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Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).

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ASIA AND NEAR EAST

	FY 1997 Actual	FY 1998 EstimateSee footnote 1	FY 1999 Request
Development Assistance..............	$202,600,000	$200,422,000	$223,558,000
Child Survival and Disease..........	$52,059,000	$72,550,000	$73,954,000
Economic Support Funds.............	$2,179,575,000	$2,211,005,000	$2,195,400,000
P.L. 480 Title II...........................	$236,099,000	$126,795,000	$111,112,000

INTRODUCTION: The Asia and Near East (ANE) region spans more than half the globe, is home to more than one-third of the world's population (excluding China), and encompasses some of the world's fastest growing and poorest economies. The region includes economies in transition and crisis, governments ranging from democratic to autocratic, and is a center of transnational environmental, health and population problems.

The ANE region is important to the United States' national security, foreign policy and economic interests. Fostering a comprehensive peace in the Middle East has been at the forefront of U.S. foreign policy for the last 20 years. Strengthening trade and cooperation with Asia is of growing importance since more than two million U.S. workers currently earn their living producing goods that are exported to Asia, and imports from USAID-assisted countries in the region have increased 400% since 1986. Asia also has the highest rate of growth of greenhouse gasses and more than half of all new HIV/AIDS infections in the world.

U.S. NATIONAL INTERESTS: USAID programs in the ANE region respond to critical bilateral and regional development needs and are uniquely structured to address four key U.S. foreign policy interests:

*    Secure a comprehensive peace settlement in the Middle East;
*    Strengthen trade and technology links, and foster investment and agricultural development;
*    Consolidate democracies, strengthen participation and governance, and reduce gender disparities, and

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[ Figure 1 ]
*    Improve the global environment, stabilize world population and protect human health.

USAID programs address these foreign policy interests by helping countries in the region develop outward-looking economies, expand trade, attract foreign investment, increase participation of men and women in the market place, improve access to responsive government and public policy institutions, increase investments in the quantity and quality of social services (especially health, education and population), and slow environmental deterioration.

DEVELOPMENT CHALLENGES:

The developing countries in the ANE region constitute the fastest growing regional market for U.S. merchandise exports. This market has expanded at more than 12% per year (see Figure 1), but is now

threatened by the financial crisis in East Asia. The continued growth of this market requires overcoming the current economic crisis in East Asia, and addressing the more fundamental issues of poverty. USAID programs throughout the region help remove protectionist policies and trade barriers, strengthen financial markets, and expand economic opportunities by strengthening microenterprise lending institutions.

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[Figure 2 ]
Countries in the region face severe health challenges and burgeoning population pressures. The region's population (3.2 billion people) will double in about 42 years at current growth rates. More women die from childbirth in the ANE region than the rest of the world combined (See Figure 2). HIV/AIDS is spreading so rapidly that Asia surpassed Africa in 1996 as the principal center of the HIV/AIDS epidemic. In India alone, the number of infected people is estimated to reach 10 million by 2000. Other emerging health problems include the unregulated use of antibiotics and a lack of infectious disease monitoring. USAID programs target reducing fertility rates to near replacement levels, reducing maternal mortality, slowing the spread of HIV/AIDS, controlling the unregulated use of antibiotics and improving the monitoring of infectious diseases.

Industrialization helped fuel the region's exceptional economic growth, and in turn accelerated urbanization. While economic growth created more diversified economies, generated millions of jobs and improved incomes, it also contributed to severe environmental problems. Industries and municipalities dump untreated solid and liquid wastes onto the land into rivers and bays. The use of outdated industrial technologies, and dependence on fossil fuels for energy and transportation have caused severe air pollution that translates into local health problems and contributes to global warming. USAID programs target these problems in three ways: (1) link developing industries with U.S. suppliers of modern, less polluting technologies, (2) help national and municipalities overcome water, sewerage and solid waste management problems, and (3) help governments promote investment in cleaner fossil fuel technologies, renewable energy and improved efficiency in the transport and power sectors.

Given the size and diversity of the ANE region, these challenges and ANE's programs are best examined in the context of three subregions: the Middle East and North Africa, South Asia, and East Asia.

Middle East and North Africa: USAID's programs in this subregion support the achievement of a comprehensive peace settlement in the Middle East by addressing four key development challenges:

*    resolve chronic water shortages;
*    change protectionist policies to stimulate economic growth;
*    reduce high fertility rates, and
*    strengthen weak democratic processes and institutions.
    
