTERS HERE

Today we find ourselves at a critical juncture. The challenges our country faces 

at home and abroad are serious and emblematic of a new era. An era where the 

world’s challenges—disease, human and food insecurity, climate change, financial 

crises—do not respect borders and are truly global problems requiring global solutions. Trade, remittances, and private investment tie rich and poor countries together, creating shared opportunities for prosperity in plentiful times, but also 

shared instability and strain in times of financial crisis. Outdated and inefficient 

policies, instruments, and organizational structures must be brought into the 21st 

century. The new Obama administration is confronting a perfect storm of domestic 

economic concerns at home and multiple challenges overseas: Continued wars in 

Iraq and Afghanistan, escalating instability in Pakistan, emerging sanctuaries for 

terrorism and piracy in unstable regions of Africa, and, in the wake of the global 

economic downturn, deepened poverty and threats of heightened political instability 

in countries across the world. 

All of these global threats pose direct and grave challenges to our national security at home and to fighting disease and poverty around the world. In each and 

every case, cutting-edge development policy and an empowered development agency 

are critical to an effective solution. As President Obama outlined in his administration’s new strategy for Pakistan and Afghanistan, stability in these crucial areas 

will remain elusive unless development outcomes are achieved. Part and parcel of 

the administration’s strategy in these countries are core development activities: The 

delivery of basic health and education services, efforts to bolster the capacity of both 

states to govern effectively, the introduction of alternative sources of livelihoods for 

Afghan poppy growers, building infrastructure, and stimulating robust economic 

growth in the impoverished border regions of Pakistan that are home to extremists, 

to name a few. 

For these reasons, President Obama has pledged his commitment to elevate development as one of the three ‘‘D’s’’ of our national security—alongside defense and 

diplomacy—and to leverage development and foreign assistance as key ‘‘smart 

power’’ tools of statecraft. So, too, have a host of public officials across government: 

• Secretary Clinton, in her Senate confirmation hearing, said ‘‘Investing in our 

common humanity through social development is not marginal to our foreign 

policy but integral to accomplishing our goals.’’ 

• Retired Marine Corps General Anthony Zinni has said ‘‘We know that the ‘enemies’ in the world today are actually conditions—poverty, infections disease, 

political turmoil and corruption, environmental and energy challenges.’’ 

• Defense Secretary Gates said ‘‘It has become clear that America’s civilian institutions of diplomacy and development have been chronically undermanned and 

underfunded for far too long—relative to what we spend on the military, and 

more important, relative to the responsibilities and challenges our nation has 

around the world.’’ 

• Former Secretary of Agriculture Daniel Glickman urged this committee just last 

week to strengthen U.S. development leadership and USAID to address the 

global food crisis. 

Furthermore, global development was part of the political discourse in the 2008 

Presidential elections, spurred by an informed, supportive, and growing constituency 

of Americans who asked Republican and Democratic candidates alike how they 

would strengthen U.S. development programs. There has been no greater moment 

in recent history to modernize and strengthen our development programs to address 

the challenges and opportunities of the 21st century. 

14 

II. INVESTING IN A MODERNIZATION AGENDA: WHAT ARE WE TRYING TO ACHIEVE?

As the Obama administration, Congress, military leaders, and American voters 

have recognized, strong development policies and programs are critical to enhancing 

the U.S. image in the world, achieving our foreign policy goals and increasing our 

national security. To reap these benefits from development, however, we must have 

a greater impact on the ground and demonstrate that we are reaching our key objectives in developing countries: Stimulating economic growth and poverty reduction, 

promoting political stability, and responding to humanitarian crises. 

Our current development programs deserve more credit than they usually receive. 

PEPFAR has put 2 million people on life-saving antiretroviral treatment through 

PEPFAR; the MCC has spurred policy reforms and paved the way for supporting 

economic growth in 18 countries through investments in agriculture and essential 

infrastructure; and USAID has many examples of large-scale successes, from the 

substantial reductions in deaths from maternal and child mortality and diseases 

like river blindness and polio, to efforts to bring peace and security to countries such 

as Bosnia and Liberia. 

At the same time though, the U.S. development voice is more like a choir, without 

a conductor. We have 20-some different agencies with different policy objectives, 

structures, and bureaucracies and little strategic oversight and coordination. And 

that is just our foreign assistance. Policies affecting trade, migration, climate 

change, capital flows, governance and others also influence America’s standing in 

the world and our relationship with other countries, and at present, these policies 

often contradict each other and undermine our development objectives. 

We can, and must, do better. Getting a bigger bang for our development bucks 

requires being smarter about our development strategy, legislation and organizational apparatus. 

III. STEPS TOWARD MODERNIZING FOREIGN ASSISTANCE

While it may be tempting to consider partial changes that make small improvements in our current development architecture, marginal reforms will only lead to 

marginal improvements, which will fall short of achieving our objectives and may 

not be sustained over time. More fundamental changes are needed to meet our foreign policy objectives. In particular, four broad steps should be taken to modernize 

our foreign assistance programs: 

• Craft a development strategy. The administration should prepare, under the 

leadership of the NSC, a National Strategy for Global Development, distinct 

from but consistent and coordinated with the National Security Strategy. A 

strong strategy is essential for clarifying goals and objectives, coordinating 

development-related activities spread across the government, and increasing the 

efficiency and effectiveness of key programs. 

• Rewrite the Foreign Assistance Act. The FAA is unwieldy and outdated, and 

adds significantly to the costs and inefficiencies of many of our programs. While 

using the authorities in the current act more strategically is a good first step, 

it is no substitute for reaching a new understanding and alliance with Congress 

on the goals, objectives, and modalities of foreign assistance programs. 

• Increase funding for and accountability of foreign assistance. While foreign 

assistance funding has increased in recent years, it is still a tiny share of the 

budget, and very small relative to the amounts needed to meet today’s challenges. As our HIV/AIDS program has shown, relatively small investments can 

pay big dividends for both showing strong U.S. leadership abroad and effectively 

fighting disease and poverty. 

• Build a strong, consolidated, and empowered development agency. Our programs 

are spread across too many agencies, and USAID has been significantly weakened over the last decade. President Obama had it right during the campaign: 

To meet today’s challenges we need an elevated, empowered, consolidated, and 

streamlined development agency. 

Action on all four fronts is needed to elevate development and modernize U.S. foreign assistance programs. Our discussions today focus on the fourth area, and in 

particular the next steps for USAID, but these discussions should be seen in the 

context of the need for other complementary steps to truly make our programs more 

effective. 

IV. AN AGENDA FOR BUILDING A 21ST CENTURY DEVELOPMENT AGENCY

The five most important action steps to rebuild USAID include the following: 

15 

1. Put Someone in Charge, With a Seat at the NSC 

To concretely signal President Obama’s commitment to elevate development as a 

‘‘smart power’’ national security approach alongside defense and diplomacy, the administration should name a strong, capable leader as USAID Administrator as soon 

as possible to exert leadership on development policy and transform USAID into a 

21st century development agency. Over time, USAID would be strengthened and reprofessionalized to serve as the base for consolidation of other major foreign assistance programs such as MCC, PEPFAR, and perhaps even the multilateral development bank programs currently housed at Treasury. The ultimate objective would be 

to have the USAID Administrator be the one voice of the U.S. Government on development policy and development assistance, the one point of contact for the field for 

questions on development impact of programs and of other government policies 

(trade, migration, investment, etc.), and the one person accountable to Congress for 

delivering the development and development assistance agenda. 

As a real signal of the importance of development in national security, the USAID 

Administrator should be included as a member of the National Security Council and 

other high-level interagency deliberative bodies. At a minimum, the administrator 

should be invited to all NSC Principals Committee meetings dealing with international economic issues. This will provide professional development perspectives 

and policy input at the highest policy-setting table, independent from but complementary to diplomatic and defense. 

2. Smart Power Requires Smarter Division of Labor 

For our development policies and programs to contribute to the U.S. smart power 

agenda, we need to be smarter about who sets our development policies, how they 

inform the decisionmaking process and where they sit within the U.S. Government. 

Over the last 15 years, we have seen a consistent and substantial reduction in 

USAID technical staff, a sharp rise in the reliance on private contractors and overall 

decline in the agency’s ability to fulfill its development mission. The creation of the 

MCC and PEPFAR outside of USAID was viewed as an effort to work around 

USAID dysfunction instead of rebuilding its capacity. And in 2006, USAID’s budget, 

planning, and policy functions were transferred into the State Department through 

the creation of the Director of Foreign Assistance (DFA) further relegating USAID 

to the status of a contract manager and pass-through for foreign assistance funds. 

Although the F Bureau was created in part to better coordinate and elevate foreign 

assistance, it has come at the expense of a weakened USAID and has divorced onthe-ground implementation of programs from the important policy and budgetary 

decisions that underpin them. As a result, we now know better where and for what 

our foreign assistance dollars are going, but the ability to better plan for the most 

effective use of those resources to meet U.S. objectives have been diminished. 

Building a strong and effective development agency will require providing our development programs with a certain degree of autonomy from our diplomatic and defense efforts alongside distinct authority and responsibility over the development 

budget and policy. 

• Autonomy. While development programs should be closely aligned with our 

overarching foreign policy objectives—diplomatic and defense—development is a 

distinct set of issues requiring very different professional skills and background 

to address economic development, poverty reduction, and long-term management of development programs. Too close of a relationship between State and 

USAID runs the risk of confusing the two skills sets and not necessarily doing 

better at either. Some separation between the two objectives will help attract 

the right experts for each institution and strengthen the core technical development skills required to be more effective with our development dollars. Moreover, direct oversight by the State Department of foreign assistance programs 

raises the concern that the development mission will be subordinated to the 

short-term political pressures and diplomatic objectives of the State Department, which could undermine the achievement of key development objectives 

over time. • Budget. A strong development agency must have budget responsibility to enable 

the agency to provide a meaningful voice for development (and contribute field 

perspectives) during the budget preparation and interagency budget negotiations, currently managed by the Office of the Deputy Secretary of State. Many 

broad budget responsibilities may appropriately lie within the State Department—including responsibilities for reviewing and coordinating budgets across 

many foreign affairs agencies, reviewing proposals for reducing inefficiencies 

and nonperforming programs, consulting with Congress on the need to rationalize earmarks, and mobilizing financial resources. But USAID’s authority over 

its own budget should be restored, including control over the final allocation of 

16 

development resources across countries and programs based on input from 

country teams. 

• Policy. Development assistance strategies, including sectoral and country strategies, should be developed at USAID. The policy function (formerly PPC) currently resides in the F Bureau and should be transferred back to USAID to 

facilitate long-term thinking and planning on development policy. Capacity 

should also be restored to USAID to enable it to design its programs in-house 

to best meet strategic objectives, ending over time the current practice of 

outsourcing program design to contractors. 

3. Build the Right Team 

One of the key resources needed at USAID is people: Both the right numbers of 

staff and the technical skills required to function as a premier development agency, 

as well as the capacity to hire and train staff. Over the past 15 years USAID’s professional capacity has been weakened, not only compared to the past, but also compared to the Departments of Defense and State. In recent years, administrative 

resources and staffing for USAID have been slashed, at the same time that responsibilities and budgets have grown. Today USAID faces a critical shortfall of experienced career officers and a dearth of technical expertise within USAID in such areas 

as science, economics, and agriculture, rendering the institution ill-equipped to address the myriad development challenges of the 21st century. This combination of 

staff reductions and scarcity of technical expertise has weakened USAID’s capacity 

to provide strong development input in policy formulation and decisionmaking, adequately manage projects, and provide appropriate technical oversight. 

Fortunately, during the last year this trend has begun to change, with commendable efforts underway to rebuild USAID’s staff. But there is still a long way to go. 

To fill this gap, it will be important to ensure that net increases at field posts are 

significant, above and beyond conversions of Personal Service Contracts (PSCs) and 

Foreign Service Limited positions (FSLs). To pave the way for an increase in permanent staff hires, it is critical that the constraint on Operating Expenses (OE) be 

relieved. Other important measures include filling USAID’s management gap with 

an increase in permanent staff, including mid-level managers, possibly through the 

expansion of the Development Leadership Initiative into civil service and FSN positions, and shifting the balance of USAID human resource from an overwhelming 

concentration of general management experts to a larger percentage of technical 

experts. 

4. Provide a Strong Legislative Foundation 

USAID’s legislative foundation is the Foreign Assistance Act of 1961. But that 

foundation is weak and largely out of date. The FAA is nearly 50 years old, 

grounded largely in cold war threats, and not focused on meeting today’s challenges. 

Over time hundreds of amendments have added multiple objectives and priorities 

that in some cases conflict with one another, rendering it ineffectual as a rational 

policy framework. It has become laden with multiple earmarks that are administratively burdensome, undermine USAID’s ability to respond effectively on the ground 

to greatest needs, and weaken its ability to achieve strong results. The foreign assistance authorization process, which once reviewed and modified the FAA nearly 

every year, has not functioned in over 20 years. 

Rewriting the FAA is central to building a strong and capable development 

agency. Although several critical pieces of foreign assistance reform can be achieved 

without legislation—creating a national development strategy, strengthening monitoring and evaluation system, improving procurement and contracting procedures, 

building human resource capacity—no broad-based foreign assistance modernization 

initiative can be fully implemented without major legislative modifications. 

Rewriting the FAA will require a ‘‘grand bargain’’ between the executive branch 

and Congress, reflecting a shared vision of the role and management of U.S. foreign 

assistance, providing the executive branch with the authorities it needs to respond 

to a rapidly changing world, and ensuring rightful and effective legislative oversight. Done purposefully, inclusively and transparently, this bargain would reestablish confidence in the foreign assistance system among the U.S. public and nongovernmental development organizations and reduce the ability of special interests 

to secure self-serving earmarks. Partially amending the FAA, rather than rewriting 

it, would run the risk of exacerbating the fragmented and incoherent nature of the 

existing act, continuing to layer modernized legislative provisions on top of outdated 

and irrelevant policy authorities. As part of this process, the administration and 

Congress should consider renaming USAID to signal a break from the past and its 

intention transform it into a 21st century development agency, perhaps naming it 

17 

the Development Investment Agency to emphasize our investments in the development process. 

The bottom line is that without a restructuring of authorities and a rationalization of restrictions, whether they be congressional earmarks or Presidential directives, all the personnel and organizational reforms undertaken will not make a truly 

material difference in the effectiveness of U.S. foreign assistance programs. 

5. More Money, Better Spent 

More money by itself will not help the U.S. to better achieve its foreign policy 

goals. But more money, better spent, is an important part of the answer. In today’s 

difficult economic times, we must ensure that every dollar we spend is used as effectively as possible on the ground, and the steps outlined above are central to spending U.S. funds more effectively. So, too, is allocating our funds more wisely, with 

more funding going to low-income countries with the biggest needs and to better 

governed countries that can use it well. We can also allocate funding toward promising new innovations, such as Advanced Market Commitments (AMCs) for vaccines 

and other applications, and cash-on-delivery programs that provide payment only 

after the provision of goods and services has been verified. 

