U.S. Foreign Aid to East and South Asia: Selected Recipients
Released: 2008-10-08T00:00:00

Overview

New Approaches to Foreign Aid

The United States acts to advance U.S. foreign policy and national security goals and respond to global development and humanitarian needs through its foreign assistance programs. Following the September 2001 terrorist attacks, foreign aid gained importance as a "vital cornerstone," along with diplomacy and defense, in U.S. national security strategy. The Bush Administration reoriented foreign assistance programs, particularly to "front line" states in the war on terrorism. For many countries, the U.S. government directed not only increased security and military assistance but also development aid for counterterrorism efforts, including programs aimed at mitigating conditions that may make radical ideologies and religious extremism attractive, such as cycles of violence, poverty, limited educational opportunities, and ineffective or unaccountable governance.

In 2007, the Bush Administration restructured U.S. foreign aid programs to better serve the goal of transformational development , which places greater emphasis on U.S. security and democracy building as the principal goals of foreign aid. Toward these ends, the new Strategic Framework for U.S. Foreign Assistance divides aid programming among five objectives: peace and security; governing justly and democratically; investing in people; economic growth; and humanitarian assistance. The Millennium Challenge Account (MCA), established in 2004, promotes these objectives by rewarding countries that demonstrate good governance, investment in health and education, and sound economic policies.

Critiques

According to some analysts, recent U.S. foreign policy trends have weakened programs and institutions that specialize in basic development. Some policy-makers have expressed concern that transformational development and MCA funding priorities have taken resources away from traditional programs, particularly in countries that contain lesser security threats to the United States or where governments do not meet various U.S. performance criteria. Other analysts argue that promoting democracy in some countries prematurely may result in a waste of aid. According to one study, insufficient funding for foreign assistance objectives has reinforced a "migration of foreign aid authorities and functions to the Department of Defense."

Funding Trends

Foreign operations appropriations declined from a peak in 1985 to a low in 1997, after which they began to grow again. Many of the fluctuations in aid flows over the past 25 years can be attributed to U.S. foreign policy responses to events such as natural disasters, humanitarian crises, and wars and to U.S. military assistance and other security initiatives in the Middle East. Since 2001, U.S. assistance to front line states in the global war on terrorism and Iraq war-related funding have propelled foreign aid funding to new highs.

Other sources of growth include the Millennium Challenge Account (MCA) and the President's Emergency Plan for AIDS Relief (PEPFAR). Four Asia-Pacific countries are eligible to apply for MCA assistance—East Timor, Mongolia, Sri Lanka, and Vanuatu—while two countries—Indonesia and the Philippines—have been designated as "threshold," qualifying them for assistance to help them become eligible for MCA funds. In October 2007, the Mongolian government and the Millennium Challenge Corporation (MCC) signed a five-year, $285 million agreement. Vietnam is the largest Asian recipient of Global HIV/AIDS Initiative (GHAI) funding under PEPFAR ($118 million between 2005 and 2007).

The war on terrorism has reoriented foreign assistance priorities in Asia and accelerated a trend toward increased aid to the region that began in 2000. Throughout the 1990s, U.S. assistance to Asia fell due to the ebbing of Cold War security concerns, nuclear proliferation sanctions, and favorable economic and political trends. For example, the withdrawal of U.S. military forces from the Philippines, nuclear proliferation and other sanctions against Pakistan, and the reduced need for economic assistance, particularly in Southeast Asia, contributed to declines in U.S. aid levels. The Asian financial crisis of 1997-98 reversed the downward trend, as USAID funded a regional economic recovery program for Indonesia, the Philippines, Thailand, and Vietnam.

Since the war on terrorism began in 2001, Pakistan, India, the Philippines, and Indonesia became the foci of the Bush Administration's counterterrorism efforts in South and Southeast Asia, due to their strategic importance, large Muslim populations, and insurgency movements with links to terrorist groups. These countries have received the bulk of the increases in U.S. foreign aid (non-food) to Asia (excluding Afghanistan), although funding for aid programs in India and the Philippines reached a peak in 2006 and fell in 2007 and 2008. Beginning in 2004, both Indonesia and the Philippines received new funding for education programs in order to promote diversity, non-violent resolution of social and political conflict (Indonesia), and livelihood skills among Muslims residing in impoverished and conflict-ridden areas (southern Philippines). See Figure 1 .

Both the Bush Administration and Congress have supported increased funding for the Department of State's Human Rights and Democracy Fund (HRDF). Spending for HRDF increased from a yearly average of $13 million in 2001-2002 to $31 million in 2003-2005. The Fund received $71 million in both FY2006 and FY2007. In addition, the U.S. government provided a total of $65 million for National Endowment for Democracy (NED)-administered HRDF programs between 2003 and 2007. Approximately one-third of the Democracy Fund has been allocated to Asia, mostly for rule of law and civil society programs in China.

Foreign Aid Restrictions

In the past decade, the United States has imposed restrictions on non-humanitarian development aid, Economic Support Funds (ESF), and military assistance to some Asian countries in order to pressure them to improve performance related to democracy, human rights, weapons proliferation, foreign debt payments, and other areas. These countries include Burma, Cambodia, China, Indonesia, Thailand, and Pakistan. However, the United States continues to fund non-governmental organizations (NGOs) that run development and democracy programs in some of these countries. Most sanctions on aid to Cambodia, Indonesia, Thailand, and Pakistan have been lifted. The Consolidated Appropriations Act for FY2008 placed human rights conditions upon portions of the U.S. military assistance grants to Indonesia, the Philippines, and Pakistan.