Water supply and demand are at the heart of bilateral development issues and regional concerns for sustainable peace. Water demand in Jordan is projected to exceed supply by 78% by 2000, and in West Bank/Gaza, Palestinians have access to only one-third the minimum water needed by households according to World Health Organization standards. In response, USAID is making significant investments in water-related programs throughout the subregion to improve supply, quality and

efficient use of freshwater resources. In addition, USAID's regional program is helping resolve specific water disputes within Jordan, Egypt and West Bank/Gaza.

Generally, countries in the subregion have maintained protectionist economic policies that include high average tariffs and cumbersome regulations. These policies inhibit economic efficiency and foreign investment. USAID programs are helping governments and the private sector remove these impediments to trade and investment, and improve economic opportunities and incomes, especially for the poorer segments of society. Complementary activities are expanding access to finance by micro-enterprises. By strengthening national economies and improving the climate for both large and small-scale businesses, these efforts are helping reduce the disparities that can fuel violence and political instability.

The countries in the subregion have some of the highest fertility rates in the world. Stabilizing population improves prospects for development, and is especially important for containing growth in demand for water and increasing education and employment opportunities. By extending knowledge and availability of contraception and reproductive health services, and by integrating health and family planning interventions, USAID's programs in Morocco, Egypt and Jordan improve maternal and child health and reduce fertility. These programs are further expanding services to rural populations and focusing on newly married couples.

Government and political institutions in the subregion are undergoing significant changes. In Egypt, the people are beginning to express democratic aspirations. In Morocco and Jordan, the traditional monarchies are showing signs of democratization, while in West Bank/Gaza the Palestinian Authority and the Palestinian Legislative Council are beginning to understand their respective roles in a democratic system. Working with NGOs and governments in Lebanon, Egypt, Morocco and West Bank/Gaza, USAID's programs are helping decentralize authority, encourage tolerance and respect within societies, transparency and accountability in governments and private institutions, and respect for universal human rights and rule of law.

South Asia: USAID programs focus on four principal development challenges in this poorest subregion of the world:

    * stabilize population growth, improve child and maternal health, and slow the spread of HIV/AIDS;
*    improve the economic, educational and political opportunities for women;
*    improve the environmental performance of industry-led economic growth, and
*    strengthen financial sectors to serve as the foundation for economic growth.

The population of South Asia is about 1.5 billion, many of whom live in large urban areas. The U.N. projects that five of the world's largest cities will be in South Asia by the year 2015. In spite of general trends toward lower fertility, population growth rates are still high in northern India, Pakistan, Nepal and Bangladesh. The HIV/AIDS epidemic is spreading rapidly in South Asian countries. In India alone there are an estimated 3 - 5 million HIV cases. USAID programs aim at stabilizing population growth and protecting human health by: (1) expand access to quality maternal-child care and family planning services, (2) improve monitoring to warn of growing resistance to antibiotics by selected infectious diseases, and (3) develop effective responses to the spread of HIV/AIDS. These programs enable couples to make informed and safer decisions about child bearing, and help slow the spread of HIV/AIDS and other infectious diseases.

South Asia statistics show some of the greatest differences between men and women in terms of life expectancy, literacy, educational attainment and income in the world in South Asia. In addition, the low status of women and the low value placed on female children has led to a disproportionately high death rate among infant girls, mainly as a result of neglect and malnutrition. USAID programs address these gender disparities by expanding opportunities to improve women's literacy and social and

economic empowerment. These improvements are essential to reduce fertility and infant mortality, increase women's participation in the economy, and expand democracy.

Rapid industrialization and economic development have exacerbated pollution problems that threaten local health and contribute to global warming. USAID is leading donors in the development of win/win approaches to reduce industrial pollution, mitigate the growth of greenhouse gases, and improve the economic efficiency of energy and industrial processes. These programs focus on the development of policies and incentives that encourage private sector investment in cleaner energy and industrial technologies. They target India, in particular, because it is the world's fifth largest source of greenhouse gas emissions and second only to China in the growth of new emissions.

USAID programs work to increase incomes and generate employment opportunities by: (1) advocating stable, market-oriented financial policies, and (2) expanding availability and access to capital through stronger and more diverse stock and bond markets and microfinance institutions. These measures are stimulating increasing investment, both local and foreign, in productive enterprises that create jobs and income.