But additional funding also will be necessary. President Obama’s commitment to 

doubling foreign assistance is critical for the U.S. to meet some of its most important foreign policy and national security goals. The increased funding of recent 

years is a good start, but it was on top of a very low base, and is inadequate for 

the United States to fight poverty, state failure, and instability in low-income countries around the world. If we invest in solving global problems early—like halting 

the spread of new infectious diseases before they reach the U.S., and easing the suffering and indignity that foster anger and violence—we save both lives and money. 

To ensure stronger accountability for funds spent, we must establish much 

stronger monitoring and evaluation (M&E) and impact evaluation processes aimed 

at keeping programs on track, guiding the allocation of resources toward successful 

activities and away from failures, and ensuring that the lessons learned—from both 

successes and failures—inform the design of new programs. USAID—once a leader 

in this area—has lost much of that capacity, and is behind MCC and PEPFAR in 

terms of transparency. 

One important step would be to establish an independent office for monitoring 

and evaluating foreign assistance programs. This office should be responsible for 

setting M&E standards, training, conducting external studies, and collecting and 

making public all evaluations for the sake of transparency and learning. The MCC 

model is a best-practice in this regard and could be applied more broadly to USAID 

and other agencies. It is crucial that measures of ultimate impact be conducted independently of the designers and implementers of the programs. For that reason, the 

United States should support and ultimately join the International Initiative for Impact Evaluation (3IE), which brings together foreign assistance providers from 

around the world to provide professional, independent evaluations of the impact of 

development initiatives. 

Finally, a key component of ensuring that funds are better spent will be streamlining and reforming USAID’s procurement processes and capacity—both in Washington and in host countries. To promote local ownership, procurement management 

capacity of host countries should also be bolstered. USAID should prioritize regular 

publishing of procurement plans, as well as program implementation to apprise 

partners of USAID’s achievements and best practices. The timeframe of contracts 

should be long enough to achieve sustainable results. An expansion of contracts to 

5 years would help reduce transaction costs and create incentives for implementing 

partners to focus on longer term, complex challenges. The establishment of a unified 

set of rules and regulations for foreign assistance funds would help reduce the cost 

of regulatory compliance and risk of noncompliance. To the extent possible, these 

rules and regulations should be harmonized with other bilateral and multilateral 

donors. 

V. CONCLUSION

Taking on these reforms will not be easy. Rebuilding USAID into a strong, modern development agency capable of addressing the myriad challenges of the 21st 

century requires investments in resources, organizational change, and real reforms. 

Yet change we must, and delay we cannot. The impact of the financial crisis—on 

our budget at home, and on escalating poverty abroad—reminds us of the imperative of using each and every one of our foreign assistance dollars with the maximum 

effectiveness, to achieve the greatest possible impact in poor countries. Likewise, the 

national security threats posed by fragile regions abroad—in Pakistan and Afghanistan and in unstable countries that tomorrow might be at the top of the U.S. 

18 

agenda—point to the imperative of bolstering our ability to deliver development on 

the ground, and along with it stability and peace. It is time to take advantage of 

this unprecedented opportunity to modernize and strengthen U.S. foreign assistance 

and to deliver on the promise of development to serve as a critical pillar of our national security. 

Senator MENENDEZ. Thank you, Doctor. 

Ambassador Natsios. 

STATEMENT OF HON. ANDREW S. NATSIOS, DISTINGUISHED 

PROFESSOR, EDMUND A. WALSH SCHOOL OF FOREIGN 

SERVICE, GEORGETOWN UNIVERSITY, WASHINGTON, DC 

Ambassador NATSIOS. Thank you, Mr. Chairman. I would like to 

thank the committee for the invitation to speak this morning. 

Two former USAID Administrators, Brian Atwood and Peter 

McPherson, in two different administrations, and I wrote an article 

on foreign aid reform which appeared in Foreign Affairs in December of last year. I stand behind the analysis and recommendations 

we made in that article, which has been widely circulated in the 

development community and in the State Department, but I want 

to cover a few of those issues that are in that article. 

I am convinced no great power can maintain its preeminence 

without a robust foreign aid program. Given what defense intellectuals call the asymmetrical threats facing American vital national 

security interests since 9/11, we are likely entering a period in 

international affairs where foreign aid, humanitarian assistance, 

and long-term development may be the most important instrument 

of national power available to our policymakers, more important 

than diplomacy or military power. And I served as a diplomat for 

a while, and I was a military officer for 23 years; I retired as lieutenant colonel. My son is in the military. I’m very pro-military. The 

Defense Department is not a development agency, and neither is 

the State Department. 

President Bush accomplished three important tasks in foreign aid. He increased funding from $10 to $23 billion; he placed heavy 

focus in foreign aid on our foreign policy; and he made changes in 

doctrine and theory. However, the organizational structure is a different matter. It remains dysfunctional and very confused. 

Let me begin by talking about mission and mandate. Some will 

argue, in Europe and in the national system, that poverty alleviation should be the only mission of our assistance programs. I 

think that would be a mistake. While poverty reduction must be 

one of its central objectives, it is insufficient, as a mission alone for 

AID, given the threats facing America and our other friends around 

the world. The need, particularly of developing countries, to move 

away from aid dependency requires us to move beyond poverty 

reduction as an exclusive focus. We must also be engaged in statebuilding, and that is helping countries build the public and private 

institutions necessary to keep order, administer justice, provide 

public services, such as schools, health services, and roads, facilitate and encourage economic growth, and improve democracy to 

protect human rights and democratic principles. 

I want to just add, here—this is not in my testimony—we actually reorganized AID in 2001, prior to 9/11, to create a bureau 

focused on fragile and failed states. And when we did that, we 

made a whole series of reforms. If anyone’s interested, either of you 

19 

Senators, I’d be glad to, in the questions and answers, to go into 

the details of that. Much of that is still in place, and it’s becoming 

more enriched. 

We moved democracy and governance—I moved democracy and 

governance—Carol, you know, wanted to be polite here—to the conflict office, which we created. There was no conflict office in AID 

before I was there. We created an Office of Conflict Mitigation 

because of this fact: We did a survey of the 70 USAID missions in 

the field, and we asked them how many had had civil wars or 

major conflicts that traumatized the country in the preceding 5 

years. I thought maybe five, six, seven, eight. Sixty percent of 

USAID missions were in countries that had civil wars in the preceding 5 years from 2001. Many of them had destroyed the countries. That needs to be a central focus—state fragility and state 

failure—of what AID does. And that bureau was designed to do 

that, and people in the bureau know that. We moved democracy 

and governance there because governance is the reason for state 

failure, and it’s the major threat to national security interests. The 

State Department and Defense Department call this ‘‘ungoverned 

spaces.’’ Ungoverned spaces mean state failure. 

Where was bin Laden’s headquarters before he went to Afghanistan, a failed state? It was in Sudan, another failed state. And 

before that, in Somalia, another failed state. We are threatened by 

failed states. We must deal with this from a developmental standpoint, because it’s a failure—essentially, a failure of governance. 

Because AID has been traditionally associated with the State 

Department organizationally, development and diplomacy somehow 

have become conflated. They are alike in every unimportant way, 

to paraphrase Wallace Sayre. While diplomacy is all about managing our relationships with other countries, development is about 

changing and transforming countries internally. That’s not what 

diplomacy is about. USAID is a program management organization 

that hires, promotes, rewards, and trains staff to develop their 

skills as technical leaders in their disciplines, as good program 

managers, and highly operational people who get things done. 

The State Department is an information collection and analysis 

foreign policy coordination institution which values good writing, 

interpersonal political and negotiating skills. It hires and promotes 

generalists, not technical specialists, which is what AID does. Most 

career people in AID privately—in my own observations as a political appointee—would tell you the agency has far more in common 

with the Defense Department, in terms of organizational culture, 

than the State Department. The current gradual absorption of 

USAID by stealth, a term I borrowed from my friend Carol Lancaster, into the State Department to the merging of the agency’s 

budgeting system, procurement system, which they’re trying to get 

a hold of now. I hope they don’t do that; it’ll be very destructive 

to AID if State takes control of that. The electronic e-mail system— 

its logistics in the field, its office space in the field, its motor pools 

in the field, reduction of AID’s field presence and warehousing 

capacity in the fields—all have been merged in the embassies. 

There’s a whole focus on downsizing AID in the field. You cannot 

win a war by withdrawing from the battlefield, which is what we’re 

doing now. And it’s been done through three administrations. It is, 

20 

in my view, a disaster. If this continues, it will paralyze the agency 

and we will not have a development function. 

This has nothing to do with political party or ideology. If you 

want a functional aid agency, you have to put them in the field, 

where they belong, and that’s not what’s happening. 

AID and the State Department are like oil and water. This is not 

an attack on the State Department. I served as a diplomat for a 

year and a half. I have great respect for our diplomats; they do 

excellent work. The two institutions do completely different things. 

State is now managing development programs that, I have to tell 

you—the only Federal agency, when I left AID, that did not do program audits in their IG office is the State Department. There’s a 

reason for that. If they did program audits of their programs that 

they manage out of State, there would be a lot of very serious problems in this body. There’s a reason they don’t do program audits. 

They do a terrible job of managing programs. I remember, at one 

point, when the—what’s that program in the Middle East—Middle 

East Partnership Initiative was set up. There was an instruction 

from Washington, ‘‘Do not ever let anybody from AID manage the 

program. State’s going to manage it.’’ In one mission, the Ambassador said, ‘‘I am not allowed to give AID this money. I must have 

the embassy mission,’’ so they—she called in the U.S. Embassy 

nurse—not the nurse for the country, the nurse for the diplomats— 

to run the program. She quietly went to the AID mission director 

and said, ‘‘I’m going to get in serious trouble. I have no idea how 

to manage health programs. I’m a nurse. Why are they giving me 

this program?’’ Because there’s no one else in the embassy to run 

these programs. The instructions to have AID not be involved in 

the MCC is one of the reasons the program is so slow in implementation in the field. These kinds of decisions make no sense, operationally, at all. 

While I support a Cabinet-level position, I am not certain there 

is political support for a change in Washington, so I believe in a 

good compromise. Senator, you properly said we need to be politically realistic; I completely agree with you. Complete organizational independence, with a dotted-line relationship from the 

Administrator of AID to the Secretary of State, not for the whole 

agency. I used to have desk officers who were 23-year-olds, trying 

to give assistant administrators, confirmed by the Senate, instructions on what to do, because everybody at State thinks everything 

in AID is completely under their control. I’ve had people—career 

people at State say, ‘‘It’s a wholly owned subsidiary. You do what 

we tell you to. And don’t make any comments. We know what we’re 

doing.’’ They know what they’re doing in diplomacy, they’re excellent diplomats; they do not know anything about development. 

I think the statutory responsibility of the AID Administrator 

should be, in law, as the chief international development officer for 

the United States Government for all agencies. That is the case, by 

the way—we already have precedent in the Foreign Assistance 

Act—in terms of disaster response. And it does make a difference. 

When we have a major international disaster, like the tsunami, I 

would say, ‘‘I have a letter from the President of the United States, 

under Federal law, saying, I, as Administrator of AID, am in 

charge of disaster response for this,’’ and the military carried out 

21 

orders. You show that letter, they do what you ask them to. We 

didn’t used to have fights in natural disasters, as a result of that. 

I think giving that authority to the AID Administrator, in law, 

would make a great deal of difference. 

I might also add that the legal authorities in the Foreign Assistance Act are to the Secretary of State, not to the AID Administrator. That’s a big problem. If you’re going to rewrite the Foreign 

Assistance Act, gentlemen, I think you should seriously consider 

vesting those authorities with whoever is the AID Administrator, 

statutorily. We now have 20 Federal agencies, like we did in 1961, 

when Jack Kennedy created AID, running our AID program. The 

way in which we’re dealing with this is by having interagency 

meetings of four different Federal Cabinet departments coordinating $20 million programs. I mean, it’s one thing to coordinate 

a $50 billion program, but $20 million? And the way we used to 

do it, and it’s been done through several administrations, is lowest 

common denominator. If anybody objects to what anybody else is 

doing, they veto the program. So, it slows everything down. It 

means that domestic agencies that have no experience in the developing world can veto an AID program. 

During the cold war, OMB enforced an administrative discipline 

on the Federal system that all program moneys spent in development projects had to go through, and be managed by, AID. I asked 

career people at OMB, ‘‘Did it work?’’ They said, ‘‘Yes, it did.’’ It 

collapsed in the early 1990s. If you want to discipline this properly, 

go back to the old system. That did not mean we didn’t use other 

Federal agencies, but it meant, if the U.S. Geological Survey, which 

OFDA, the Office of Foreign Disaster Assistance, which I ran in the 

early 1990’s, needs help in earthquakes, they contract with the 

U.S. Geological Survey, which has expertise in this area, to work 

for AID in the field. And so, they would join the technical teams, 

but there was never any doubt who was in charge. Now everybody 

does their own work with no real coordination. 

There’s two Federal agencies and two different administrations 

that signed 20 to 30 agreements with sovereign governments in 

other countries to do development programs, when they had no resources to do it. And the mission directors would come back to 

AID—the ministers in the governments in the Third World—come 

back to AID, saying, ‘‘Why aren’t you implementing these programs?’’ ‘‘Well, we didn’t even know the agreements had been 

signed.’’ Neither did the ambassadors, I might add. 

I’d like to suggest two immediate reforms. PEPFAR office should 

be moved from State to AID. 

Senator MENENDEZ. If you can wrap up for—— 

Ambassador NATSIOS. Yes. 

And finally, I think the MCC Board should be kept in place, but 

the MCC field presence should be merged into field missions. And 

once the contracts—or the compacts are approved, the implementation should be done with the AID mission and the ministries in the 

governments in the countries, not in the separate—we have all 

these separate entities implementing programs; it doesn’t make 

any sense. 

Thank you very much. 

[The prepared statement of Ambassador Natsios follows:] 

22 

PREPARED STATEMENT OF ANDREW NATSIOS, PROFESSOR IN THE PRACTICE OF DIPLO- MACY, THE WALSH SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY, WASHINGTON, DC 

Mr. Chairman, I would like to thank the committee for the invitation to speak 

this morning. This is a matter of great importance for the United States. Two 

former USAID administrators, Brian Atwood and Peter McPherson, and I wrote an 

article on aid reform which appeared in Foreign Affairs in December 2008. I stand 

behind the analysis and recommendations we made in that article, but will review 

this morning a few of the issues we covered. 