The FY2008 and FY2009 Budgets

The Administration's FY2008 budget request for the East Asian countries that are covered in this report ($453 million) represented a slight increase compared to FY2007 ($442 million). With the exception of Indonesia and Vietnam, assistance to most East Asian countries is to decrease or remain about the same in 2008 compared to 2007. The budget request for Indonesia included large increases in Development Assistance (DA) and Foreign Military Financing (FMF). Global HIV/AIDS Initiative funding for Vietnam is to grow by 36% in FY2008, from $63 million in FY2007 to $86 million.

The FY2008 budget raised assistance to South Asian countries by 8% (from $900 million in FY2007 to $974 million). This reflected greater funding for Bangladesh (mostly Development Assistance) and Pakistan (ESF). In addition, for FY2008, the Administration requested new funding for law enforcement enhancement activities in Nepal and Sri Lanka. Regional Development Mission Asia programs (an estimated $13.7 million in FY2008) support public health efforts, improved water and sanitation services, trade, environmental preservation, and investments in energy efficiency, renewable energy, and clean technologies in East and South Asia.

The Consolidated Appropriations Act, 2008 ( H.R. 2764 , signed into law as P.L. 110-161 ), Division J, made some changes to the Administration's request. These revisions included additional ESF for democracy and humanitarian activities for Burma; funding for democracy, rule of law, and Tibet programs in China as well as U.S.-China educational exchanges; and increased FMF for the Philippines. The spending measure also imposed new restrictions on FMF for Sri Lanka.

Regional Comparisons

Africa remained the largest regional recipient of Child Survival and Health (CSH) and Development Assistance (DA) funding in FY2007. The largest regional recipients of Economic Support Funds in FY2007 were Near East Asia (Middle East) and South and Central Asia (mostly to Afghanistan, with a large portion going to Pakistan as well). The largest recipient of military assistance, by far, was Near East Asia followed by South and Central Asia. These rankings were the same as those for FY2006. See Table 1 and Figures 2-4 .

East Asia

Since 2001, foreign aid spending in East Asia has grown markedly, largely due to counterterrorism efforts in the Philippines and Indonesia. The Philippines, a Major Non-NATO Ally, and Indonesia, a democratizing nation with the world's largest Muslim population, are home to several insurgency movements and radical Islamist organizations, some with ties to Al Qaeda, such as the Abu Sayyaf Group (Philippines) and Jemaah Islamiyah (Indonesia). USAID's programs in East Asia also aim to address the conditions that may give rise to radical ideologies and terrorism, such as poverty and unemployment, lack of education, failing governments, political disenfranchisement, and violent conflict. In October 2003, the Bush Administration launched education programs in Muslim communities in the Philippines and in Indonesia as part of its regional counterterrorism efforts.

Among East Asia and the Pacific (EAP) countries (excluding the Pacific Island nations), in FY2007, Indonesia was the largest recipient of U.S. foreign aid, particularly ESF, health, and development assistance (CSH and DA), followed by the Philippines. The Philippines was the region's largest beneficiary of Foreign Military Financing (FMF) and International Military Education and Training (IMET). Counter-narcotics and law enforcement assistance (INCLE) were provided to Indonesia, the Philippines, Laos, and Thailand. Indonesia, Cambodia, and the Philippines were the largest recipients of Non-proliferation, Anti-terrorism, De-mining, and Related Programs (NADR). Vietnam, as one of 15 focus countries under the President's Emergency Plan for AIDS Relief (PEPFAR), received $118 million from the Global HIV/AIDS Initiative (GHAI) account between 2005 and 2007 and is to receive $86 million in 2008. See Figures 5 and 6 .

U.S. assistance also finances several EAP regional programs. Estimated funding for such programs in FY2007 was $27 million, a slight decrease from that provided in FY2006. Most of the funding—approximately 75%—supports economic growth efforts. In addition, the United States contributes to the Developing Asian Institutions Fund as part of the establishment of a Free Trade Area of the Asia-Pacific. The second largest regional aid objective is the advancement of peace and security (nearly 20% of regional program funding), including the following aid activities: counterterrorism, counternarcotics, fighting transnational crime, non-proliferation, and maritime cooperation. The third largest aid area is democracy-building.

Taiwan and Singapore

Taiwan and Singapore, two newly developed countries in East Asia, also receive limited U.S. assistance. Taiwan receives over $550,000 annually to develop its export control system and combat trafficking in persons. The United States government provides Singapore roughly $700,000 per year to help the country deter, detect, and interdict the flow of illegal arms across its maritime borders.

Foreign Aid Restrictions

In some East Asian countries, the United States has withheld assistance or restricted it to non-governmental organizations (NGOs) or to exiled democratic political groups in response to government actions that the U.S. government has deemed in violation of international human rights standards. In the past decade, foreign operations appropriations measures have imposed human rights-related sanctions on U.S. foreign assistance to the governments of Burma, Cambodia, and Thailand and to the Indonesian military while supporting Burmese dissident groups and promoting human rights, civil society, and democracy in Cambodia, China, East Timor, Indonesia, Mongolia, and elsewhere. Since 2006, most sanctions on aid to the governments of Cambodia and Thailand and to the Indonesian military have been lifted.

