Introduction Statement of the Administrator USAID Organization Chart Assisted Countries - World Map Summary of FY 2003 Budget Request Program Highlights Management Improvements Operating & Administrative Expenses Capital Investment Fund Working Capital Fund Operation Expenses of the Inspector General Foreign Service Retirement and Disability Fund Summary Tables Regions     Africa     Asia & the Near East     Europe & Eurasia     Latin America & the      Caribbean Central Programs Glossary Abbreviations and Acronyms Wednesday, 29-May-2002 18:53:12 EDT

Overview

Even before September 11, the United States' interests in the developing world had changed, becoming more pressing and more relevant to its overall economic and security interests. We have moved from an era dominated by Cold War politics and issues of containment to one where globalization and the challenges of terrorism and world economic growth occupy our agenda. The issues of this new era center on promoting good governance and managing conflict across the globe, as well as erasing illiteracy and stemming the spread of infectious disease. At this time in history, U.S. foreign policy interests are predicated not only on traditional security concerns, but also on maintaining a liberalized international economic system and democratic capitalism as the preferred model of governance.

The tragic events of September 11 underscore the threats such a system faces, and the need to confront those threats, in part, by confronting the problems of the developing world, home to more than three-quarters of the earth's population. This is not a new charge. For the past 40 years, the United States has sought with substantial success to better the lives of the world's poorest citizens. Yet as the forces of globalization bring the world closer together, the problems of the developing world from a national and economic security perspective become more acute. In terms of national security, the National Intelligence Council predicted in its Global Trends 2015 report, published in December 2000, that "states with poor governance; ethnic, cultural, or religious tensions; weak economies; and porous borders will be prime breeding grounds for terrorism." Economically, states that fail to realize tangible benefits from globalization in trade could derail further economic openness in multilateral trade negotiations or face greater internal conflict domestically from those opposed to globalization.

The President's National Security Goals

Last summer President Bush, in an address to the World Bank, laid out three national security goals:

• First, for America and her friends and allies to pursue policies that keep the peace and promote prosperity;
• Second, to ignite a new era of global economic growth through a world trading system that is dramatically more free and open;
• Third, to work in partnership with developing countries to remove obstacles to economic growth; to help them fight illiteracy, disease, and unsustainable debt.

These goals confirm that it is in our interest to have strong and stable countries as neighbors and partners. The President stressed that:

While poverty does not, on its own, spawn extremist responses, the very word development means more than enhanced economic well-being. It is about putting into practice the universal values of individual freedom, economic opportunity, and upward mobility, and the resolution of disputes through democratic governance. American national interests are most secure in a world built on these values.

At a time when a large measure of public resources must necessarily be directed toward immediate security concerns, a well-focused and economical foreign assistance program can help anchor the longer-term future that our diplomacy and military action have delivered but not yet secured. While no program transferring resources or skills can promise a world free of threats such as terrorism, a world in which development of the type we seek remains absent for hundreds of millions of people remains a world susceptible to extremism.

USAID's Contribution

USAID's programs and staff in developing and transition countries contribute to the President's goals directly by:

• Fighting hunger and poverty, and promoting prosperity and sustainable management of the world's natural resources;
• Improving health, especially by addressing the devastating effects of HIV/AIDS and other infectious diseases;
• Strengthening the quality of democratic governance and reducing the sources of conflict; and
• Responding to international disasters and delivering humanitarian assistance to countries facing crises.

USAID programs achieve a broad range of outcomes from improving agricultural productivity to strengthening democratic institutions to protecting tropical forests. Specific examples include establishing a mission in Afghanistan to help that war-torn country move from relief to reconstruction, launching a multiyear basic education program in Pakistan to increase literacy and lay the foundation for sustained growth, and aggressively fighting HIV/AIDS in Africa. We are encouraging the adoption of market-oriented economic policies in eastern Europe, helping African nations qualify to join the World Trade Organization, financing job creation programs in rural central America to expand economic opportunity and help stem the flow of illegal immigration to the United States, and using agricultural research to increase food production in Africa. USAID works in a variety of ways, including delivering services directly, providing technical assistance and training to strengthen institutions, sponsoring policy analysis, and facilitating the sharing of ideas and approaches among people facing similar problems.

Ultimate success depends on connecting developing countries to the global economy, where they can benefit from market-driven capital flows far in excess of those the donor community can provide. Private capital flows to the developing world have reached a point where they total nearly six times the amount of all official assistance. Yet not all developing countries shared in this bounty, and faced with a serious global recession, negative capital flows to the developed economies have been draining developing world economies for the first time in many decades.

To reverse this trend and build the foundation for sustained economic growth, developing countries need peace and security, good governance, and educated and healthy workers. Where these conditions exist, development has progressed measurably, expanding markets for American goods and services and expanding the middle class supportive of open and free societies. Unfortunately, for much of the developing world these conditions are absent or just now emerging, requiring careful nurturing to become a robust part of society.

