Engagement Amid Austerity

8/2/2019 Engagement Amid Austerity

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Engagement Amid AusterityA Bipartisan Approach to Reorienting the International Aairs Budg

By John Norris and Connie Veillette

With Casey Dunning and William McKitterick May 2012

www.americanprogress.org www.cgdev.o


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Engagement Amid AusterityA Bipartisan Approach to Reorienting

the International Aairs Budget

By John Norris and Connie Veillette

With Casey Dunning and William McKitterick May 2012


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Working Group on Aid Priorities amid Declining Resources

In November 2011 he Cener or Global Developmen, or CGD, and he Cener or American Progress, or CAP,

ormed a Working Group on Aid Prioriies amid Declining esources. Ta groups work inorms his repor.

Te working group was a diverse selecion o expers and praciioners who came ogeher o oer independen

policy recommendaions on craing an inernaional aairs budge ha advances imporan reorms, maximizes

he mos benecial U.S. programs, mainains core operaional capabiliies, and idenies areas o lesser prioriy

and unding. Te recommendaions in his repor were developed hrough consulaive meeings, one-on-one

inerviews, lieraure reviews, and working group deliberaions.

Te working groups co-chairs, Connie Veillete o he Cener or Global Developmen and John Norris o he

Cener or American Progress, auhored he nal repor based on he oucomes. All opinions in this report are

those o the co-authors and do not necessarily relect the endorsement o the working group members in

whole or part.We are paricularly hankul or he signican research assisance o Casey Dunning and William

McKiterick o CGD.

Working group members

Co-Chair: Connie Veillette, Direcor, ehinking U.S. Foreign Assisance Program, Cener or Global Developmen

Co-Chair: John Norris, Execuive Direcor, Susainable Securiy and Peacebuilding Iniiaive, Cener or

American Progress

Gordon Adams, Disinguished Fellow, Budgeing or Foreign Aairs and Deense Program, Simson Cener

Rodney Bent, Direcor, Unied Naions Inormaion Cenre

Steve Berry, Presiden and CEO, ural Cellular Associaion

Amanda Glassman, Direcor, Global Healh Policy Program, Cener or Global Developmen

Richard Greene, Vice Presiden or Sraegy, PAE

Jeremy Konyndyk, Co-Direcor o Policy and Advocacy, Mercy Corps

Jim Kunder, Senior esiden Fellow, German Marshall Fund

Clay Lowery, Vice Presiden, ock Creek Global Advisors

Sarah Margon, Associae Direcor, Susainable Securiy and Peacebuilding Iniiaive, Cener or American ProgressLarry Nowels, Independen Consulan

Paul OBrien, Vice Presiden or Policy and Campaigns, Oxam America

Beth Tritter, Managing Direcor, Glover Park Group

Noam Unger, Fellow, Global Economy and Developmen Program, Brookings Insiuion
http://www.cgdev.org/http://www.americanprogress.org/http://www.americanprogress.org/http://www.cgdev.org/


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ContentsContents 1 Introduction and summary

9 Trends shaping Americas approach to the world

13 Key budget areas deserving protection

17 Reorm 1: Make bilateral economic

and security assistance more selective

37 Reorm 2: Transition PEPFAR to country ownership

43 Reorm 3: Overhaul U.S. ood assistance

47 Reorm 4: Create an international aairs

realignment commission

51 Conclusion

53 Glossary

61 About the authors

62 Endnotes

65 Country assistance proiles


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Introduction and summary

U.S. governmen spending on oreign aairs will ace signican pressures in

he coming years under almos any scenario. A divisive poliical environmen,

coninuing worries abou a sluggish economic recovery, concerns over rising

budge decis and naional deb, and upcoming elecions make i dicul or

policymakers o reach agreemen on budge prioriies. Ta uncerainy will have

ar-reaching consequences.

Tis biparisan repor is oered in he spiri o rying o deermine how we as anaion can make he mos ecien and eecive use o scarce resources, reorm

our oreign aairs insiuions, and deend our core naional ineress amid such

major budge uncerainy.

I is imporan o underscore he imporance and value o he inernaional aairs

budge in advancing U.S. ineress while a he same ime conducing reasonable

coningency planning or he possibiliy o sharply reduced unding in he near

and medium erm. I is ideal or Congress and he adminisraion o reach a sen-

sible 10-year budge plan ha includes boh cus and revenues while proecing

our core ineress boh domesically and inernaionally.

In ha ligh, i is worh menioning he recenly passed yan Budge o emerge ou

o he House o epresenaives. (Tis budge plan was issued aer he nal working

group meeings were conduced, and so he opinions on i are solely hose o he

auhors.) Te budge plan would slash some $31.6 billion rom 2012 levels ou o

he oreign aairs accouns in jus our years. By any reasonable esimaion, such an

approach would decimae our naions abiliy o eecively advance our ineress

overseas, and such budge calculaions canno be jusied based on a deliberae

analysis o our needs and oreign policy prioriies as a naion.

In conras, we hope ha our repor can be used o begin a pracical conversaion

even as he high-sakes budge batle is waged and allow policymakers o boh

Itroductio ad summary | Ceter or global Developm


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ideniy areas ha require susained or even increased resources in order o main-

ain U.S. global leadership as well as areas o lesser prioriy.

Te Unied Saes is no alone in rying o beter balance is approach o inerna-

ional aairs a a ime o declining resources. A number o our key European allies

have also reviewed heir approach o diplomacy and developmen in recen yearsin hopes o beter ocus.

Cenral o his challenge is undersanding several imporan developmens ha

will shape Americas engagemen in he coming years. Tese mega-rends include

enormous pressures on he ederal budge, coninued globalizaion, he increas-

ingly imporan role ha privae philanhropy plays in

inernaional developmen, and a likelihood ha he major

sae-building exercises o Iraq and Aghanisan over he las

decade will be a hisorical anomaly.

Almos every major sudy and review o our oreign aairs

insiuions and spending prioriies has idenied areas o dys-

uncion and operaions ha need signican reorm. Eors

such as he Obama adminisraions rs-ever Quadrennial

Diplomacy and Developmen eview and a Presidenial

Sudy Direcive on Global Developmen are imporan seps

orward on reorm. Ye enormous work remains, and he

execuive and legislaive branches do no agree on he under-

pinnings o eecive inernaional engagemen.

Te Cener or Global Developmen and he Cener or

American Progress esablished he senior-levelWorking

Group on Aid Prioriies amid Declining esources o help

policymakers and concerned ciizens se sensible priori-

ies or inernaional aairs spending in he Funcion

150 accoun: he Sae, Foreign Operaions, and elaed

Agencies appropriaions bill conaining spending on global

economic, diplomaic, and humaniarian programs by he

Sae Deparmen, Unied Saes Agency or InernaionalDevelopmen and he Millennium Challenge Corporaion

among ohers, and ood aid accouns in he agriculure

appropriaions bil l.

2 Ceter or America Proress | Eaemet Amid Austerity: Reorieti the Iteratioal Aairs Budet

Every U.S. president since Harry Truman has seen

economic and security assistance abroadwhich

made up about 1 percent o the ederal budget in

recent yearsas essential to Americas national

interests even though oreign aid traditionally lacks

strong deenders in Congress. In act, Republican

presidents have overseen the largest increases in

oreign assistance. To be sure, oreign assistance is an

imperect tool, but it also is a core part o Americas

strategy to increase the number o stable, ree-market

democracies around the world. Such countries makebetter trading partners and better allies, and are an

abiding source o stability.

Nations need not be aid recipients orever. In the

1960s nations across Latin America and Asia were

dismissed as perennial basket cases yet countries

in both regions combined sensible reorms with a

jump-start rom U.S. assistance programs to achieve

dynamic, lasting growth. Ten o the 15 largest

importers o American goods and services, including

countries such as South Korea, Taiwan, and Singapore,

graduated rom U.S. oreign aid programs according

to the United States International Trade Commission.1

Why oreign aid is important
http://blogs.cgdev.org/mca-monitor/2011/11/aid-priorities-amid-declining-resources.phphttp://blogs.cgdev.org/mca-monitor/2011/11/aid-priorities-amid-declining-resources.phphttp://blogs.cgdev.org/mca-monitor/2011/11/aid-priorities-amid-declining-resources.phphttp://blogs.cgdev.org/mca-monitor/2011/11/aid-priorities-amid-declining-resources.php


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Te working group was comprised o a highly biparisan group o policy expers

wih long experience in epublican and Democraic adminisraions, Congress,

nongovernmenal organizaions, philanhropy, and he privae secor. Te work-

ing groups co-chairs, Connie Veillete o he Cener or Global Developmen and

John Norris o he Cener or American Progress, auhored he nal repor based

on he oucomes o he working groups deliberaions. All opinions in his reporare hose o he co-auhors and should no be seen as refecing he endorse-

mens o he working group members in whole or par.Te recommendaions

were developed hrough consulaive meeings, one-on-one inerviews, lieraure

reviews, and working group deliberaions.

