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Statement of the Administrator
Development plays a critical role in implementing transformational diplomacy. Transformational diplomacy seeks "to work with our many partners around the world, to build and sustain democratic, well-governed states that will respond to the needs of their people and conduct themselves responsibly in the international system." As the Secretary of State said in a January 2006 visit to USAID, "I consider development to be one of America's most important priorities because our goal ought to be to use our assistance to help people better their lives, but also to help their governments to be better able to deliver for them." This budget proposes funds and programs that will help peoples and their governments to make progress toward this vision.
The FY 2007 program budget supports key Administration priorities.
- It continues efforts to build democracy and good governance in Iraq and Afghanistan, and requests funds in support of other frontline states in the Global War on Terror.
- It supports the President's Freedom Agenda through activities to strengthen effective democracies in programs that promote transformational development or address state fragility.
- To foster transformational development through economic growth, USAID proposes to sustain programs devoted to building trade capacity.
- It seeks authority in certain critical emergency situations to use P.L. 480 Title II funds for the local or regional purchase and distribution of food to assist people threatened by a food security crisis.
- It includes funds to robustly address the global issues of HIV/AIDS, malaria and the threat of avian influenza.
In the FY 2007 budget, USAID proposes to advance transformational diplomacy through five core strategic goals. These goals respond to the Joint State-USAID Strategic Plan's objectives to Preserve the Peace and Extend the Peace, and to the Administration's principles for restructuring foreign assistance, such as improved accountability, country-based strategies, effective use of U.S. resources, distinguishing among key challenges and encouraging eventual graduation from economic and governance aid.
The five core strategic goals that USAID has established are:
- promote transformational development to bring far-reaching, fundamental changes to institutions of governance, human capacity, and economic structure that help countries to sustain further economic and social progress without continued dependence on foreign aid;
- strengthen fragile states to enhance stability, improve security, advance reform and develop the capacity of essential institutions and infrastructure;
- provide humanitarian relief to meet immediate human needs in countries afflicted by violent conflict, crisis, natural disaster, or persistent dire poverty;
- support strategic states to achieve specific U.S. foreign policy goals in selected countries of high priority from a strategic standpoint, using the tools of development and reconstruction; and
- address global issues and special concerns including HIV/AIDS, global climate change, other infectious diseases, direct support for international trade agreements, and counter narcotics.
These goals support the overall reforms introduced by Secretary Rice to make foreign aid more effective.
To make progress on these goals, USAID is requesting $3.1 billion for its FY 2007 programs. We anticipate working with the Departments of State and Agriculture on joint programs that total $5.4 billion in Economic Support Funds, Assistance for the Independent States of the Former Soviet Union, Assistance for Eastern Europe and the Baltic States, Andean Counter-narcotics Initiative and P.L. 480. We will also manage a portion of the $2.9 billion requested for the Global HIV/AIDS Initiative by the Department of State's Global AIDS Coordinator and a portion of the $3 billion for the Millennium Challenge Corporation. USAID is requesting $857 million in Operating Expenses (OE), the Capital Investment Fund, the Development Credit administrative funds and the Office of the Inspector General to fund the administrative costs of managing slightly under $8.5 billion in program funds.
Many U.S. strategic partners are countries facing recovery or development challenges. The FY 2007 budget request continues support to Afghanistan and Iraq to build safe, stable societies that meet the needs of their peoples and eliminate environments that breed and harbor terrorism. The request includes assistance to other key frontline states in the Global War on Terror on the principle that democratic, well-governed states that provide opportunity and freedom to their citizens are inhospitable environments for terrorism to take root.
The FY 2007 request continues and expands the process begun in FY 2006 of tying Development Assistance to countries' own development efforts. Consistent with the country focus of foreign aid reform, we have allocated the greater share of resources designated for transformational development to needy countries that are not yet eligible for the Millennium Challenge Account (MCA), but that are demonstrating through sustained good performance that they are striving for the conditions that will lead to progress in democracy and governance, economic freedom and investing in people. This enables USAID to work in synergy with the Millennium Challenge Corporation (MCC). In this budget we have used a performance-based approach, comparing need and performance across regions, to allocate part of the Development Assistance account.
