Introduction Statement of the Administrator Summary of FY 2002 Budget Request Program, Performance, and Prospects Operating Expenses, USAID Working Capital Fund Operation Expenses, Inspector General Foreign Service Disability and Retirement Fund Regions     Africa     Asia & the Near East     Europe & Eurasia     Latin America & the Caribbean Central Programs Glossary Abbreviations and Acronyms Wednesday, 29-May-2002 18:52:56 EDT

This section of the FY 2002 budget request discusses USAID's program, recent performance and further prospects and is organized by the three program pillars.

From a budgetary perspective, the Global Development Alliance is integrated into the program pillars. This budget request covers four program accounts for which USAID is responsible: Development Assistance, Child Survival and Diseases Program Fund, International Disaster Assistance and Transition Initiatives. While P.L. 480 Title II, Food for Peace assistance is not covered in this request, it is an integral part of the programs being requested. Additionally, USAID manages programs under other accounts jointly administered with the State Department: Economic Support Funds, Assistance for Eastern Europe and the Baltic States, and Assistance for the Independent States of the Former Soviet Union. These accounts address most of the same objectives noted above and are an integral part of the Agency's strategic programming process.

The Economic Growth and Agriculture Pillar

Program and Resource Request

Assistance supported by this pillar will lead and better integrate the efforts in all sectors essential to the creation of long-term viable economies. This is especially important given the globalization of the world economic system. Funding will come from both the DA and CSD accounts.

This pillar includes three broad clusters of programs. The first cluster aims to encourage broad-based economic growth through agricultural development; improved business climates and other measures to strengthen markets; and through microenterprise support and other efforts to enhance access and opportunity for the poor. The second cluster encourages economic growth by building human capacity through education, especially basic education, and through training. The third cluster includes programs to protect the world's environment through improved management of natural resources; increased energy efficiency; conservation of biological diversity; sustainable urbanization; and measures to reduce the threat of global climate change. There are obvious linkages and synergies among these groups of programs. For instance, more widespread and higher quality basic education and improved use of natural resources, including energy and agricultural resources, all make important contributions to economic growth. The interrelationship and interdependence of economic growth, environmental sustainability, and the development of a country's human capital will be highlighted with this pillar.

• The request for FY 2002 is $948 million, compared to an equivalent figure of $871 million in FY 2001 (both including $28 million for the African and Inter-American Development Foundations).
• Given the importance of agriculture and basic education (especially for girls and women) in most recipient countries, USAID plans to increase its emphasis in these sectors. For example, USAID proposes to increase basic education for children from $103 million in FY 2001 to $123 million in FY 2002.

Performance and Prospects

By the end of the 1990s, economic growth performance in USAID-recipient countries had improved significantly, despite the Asian financial crisis and other financial disturbances. Nearly 70% of USAID partner countries were growing at significantly positive rates compared with only 45 % in the early years of the decade. This overall trend reflects sharp improvements in the two regions that faced the greatest challenges and problems at the beginning of the 1990s - Africa and formerly communist Europe and Eurasia. The challenge for the present decade is to maintain and build on this momentum.

The combination of superior U.S. competitiveness and increased openness and growth in developing countries has resulted in rapidly expanding demand for U.S. exports, contributing to higher incomes and employment for Americans. Since the late 1980s, the United States has been the industrial world's leading exporter. At the same time, the fastest growing markets have been in developing countries. Consequently, U.S. exports to developing countries have expanded much more rapidly than U.S. exports to industrial countries, and much more rapidly than U.S. domestic demand.

Agriculture: The majority of people in the poorest countries, particularly those in Africa, derive their livelihoods from agriculture. Therefore, in the least-developed countries the transformation of agriculture and food systems is an essential aspect of broad-based economic growth. The shift from subsistence agriculture to producing for off-farm markets and consumers contributes to a more prosperous rural environment and generates additional opportunities for employment and economic progress throughout the economy.

Agency agricultural programs promote increased production and diversification of agricultural goods for both local consumption and export and strengthen public and private agricultural institutions. They reform policies to provide incentives for farmers and agricultural entrepreneurs and promote research for and adoption of improved agricultural practices and technologies. They also increase access to markets and market information.

In Malawi, USAID has worked to enable small farmers to achieve economic diversification and increase incomes. USAID efforts helped contribute to a 15% increase in rural incomes from 1998 to 1999. By 1999, 44% of the area farmed by small-holders had been diversified into crops such as rice, potatoes, and coffee, compared with 37% in 1998. In Uganda, production of disease-resistant varieties of cassava (developed with USAID support) increased by more than 700% from 1998 to 1999. As a group, USAID programs in agriculture performed very well, with all programs achieving planned goals and targets.

USAID programs contributed to a marked improvement in agricultural performance during the 1990s. In Africa, between 1996 and 1998 (the latest data available), two-thirds of low-income countries achieved agricultural growth at least as rapid as their population growth, compared with only 40% during the first half of the 1990s. In Asia, the share rose from 60% in the early 1990s to 90% for 1996-98.

Business Climate, Trade and Investment, and other Efforts to Strengthen Critical Private Markets: Most analyses of growth performance and development progress assign primary importance to the policies and institutions that determine the business climate. Policies and institutions that support private markets provide the enabling environment for trade, investment, and other private sector activity. While only a relatively small share of development resources supports activities to strengthen private markets, such programs command a preponderant share of SEED, NIS, and ESF resources, and thus a very significant share of overall resources programmed by USAID.