I am convinced no great power can maintain its preeminence without a robust foreign aid program. Given what defense intellectuals call the asymmetrical threats 

facing American vital national security interests since 9/11, we are likely entering 

a period in international affairs where foreign aid, humanitarian assistance and 

long-term development may be the most important instrument of national power 

available to our policymakers, more important than diplomacy or military power, or 

at the very least, of equal importance. I know that members of both parties of this 

committee for some time have been trying to rewrite the Foreign Assistance Act to 

correct the current chaotic organizational structure, inadequate staffing, and confused mission of our current U.S. foreign assistance program which is spread out 

across 20 agencies. President Bush accomplished two important tasks in foreign aid: 

He increased funding from $10 billion to $23 billion, placed heavy focus on the foreign aid in our foreign policy, and made major changes in the doctrine and theory 

of our aid program. The organizational structure is, however, a different matter: It 

remains confused and dysfunctional. 

Let me begin by talking about the mission and mandate. Some will argue that 

poverty alleviation should be the only mission of our assistance programs. While 

poverty reduction must be one of its central objectives, it is insufficient alone as a 

mission given the threats facing America and our allies, and the need of developing 

countries to move away from aid dependency. We must also be engaged in statebuilding, that is, helping countries build the public and private institutions necessary to keep order and administer justice, provide public services such as schools, 

health services, and roads, facilitate and encourage economic growth, and improve 

governance to protect human rights and democratic principles. This goes beyond an 

exclusive poverty focus. 

Because of the demand in this city (which has grown stronger over the past 15 

years) for quicker, measurable, and quantifiable results our aid program has gradually moved away from institution-building, program sustainability, and capacitybuilding toward the delivery of services directly to poor people in developing countries. The HIV/AIDS PEPFAR program is one example of this. Building institutions 

takes a long time and a great deal of patience, requires local political will and leadership, and sustained funding, but it ought to be the ultimate objective of aid programs. Progress in building states can not be easily quantified as required by Federal law, OMB, GAO, and IG audit requirements. One of the major reasons that 

OMB phased out funding for USAID scholarship programs, one of the most successful programs in doing institution-building, is that its outcomes can not be easily 

measured, particularly over the short term. The focus on measurement is now mandated under Federal law, called GYPRA (Government Performance and Results 

Act). This is also one reason USAID programming has become increasingly risk 

averse, avoiding experimentation and innovation, because new approaches increase 

the risk of project failure which the regulatory apparatus in Washington was designed to minimize. 

We can correct some of these problems through reform. The grantmaking portion 

of USAID’s portfolio should be redefined and overhauled to encourage new nontraditional partners, more indigenous organizations and institutions, and new 

experimental approaches to development, a clear exemption of grants from results 

measurement requirement for all aid programs (allowing that there will be failures 

sometimes), with a more lenient standard for IG audits, GAO evaluations, and OMB 

oversight (so long as there is no malfeasance). 

Much of what people say is wrong with our aid program regardless of which 

agency is running the program is more a problem with the Federal Government 

broadly and this has to do with the regulatory environment in which all Federal 

agencies must do their work. Our aid programs must conform to the 1,982 pages 

of the Federal Acquisition Regulations which govern all Federal procurements. It 

has no control over the contradictory demands made on it by the Congress, State, 

OMB, IG, and the GAO. I found the most frustrating element of my job was getting 

agreement among overseers to do anything complex took a very long time and this 

was because stakeholders and overseers often disagree with each other even on 

23 

mundane matters. As the committee, I am sure knows, unlike most other Federal 

departments the work of our aid agencies is not done in the United States but developing countries of very different culture, norms, and worldviews which do not 

always see things exactly the way people do in countries contributing the funding. 

If we are to undertake successful development programs they must be tailored to 

the local circumstances or they will fail. 

Because USAID has been traditionally associated with the State Department 

organizationally, development and diplomacy have somehow become conflated. They 

are alike in every unimportant way, to paraphrase Wallace Sayre. While diplomacy 

is all about managing our relationships with other countries, development is about 

changing and transforming countries. The State Department focuses on managing 

external relationships and short-term crisis management; USAID focuses on longterm transformational change inside other countries through its development portfolio. Certainly over the past 15 years USAID has become much more skilled at 

assisting our military officers and diplomats in crisis management, but at the heart 

of it the three D’s are very different instruments of national power. The tools of the 

development professional in USAID are technical expertise in development sectors, 

country strategy papers, procurement instruments, assessment and evaluation tools, 

financial spread sheets, and implementation plans. USAID is a program management organization which hires, promotes, rewards, and trains staff to develop their 

skills as technical leaders in their disciplines and as good program managers. 

Conversely, the State Department is an information collection, analysis, and foreign policy coordination institution which values good writing, interpersonal, political and negotiating skills. The current gradual absorption of USAID by stealth into 

the State Department through the merging of the agency’s budgeting system, procurement, electronic mail system, its logistics, office space, motor pool, reduction in 

USAID field presence, and warehousing capability in the field, is gradually eroding 

the Agency’s capacity to carry out its mission. OMB has been facilitating this 

merger using the argument of efficiency, ignoring the program consequences of this 

merger. I believe the result will be organizational failure. Unless this trend is reversed the foreign aid program of the U.S. Government will end up the way our 

public diplomacy program did when State absorbed USIA. USAID and State are like 

oil and water. This is not an attack on the State Department. I served as a diplomat 

for a time and I must say I have great respect for our diplomats and for the fine 

work the State Department does around the world, but that work should not be confused with development. If the Congress intends on having a competent international development agency, its independent policymaking authority over the allocation of its budget with a direct-line relationship to OMB should be restored and 

its business systems made once again independent. Structurally a reformed foreign 

aid agency should be organizationally independent of the State Department. 

While I support a Cabinet-level position I am not certain there is political support 

for such a change in Washington, and so I believe a good compromise would be organizational independence with a dotted-line relationship to the Secretary of State for 

the Administrator of the Agency with an independent statutory seat on the NSC, 

statutory responsibility of the USAID Administrator as the chief U.S. international 

development officer, as the coordinator of international disaster assistance for the 

U.S. Government, and independent legal authorities for the Agency under the Foreign Assistance Act. 

Having foreign aid programs run by 20 different Federal agencies embarrasses 

the U.S. Government abroad with contradictory programming, endless transactional 

costs in program implementation, time delays, interagency fighting, and unclear 

decisionmaking. For example, over the past 12 years two Federal departments have 

written Memos of Understanding with dozens of countries to provide technical 

assistance without funds to carry out the programs, no staff, no field presence and 

no coordination with the embassies or USAID missions. None of the agreements 

have been implemented which has been an embarrassment to the U.S. Government. 

Inevitably the country Cabinet Ministers who signed the agreements end up in the 

USAID mission director’s offices asking why the program hasn’t started, which the 

USAID mission were not party to. During the cold war, OMB enforced an administrative discipline on the Federal system that all program money spent in development projects had to go through and be managed by USAID, a discipline which 

ended with the cold war. We should restore the discipline now that we have a new 

war on our hands. One of the principles of war I learned as a military officer was 

unity of command; that should be equally true for aid programs with the U.S. Government as well. 

I would like to suggest several organizational changes to improve the structure 

of our aid program. One immediate change would be for the PEPFAR HIV/AIDS 

Office in State to be moved to USAID where it properly belongs. The independent 

24 

MCC board should be kept in place, along with the indicators and central staff to 

review proposals and do evaluations, but the field presence of the MCC should be 

merged into the USAID mission abroad and have a reporting line back to Washington. The sector earmarking by both the executive and legislative branches of all 

development spending outside the MCC has come at the cost of local ownership, 

local leadership, and decentralized decision making. The World Bank, U.N., and 

European aid agencies are now generally moving to much greater degree of decentralization, while our aid program, which had been for decades the envy of the development community because of its high level of decentralization and heavy field 

presence, is being centralized in the State Department through the F process. This 

has been further aggravated by the sector earmarks of OMB and appropriations 

process which now absorb any remaining discretionary funding in the accounts. I 

think the abolition of sector earmarks is unlikely, and thus I would suggest this 

committee consider giving USAID mission directors transfer authority of up to 10 

percent (or more) of the country budget allocation out of one or more earmarks to 

another priority demanded by the local situation, with full disclosure to Washington. 

This would mean total sector earmarks spending levels would not be exactly the 

same as required by law. I would urge Congress to support the tripling of the size 

of the USAID Foreign Service to 3,000, which would require a relaxing of embassy 

restrictions on the size of USAID field staffs, the rewrite of the embassy security 

statute to allow more flexibility to get staff to the field and then let them leave the 

embassy compounds more regularly. The Embassy Security Act is now a serious impediment for USAID getting its work done. 

Finally I would add that USAID did its job exceptionally well during the cold war 

and was regarded as the preeminent development agency in the world 20 years ago. 

When the bipartisan coalition behind foreign aid ended with the collapse of the 

Soviet threat, the base of support eroded and led to the current weakened agency. 

If the United States is to have a robust development agency to match its diplomatic 

and defense capability, a bipartisan coalition is needed to sustain the program over 

the long term. My hope is that the Congress will move to form the bipartisan coalition support base once again. 

Senator MENENDEZ. Thank you. Thank you all. 

Let me start a round and then turn to Senator Corker, and we’ll 

go from there. 

I think it was a very thoughtful beginning, here. And, Dr. 

Radelet, I know you started off with a broader view, and I think 

that the chairman of the full committee will, hopefully, be holding 

a hearing soon that will start there, and we’ll continue to work 

with him on these other issues. But, we wanted to start with AID. 

And in the context of so many varying opinions, I had my staff 

do a little chart for me about various organizations and significant 

individuals who have made key recommendations for foreign assistance reform. So, I did a little chart. And, you know, it varies. There 

are some that are fundamental across-the-board common views, 

but with so many studies having so many varying opinions, I’d like 

to ask all of you, for starters, on the best—you know, on those overall studies, on the best way to reform foreign aid’s structure. What, 

in your opinion, are the two top reforms? And how would they 

affect USAID in that context? 

You have had several—several of you have listed several, but if 

I were to say to you, ‘‘What are the two top reforms, in priority 

order, and how will they affect USAID in that overall structure?’’ 

what would you say? Any one of you who choose to—— 

Professor Lancaster. 

Ms. LANCASTER. Yes. Well, I am of the opinion, both from my 

scholarly background, but also, importantly, from my many years 

in the U.S. Government, that organization is politics. Where you 

put something organizationally has a great deal to do with how it 

functions and what its mission is, no matter what’s written down 

on paper. The most pressing concern I have is the relationship 

25 

between AID and the State Department. That has to be, as both 

of my colleagues have said, a relationship that is compatible, but 

leaves enough autonomy for USAID to protect its development 

mission. 

I remember, just as an anecdote, when I was hired as the Deputy 

Assistant Secretary of State for Africa, the Assistant Secretary— 

then-Assistant Secretary said, ‘‘Your job is to raid the aid budget.’’ 

And—in those words—and I tried. And often I failed. 

Senator MENENDEZ. To what? Raid? 

Ms. LANCASTER. Raid the aid budget. 

Senator MENENDEZ. Raid the aid budget, OK. 

Ms. LANCASTER. I tried, and often I failed. 

Senator MENENDEZ. Like the pirates off the—— 

Ms. LANCASTER. Sorry? 

Senator MENENDEZ. Like the pirates off the coast—— 

Ms. LANCASTER. Yes, that’s right. Except that they’re more effective than I was. [Laughter.] 

And the reason I was so often ineffective was that there was 

enough space, if you like—bureaucratic space—between USAID 

and the State Department so that when I had to go out on a particularly stupid mission, I could be resisted. The only way I could 

make a real dent was if I could engage the Secretary of State. 

That’s a lot harder—it would not be a lot harder to keep me contained if, ultimately, everything is under the same chain of command. So, that has always been a concern for me. That’s No. 1. 

Where that ends up is going to make a huge difference into what 

we do with foreign aid funding. 

The second thing is the capacity of USAID. Even an autonomous 

agency cannot do the job we needed to do if that capacity isn’t 

greatly, greatly strengthened. And AID needs to be able, not just 

to implement and evaluate—and I so much agree with Steve, that’s 

an important thing—but, to think, to be able to engage in policymaking. 

The relationships with the other agencies are very important, but 

I think these two are my top priorities. 

Mr. RADELET. I would suggest, as No. 1, the legislative reform 

with the Foreign Assistance Act, for a variety of reasons, on the 

restrictions and earmarking; but, as a key part of that foreign 

assistance reform, to get the relationship between USAID and 

State correct, as part of that legislation. So, I completely agree on 

the core issue of the division of responsibilities between State and 

AID, and my concern that, over time, as things move toward State, 

that that is fundamentally weakening. So, that’s No. 1. 

And second is the capacity issue of getting the right numbers of 

staff and the right kinds of skills at AID, which has been so significantly diminished over the last 15 years, and needs to be very seriously rebuilt. 

Ambassador NATSIOS. Mr. Chairman, I completely agree with my 

two colleagues, but let me add one other thing, and that is the 

staffing levels. We cannot run AID with 1,000 Foreign Service officers and 1,000 civil servants. The budget doubled and our staff 

declined. This doesn’t make any sense. If you want AID to do the 

work itself, you need to increase the size of the career service—and 

that’s happening now. 

26 

But, there’s something else that has to happen. And unfortunately, I’m not sure it’s in the control of the committee—the Senate 

Committee on Foreign Relations—I wish it were. And that is, there 

is an act which has told the embassies to downsize the U.S. Government presence in the field. After the 1998 embassy bombings, 

the Government—the Senate—the House and Senate committees 

that deal with government operations wrote an Embassy Security 

Act, which basically creates huge walls around the embassies, puts 

the AID compounds inside the embassy. By the way, that’s isolating us from civil society, which is the lifeblood of AID in the 

field. People are afraid to go see AID now, because they—I mean, 

people from local civil societies see all of the security barriers, they 

don’t even want to come into the compounds anymore. We used to 

have separate buildings. And I might add, they were secure buildings, too. And our staff has been reduced in size. If you increase 

the number of Foreign Service officers, they’re all going to stay in 

Washington unless that law is changed. 

And there’s another problem, and that’s the merger of the business systems that is happening in the field and in Washington. 

OMB is pushing this, under the guise of efficiency. 

Let me tell you what really happens. AID motor pools are being 

merged into State’s all over the world—or was abolished. So, we 

must now wait in line for five other bureaus within the State 

Department—that always have priority, because they’re within the 

State Department—for the drug-control people, the economic counselor—to get out to see a project. We used to have our own motor 

pools. We don’t have those anymore. They are being gradually 

phased out. 

We used to have our own warehouses run by Foreign Service 

nationals. It costs very little to run this. They’re being merged into 

State. We don’t even have control over our warehousing. That’s a 

serious problem; and unless that’s corrected, it seems to me, the 

operational capacity of AID to get stuff done is already compromised; is going to be compromised further. 

Senator MENENDEZ. Let me ask one quick followup question, Dr. 