Lifting Sanctions on Indonesia

Between 1993 and 2005, Indonesia faced sanctions on military assistance largely due to U.S. congressional concerns about human rights violations, particularly those committed by Indonesian military forces (TNI). In February 2005, Secretary of State Condoleezza Rice determined that the Indonesian government and armed forces (TNI) had satisfied legislative conditions and certified the resumption of full IMET for Indonesia. P.L. 109-102 , Section 599F(a), continued existing restrictions on FMF, stating that such assistance may be made available for Indonesia only if the Secretary of State certifies that the Indonesian government is prosecuting, punishing, and resolving cases involving members of the TNI credibly alleged to have committed gross violations of human rights in East Timor and elsewhere. Section 599F(b) provided that the Secretary of State may waive restrictions on FMF for Indonesia if such action would be in the national security interests of the United States. In November 2005, the Secretary of State waived restrictions on FMF to Indonesia on national security grounds pursuant to Section 599F(b).

September 2006 Military Coup in Thailand

In response to the September 19, 2006, military coup in Thailand, the Bush Administration suspended military and peacekeeping assistance pursuant to Section 508 of the Foreign Operations Appropriations Act, which provides that such funds shall not be made available to any country whose duly elected head of government was deposed by military coup. The U.S. government also suspended funding for counter-terrorism assistance provided under Section 1206 of the National Defense Authorization Act for FY2006. Other aid programs not affected by Section 508 or in the U.S. national interest continued to receive funding. In February 2008, the United States resumed security and military assistance to Thailand following the holding of democratic elections.

Chinese Aid to Southeast Asia

In comparison to major bilateral donors in the region, the People's Republic of China (PRC) provides relatively little official development assistance (ODA). Furthermore, the PRC government appears to lack a foreign aid system with a centralized organizational structure, long-term development goals, open funding processes, and published data. Nonetheless, the PRC administers a wide range of economic assistance to Southeast Asia that includes many forms of aid that generally are not counted as ODA by established international aid agencies: infrastructure and public works projects, trade and investment agreements, pledges of foreign direct investment, and technical assistance. China is also a large source of loans. According to some analysts, when these kinds of assistance are included, China is one of the largest bilateral aid donors in Southeast Asia. The PRC has been described as the "primary economic patron" of the region's least developed countries (Burma, Cambodia, and Laos). China also has provided considerable foreign aid to Vietnam as well as other large and more developed countries (Thailand, Indonesia, and the Philippines).

Some analysts have criticized PRC assistance and investments for being non-transparent, supporting urban "trophy projects" rather than sustainable development, and lacking performance criteria and environmental safeguards. Others have argued that the benefits of PRC assistance to these countries, particularly Cambodia and Laos, have outweighed adverse effects, and that China has helped to address needs not met by Western and Japanese aid. Many observers argue that the United States should bolster its aid programs, trade activities, and diplomatic presence in the region in order to counteract China's growing influence.

Country Aid Levels and Restrictions—East Asia14

Burma

Burma's political, economic, educational, and public health institutions and systems have deteriorated under 40 years of military rule. The United States provides no direct aid to the Burmese government in response to the Burmese military junta's (State Peace and Development Council or SPDC) repression of the National League for Democracy (NLD), failure to honor the NLD's parliamentary victory in 1990, and harassment of its leader, Aung San Suu Kyi, who remains under house arrest. U.S. sanctions were tightened, especially travel and financial restrictions against SPDC leaders, following the Burmese government's violent suppression of democracy demonstrators in September 2007.

On June 11, 2003, the 108 th Congress passed the Burmese Freedom and Democracy Act of 2003 ( P.L. 108-61 ), which bans imports from Burma unless democracy is restored. Additional U.S. foreign aid sanctions against Burma include opposition to international bank loans to Burma and a ban on debt restructuring assistance. Since the Office to Monitor and Combat Trafficking in Persons was established by the U.S. State Department in 2001, Burma has received a "Tier 3" assessment annually by the Office for failing to make significant efforts to bring itself into compliance with the minimum standards for the elimination of trafficking in persons. The Tier 3 ranking could serve as a basis for withholding non-humanitarian aid.

Inside Burma, the United States provides assistance for HIV/AIDS prevention, care, and treatment, English language training, and civil society. The largest U.S. aid programs assist Burmese refugees in Thailand.

The Consolidated Appropriations Act for FY2008 ( P.L. 110-161 ) appropriated $13 million (ESF) primarily for Burmese student groups and other democratic organizations located outside Burma, and for the provision of humanitarian assistance to displaced Burmese along Burma's borders. The act also provides $3 million for community-based organizations operating in Thailand to provide food, medical and other humanitarian assistance to internally displaced persons in eastern Burma.