Te working group reviewed he enire inernaional aairs budge, which

encompasses he operaions o he Sae Deparmen, he U.S. Agency or

Inernaional Developmen and he assisance programs hey manage, ood

aid programs, and he programs o many smaller and specialized U.S. agen-

cies. Approximaely wo-hirds o he 150 accoun is made up o economic andsecuriy assisance provided by boh he Sae Deparmen and USAID. (Tis

repor does no cover aid appropriaed by he Deparmen o Deense, hough

he Deense Deparmen delivers some Sae Deparmen securiy assisance.)

Since his is he larges share o he inernaional aairs budge, he core o our

recommendaions cener on how o improve his assisance.

Given he rapid imerame o his exercise we ocused on areas oering he grea-

es promise or reorm. Tis repor is no a comprehensive review o every single

aciviy carried ou hrough he 150 accoun. We hope o urher ariculae and

explore some o he key issues in his repor going orward.

Furher, U.S. conribuions o mulilaeral insiuions, such as he World Bank

and he Unied Naions, represen a vial means or he Unied Saes o engage he

world. Tey also make an impac on secors or counries where our bilaeral pres-

ence is less infuenial and represen an imporan complemen o bilaeral assisance

programs. We welcome a closer examinaion o hese mulilaeral conribuions, and

a number o oher donors and organizaions have also begun examining where heir

mulilaeral dollars can bes be direced o make he greaes impac.2

Our work idenied our ideas ha would undamenally ransorm how we con-

duc diplomacy and developmen. None o hese ideas is wihou conroversy, and

all would require signican change o be insiued.



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Behind all o our ideas is he belie ha Americas approach o diplomacy and

developmen requires signican modernizaion. Our engagemen and dol-

lars should be ocused where hey are going o make a lasing dierence, and

we have oen been oo slow o recognize and admi where engagemen and

invesmens have litle reurn. Bu we also argue srongly or increased, no

decreased, invesmens in raining our inernaional aairs personnel and eelha universal diplomaic represenaion very much remains in he naional

ineres. Working group members agreed ha Americas invesmens in diplo-

macy, developmen, and inernaional rade are exremely valuable and any

cus should no undermine our sraegic prioriies or values. We ideniy bud-

ge areas ha should be proeced.

Here are our ideas ha have he greaes poenial or eeciveness and ransorm-

ing how his counry engages he world.

Make economic and security assistance more selective

In 2012 he Unied Saes is delivering bilaeral assisance hrough he iner-

naional aairs accoun o 146 naions wih 103 o hese receiving economic

assisance and 134 receiving securiy assisance.3 Tese eors are ar oo diuse,

undisciplined, and unocused, and we could achieve much more by concenraing

economic and securiy assisance where hey will be mos eecive and curail-

ing resources where hey will no. Tis idea may sound simplisic, bu i would be

revoluionary in conras o how aid is currenly disbursed.

Our counry-by-counry analysis o economic and securiy assisance included in

his repor was subjecive bu highly daa-inormed, aking ino consideraion a

counrys commimen o reorm, is capaciy o achieve lasing developmen and

sabiliy, is need, and is sraegic imporance o he Unied Saes. In a limied

number o cases we argue or prioriy invesmens based on immediae confic

prevenion eors or o ensure ha a counry ha enjoyed signican posconfic

invesmen does no slide backward. We made he daa we used or each counry

readily available as par o his repor o encourage urher debae on hese issues.

(see Counry Proles secion)



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Bilateral economic assistance

We argue or a major shi away rom 103 recipien counries o susaining or

increasing invesmen in 53 core counries over a ve-year period. Tis includes

increasing invesmen in 32 high-prioriy counries and holding unding levels fa

in 21 counries where here is a coninued imperaive or engagemen bu morelimied expecaions. Eigheen counries would graduae rom U.S. bilaeral eco-

nomic assisance wihin a ve-year period; 11 counries would see heir programs

eliminaed because hey are small, expensive o operae, or peripheral-ineres

counry programs; and 21 poor-perorming counries would see economic assis-

ance largely limied o suppor or democraic and civil-sociey groups, humani-

arian relie, and PEPFA unding. Eleven USAID missions could be closed or

consolidaed as par o his realignmen.

Bilateral security assistance

We argue ha aid should be ocused on 72 core counries raher han 134 recipi-

ens, wih increased invesmen in 45 high-prioriy counries and fa unding lev-

els in 27 counries where here is a coninued imperaive or engagemen bu more

limied expecaions. Assisance would be curailed in 62 counries, including 30

ha should be able o graduae rom U.S. securiy assisance wihin he nex ve

years, 15 where securiy assisance is relaively small or peripheral o our naional

ineres, and 17 we deem o be poor perormers.

Transit ion PEPFAR to countr y ownershipTe Presidens Emergency Plan or AIDS elie, or PEPFA, coninues o be

a very large porion o U.S. inernaional aairs spending. Sared by Presiden

George W. Bush in 2003 o help provide prevenion, reamen, and care services

o counries suering high HIV/AIDS burdens around he world, he iniiaive

represens he larges healh commimen ever by one counry o comba a single

disease inernaionally.

Te Obama adminisraion esablished PEPFA Parnership Frameworksve-

year join sraegic rameworks or cooperaion beween he U.S. governmen,

he parner governmen, and oher parners o comba HIV/AIDS in he hos

counry. Tese parnership rameworks acknowledge ha PEPFA recipien



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counries need o share much more o he burden moving orward. Tis creaed

some conroversy, bu sharing coss, paricularly wih upper-middle-income

PEPFA recipiens (Boswana, Caribbean egional, Cenral America egional,

Dominican epublic, Namibia, and Souh Arica) should be acceleraed as par

o a well-managed and ransparen plan ha will allow hos counries and privae

philanhropy o work ogeher wih he Unied Saes o keep momenum going inhe batle agains HIV/AIDS.

Tis also recognizes ha PEPFA Parnership Frameworks can provide a

model or how o oser counry ownership and ranser nancial responsibil-

iy o recipien counries while changing he program isel rom an emergency

humaniarian program o more o a long-erm, susainable, and inegraed

approach o healh and developmen.

Overhaul U.S. food assistance

A web o oudaed laws and regulaionscargo preerence, limiaions on local

and regional purchase, and moneizaionvasly increase he cos and reduce

he eeciveness (and imeliness) o our ood aid. Food mus be purchased in he

Unied Saes and shipped on U.S.-fagged vessels. Some o he ood can hen be

sold on local markes o raise cash ha NGOs use or developmen projecs.

Numerous sudies show he inheren ineciencies o his process. Overhauling

hese resricions could save axpayers billions o dollars and make ood aid pro-

grams more eecive and ecien. Food aid is a classic example o an area where

smar reorms would make programs work beter and save a grea deal o money.

Create an I nternational Affairs Realignment Commission

Finally, he adminisraion, in consulaion wih Congress, should appoin a com-

mission o underake a sorely needed overhaul o our oreign aairs agencies and

operaions based on he very successul model o he Deense Base ealignmen

and Closure Commission, or BRC.

aher han ocus on physical insallaions, as BRC did, an Inernaional Aairs

ealignmen Commission would have he wri o no only look a he physical

presence o U.S. embassies, consulaes, and USAID missions around he globe



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bu more imporanly recommend regulaions ha could be eliminaed, programs

and projecs ha are no longer necessary, or even insiuional consolidaion or

sreamlining. In essence, he commission would help shepherd a long-overdue

rewrie o he Foreign Assisance Ac o 1961, he aniquaed legislaion guiding

he auhoriies, use, and allocaion o U.S. oreign assisance.

Te presiden would appoin commissioners in consulaion wih Congress, and

he commissioners would base heir recommendaions on he broad sraegic

guidance esablished in he Quadrennial Diplomacy and Developmen eview

and hrough subsequen consulaions. Te presiden could accep or rejec he

commissions recommendaions in heir enirey. I rejeced, he commission

would have a se period o amend and resubmi. Te commissions nal repor

would have he orce o law i Congress did no rejec i.



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Trends shaping Americas

approach to the world

In looking a how bes o reshape Americas inernaional engagemen, i is use-

ul o underscore rends ha will aec how we conduc oreign aairs in he

years o come. Tese rends will shape he resources we will have available or

oreign aairs while guiding he areas where he Unied Saes should ocus is

diplomaic and developmen eors.

Four in paricular sand ou.

Funding

Tis repor is driven by an undersanding ha ederal spending on inernaional

aairs will be under considerable pressure or a number o years and ha here con-

inues o be an unusually high degree o uncerainy in oreign aairs agencies bud-

ges. Te inernaional aairs baseline budge ell by more han 14 percen beween

2010 and 2012, hough his decline is even lower when unds rom he Overseas

Coningency Operaions accoun or Aghanisan, Pakisan, and Iran are included.

While he presidens 2013 budge shows a sligh increase rom 2012 levels,

oreign aairs spending will coninue o be under a high degree o scruiny going

orward and will oen be pited agains cus in domesic programs. As noed ear-

lier, he House-passed 2013 budge would decimae unding or he oreign aairs

agencies. While i is no suppored by eiher he Senae or he adminisraion, i

is equally unlikely ha any siting epublican presiden would suppor such deep

cus o our oreign aairs archiecure.