USAID aims to improve business climates and expand trade and investment by supporting policy reform, strengthening institutions, improving infrastructure, and providing training and technology transfer. Major areas of program concentration include private enterprise development, fiscal reform, strengthening financial markets, privatization, and trade and investment.

In Egypt, USAID is promoting export-oriented growth fueled by the private sector. USAID technical assistance helped the government adopt numerous policy reforms in 1999, including the streamlining of inspections. In the sectors that USAID targets, the value of private sector exports (including fresh and processed agricultural products, spinning and weaving products, leather goods, and furniture) rose from $361 million in 1998 to $462 million in 1999. More generally, Egypt's economic performance has improved significantly in recent years. Growth in per capita income was 3.3% for 1996-99, compared with -0.3% for 1992-95.

Economic freedom scores such as those produced annually by the Heritage Foundation provide a good indicator of a country's overall business climate. From 1995 to 2000, USAID programs helped achieve improvements in these scores in 55 out of 75 USAID recipients. For every region, a clear majority of recipients registered improvements, ranging from 60% in Asia and the Near East to 83% in Europe and Eurasia.

Microenterprise and enhanced access and opportunity for the poor: A particularly popular tool for enhancing access and opportunity for the poor is microenterprise development, involving the provision of financial services and business development assistance to microentrepreneurs and poor farming households. Programs also work towards legal and regulatory reform to improve the economic environment for small and microenterprises.

Millions of poor households around the world participate in microenterprises to provide income that pays for basic family expenses such as food, clothing, shelter, school tuition, and medical bills. In addition, many farming households use microenterprises to balance income flow and reduce risk. During times of crisis and economic distress, additional households also use informal business activities to generate needed income.

In FY 1999, the Agency's microenterprise initiative, supporting the provision of small loans to those in need, benefited more than two million clients across the globe. Of these borrowers, the vast majority (70%) were women. The average loan size was $329, reflecting the Agency's emphasis on poverty lending, and the conviction that very small loans to poor clients, in the right circumstances, can go a long way in empowering them to help themselves. The 627 microenterprise organizations supported by USAID also provide business development services to microentrepreneurs, including training, counseling, product marketing, and assistance with production technologies.

USAID microfinance activities helped Bolivia's poor gain access to financial services to support their entrepreneurial businesses. Active borrowers under USAID-supported programs in Bolivia increased from 189,000 in 1998 to 215,000 in 1999.

Basic Education: USAID supports basic education reform because broader access to better-quality basic education contributes to progress in virtually all areas of development. For example, a worker with a good basic education works more productively, adopts new techniques more readily, and adapts to changing economic conditions more easily. At the individual level, the result is higher household income and more stable employment. At the national level, developing countries that ensure equitable access to basic education achieve stronger economic growth and lower income inequality, and, consequently, faster progress in reducing poverty. Likewise, increased educational achievement among girls yields large and varied social benefits once those girls become mothers, benefits including improved family health and child survival, reduced fertility, and stronger support for children's education, especially girls' education.

Basic education programs typically concentrate on encouraging and helping countries to improve their educational policies and institutions, on promoting the adoption of improved educational practices at the classroom level, and on increasing the participation of families and local communities in educational decision-making. Through these efforts, the Agency has gained a reputation as a technical leader and innovator in basic education, investing in pilot programs that are later funded on a larger scale by the World Bank and regional development banks.

The United States, through USAID, supports basic education programs in 11 countries in sub-Saharan Africa, 2 countries in the Near East, and 7 countries in Latin America and the Caribbean. Especially in sub-Saharan Africa and the Near East, USAID basic education programs strongly emphasize the need to ensure equitable access for girls, who suffer large educational gender gaps in many countries in these regions. In contrast, programs in Latin America and the Caribbean, where gender gaps tend to be small and initial enrollment rates high, USAID concentrates on improving the equity and quality of basic education, to help reduce the high rates of grade repetition and school drop-out prevalent in those countries.

In Benin, the mission has adopted an integrated approach to increase primary enrollments, particularly among girls, and to improve educational quality. With strong support from the central government, the overall enrollment rate exceeded its target by four percentage points. Further, the improved quality of primary instruction and the availability of new textbooks and workbooks for students helped raise the pass rate in experimental schools to 82%, compared to 70% using the old curriculum. In Peru, USAID has supported the establishment of local networks to promote quality education for girls in four provinces where girls suffer particularly high rates of dropout from primary school. As a result, opportunities for basic education in those areas have expanded, with the share of girls enrolled at the appropriate grade in primary school rising from 20% in 1996 to 27% in 1999.

Programs have contributed to widespread increases in primary net enrollment ratios in USAID-assisted countries. Among the six low-income, USAID-assisted countries in Africa for which data are available, the (weighted average) net enrollment ratio rose from 34% in 1990 to just under 48% in 1997. For six USAID-assisted countries in LAC, for which data are available, the increase was from less than 83% in 1990 to almost 87% in 1997. Egypt and Morocco also achieved significant improvements.

Higher Education and Training: Efforts in higher education focus on helping existing colleges and universities function more effectively. Developing and transition countries alike need effective institutions of higher education to provide advanced training to the new generation of business executives, technical specialists, and political leaders. Such institutions also help link host countries to global sources of science and technology in all areas, and carry out research on problems of local and national importance. However, colleges and universities in many countries fall short of their potential in these roles, lacking the faculty skills and the institutional capacity to meet local and national development needs.