Cambodia

Cambodia ranks 131 st out of 177 countries and regions on the United Nations Development Program's Human Development Index, which measures GNP per capita, life expectancy, and educational attainment. The U.S. State Department reports that Cambodia's fragile institutions, weak rule of law, and rampant corruption are major challenges to Cambodia's democratic development and economic growth. Furthermore, Cambodia's health and education systems were decimated under the rule of the Khmer Rouge (1975-1979) and subsequent Vietnamese control. The largest U.S. assistance sectors in Cambodia are health and education ($25 million), including a significant HIV/AIDS program component. The U.S. assistance mission in Cambodia also aims to promote transparency and accountability in government, combat corruption, and strengthen civil society. Other program areas include economic reform and growth and improving the military's capability to protect Cambodia's borders from transnational threats.

In February 2007, the United States government lifted a decade-long ban on direct bilateral aid to Cambodia. The U.S. government had imposed restrictions on foreign assistance to Cambodia following Prime Minister Hun Sen's unlawful seizure of power in 1997 and in response to other abuses of power under his rule. Foreign operations appropriations barred U.S. assistance to the central government of Cambodia and to the Khmer Rouge tribunal and instructed U.S. representatives to international financial institutions to oppose loans to Cambodia, except those that met basic human needs. U.S. assistance was permitted only to Cambodian and foreign NGOs and to local governments. Statutory exceptions allowed for the following categories of U.S. assistance to the central government of Cambodia: reproductive and maternal and child health care; basic education; combating human trafficking; cultural and historic preservation; the prevention, treatment, and control of HIV/AIDS and other infectious diseases; and counter-narcotics activities.

Cambodia, one of the top five countries in the world for the number of landmine casualties (approximately 800 victims per year), received $5 million 2006 and an estimated $3.8 million in 2007 in U.S. de-mining assistance. Under the Administration's FY2008 budget, the country is to receive $2.5 million in de-mining assistance. In addition, in the past decade, USAID has supported programs worth $13 million providing for prostheses, physical rehabilitation, employment, and related services for mine victims using Leahy War Victims Funds.

On October 12, 2005, U.S. Secretary of Health and Human Services Michael Leavitt, on a visit to Southeast Asia, signed a cooperation agreement with Cambodian officials in which $1.8 million was pledged to help the country guard against the spread of H5N1 (avian influenza).

In January 2007, the Peace Corps launched programs in Cambodia to teach English and develop sustainable community activities.

People's Republic of China (PRC)18

USAID does not have a presence or mission in the People's Republic of China (PRC). However, the Peace Corps has been involved in English language and environmental education in China since 1993, and United States funding primarily to U.S.-based non-governmental organizations (NGOs) for democracy and Tibet programs has grown substantially since 2002 (approximately $15 million per year).

China received only Peace Corps assistance prior to 2000. The Consolidated Appropriations Act for FY2000 provided $1 million for foreign-based NGOs working in Tibet and authorized ESF for foreign NGOs to promote democracy in China. For FY2001, the United States extended $28 million to the PRC as compensation for damages caused by the accidental NATO bombing of the Chinese Embassy in Belgrade in 1999. Congress has increased its annual appropriation for democracy, human rights, and rule of law programs in China from $10 million in 2002 to $23 million in 2006. Appropriations for cultural preservation, economic development, and environmental conservation in Tibetan communities in China have also grown. In 2004, the Bureau of Democracy, Human Rights and Labor (DRL) of the Department of State became the principal administrator of China democracy programs. Major U.S. grantees have included the National Endowment for Democracy (NED), the Asia Foundation, Temple University (School of Law), the American Bar Association, and the Bridge Fund (Tibet). In addition, NED provides grants (approximately $2 million per year since 1999) for programs that promote human rights, labor rights, electoral and legal reforms, and independent mass media in China from its annual congressional appropriation.

Since 2006, Congress has appropriated Development Assistance (DA) to American educational institutions for exchange programs related to democracy, rule of law, and the environment in China. In 2007, the U.S. government began funding HIV/AIDS programs in China.

The United States continues to impose other restrictions that were put in place in the aftermath of the 1989 Tiananmen Square military crackdown, including "no" votes or abstentions by U.S. representatives to international financial institutions regarding loans to China (except those that meet basic human needs) and a ban on Overseas Private Investment Corporation (OPIC) programs in the PRC. The Foreign Operations Appropriations Act for FY2002 ( P.L. 107-115 ) lifted the restrictions (effective since FY2000) requiring that ESF for China democracy programs be provided only to NGOs located outside the PRC. However, Tibet programs are still restricted to NGOs. Congress continues to require that U.S. representatives to international financial institutions support projects in Tibet only if they do not encourage the migration and settlement of non-Tibetans (Han Chinese) into Tibet or the transfer of Tibetan-owned properties to non-Tibetans. In addition, foreign operations appropriations legislation forbids funding to the United Nations Population Fund (UNFPA) for programs in China due to alleged coercive family planning practices.

East Timor (Democratic Republic of Timor-Leste)

East Timor (Democratic Republic of Timor-Leste) gained full independence in May 2002. The United States supports a wide range of aid programs in East Timor, one of Asia's poorest countries, with the goal of building a viable economy, functional government, and democratic political system. The largest strategic objective of U.S. assistance is economic growth, targeting agriculture, private sector competitiveness, and economic opportunity. Other major objectives are improved governance and peace and security. Program areas include rule of law, human rights, and civil society. IMET activities aim to develop more professional military and police forces. In November 2005, the Millennium Challenge Corporation selected East Timor as eligible for MCA assistance.

In May 2006, the Peace Corps suspended its programs in East Timor due to civil and political unrest in the country.