Te Join Selec Commitee on Deci educions inabiliy o reach an agreemeno reduce budge decis over 10 years will require sequesraionor auomaic

cuso unds beginning in 2013 unless Congress and he adminisraion can

reach a deal beore hen. Te Congressional Budge Oce esimaes ha i seques-

raion goes ino orce, he resuling across-he-board reducion in discreionary

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programs such as inernaional aairs would be abou 8 percen in 2013. Tose

cus would cause signican disrupions in our inernaional programs and would

bes be avoided by a sensible biparisan 10-year agreemen o reduce he deci

ha included boh cus and revenues.4

Securing a deal o avoid sequesraion will be highly challenging given he sarkly di-eren approaches o he House and Senae. Furher, even i an agreemen is reached,

cus in inernaional aairs are very possible as par o such a deci reducion pack-

age, even i no on he same scale as hose conained wihin sequesraion.

Te realiy is ha aer 10 years o relaively srong growh in inernaional aairs

spending ollowing Sepember 11, considerable bel-ighening is ahead and

indeed has already begun.

We can ake lessons rom he decline in resources ha also occurred in he 1990s

as policymakers sough a peace dividend rom he end o he Cold War. Terewas a high-prole debae abou eliminaing USAID as an agency and olding is

surviving uncions ino he Sae Deparmen. Te eor o eliminae USAID was

ulimaely rebued, bu rom 1990 o 1997, aid unding ell by one-hird.

In hindsigh, unding decreases were no well managed, wih cus o USAIDs

operaing expenses ar oupacing program decreases. As a resul o hese und-

ing cus, boh in operaing expenses and o he oreign aairs accouns generally,

sang and experise, especially a USAID, declined precipiously. USAID began

o look more like a conracing agency han a hub o experise on developmen.

Domesic governmen agencies lled in some gaps, bu his also served o urher

ragmen Americas approach o developmen as more and more ederal acors

played a role in promoing developmen wihou a coheren overarching rame-

work and sraegy or heir eors. Te Sae Deparmen also ook on a greaer

role in developmen decisions.

As aid programs began o increase in he 2000soreign assisance increased

some 38 percen beween 2001 and 2007USAID ound isel shor on sa and

experise, making i more relian on using large conracs requiring less hands-on

managemen and oversigh.

USAIDs lack o resources mean ha new pro-gramsPEPFA and he Millennium Challenge Accounwould no be par

o is porolio, urher muddying leadership on aid issues. Te Deparmen o

Deense ook on greaer roles in civilian programs in many confic and poscon-

fic environmens, hough is personnel had almos zero raining in designing and



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implemening such programs, leading o repeaed and expensive misakes on he

ground in places like Iraq and Aghanisan.

I he Unied Saes is o avoid compounding he problems o an already subopi-

mal aid archiecure, a ar more selecive approach o aid makes eminen sense no

mater wha he budge batle oucome is.

Continued globalizationTe ac ha he world is increasingly inerconneced and inerdependen a

almos every level is no news.Ye, and somewha ironically, U.S. oreign aairs

agencies are no always he quickes o come o erms wih his. wo poins are

paricularly imporan here.

Firs, he recen global nancial crisis highlighed he need or srong and accoun-able governmen insiuions when dealing wih economic shocks ha spread rap-

idly rom one counry o he nex. Bu srenghening governmen insiuions has

never been a srong sui o he Unied Saes or mos oher donors or ha mater.

Tis remains somehing o a blind spo and oo many U.S. assisance programs

coninue o ocus on micro-level condiions while ignoring he broader condiions

or developmen and sabiliy.

Te second par o globalizaion worh noing is ha virually every communiy

across he Unied Saes now has an unprecedened web o links, ies, and con-

cerns wih oher pars o he world. Bu our oreign aairs insiuions are slow o

embrace and harness he deph o hese connecions a a ime when we desper-

aely need an eecive consiuency supporing sensible inernaional engagemen.

The rise of private philanthropy

Ocial governmen economic assisance is a smaller and smaller porion o he

overall developmen engagemen he Unied Saes provides. U.S. privae economic

engagemen wih developing counriesa combinaion o U.S. privae philan-hropic giving and U.S. privae capial fowswas $106.7 billion in 2009, $77.9 bil-

lion more han oal U.S. ocial developmen assisance ha year.5 A new generaion

o philanhropiss, such as Bill Gaes and Warren Buet, willing o pu billions o

dollars ino developmen has undamenally alered he landscape.

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By and large his is an incredibly posiive developmen, and i should allow he

U.S. governmen o beter ocus on areas where is srenghs are he greaes. Ta

said, i also poses new challenges in coordinaion, sraegy, and approach, and

boh privae donors and governmen ocials have much o learn rom each oher.

In general, governmen assisance programs need o be shied o beter doveail

wih he increasingly imporan role o privae philanhropy and privae capial.

We should avoid fighting the past war

Te Unied Saes dramaically alered many o is diplomaic and develop-

men pracices as a resul o massive invesmens over he las decade in Iraq,

Aghanisan, and Pakisan.6 All are deeply roubled engagemens and hisorical

anomalies, and he Unied Saes is unlikely o be engaged in such massive sae-

building exercises on a regular basis. Tis is why i would be a misake o overly

ocus our diplomacy and developmen on preparing or he las warno he nexone. Te Inernaional Aairs accoun needs o be reoriened wih an eye oward

he uure, wih more o an emphasis on crisis prevenion han sae rebuilding.



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Key budget areas

deserving protection

I is vial ha we no only ideniy areas where we can achieve reorm and savings

bu also dene core ineress ha deserve absolue proecionand perhaps even

greaer undingin he budge.

Tis paper refecs he views o is wo auhors, bu he working group endorsed

many core areas. All members agreed ha robus diplomaic and developmen

capaciy are in he naional ineres and represen ools ha he nex presiden,

whaever his pary, will nd indispensable. All working group members elsrongly ha even as specic cus are idenied, i is essenial o mainain or

srenghen a number o prioriy areas even during a period o budge sress.

Key areas deserving proecion are discussed below.

Universal diplomatic presence

Te Unied Saes has long ried o mainain diplomaic presence in every coun-

ry around he globe. Te ew excepions o his rule are he mos confic-orn or

despo-ridden saes where he Unied Saes is orced o manage is diplomaic rela-

ions rom aar or a relaively shor period o ime. Bu mainaining embassies, even

when hey are small oces, enails considerable expense boh in keeping up and

securing he physical embassy or consulae and in relaed sang coss and benes.

I would be easy o hand-pick a lis o counries where i is less han compelling or

he Unied Saes o mainain an embassy. Ye he working group agreed ha he

Unied Saes benes remendously rom universal represenaion, which under-

scores our willingness and abiliy o engage wih riends, allies, and even oes aroundhe world. Ending universal represenaion would make i ar harder o advance

Americas ineress a a ime when he inerconnecion o saes is deeper han ever.

In addiion, universal represenaion is also crucial in looking ou or Americans

ineress and saey as hey work and ravel in every corner o he world.

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Supporting development, democracy, and stability

Te sraegy behind economic and securiy assisance programs is compelling:

Te greaer he number o sable, ree-marke democracies around he world, he

more secure, prosperous, and dynamic our naion becomes. Direcly promoing

susainable economic developmen, democraic values, proessional civilian-conrolled miliaries, and well-uncioning civil socieies is hereore vial or he

Unied Saes even when oreign aairs spending will be cu.

Tere is a robus debae abou which assisance programs bes achieve hese

goals. Bu here is broad recogniion ha lasing developmen only works when

he recipien counry is genuinely commited o change and growh. Te Unied

Saes needs o keep supporing such long-erm developmen eors, bu i needs

o do a ar beter job ocusing such assisance in hose saes where i will help spur

lasing change, as is argued elsewhere in his repor.

Operating expenses

I is impossible o carry ou eecive diplomaic and developmen programs

wihou commensurae operaing expenses. Ta may sound sel-eviden, bu in

previous bous o budge cuting, Congress showed a endency o proec unds

or programs while slashing unds or people who design, oversee, and implemen

such programs. Figure 1 makes clear here is a sharp disconnec beween opera-

ing expenses and program unds a USAID.

Te resul o keeping operaing expenses ighly consrainedeven when

program expenses are expandingis o leave USAID as litle more han a con-

racing agency wih less and less experise and knowledge abou how develop-

men programs should be designed and where hey could bes be conduced o

advance he naional ineres.

Te compulsion o cu operaing expenses while proecing program unds is

undersandable. I is easier or policymakers o cu budges or sa han o cu

programs ha comba malaria, promoe economic growh, or deliver humaniar-ian assisance. Bu he las decade clearly augh us ha developmen works bes

when i is conduced wih good parners commited o reorm and heir own

people. Funding programs wihou he experise o manage hem is a recipe or

wased money, a lack o accounabiliy, and programs increasingly divorced rom



21/69

FIGURE 1

Cutting the workforce but not the programs

USAID foreign service permanent workforce and USAID managed program dollars, 1970-2012

(inflation adjusted 2008 dollars)

$20

$15

$10

$5

$0

Billions

4

3

2

Workf

1970 1980 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Fiscal year

Program levels

Workforce

USAIDs permanent Foreign Service workforce declined 58% from 1970. Source: United States Agency or International Develop

pracical realiy. Tis repor spells ou areas where a more selecive approach o

invesmens could also achieve considerable operaing expense savings.