To help host country institutions more fully realize their potential, USAID promotes partnerships with U.S. universities, colleges, and community colleges, widely acknowledged as world leaders in their fields. These partnerships serve a dual purpose. Most are directly aimed at promoting progress in some particular area of development, including agricultural and health research, enhanced policy analysis in basic education, or advanced training in business management and other fields. Collectively, these direct contributions span the full range of USAID's programs. Meanwhile, by working closely with experts from U.S. institutions, faculty and staff receive an object lesson in the broader potential for higher education to help resolve the practical problems facing their nations and communities.

In addition to its efforts in basic and higher education, USAID programs support two relatively distinct forms of training. First, they support technical and management training to strengthen the skills of individuals working in key positions in government, non-government organizations, and the private sector. Investments in training agricultural scientists, medical technicians, teacher trainers, etc. help strengthen the capacity of host countries to manage their own development process. Second, USAID investments support a variety of workforce development activities, aimed at improving the productive skills of the host country's workforce. These programs typically combine support for the development of effective vocational training programs, usually involving partnerships between the public and private sectors, with parallel efforts to diagnose and correct policy and institutional barriers that keep workers from finding employment and discourage firms from investing in the productive skills of their employees.

Assessing results in these areas has mainly involved looking at the level and nature of activities. In Egypt, USAID has awarded 53 linkage grants to support cooperative research by U.S. and Egyptian universities to help solve problems facing Egyptian business and industry. Businesses benefiting from the research have committed to covering the local currency costs of the research performed on their behalf. The linkage grants program has helped promote the importance of applied research, something of a new idea in Egyptian education.

Environment: The final cluster of programs in the economic growth and agriculture pillar relate to USAID's role in addressing environmental degradation around the world. These problems, if not handled rationally, present a severe and increasing threat to long-term economic growth and development, especially to health improvements, poverty alleviation, improved trade and political stability in developing and transitioning countries. Accordingly, the treatment of these issues relates directly to U.S. national security and economic prosperity, and these issues are regarded as integral components of America's foreign assistance program.

The environment not only has a major set of programs within the economic growth and agriculture pillar, but it is integral to many aspects of global health and conflict prevention and developmental relief. A challenge facing USAID is to expand and better integrate its environmental activities within these other development priorities so they have improved chances for long-term success.

Creative solutions, alliances and partnerships with the private sector, and leadership of other donors, the multilateral development banks and U.S. Government agencies are hallmarks of USAID's environment activities. One example is USAID's leadership role in the U.S. Government and with its non-governmental partners in implementing the field activities of the Tropical Forest Conservation Act and the related Enterprise for the Americas Initiative. These programs reduce foreign debt in exchange for creating endowed local civil society foundations. The foundations provide small grants to community groups and NGOs in support of tropical forest conservation, environmental protection, child survival and child development.

USAID's objectives for FY 2002 environment activities are:

• to conserve biological diversity;
• to promote sustainable urbanization and pollution control;
• to provide environmentally sound energy technologies;
• to sustainably manage natural resources; and
• to increase developing countries' ability to participate in reducing the threat and impacts of global climate change.

In the area of biodiversity, USAID supports host country governments and partners to improve the land management within and outside protected areas in species-rich areas, while enabling local people to improve their living standards. Since FY 1996, USAID activities have improved management of over 70 million acres of the world's most biologically valuable ecosystems, an area totaling approximately the size of Arizona. Activities aimed at conflict resolution and improved park management benefit both human and wildlife populations in countries as diverse as Kenya, Zimbabwe, Bolivia, Indonesia and Nepal. In FY 2002, USAID anticipates continuing these activities.

Urban programs address a major challenge which dramatically impacts on USAID objectives in economic growth and health. The majority of the world's population now lives in urban surroundings. Already, the developing world's cities are facing the daunting task of absorbing 2.5 billion people in the next 25 years. This explosive and inevitable growth of cities in developing countries is overtaxing the environment, while job growth, services, infrastructure, and social supports lag what is needed to head off instability. USAID's urban programs focus on making cities work. Cities that can manage the environmental consequences of rapid urbanization are the ones that will also provide the greatest impetus to economic growth. One example of USAID's plans for 2002 is in Indonesia, where 12 cities and towns will be paired with 12 U.S. cities for a series of carefully structured exchanges. The U.S. city managers will provide hands-on training to show how their cities improve urban environmental services while promoting public participation and transparent management practices.

Energy problems are growing in the United States and around the globe. Few things are more central to social, economic and political development and stability than energy. All aspects of development - education, health, agriculture, employment, shelter, transportation - depend on energy. Global energy use will increase by 50% over the next 20 years with major demand and growth occurring in developing and transitioning countries. Providing energy through sustainable and clean technologies and policies is needed to responsibly respond to this demand and begin to address the issue of 2 billion of the world's people without access to reliable energy. USAID's FY 2002 energy plans will continue to focus on enabling policy, regulatory and institutional environments for increased private sector investment and project development.

Natural resources are the raw materials from which economic development is created. Poor management of natural resources results in negative development since it is far more costly to restore them than to manage them properly. When the natural resource base is degraded to the point where it can no longer support the number of people who need to live on it, the area experiences famine, social instability and conflict. USAID's natural resource management programs focus on sustainable use and conservation of soils, water, forests and fisheries. Coastal zone management, sustainable agriculture, parks and ecotourism, watershed management and slowing desertification are examples of the kinds of activities USAID is planning to continue in FY 2002. Natural resource management programs are planned around the world in places as diverse as the upper reaches of the Amazon basin and the Gulf of Aqaba.