Indonesia

The U.S. State Department reports that the "overarching U.S. foreign policy priority in Indonesia is to assist its transformation into a stable, moderate democracy capable of addressing regional and global challenges in partnership with the international community." The country faces many development and security challenges, including terrorist threats, ethnic and separatist conflicts, weak institutions, high levels of corruption, poverty and unemployment, low levels of education, and poor health conditions. The largest strategic objective in terms of funding is investing in people ($87.6 million), which includes education, health, and clean water programs. A major U.S. assistance initiative is the six-year, $157 million education program that began in 2004. The second largest area of U.S. aid is peace and security—the Administration requested $41.7 million for FY2008 for the Indonesian military and police to fight terrorism, combat weapons proliferation and other transnational crimes, monitor strategic waterways, and cooperate with the United States armed forces. This increase in funding reflects the normalization of military ties in 2005.

For FY2008, over $29 million in U.S. assistance are to support programs for strengthening the justice and legislative branches, participatory governance, human rights, and civil society. Economic growth programs worth $27 million are to promote greater transparency and combat corruption, and are expected to lead to an improved trade and investment climate, financial sector soundness, and increased private sector competitiveness.

The MCC has designated Indonesia as a "threshold" country for 2006, meaning that the country is close to meeting MCA criteria and may receive assistance in reaching eligibility status. In November 2006, USAID and the government of Indonesia signed a $55 million, two-year agreement for MCA assistance under the MCC Threshold Program.

Resumption of Military Assistance

In 2005, the Bush Administration determined that Indonesia had met legislative conditions for the resumption of full IMET and waived restrictions on FMF on national security grounds, thus lifting sanctions on military assistance that were first imposed in 1993. The Consolidated Appropriations Act for 2004 ( P.L. 108-199 ) made IMET available to Indonesia if the Secretary of State determined that the Indonesian government and armed forces (TNI) were cooperating with the United States in the investigation regarding the August 2002 attack in Timika, Papua, in which three school teachers, including two Americans, were killed. P.L. 108-199 continued the ban on FMF unless the President certified that the Indonesian government was prosecuting and punishing those members of the Indonesia armed forces credibly alleged to have committed gross violations of human rights, particularly in East Timor in 1999. The FY2005 foreign operations appropriations measure ( P.L. 108-447 ) contained similar provisions. In February 2005, Secretary of State Condoleezza Rice determined that the Indonesian government and armed forces had cooperated with the FBI's investigation into the Papua murders, thereby satisfying legislative conditions, and certified the resumption of full IMET for Indonesia. The foreign aid appropriations act for FY2006 ( P.L. 109-102 ) continued existing restrictions on FMF to Indonesia; however, the law provided that the Secretary of State may waive restrictions if such action would be in the national security interests of the United States. In November 2005, the Secretary of State exercised the waiver authority and allowed FMF for Indonesia.

The Consolidated Appropriations Act for FY2008, Section 679(a) appropriated up to $15.7 million in Foreign Military Financing (FMF) for Indonesia, of which $2.7 million "may not be made available" unless the Government of Indonesia has taken steps to prosecute and punish members of the TNI credibly alleged to have committed human rights violations in East Timor and elsewhere, implement reforms related to improved transparency and accountability of the military, and allow public access to Papua.

2004 Tsunami Relief

The December 26, 2004 tsunami caused catastrophic losses of lives and property in Aceh province, Indonesia, with nearly 130,000 persons dead and over 500,000 displaced. The Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief, 2005 ( P.L. 109-13 ) appropriated $631 million for tsunami recovery and reconstruction in East and South Asia. Of this amount, the Bush Administration pledged $400 million for relief and reconstruction efforts in Indonesia.

Laos

The bulk of U.S. aid programs in Laos are related to peace and security. The Administration's request for FY2008 includes the following programs: removing unexploded ordnance (UXO), English language training for Lao defense officials, counter-narcotics efforts, and combating transnational crime. Other program areas include public health, rule of law, and improving the country's trade and investment environment. Laos also receives assistance through the Leahy War Victims Fund ($1.5 million during the 2004-2009 period) to assist victims of UXO. U.S. mines from the Vietnam War cause an average of 120 deaths per year (nearly 4,000 deaths, and over 13,000 casualties, since 1975). UXO also takes a significant economic toll on rural areas, affecting 25% of villages or one-third to one-half of the nation's land area.

In October 2005, U.S. Secretary of Health and Human Services Michael Leavitt signed a cooperation agreement with Lao officials in which the United States pledged $3.4 million to Laos for controlling outbreaks of avian flu.

Malaysia

Malaysia is not a recipient of U.S. development and economic aid. The U.S. State Department describes Malaysia as a "key Muslim-majority state in Southeast Asia and an important contributor to conflict resolution and peacekeeping both regionally and internationally." Regional terrorist organizations, most notably Jemaah Islamiyah, are known to use Malaysia for planning and fund raising. Over half of U.S. assistance to the country is related to antiterrorism and non-proliferation activities. Other assistance is provided for military operations and law enforcement restructuring.

The U.S. State Department's 2007 Trafficking in Persons Report placed Malaysia in the "Tier 3" category for failing to "make significant efforts to bring itself into compliance with the minimum standards for the elimination of trafficking in persons." Such an assessment could trigger the withholding of non-humanitarian, non-trade-related U.S. foreign assistance.