Crisis prevention

ecen insiuional reviews such as he Quadrennial Diplomacy and

Developmen eview ocused on improving he Unied Saes capaciy o preven

crises beore hey erup. Bu oreign aairs agencies need o do more.

Geting he agencies more adroi a crisis prevenion will require signican inves-

mens in coninued and new raining or personnel and a reshaping o he insiu-

ional ehos a he oreign aairs agencies, which are risk averse. Prevening crises

Key budet areas deservi protectio | Ceter or global Developme


22/69

requires sensible unding, srong eld-driven analysis, a willingness o inervene a

key momens, and a broad undersanding o he insiuional levers, pressures, and

incenives ha can be brough o bear on a poenial crisis siuaion.

I is welcome ha crisis prevenion is a key goal or our oreign policy esablish-

men on a rheorical level. ranslaing ha rheoric ino realiy, however, willrequire dynamic leadership and susained invesmens a a ime when even radi-

ional program areas are coming under he knie.

We now move o our recommendaions or reorm.



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Reform 1: Make bilateral economic

and security assistance more selective

Reorm 1: Make bilateral ecoomic ad security assistace more selective | Ceter or global Developme

Presidenial candidaes hroughou U.S. hisory have oen been quick o criicize

U.S. economic and securiy assisance abroad. Ye every single presiden since

World War II, once in oce, deended assisance programs or one simple reason:

Tey are an essenial ool o U.S. oreign policy. Equally, no presiden advocaed

reducing he U.S. diplomaic presence. As long as he Unied Saes remains a

global leader, is presiden will rely on diplomacy and developmen o help pro-

moe a world in which U.S. ineress and ideals can hrive.

Whoever occupies he Oval Oce in 2013 will have o employ boh diplomaic

and developmen ools or he Unied Saes o mainain is global leadership. Bu

boh ools need sharpening regardless o budge dynamics.

Tis approach or reorming economic and securiy assisance is based on

several principles:

Our assistance programs should be structured to reward and strengthen

countries that are reorm-minded, good allies, open to business, and willing to

make hard choices to advance their own people.We should look a all o our

economic and securiy assisance programs as invesmens in creaing he nex

generaion o donors and rade parners.

Working in ewer countries will allow us to increase investments in those making

promising reorms so that our aid makes a diference and helps cement lasting change.

And our considerable invesmen in mulilaeral insiuions lessens he need or our

bilaeral assisance programs o be acive in such a large number o counries.7

Aid programs that are ineicient, ineective, outdated, or better carriedout by other partners should be ended. Poorly perorming counrieshose

unwilling o implemen economic growh reorms or ha rejec principles o good

governance and human righsare no good invesmens or economic assisance

and should only receive securiy assisance when here is a compelling reason.


24/69

Assistance programs should ocus on sectors in which the U.S. has a compara-

tive advantage over other donors. I is imporan o recognize wha he U.S. does

well, is more capable o doing han ohers, and should coninue doing. We believe

hese areas o comparaive advanage are humaniarian assisance, global healh,

and ood securiy. Cos savings ha we ideniy in his repor could equally be

used o ocus on hese areas, or o conribue o reducing budge decis.

The United States can only maintain its leadership position and stabilize its

budget by more eectively and selectively using diplomacy and development.

I canno, nor should i, rely primarily on he Deense Deparmen o projec

U.S. infuence and power.

While we believe in a universal diplomaic presence, we do no endorse universal

economic and securiy assisance. U.S. oreign assisance programs are oo disbursed

across counries and secors o be ruly eecive. Aid allocaions are oen made in

ways ha resul in doing a litle bi here and here in an eor o curry small mea-sures o diplomaic avor. Secor choices are oen allocaed no by wha we do well,

bu as an eor o placae key acors in Congress and he aid communiy.

As o scal year 2012 he Unied Saes provides economic assisance o 146 coun-

ries, wih 103 o hese receiving economic assisance and 134 receiving securiy

assisance. Tis means every counry on earh has roughly a 75 percen chance o

receiving U.S. economic or securiy assisance, which only underscores he undis-

ciplined naure o he aid porolio.

O oal economic assisance allocaed in scal year 2012, one counry,

Aghanisan, consumes roughly 15 percen o U.S. economic assisance. Te op

10 recipiens represen abou 50 percen o oal bilaeral aid. Te remaining 50

percen is allocaed among 93 counries, some receiving as litle as $492,000.

Selective economic assistance


Principles to guide more focused and selective U.S. economic assistanceSquaring wo compelling needsachieving cos savings and mainaining eec-

ive U.S. global engagemenmay seem a odds, bu as long as we concenrae

our resources where hey are likely o be mos eecive and reduce hem where

hey are no, we can achieve boh.


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Te Presidens Policy Direcive on Global Developmen, which sudied he role

o U.S. economic assisance, called or greaer ocus and seleciviy in delivering

economic assisance, which we dene here as he ollowing 150 bilaeral accouns:

Developmen Assisance; Global Healh Programs; Economic Suppor Fund;

Assisance or Europe, Eurasia, and Cenral Asia; and he nonemergency porions

o he Food or Peace accoun. Te adminisraion advocaes a more seleciveapproach or hese programs, bu progressas refeced in he 2012 and 2013

budgesis limied. Aid programs were eliminaed in only ve counries in 2012,

bu none are zeroed ou in 2013.


Congress and the White House oten dier on oreign policy and spending priorities, and these dierences are regu-

larly reected in the annual appropriations bill or the State Department, Foreign Operations, and Related Agencies.

As Congress increasingly has been unable to pass oreign policy authorizing legislation, it has come to rely almost

exclusively on its critical role in the appropriations process to assert congressional preerences and to inuence policy.

A casual review o any recent State-Foreign Operations bill shows that the bills now include more policy directives

than spending. A 2011 study calculated that Congress included specic country and sector directives or 66.5 per-

cent o total bilateral economic assistance in the 2010 bill. Just 3 percent o the Economic Support Fund was let to

the discretion o the secretary o state.

When Congress includes directives at the country and sector level, it makes it more difcult or any administra-

tion to respond exibly and to adjust its approach to changes in conditions on the ground. The Arab Spring is only

one recent example where increased exibility could have improved the U.S. response. USAID missions are otenorced to engage in extended contortions to make their country programs match up with congressional directives

dictated rom thousands o miles away. And sector earmarkswhether or programs in water, agriculture, micro-

nance, or other issuesrun counter to the concept o designing development approaches in shared partnership

with the host country and holding the host country accountable or results.

Congress moved in 2011 to reduce the number o earmarks and change requirements to recommendations, using

sot earmarks rather than hard ones. Sot earmarks are statements o preerred policy and approaches rather

than directives. Yet some appropriators quickly expressed rustration that the administration did not treat all o

their requests as directives.

In short, Congress still needs to move urther away rom micro-managing the oreign assistance accounts. At thesame time, administrations need to do a better job o communicating with the Hill and engaging Congress in a

genuine dialogue on policy approaches.

Congress as policy activist or micro-manager?


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Managing inernaional programs in he ace o anicipaed deep budge cus can

be approached in wo ways: a reducion in all programs and counry allocaions

or a major reorienaion o approach and ocus. Te ormer would spread he pain

evenly bu mos cerainly dilue eeciveness. Good programs and prioriy coun-

ries would ace he same cus as bad programs and parners o lesser imporance.

And such an approach cerainly would no accomplish high-impac developmenwhile perpeuaing a major weakness o he U.S. approach: rying o do oo much

in oo many places wih limied eec.

Te alernaivea major reorienaionis poliically challenging. Bu making

our aid programs more selecive and ocused would make hem ar more eec-

ive and beter-posiioned o achieve he changes ha bes serve our naional

ineress. We should concenrae on eeciveness while mainaining he U.S.

commimen o be a world leader.

I should be noed ha achieving greaer seleciviy where aid is provided and greaerocus on programmaic comparaive advanage will be impossible i Congress con-

inues o heavily earmark unds a he counry and secor level. Earmarks, wih heir

associaed requiremens o noiy Congress in order o reprogram unds, grealy

reduce fexibiliy and responsiveness and ulimaely undermine aid eeciveness.

Te ollowing are recommendaions o beter guide budgeing around

seleciviy and ocus.

Be clear on why aid is provided and when it will end

Incorporate benchmarks into development strategies. Te Unied Saes does

no have exi sraegies or is economic and securiy assisance programs. I is

indeed dicul o end aid allocaions o longime recipiens even when counries

are clearly ready o ransiion o aid. Perversely, many in governmen eel ha

ending assisance sends a negaive message abou he bilaeral relaionship raher

han signaling he enormous progress made on he ground.

Having a plan wih clear benchmarks and goals would allow boh Washingonand assisance recipiens o ocus on wha needs o be accomplished raher han

simply judging he U.S. commimen by aid unding levels. When he counry

mees is goals, he wihdrawal o aid demonsraes ha he aid was successul



27/69

and U.S. engagemen should evolve ino oher areas like rade and commerce. Te

benchmarks should be clearly ideniable and measurable, and compor wih he

principle o counry ownership, developed joinly wih he recipien counry.