Climate change is a concern to all countries. USAID focuses its climate change efforts on activities that have strong economic growth benefits that also reduce greenhouse gas emissions, protect natural habitats that sequester carbon and reduce vulnerability to extreme weather events. The Agency facilitates policy development that enables developing countries to participate in global efforts to address climate change. USAID also works to increase partnerships between U.S. and developing country companies to take advantage of the growing international market for clean technologies that is expected to reach $50-$65 billion by 2010. The Agency will continue its work in these areas in FY 2002 with emphasis on those countries that are the fastest growing sources of climate change gases, contain the largest forests to hold carbon and are at the greatest risk from the effects of climate change. Partnerships within and outside the United States will be created to address these problems.

The Global Health Pillar

Program and Resource Request

Programs supported by this pillar include maternal and child health, nutrition, family planning and many of the related transnational issues confronting the United States., such as HIV/AIDS and other infectious diseases. This budget includes a major initiative to combat HIV/AIDS and other infectious diseases, mainly malaria and tuberculosis, which have significant public health impact.

Child survival interventions target the major childhood killers, including vaccine preventable diseases (e.g., polio), diarrheal disease, malnutrition, acute respiratory infections, and malaria. USAID programs continue an aggressive effort to eliminate vitamin A and other micronutrient deficiencies. Maternal health activities aim to reduce maternal deaths and adverse outcomes as a result of pregnancy and childbirth. In family planning, USAID programs seek to stabilize population through sustainable reductions in unintended pregnancies, and to reduce rates for maternal and child mortality and sexually transmitted diseases, including HIV/AIDS. For HIV/AIDS and infectious diseases, USAID will aggressively promote public and private partnerships and will provide technical leadership for programs at the national and grass-roots levels.

The global health programs are funded from the CSD account, with the exception of family planning which is currently financed from DA funds and other accounts. The FY 2002 request for global health, $1.276 million, compares to an equivalent figure of $1.259 million in FY 2001. (Both include funding for about $110 million in transfers to United Nations Children's Fund.)

• The global health request for HIV/AIDS funding has increased from $299 million in FY 2001 to $329 million in FY 2002 to better address this major public health issue. The total amount available for HIV/AIDS from all appropriated accounts, including ESF, is expected to be about $370 million.

The remaining $947 million is proposed for child survival and other global health activities. These funds would support efforts to improve maternal and child health and nutrition, reduce infant and child mortality, and provide family planning to reduce unwanted and unintended pregnancies. This figure includes $110 million for UNICEF. The total amount available for family planning is $425 million, which includes development assistance funds from DA as well as funds from other appropriated accounts, including ESF.

Performance and Prospects

USAID has five major development goals in promoting global health: reduce unintended and mistimed pregnancies; improve infant and child health and nutrition and reduce infant and child mortality; reduce deaths, nutritional insecurity, and adverse health outcomes to women as a result of pregnancy and childbirth; reduce the transmission of human immuno-deficiency virus (HIV) and the impact of the HIV/AIDS pandemic in developing countries; and reduce the threat of infectious diseases of major public health importance. Moreover, research, policy dialogue, systems strengthening, and capacity building are significant cross-cutting activities necessary for ensuring long-term sustainability, accessibility, efficiency and quality of global health services.

In addition to being crucial in its own right, USAID's work in global health has clear links to results in other sectors. A smaller population size, as a result of couples' ability to choose the number of children they have, puts less pressure on the environment by improving the balance between the supply and demand for natural resources such as firewood, water, and land. Less competition for resources may also help ease tensions that would otherwise lead to conflict. As the HIV virus strikes primarily people in their peak productive years, it has devastating effects for a country's economy and national security when AIDS reaches pandemic levels, as it has in parts of Africa. Newborns, whose mothers die in childbirth, are 10 times more likely to die within the first two years, and the estimated combined annual economic impact in lost productivity due to maternal mortality and subsequent child mortality is $15 billion. Without question, USAID's longstanding investments in health and population programs have contributed to enormous gains for millions of people around the world, counted in more children surviving to adulthood, longer life spans, fewer days lost to illness, and smaller family size.

For several decades, USAID has been the leader among donors in addressing the critical issues of family planning, health, and nutrition in the developing world. More recently, USAID has intensified its efforts to mitigate the impact of HIV/AIDS on communities and to combat infectious diseases, especially tuberculosis and malaria. Success has come from maintaining a field presence that enables strong relationships with host country counterparts. Combining this front-line experience with programs to research and test innovative technologies has given USAID a unique advantage in designing effective programs and influencing global and national policies.

Population and Family Planning: USAID has been a world leader in supporting voluntary population and family planning programs in developing countries for over 35 years, helping families all over the world achieve their desired family size. USAID programs have had a significant impact, contributing to a decrease in average number of children per family in developing countries (excluding China) from more than 6 in the 1960s to the current level of less than 3.7. In 2000, approximately 46% of married women in less-developed countries (excluding China) used modern contraceptives.

In FY 2002, USAID will expand quality reproductive health services, including family planning and reproductive health education, HIV/AIDS and sexually transmitted infection prevention, and postabortion care for women suffering complications of unsafe abortion. Burgeoning numbers of youth reaching reproductive age worldwide have also led USAID to design activities appropriate to their special needs. In January 2001, President George W. Bush reinstated the Mexico City policy, requiring that foreign non-governmental organizations agree, as a condition of their receipt of U.S. Government funds for family planning activities, not to perform or actively promote abortion as a method of family planning using funds from any source. All of USAID's population programs will be implemented and monitored in line with the requirements of this policy.