Building Blocks of Development

Our budget request addresses these fundamental building blocks of development. We have increased efforts in conflict prevention, good governance, and fighting corruption. To build and protect a productive workforce, we are requesting more funding to fight HIV/AIDS, a disease that attacks the most productive segments of society, the nascent middle class, and particularly the teachers, health care workers, and public servants of developing countries. We plan to launch an initiative in Africa to cut hunger through agricultural development. We have increased the request for education by 65% over the last two years. We are building our trade and investment programs, such as those pursuant to the Africa Growth and Opportunities Act, that focus on building policy environments and institutional capacity to allow African nations to enter the global economy. Finally, we plan to increase our efforts in central and south Asia to enhance the peace and stability of this region critical to the war against terrorism. These six areas are highlighted below.

Fighting HIV/AIDS

The HIV/AIDS pandemic is devastating Africa and its middle class, including educators, business leaders and government officials. The disease is also poised to escalate dramatically, especially in parts of Europe and Eurasia, and some Asian countries. In addition to untold human suffering, the disease directly threatens stability in these regions and achievements of development objectives. In response to these challenges, USAID is dramatically escalating its support for HIV/AIDS by funding both the bilateral programs and the Global Fund to Fight AIDS, Tuberculosis and Malaria. This budget increases funding from $429 million in FY 2001 to $485 million in FY 2002 to a request of $640 million in FY 2003 from all accounts. The increases will allow USAID to strengthen and expand the critical assistance it provides to prevention, care and support, and treatment activities in countries most affected by the pandemic.

Attacking Illiteracy

Basic education provides children and young adults with core skills essential to success in all aspects of later life: finding or creating a decent job; raising healthy, educated children in turn; and participating constructively in the democratic process and the wider world. The benefits of girls' education are particularly high. Educational failure and ignorance contribute to broader failure at the national level, both economic and political. Despite universal recognition of these facts, over 110 million primary-school-age children in developing countries remain out of school, and more than 60% of these unenrolled children are girls. This budget includes a substantial increase in funding for basic education programs, from $102 million in Development Assistance in FY 2001 to $165 million in FY 2003.

Promoting Trade and Investment

International flows of trade and investment resulting from globalization produced extraordinary levels of growth and employment in the United States and many other countries over the last decade. However, most developing and transition countries, which account for about 90% of global poverty, hunger, and illiteracy, have not been able to capitalize on this phenomenon. This is due to a variety of reasons ranging from poor policies and ineffective governance to a lack of training and technological infrastructure. Poor countries are sometimes politically unstable and make risky economic partners. USAID plans to re-energize programs that improve local business environments, stimulate agriculture, lead to income growth for families, and increase trade, as well as address important environmental issues. The environment, particularly forestry and energy, is a critical element of any trade and investment strategy, and this budget request addresses important environmental issues to which economic growth gives rise.

Cutting Hunger in Africa

The problem of hunger in Africa is widespread, and it is getting worse. One out of three men, women, and children in Africa go to bed hungry, and it is estimated that Africa will account for 73% of the world's undernourished by 2015 if more aggressive action is not taken. In response, USAID plans to launch an initiative in FY 2003 to concentrate on agricultural productivity on the continent, where research indicates investments have a stronger impact per dollar on poverty than investments in any other sector. The initiative will stress African ownership of the drive to cut hunger and poverty, stronger regional trade links, and the opportunities offered by new science, such as biotechnology.

Mitigating Conflict and Improving Governance

Corruption, ideological extremism, and the absence of responsible governments in many countries present the United States with emerging challenges to our development assistance efforts and overall national security interests. An effective U.S. response must be comprehensive in scope and sustained over an extended period. Consequently, USAID is developing a strategy that better links and sequences programs for security, rule of law, democracy, economic growth, and humanitarian relief. Under its conflict management initiative, approximately $50 million in FY 2003 funds are for this priority that integrates all tools and programs more effectively among each of the agency's regional and functional bureaus. Ultimately, this initiative will better focus U.S. foreign assistance to problem countries so that their capacities for self-governance and the peaceful resolution of their own conflicts are strengthened.

Stabilizing Front Line States of Central and South Asia

Central and south Asian countries are playing a central role in the war on terrorism. However, many of these countries face challenges that threaten the region's prospects for long-term development and stability. Most south Asian countries are characterized by poor governance, as well as tenuous civil liberties and individual rights, especially for women. South Asia's adult literacy rates, especially for women, are the lowest in the world, and child mortality rates are incredibly high. Even before September 11, a broad consensus had emerged that U.S. re-engagement in south Asia was necessary to improve the region's social and economic conditions, and thereby reduce the risk of regional and global instability. USAID will respond to pressing needs in Afghanistan, Pakistan, and the rest of south Asia by focusing on basic education and health, agriculture and rural economic vitality, and governance programs, with special emphasis on improving the status of women. To help reduce poverty and threats to stability in the central Asian republics, increased budget resources have been allocated for a variety of programs including infectious disease, conflict mitigation, economic governance, and democracy.