Mongolia

U.S. assistance efforts in Mongolia aim to build foundations for the country's private economic and democratic political development. Security assistance focuses on reform of the Mongolian armed forces and regional stability. In September 2005, the government of Mongolia submitted a proposal to the Millennium Challenge Corporation for several projects to be funded by MCA funds, including railroad construction, improved housing, and health services. In October 2007, the Mongolian government and the Millennium Challenge Corporation (MCC) signed a five-year, $285 million agreement.

Philippines

The United States shares important security, political, and commercial interests with the Philippines, a Major Non-NATO Ally and front-line state in the global war on terrorism. Since 2001, the Philippines has received the most dramatic increases in U.S. foreign assistance in the EAP region. The main goals of U.S. assistance in the Philippines are: fighting terrorism through military means and education; supporting the peace process in Muslim Mindanao; improving governance; promoting economic reform and encouraging foreign investment; preserving the environment; and reversing the deterioration of the educational system. The largest U.S. aid accounts in the country fund health and education programs, especially in conflict-affected areas of Mindanao. Other large funding priorities are economic growth and security. Security programs include support for Philippine Defense Reform, joint military exercises, and enhanced counterterrorism capabilities. U.S. assistance also supports the battle against transnational crime (money laundering, trafficking in persons, and narcotics trade).

In 2006, the MCC designated the Philippines as a "threshold" country or close to meeting MCA criteria and eligible for assistance in qualifying. The Philippines recently initiated a two-year, $21 million MCA threshold program that focuses on fighting corruption and improving government revenue collection.

The Consolidated Appropriations Act for FY2008, Section 699E provided up to $30 million for FMF for the Philippines, of which $2 million may be made available after the Secretary of State reports that:

the Philippine government is implementing the recommendations of the United Nations Special Rapporteur on Extrajudicial, Summary or Arbitrary Executions; the Philippine government is implementing a policy of promoting military personnel who demonstrate professionalism and respect for human rights, and is investigating and prosecuting military personnel and others who have been credibly alleged to have committed extrajudicial executions or other violations of human rights; and the Philippine military is not engaging in acts of intimidation or violence against members of legal organizations who advocate for human rights.

The United States signed a Tropical Forest Conservation Act Agreement with the Philippines on September 19, 2002. This accord cancels a portion of the Philippines' debt to the United States. The money saved by this rescheduling—estimated at about $8 million—is to be used for forest conservation activities over a period of 14 years.

Thailand

Thailand is one of five U.S. treaty allies in Asia and was designated a Major Non-NATO Ally in 2003. Thailand has sent troops to both Afghanistan and Iraq and has aggressively pursued terrorist cells in its southern provinces. For FY2008, the Bush Administration proposed funding for domestic counterterrorism activities, border security, countering the proliferation of weapons of mass destruction, and military reform. Thailand would also receive funding for HIV/AIDS programs.

September 2006 Military Coup and U.S. Aid Sanctions

In response to the September 19, 2006, military coup in Thailand, the U.S. State Department announced the suspension of nearly $24 million in U.S. foreign assistance to the country, including military and peacekeeping assistance and training under foreign operations appropriations ($7.5 million) and counterterrorism assistance under Section 1206 of the National Defense Authorization Act for FY2006 ($16.3 million). The bans were imposed pursuant to Section 508 of the Foreign Operations Appropriations Act, which provides that such funds shall not be made available to any country whose duly elected head of government was deposed by a military coup. Under Section 508, the funds can be reinstated once a democratically-elected government is in place. Other aid programs not affected by Section 508 or in the U.S. national interest would continue to receive funding. In February 2008, the United States resumed security and military assistance to Thailand following the holding of democratic elections.

Other Programs

In 2001, the United States and Thailand signed an agreement pursuant to the Tropical Forest Conservation Act ( P.L. 105-214 ), providing $11 million in debt relief to Thailand. In return, Thailand is to contribute $9.5 million over 28 years toward the protection of its mangrove forests. The United States government pledged $5.3 million in relief and reconstruction assistance for areas in Thailand affected by the December 2004 tsunami.

Vietnam

Vietnam, with over 250,000 HIV-positive persons in 2006, is the largest Asian recipient of Global HIV/AIDS Initiative (GHAI) funds under the President's Emergency Plan for AIDS Relief (PEPFAR). Other U.S. assistance objectives in Vietnam include the following: accelerating Vietnam's transition to an open and market-based economy; de-mining; promoting human rights and supporting civil society; and countering illegal cross-border transport of arms and narcotics. IMET programs include training in English language and international peacekeeping.

The Vietnam Human Rights Act of 2007 ( H.R. 3096 ), passed by the House on September 18, 2007, would freeze U.S. nonhumanitarian assistance to the government of Vietnam at FY2007 levels unless the President certifies to Congress that the government of Vietnam has made substantial progress in the following areas: the release of political and religious prisoners; religious freedom; the rights of ethnic minorities; access to U.S. refugee programs by Vietnamese nationals; and combating trafficking in persons.