Delineate development and diplomacy. Developmen and diplomacy are power-

ul ools o U.S. global engagemen. Tey should be complemenary bu disinc.As hey have become confaed, i is more dicul o end programs ha are under-

perorming or are no longer necessary.

Te Quadrennial Diplomacy and Developmen eviews use o he erm develop-

men diplomacy is a case in poin. Tis urn o phrasewhich conveys he view ha

developmen is a ool o diplomacy raher han a ool o U.S. oreign policymakes i

much harder o be selecive abou where we direc boh economic and securiy assis-

ance. Almos every diploma wans o mainain an aid program in he counry where

hey are posed, eeling ha i will buy good will. Bu we need a ar more sraegic

approach where leadership in Washingon, in consulaion wih Sae and USAID o-cers in he eld, direcs aid o hose selec locales where i will really make a dierence.

USAID shows a greaer, albei sill limied, willingness o end aid programs and

close missions han Sae. American diplomas need o be sucienly alened ha

hey can represen our naional ineress in a oreign capialeven i ha counry

no longer seems like a wise place o pu increasingly scarce aid dollars.

A he same ime, diplomacy can be used o advance developmen, especially

when developmen hinges on changes in governmen policieswhich is oen

he case. Tese are opporuniies o ampliy orms o U.S. engagemen and should

become hallmarks o he relaionship beween developmen and diplomacy.

Create a State Department strategic und. In some counries assisance or

purely diplomaic reasons is jusied, such as in a counry ha is a poor develop-

men parner bu plays a key role in combaing errorism. In hese cases he Sae

Deparmen should have a separae aid accoun. Te curren Economic Suppor

Fund, or ESF, is co-managed by Sae and USAID and, while is unds can suppor

developmen aciviies, is primary purpose is no developmen. ESF was creaed

o suppor sraegically imporan counries ha migh no oherwise qualiy oraid. Tis disincion has been los as ESF has become a general po o unds given

regardless o wheher a counry receives oher economic assisance. Over ime

many counries have received boh ESF and developmen assisance.



28/69

Te ESF und should be eliminaed and replaced wih a Sae Deparmen accoun

or sraegic counries. Curren ESF unds used or developmen aciviies should be

ranserred o he Developmen Assisance accoun wih he remaining unds con-

siuing he new Sae und.8 Te new und should be allocaed by counry o cover

increased amouns or he curren Ambassador Funds, wih ambassadors making he

key recommendaions on how bes o use hose unds o accomplish U.S. objecives.9

Focus on U.S. comparative advantage: Health, food security, and

humanitarian assistance

Almos every observer o U.S. aid programs believes hey lack ocus, and here is

nary an aciviy in which he Unied Saes does no have a program. Tis is why he

adminisraion and Congress mus joinly provide leadership ocusing bilaeral pro-

grams where here is a comparaive advanage. Cos savings idenied in his repor

could be used o urher srenghen U.S. programs.

We ideniy healh, ood securiy, and humaniarian

assisance as areas in which he Unied Saes has

considerable resources, experience, and experise.

Tey should orm he oundaion o secor pro-

grams. Furher, U.S. aid programs should work in

no more han hree secors in each counry o more

eecively ocus resources. We do no believe his

approach devalues he principle o counry owner-

ship bu insead pus U.S. resources where hey will

have he greaes impac.

Healh is a global public good rom which all

naions bene, and he Unied Saes is a long-

sanding leader in healh including disease research,

echnology, pharmaceuicals, and general medical

sciences. I has increased healh aid in he iner-

naional aairs budge nearly six-old, rom $1.38

billion in 2001 o $7.85 billion in 2011. In somerecipien counries i dwars he assisance oher

donors provide. Te Global Healh Iniiaive, an

Obama eor o inegrae PEPFA and oher

healh programs under a more holisic umbrella,

The Millennium Challenge Corporation is a leader in part-

nering with countries around the principle o country

ownership. It has also taken on work in key sectors, such as

inrastructure, that other U.S. agencies have largely aban-

doned. Initially designed to work with countries poised to

make signicant gains in economic growth, it has selected arange o aid partners along the income spectrum with some

compact countries decades away rom aid graduation.

The MCC model is a good complement to a redesigned U.S.

aid system and should continue. But it should rethink its

compact partners and ocus on helping countries graduate

completely rom U.S. economic assistance.

Further, i the presidents 2013 budget request is approved,

MCC unding will have remained at $898 million or three

straight yearsquite a distance rom the $5 billion President

George W. Bush promised. At this level the MCC will need to

be even more selective about compact partners.

The Millennium Challenge Corporation



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has enjoyed biparisan suppor. In addiion, U.S. privae philanhropy is deeply

involved in he healh secor and boh U.S. public- and privae-secor involvemen

is sensible, and allows or greaer cumulaive impac in he long run.

Promoing global ood securiy is also a U.S. prior-

iy consisen wih is hisorical leadership in hiseld. A growing global populaion projeced o

reach around 9 billion in 2050,10 changing dies ha

require increased agriculural inpus, volailiy in

uel prices, and he uncerainy o climae change all

conribue o he need o increase producion, sa-

bilize prices, and do so in a susainable ashion. Te

Unied Saes enjoys an elaborae nework o agricul-

ural universiies, research insiuions, and privae-

secor eniies ha bring a wide range o experise

o bear on hunger and promoing lasing economicgrowh hrough ood securiy.

Equally, he Unied Saes excels in responding o

humaniarian disasers wheher naural or manmade.

Humaniarian assisance should remain a he ore-

ron o aid eors given he U.S. miliarys reach and

capaciy, he generosiy o he American people, and

he poenial or building goodwill. Te Unied Saes

is generous in providing such assisance and is also

excepionally good a iin no small par because

emergency assisance programs are largely spared

he hicke o bureaucraic regulaions ha oen bog

down developmen programs. Te American public

deeply suppors such humaniarian programs, and hey refec our aih and belie

ha we can assis he leas orunae in heir momen o need.

And while we see healh, ood securiy, and humaniarian relie as our greaes

comparaive advanages, his does no mean ha none o hese areas should be

improved, as is discussed laer wih regard o ood aid programs and PEPFA.

Economic growh has been and should remain a U.S. prioriy. I he ranks o

he impoverished are o be signicanly reduced, i will come hrough growh.

Bu economic growh coninues o be an elusive goal or many counries wih

Suggesting that our greatest comparative advantage

or bilateral assistance is in health, ood security, and

humanitarian assistance needs to be taken in context.

saying that these three areas should be the greatest o

or bilateral economic assistance unding. The environ

education, microenterprise, democracy activities, or a

other activities are not unimportant.

We remain committed and inuential in these sectors th

our bilateral aid and also by contributions to multilatera

agencies such as the Global Environmental Facility and

Global Partnership or Education. And as the United Sta

consolidates its oreign assistance portolio, it should co

channeling more unds through multilateral organizatio

maintain these commitments and to do so more eectiv

Bottom line: We are urging ewer activities in ewer

countries, with much sharper lines drawn between wh

we are trying to achieve through bilateral assistance,

multilateral institutions, and work that could be bette

supported by other donors or institutions.

What about other sectors?



30/69

disagreemens among donors and parner counries on he assormen o

inervenions ha will enable i.

We are no challenging he goal o economic growh in ideniying healh, ood secu-

riy, and humaniarian assisance as areas o U.S. comparaive advanage. aher we

nd hese hree areas are elds where he Unied Saes has he resources, experience,and experise o conribue o economic growh.

Use data to make decisions about aid

Te link beween aid allocaion and a recipien coun-

rys need and capaciy is oen weak because poliical

dynamics and budge process ineria infuence aid

decisions. Like an old ship wih oo many barnacles,

aid budges are no horoughly scrubbed rom yearo year or even decade o decade. New programs are

sared even as oudaed ones linger on pas heir pur-

pose. Counry allocaions are adjused up or down

based on las years level. Unless a major even is

occurring, such as he Arab Spring, adjusmens are

oen largely peruncory.

Clearly he lis o counries receiving U.S. economic

assisance needs a much more eecive scrub han i

has been given o dae, and ha review needs o be

daa-inormed while sill recognizing poliical and

securiy imperaives.

ecen adminisraion atemps o be more selecive

are uneven. Te 2012 budge eliminaed develop-

men assisance o ve counries and closed hree

missions. Te 2013 reques reduces unding o a

number o counries, mosly in PEPFA bilaeral

unds, bu here is litle evidence ha hose cusrefec a sysemaic assessmen o counry need or

capaciy.12 And no USAID mission closures were

proposed as par o he 2013 budge reques.

In our country-by-country analysis o where we should direct

economic and security assistance, we weighed a series o data

and actors on the recipient countrys political climate, busi-

ness environment, need, willingness to tackle corruption, and

amount o aid and investment received rom other sources.