Through its family planning and reproductive health programs, USAID aims ultimately to reduce the number of unintended and mistimed pregnancies. This is reflected by a goal to reduce total fertility rate of 20% between 1996 and 2006 in the countries in which USAID works, and the Agency is on track to meet this goal.

Child Health and Survival: USAID has been a global leader in child survival since the 1980s. Using proven tools - many of them, like oral rehydration therapy and vitamin A supplementation, developed with USAID support - child survival programs have demonstrated the ability to save children's lives even in the poorest countries. As a result, mortality of children under five in developing countries (excluding China) has declined from approximately 105 per 1,000 live births in 1985 to approximately 70 per 1,000 in the year 2000. In concrete terms, this means several million children saved every year from common childhood diseases and malnutrition.

In FY 2002, USAID will continue to improve children's health and reduce infant and child mortality. USAID will fund activities reducing the impact of the major childhood killers and the burden of disease. Combating childhood malnutrition and preventing nutritional deficiencies will also be part of USAID's programs, as will safe birthing and effective prenatal, postpartum and neonatal care. USAID's environmental health interventions, such as promoting good hygiene behavior, controlling vector-borne diseases, and improving access to water and sanitation services are also critical. The Agency will support a set of programs specifically designed to address critical needs of children at risk, needs of children in crisis, and children affected by HIV/AIDS, including orphans.

USAID aims to reduce the mortality rate for infants and children under 5 and the percentage of children under 5 who are underweight by 25% between 1998 and 2007 in countries where USAID works. USAID expects to meet this goal, however, issues such as the mounting HIV/AIDS pandemic and the deterioration of the economy and health systems in some countries may slow the Agency's progress.

Maternal Health:In addition to the enormous toll that pregnancy and childbirth take on women's survival and health, child health and family well-being are directly related to, and powerfully dependent on, maternal health. USAID has recently increased its efforts to reduce maternal deaths and disabilities and their indirect effects. Half a million mothers die every year, and 95% of those deaths are preventable. These mothers leave behind 2 million maternal orphans. USAID recently identified a set of feasible, low-cost interventions and best practices that result in the greatest impact in reducing mortality among mothers and newborns. The interventions include improvements in maternal nutrition, birth preparedness, deliveries attended by medically trained personnel, management of obstetrical complications, postpartum care, and post-abortion care.

In FY 2002, maternal health activities will include a focus on scaling-up successful programs to the national level, while encouraging greater community involvement in advocacy, needs assessment and evaluation. USAID will also be working to create a more favorable policy environment for maternal health and nutrition issues. USAID aims to reduce the maternal mortality ratio by 10% between 1998 and 2007 in countries where USAID works. The maternal health program is relatively new, and initial programs in some countries have had dramatic successes.

HIV/AIDS: The HIV/AIDS pandemic is a serious threat to both public health and sustainable development in many less-developed countries. USAID estimates that, since the disease was first recognized in 1981, 57 million people have become infected with HIV worldwide. USAID is committed to enhancing the capacity of developing and transitional countries to protect their populations not yet infected by HIV, and to providing services to those infected and others affected by the epidemic. In all programs, USAID will pay special attention to refugees, the internally displaced, combatants and their families, and victims of conflict, all of whom are at especially high risk.

FY 2002 USAID activities will encourage behavior change that reduces the risk of HIV transmission and the stigma attached to persons living with HIV/AIDS, and will increase local capacity to take on these efforts. USAID activities will also prevent sexually transmitted infections and improve evaluation and surveillance information. The Agency will continue to fund Joint United Nations Program on HIV/AIDS and other special trusts. Since 1999, the Agency has almost tripled its resources for HIV/AIDS and has developed an expanded response to HIV/AIDS, which focuses and targets efforts for HIV/AIDS prevention, care, and surveillance.

In a set of intensive focus countries and in concert with other donors, USAID aims to reduce the prevalence of HIV among 15-24 year-olds in high prevalence settings by 50% by 2007, and to maintain prevalence below 1% among 15-49 year-olds in low prevalence settings. USAID also aims to ensure that at least 25% of HIV/AIDS-infected mothers in high prevalence countries have access to interventions to reduce HIV transmission to their infants, to help local institutions provide basic care and psychosocial support services to at least 25% of HIV-infected persons, and to provide community support services to at least 25% of children affected by AIDS in high prevalence countries. Given the newness of this intensive effort, progress cannot yet be measured, but monitoring systems are being established to measure progress. USAID's commitment and energy for the task are high in response to the immediacy of the crisis.

Infectious Disease: In 1998, USAID launched a new initiative to combat infectious diseases. The Agency expects to have a significant impact on the control of infectious diseases by combating anti-microbial resistance, preventing and controlling tuberculosis and malaria, and improving disease surveillance and response capabilities. For example, USAID has developed and launched a new program to track and combat malaria drug resistance along the Thai-Cambodia border. During 1999, USAID also established an important cross-disciplinary, electronic network that brings together malaria and maternal health experts to share technical information, program developments, and research findings over a wide area. As with HIV/AIDS, it should be noted that the FY 2001 budget significantly increased available funding for tuberculosis and malaria. In this goal area, USAID aims to reduce deaths from infectious diseases of major public health importance other than HIV/AIDS, including tuberculosis, malaria, acute respiratory infections, and vaccine-preventable childhood diseases.