Radelet. You’ve mentioned the rewrite of the Foreign Assistance 

Act several times. And I think that is a very worthy goal. I also 

think it is a significant challenge to ultimately achieve. So, as—and 

I know that Congressman Berman, on the House side, is very much 

focused on this, and we share his desire. But, while we seek to 

attain that goal, you’ve all mentioned that the train is already leaving the station in some critical issues, of which AID is not there 

at. So, how does one—does not one need to move on this now? 

While we seek the greater aspirational goal of having a rewrite of 

AID, do we need to seek to create certain authorities now within 

that context? Otherwise, I think we’re in trouble. That’s one question, specifically to you. 

And all of you have mentioned capacity. Ambassador Natsios 

actually quantified it. I wondered if you both would quantify for 

me, and, to some extent, qualify it, as well, and then I’ll turn to 

Senator Corker. 

Mr. RADELET. On the first question, I think you’re absolutely 

right, and I think the answer is to move as quickly as possible on 

the things that can be done today—and there are many things that 

27 

can be done with the current legislation—but, at the same time, to 

set the foundation in to work, over the time required, which will 

be a while, to move forward on the Foreign Assistance Act. But, 

we’ve been waiting for 48 years, so if it takes another few months 

or a year or two, that will be OK. 

But, there are certain things that can be done. Staffing, for 

example, can be increased. A stronger monitoring and evaluation 

capacity can be rebuilt, within the legislation. Although there are 

restrictions, there are ways that those can be used more flexibly. 

Some changes can be made on procurement. There are a number 

of things that can be done now, while the foundation is laid to 

move forward on the deeper reforms. So, it should absolutely not 

wait, it cannot wait, it should not wait. 

But, at the same time, to only do the rather modest reforms that 

can be done without the broader legislative reform will only lead 

to modest improvements. And those modest improvements can be 

easily reversed by whoever—in the future. So, I think we need to 

take advantage of this opportunity that we’ve had, which last for 

decades to really make the fundamental changes that will last for 

decades to come. Modest changes won’t do it, in the long run. 

Senator MENENDEZ. Professor. 

Ms. LANCASTER. At great risk to my reputation, I’m going to disagree with Steve a little bit, here. I think it’s a very good idea to 

rewrite the Foreign Assistance Act. But I think it’s going to be a 

huge political lift, both in the Congress and on the part of the 

White House. And I hope it happens, but I realize the world we’re 

living in. I think we can do more than modest reforms, otherwise. 

We did not rewrite the Foreign Assistance Act to create the Millennium Challenge Corporation. And I think some of the things we’re 

talking about here can be done in other ways, whether it’s a small 

piece of authorizing legislation or, God forbid, through the appropriations process. 

On capacity I think it’s very hard to put numbers on capacity, 

at this point. I think we can identify functions. The policy function 

ought to be in AID for AID. The same for monitoring and evaluation. But, the size of those functions, I think, will depend on resolving some of these other issues. What is the role of AID going to be? 

Where is its strategy going to take us? A lot of that, we’ll have to 

sort out as a result of some of the organizational issues, because 

they’re all wrapped up together there. 

So, numbers, if that’s what you are seeking, are hard to estimate 

at this point, until we sort out the fundamental questions. 

Senator MENENDEZ. Senator Corker. 

Senator CORKER. Thank you, Mr. Chairman. And I thank each 

of you for your service and testimony. 

Mr. Natsios, I know, mentioned that the mission of USAID ought 

to be more than poverty alleviation, it ought to also be state-building, and I’d love to—neither one of you, I don’t think, specifically 

mentioned that in your testimony, and I guess, before we move 

down the path of how to organize USAID, is there an agreement, 

I guess, among the three of you, that that dual mission is what 

USAID ought to be about? 

Mr. RADELET. I agree, I actually think of three missions. One is 

economic growth and poverty reduction. The second is state-buildVerDate Nov 24 2008 15:21 Apr 13, 2010 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6602 H:\DOCS\USAID.TXT SENFOR1 PsN: BETTY
28 

ing, building capacity, including encouraging democratic governments, over time, to emerge. And the third is responding to humanitarian crises, which is a little bit different from the other two. But, 

I think those three, I would put at the top as the core objectives. 

Senator CORKER. Professor. 

Ms. LANCASTER. I’d just like to add one thought—two thoughts, 

actually. I would add another priority, which is already there, and 

we need to—— 

Senator CORKER. They’re sort of getting watered down, aren’t 

they? 

Ms. LANCASTER. There are only four. Only four, not 50. [Laughter.] 

And that’s addressing global issues, which I don’t think we can 

avoid. I think it’s already a great deal of what we do. Things like 

the spread of infectious disease—HIV/AIDS is led by PEPFAR, but 

USAID inevitably comes in behind to help that work. And, of 

course, I think we’re moving into an area where we’re going to be 

concerned about adapting and mitigating climate change. So, I 

wouldn’t put those off the table. And there may be more of a coordinating function than an aid function, but I think it needs to be 

there. 

I just have one other thought with state-building. I think it’s 

great to put state-building in there. I think we have a lot of work 

to do before we figure out how to do it right. 

Senator CORKER. So, on that note, there was a recent long 

op-ed, I guess, in the Wall Street Journal by a lady named Ms. 

Moyo, talking about our foreign aid to Africa has actually helped 

corrupt many governments there. Again, I say this—I’m a very 

strong supporter of foreign aid. I think we have got a long ways 

to go to get it right. So, we talk about, you know, USAID being involved in state-building, and we talk about it being separate from 

the State Department. And yet, there is a conflict, I think, there 

between the relationship of State Department to these foreign governments and the work that USAID might build—might be involved in, within these states, in trying to build a government that 

is less corrupt, is more transparent, and builds on democratic principles. So, I’d love for you all to sort of help us understand how 

that conflict, which would be major conflict, could be resolved, and 

also any editorial comments you might have about the op-ed itself. 

Ambassador NATSIOS. If I could just make a comment about—I 

haven’t read her book yet. I’m writing my own book now. And I 

need to read it. But, there is a series of books, that Bill Easterly 

has sort of encouraged, that is the opposite of Jeffrey Sachs’ sort 

of utopianism. I think they’re both wrong. I’ve read reviews of her 

book. She seems to be talking more about aid programs that go 

through the governments of sub-Sahara Africa. AID does not do 

any budget support in sub-Sahara Africa, so there’s very little corruption in aid programming in Africa, because it doesn’t go through 

the governments that she says are corrupt. There is criticism that 

AID has built a parallel structure of contractors, universities, and 

NGOs to do their programming. We do work with the governments, 

but we don’t put the money through them, because we had a lot 

of problems of the kind she talked about. 

29 

She’s more criticizing the European budget approach, which, instead of doing their own programming, they go through the government ministries, through just giving them a check. And the World 

Bank, of course, always goes through governments, because they 

are dealing with sovereign debt, in most cases. 

I actually agree with her that, in countries that have very weak 

institutions, it’s very unwise to put large amounts of budget support. We stopped doing that, 15, 20 years ago. So, I think some of 

her criticism is misplaced. It’s making generalizations about all aid 

programs, when they’re not all alike. They’re very different from 

each other, depending on the country running the program. 

Mr. RADELET. Ms. Moyo has an opinion that is shared by some 

in Africa, but it is a decidedly minority opinion. As on just about 

any issue in the world, there are people with a range of wide reviews. I spend a lot of time in Africa these days, mostly working 

in Liberia or working with President Sirleaf and many others 

there, and this is a very—Ms. Moyo’s views is decidedly a minority. 

I have read the book. I think it is very weak analysis. And I 

think it does not do justice to the facts. The idea that aid has not 

worked as effectively as possible is absolutely right. The idea that 

aid is the cause of Africa’s slow growth over the last three decades, 

which is her thesis, just has no—I don’t think there’s any academic, intellectual, or other support for that view. 

Mr. Natsios is right, these extreme views, as with extreme views 

on any issue, are not particularly helpful to moving forward. 

There is a challenge—— 

Senator CORKER. But, let me—I mean, I expected that you might 

say that, and I understand the difference between budgetary support and—— 

Mr. RADELET. Right. 

Senator CORKER [continuing]. And direct aid to citizens. But, the 

conflict also that exists between USAID and State Department still 

seems to be an—and that was not addressed; if you could also 

speak to that as you’re answering. 

Mr. RADELET. Yes. There is the conflict between the two, and I 

think that this requires the real development expertise that can 

balance the objectives of needing to work with weak states that are 

not perfect, that do have corruption problems, that do have weak 

governance; but, at the same time, they are places where we have 

goals and objectives, where we need to work. I think what this 

means is that we need a development agency that can—that has 

more flexibility to work with different kinds of countries in different ways, and getting away from kind of a one-size-fits-all. The 

MCC is a terrific first step in that direction, where, in the bettergoverned countries, where there is less corruption, we give longer 

term commitments, we give those countries more say in making 

sure that what we’re doing is consistent with their objectives, and 

we’re working with their systems to try to build those systems up. 

That kind of approach would not work in a Zimbabwe or other 

places, where there’s a completely, not functional, or government 

that’s creating many problems, where we would never give the 

President of Zimbabwe or leaders in other countries the say in 

where our U.S. funding should be allocated. There we would work 

through NGOs and nongovernment types of agencies, try to adVerDate Nov 24 2008 15:21 Apr 13, 2010 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 H:\DOCS\USAID.TXT SENFOR1 PsN: BETTY
30 

dress the immediate needs, as we can, have a shorter term perspective, and work in a very different way. And then there are countries in between. 

We need to have a different set of approaches for different countries, based on their level of governance, their commitment to 

strong development and poverty reduction; and, in countries that 

are moving in the right direction, we need to give them stronger 

support, longer commitments, and more scope to work on it; whereas, countries where there is greater corruption, we need to work 

around the governments and try to support NGOs and nongovernment actors that can meet more immediate needs. 

Ms. LANCASTER. Senator, could I just take another—— 

Senator CORKER. Sure. 

Ms. LANCASTER [continuing]. Shot at this question? Because I see 

your question in bit of a different light. 

Pakistan is actually the interesting case right now, but you could 

take Egypt, as well, where there is a potential conflict between how 

much aid we give and what we do with it for diplomatic purposes 

and for development purposes. And I think we have to recognize 

that it’s absolutely essential that the Department of State have 

funding that backs up its diplomacy. I don’t think anybody contests 

that. And sometimes that money goes to countries whose governments are not the best. Zaire was the poster child for poor governance in the 1960s and the 1970s. The volume of aid and sometimes 

its uses are decided based on diplomatic purposes, because we are 

strengthening an ally or rewarding a country that’s obviously done 

us a favor even though that aid is often implemented by development agencies. That kind of money, economic support funds, ought 

to be used and identified as something separate from development 

assistance funds. What I think worries a lot of us is when development assistance funds are allocated primarily for diplomatic purposes. 

Senator CORKER. My time is—thank you, and my time’s up. And 

I’m—keep going? Sure. Thank you, Mr. Chairman. [Laughter.] 

That’s post-partisanship. I thank you so much. [Laughter.] 

So, let me follow up a little bit on—I mean, do you think that, 

the three of you—you know, we have, you know, an expanding mission as we move from right to left on the table, from whence I’m 

looking—do you think there is a—is it that same sort of internal 

discussion that takes place between State and USAID that sort of 

drives us to end up having 20 different organizations that are carrying them? And how—what—the three of you have a sort of a different vision. I know that they’re little microdivisions, but do you 

think the three of you could quickly—and I’m not asking you this, 

but—come up, in a day or so, with a mission that you all agree 

upon, the three of you, coming from different backgrounds? So—— 

Ambassador NATSIOS. The mission that Steve mentioned, I agree 

with. I ran the humanitarian aid functions for many years. I’ve 

written many books about it. I didn’t intend to leave that out. I 

was adding in state-building to poverty reduction and economic 

growth, because it’s not discussed enough in the literature. But, 

Steve is correct. AID is the preeminent emergency response agency 

in the world. I mean, 60 percent of all of the emergency response 

31 

funding for the disaster in Darfur comes from AID. So, we don’t 

want to compromise that. It works very well. 

Senator CORKER. And then—so, we’d move on out into, you know, 

issues—climate change, the effects, adaptation issues—we’d move 

on out into PEPFAR and all—we would all agree that those things 

would come under the same umbrella. 

Ambassador NATSIOS. Well, I believe—Carol and I would disagree on this—I think the notion of global issues—global issues are 

dealt with in countries. There’s no such thing as a PEPFAR program, except in the countries in which people have HIV/AIDS. And 

we use the health ministries, we use the church community and 

Muslim groups to help us. We use civil society and private hospitals, but we work in the context of the institutions of the country. 

That’s state-building. 

So, I think—state-building includes the Ministries of Health, it 

includes civil society in those societies. So, I think you can include 

those global issues, in terms of building up the state structures to 

deal with these global issues. It’s not that we should ignore them, 

it’s the context in which we deal with them. 

Ms. LANCASTER. Yes, I think that Andrew and I are probably differing on packaging rather than anything else. 

I think that all of us, probably would share those goals. 

Mr. RADELET. I think so. There’s no way that we can ignore 

global issues, like HIV/AIDS and climate change, but those need— 

our support for those issues need to be developed in the context of 

specific countries and, I think, come under part of the rubric of poverty reduction, frankly, because if we don’t address those kinds of 

issues, that gets right at the heart of poverty. 

What the global issues call for is coordination across our different 

programs in different countries, particularly neighboring countries, 

but sometimes even beyond neighboring countries, to make sure 

that the approaches that are being taken in one country on endemic disease are consistent with the approaches taken in the 

country next door, because disease does not honor international 

boundaries. 

So, I think it is—I think we are consistent. 

Senator CORKER. Mr. Chairman, thank you for the time. I know 

Senator Casey has arrived. I have a number of other questions. I 

don’t know how long the hearing will last, but I know it’s time for 

Senator Casey. 

Senator MENENDEZ. We’ll—depending upon members, we’ll see— 

we’ll see if we can stay a little longer. 

Senator Casey. 

Senator CASEY. Thank you, Mr. Chairman. I appreciate you calling this hearing. 

This is a topic that so many people who care about how the 

United States conducts its foreign assistance have been concerned 

about for an awful long time, and are worried about how we deliver 

that and the reforms that need to take place. 

I wanted to, first of all, thank each of the witnesses for your testimony, for the perspective that you bring to this issue from long 

years of experience. And I guess I wanted to start with the issue 

of organizational reforms. And some of this, I know you’ve covered 

in your statements and you may have responded to by way of 

32 

answering questions of my colleagues, Senator Menendez and Senator Corker. But, it doesn’t hurt to repeat yourself, if you have to, 

on this. 