We considered the ollowing indicators against a countryscurrent assistance level: gross national income per capita

2010; Freedom in the World reedom status 2011; Human

Development Index 2011 rank; Transparency International

Corruption Perceptions Index 2011; Doing Business Index

2012; population living on less than $2 per day; Worldwide

Governance Indicators Rule o Law percentile rank 2010; WGI

Government Eectiveness percentile rank 2010; net ofcial

development assistance per capita; net oreign direct invest-

ment; and military expenditure as a percent o GDP.15

In addition, we included a broad range o more subjectiveconsiderations, including short- and long-term strategic

interests, political support, and the traditional strength o the

bilateral relationship.

No one indicator, piece o data, or piece o political intel-

ligence is sufcient or a wide-angle view, but these indica-

tors provide enough insight on need and capacity to make

inormed decisions through a process that is data-inormed

without being mechanistic. The outcome is a categorization

o countries that sheds light on where aid should be ocused

because it has a greater probability or success and impact,

where aid is likely necessary but may yield limited results, and

where aid is probably not a wise investment.

The actors we weighed



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In general, unding was reduced, someimes dramaically, in a number o counries o

allow or he creaion o a und o mee he needs o he Arab Spring and o allow or

deb reducion or Sudan. Bu hese cus were oen across he board and no ocused.

Many inernaional donors are also reexamining heir programs during his period

o budge auseriy and greaer concern or eecive aid. Several donors scaledback aid recipiens and secors. Sill ohers decided o pull ou o or grealy reduce

heir presence in middle-income counries.13

Doing so presens a moral dilemma. While hese counries may be growing, some

sill have sizeable impoverished populaions.14 Insead o rewarding hem or imple-

mening good policies and making heir own commimen o developmen, some

donors are cuting o assisance ha could be counerproducive. A he same ime

i is myopic o coninue aid wihou recognizing hese counries growing abiliy o

ake on more responsibiliy or heir own developmen. aher, a counrys income

should guide he ype and ocus o aid, puting some on a seeper pah o ransiionrom aid and a reoriened relaionship ouside o an aid ramework.

Wha ollows is our selecion o counries ino wo broad caegories: coninued or

expanded assisance, and curailed assisance. Tere is room or healhy debae on our

selecions, and hey were oen debaed a lengh as we pu he repor ogeher. We

oer his as an illusraive approach in he hope ha i leads o a more inormed dis-

cussion o resource allocaion and a sharper debae abou where our aid dollars work.

Continued or expanded economic assistance

Seleciviy and ocus, as called or in he Presidens Policy Direcive on Global

Developmen, means scaling back he number o recipiens and reocusing

resources or greaer impac. As a resul, even as aid o some counries is reduced

or phased ou, here may be good reasons o expand aid elsewhere in a more

ocused manner. A number o counries in he coninued or expanded assisance

caegory could graduae rom U.S. assisance wihin 5 o 10 years.

Wihin his caegory we ideni y prioriy invesmen counries and hose or

which we have limied expecaions.

Prioriy invesmen counries are he highes prioriy or economic assisance

because hey exhibi boh need and a capaciy and commimen o develop-

men. Some are also included because o heir sraegic imporance o he Unied

Saes, bu hey sill demonsrae a reasonable capaciy o bene rom assisance.



32/69

In some cases we argue or invesmens based on immediae confic prevenion

eors or o ensure a counry ha enjoyed signican previous posconfic inves-

mens does no slide backward.

Te32 prioriy invesmen counries by region include:Priority investment countries

AricaBenin; Burkina Faso; Cote dIvoire; Ghana; Kenya; Lesotho; Liberia; Mali*;

Mozambique; Senegal; Sierra Leone; South Sudan; Tanzania; Zambia

East Asia and the Pacifc Burma; Indonesia; Mongolia; Philippines

Europe and Eurasia Georgia; Macedonia; Moldova

Near East Lebanon; Tunisia; West Bank and Gaza

South and Central Asia Bangladesh; Kyrgyz Republic; Nepal

Western Hemisphere Dominican Republic; El Salvador; Guatemala; Honduras; Peru

*We made this categorization prior to an attempted coup and military seizure o power in Mali. The lack o a democratically elected leaderwould afect our categorization o Mali and its associated unding levels.

Counries or which we have limied expecaions will likely coninue o receive

signican assisance largely based on shor-erm imperaives including securiy

and oher geopoliical concerns bu where here are red fags wih he bilaeral

relaionship or he behavior o he recipien counrys governmen. Tis assisance

will probably no drive developmen, given he poor supporing environmen on

he ground, and we do no recommend increased assisance o hese counries

unil condiions change. aher developmen assisance could be replaced by a

new Sae Deparmen sraegic und, as we suggesed earlier.

In this section we propose countries that should be given expanded assistance,

those whose assistance should be kept level, and those whose assistance can be

constrained. Importantly, these judgments are based on their current and requested

levels o unding. So by saying that Benin is a priority investment country and that

we have limited expectations or the Democratic Republic o the Congo, we are not

saying that Benin is more important than the Democratic Republic o the Congo orshould receive more unding than the Democratic Republic o the Congo. We are

arguing that based on current unding trends, conditions on the ground, and the

likelihood o assistance being eective, Benins relatively small allocation could be

larger while Nigerias considerable unding deserves to be kept at.

More about our methodology



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Te 21 limied expecaion counries by region include:

Limited expectation countries

AricaBurundi; Democratic Republic o Congo; Ethiopia; Guinea; Malawi; Niger;

Rwanda; Uganda; Zimbabwe

East Asia and the Pacifc None

Europe and Eurasia Kosovo; Ukraine

Near East Egypt; Iraq; Jordan; Yemen

South and Central Asia Kazakhstan

Western Hemisphere Bolivia; Cuba; Ecuador; Haiti; Mexico

Curtailed assistanceWihin his caegory we ideniy counries ha can be pu on a one- o ve-year

aid graduaion rajecory, counries wih small or expensive-o-operae programs,

and poor perorming counries.

Te graduae in one o ve years caegory includes counries ha are well posi-

ioned o graduae rom U.S. assisance in he near o medium erm based on

declining need and growing capaciy. In some cases his would be a more expedi-

ious cessaion o aid while in ohers i would be more gradual. In eiher case he

relaionship should ransiion rom one largely based on aid o ha o rade and

oher areas o cooperaion. For emerging donors his may mean exploring some

rilaeral cooperaion aciviies.

Te 18 counries we rank as graduaing in one o ve years by region include:

Graduate in one to ive years countries

Arica Botswana; Namibia; Nigeria; South Arica

East Asia and the Pacifc China; Thailand

Europe and EurasiaAlbania; Armenia; Cyprus; Ireland (International Fund); Montenegro;

Poland; Russia

Near East None

South and Central Asia India; Sri Lanka

Western Hemisphere Barbados and Eastern Caribbean; Brazil; Colombia



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In a number o counries, aid programs are oo small o have much eec, con-

duced in naions where our ineress are largely peripheral, or oo expensive o

operae given heir size (see he nex secion on eliminaing small and oudaed

programs and closing and consolidaing missions or a discussion on mission

closure). Some counries in his caegory should have heir aid reduced while

ohers should see i managed rom a regional mission wih a de minimus counrypresence. Inclusion in his caegory is no a commenary on a counry s general

willingness o reorm bu speaks more direcly o making ocused invesmens ha

will aec a large number o people.

Te 11 counries in he small, expensive-o-operae, or peripheral-ineres counry

programs by region include:

Small, expensive-to-operate,

or peripheral-interest country programs

Arica None

East Asia and the Pacifc Laos; Marshall Islands; Micronesia; Papua New Guinea; Timor-Leste

Europe and Eurasia Bosnia and Herzegovina; Serbia

Near East Morocco

South and Central Asia None

Western Hemisphere Guyana; Jamaica; Paraguay

Poor perorming counries do no srike us as good developmen parners,

because o poor governance, corrupion, or an absence o a commimen o

developmen. In his period o limied resources, U.S. aid dollars could be beter

spen elsewhere. Generally humaniarian aid and assisance o democraic and

civil sociey groups are more appropriae in hese counries. PEPFA unding

should also be coninued. In some cases, he privae secor could ake over eco-

nomic aid unil he governmen shows a greaer willingness o parner wih he

Unied Saes in a developmen relaionship. Oher counries could bene rom

Saes sraegic und. Pakisan and Aghanisan, boh special cases wih high

sraegic ineres bu numerous governance issues, should see reducions unilrelaions ge on more solid ooing.



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Te ollowing are he 21 counries we rank as poor perorming counries by region:

Poor perorming countries

AricaAngola; Cameroon; Chad; Djibouti; Madagascar; Mauritania; Somalia;

Sudan; Swaziland

East Asia and the Pacifc Cambodia; Vietnam

Europe and Eurasia Azerbaijan; Belarus

Near East None, with caveats

South and Central Asia Aghanistan; Maldives; Pakistan; Tajikistan; Turkmenistan; Uzbekistan

Western Hemisphere Nicaragua; Venezuela

Eliminate small and outdated programs and close and consolidate missions

End outdated programs. Some programs have oulived heir purpose. An exam-

ple: Te Assisance o Europe, Eurasia, and Cenral Asia, or AEECA, accounencompassed wo earlier pos-Cold War aid accouns or Easern Europe and

ormer Sovie republics. As o 2012 i includes unding o $627 million or 22

counries, many o which have atained middle-income saus.