Alliances: USAID will continue to seek opportunities to collaborate with other organizations at many levels. The Agency will coordinate with other U.S. Government agencies to develop coherent and unified strategies such as for HIV/AIDS, on which USAID, the State Department and the Department of Health and Human Services led the effort. USAID will support trust funds and the Global Development Alliance to explore new partnerships in the sector. In addition, USAID will continue other successful alliances such as the Global Alliance for Vaccines and Immunization (GAVI), Polio Partners, the International AIDS Vaccine Initiative (IAVI) and the Micronutrient Enrichment Initiative, garnering support from local governments, private foundations and multilateral donors to combat dangerous diseases and protect health. USAID will share the costs of important efforts with the scientific and commercial communities for new contraceptive methods and other technological developments.

The Agency will further engage with international and local NGOs and grass-roots organizations, including faith-based organizations, as in its participation in the White Ribbon Alliance for Safe Motherhood. USAID will increase the involvement of private voluntary organizations such as CARE, Save the Children and local non-governmental organizations, as well as the for-profit private sector, to broaden the knowledge base and improve self-sufficiency. USAID will also encourage public and private sector alliances, between local non-governmental organizations and the commercial sector, for example, in order to deliver sustainable, quality health services while developing and strengthening local organizations and institutions.

Summary: Stabilization of population size and improved health and nutrition are essential to sustainable development. They are also fundamentally interdependent. When people are nourished and free from the ravages of infectious diseases, they can contribute more fully to their own social and economic progress and to that of their nation. Immunizations, health education, investments to correct micronutrient deficiencies, and investments in basic health services will significantly improve the health of people, especially women, children and vulnerable populations. When couples can determine the size of their families, resources are made available at the household, national, and global levels for enduring improvements in quality of life. Improved health status of women and girls plays a critical role in child survival, family welfare, economic productivity, and population stabilization. USAID's work in these arenas is making a difference in the lives of millions of people all over the world.

USAID's global health programs are pursued under the Agency goal, World Population Stabilized and Human Health Protected, and closely linked to the U.S. International Affairs strategic goals of Stabilize World Population and Protect Human Health and Reduce the Spread of Infectious Diseases.

The Conflict Prevention and Developmental Relief Pillar

Program and Resource Request

Given the rising number of collapsed states and internal conflicts in the post-Cold War period, some of which have become focal points of U.S. foreign policy, USAID will undertake a major new conflict prevention, management, and resolution initiative. This initiative will integrate the existing portfolio of USAID democracy and humanitarian assistance programs with new approaches to anticipating crisis, mediating conflict at all levels, and addressing the economic and political (or governance) causes of conflict. These new approaches will necessarily involve strategic alliances with institutions such as the U.S. Institute for Peace, the U.S. military, indigenous religious institutions dedicated to conflict prevention and resolution, and NGOs. There will be continuing close coordination with the U.S. foreign affairs community, especially the Department of State, in this area.

USAID continues to stand at the forefront of agencies around the world in its ability to respond to man-made and natural disasters. In addition to launching the new conflict initiative, this budget request will enable USAID to maintain this capability (unique within the United States and, indeed, the world) to provide needed help rapidly when international emergencies occur.

• The request for FY 2002 is $1.217 million, compared to an equivalent figure of $1.181 million in FY 2001 (both including P.L. 480 Title II resources at $835 million).
• International Disaster Assistance funding increases from $165 million to $200 million in recognition of the increased demands generated by complex emergencies and natural disasters.
• The request includes Transition Initiatives funding of $50 million to meet challenges in conflict-prone countries and those making the recovery from crisis.
• Democracy and governance funding continues at $132 million.

Program, Performance and Prospects

This pillar includes programs for international disaster assistance, food aid, transition initiatives and democracy and governance, with a new cross-cutting emphasis on dealing with conflict situations. As evidenced by the recent Nassar Investment Company report, Global Trends 2015, future threats to the United States are multiple, varied, and complicated. These include the spread of infectious diseases such as HIV/AIDS, land degradation, severe water shortages, forced migration, and a growing terrorist threat; all are likely drivers of conflict. USAID assistance programs must be restructured to deal more effectively with this global reality and with conflict, and must be carried out in partnership with U.S. friends and allies.

Developmental Relief

USAID, working through a broad range of governmental, private sector and NGO partners, provides relief assistance in response to four types of emergencies or crises: natural disasters, man-made disasters, complex emergencies, and economic and political transitions.

Natural disasters are caused by physical hazards such as fire, flood, drought, earthquake, and disease outbreak. Man-made disasters are caused by human error, such as a building collapse or industrial accident. Complex emergencies may include natural disasters such as droughts but are frequently caused or complicated by civil strife. They are manifested in armed conflict, displaced populations, hunger and death. To reduce the intensity of emergencies and crises, a concerted effort is underway to integrate relief assistance with longer-term development planning to strengthen the capacity of local institutions to conduct early warning, disaster preparedness and mitigation.

In FY 2000, USAID, through the Office of Foreign Disaster Assistance, responded to 66 declared disasters in 63 countries. This included 46 natural disasters, 16 complex emergencies and 4 human-caused emergencies. Natural disasters affected approximately 154 million people and their livelihoods and killed more than 45,000 people. More than 50 million people remain displaced by complex emergencies.

Drought and floods were the most prominent natural disasters, accounting for 75% of casualties caused by natural disasters and 87% of the total number of people affected by natural disasters.

Drought affected approximately 121 million people worldwide. In addition to critical food shortages, it caused acute potable water shortages, significant crop failures and livestock losses. Drought in India, for example, killed 54 million cattle, and approximately 90 million people in India became food insecure. In the Horn of Africa, close to 28 million were affected by drought in FY 2000, and continue to require emergency food and water assistance. Pastoralists and agro-pastoralists lost more than half their livestock due to lack of adequate water and pasture for three consecutive years.