First of all, with regard to the suggestions as to how to streamline Federal agencies that currently handle our foreign assistance, 

I wanted to—first of all—refer to Ms. Lancaster’s opening statement. You said there’s only a notional division of labor between 

USAID, the Millennium Challenge Corporation, and PEPFAR, and 

the latter two programs, obviously established under the Bush 

administration, and work on different development models than 

that of USAID. How would—the basic question I have is, How 

would coordination between these three major bilateral aid programs work? What’s the balance that we need to strike, here? 

Ms. LANCASTER. Well, there is a little bit of a crossover between 

USAID and PEPFAR in dealing with international health issues. 

And in particular, I see PEPFAR as facing a challenge to its effectiveness if some of the elements that are needed to make HIV/ 

AIDS campaigns effective are not there, including nutrition and 

adequate food and so on. So, there is a notional division of labor 

there. I am a little concerned, though, that the enormous size of 

the PEPFAR budget could really absorb a lot of the development 

budgets in the countries where PEPFAR is operating, because of its 

gravitational pull. 

There has been a little bit of a division of labor between AID and 

MCC. AID is doing some of the threshold work in countries teeing 

up for an MCC compact. However, I think there are still places 

where two or three of these agencies are still working. I would 

think, together, they might be able to find synergies that would 

make each of them a little more effective. 

Senator CASEY. Yes? 

Ambassador NATSIOS. If I could just add. PEPFAR does not exist 

in the field. There are only two agencies, basically, spending the 

money—the Center for Disease Control and AID. And HHS got into 

this, with CDC, using the same AID contractors, the same AID 

health experts, the same AID partner NGOs, doing the same thing 

in the same countries. It actually makes no sense, organizationally, 

and there’s constant conflicts in the field. The ministries of health 

don’t know who to go to sometimes, and there’s all these turf wars. 

It’s useless. PEPFAR is simply a coordinating office in the State 

Department. It has no business being in the State Department. 

What does the State Department know about disease prevention 

and program management? Those functions belong in AID. 

You know, the three functions that AID still is a leader in, intellectually, in the world are the ones Steve mentioned. If you ask 

European aid agencies or the World Bank, Where is AID preeminent? It’s in disaster response, civil wars, conflicts, natural 

disaster; it’s in economic growth and poverty reduction from a private-sector point of view; and it’s in international health. The preeminent international health—bilateral or multilateral—is AID. 

This was done for political reasons. PEPFAR could be moved, 

with no effect in the program, simply into the International Global 

Health Bureau in AID. 

In terms of MCC, the MCC board, the way the Congress 

designed it, is protecting the program from use of the money for 

33 

other nondevelopmental purposes. Let me put it in a diplomatic 

way. I’ve watched attempts to raid the budget, because I used to 

sit on the board. And the fact that you have all these people making these decisions on which countries get their compacts approved 

makes great sense. I would not touch the board. It protects the integrity of the program. The local control of this makes sense. What 

does not make sense is having an education program in the country 

where AID has an education program and there’s a compact program in the same country. 

And you know who’s hiring—being hired to run the AID program—the MCC programs in the field? Retired AID officers. When 

they started the MCC, they said, ‘‘We want nothing to do with AID. 

AID’s the problem.’’ Then everything got all screwed up and people 

were removed from positions, and now the rule is—‘‘we want 

retired World Bank people and retired AID officers.’’ If you look at 

a current roster, they’re mostly retired AID officers. So, it’s not as 

though there’s a culture conflict, because they’re the same officers 

who ran both programs. 

So, putting the AID—the implementation of the program in the 

AID—as a separate division in the USAID missions in the field 

would not be any kind of a stretch, organizationally. And in many 

countries, do you know where the office space is and the technical 

support for the MCC, informally, is? It’s in the AID missions. They 

physically sit there. 

Mr. RADELET. The Office of the Global AIDS Coordinator and the 

MCC were set up as separate entities from USAID because of the 

belief that USAID did not have the institutional strength to take 

on these responsibilities. The better solution would have been to 

address that problem several years ago, but that wasn’t taken on. 

Now we have the opportunity to do that. 

It is exceptionally odd that we have an HIV/AIDS program at the 

State Department. It has nothing to do with diplomacy. It is a technical health problem with much broader implications, beyond HIV, 

into nutrition, into health systems, into agriculture and livelihoods, 

that affect people’s capabilities to prevent HIV and to deal with it, 

if they happen to contract it. That needs to be moved back into 

AID. And the MCC, as a fundamental economic growth program, 

also obviously, properly belongs in a strong development agency. 

The right way forward is not to merge those in, today, but to 

rebuild AID and give it the capacity and the strong professional— 

the leadership and the professional capacity that it needs, and 

then, at the appropriate time, move those back in, as separable entities within a strong development agency, so they can continue to 

do the great work that they are doing, with the special characteristics that the MCC and PEPFAR have, but under a strong leadership so that they can be better coordinated and better integrated 

with the other development programs that will make them, ultimately, more successful. That’s the right way forward. It’ll take us 

a couple of years to get there, but having them as separate entities 

with everyone stepping on each other’s toes and poor coordination 

doesn’t make sense and won’t work in the long term. 

Senator CASEY. Well, thank you very much, that’s very good 

advice. Thank you. 

34 

Senator MENENDEZ. Let me indulge the panel just for a couple 

more questions, here. I don’t know if Senator Corker will have 

some more, but—you all listed—when I asked you about the two 

major reforms, and how they would interface with AID, pretty 

much came up with a consensus view that independence and capacity were important. Let me ask you a broader question, Which 

agency should take the lead on coordinating all U.S. foreign aid? 

Mr. RADELET. Let me answer that in terms of development, more 

broadly, because it’s a slightly different answer, here. I think, in 

terms of development, more broadly, and U.S. engagement to support development, I think the NSC has to play a strong role in 

developing a strategy that brings together agencies that talks— 

that brings together, strategically, foreign assistance, trade, migration, other development policies. So, at that development level, 

NSC. 

In terms of foreign assistance, AID should be the premier organization under which many of our foreign assistance programs are 

consolidated. Whether we bring all of those together, one can debate whether every little thing should be brought together, or not. 

But, certainly what is now in AID, much of which is what is now 

done by the Defense Department, the MCC and PEPFAR should be 

brought under the umbrella of a strong development agency. And 

also, arguably, our multilateral development policy, which is at 

Treasury, which, therefore, is somewhat divorced from our bilateral 

programs that are elsewhere. So, I think those core things should 

be brought together under a strong agency. It can’t happen now, 

but if AID is strengthened in the way that all of us would like to 

see it strengthened over the next couple of years, that should create the opportunity to bring at least those core programs together. 

Senator MENENDEZ. Anyone else, or you all agree on that? 

Ambassador NATSIOS. Let me just add one comment about the 

notion of the use of foreign aid for diplomatic purposes. Carol has 

spoken to it, and I agree with what she said. But, the Defense 

Department—I, you know, lecture a lot at the National Defense 

University, and read their journals, and publish in their journals, 

so I know the Defense intellectual world a little bit. And they have 

an interest in this that’s very direct. You know, my son is training 

to become an officer, and he will be shortly, and I’m a little worried. And I know that what we do in development is going to affect 

him in the field when he goes—and he’s going to go into combat, 

I’m sure. 

So, we can’t say to the Defense Department, ‘‘It’s none of your 

business.’’ We created an Office of Military Affairs. It was very controversial when we created it. State didn’t want me to do it. They 

said, ‘‘You go through us to get to Defense.’’ We put Foreign Service 

offices, for the first time, in all the regional combatant commands, 

which we never had before. There are 66 AID officers or staff on 

the PRTs, Provincial Reconstruction Teams, in Afghanistan right 

now, including 18 professional Afghans working for AID. So, we’re 

involved in doing planning all over the world on this. 

I think the Defense Department actually has something we need, 

which is—when I talk about the $3 or $4 billion they’re spending 

on development, they don’t know how to spend it. They privately 

admit to me they don’t want to spend it, but they want it spent 

35 

in the countries. For example, there’s no AID mission in Mauritania, in Niger, or Chad. There are serious terrorist threats to 

those countries. They want programs there. And State Department 

does, too. The Defense Department has an account, the 1206 

account. It says they can’t spend the money, but they can give the 

money to another agency. 

I think what they should be allowed to do is decide which country to spend the money in, and the overall level of spending out of 

those accounts, but the programming of the money, the management of the money, the policy decisions on how it’s spent in the 

country should be done by AID. 

And the British have a system where they have people from the 

foreign ministry—one person from the foreign ministry, one person 

from the development agency, one person a military officer—sit and 

decide, in these special funds that focus on counterterrorism and 

on conflict zones, where there are national security issues, how to 

allocate those funds. And that makes a lot of sense to me. In fact, 

frankly, it’s going on now—no one knows it—at an operational 

level. 

Senator MENENDEZ. One of the—I understand what you’re saying, Ambassador—one of the concerns I have, I just read Secretary 

Clinton’s comments in the Post about development assistance in 

Afghanistan. She said there are so many problems with them that 

there are—problems of design, problems with staffing, a problem of 

implementation, problems with accountability, go down the line, I 

think was her quote, and then she ended up referring to the 

amount of money spent without results there is heartbreaking. 

And, you know, I get concerned—and she went on to talk about 

that there’s very little credibility among Afghans. And I know that 

Oxfam had a report that charged that much of U.S. aid in Afghanistan is wasted on consulting costs, subcontractor fees, and duplication. So, my concern, here, is that, in fact, so much has been 

shifted to the Department of Defense. Also, to Secretary Gates’s 

credit, he has talked about how, in fact, he—you need a robust, you 

know, foreign diplomacy, as well as a foreign—foreign assistance, 

so I give him all the credit in the world. Transforming—making 

that shift from those words is going to be, you know, one of the 

things that we need to see happen. 

But, I don’t even think that we have the same accountability or 

scrutiny for those funds as we do, for example, AID. I think scrutiny is good, by the way. I’m not suggesting there should be less 

for AID. But, I also think that that type of scrutiny should be 

looked at, in terms of what’s been happening in the use of these 

funds at the Department of Defense. So, I’d like to see this transition out to, you know, what is, in essence, a civilian agency, working in coordination—— 

Ambassador NATSIOS. Yes. 

Senator MENENDEZ [continuing]. Working in coordination. But, 

you know, I think that when a civilian agency goes to a population 

somewhere else in the world, since we, as Americans, are here to 

be a partner—I think when the Department of Defense goes someplace in the world and, you know, tries to do the same thing, it is 

much more suspect as to what the purpose is. You may be winning 

hearts and minds for the moment, but I don’t know that you’re 

36 

winning hearts and minds for the long term, at the end of the day. 

That’s just a personal reflection that I have. 

Senator Corker, do you want another round? 

Ambassador NATSIOS. Could I just add one comment about—— 

Senator CORKER. Sure, sure. 

Ambassador NATSIOS [continuing]. What you’re talking about, 

Senator? Because I think you’re right. I am not suggesting the 

Defense Department should be spending any of that money. And 

they shouldn’t be. And I’ve said, repeatedly at NDU, ‘‘You should 

not be engaged in this, but we need to plan with you and talk with 

you.’’ And so, that’s what I’m proposing, here. 

But, if you want some strategic reforms that don’t require massive rewrites of anything, make the USAID IG responsible for auditing all spending of all foreign assistance for all Federal agencies. 

You’ll see a huge change, because Federal agencies will not want 

to spend this money. Most of the other Federal agencies have no 

audit people abroad. Most of the IG for AID, their people are all 

over the world. They live in the Third World, doing audits. Make 

them be placed in charge of all the Defense Department spending, 

particularly if it goes through AID, by statute. Do it even for the 

State Department. That would shock the State Department, because there’s no real auditing going on, from a programmatic 

standpoint, now. 

Let me just—I should probably say this publicly, because I don’t 

think most people know this. Do you know who the Defense 

Department sent to oversee the AID reconstruction program in 

Afghanistan? The former chief operating officer of General Motors, 

who had never been a Third-World country or a war zone or done 

reconstruction. We were told that they had skills from the industrial sector that would be useful in reconstruction, which is utter 

nonsense, with all due respect. And I’m a Republican, I love the 

business community. Government and business are alike in every 

unimportant way. 

Some of the most stupid decisions I have ever seen were made 

by people who have never been to a war zone, never done reconstruction in Iraq and Afghanistan. I mean, they weren’t malicious, 

but they didn’t have any expertise. 

This is a separate discipline. It requires professional career officers to run it. And if we had made some of these allocation decisions in both countries, I don’t think we’d have had some of the 

issue we’ve had. We did what we were told, as best as we could 

under the circumstances, but the structure needs to be changed so 

we are no longer subordinated. 

No one should be sent to run—the AID mission director’s supposed to be in charge of these reconstruction programs. 

Senator MENENDEZ. I think you should be more passionate about 

how you feel. [Laughter.] 

Senator MENENDEZ. Senator Corker. 

Senator CORKER. It’s very good testimony, and I’m really glad 

you’re having this hearing, and you can see that, walking through 

all of these issues, we’re just beginning. It’s going to take a lot of 

tough sledding, if you will, to actually come to an end that makes 

sense. 

37 

But, let me just follow up on the whole issue of the Defense 

Department and aid, and the rub that’s there, and some of the suggestions that have been made. 

In visiting Iraq and Afghanistan—and, I think, soon, Pakistan’s 

going to be in similar situations, in some parts of the country—but, 

in visiting there, there seemed to be—the reason the Defense 

Department subsumed this, was the urgency of getting money out. 

OK? And I realize that sometimes urgency doesn’t lead to the longterm benefit. But, there were also some cultural issues, it seemed. 

Look, the military basically can tell people where they’re going and 

when they’re going to be there, just like they will with your son, 

soon. The culture at USAID and State is different than that, to 

some degree. 

And so, as we talk about aid, especially aid during a time of conflict, and security needing to be provided, which seems to me an 

incredibly difficult task, no matter who’s carrying it out, are there 

not some built-in issues that make it difficult to do exactly some 

of the things that you all have said about USAID in these conflict 

zones? I’d just love to hear your response. 

Mr. RADELET. There are some things that are built in, but I 

think they can be changed, on both counts. What your point is— 

both on the money and the people, is the flexibility that Defense 

has that AID does not have, and the ability to respond very quickly. Partly, AID can’t respond very—it doesn’t have the flexibility, 

for the reasons around the Foreign Assistance Act and the heavy 

restrictions, and that every dollar is determined, how it’s going to 

be spent, long in advance. So, when something happens quickly, 

mission directors don’t have the flexibility and the resources to 

move, just on the money, to allocate money to an urgent crisis. 

Second, on the personnel issue, you’re right, but that’s partly 

because AID’s professional capacity has been so decimated over the 

last 15 years that they’re not able to move people quickly. That’s 

beginning to change, because they’re hiring people, and they’re 

also, my understanding is, developing a rapid-response capability 

with a staff of people that will be available for exactly this purpose, 

that when something comes up, that they can move people quickly 

to the field, that have the background, that have the experience 

doing this in other countries, to address these problems. 