Te presidens 2013 reques would eliminae AEECA, bu i does no produce

considerable savings. Insead AEECAs unding is reduced by jus 18 percen

and he remaining unds are ranserred o oher accouns such as he Economic

Suppor Fund, he Inernaional Narcoics Conrol and Law Enorcemen

accoun, and he Nonprolieraion, Ani-errorism, Demining, and elaed

Programs accoun. As noed in he previous secion, many AEECA counries

could have heir assisance ended in he near o medium erm. Some counries o

sraegic ineres can have programs unded hrough Saes sraegic und.

Oher small and oudaed programs, including he Inernaional Fund or Ireland

and Assisance o Schools and Hospials Abroad, are largely conduced in coun-

ries ha are very well o, and should be eliminaed.

Close and consolidate missions.Eliminaing small programs goes hand in handwih closing and consolidaing missions. According o he F Y 2013 reques, 19USAID missions had adminisraive coss exceeding 15 percen o he value o

aid provided.16 Counries wih missions above his hreshold warran urher

scruiny o ensure cos eeciveness. USAID program unding in hese counries

should eiher be increased in he case o prioriy counries or he mission



36/69

should be closed or consolidaed in he case o graduae and peripheral ineres

counries. In some regions such as Easern Europe and Lain America, aid dollars

have declined bu sang levels appear o no have ollowed sui. A number o

aid missions in hese regions can be closed and i necessary consolidaed ino a

regional oce. In many cases i may be worhwhile o replace ull aid missions

wih a developmen atach or counselor.

Closing missions has immediae coss including ending leases and erminaing he

employmen o Foreign Service naionals. Tese coss are emporary and exraordi-

nary. As such hey should be included in a separae accoun or his specic purpose.

Under our review he ollowing 11 missions could be considered or closure over

he nex ve years: Albania, Angola, Brazil, Djiboui, Jamaica, Morocco, Nicaragua,

Paraguay, Serbia, Sri Lanka, and imor-Lese.

Develop trilateral cooperation with emerging donors

Several middle-income aid recipiens have sared assisance programs o heir

own in souh-o-souh cooperaion. Noable examples include India, Souh Arica,

and o a lesser exen Brazil, all o whom receive U.S. economic assisance bu

are also donor naions hemselves. As discussed elsewhere in his repor, hese

counries are in a posiion o ake over more o he programs he Unied Saes

currenly unds. A he same ime i would be wise or he Unied Saes o say

engaged wih hem as emerging donors.

One way o do his is hrough rilaeral cooperaion, in which a donor counry, an

emerging donor, and a developing counry work ogeher. Tis oers many oppor-

uniies o improve eeciveness and reduce coss. I can be used o leverage und-

ing rom emerging donors, capialize on exising parnerships, and ake advanage

o regional experise. I can also help emerging donors develop aid approaches

ha conorm o bes pracices and Paris/Accra/Busan principles, especially coun-

ry ownership, ransparency, and local capaciy building.17

Economic assisance o India, Souh Arica, and Brazil hrough he developmenassisance accoun oals $156.1 million. PEPFA unding, which all hree receive,

is discussed in anoher secion o his repor. As aid unding is reduced, missions

in each could be scaled back accordingly, or closed and replaced wih a develop-

men atach, a USAID ocial atached o he U.S. embassy or embedded in he

hos counrys aid agency.



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Selective security assistance

U.S. securiy assisance, like economic aid, should be beter ocused around clear

objecives and direced oward counries where i can make a lasing dierence.

For he purposes o his repor, we dene securiy assisance as Foreign Miliary

Financing; Inernaional Miliary Educaion and raining; Nonprolieraion, Ani-errorism, Demining, and elaed Programs; Inernaional Narcoics Conrol and

Law Enorcemen; Peacekeeping Operaions; and Pakisan Counerinsurgency

Capabiliy Fund accouns as provided in he Sae and Foreign Operaions

appropriaions bill. Te Sae Deparmen oversees his assisance, hough he

Deense Deparmen carries ou he acual provision o some o his aid and

raining. Tis repor does no include miliary assisance budgeed purely hrough

he Penagon because i is no a componen o he 150 accoun.

Te Unied Saes provides securiy assisance or a variey o purposes and in

dieren poliical environmens: raining securiy orces, nancing miliary equip-men, working wih law enorcemen on he illegal narcoics rade, and cooper-

aing on nonprolieraion issues. In a large number o cases, aid is provided o

improve miliary-o-miliary conacs.

Ye oo oen we provide securiy assisance wihou a sensible discussion o is

meris. Tis occurs or wo reasons.

Firs, he Sae Deparmen, hough ormally in charge o overseeing his porolio,

does no inves in he human capial and raining o ensure i has he experise

o do his job properly. As a resul, Sae Deparmen approval and auhorizaion

o securiy assisance hrough hese accouns is oen pro orma. Tis, combined

wih a general congressional endency o ignore scruiny o anyhing broadly

dened as deense, means ha our securiy assisance programs and heir respec-

ive goals, accomplishmens, and shorcomings receive very litle oversigh.

Second, oreign miliaries and he securiy assisance o hose miliaries are no

examined wih he counrys governance in mind. Far oo oen governance is

reaed as an aerhough in providing securiy aid. Also, hard quesions abou

wheher such assisance will really help improve governance are oo oen noconsidered excep peruncorily.

Yes, having miliary-o-miliary conacs ha are enhanced by U.S. miliary

raining is oen useul and can build imporan relaions and some measures



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o lasing rus. Bu i is equally rue ha he U.S. axpayer should no be

underwriing securiy assisance o a counry whose leadership is openly despoic

or o naions o litle or no sraegic signicance. Securiy assisance will be money

poorly spen i a recipien counry is wildly corrup, undemocraic, or unwilling o

embrace even he mos basic reorms oward ree markes and ree governmen.

In shor, securiy assisance should no escape scruiny given he push or greaer

budge auseriy. And, similar o economic assisance, we argue ha securiy assis-

ance is spread oo hinly across oo many counries. I would be ar more eecive i

concenraed in high-perorming counries and key sraegic concerns while reduced

in more peripheral naions ha have proven hemselves

poor parners. Seleciviy has no been he byword o he

U.S. governmen approach o dae: In 2012, 134 counries

received securiy assisance hrough he 150 accoun.

We applied a similar seleciviy process o securiy assis-ance as o economic aid, ideniying where aid should

be mainained or expanded and where i may be limied

or oudaed. Some counries represen greaer securiy

challenges and signicance o U.S. naional ineress han

ohers. And in imes o budge auseriy, i is imporan o

ocus on where assisance will have he greaes impac.

In many cases, bu cerainly no all, counries ha are

good parners on he developmen ron are also places

where we should be srenghening he hos counrys

miliary capaciy and proessionalizaion. Tis also makes

i more likely ha counries will graduae compleely

rom he need or securiy and economic aid over ime.

Te wo sides o he aid ledger are oen relaed.

Developmen rarely works amid insabiliy and confic,

and assisance ha proessionalizes securiy orces can

conribue o beter governance. Beter governmens, sup-

pored by economic assisance, are also ar more likely obe dependable and sable securiy parners over ime.

Wha ollows is our selecion o counries ino wo

broad caegories: coninued or expanded assisance,

One hundred and twenty-six countries received

International Military Education and Training, or IMET, in

scal year 2012. The program seeks to proessionalize or-

eign militaries and to strengthen military-to-military ties.

While the 2013 budget request shows a $3 million decline,

only one nationGuinea-Bissauis zeroed out. Whats

more, wealthier nations such as Argentina, Bahrain, Brazil,

Poland, Portugal, Saudi Arabia, and Turkey also receive IMET

grants even though they are quite capable o covering the

training costs o their military personnel.

Countries remain on the IMET list or a simple reason: It

makes them eligible or reduced rates on education and

training associated with the Foreign Military Sales and

IMET programs. (The Foreign Military Sales program is

the United States government-to-government method

or selling U.S. deense equipment, services, and train-

ing.) IMETs goal is to improve the proessionalism o

oreign militaries. It is not, nor should it be, to provide

discount rates to countries that can easily aord these

services. We recommend that IMET be provided to onlythose countries with the greatest need and that the link

between IMET and the purchase o training at dis-

counted rates be severed.

All over the map: InternationalMilitary Education and Training



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and curailed assisance. As wih economic assisance here is room or debae on

our selecions. We oer his illusraive approach in he hope ha i leads o a more

inormed discussion o resource allocaion.

Continued or expanded assistance

Wihin his caegory we ideniy prioriy invesmen counries and hose or

which we have limied expecaions.

Prioriy invesmen counries should be given a higher prioriy or securiy assis-

ance han heir curren budge allocaions because o heir sraegic imporance,

heir need or such aid, and heir capaciy o achieve lasing sabiliy. Decisions

on securiy assisance need o be aken wihin a broader ramework o eecive

governance and he probabiliy ha such assisance will conribue o sabiliy and

enhanced parnerships on securiy issues.