East Asia: Programs in East Asia focus on the need to:

*    strengthen economic institutions to face the challenges of globalization, and improve opportunities for disadvantaged populations;
*    strengthen evolving democratic processes and institutions;
*    improve management of natural resources and environmental performance in the energy and industry sectors;
*    slow population growth and the rapid spread of HIV/AIDS, and improve maternal and child health.

The subregion's current financial crisis represents a significant setback in long-term efforts to strengthen trade and investment linkages between U.S. and Asian businesses that benefit U.S. workers, businesses, and consumers. The crisis is putting millions of people out of work, cutting real incomes of those who still have jobs, and limiting the ability of governments to meet the growing demand for social "safety-net" services. These social and economic consequences also threaten political stability. USAID has an important role in helping countries address the root causes of the crisis, especially through economic growth and democracy and governance activities. Increasing competition and accountability in capital markets and other financial sector institutions remains the focus of USAID activities in Indonesia, the Philippines and Mongolia. USAID is also working to liberalize international trade, increase the degree of competition within domestic economies, eliminate restraints on foreign and domestic investment, and privatize infrastructure. The needs of the poor are being addressed through programs that strengthen microenterprise finance institutions, transfer improved technologies and practices to business and agriculture, and strengthen civil society.

With the exception of the Philippines, most East Asian countries assisted by USAID have weak or nascent democratic institutions. As an initial step, USAID programs in Mongolia and plans being developed for Laos and Vietnam have targeted strengthening civil society institutions and enhancing respect for human rights and rule of law. In the wake of political upheaval in Cambodia, USAID has redoubled its efforts to strengthen non-governmental organizations that protect and enhance human rights. Finally, the Asian financial crisis has created opportunities for programs in Indonesia and the Philippines that improve transparency and accountability in government and private institutions, strengthen NGOs, and make governments more responsive to citizen needs.

East Asia's rapidly expanding economies fueled by industrialization and large populations have have led to sprawling urbanization and placed tremendous pressure on the subregion's forests, coastal and ocean resources. Most countries today face extensive loss of natural habitats and plant and animal species, and severe air, water and land pollution that threatens health and contributes to global

warming. USAID has responded to these challenges by developing innovative, participatory approaches for sustainable resource management, and by advocating policies, incentives and technology that improve industrial performance and municipal environments.

Total fertility rates vary widely in the region (2.9 - 5.8 births per woman). Several key countries have had successful USAID-led family planning programs (Indonesia, Thailand) and achieved steady declines in fertility to near replacement levels. As a result of its successes, USAID closed its program in Thailand and plans to phase out reproductive health activities in Indonesia, leaving in-place an indigenous capability to provide quality health and family planning services. The more serious threat is the exponential growth of HIV, especially in Cambodia and Vietnam. USAID has developed bilateral and cross-border HIV prevention programs in response to this threat, as well as outreach and clinical services that lower risk and save lives. In countries like the Philippines and Indonesia, where the spread of HIV is considerably slower, USAID supports monitoring and evaluation of HIV and other sexually transmitted diseases, and operations and behavior research that will improve understanding of HIV transmission and how to prevent it.

PROGRAM AND MANAGEMENT CHALLENGES: Over the past five years, USAID has undertaken significant reforms to: (1) improve program performance, (2) link programs to U.S. foreign policy and national interests, (3) improve partnership with host countries, and coordination with other USG agencies and international donors, and (4) improve response to changing development challenges and new USG initiatives. USAID will continue these efforts, but declining budget levels constrains USAID's sustainable development programs and ability to respond to unanticipated foreign policy priorities in the region.

OTHER DONORS: Excluding its assistance to Israel, USAID ranks fifth within the donor community in the level of resources it is investing in the ANE region. The leaders are the World Bank (IBRD), the Asian Development Bank (ADB), the Japanese (JICA and OECF) and European Union (EU). Other significant bilateral donors in the region include Australia, Germany , and United Kingdom. USAID has worked aggressively with these donors and the U.N. agencies to reach consensus on development priorities and coordinate programs in every USAID-assisted country in the region. However, partnering with other donors to deliver timely and appropriate assistance is not without problems. Other donors have their own bureaucratic processes and are just as vulnerable as USAID to changes in budgets and priorities. In spite of the problems, these efforts have paid dividends, enabling USAID to leverage considerable funding for common objectives and maintain significant influence with host countries in this time of declining budgets and staff.