At the same time that we reward good performers in transformational development, we cannot ignore countries that are vulnerable to or recovering from crisis; many are managing fragile political and economic transitions. USAID has embarked on a new strategic approach towards these countries. This approach emphasizes better monitoring and analysis, country-based strategies and programs that address sources of fragility, and greater flexibility to respond to changing conditions.
We have also requested resources for humanitarian relief. No matter where or what the cause, USAID stands ready and able to come to the assistance of countries where lives are threatened due to natural or man-made disasters. For example, in FY 2005, USAID led the U.S. government's relief efforts after the Asian tsunami. We conducted assessments and oversaw the provisioning of India, Indonesia, the Maldives, Sri Lanka and Thailand with relief commodities, then funded programs to restore the livelihoods of affected populations and developed capacities critical to disaster early warning, mitigation and recovery.
Global ills and opportunities know no borders. USAID will continue to combat HIV/AIDS and ramp up malaria programs in targeted African countries as part of the President's Malaria Initiative. USAID will also help countries detect the incidence and control outbreaks of avian influenza. USAID will work with developing countries to take advantage of the globalizing economy and to play their roles in managing global climate change, including initiatives in using clean energy and preserving biodiversity, which may also offer sources of income.
USAID's development work puts us on the front lines of transformational diplomacy in some of the most challenging operating conditions around the world. Given constrained Operating Expense resources in FY 2006, the Agency has accelerated its efforts to restructure its business model to achieve more efficient, economical operations. In FY 2007, USAID will continue its restructuring efforts through rightsizing its overseas and Washington presence, regionalizing business functions, and consolidating administrative services with the Department of State.
Program Priorities
With this budget request, USAID responds to the principles of the Administration's restructuring of foreign assistance toward transformational diplomacy. These are:
- Set and measure clear outcomes and impacts for every dollar of foreign assistance;
- Develop and manage coherent, country-based strategies that integrate U.S. assistance programs with diplomatic initiatives;
- Make the most effective use of U.S. resources to achieve foreign policy, national security, and development objectives;
- Distinguish among the key challenges to and constraints on nations at different stages of stability and development, and select the most appropriate policy and assistance tools accordingly; and
- Encourage eventual "graduation" from foreign economic and governance aid.
USAID's Policy Framework for Bilateral Foreign Aid sets forth the five core strategic goals and establishes guiding principles that respond to the foreign assistance restructuring precepts. The FY 2007 budget proposes that programs be managed and resources allocated as much as possible strategically for distinctive results aligned with each of the five goals for maximum impact. This will implement transformational diplomacy in the following ways:
Goal: Support Strategic States. USAID's budget proposal emphasizes strengthening democratic governance and continued economic recovery in Iraq and Afghanistan and building national capacity in Iraq, so that Iraqis can transition to self-reliance. Using a combination of DA, CSH, ESF, FSA, and other accounts, USAID supports frontline states in the Global War on Terror, including Pakistan and Djibouti, using our development tools and knowledge.
Iraq: Ten Top Achievements in 2005
- For the first democratic elections in over 50 years, USAID trained election monitors, provided logistical assistance to the Independent Election Commission of Iraq, and trained political parties.
- Assisted Iraq in meeting IMF requirements for a Stand-by Arrangement that leads to the Paris Club moving to the second stage of a deal to forgive 80 percent of Iraq's $40 billion debt to Paris Club members and $685 million in new credit from the IMF.
- Assistance to the Constitutional Drafting Process: USAID assisted the Constitutional Drafting Committee regarding systems of representation, constitutional referenda and electoral law. USAID is also conducting public awareness and participation campaigns to encourage civic engagement in the constitutional process.
- Provided between 30 - 50 thousand short term jobs weekly and created 10s of thousands of long term jobs: The Community Action Program (CAP) and Office of Transition Initiatives have employed between 30 and 50 thousand Iraqis in reconstruction efforts every month and these programs along with USAID's Economic Growth initiatives have created 10s of thousands of new long term jobs.
- Started the process for Iraq's accession into the World Trade Organization: Assisted the Government of Iraq in submitting its formal request to enter into the WTO and provided policy support for Iraq to meet WTO requirements. Trade liberalization fosters economic growth while WTO ascension will open up new markets for Iraq.