As noed wih economic assisance, prioriy is deermined in relaion o cur-

ren unding levels. So while Albania is ranked as a prioriy counry and Egyp

a limied expecaions counry, his is no o say Albania is more imporan han

Egypsimply ha unding or Albania deserves a sligh increase while Egyp

should probably remain fa.

Te 45 prioriy invesmen counries by region include:

Priority investment countries

AricaBenin; Botswana; Burkina Faso; Ghana; Kenya; Liberia; Mali*; Nigeria;

Senegal; South Arica; South Sudan; Tanzania; Uganda; Zambia

East Asia and the Pacifc Indonesia; Mongolia; Philippines; Thailand; Timor-Leste

Europe and EurasiaAlbania; Armenia; Bosnia and Herzegovina; Bulgaria; Georgia; Macedo-

nia; Moldova; Russia; Turkey

Near East Israel; Lebanon; Libya; Morocco; Tunisia; West Bank and Gaza

South and Central Asia Bangladesh; Kyrgyz Republic; Nepal

Western Hemisphere

Colombia; Dominican Republic; El Salvador; Guatemala; Honduras;

Mexico; Panama; Peru

*We made this categorization prior to an attempted coup and military seizure o power in Mali. The lack o a democratically elected leader

would afect our categorization o Mali and its associated unding levels.



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Counries or which we have limied expecaions will likely coninue o receive

signican assisance largely based on shor-erm imperaives, including securiy and

oher geopoliical concerns. Bu here are a number o red fags wih he peror-

mance o some o hese governmens.

Te 27 limied expecaion counries by region include:

Limited expectation countries

AricaBurundi; Democratic Republic o Congo; Djibouti; Ethiopia; Gabon;

Guinea; Mauritania; Mozambique; Rwanda; Sierra Leone; Somalia

East Asia and the Pacifc Vietnam

Europe and Eurasia Azerbaijan; Kosovo; Ukraine

Near East Algeria; Egypt; I raq; Jordan; Yemen

South and Central Asia Kazakhstan; Tajikistan

Western Hemisphere Bolivia; Ecuador; Haiti; Jamaica; Paraguay

Curtailed assistance

Wihin his caegory we ideniy counries ha should be graduaed rom assis-

ance in he near erm, hose peripheral o U.S. securiy ineress, and poor per-

orming counries.

Counries ha should graduae in one o ve years are hose doing well enough o

no longer rely on U.S. assisance. Inclusion in his caegory does no mean ha oher

ypes o miliary-o-miliary or securiy cooperaion should be negleced.

Te 30 counries ha couldgraduae in one o ve years include by region:Graduate in one to ive years countries

Arica Mauritius; Namibia

East Asia and the Pacifc China; Malaysia; Singapore; Taiwan

Europe and EurasiaCroatia; Czech Republic; Estonia; Greece; Hungary; Latvia; Lithuania; Malta;

Montenegro; Poland; Portugal; Romania; Serbia; Slovakia; Slovenia

Near East Oman

South and Central Asia India

Western HemisphereArgentina; The Bahamas; Barbados and Eastern Caribbean; Brazil; Chile;

Costa Rica; Uruguay



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Counries peripheral o U.S. securiy ineress oen have small programs ha call

ino quesion wheher he level o unding will produce major resuls. Inclusion in

his caegory is no a commenary on he counrys general willingness o cooper-

ae on securiy issues.

Te 15 counries in he peripheral caegory by region include:

Small, expensive to operate,

or peripheral-interest country programs

AricaCape Verde; Central Arican Republic; Comoros; The Gambia; Lesotho;

Malawi; Sao Tome and Principe; Seychelles; Togo

East Asia and the Pacifc Marshall Islands; Samoa

Europe and Eurasia None

Near East None

South and Central Asia None

Western Hemisphere Belize; Guyana; Suriname; Trinidad and Tobago

Poor perorming counries show litle regard or governance and human righs.

In many cases securiy assisance is meried or sraegic consideraions, bu

policymakers should be aware o he perverse eec o reinorcing undemocraic

enrenched elies. Inclusion on his lis does no mean all securiy aid should be

cu bu ha here is room o reduce or revamp or beter resuls.

Te 17 poor perorming counries by region include:

Poor perorming countries

AricaAngola; Cameroon; Chad; Guinea-Bissau; Republic o Congo; Sudan;

Swaziland

East Asia and the Pacifc Cambodia; Laos

Europe and Eurasia None

Near East Bahrain

South and Central Asia Aghanistan; Maldives; Pakistan; Sri Lanka; Turkmenistan; Uzbekistan

Western Hemisphere Nicaragua



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Reform 2: Transition PEPFAR

to country ownership

Te Presidens Emergency Plan or AIDS elie, or PEPFA, is he larges

commimen by any naion in hisory o comba a single disease, and U.S. gov-

ernmen spending sill consiues a majoriy o global donor unding o comba

HIV/AIDS. Mos PEPFA unds are dedicaed o reamen, esing, and build-

ing up local healh sysems.

PEPFA is he elephan in he room when i comes o U.S. inernaional assisance

prioriies because even hough he scal year 2013 budge reques or global healhalls 3.8 percen below curren levels, his remains he larges oreign aid accoun a

$7.85 billion. Te scal year 2013 reques redirecs some o he unding radiion-

ally direced oward PEPFA o

he Global Fund o Figh AIDS,

uberculosis and Malaria. Te

Global Fund, in conras o

PEPFA, is a mulilaeral insiu-

ion suppored by a range o gov-

ernmens and privae donors.

Beween scal years 2004 and

2012, he Unied Saes spen

more han $38.6 billion on bila-

eral HIV/AIDS programs, dwar-

ing commimens in many oher

areas including unds dedicaed

o economic growh, agriculure,

and he environmen.

Bu i is equally clear ha he need

remains vas. More han 30 million

people coninue o live wih he

virus, he majoriy in sub-Saharan Source: Authors calculations.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FIGURE 2

Funding the fight against AIDS

U.S. funding for bilateral global HIV/AIDS programs in constant dollars,

FY2004-FY2012

2004 2005 2006 2007 2008 2009 2010 2011

U.S. PEPFAR funding (in millions)

Reorm 2: Trasitio PEPFAR to coutry owership | Ceter or global Developme


44/69

Arica where healh sysems are poor.18 PEPFA has made an enormous dierence,

and he adminisraion recenly highlighed some imporan achievemens:19

Te Unied Saes direcly suppored lie-saving anireroviral reamen or

more han 3.2 million men, women, and children worldwide as o Sepember

30, 2010, up rom less han 2.5 million in 2009. Te Obama adminisraion hasurher pledged o pu 6 million people on reamen globally by 2013.

PEPFA direcly suppored anireroviral prophylaxis o preven moher-o-

child HIV ransmission or more han 600,000 HIV-posiive pregnan women in

scal year 2010, resuling in more han 114,000 inans born HIV ree.

Trough is parnerships wih more han 30 counries, PEPFA direcly sup-

pored 11 million people wih care, including nearly 3.8 million orphans and

vulnerable children, in scal year 2010.

PEPFA direcly suppored HIV counseling and esing or nearly 33 million

people in scal year 2010.

Debaes abou PEPFA are oen conenious and poliically charged. Suggesing

changes or aleraions in he program is challenging because no one wans o appear

less han ully commited o an eor ha so clearly saves lives. Case in poin: Te

adminisraions proposal, as embodied in he 2013 budge reques, o increase

resources o he Global Fund o Figh AIDS, uberculosis and Malaria while reduc-

ing direc unding o some PEPFA counries received a mixed welcome.

A he same ime, PEPFA may be uninenionally skewing broader developmen

by ocusing on a single disease. U.S. assisance dominaes he healh secor in he

counries ha receive he mos PEPFA unding, and i has proven challenging o

gure ou how bes o secure lasing and susainable developmen in key PEPFA

recipien counries while simulaneously combaing HIV/AIDS.20

Te quesion or PEPFA is how and a wha speed he program can be convered

rom wha is essenially an emergency humaniarian programeven hough

i was no always labeled as sucho a long-erm and genuinely susainableapproach o healh ha s wihin a broader developmen model.

I was wih his in mind ha Presiden Barack Obama announced he Global

Healh Iniiaive in 2009 wih an emphasis on aking a more comprehensive



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approach o healh issues wri large. Middle-income counries would seem he

logical place o sar or sharing he nancial load, bu he adminisraion did no

specically emphasize ha approach.

Te 2008 reauhorizaion o PEPFA also sressed he need o build more susain-

able healh oucomes and sysems. Tis included plans o iniiae ParnershipFrameworks wih PEPFA parner counries o srenghen counry capaciy, own-

ership, and leadership o HIV/AIDS programs. Tese muual nonbinding agree-

mens ouline he expeced arc o U.S. governmen suppor and how hos-counry

invesmens and policy changes can posiion governmens o assume primary

responsibiliy or HIV/AIDS in he uure.21

Parnership Frameworks provide a ve-year join sraegic ouline or coopera-

ion beween he U.S. governmen, he parner governmen, and oher parners

on service delivery, policy reorm, and coordinaed nancial commimens.

Wihin his imerame, hos counries will be beter siuaed o conrol hemanagemen, sraegic direcion, perormance

Engagement Amid Austerity

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