FY 1999 PROGRAM: The resources requested by ANE for FY 1999 total $2.604 billion. Of this amount, $223.5 million is Development Assistance (DA), $73.9 million is Child Survival and Disease (CSD), 2.195 billion is Economic Support Funds (ESF) and $111.1 million is PL-480 Title II. The specific results to be achieved with these funds are described in the detailed country and regional program narratives. In general, USAID will finance programs that contribute to the following results in FY 1999.

*    Facilitate economic reforms that increase openness and access to markets (including capital markets).

*    Help countries in the region achieve high annual economic growth rates (6 - 8%) that generate large numbers of jobs for poor people.

    * Reduce fertility and population growth, improve reproductive and maternal health, and slow the spread of HIV/AIDS.

*    Improve energy efficiency and urban waste management, improve water resource management, improve the management and protection of forest and coastal resources, and promote a "clean industrial revolution" in Asia.

*     reduce the rate of growth of greenhouse gas emissions.

*    Encourage the liberalization of authoritarian states, consolidate democracy in countries that have recently emerged from authoritarian rule, and strengthen political participation, including local, grassroots participation and the empowerment of women.

*    Reduce gender disparities and the trafficking of young girls and women in USAID-assisted countries.

*    Use humanitarian assistance resources (PL-480 Title II) to complement and expand upon child survival, women's education and economic growth programs in India and Bangladesh.

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ASIA AND THE NEAR EAST REGION
FY 1999 PROGRAM SUMMARY
(in Thousands of Dollars)

Country	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Development	Humanitarian Assistance	Total
BANGLADESH - DA -CSD - PL 480/II	5,630 --- ---	32,000 24,430 ---	1,300 --- ---	2,000 --- ---	--- --- ---	--- --- 19,360	40,930 24,340 19,360
CAMBODIA - ESF	500	6,000	1,000	6000	4,000	2,500	20,000
EGYPT - ESF	618,700	54,500	101,000	30,800	10,000	---	815,000
INDIA - DA -CSD - PL 480/II	9,900 --- ---	20,000 14,500 ---	11,600 --- ---	200 --- ---	300 --- ---	--- --- 91,752	42,000 14,500 91,752
INDONESIA - DA -CSD	5,500 ---	--- 8,700	18,000 ---	6,169 ---	--- ---	--- ---	29,669 8,700
ISRAEL - ESF	1,200,000	---	---	---	---	---	1,200,000
JORDAN - ESF	8,300	6,700	10,000	---	---	---	25,000
LEBANON - ESF	6,000	---	3,000	3,000	---	---	12,000
MONGOLIA - ESF	4,000	---	---	2,000	---	---	6,000
MOROCCO - DA -CSD	1,000 ---	2,000 3,000	3,755 ---	--- ---	2,026 ---	--- ---	8,781 3,000
NEPAL - DA -CSD	4,800 ---	12,000 5,460	3,000 ---	1,000 ---	--- ---	--- ---	20,800 5,460
PHILIPPINES - DA -CSD	8,442 ---	21,381 5,500	8,502 ---	8,500 ---	--- ---	--- ---	46,825 5,500
SRI LANKA - DA	1,500	---	---	---	---	---	1,500
W.Bank/Gaza - ESF	7,000	---	58,000	10,000	---	---	75,000
US-AEP -DA	---	---	18,000	---	---	---	18,000
Country	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Development	Humanitarian Assistance	Total
ANE Regional - DA -CSD - ESF	1,823 --- 26,000	6,243 12,454 ---	6,317 --- ---	370 --- 16,400	300 --- ---	--- --- ---	15,053 12,454 42,400
Total -DA -CSD -ESF -PL 480/II	38,595 --- 1,870,500 ---	93,624 73,954 67,200 ---	70,474 --- 173,000 ---	18,239 --- 68,200 ---	2,626 --- 14,000 ---	--- --- 2,500 111,112	223,558 73,954 2,195,400 111,112

Kelly C. Kammerer
Acting Assistant Administrator
Bureau for Asia and the Near East

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Footnote: 1 Economic Support Fund levels in Middle East country narratives for FYs 1998 and 1999 are still under review and the State Department will work with Congress on any changes proposed in country levels within that region.

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