So, at the moment, Defense filled the void because AID couldn’t 

do it, but there are steps that can be taken to give USAID both 

the resources and the flexibility so that they can adapt, with professionals with the right background, to address these issues in the 

future. 

Ambassador NATSIOS. Well, let me—I understand what you’re 

talking about, Senator, and you’re right. This is not written down, 

but I’ll tell you the story. I used to ask, annually, of, not just the 

career staff, the 2,000 people, Civil Service, but our 6,000 Foreign 

Service nationals, in a confidential survey—we’d ask a set of questions. And we got huge response rates—like, 60 percent of the 

workforce would respond. At the end, I would say, ‘‘Do you have 

advice to say to me?’’ Fifty of the career Foreign Service citizens 

would ask me to resign, because I was ruining the agency by dealing with the military, being in conflict zones, your—and the 

career—the senior people running the agency said, ‘‘You know, 

38 

they’re from the old order, and they just don’t get it.’’ They all retired. They got sick of me and that I wasn’t going to change where 

I was moving the agency. 

We created a specialty in the Foreign Service, Backstop 76, for 

dealing with emergencies. Out of the 1,000 Foreign Service officers, 

130 officers, including very senior people, volunteered to change 

their specialization into this field to deal with reconstruction, conflict, and civil wars dealing with the military. I was stunned, 

because I thought no one would join it. Everybody wanted it. We 

had to actually cut back the number of volunteers to get into these 

positions. We’re not having any problem getting people. In fact, 

when we created OMA, I thought no one in the career service 

would join. They had a waiting list of career people who wanted to 

join the office. 

So, there is—there was, in the old order, a bunch of people from 

the 1960s who couldn’t take the—and they left, they retired, and 

they were angry when they retired. They were angry at me. They 

kept asking, every year, for me to resign. So, by the time I left, no 

one asked me to resign, in these surveys, and I thought maybe I 

converted them. They said, no, they just retired. 

So, the agency made the conversion—both of you, Senators, at 

the beginning, asked—already; and they’re doing this issue, and 

they’re doing a very good job. And the military respects them much 

more now. 

One, just, quick question. At the beginning of Afghanistan, the 

military sent e-mails to Colin Powell, saying, ‘‘Oh, AID takes forever to build a school. We can build it in a month. It takes them 

6 months.’’ Because we have a rule, we never build a school unless 

the Ministry of Education agrees where it’s going to be built, how 

big it is, and whether they will put teachers in it. There were a 

dozen military schools built that are now barnyards, because the 

Ministry of Education was never consulted, had no intention of 

sending teachers there, sent no textbooks, and, in fact, there 

weren’t even enough kids to go in the school. Some of them are 

police stations now. 

When they had those disasters, one good thing about the military 

is, they’re very flexible. If they make a mistake, they shift. Right 

now, in the field, DOD funds cannot be spent unless the AID officer 

approves them. It’s not a DOD edicts but a practice of field commanders. All the commanders said, ‘‘We’re not making any of those 

mistakes again.’’ The AID officers know what they’re doing. They 

have to approve everything that’s done in the PRTs, even if it’s 

DOD funds, because they know what they’re doing. 

The military respects our officers in the field. That is being dealt 

with operationally. You know why? Because they want to survive, 

and they want to get the mission done. All of our employees are 

dedicated to doing this right—including our diplomats. 

Senator CORKER. Professor. 

Ms. LANCASTER. I just have a footnote. I watch young people 

coming through master’s programs, interested in doing development. And I am seeing an uptick in master’s students who have 

some military background and want to shift into the development 

field. They will span those two cultures. 

39 

There is a very can-do military culture, which makes you feel 

really good, when things can be done quickly and expeditiously. I 

think the AID culture is one that sees more complexities in the 

world, because, in fact, that’s what they have to face. Those two 

cultures exist. 

There are actually two cultures in USAID right now. I think 

Andrew might have touched on it. The humanitarian response, 

which is a real can-do culture, and, again, the longer term how-dowe-do-this-right, let’s-take-enough-time-to-do-it. 

But, I don’t think that the cultural differences are insuperable, 

and I think Andrew’s sense is that they are being bridged. 

I do think there are real issues, though, with the involvement of 

the Defense Department. And, again—we’ve talked about it 

already—what is that relationship going to be with AID and with 

State, and how directly involved will they be in delivering assistance? I say to people, I wouldn’t want to drive a tank down Pennsylvania Avenue, the military is not my profession. There is also 

a profession that involves development work. And I think somehow 

we have to—and hopefully you all will take a lead to sort out those 

difficulties there. 

Senator CORKER. Mr. Chairman, I know my time is up. I just 

want to make a statement about PEPFAR. I think many of the 

statements made were dead-on. You know, what I’ve seen in 

PEPFAR that—you know, look, that’s where the money is, right? 

And so, as you watch USAID and, just, in-country teams dealing 

with PEPFAR, there’s this migration of mission creep. I mean, all 

of a sudden everything is about HIV. Everything. I mean, economic 

development—I mean, you can—there’s a chain of—there’s a progression that says that everything in the world contributes to HIV, 

and the reasoning is there, because that’s where the money is and 

that gives us access to money. 

So, I think the comments you made about MCC, and being able 

to separate out those moneys so they’re actually spent exactly in 

that area, is applicable to PEPFAR, also. OK? And I think we have 

this undefined creep that’s taking place. I don’t criticize the people 

in the field, because they’re being entrepreneurs. I mean, they’re 

figuring out a way to get their hands on money to do things that 

they think are important. But, I think as we move through this, 

we’ve got to figure out a way to, again, have people working 

together, but actually stovepipe the money in such a way that it’s 

being spent on those things that we are allocating to be spent on. 

Otherwise, I think we come back, in a decade, and we’re going 

through this all again, because there’s not specificity, if you will, 

in these programs. 

So, I’ll stop there. And, Mr. Chairman, I may leave, but I really 

do thank you for your leadership. I look forward to working with 

you and Senator Casey and others, and truly believe, as you stated 

in your opening comments, that this is something that’s very important to the security of citizens in this country, too. I know that 

we do focus a lot of domestic issues, as the professor mentioned, 

because that’s what our constituents call about, and that’s what is 

on their minds, but somehow or another we’ve got to elevate the 

consciousness in this country that the things you’re working on inVerDate Nov 24 2008 15:21 Apr 13, 2010 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6602 H:\DOCS\USAID.TXT SENFOR1 PsN: BETTY
40 

directly are equally important to their well-being. And I thank you 

for what you do. 

Senator MENENDEZ. Thank you, Senator Corker. 

Senator Casey. 

Senator CASEY. Thank you very much. 

I wanted to just focus on one bill, one issue. Senator Lugar and 

I introduced the Global Food Security Act, and it was just moved 

out of committee yesterday. As many of you know, it’s really 

focused on a couple of areas. One is improving or enhancing the 

coordination between USAID and the Department of Agriculture, 

as well as other agencies. We’re attempting to expand U.S. investment in the agriculture productivity of developing nations. The bill 

also is an attempt to make food assistance programs more flexible. 

And we have authorization language for a $500 million fund for 

U.S. emergency food assistance. 

I was wondering if you could put that in the context of your own 

experience on aid, generally, just in the context of food aid, some 

of the problems you’ve seen, and react to the bill, as well. I’m not 

sure I’m looking for a lot of amendments, at this point, but we’re 

always open to listening. But, to put that in perspective, the problems you’ve seen with food aid and how this or other legislative 

remedies could help. And anything, in addition, that you would 

have, based upon your own experience. 

And, Mr. Natsios, I know that you haven’t been shy today, or 

bashful. [Laughter.] 

Ambassador NATSIOS. Well, sir, I ran—— 

Senator CASEY. My wife’s a Massachusetts—— 

Ambassador NATSIOS [continuing]. The food aid program. 

Senator CASEY [continuing]. Native, by the way. So—— 

Ambassador NATSIOS. Pardon me. 

Senator CASEY. My wife is a Massachusetts native. 

Ambassador NATSIOS. Is she really? Where is she from in Massachusetts? 

Senator CASEY. From Belmont. 

Ambassador NATSIOS. Belmont, not too far from Hollister, where 

I come from. Yes. 

Senator CASEY. Yes. So, we’re—I’ll tell her about our meeting 

today. 

Ambassador NATSIOS. OK. [Laughter.] 

I ran the food aid programs 20 years ago, in AID, and when I 

was at World Vision, I was in charge of World Vision’s food programs, funded by the U.S. Government, so I know them, I’ve written articles on food aid issues. 

We proposed, in AID, an amendment, which didn’t get through, 

to allow local purchase of food aid. Food aid now has to be purchased in the United States. And about 30 to 40 percent of the cost 

of food aid is transporting it from the United States to Ethiopia or 

Afghanistan. We put a lot of food aid in Afghanistan. And I don’t 

want to have the whole program local-purchase, but I think a portion of it needs to be flexible. 

Now, I’ll tell you a story, and it’s—this is a true story. We had, 

in Afghanistan, after 2001—after we took control, we defeated the 

Taliban, Karzai took over—we introduced a new seed variety of 

wheat. It’s actually not that new, but it’s drought-resistant, high 

41 

yield, and we tripled production in many areas of Afghanistan in 

early 2002; so much so, they had the biggest wheat crop in history. 

Farmers stopped harvesting it, because the price dropped to 20 percent of the normal level. And it started to rot in the fields. Meanwhile, we introduced 200,000 tons of wheat from our Food for 

Peace Program. My economist said, ‘‘Andrew, you know, if we could 

purchase the 200,000 tons in Afghanistan, the price would have 

gone back up again.’’ You know what happened the next year? 

Those farmers who lost money in wheat, moved to poppy production for heroin, because they said, ‘‘We can make more money, we 

won’t have this happen.’’ And our staff said, ‘‘Andrew, why can’t we 

local-purchase the food that we grew in Afghanistan for the Afghan 

people?’’ 

Dr. Norman Borlaug, who probably saved more lives than anybody in human history—he got the Nobel Peace Prize in 1970 for 

the Green Revolution—he and I wrote an article, for the Wall 

Street Journal, on the local purchase of food aid. If there’s one 

change I would make in the Food for Peace—the agriculture—the 

farm bill, which just went through, it would have been to allow 

this. Congress allowed a $12 million program over 5—$60 million 

program over 5 years as a test, run by USDA, overseen. Now, I 

have to say, USDA has a little different interest than AID in this. 

Their view is they market American products abroad. I was troubled that it was structured this way. But, it’s a plus. 

I don’t know what’s in this bill. Senator Lugar, who I have great 

respect for—I understand there’s more flexibility for our officers in 

that bill, to spend this money. If that’s the case, it would be a big 

boon, because we can marry, then, the food programs with the agricultural programs and stimulate local production that we then purchase for our emergency programs. It makes great sense, developmental sense. 

Senator CASEY. We’d invite your comments on it, thank you. 

Mr. RADELET. If I can add to that, I applaud your efforts and 

Senator Lugar’s efforts. And Andrew has spoken on the food-aid 

side. I just want to underscore—and I’m—I know he would agree, 

and I think Carol would agree, as well—the emphasis on agricultural productivity. It is remarkable and distressing how there has 

been a drop in funding—from all donors, not just the United 

States—for supporting agriculture, in the last 20 years, which is 

just at the core of so many development issues, from rural poverty 

to food, nutrition, to, frankly, mitigating HIV/AIDS, both in terms 

of prevention, to give people a livelihood, but also to strengthen 

people’s nutrition and their ability to withstand the virus. Funding 

has dropped enormously, and it’s time that we get back into it. We 

have such tremendous expertise in our land grant universities and 

other places, where we can move both on the technological front, 

but also in terms of getting those technologies out to the field. 

Now, we can’t do this alone. And here is a great place where we 

need to coordinate our bilateral assistance with our multilateral 

assistance, because one of the keys to agricultural productivity and 

fighting rural poverty is infrastructure, is roads, is getting roads 

out to the rural areas to connect people to markets, both to make 

their inputs cheaper, but also to give them markets so that they 

can sell their goods. I’m not sure it makes sense for USAID to get 

42 

back into major road-building, but the World Bank and the African 

Development Bank and the Asian Development Bank should have 

those kinds of expertise. And it’s—I think it’s a good example 

where—but, they don’t have the expertise in developing new agricultural technologies, which we do. So, there are opportunities here 

to work together. 

And a great example of the beginnings of this is with the MCC 

and the Gates Foundation. I happened to be at a reception last 

week where Bill Gates was there and was talking about the beginnings of their partnership, the Gates Foundation partnership with 

the MCC in Tanzania on, particularly, this score. Here, the MCC 

is actually building the roads, but doesn’t have the technological 

capacity. The Gates Foundation is working on ag technology, and 

they’re working together. We can do that more broadly to really try 

to address, much more significantly, the problems in agricultural 

production. 

Ambassador NATSIOS. I agree with everything that Steve said. 

Ms. LANCASTER. Yes, can I just—— 

Senator CASEY. Thank you 

Ms. LANCASTER [continuing]. Say a word? 

Senator CASEY. Sure. 

Ms. LANCASTER. Just two quick points. 

U.S. support for agriculture used to be very high. It was in the 

1980s that it came down, down, down. And the reason is, the world 

food crisis that we talked about, in the 1970s, vanished. And so, 

the interest in it diminished, and the political support for putting 

efforts into promoting agricultural production in poor countries 

diminished. And I saw it happening when I was in AID, too. 

I don’t want to be an advocate for congressionally mandated programs, but I think interest in Congress in this issue is important. 

The one piece that I don’t think anybody quite mentioned was 

agricultural research. It’s probably had the biggest payoff of any 

aid moneys anywhere, but it’s often a long-term investment, and 

sometimes it’s risky. 

I think we came close to eliminating U.S. contributions to international agricultural research, a year or two ago, just before the 

recent food crisis, broke. There needs to be some more attention to 

that, because it’s an ongoing problem. You solve one agricultural 

problem, and you’ve got another one right behind it for further 

research. I hope there will be a piece in that bill that talks about 

that. 

Thanks. 

Senator CASEY. Thank you very much. 

Senator MENENDEZ. Well, thank you, Senator Casey. 

Thank you all. Let me thank the witnesses for their testimony. 

I think it’s a great start to our work. It was very thoughtful. 

Ambassador Natsios, on behalf of all of us, thank your son for 

his service to our country. 

The record will remain open for 2 days so that committee members may submit additional questions to the witnesses. And we ask 

the witnesses to respond as expeditiously as they can to these 

questions. 

Senator MENENDEZ. And seeing no one else seeking recognition, 

the hearing is adjourned. 

43 

[Whereupon, at 11:18 a.m., the hearing was adjourned.] 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

RESPONSES OF PROFESSOR ANDREW NATSIOS TO QUESTIONS SUBMITTED BY SENATOR

JIM DEMINT

FOREIGN AID ADMINISTRATION

Question. It has been suggested that USAID should be elevated to an independent 

Cabinet Agency, as in Great Britain. But the result there indicates that such a step 

would make it more difficult to shape development programs in a way that would 

advance the national interest and make for a coherent strategy. What are your 

views? 