Also in India, cyclones, which impacted 7 districts, claimed more than 9,465 lives, injured 2,260 people, rendered 7 million homeless and affected an additional 15 million people. These storms damaged homes, schools, roadways, electric, water and telecommunication systems and destroyed livestock and crops. More than 1.2 million hectares of cropland were damaged or destroyed.

From complex emergencies over the last two decades, more than 50 million people remain displaced, and these emergencies have cumulatively claimed more than 4.8 million lives in countries including Angola, Burundi, Rwanda, Sierra Leone, Somalia and Sudan. Drought effected approximately 121 million people worldwide including India, Afghanistan and the Horn of Africa. Ethnic conflict and civil war have claimed hundreds of thousands of human lives, have caused significant damage to governmental, economic and social infrastructures, and have robbed people of their livelihoods. As a consequence, displaced people are extremely vulnerable to malnutrition, disease, and exploitation by warring factions.

Transition Initiatives

One of the most serious challenges facing the world today is a country's transition from crisis to stability. These transitions often include armed conflict, large-scale human rights abuses and the destruction of governance institutions. USAID transition initiatives programs bridge short-term responses addressing immediate post-conflict rehabilitation needs and longer-term development approaches and the return to normalcy. Assistance for economic and political transitions supports personal security and basic institutions to help meet critical intermediate needs, protect human rights and advance peaceful, democratic change.

During FY 1999, USAID provided transition assistance in response to 18 complex emergencies, and helped advance more peaceful, more democratic transitions in 12 other countries including Indonesia, Nigeria, and Kosovo. Activities in transition countries were increasingly integrated into USAID field mission programs to strengthen the linkage with longer-term USAID and foreign policy objectives.

Democracy and Governance

USAID sustains its short-term, transition investments by strengthening the institutions of good governance and democratic participation, both of which are critical to long-term development that responds to citizen needs, promotes social and economic gains, and prevents conflict. USAID's democracy programs also are conflict preventative in that they build trust and legitimacy for government, which helps prevent political destabilisation and, in extreme cases, state failure.

USAID's strategy for strengthening democracy and good governance has four objectives: (1) strengthening rule of law and respect for human rights; (2) developing more genuine and competitive political processes; (3) fostering development of a politically active civil society; and (4) promoting more transparent and accountable government institutions.

The Agency is implementing democracy and governance activities through 75 country and regional programs. This number represents 85% of all USAID operating units. Priority setting is done in close collaboration with the State Department. The highest funding allocations were directed recently to Indonesia, Colombia, Serbia, Gaza and the West Bank, Egypt, Nigeria, Ukraine, Haiti, Bosnia and Russia.

At the end of 1999, the Freedom House classified 21 out of 87 USAID-assisted countries as free. Just under half, 42 countries, were considered partly free, while the remainder were considered "not free." During the year, the number of free countries decreased, but four countries with USAID democracy assistance - Azerbaijan, Liberia, Indonesia and Nigeria - progressed from "not free" to "partly free."

Many of these nations are in a fragile state and have made incomplete democratic transitions, demonstrating limited competition within their political systems and lack of fully functioning democratic institutions. USAID is responding to this challenge through fine-tuning its efforts to strengthen national capacity to govern, develop vibrant civil society, promote broad-based initiatives for increased openness and freedom and, as detailed below, more explicitly orient democracy programs to respond to those factors which cause conflict and, consequently, impede democratic consolidation.

The Conflict Prevention Initiative

Globally, the increasing lack of capacity of states to deal with problems that are potential sources of conflict, instability and, in some cases, chaos will pose a major and growing future threat. In response, USAID plans a major new initiative to structure its programs and external relationships to deal more effectively with this global reality. This applies to all programs and partners but especially those that directly address emergency assistance, the transition from crisis to stability, the strengthening of democratic institutions and conflict and crisis prevention and resolution.

This new initiative will center around five essential priorities:

• Developing integrated, focused U.S. Government strategies, based on conflict vulnerability analysis, that aim to prevent violent conflict;
• Expanding democracy and governance programs that seek to prevent, mitigate and resolve conflict, either before it escalates or after, as a means to reconcile fractured societies;
• Learning from the successes and relying more on the initiatives of U.S. and in-country faith-based groups, particularly at the grass-roots level;
• Providing the parties to the conflict with greater opportunities, methods and tools to acknowledge and effectively act on their responsibilities to resolve root-cause issues in a peaceful manner; and
• Strengthening and institutionalizing innovative programs that integrate USAID's relief and development resources.

In the post-Cold War era, the cost in both human and financial terms of responding to complex emergencies after the fact has been enormous. In Bosnia alone, the United States and its allies spent an estimated $53.7 billion from 1992 to l998 to bring an end to ethnic cleansing. Three years later, the international community is still engaged in Bosnia, thus, the real costs are even higher and will rise further. The humanitarian cost to respond to the aftermath of the genocide in Rwanda was $4.5 billion. This does not include the human suffering and humanitarian costs associated with the related war in the Congo. For Somalia, the cost was $7.3 billion. The cost of prevention, both in terms of financial resources and lives saved, could have been smaller by billions of dollars and thousands of innocent victims.

