STATEMENT OF GEORGE LAUDATO

SPECIAL ASSISTANT TO THE ADMINISTRATOR FOR THE MIDDLE EAST

MIDDLE EAST BUREAU

U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT

BEFORE THE

HOUSE COMMITTEE ON FOREIGN AFFAIRS

SUBCOMMITTEE ON THE MIDDLE EAST AND SOUTH ASIA

U.S. Assistance to the Middle East: Old Tools for New Tasks?

Chairman Ackerman, Ranking Member Pence and other distinguished members of the committee, thank you for inviting me to appear before you today to testify on U.S. assistance in the Middle East. I am pleased to have the opportunity to share the perspective of the U.S. Agency for International Development (USAID) with the subcommittee.

The world has changed dramatically in the nearly 50 years since USAID was created through the Foreign Assistance Act of 1961. In the past 50 years, we have learned firsthand that regions lagging in development —lack of economic opportunity, poor health and education, lack of women’s empowerment, and lack of transparency and rule of law—in countries halfway around the globe can have effects that stream across borders. At the same time, the expansion of trade and investment has led to exciting new possibilities for economic growth and poverty reduction.

Situated along major fault lines of geography, religion, and culture, the Middle East has experienced the strains and stresses—as well as the promise—of the global changes that have occurred in recent decades. The President elevated development alongside diplomacy and defense in the 2002 National Security Strategy, equipping our country to respond to the evolving challenges that face us in this complicated region. And the 2009 budget request integrates these focal points and represents a coordinated effort both within USAID and with related agencies to maximize the impact of our foreign assistance.

Since USAID began working in the Middle East over 50 years ago, U.S. assistance has benn used to provide clean water and sanitation facilities, better health care, modern schools and teacher training, microfinance and help for small business, roads and cutting edge information technology. We have helped countries in the region to improve their trade regimes, modernize their banking systems, remove impediments to private sector development, and put effective regulatory systems in place to ensure accountable and transparent governance. The region has seen many improvements over these years that will undergird future advancements where USAID development programs operate.

Addressing Global Challenges

In the Middle East, USAID operates programs in six countries and in the West Bank-Gaza, delivering assistance through individual country missions and through the new Office of Middle East Programs (OMEP), a platform that supports key regional strategic priorities, including reducing the underlying causes of terrorism, through cross-regional activities that maximize the impact of U.S. assistance. These delivery mechanisms allow us to respond to development trends at the country level as well as the regional level.

By addressing the urgent development challenges facing the Middle East, USAID assistance contributes to the our government’s broader efforts to promote stability, prosperity, and human dignity throughout the region. Americans value progress in development out of genuine humanitarian concern, as well as from an acknowledgement that weak states and disadvantaged populations are more susceptible to political instability and the sway of terrorism. USAID works closely with the Department of State to ensure that overall transformational diplomacy activities are carried out in a coordinated way in order to maximize the impact of our funding.

The USAID Middle East Bureau receives a significant amount of appropriated funds, reflecting the USG’s strong commitment to the people and governments in the region. USAID funding levels in the region are rooted in the USG’s overall foreign policy priorities, concentrating on Iraq, Jordan and Lebanon—key programs for maintaining regional stability. USAID assistance in Morocco is directed at solidifying economic and political gains and boosting development indicators.

The largest shift in request levels from FY 2008 to FY 2009 is the decrease in Economic Support Funds for Egypt. The drop from $415 million in FY 2008 to $200 million in FY 2009 is reflective of a few factors: (a) Egypt’s reduced need for assistance given its recent positive economic performance, (b) the more mature bilateral relationship emerging between the United States and Egypt, and (c) the need to adapt resource allocations in the Middle East region to meet current priorities. Nevertheless, our funding levels also show and support the USG’s continuing commitment to promoting democracy, human rights, transparency, education, economic growth, and maternal and child health in Egypt. Funding for the Foreign Military Financing remains at $1.3 billion.

Reflecting national security priorities, Iraq remains a central focus of USAID activities in the Middle East, with an FY 2009 request level of $300 million in Economic Support Funds (ESF). USAID programs are focused both on institutions of the Government of Iraq (GOI) and directly on the Iraqi private sector, both key elements in helping Iraq to become a self-reliant and stable country. Current USAID foreign assistance to the GOI is targeted to help build capacity at all levels to manage resources effectively in order to provide the essential services. USAID’s foreign assistance no longer includes large-scale infrastructure, which is undertaken and funded directly by the GOI.