Answer. I believe that development is an instrument of national power, soft 

power, with profound implications for U.S. national interest and that its subordination to the State Department means the necessary development voice of USAID is 

not being heard. Some of the worse mistakes made by the USG in Iraq and Afghanistan were because the USAID policy voice was never heard (because we weren’t in 

the meetings) or went through State or DOD and became hopelessly muddled and 

emasculated before it got to the White House for decision. I could give many practical examples of why this is the case. The DFID model would avoid that. The early 

years of the DFID reorganization in 1998 led to the agency trying to stay independent of the British foreign policy apparatus, but the past 3 or 4 years it is much 

better integrated. I think the way to organize the U.S. system is to put a much 

stronger and larger USAID at the policy table with a seat at all national security 

council meetings involving developing countries. That would ensure their views and 

expertise are used properly, but also that they are held accountable for carrying out 

the aid portion of a national security strategy. But to make this work USAID would 

have to be independent of the State Department Diplomacy and development are 

completely different from each other, while they both need each other to be successful one should not be subordinated to the other. 

Question. What are your thoughts on the F Bureau and the Director of Foreign 

Assistance position, and how would you optimize the relationship between USAID 

and the State Department to ensure an appropriate balance between priorities and 

resources for development and diplomacy? 

Answer. The F Bureau did some very damaging things and some very good things. 

The Bureau was created by cutting the policy and budgeting head of USAID off— 

the PPC Bureau within USAID was gutted and all the staff moved to State to the 

F Bureau which deprived the agency of its intellectual and strategic nerve center. 

This was a disaster for the development function in the U.S. Government as the F 

Bureau is not being used for strategic purposes but for budgeting. The F Bureau 

did build a new budgeting system (which I had started the year before I retired as 

Administrator) and management information system which is excellent and badly 

needed. In any reorganization these new budgeting and information management 

systems should be kept in place—but transferred to USAID. Gordon Adams, who I 

believe teaches at American University and may have helped design the new system, but certainly is a defender of the system, has spoken and written widely about 

it. He is a fine scholar, but no development expert, and has written some deeply 

flawed things about the F Bureau. The things he likes most about it are the most 

destructive. For example, the decentralized nature of the USAID program which 

allowed us to have a very influential role in the development of poor countries has 

been compromised by this new system of highly centralized decisionmaking. All development like all politics is local, having people in the State Department making 

decisions on what should or should not be done in rural Tanzania is crazy and violates all of what we know about good development practice. What in heaven’s name 

does the State Department know about food security in India or rural Africa, and 

yet they are making profound decisions about resource allocation that are completely outside their technical expertise. In this respect the F process is a disaster. 

That does not mean the new budgeting and management information system should 

be eliminated, it is the one good thing that came out of an otherwise bad experience. 

Question. How should the President organize the administration to support the 

three pillars of national security, defense, diplomacy, and development to best support U.S. interests abroad? 

44 

Answer. Recentralize all foreign aid programming and resource allocation back 

into a much better staffed USAID as it was during the cold war. Separate USAID 

and its business systems from the State Department as it was during the cold war. 

Put USAID on the national security council, and create an interagency coordinating 

committee of DOD, State, and USAID to decide on resource allocation by region and 

country for the geostrategic portion of our aid budget. Much of what USAID does 

by law and practice is not supposed to be driven by DOD or State. For example, 

the HIV/AIDS program, polio eradication, famine relief budget allocations are decided by a need-based formula based on infection rates or mortality rates in the case 

of famine relief. Why DOD or State would be involved with this makes little sense 

to me. It ought to be a clinical and quantitative measurement matter, not diplomatic 

or defense driven. But we clearly have situations where foreign aid is essential to 

implementing a peace agreement, or stopping the spead of terrorist networks, shoring up friendly governments under attack by terrorist or narcotics syndicates. In 

these cases clearly there is a need to have State and DOD drive the broader process 

of resource allocation, but not the management of the program in the country itself. 

This should be based on the account (ESF in the case of State and the section 1206 

in the case of DOD) out of which the money is being spent, as it was during the 

cold war. Aid is allocated based on four criteria: Need (of the people or society we 

are trying to help), performance (how productive is the aid and how reformed is the 

country we are assisting), risk (are their future risks we are trying to protect 

against such as an Avian flu pandemic) or interest (the foreign and strategic policy 

interest of the U.S. Government). It is in the last area State and DOD must be involved in aid decisionmaking. 

Question. It has been demonstrated that our U.S. ambassadors have the ability 

to distribute only 5 percent of U.S. aid in their respective countries. Do you believe 

that our ambassadors, in close coordination with regional experts at the State 

Department and USAID, should have control of a larger percentage of assistance? 

Answer. I don’t know what you mean by this question. What do you mean by the 

word ‘‘control’’? If you mean should ambassadors decide how much money the country they are posted to should get, this makes no sense since every ambassador 

would ask for massive increases in their aid budgets. If you mean the allocation by 

sector of aid money once it gets to the field, that would require OMB and the Congress to end all sector accounts and earmarking (HIV/AIDS, child and mother 

health, food aid, education etc.) and leave these decisions to be made in the field 

which is unlikely to happen (we could abolish much of the F Bureau if we did this). 

I would support a process by which developing countries (if they are governed reasonably well) once they knew how much their country was getting in over all aid 

would negotiate with the USAID mission how the money would be allocated by sector and by strategic objective, and then get the ambassador’s approval for this. That 

would be the ideal process, but it is unlikely to happen because of the F process 

(which has centralized whatever local decisionmaking discretion existed in the old 

system). The only aid program like this is President Bush’s MCC which leave decisionmaking to the countries getting the aid (with some limitations of course), which 

is the best system. If you mean of ambassadors controlling aid, that they should decide how aid money is spent in terms of partner organizations and implementation 

mechanisms it would probably lead to serious abuse of funds, it would mean we 

would not achieve strategic development objectives (congressional oversight committees, the GAO, OMB, and the inspector general’s demand that aid be managed 

based on country strategic plans). Most ambassadors are reactive, that is local 

groups come to them asking for a grant or financial help and they like to say yes. 

This is hardly a way of making aid decisions. 

Question. USAID and DOD Provincial Reconstruction Teams fall under different 

rules of engagement complicating and sometimes preventing partnership in development and reconstruction efforts in Iraq and Afghanistan. Ambassador Crocker, 

under the advice of General Petraeus, adjusted some of the rules of engagement enabling USAID and FSOs to accompany DOD teams on patrols. Despite USAID and 

FSOs volunteering to participate on the patrols, mid-level management prevented 

their participation. How should the government transform the culture of the State 

Department and USAID to address the 21st century environment and eliminate barriers to cooperation with the DOD? 

Answer. The culture of State and USAID is driven by Federal law, and congressional demands to minimize risk to our embassies and aid missions abroad. The 

Federal law passed after the Embassy bombing of 1998 makes security, not getting 

the job done by our aid officers and diplomats, the first priority. USAID officers 

refer to the USAID mission in Kabul as the prison because it is so difficult for offiVerDate Nov 24 2008 15:21 Apr 13, 2010 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6621 H:\DOCS\USAID.TXT SENFOR1 PsN: BETTY
45 

cers to leave the compound and as a result they can’t get out to see the projects 

in the provinces. The law needs to be completely overhauled as it is a major impediment to restaffing our aid programs and embassies abroad and getting aid work 

done in insecure environments. Ryan Crocker and General Petraeus were right in 

what they did. The law is being used to downsize our diplomatic and aid presence 

abroad, when we should be increasing our presence. The notion that every time an 

aid or state officer is murdered abroad there has to be a commission of inquiry is 

crazy—if we did that to DOD we might as well withdraw from the battlefield. The 

world has changed since 1998 and the law is caught in a time warp. 

FOREIGN ASSISTANCE

Question. President-elect Obama made commitments to ‘‘elevate, empower, consolidate, and streamline’’ U.S. development programs. With foreign assistance programs scattered across more than 20 different Federal agencies, how should the government address inefficiencies and incoherence within the current structure in order 

to help maximize the impact of U.S. assistance and instability that threaten prosperity and security globally and at home? 

Answer. During the cold war, OMB and the White House enforced a standing rule 

that no aid money could be spent abroad unless it was controlled and managed by 

USAID. If USAID needed a technical expert on, say, seismology from the U.S. geological survey to help with earthquake monitoring they would sign a PASA interagency agreement (in fact USAID has had such an agreement for 30 years). I would 

return to the old discipline which worked quite well from what OMB career staff 

told me. 

Question. What metrics should the U.S. Government use to gauge the success of 

U.S. foreign assistance programs? If the metrics are not met would you advocate for 

the elimination of a program? 

Answer. The F process has created metrics for every item in the aid budget, so 

the metrics exist. I do not like them myself. This is not the place to critique the 

use of metrics as it would take pages. I have a chapter in a book I am now writing 

on the very damaging affect metric-based management of aid programs has on innovation, creativity, and new thinking. Some of the best aid programs are not easily 

measured by metrics. Some of the worst aid programs have very appealing metrics 

but are developmentally very unsound and counterproductive. Metrics is seriously 

overrated and yet the aid community is moving toward them. 

Question. Over the past five decades, the Foreign Assistance Act of 1961—which 

was originally written and enacted to confront the cold war threats of the 20th century—has swelled into a morass of rules, regulations, objectives, and directives. Foreign policy experts on both sides of the aisle—including former USAID administrators from both Democratic and Republican administrations—have said writing an 

entirely new Foreign Assistance Act is central to clarifying the mission, mandate, 

and organizational structure for U.S. foreign assistance. The Project on National 

Security Reform also recently recommended a ‘‘comprehensive revision of the Foreign Assistance Act of 1961.’’ 

• How do you propose we redesign the foreign assistance of the U.S.? Who do you 

believe are the key players that could ensure reforms meet the needs of the 21st 

century? 

Answer. The Foreign Assistance Act should be rewritten, but I think it will be 

politically very difficult to get through the Congress. USAID has the most expertise 

in the area, but State and DOD clearly have a major role as well. The NGOs, contracting firms, and think tanks have some expertise that should be used. 

• Where do you believe the Millennium Challenge Corporation fits into any new 

restructuring? 

Answer. The chair of the MCC Board should be the USAID administrator, but the 

board should be kept as an entity. The field offices of the MCC should be merged 

into the USAID missions where many of them sit physically anyway. Many of the 

MCC field directors are retired USAID officers, so this could happen without a big 

culture conflict in the field. I think the MCC Washington staff should be more narrowly focused on reviewing compacts for presentation to the board for approval and 

then conducting independent evaluations of how the compacts are doing. The technical assistance to local governments to prepare compacts, implementation and coordination with local governments in the field should be transferred to the field 

USAID missions. 

46 

Question. Do you think the government should link U.S. foreign aid to human 

rights conditions? For example, Egypt, the second largest recipient of U.S. aid since 

1979. They persist in major abuses of human rights and religious freedom. Should 

the government consider conditioning aid to Egypt based on the government meetings certain benchmarks like the release of political prisoners, lifting of media restrictions, etc.? 

Answer. Our U.S. Ambassador to Egypt, DOD, and the State Department would 

strenuously object. The Egyptian Government will simply not accept the funding 

and the aid program would be shut down. I think a better way would be to put into 

the new Foreign Assistance law that any government abusing human rights using 

some objective measurement should not get any budget or sector support from the 

U.S. aid program (money that goes directly into the local government’s treasury), 

which means the aid program would be completely run through NGOs, contractors, 

and private universities not through the local government. 

FOREIGN AID REFORM

Question. Senator Clinton committed President Obama to ‘‘enhancing our foreign 

assistance architecture to make it more nimble, innovative, and effective.’’ What 

specific ideas and actions do you believe are necessary to achieve these goals? 

Answer. We would have to completely overhaul the very onerous regulatory apparatus in Washington set up to control the Federal bureaucracy run by OMB, GAO, 

IG, and congressional oversight committees which micromanage every aspect of our 

aid program. I am writing a chapter in my book on foreign aid on the consequences 

to innovative and effectiveness of this regulatory system which is a gotcha culture 

which penalizes risk taking, experimentation, and innovation. And has created an 

extremely complicated system of controls to avoid any problems—if you innovate you 

will have problems and failures which is in the nature of innovation. 

METRICS

Question. In addition to what metrics we should use to gauge success, what criteria should the government use to determine elimination or reduction of foreign 

assistance programs? 

Answer. I am a conservative, but I believe in the new world of threats this country faces cutting the aid budget makes as much sense as cutting the defense (I am 

a former army officer) budget. We should be talking about making aid more effective, not cutting it. It is a best defense against the darker forces of globalization (90 

percent of globalization is very productive and good, but it has a very dark side of 

terrorist networks, drug cartels, human trafficking, illegal arms markets, money 

laundering, smuggling, etc.). 

Question. Some of the largest criticism regarding foreign aid regards distribution 

monitoring and management. What do you believe is the proper balance between 

rapid delivery of aid and accountability and oversight to ensure aid does not find 

its way to terrorist organizations? How can we build a monitoring-and-evaluation 

capability at USAID that is independent, rigorous, and reliable across U.S. foreign 

assistance activities, that will contribute to restoring the United States as a credible 

partner, and that will ensure U.S. taxpayer funds are invested well? Is there any 

way to leverage low-cost technology to track aid distribution? 

Answer. The State of the art in monitoring and evaluating the quality of aid programming according to many aid professional around the world was the CDIE in 

USAID which has been strangled by budget cuts and personnel losses from the mid1990s on. I tried to revive CDIE but we could not get funding to do it. The monitoring of aid programs to ensure money is not stolen or falls into the wrong hands 

(which is different than the monitoring and evaluation function which is about the 

quality and productivity of aid programs) is already built into the aid system, which 

has probably less leakage than any aid program in the world. This function may 

be so developed it is reducing innovation and experimentation in programming aid 

funds. If you look at the more than 100 audits done of recontruction in Iraq USAID 

did much better than any of the other Federal departments involved. You might also 

want to look at the SIGIR final report which again complements USAID on what 

it did right in Iraq under very difficult secure conditions. 

47 

RESPONSES OF STEVEN RADELET TO QUESTIONS SUBMITTED BY SENATOR JIM DEMINT

FOREIGN AID ADMINISTRATION

Question. It has been suggested that USAID should be elevated to an independent 

Cabinet agency, as in Great Britain. But the result there indicates that such a step 

would make it more difficult to shape development programs in a way that would 

advance the national interest and make for a coherent strategy. What are your 

views? 

