QUESTIONS SUBMITTED BY SENATOR JOHNSTON

SENATOR JOHNSTON. What are the differences in mission among our three major vehicles for foreign assistance: (a) bilateral assistance through the Agency for International Development; (b) multilateral assistance through international development banks; and (c) the United Nations Development Program? Are there duplications of effort among the three programs? Are there certain kinds of development projects identified with each of these three kinds of assistance?

SECRETARY VANCE. Our bilateral assistance through the Agency for International Development allows us to focus on the geographic and functional areas, e.g. population planning and food and nutrition, of particular interest to us. Further, our bilateral program permits the direct utilization of U.S. universities, private voluntary organizations, and firms, and the tapping of U.S. scientific and technological skills.

The multilateral development banks have operations in a much larger number of countries than our bilateral program. Although these institutions have historically focused on major infrastructure projects, in recent years they have placed increasing emphasis on activities designed to relieve the poverty of large numbers of people in the developing countries. These institutions perform important functions of financial intermediation and of providing sound economic advice in a non-political atmosphere to recipient countries. They also contribute to equitable burden sharing among donors.

The United Nations Development Program provides grant aid for technical assistance to a wide variety of sectors including agriculture, health, education, science and technology, and industry. UNDP operates in 147 countries but concentrates its efforts on the poorest countries and is the only significant source of technical assistance in a number of countries.

Both formal and informal mechanisms are used to coordinate all of the above activities. The United States has frequent contact, coordinated on an interagency basis, in Washington and in the field with representatives of the international development banks and participates with them in some 20 aid consortia and consultative groups for LDCs. In the field, our officials work actively with the UNDP resident representative in the particular country and support his role in local coordination of donor assistance. Regarding the international development banks and the UNDP, an example of institutionalized division of labor exists between the IBRD and the UNDP in the investment field. UNDP, in cooperation with the specialized agencies, often is responsible for the funding of pre-investment studies which then become the basis for subsequent capital lending by the IBRD. Admittedly, there are instances of these various agencies providing similar kinds of assistance. The close coordination described above does an effective job, in our opinion, of minimizing inefficient duplication of effort.

SENATOR JOHNSTON. Over the last ten years, what has been the year-by-year allocation of United States' resources in each of the three categories listed in question 1?

SECRETARY VANCE. The year-by-year allocation of United States' resources over the last ten years for bilateral, multilateral, and UNDP assistance was as follows:

SENATOR JOHNSTON.

What are our present capital

contribution comments to international development banks, and what is the source of those commitments?

SECRETARY VANCE. In accordance with previous authorization legislation passed by the Congress, we have made the following commitments:

We will be seeking authorization for the following commitments:

SENATOR JOHNSTON.

180.0 million

What is the justification for the substantial increase in funding for international development banks proposed by both President Ford and President Carter?

SECRETARY VANCE. The substantial increase in funding for the international development banks results in part from inflation and in part from the Administration's decision to seek appropriations for all callable capital subscriptions, in keeping with the wishes of Congress. However, more importantly, it represents a substantial real increase which reflects the importance attached by the Administration to the international development banks as a major element in our North/South strategy.

Specifically, the increased level results from the following factors:

(a) An increase of $800 million in IDA funding, as we seek to make our third annual payment of $375 million to IDA IV at the same time as our initial payment of $800 million to IDA V. Our payments to IDA IV and IDA V overlap because we delayed by one year and extended to four years, rather than three, the period during which we are making our IDA IV payments. We hope to begin our IDA V payments in FY 78 so as to make them concurrently with other IDA donors and so that the congressional appropriations process may be complete prior to the time at which IDA actually makes commitments based on U.S. contributions, in keeping with the new procedure of multiyear sign ups "subject to appropriations." The size of our IDA V contribution represents a significant real increase over the IDA IV level.

(b) A request for $523 million for the IBRD, representing the first of three payments we wish to make for the Selective Capital Increase. I of this amount, $52.3 million is for paid-in capital which will have a budget outlay and $470 million is callable capital.

(c) An increased request for IDB of $160 million, resulting from the decision to require appropriation of our interregional callable capital subscription.

(a) An increased request for the ADB of $83 million. (e) A request for $44.6 million for the IFC, representing our first installment to the proposed capital increase.

SUBCOMMITTEE RECESS

Senator INOUYE. The subcommittee will stand in recess until Wednesday, March 2, at 10 a.m., at which time the Secretary of the Treasury will appear to justify the fiscal year 1978 budget requests for the International Financial Institutions.

[Whereupon, at 11:56 a.m., Thursday, February 24, the subcommittee was recessed to reconvene at 10 a.m., Wednesday, March 2.]

FOREIGN ASSISTANCE AND RELATED PROGRAMS APPROPRIATIONS FOR FISCAL YEAR 1978

WEDNESDAY, MARCH 2, 1977

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, D.C.

The subcommittee met at 10:15 a.m. in room 1318, Everett McKinley Dirksen Office Building, Hon. Daniel K. Inouye (chairman) presiding. Present: Senators Inouye, Chiles, Johnston, and Schweiker.

DEPARTMENT OF THE TREASURY

INTERNATIONAL FINANCIAL INSTITUTIONS

STATEMENT OF HON. W. MICHAEL BLUMENTHAL, SECRETARY OF THE TREASURY OF THE UNITED STATES

OPENING REMARKS OF SECRETARY INOUYE

Senator Inouye. This morning we are pleased to welcome Hon. Michael Blumenthal, the new and distinguished Secretary of the Treasury, who is appearing before us for the first time.

Secretary Blumenthal will justify President Carter's fiscal year 1978 request for a contribution of $2,616,200,000 for what we term the international financial institutions. The President's request for $300 million in fiscal year 1978 assistance to Portugal will be heard at a later date.

Mr. Secretary, we are grateful for Treasury's recent responses to congressional concerns. In turn, we look forward to cooperating with you in improving the effectiveness of the vast amounts of assistance now flowing through the development banks.

PREPARED STATEMENT

Sir, once again, I welcome you on behalf of the committee. As you know, we have received your prepared statement and without objection it will be made part of the record at this point. Please proceed as you desire.

[The statement follows:]

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