USAID foreign assistance to the Iraqi people is comprised of support for civil society, democracy and private sector development programs. USAID provides technical expertise and support to the Iraqi private sector to foster a market-oriented economy. Finally, on the ground in Iraq’s Provincial Reconstruction Teams (PRTs), USAID, the Department of State, and Multinational Forces-Iraq (MNF-I) personnel collaborate closely and effectively to consolidate the gains of the military surge. In addition, the Administration has requested $797 million in ESF funding in the pending FY 2008 supplemental and $213 million in the FY 2009 ‘bridge’ to support urgent and critical programs to help us solidify the strategic gains made by our military forces, support recently announced elections for the Fall, and help the Iraqis transition to self-sufficiency.

The scale of the USAID FY 2009 request for Jordan—at $277 million (including Global Health and Child Survival, and ESF), rivaling the total requested for Iraq—reflects the critical importance of the U.S.-Jordanian relationship, Jordan’s leadership in the region and the support they provide to our efforts in Iraq. USAID’s FY 2009 base funding request will maintain many of USAID’s important development initiatives in Jordan, including economic reform, improved access to quality health services, education and workforce training, clean water, and good governance. In addition, the funding request reflects the fact that Jordan has become an invaluable partner in achieving regional development goals, highlighted by its assistance in hosting Iraqi refugees. An additional $100 million has been requested in the FY 2009 ‘bridge’, including $60 million to address urgent needs in Jordanian communities with a large influx of Iraqi refugees.

In Lebanon, an increase in requested ESF funding—to $67.5 million—will maintain programs that support reconstruction and stability. USAID’s economic growth programs will continue to assist the country in rebuilding its economy and provide an atmosphere where job creation, wealth and prosperity prevail. USAID programs also support the right of the people of Lebanon to have a transparent, credible, and strong democratic government and institutions. In addition, support for American educational institutions in Lebanon enhances and improves Lebanese citizens’ understanding of the United States and its policies.  

USAID programs in the West Bank and Gaza are essential to supporting the President’s objective of a two-state solution to the Israeli-Palestinian conflict, including the establishment of a Palestinian state, living side-by-side with Israel in peace and security. Our programs work to strengthen the forces of moderation and improve the lives of Palestinians by encouraging good governance and providing for infrastructure, capacity building, and support vital social services. A portion of the request will also be used to address humanitarian needs in the Gaza Strip. The USAID funding request for FY 2009 is $75 million in ESF. There is an additional $195 million in the FY 2008 supplemental and $150 million in the FY 2009 ‘bridge’. Dispersals of funds to the West Bank and Gaza undergo a robust vetting and oversight process to prevent aid from being directed towards any Foreign Terrorist Organization (FTO).

FY 2009 funding requests for Morocco and Yemen support smaller programs but represent increases for USAID over FY 2008. Morocco is an important ally of the United States. USAID programs provide critical support in the following strategic areas to help maintain Moroccan stability: improving the business climate and ensuring implementation of and full compliance with the bilateral Free Trade Agreement, strengthening basic education to better equip youth with employment skills, and supporting Moroccan reforms to establish transparency and accountability in governance.

We face a number of challenges in Yemen, a country which ranks as one of the least developed in the world and which some believe may be on the verge of becoming a failed state. Despite the significant problems that exist, USAID is able to continue activities in the areas of good governance and decentralization, improving maternal and child health, developing health policy and planning systems, increasing literacy, and developing education information systems. The FY 2009 request represents a $14 million increase in funding that will allow USAID to expand existing programs geographically, to areas in Yemen where programs have not operated in recent years.

Finally, USAID’s Office of Middle East Programs—or OMEP—located in Cairo, Egypt, develops and carries out programs on regional and cross-border issues, including water use, governance and youth opportunities. This new regional office is an innovative approach to help USAID better address development issues across the Middle East region. One prominent example is the Blue Revolution Initiative, which addresses the scarcity of water in the Middle East and North Africa, where water is used faster than it can be replenished. This initiative emphasizes conservation, demand management, re-use, public participation and the building of regional institutions. The FY 2009 request of $5.5 million for OMEP represents an increase over the FY 2008 request of $3.8 million. The additional funds will allow the expansion of this successful integrated regional approach.