- Investing in Iraqi schools: Since starting work in Iraq, USAID has provided 8.7 million math and science text books, rehabilitated 2,529 schools, and trained over 36,000 teachers. These programs are ongoing. UNESCO subsequently provided over 20 million text books
- Rebuilding Iraq's electrical sector: As of September 1, 2005, USAID added 855 megawatts (MW) of new capacity to the electrical grid. By the end of 2005, the total capacity contributed to the grid through USAID projects is expected to be over 1,600 MW.
- Supporting women's engagement in political and economic life of Iraq: USAID is working with female politicians in the Iraqi National Assembly (INA), female journalists, and NGOs and community organizations that advocate for women's interests and providing them with training in constitutional drafting skills, advocacy efforts, and developing legislative platforms. Also, nearly 60 percent of the small business development grants administered by USAID have been awarded to women.
- Community Development: Facilitated the creation of more than 670 Community Action Groups in 17 governorates. More than 1,966 projects worth $92 million have been completed or are in development. The Iraqi communities have committed approximately $23 million in resources for projects in their communities.
- Developing the private sector: Brought over 28,000 businesses into the formal sector. Trained lending officers in microfinance best practice.
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Afghanistan: Ten Top Achievements in 2005
- Two peaceful, democratic elections held. In October 2004, 7.3 million Afghans (40% female) voted in Presidential elections and more recently, 6.8 million voters (43% female) elected Parliament and Provincial Councils.
- Roads link the country. The highway from Kandahar to Herat nears completion, and construction is underway or complete on over 1,200 km of secondary roads.
- Critical infrastructure developed. 17 women's centers have been developed, 29 courts have been rehabilitated or constructed, and 3 industrial parks are under construction.
- Agricultural output rises. Cereal output increased 24% and livestock & poultry production increased by $200 million.
- Responding to the Poppy Problem. Poppy production declined significantly (96%) in 2004-2005 in Nangarhar Province, where one of USAID's largest alternative livelihood programs was coupled with the commitment of the national and provincial government to promote the anti-poppy message and interdict drug labs in the province. Initial 2006 estimates show that cultivation in Nangarhar will still be down from 2004, despite projected growth in production.
- Combatants choose peace. Over 60,000 former combatants have given up their weapons and are reintegrating into the civilian labor force.
- Domestic revenue increases. $260 million in Total Domestic Revenue was collected in this past Afghan fiscal year, an increase of 20% from the previous year.
- Media outlets grow. Created 32 community-based, independent FM radio stations across the country.
- Access to healthcare expanded. 7.1 million Afghans in 14 provinces now have better access to quality health services, approximately 70% of patients served are women and children.
- Practical reading skills for women and girls. 8,400 female learners from over 360 villages enrolled in health-oriented literacy programs of which 288 qualified for further training as community health workers or midwives.
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Goal: Strengthen Fragile States. There are many sources of fragility in developing states. Recent conflict is one. Lack of preparation to govern in fledgling democracies is another. Corruption, spillover effects from instability in a neighboring country or financial crises are still others. The FY 2007 budget proposal will address the multiple and varied sources of fragility in sub-Saharan Africa, Asia and the Near East and Latin America. Programs to help a country stabilize, strengthen human security, begin a reform process and progress toward a government that helps its people better their own lives will be funded in countries such as Nepal and Sudan.
Sudan: Ten Top Achievements in 2005
- Repairs and improvements to over 2500 km of roads, creating employment for over 1,300 people, reducing the commercial transport rate by 25 percent, and lowering the cost of public transportation by over 50 percent.
- USAID-supported microfinance institutions in four major districts have disbursed $1,312,269 in loans to 2,723 clients, who have a repayment rate of 97.8 percent.
- USAID has rehabilitated 55 primary schools and one secondary school and trained 7,757 administrators and parent-teacher association members associated with the schools.
- USAID has provided 2,679 scholarships for girls and women. A sampling of participating institutions shows a 14 percent increase in girl's enrollment.
- Non-formal education activities reach 13,317 learners, half of whom are women.
- Fifty thousand radios are being distributed throughout Southern Sudan to give citizens access to informational and educational programming.