Changing to Meet the Challenge-Management and Organization

Helping people in the developing world through effective assistance requires a transparent, agile, and skillful organization. It must have adequate security to safeguard employees frequently working in difficult situations. We are focused on performance-based management to ensure that every tax dollar will be spent wisely, leveraging the Agency's funds to help build local capacity and attract private investment. What today's challenges demand of USAID in Washington is fundamental management reforms in key areas and an organizational structure that can bring necessary technical expertise to bear on problems in the field in a flexible and efficient manner. We must also ensure that necessary investments to enhance security are made at all USAID locations, especially those that are high threat.

Management Reforms

Reform of USAID's business systems is key to improving the Agency's performance and will require sustained, disciplined, well coordinated, agency-wide action. To strengthen agency-wide leadership and management capacity, we have established a Business Transformation Executive Committee, based on commercial best management practices, to oversee management improvement initiatives and investments. It will set an aggressive pace in developing and implementing new business systems, processes, and structures, and "sunsetting" outdated or redundant ones.

During FY 2001, planning of reforms was begun and some results were achieved, but much work remains:

• In the area of financial management, the Agency plans to enhance the core accounting system, installed last year, to provide more accurate and timely financial information, and improve accountability and regulatory compliance.
• In human resources management, we will expand the Agency's talent pool by recruiting junior-level Foreign Service professionals and focusing on key skill areas in the Civil Service like procurement and information technology.
• In information technology, having ensured last year that all overseas posts have reliable access to Agency systems and to e-mail, we will initiate actions to improve our systems' security in order to reduce the possibility of unauthorized access.
• In the procurement field, in addition to the new, automated contract-writing system implemented last year, we are preparing a competition plan to facilitate out-sourcing of selected functions currently carried out by USAID staff.
• In the area of strategic budgeting, we have consolidated the budgeting function into the Policy and Program Coordination Bureau to more closely link resources with policy priorities.

In the area of performance measurement and reporting, we are streamlining, simplifying, and improving our annual performance reporting process beginning with our field missions and operating units through to our Agency-level reporting. The result will be an improved ability to collect and report on performance and to relate performance to budget requests and allocations.

Development Partnerships and the Global Development Alliance

USAID recognizes that it is only one piece of the puzzle needed to overcome the challenges to economic growth in the developing world. Four decades ago, Official Development Assistance (ODA) comprised 70% of all U.S. financial flows to developing countries; in today's globalized world, they comprise 20%. To be effective in carrying out our mission and our foreign policy responsibilities, USAID must recognize its niche as a catalyst for enabling private trade and investment. We need strategies and approaches that allow us to work cooperatively with other entities investing in and providing development and humanitarian resources to the developing world. To start this process, last year we established the Global Development Alliance (GDA).

The Global Development Alliance is a commitment to improve the way the Agency implements its assistance and foreign policy mandate through better and increased collaboration with private sector, government, and nongovernmental organization (NGO) partners. It signals a new era of cooperation where we work together to get projects accomplished on a much larger scale than USAID could do with only its own resources. In the past, USAID has brokered alliances that pooled resources with matching grants such as the Children International program that collaborated with Smith-Klein Beecham in nine Latin American and Asian countries to support integrated health and nutrition programs. One example of a new alliance under active consideration at this time is with leading U.S. coffee buyers and is designed to help stabilize local economies while improving the quality of product available to consumers.

The GDA Secretariat was officially established as an operating unit on November 26, 2001 with a separate staff and a limited budget to initiate new alliances. As this model is integrated into our routine operations across the Agency, separate staff and funding will be phased out.

Agency Reorganization

We are modifying many of our program priorities, business practices, and our organization to better address the new challenges of the changing international environment, especially those related to globalization. This includes the creation of three technical pillar bureaus and the merger of our central budget function into our policy bureau.

• The Bureau for Economic Growth, Agriculture and Trade will allow us to give increased attention to economic issues of globalization, trade capacity building, and agriculture. It will be at the forefront in leading and coordinating our programs that contribute to global economic security. The bureau also has central responsibility for the important areas of environmental protection and education and adult training.
• The Bureau for Global Health will give greater focus to evolving health issues, especially our increased emphasis on HIV/AIDS and other infectious diseases. This bureau will be the point of technical leadership within the Agency for all of our traditional health, nutrition and family planning programs, including those that address maternal and child health and infectious diseases.
• The Bureau for Democracy, Conflict and Humanitarian Assistance will allow us to tighten the links between these related issues that are being drawn increasingly into the spotlight as the number of collapsed states, internal violent conflicts, and complex humanitarian emergencies grows. Our current conflict prevention task force, which leads the conflict prevention, management, and resolution initiative announced last year, will be folded into this bureau by September 2002. We intend to build on our experience in post-conflict countries like Afghanistan to learn how long-term engagement and political assistance can help states formerly in conflict create effective institutions and peaceful development.

In submitting USAID's budget request for FY 2003, we at USAID would like to assure the Congress that it rests on a commitment to adapt basic themes proven successful in the past to new circumstances while working to buttress the institutional strengths of the Agency and its management systems so we are better able to face the challenges of this century.