Answer. Currently, U.S. foreign assistance programs are spread across nearly 20 

agencies with different objectives and implementing procedures. There exists widespread agreement that this fragmented organization undermines the ability of the 

U.S. Government to implement a coherent strategy and to shape development programs in a way that advances the national interests. Moreover, USAID, our lead 

development agency, has been significantly weakened over the years through a loss 

of professional staff and a shift toward contracting out services rather than directly 

overseeing and implementing programs. 

As a result, there is a clear need to build a strong, consolidated, and streamlined 

development agency to elevate our development programs and make our foreign 

assistance programs as efficient and effective as possible. There are several options 

that could help achieve this goal, including a serious effort to rebuild and re-professionalize USAID and fold into it other programs, create a strong successor agency 

that consolidates programs, or over time create a Cabinet-level agency for development, similar to the way in which the EPA consolidated many disparate programs 

and became a strong Cabinet agency over time. The key objective should not be a 

particular institutional form, but to build a strong and professional agency that consolidates programs, reduces redundancy and duplication, enhances coordination, and 

makes every dollar we spend more effective. Such an agency—with the budgetary 

authority and mandate to lead policy formulation, coordinate with programs and 

policy that remain in other departments, and to manage foreign assistance programs in the field—would help reduce bureaucracy, eliminate waste, increase efficiency, and streamline decisionmaking. 

A critical first step toward a longer term agenda of consolidation of the major foreign assistance programs is the strengthening and re-professionalization of USAID. 

For USAID to serve as the ultimate base of future consolidation, its capacity must 

first be bolstered so that it can lead as the preeminent development voice of the U.S. 

Government. 

Question. What are your thoughts on the F Bureau and the Director of Foreign 

Assistance position, and how would you optimize the relationship between USAID 

and the State Department to ensure an appropriate balance between priorities and 

resources for development and diplomacy? 

Answer. The creation of the F Bureau and the Director of Foreign Assistance position in 2006 were well-intentioned first steps toward the goal of better coordinating 

our foreign assistance programs. Despite some achievements in framing and reporting of foreign aid, however, the creation of the F Bureau came at the expense of 

a weakened USAID and has divorced on-the-ground implementation of programs 

from the important policy and budgetary decisions that underpin them. As a result, 

we now know better where and for what our foreign assistance dollars are going, 

but the ability to better plan for the most effective use of those resources to meet 

U.S. objectives has been diminished. 

Building a strong and capable development agency will require the provision of 

autonomy of development from our (distinct) diplomatic and defense efforts; the restoration of USAID’s authority over its own budget; and shifting the policy function 

from the F Bureau back to USAID, to enable long-term thinking and planning on 

development policy. 

Question. How should the President organize the administration to support the 

three pillars of national security, defense, diplomacy, and development to best support U.S. interests abroad? 

Answer. President Obama has expressed his commitment to elevate development 

as a ‘‘smart power’’ national security approach, alongside defense and diplomacy. As 

a real signal of the importance of development in national security, President 

Obama should name a strong, capable leader as USAID Administrator as soon as 

possible and name the Administrator as a member of the National Security Council 

and other high-level interagency bodies. At a minimum, the administrator should 

be invited to all NSC Principals Committee meetings dealing with international economic issues. This will provide professional development perspectives and policy 

48 

input at the highest policy-setting table, independent from but complementary to 

diplomatic and defense. 

Question. It has been demonstrated that our U.S. Ambassadors have the ability 

to distribute only 5 percent of U.S. aid in their respective countries. Do you believe 

that our Ambassadors, in close coordination with regional experts at the State 

Department and USAID, should have control of a larger percentage of assistance? 

Answer. Currently, our foreign assistance is unable to respond flexibly to the priorities and changing conditions in country and on the ground. This lack of flexibility 

and adaptability undermines the effectiveness of our foreign assistance programs. 

Part and parcel of our efforts to make our foreign assistance programs more contextdriven and effective should be the granting of more discretion of foreign assistance 

dollars to country missions and embassies. Such reforms would enable USAID missions to respond more effectively and swiftly to crises—whether they be violent conflicts, natural disasters, or health pandemics—and to evolving priorities on the 

ground. These reforms should also build in accountability measures to assure that 

funds spent are used effectively and help achieve broader U.S. goals. 

Question. USAID and DOD Provincial Reconstruction Teams fall under different 

rules of engagement complicating and sometimes preventing partnership in development and reconstruction efforts in Iraq and Afghanistan. Ambassador Crocker, 

under the advice of General Petraeus, adjusted some of the rules of engagement 

enabling USAID and FSOs to accompany DOD teams on patrols. Despite USAID 

and FSOs volunteering to participate on the patrols, mid-level management prevented their participation. How should the Government transform the culture of the 

State Department and USAID to address the 21st century environment and eliminate barriers to cooperation with the DOD? 

Answer. There is little doubt that civilian-military partnerships are an important 

reality in the efforts to bring stability and development to countries such as Iraq 

and Afghanistan, and increasingly Pakistan as well. The military’s tremendous 

logistical, transport, and human resource capacity make it a natural partner in 

some global development initiatives, and in particular in immediate post-conflict 

and natural disaster situations. However, problems can arise in this partnership. 

When the line between military and civilian personnel becomes blurred, for 

instance, civilian development workers can be endangered. Coordination problems 

can also arise, as pointed out in the example of cultural barriers. To strengthen 

civil-military partnerships on the ground in countries on the ground will require a 

bolstering of civilian capacity and more active coordination in-country by the 

ambassador. 

FOREIGN ASSISTANCE

Question. President-elect Obama made commitments to ‘‘elevate, empower, consolidate and streamline’’ U.S. development programs. With foreign assistance programs scattered across more than 20 different Federal agencies, how should the 

Government address inefficiencies and incoherence within the current structure in 

order to help maximize the impact of U.S. assistance and instability that threaten 

prosperity and security globally and at home? 

• What metrics should the U.S. Government use to gauge the success of U.S. foreign assistance programs? If the metrics are not met would you advocate for the 

elimination of a program? 

Answer. A key component of revamping the way the United States does development must be the establishment of a good system to evaluate the real, long-term 

impacts of our development investments. To ensure accountability for funds spent, 

a much stronger monitoring and evaluation (M&E) and impact evaluation process 

must be established, aimed to keeping programs on track, guiding the allocation of 

resources toward successful activities and away from failures, and ensuring that the 

lessons learned—from successes and failures alike—inform the design of new programs. At the performance level, a monitoring and evaluation system should be designed in close coordination with State, USAID, MCC, and PEPFAR to aggregate 

to top-line objectives and standardize indicators across foreign aid agencies to both 

effectively report on the impact of foreign aid and to reduce unnecessary data collection and reporting requirements from the field. Programs that do not meet objectives should be revamped and adjusted, using feedback from the evaluation process. 

Programs that continue to fail to meet objectives, even after efforts to adjust the 

program, should be discontinued, with funding instead going to programs that are 

achieving success. 

49 

Question. Over the past five decades, the Foreign Assistance Act of 1961—which 

was originally written and enacted to confront the cold war threats of the 20th century—has swelled into a morass of rules, regulations, objectives, and directives. Foreign policy experts on both sides of the aisle—including former USAID administrators from both Democratic and Republican administrations—have said writing an 

entirely new Foreign Assistance Act is central to clarifying the mission, mandate 

and organizational structure for U.S. foreign assistance. The Project on National 

Security Reform also recently recommended a ‘‘comprehensive revision of the Foreign Assistance Act of 1961.’’ 

• How do you propose we redesign the foreign assistance of the United States? 

Who do you believe are the key players that could ensure reforms meet the 

needs of the 21st century? 

Answer. Rewriting the FAA is central to building a strong and capable development agency. Without a restructuring of authorities and a rationalization of restrictions, whether they be congressional earmarks or Presidential directives, no broadbased foreign assistance modernization initiative can be fully implemented without 

major legislative modifications. Fundamentally, rewriting the FAA will require a 

‘‘grand bargain’’ between the executive branch and Congress, reflecting a shared 

vision of the role and management of U.S. foreign assistance. The executive branch 

must be provided the requisite authorities to respond to a rapidly changing world, 

while at the same time the rightful and effective legislative oversight is ensured. 

To be successful, creation of a new FAA will require significant leadership and 

investment from the executive branch, where the legislation should originate, but 

only in active partnership with congressional champions of foreign assistance modernization. Responsible and interested parties in both branches must own this process if it is to succeed. It should also help forge a more positive and constructive relationship through which Congress will be more willing to extend greater flexibility 

to the Executive, while receiving greater administration attention to their priorities 

and better tools for exercising policy and program oversight. 

• Where do you believe the Millennium Challenge Corporation fits into any new 

restructuring? 

Answer. The Millennium Challenge Corporation (MCC) was described by Secretary Clinton in her Senate confirmation hearing as ‘‘a very creative and innovative 

approach to foreign aid.’’ Launched 5 years ago, the MCC is one of the U.S. Government’s most promising ‘‘smart power’’ national security tools, and its innovative 

approach to foreign assistance complements other key U.S. development programs, 

including USAID, PEPFAR, and the Multilateral Development Banks. The MCC has 

made considerable progress since its inception, and is showing great potential 

toward fulfilling its mission of supporting poverty reduction through sustainable 

economic growth. 

In the absence of significant reforms to USAID and the Foreign Assistance Act, 

the MCC should remain where it is. However, a restructuring of foreign assistance 

programs could lead in the medium to long term—under the right circumstances— 

to a consolidation of foreign assistance programs, including the MCC, into a significantly empowered and strengthened USAID, or a successor agency. At the heart of 

this consolidation would be efforts to improve coordination, reduce bureaucratic 

costs, and provide cross-fertilization of ideas and innovations. To preserve the integrity of the MCC’s innovative approach to foreign assistance and to ensure its effectiveness, the unique components of the MCC model (including country ownership, 

predictable financing, policy-based selectivity, and public-private governance model) 

should be maintained. 

Question. Do you think the Government should link U.S. foreign aid to human 

rights conditions? For example, Egypt the second largest recipient of U.S. aid since 

1979. They persist in major abuses of human rights and religious freedom. Should 

the Government consider conditioning aid to Egypt based on the government meeting certain benchmarks like the release of political prisoners, lifting of media 

restrictions, etc.? 

Answer. Since the launch of the Millennium Challenge Account 5 years ago, we 

have seen already a shift in our foreign assistance dollars being awarded to those 

countries with sound governance and a clear track record of investing in people and 

respecting human rights. In that sense, many of our development dollars are 

already being directed to those countries with proven performance in areas like control of corruption, sound governance, and human rights. In other instances, foreign 

assistance money is distributed by the State Department for purposes other than 

strictly development objectives, and often to countries with less sound human rights 

and governance records. In these situations, a different political calculus is made 

50 

and issues like human rights are considered alongside other political and economic 

objectives. On ongoing challenge that must be considered on a case-by-case basis is 

our support to countries that may not fully adhere to all of our principles, but at 

the same time provide vital actions in support of other key foreign policy objectives. 

FOREIGN AID REFORM

Question. Senator Clinton committed President Obama to ‘‘enhancing our foreign 

assistance architecture to make it more nimble, innovative, and effective.’’ What 

specific ideas and actions do you believe are necessary to achieve these goals? 

Answer. Other than actions already described above on strengthening USAID, 

possible restructuring of our foreign assistance agencies, rewriting the FAA, and 

strengthening our monitoring and evaluation programs, there are many promising 

innovations in foreign assistance. One such innovation is the Advanced Market 

Commitments (AMCs) for vaccines and other applications. Through an AMC, donors 

could make a commitment in advance to buy vaccines if and when they are developed, which would create incentives for industry to increase investment in research 

and development. New commercial investment would complement funding of 

research and development (R&D) by public and charitable bodies, accelerating the 

development of vital new vaccines for the developing world. 

Another promising innovation is cash-on-delivery programs, a new form of aid in 

which donors would commit ex ante to pay a specific amount for a specific measure 

of progress. In education, for example, donors could promise to pay $100 for each 

additional child who completes primary school and takes a standardized competency 

test. The country could then choose to use the new funds for any purpose: to build 

schools, train teachers, partner with the private sector on education, pay for conditional cash transfers, or for that matter build roads or implement early nutrition 

programs. This innovative approach would place full decisionmaking about the use 

of funds in the hands of developing country governments, letting them determine 

the best way to achieve the outcome recipient and donor both want: a quality education for all. 

METRICS

Question. In addition to what metrics we should use to gauge success, what criteria should the government use to determine elimination or reduction of foreign 

assistance programs? 

Answer. A stronger monitoring and evaluation (M&E) system would enable the 

Government to assess whether foreign assistance programs are achieving their 

objectives and impact on the ground, and make decisions on redesigning, refocusing, 

eliminating, or reducing funding accordingly. In addition to the evaluation of the 

impact of a program, the U.S. Government has begun to apply an additional set of 

criteria in determining eligibility and elimination of foreign assistance programs. 

Since the launch of the MCC 5 years ago, for instance, the United States has applied a very rigorous and objective set of criteria to determine eligibility and also 

elimination of MCC compact and threshold program assistance. These include 17 

indicators that measure a country’s commitment to promote political and economic 

freedom, invest in education and health, the sustainable use of natural resources, 

control of corruption, and respect for civil liberties and the rule of law. In several 

instances, the MCC has terminated program funding for countries that have failed 

to meet these objective indicators. 

Question. Some of the largest criticism regarding foreign aid regards distribution 

monitoring and management. What do you believe is the proper balance between 

rapid delivery of aid and accountability and oversight to ensure aid does not find 

its way to terrorist organizations? How can we build a monitoring-and-evaluation 

capability at USAID that is independent, rigorous, and reliable across U.S. foreign 

assistance activities, that will contribute to restoring the United States as a credible 

partner, and that will ensure U.S. taxpayer funds are invested well? Is there any 

way to leverage low-cost technology to track aid distribution? 

Answer. Quality monitoring and evaluation (M&E) are critical components of 

effective development assistance, paving the way for achieving better results, bolstering transparency, and sharing knowledge and learning. M&E informs program 

managers whether a desired result is or is not being achieved and also why. 

To pave the way for stronger, more rigorous, and more reliable M&E at USAID, 

an independent office for monitoring and evaluating foreign assistance programs 

should be established. The office should be responsible for: setting M&E standards, 

training, conducting external studies, and collecting and making public all evaluations for the sake of transparency and learning. The MCC model is a best-practice 

51 

in this regard and could be applied more broadly across other agencies. An M&E 

system should be built that enables the aggregation to top-line objectives and standardizing across foreign aid agencies. All data and evaluations should be made public, including budget process data at each stage—request, passback, 653a, and final 

appropriation. 

It is crucial that measures of ultimate impact be conducted independently of the 

designers and implementers of the programs. For that reason, the United States 

should support and ultimately join the International Initiative for Impact Evaluation (3IE), which brings together foreign assistance providers from around the 

world to provide professional, independent evaluations of the impact of development 

initiatives. 

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