- The government of Southern Sudan prepared and finalized its first budget with support from USAID.
- Fifty-one boreholes and 66 latrines have been built or rehabilitated at health facilities in six counties.
- USAID has trained 249 maternal health workers, including traditional birth attendants and supported the establishment of 34 health management committees.
- At eleven USAID-funded sites in Yei and Rumbek, 3,600 people were counseled and tested for HIV/AIDS. Peer educators reached 275,000 people, and 6,648 people were treated for sexually transmitted infections.
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Goal: Provide Humanitarian Relief. USAID is the leading U.S. government agency in responding to overseas crises, whether natural or man-made. The FY 2007 budget enables USAID to respond to humanitarian crises around the world. It also allows us to strengthen developing countries' ability to mitigate future disasters through activities such as surveillance and planning, and to restore livelihoods after the immediate crisis period has passed. In addition, the request includes authority to use up to 25 percent of the P.L. 480 Title II funds for the local or regional purchase and distribution of food to assist people threatened by a food security crisis. This will permit USAID to provide food assistance in the most timely and efficient manner in certain types of emergency food crises. This authority will only be used in those instances where the rapid use of cash assistance is critical to saving lives.
Tsunami Response: Top 10 Achievements in 2005
- Within hours of the tsunami, U.S. and other aid groups began sending food, water, plastic sheeting and medicine, benefiting over 1 million people in Indonesia, Sri Lanka, Thailand and India.
- Aid agencies and militaries worked together to deliver aid and evacuate the injured.
- Fast aid prevented epidemics by monitoring, preventing, and treating communicable diseases.
- One million people sheltered in schools, mosques, temples. Built temporary shelters for tens of thousands of people.
- Stricken nations coordinated foreign aid, local medical teams, Red Cross societies, NGOs, and military forces.
- Cash-for-Work programs cleaned up wreckage, employed tens of thousands of displaced people, jumpstarted-recovery.
- Clean water produced on U.S. military ships, delivered by helicopters; purification kits given to thousands.
- Trained trauma counselors. Psychiatrists trained teachers, community leaders and clerics to help counsel thousands of grieving children.
- Registered, protected children. U.S. aid assured safety of orphans, reopened schools.
- Major reconstruction has begun. An 80 km corridor between Banda Aceh and Lamno has been rehabilitated and opened. Travel time for reconstruction workers/supplies cut in half. Fifty Acehnese, including 10 former GAM combatants, employed to maintain this segment of the road.
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Goal: Address Global Issues and Special Concerns. Prevention and treatment of disease, particularly those that are or threaten to be pandemics, is an emphasis in the FY 2007 budget.
- Under the leadership of the Department of State's Global AIDS Coordinator, USAID implements prevention, care and treatment programs in over 75 countries worldwide. In FY 2007, Emergency Plan programs will scale up access to treatment by 51% over FY 2006, reaching those who have not previously had hope in the fight against AIDS.
- The President's Malaria Initiative, focused on Africa, will be expanded to increase coverage from three countries, to seven. The goal of this initiative is to reduce malaria deaths by 50% in each of the target countries after three full years of full implementation by increasing coverage to 85% of the population with proven prevention and treatment interventions.
- Avian influenza programs will work to stem the spread of avian influenza and improve the ability of nations to respond effectively by promoting awareness of risks and appropriate behaviors to reduce virus transmission; strengthening surveillance and diagnosis systems to detect outbreaks more quickly; increasing rapid response capacity by training and equipping first responders, and supporting the development of effective national preparedness and response plans for both animal and human outbreaks.
Goal: Promote Transformational Development. The primary focus for USAID's promotion of transformational development are the nearly 50 low- and middle- income countries that are committed to good governance and sound policies and are not yet eligible for MCA funds, or do not have an approved MCC compact. Countries that are MCA-eligible as well as weaker performers may also receive transformational development assistance depending on resource availability and the scope for achieving significant results. To the extent possible, USAID programs in countries receiving MCC resources are designed to synergize, thus increasing the effectiveness of U.S. Government assistance.
The three core components of transformational development are ruling justly, promoting economic freedom and making sound investments in people. USAID pursues democratic governance, economic growth and health and education programs to help developing countries transform.