South Asia

Key U.S. foreign aid objectives in South Asia include combating terrorism, developing bilateral military ties, and reducing the social and economic sources of political instability and extremist religious and political thinking. These causes include lack of accountable governance, inter-ethnic conflict, poverty, disease, and illiteracy. Prior to September 2001, South Asia was the smallest regional recipient of U.S. non-food assistance. Since the war on terrorism began, counterterrorism and related funding for South Asia, especially Afghanistan and Pakistan, have made the region a relatively large recipient of humanitarian, development, and economic assistance and the second-largest beneficiary of military assistance after the Middle East. Before 2002, India and Bangladesh were the largest recipients of U.S. bilateral aid in South Asia. Following Pakistan's participation in Operation Enduring Freedom (OEF) in Afghanistan, the country became the largest beneficiary of U.S. foreign assistance in the region after Afghanistan, followed by India. See Figure 7 .

Regional programs focus upon economic growth, combating terrorism, and fighting international crime. The South Asia Regional Fund ($5 million in FY2007) promotes economic growth through addressing energy needs in South Asia, such as assisting countries to find energy resources and facilitating trade in energy. The South and Central Asia Regional Fund ($1.5 million in FY2007) supports programs related to border control and education. The aim of assistance for education is to help reduce religious and ideological extremism and regional instability.

Foreign Aid Restrictions

Both India and Pakistan faced sanctions on non-humanitarian aid for conducting nuclear weapons tests in 1998. The United States imposed additional restrictions on aid to Pakistan because of its delinquency on foreign loan payments and because of the military coup that took place in October 1999. Many of the nuclear test-related sanctions were lifted soon after they were imposed, and the United States reportedly was prepared to normalize relations with India in the first half of 2001.

On September 22, 2001, President Bush issued a final determination removing all nuclear test-related sanctions against India and Pakistan pursuant to the Department of Defense Appropriations Act, 2000 ( P.L. 106-79 ). On October 27, 2001, the President signed S. 1465 into law ( P.L. 107-57 ), exempting Pakistan from coup-related sanctions through FY2002, providing waiver authority on the sanctions through FY2003, and granting an exemption from foreign aid prohibitions related to the country's loan defaults. In subsequent years, Congress has extended the waiver authority on coup-related sanctions. Since 2003, President Bush has annually exercised the waiver authority. A crucial challenge for the United States, according to some U.S. leaders, is how to assist Pakistan in its counterterrorism activities and reward its cooperation in Operation Enduring Freedom while still applying pressure regarding democratization, nuclear non-proliferation, and other U.S. foreign policy imperatives.

Disaster Assistance

In the December 2004 earthquake and tsunami, Sri Lanka suffered heavy human losses and property damage. The United States government pledged $134 million in disaster assistance (including USAID disaster assistance and food aid and USDA food aid) to Sri Lanka and $17.9 million to India. On October 8, 2005, a catastrophic, magnitude 7.6 earthquake struck Pakistan, killing over 73,000 persons in Pakistan and 1,333 in India and leaving nearly 3 million people homeless. The United States pledged $300 million in economic assistance to the affected region.

Country Aid Levels and Restrictions—South Asia

Bangladesh

In addition to problems related to development, corruption remains a key obstacle to social, economic, and political advancement in Bangladesh. The largest elements of the U.S. aid presence involve public health, including HIV/AIDS programs, and basic education. In other areas, the U.S. government provides support for anti-corruption reforms and democratic institutions. U.S. assistance also aims to expand economic opportunities and equitable growth in the country. Security and military assistance help to strengthen the police and military forces to counter terrorist activity, enhance border security, and fight international financial and drug crimes.

In March 2006, the Peace Corps suspended its programs in Bangladesh due to concerns that volunteers might become targets of terrorists.

In 2000, the United States signed an agreement with Bangladesh reducing the country's debt payments to the United States by $10 million over 18 years. In return, Bangladesh is to set aside $8.5 million to endow a Tropical Forest Fund to protect and conserve its mangrove forests.

India

The United States significantly increased bilateral aid to India in FY2002 and FY2003, largely as part of its counterterrorism efforts in the region. The current aid program aims to further Indian economic development in order to enhance the country's rise as "an influential U.S. partner in the international system." Furthermore, U.S. assistance serves the poorest segments of the population in order to mitigate economic and social conditions that may give rise to political extremism.

For FY2008, the largest portion of U.S. assistance to India funds public health and HIV/AIDS care, treatment, and prevention. Security and military assistance supports programs related to military professionalism, counterterrorism, counternarcotics, and border security. Economic Support Funds are to promote the private agricultural sector.

Nepal

U.S. assistance to Nepal aims to further the peace process between the government of Nepal and Maoist insurgents, establish stability, and promote development. IMET, INCLE, and NADR programs help the Nepal military and police to restore law and order. The Consolidated Appropriations Act for FY2008 allows for only Expanded International Military Education and Training (E-IMET) for Nepal. E-IMET emphasizes and teaches the military about human rights, military codes of conduct, and civilian control of the military. Other major components of United States aid programs in Nepal include building the capacity of local and national governments to provide social services and improving public health.

In 2004, the United States suspended the Peace Corps program in Nepal after Maoist rebels bombed the United States Information Center in Kathmandu.