Taking Advantage of Global Opportunities

USAID also is maximizing the impact of development aid by recognizing that the expansion of trade and investment in the region over the past 50 years represents an enormous opportunity for Middle Eastern countries to raise incomes and standards of living. For this reason, USAID’s assistance in the Middle East also helps states take advantage of the benefits of liberalized trade by providing assistance in the areas of governance and economic policy reform

As Administrator Fore has recently announced in her new USAID Economic Growth Strategy, USAID seeks systemic reforms—such as policy or institutional changes—that will have a broad impact throughout society. In the Middle East and North Africa, USAID has worked for decades to assist governments in improving their regulatory frameworks by reducing onerous red tape, strengthening property rights, and easing barriers to trade. These efforts have paid off in Morocco, for example, where a USAID trade capacity building program introduced a new risk-based cargo system, reducing the time to export by two days and import by four days. A customs reform program in Egypt achieved similar efficiencies.

Coordinating with New Development Participants

Another positive change in the past 50 years has been the rise of new categories of foreign assistance participants. Today, more and more countries are taking on responsibility for international development, heightening the importance of donor coordination. These new foreign assistance actors are not just large, wealthy states. Even small, developing states are playing vital roles. Here, Jordan is a prime example. In 2007, I visited the newly renovated maternal and infant ward at the hospital in Ghor Al-Safi. At this hospital, one in six infants is born to an Iraqi refugee mother. To its credit, Jordan has supported care for these mothers and infants, providing them with life-saving medical care.

Multinational corporations also are playing much larger roles in development in the Middle East and elsewhere, and our offices in the Middle East have been active in reaching out to these companies. The increasing prominence of corporations allows the USG to leverage significant additional resources for development to achieve mutual development goals. Between 2006 and 2008, USAID will have almost tripled the number of public-private partnerships in the Middle East and North Africa and more than tripled the resources it leverages through these partnerships. Partnerships have included programs in the areas of youth leadership, water, health communications and coffee exports.

Today, 17 public-private alliances have been established in the Middle East, with 27 additional alliances in the pipeline. In December 2007, President Bush announced the U.S.-Palestinian Partnership, a public-private partnership focused on creating economic opportunities for the Palestinian people and helping to prepare Palestinian youth for the responsibilities of citizenship and good governance.  This partnership seeks to inspire, educate, and train Palestinian youth and develop economic activities in the region, including supporting the Palestinian Investment Conference coming up in Bethlehem on May 21.  USAID’s work in leveraging private sector funds dramatically expands the development impact and sustainability of its programs in the Middle East. It pays off for corporations, too, which are recognizing that corporate social responsibility is good for their bottom lines.

Responding to Workforce Challenges

On a more sobering note, a final change in the past several decades has been the steadily shrinking USAID permanent Foreign Service Officer (FSO) workforce, which currently stands at about half the level it did in 1980—despite a significant increase in USAID responsibilities, especially in the post-9/11 Middle East. The President’s 2009 request for USAID operating expenses includes $92.1 million for a “Development Leadership Initiative” that will allow USAID to recruit, hire and train 300 new FSOs. This initiative will allow USAID to strengthen its technical assistance experts leadership and seize the opportunities presented for development in the Middle East and elsewhere.

On security challenges, conditions often make it difficult for designated USAID staff to monitor projects themselves, particularly in the more volatile regions.   However, contractors and grantees are generally able to conduct site visits throughout a country to monitor progress. In Iraq, to compensate for these mobility constraints, USAID has developed an approach to monitoring projects that involves local staff, Provincial Reconstruction Team (PRT) members and independent evaluators. For example, local staff of USAID contractors use standardized forms to collect written information on project results; the 25 PRTs throughout Iraq enable USAID, in coordination with the military and local officials, to monitor program activities at the local level; additionally, USAID deploys an independent contractor to the field to monitor and evaluate key project components; and, finally, when a project requires a change in direction or is entering a new phase, USAID engages an independent team of experts to evaluate the project

Conclusion

In the Middle East, USAID recognizes that the stakes for development and for foreign assistance have never been higher. The evolving landscape of development that I have described presents both challenges and opportunities to USAID and the USG in general. To respond to these challenges and opportunities, Administrator Fore has put forward a robust vision of a stronger, more flexible Agency—one that will be able to continue to develop innovative approaches and that will be able to expand its successful cooperation with the Departments of State and Defense. We look forward to working together with the Congress in the year ahead to ensure that we maximize the impact of the generous foreign assistance provided by the American people.

Mr. Chairman, thank you for the opportunity to appear before you and Members of the Committee today. I am happy to take any questions you may have.