In support of the President's Freedom Agenda, USAID plans to help states become more democratic and well-governed, so that they can respond to the needs of their people.
Countries with open and streamlined trade and investment regimes tend to grow more rapidly thanks to greater efficiency, incentives, technology transfers, and improved access to growing world markets. Agency programs help reduce trade barriers, increase investment, and enhance trade capacity in partner countries. Trade and growth have direct, positive effects on reducing poverty. Over the last five years, USAID has assisted more than 80 countries to improve their trade capacity.
In FY 2007, USAID will initiate the $30 million Africa Global Competitiveness Initiative to further foster trade-led growth and development. This initiative will improve the policy, regulatory and enforcement environment for private sector trade; improve private sector actors' market knowledge, skills and abilities; increase access to trade-related financial services and leverage infrastructure investments.
The cornerstone of USAID's investment in people in transformational development is its education programs. We propose a $301 million investment in FY 2007 in basic and higher education. A small number of health programs contribute to the transformative policies and systems that countries need to sustain the improvements in health status that we gain with our vertical interventions in combating infectious disease, family planning and protecting vulnerable children. Under the Development Credit Authority, USAID is requesting $5 million for the Africa Housing and Infrastructure Facility. This innovative use of the credit facility will support the subsidy costs of partial guarantees for private sector financing of water, infrastructure and housing projects in Africa.
Supporting Key Administration Initiatives. The Agency also supports on-going commitments such as education initiatives in Africa and Latin America, the Broader Middle East and North Africa Initiative, Trade Capacity Building, Global Climate Change, the Initiative to End Hunger in Africa, and Water for the Poor. These initiatives achieve a range of results that complement USAID's goals in transformational development, fragile and strategic states, and are implemented in a variety of ways, from contributing to global funds, providing training, technical assistance or policy analysis bilaterally, and directly delivering services.
Presidential Initiatives | Administration Initiatives |
African Education Initiative
Anti-Trafficking in Persons
Centers for Excellence in Teacher Training
Digital Freedom Initiative
Emergency Plan for AIDS Relief
Global Climate Change Initiatives
Initiative Against Illegal Logging
Malaria Initiative
Volunteers for Prosperity
Women's Justice and Empowerment In Africa
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African Growth and Competitiveness Initiative
Broader Middle East and North Africa Initiative
Initiative to End Hunger in Africa
Middle East Partnership Initiative
Trade Capacity Building
Water for the Poor Initiative
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Management Reforms and Initiatives
The men and women of the U.S. Agency for International Development are on the front lines of America's transformational diplomacy….The people of USAID are bringing essential knowledge and resources and skills to distant corners of the earth. They are on the ground across the world, advancing liberty and democracy, security and prosperity, often in very dangerous places. Some have made the ultimate sacrifice in the service to our country.
- Secretary of State Condoleezza Rice
January 19, 2006
Transformational diplomacy requires people, systems and infrastructure that deliver programs as efficiently, effectively and accountably as possible. The challenges of working in difficult, often insecure environments are significant. During FY 2007, the restructuring of foreign assistance is expected to open new opportunities to improve management within this difficult context.
Staffing. After an interruption due to the FY 2006 enacted Operating Expense levels, USAID continues to rebuild its human capital in the wake of the dramatic downsizing of the direct-hire workforce in the 1990s and in anticipation of the large contingent reaching retirement age. USAID will use its corporate workforce planning model to rationalize and optimize its organizational structures and staff deployment. Targeted recruitment of technical staff and training will ensure we have sufficient complements of mission-critical skills to conduct development assistance. In addition, an employee performance assessment system will enable accountability.
Business Transformation. The reduced FY 2006 OE levels accelerated USAID's restructuring efforts, which focus on rightsizing overseas and Washington presence, regionalizing business functions, and consolidating administrative services. The FY 2007 request will allow the Agency to continue the long-
term plan to restructure its business model to achieve more efficient, lower-cost ways of doing business. This will include restructuring Washington staffing to ensure the most efficient organizations support our missions and manage headquarters operations.