Pakistan

Pakistan is a front-line state in the global war on terrorism. Most U.S. assistance programs in the country claim to directly or indirectly serve U.S. counterterrorism goals. The United States government has pledged $600 million in economic and security assistance and $50 million in earthquake reconstruction aid on an annual basis through FY2009. Approximately 43% of U.S. assistance to Pakistan supports counterterrorism and border security efforts. The second largest strategic objective (36% of funding) is economic growth, aimed at nurturing a middle class as a foundation for democracy. Economic Support Funds (13%) "help Pakistan to improve the quality of and access to public education, primary healthcare, and water and sanitation services" in part to help provide alternatives to services provided by terrorist-linked charities and schools. Other assistance directly promotes democracy through support of legislative processes, democratic practices within political parties, free and fair elections, civil society, and the mass media.

Lifting of Foreign Aid Restrictions

Pakistan received limited U.S. assistance during the 1990s—counter-narcotics support, food aid, and Pakistan NGO Initiative programs—due to congressional restrictions in response to Pakistan's nuclear weapons program. In 1985, the Pressler amendment to the Foreign Assistance Act of 1961 (Section 620E(e)) barred U.S. foreign assistance to Pakistan unless the President determined that Pakistan did not possess nuclear weapons and that U.S. assistance would reduce the risk of Pakistan's obtaining them. In 1990, President George H. W. Bush declined to make such determinations, thus triggering Pressler amendment sanctions against Pakistan. This restriction was eased in 1995 to prohibit only military assistance. In 1998, following nuclear weapons tests carried out by India and Pakistan, President Clinton imposed restrictions on non-humanitarian aid to both countries pursuant to the Arms Export Control Act (Section 102, the Glenn amendment). Furthermore, Pakistan became ineligible for most forms of U.S. foreign assistance due to its delinquency in servicing its debt to the United States and to a 1999 military coup.

Following the September 2001 terrorist attacks on the United States, Pakistan was designated as a front-line state in the war on terrorism and received dramatically increased U.S. aid levels. In late September 2001, Congress enacted and the President exercised waivers to nuclear weapons sanctions that had prohibited military and economic aid to India and Pakistan. The Bush Administration rescheduled $379 million of Pakistan's $2.7 billion debt to the United States so that Pakistan would not be considered in arrears, a requirement for further foreign assistance. The President also made $100 million in ESF available before the various sanctions were eased or lifted, exercising authority afforded him under Section 614 of the Foreign Assistance Act of 1961. On October 27, 2001, President Bush signed S. 1465 into law ( P.L. 107-57 ), allowing the United States government to waive sanctions related to the military coup and authorizing presidential waiver authority through 2003, provided the President determined that making foreign assistance available would facilitate democratization and help the United States in its battle against international terrorism. P.L. 107-57 also exempted Pakistan from foreign assistance restrictions related to its default on international loans.

Since 2003, President Bush has annually exercised the waiver authority on coup-related sanctions against Pakistan. On March 25, 2008, President Bush waived democracy-related aid sanctions on Pakistan for FY2008, stating that such a waiver would facilitate the transition to democratic rule in Pakistan and was important to U.S. counterterrorism efforts. Following the national and provincial elections of February 2008, which many observers considered free, fair, and credible, the Bush Administration issued an April 2008 determination that a democratically elected government had been restored in Islamabad after a 101-month hiatus. This determination permanently removed coup-related aid sanctions.

Sri Lanka

United States assistance programs aim to promote the peace process between the government of Sri Lanka and Tamil separatists led by the Liberation Tigers of Tamil Eelam (LTTE). In order to help pressure the LTTE to return to the negotiating table, the United States provides assistance to help strengthen the capabilities of the Sri Lankan military. INCLE and NADR programs support the police force and counterterrorism activities. U.S. assistance also promotes economic growth, especially in less developed, conflict-ridden areas, and helps to advance democracy, human rights, and civil society.

In 2004, Sri Lanka met eligibility requirements for MCA funding, due in large part to positive governmental, social, and economic indicators in Western provinces. Although a Compact was expected in 2007, the MCC put an agreement on hold in early 2007 pending improvements in the overall human rights and security situations, and in December 2007 the MCC decided not to reselect Sri Lanka for 2008 Compact eligibility.

Sri Lanka suffered heavy human losses (an estimated 31,000 dead, 4,100 missing, and 519,000 displaced) and property damage worth approximately $1 billion (or 4.4% of GDP) in the December 2004 earthquake and tsunami. The Bush Administration pledged $134.6 million for disaster relief and reconstruction to Sri Lanka. In 2006, Sri Lanka received Transition Initiative (TI) funding ($1.7 million) for the peace process and $1.1 million in disaster assistance.

FY2008 Appropriations

The Consolidated Appropriations Act for FY2008, Section 699G, withheld FMF from Sri Lanka, with the exception of technology or equipment related to maritime and air surveillance and communications, unless the following conditions were met:

the Sri Lankan military is suspending and the Sri Lankan government is bringing to justice members of the military who have been credibly alleged to have committed gross violations of human rights or international humanitarian law, including complicity in the recruitment of child soldiers; the Sri Lankan government is providing access to humanitarian organizations and journalists throughout the country consistent with international humanitarian law; and the Sri Lankan government has agreed to the establishment of a field presence of the Office of the United Nations High Commissioner for Human Rights in Sri Lanka with sufficient staff and mandate to conduct full and unfettered monitoring throughout the country and to publicize its findings.

Appendix. Selected Acronyms for U.S. Foreign Aid Accounts and Programs