The conflict prevention initiative, designed to better position USAID to respond to crisis in the countries where it works before the escalation of violent conflict and humanitarian emergency, is made up of the following essential priorities:

Integrated U.S. Government Strategies: In this context, it is all the more important for U.S. foreign assistance tools to be programmed as part of an integrated, focused strategy of conflict prevention and resolution, and that USAID's conflict prevention work be integrated with the Department of State's diplomacy efforts. USAID must use all of its tools, from integrated strategic planning within the U.S. Government at the country team level, to partnerships at the country and grass-roots level with other U.S. governmental entities, including the Department of Defense and the national security community.

The Role of Democracy and Governance: Developing capable states and creating free societies based upon voluntary cooperation requires the use of democratic and market systems with widely accepted methods for resolving conflict peacefully. Lack of these foundations reflects hard realities and dangers posed by a world where there are too many "incapable states", and too little freedom. Several of the Agency's democracy interventions, including rule-of-law programs, the promotion of civil society, and local government strengthening, can contribute to conflict prevention.

Although USAID's democracy and governance programs have played a role in mitigating conflict, conflict prevention has not been an explicit objective of USAID's democracy programming. However, strengthening democratic institutions and processes, so-called "structural prevention," helps create capable states that provide good governance. Democracies don't go to war with other democracies, nor are such countries wracked by internal conflict that can result in costly humanitarian relief efforts. Integrating democracy and governance programs more fully with USAID's prevention and post-conflict relief and rehabilitation efforts will be an important part of the initiative. This approach elevates the promotion of democratic governance and recognizes the critical role such programs must play in conflict prevention and resolution.

The Role of Faith-Based Organizations in Conflict Resolution: Partnering with faith-based institutions in promoting peace and reconciliation in countries vulnerable to violent conflict is a critical tool often overlooked by conflict prevention practitioners. Yet, there are numerous examples of those institutions at the grass-roots level and higher serving as critical catalysts in conflict resolution efforts. Recent examples include:

• The Nuer/Dinka and Nuer/Nuer peace and reconciliation efforts, held under the auspices of the New Sudan Council of Churches for the past three years, have contributed to diminishing ethnic conflict within southern Sudan.
• The World Conference on Religion and Peace has established inter-religious commissions that have contributed to important dialogue in Sierra Leone, Bosnia and Kosovo.

Engaging Parties to Conflict: This initiative will vigorously pursue opportunities to create space for parties to dialogue on the root causes of, and meaningfully acknowledge their role in, conflict. USAID will facilitate the sharing of methods and tools for parties to use in acknowledging and effectively acting on their responsibilities to resolve root-cause issues in a peaceful manner, as well as preventing their resurgence. USAID will also facilitate the sharing of both local and international experiences so as to further the transition away from violent conflict.

The Role of Developmental Relief: USAID's humanitarian resources, including disaster assistance and food aid, are used to save lives in the first instance and, assisted by transition initiative resources, to reconstitute sustainable livelihoods for affected populations. Humanitarian programs also have become increasingly important tools in the promotion of market-based development, local level institution building, and sustainable health and nutrition programs. Avoiding the creation of dependencies has been a major goal of USAID humanitarian programs, and the Agency will continue to strengthen those efforts.

Efforts to support post-conflict transitions, which the Offices of Foreign Disaster Assistance and Food for Peace have undertaken in collaboration with the Office of Transition Initiatives and with USAID regional bureaus, have been effective in integrating relief and development resources. However, these linkages need to be institutionalized and strengthened within USAID's strategic planning processes.

New Partnerships and Alliances

Other bilateral donors, as well as multilateral financial and development institutions, are also becoming engaged in conflict prevention strategies. USAID will work closely with them, as the problems far outstrip the U.S. Government's financial and human resource capacities. The criteria as to what conflict prevention role should be undertaken bilaterally by the United States, as opposed to multilaterally, are complex, but it is clear that a more strategic division of labor is required. The Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) is addressing this problem currently.

USAID will develop a comprehensive assessment methodology incorporating political and security factors with humanitarian and development assistance. This will serve to increase USAID's effectiveness within the foreign affairs community and contribute to the comprehensive approach proposed in the Group of 8 Miyazaki Initiative.

The non-governmental (NGO), the private not-for-profit (PVO), and the for-profit sectors are important sources of expertise, resource mobilization, and data for conflict prevention, crisis response, and post-conflict reconstruction. Accordingly, USAID will engage the private and NGO/PVO sectors to more effectively integrate conflict prevention and resolution into development assistance efforts.

In so doing, the Agency will use a cross-sectoral approach. This will include tapping U.S. expertise and institutions such as the Synthetic Environments for National Security Estimates (SENSE) operated jointly by the Institute for Defense Analysis and the U.S. Institute for Peace. USAID will also strengthen its collaboration with such international institutions as the War Torn Societies Project International, a hybrid United Nations and Swiss NGO focused on building the indigenous capacity for conflict resolution at the local and national level.

An Integrated Approach for Funding of Conflict Prevention

There will be no request for additional resources in the FY 2002 budget for conflict prevention. Under the Global Development Alliance, USAID proposes $25 million of International Development Assistance funds for new alliances that will address short-term operational prevention. Other resources will also be available to work across sectors to support USAID's conflict prevention initiative. This will provide the State Department and USAID needed flexibility to respond to short-term operational needs and to develop a new, longer-term conflict prevention framework. It is anticipated that this will allow the Department of State and USAID to more strategically integrate the range of international assistance resources for such purposes.

A Framework to Institutionalize Conflict Prevention

It will be important to assess organizationally and managerially how conflict prevention can be made an ongoing and integral part of Agency operations. This will be carefully reviewed and a decision will be made on a structure that will ensure effective management, policy coherence, and a rational programmatic and budget process.