The Agency's workforce planning model is critical to developing our regionalization and rightsizing strategies. We are using the model to assess staffing needs worldwide and determine overseas staffing ceilings for all employment categories for FY 2007 and beyond. The ceilings will result in downsizing staff in several regions while increasing staff where current levels do not meet the model recommendations.
The Agency also will right size its overseas presence with moves to new embassy compounds. We are developing an action plan that merges State and USAID administrative services into a streamlined, unified operation in new embassy compounds that will contain costs while ensuring full programmatic support for all serviced customers.
We also are centralizing and further regionalizing business functions, making greater use of local staff, and outsourcing and eliminating areas of duplication as we work with the Department of State to consolidate administrative services overseas. Consolidation of administrative support and the subsequent merger of staff will result in costs savings through reduced total staff and costs to the USG.
The FY 2007 request will support investments in information technology (IT) that are fundamental to greater efficiency and accountability in Agency operations. We will continue to roll out our worldwide accounting and procurement systems, develop an Executive Information System, and strengthen collaboration and consolidation with the Department of State.
Partnerships. USAID is actively engaged in identifying and forging agreements with non-traditional partners, including faith-based organizations. Significant progress has been made in this area. The Global Development Alliance (GDA) is the centerpiece of our efforts to harness the power of public-private alliances to address challenges in the developing world. GDA represents a strategic approach to alliance building in order to bring significant new resources, ideas, technologies, and partners together to address development problems wherever USAID works. Through FY 2005, USAID has funded approximately 400 public-private alliances with over $1.6 billion in USAID resources and has leveraged over $4.2 billion in alliance partner contributions.
Security. By enhancing worldwide security operations and physical infrastructure, USAID will continue to protect USAID employees and facilities against threats from terrorism and espionage. Investments in FY 2007 include physical security upgrades, participation in the Capital Security Cost Sharing Program and relocation of physical facilities.
Top 10 Achievements in Business Transformation in 2005
- Conducted 11 Mission Management Assessments in Africa, Asia and the Near East, Europe and Eurasia (E&E), and Latin America and the Caribbean (LAC), developing over 300 findings and recommendations relating to program focus and content, implementation and monitoring, organization and staffing, and communication and outreach.
- Completed development of workforce planning and workforce analysis process and began implementation of strategies to eliminate mission-critical skills gaps.
- Incorporated the principles of the Policy Framework into a method to strategically allocate DA resources to USG priorities for the Operating Year Budget. Began integrating the Workforce Planning Model into the strategic planning and budget processes.
- Deployed the Phoenix accounting system to LAC and E&E Bureau missions.
- Continued the transition of Phoenix financial accounting system to servers in the State Department's Financial Service Center in Charleston, South Carolina.
- Established a back-up operations facility that will provide access to the financial system for continuity of operations in an emergency.
- Selected a joint assistance management system with State Department and an acquisition management system for USAID.
- Strengthened Communities of Practice through development of collaboration tools pilots, training through industry experts and development of a community leader's forum, Communities for Communities (C4C).
- Integrated DA Strategic Budgeting Model with existing strategic budgeting for CSH account and family planning.
- Closed the remaining two long-standing FMFIA material weaknesses, and received a third consecutive clean audit opinion.
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The Budget Request
Development is vital to the achievement of transformational diplomacy. The FY 2007 budget request responds to the President's priorities, including support for the Global War on Terrorism, and helping Iraq, Afghanistan and Sudan toward democracy and recovery. The budget sets priorities that use aid effectively to promote real transformation in developing countries committed to reform, but not yet MCA-eligible. It positions USAID to find synergies with the work of the Millennium Challenge Corporation. It also proposes that we help more vulnerable or crisis-prone states to advance stability, security and reform as the platform for transformational development. It sustains USAID's premier capacity to offer humanitarian and disaster relief to those in need, and contains the resources necessary to address global issues and special self-standing concerns.
The Agency continues to improve its operational efficiency, effectiveness and accountability through its management reform initiatives. It seeks the operating expense resources necessary to carry out its vital development work in support of transformational diplomacy. The recipients of USAID's assistance, USAID employees and the U.S. taxpayers all benefit from Agency business transformation initiatives such as the strategic allocation of resources, and enhanced financial management and procurement systems.
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