PUBLIC POLICY UPDATE May 10, 2013 WASHINGTON UPDATE Both the House and Senate enate appropriations

committees are wrapping up their initial subcommittee hearings on FY2014 14 appropriations. The next big step in the process will be the announcement of the 302b allocations, which set the overall funding levels for each of the spending bills the House and Senate lawmakers will write. There are conflicting reports, but the House may announce its allocation as early as next week with the Senate to follow. It is being reported that House Republicans will start bringing FY FY2014 14 appropriations bills to the floor in June under open rules (members of either party can offer amendments). Last week, the State Department put out Congressional Budget Justification Volume 1 1: Department of State Operations (the first volume that pertains to our community). We have heard that Volume 2: Foreign Operations will be released in the next week or two. These justifications will provide further detail about the presidents FY2014 budget et request. HEARING SUMMARIES Hearing on FY2014 Budget Request for USAID Senate Committee on Appropriations Subcommittee on State, Foreign Operations, and Related Programs May 7, 2013 Witness: Rajiv Shah, administrator, USAID

Opening Statements: Chairman Patrick Leahy (D-VT) VT) USAIDs budget is about protecting the American people, ensuring U.S. ability to compete in the world, and projecting American ideals. There shouldnt be an argument about the importance of these accounts. Worried that U.S. may y not be doing as good of a job at providing development and humanitarian assistance as it should. o Many of the governments that USAID works with are not serious about addressing the causes of poverty. o Need greater capacity building of foreign NGOs; concern concerned ed that lack of local capacity is used as justification to continue current foreign aid business model. o Need to rethink what U.S. can accomplish in warzones where security costs are prohibitive. Ranking Member Lindsey Graham (R (R-SC) Foreign assistance is 1% % of the entire budget. Every time we can solve a problem without using the military is a positive for U.S. 1

Rajiv Shah This is an important moment for development as U.S. draws down from a decade of war. 165,000 children under the age of 5 died during the Somali famine; could the international community have done better? There is an opportunity to craft a new development approach can be seen through Feed the Future program. U.S. is working with 170 countries to end preventable child deaths. USAID prioritize a results-oriented approach to education and water programs. All of these programs are shaped by USAID Forward reforms: o Rebuilding/repositioning staff to where they are needed most; o Bringing about greater transparency and evaluation; and o Directing more resources to local solutions. Signature reform for FY2014 budget is food aid. Questioning: (Note: Some senators came in late, so they gave their statements during the questioning period; bullets indicate statements, numbers indicate questions.) Chairman Patrick Leahy (D-VT) 1. How many more people could we feed by doing away with monetization? How many more through local/region purchase of food? Shah: o In total, 4 million more people will receive food aid. o Food aid used to reach 90 million people, but is now down to half of that; this trend will probably continue. 2. Under the current system, there are millions who dont get food at all, correct? What about the issue of branding? Shah: o When buying local food, put it in U.S. branded bags so that people clearly recognize that the food comes from the American people. o U.S. can reach beneficiaries 14 weeks faster through local and regional procurement. 3. How do you calculate shipping costs saved? Shah: o Transport on ocean freight (18%) and transport from port to country (7.5%) equal about 25% of the program funding spent on transportation. 4. How does this compare to local/regional food purchase costs? Shah: o There are still some costs to transport locally/regionally but it is about 2025% cheaper in total with local/regional procurement. o USAID knows this through actual programmatic experience with International Disaster Assistance account. 5. So for the same amount, USAID is feeding more hungry people? Shah: o Absolutely. And a strong partnership will remain with U.S. agriculture interests, as 55% of the program will still purchase food from U.S. farmers while feeding 4 million more. 2

6. What about maritime jobs? Shah: o Proposal has included maritime support program funding increase. o All but eight or 10 of the ships currently being used would benefit from changes. There are about 300 employees on these ships (15,000 people in total industry base). o Expect that these ships will have other business opportunities that they can pursue so have no estimates for job losses given these opportunities. 7. What are some lessons learned from aid programs in Iraq and Afghanistan? USAID learned to demand more of in-country partners, particularly governments, earlier in the process. Conditionality and demanding partnership approach is important. Sen. Mike Johanns (R-NE) That was a good point about issues of inefficiencies, especially during crises. On the other hand, one of the reasons there has been so much support for food aid is the support from the agriculture community (humanitarian and economic reasons for support); maritime community support as well. Worried that if food aid becomes a cash program, it will become another piece of the budget that will be cut. When it comes to foreign food aid, think there is bipartisan support for this and an understanding that it shouldnt be cut. This proposal is going to be impossible to get done. 1. There is a case to be made here but dont want to cut U.S. farmers and producers out of the picture. Willing to work across the aisle to come up with an idea that is acceptable to the administration without cutting out the U.S. farmer. This could include better prepositioning. Shah: o About 15% of the gains in efficiency come from ending monetization, and 85% come from greater flexibility in emergency response. Flexibility is crucial to respond to needs. o Yes, USAID needs to renew the partnership with USDA and U.S. agriculture. National Farmers Union and others have come out in favor of this approach. o Capacity to do things like prepositioning has come to its limit. 10% of program is used for prepositioning, but USAID doesnt have capacity or resources (more expensive to get product mix right many years in advance) and its very difficult to do more. Sen. Dick Durbin (D-IL) When Food for Peace was created, it was meant to send agriculture surpluses to people who are suffering around the world (good for all). Shah is suggesting that U.S. should step back now and see where the program stands today. In Djibouti, U.S. gave some flexibility about what vessels the products could be shipped on. o Overall shipping costs cut by 40% when shipped on non-U.S. ships. o U.S. ships also brought costs down.

U.S. agricultural products can distort local markets and can discourage local agriculture production.

1. What has USAID measured as the U.S. agriculture impact of this change? Shah: o 10 years ago, the program shipped 5.5 million metric tons of commodity, today only 1.8 million metric tons are bought and shipped due to cost structure of program. Total value of current purchase is 0.56% of value of U.S. agriculture exports in 2011. o If the U.S. goes from 85% to 55% tied to U.S. commodities, net change is closer to 0.2% of total value of U.S. agriculture exports. Expect others will buy these commodities. 2. Shippers what is the impact on U.S. shipping industry? Shah: o Shipping costs of program have tripled over past 10 years. o $25 million increase to Maritime Support Program to offset issues for militarily useful ships. o Total net impact is eight or 10 ships with about 300 mariners each on them. There is a strong sense that they will be able to find substitute business for these ships. 3. Sounds good, especially reaching an additional 4 million people, but as an agriculture state senator, needs to explore the reform more. Sen. Daniel Coats (R-IN) 1. Several NGOs support spirit of this reform but are concerned that by shifting program to an appropriations process, it might not have the continuity and just become a tool in a shell game as U.S. struggles with shrinking budgets. Can you address these concerns? Shah: o NGOs have signed a statement of principles that are endorsing the basic principles of the reform. o Many of the NGOs are supportive of the reform. o There are one or two groups still concerned about this reform. o Believe that the best way to defend humanitarian activities is to prove that U.S. is doing these activities with a focus on efficiency and results. 2. Getting everybody on board is important to maintaining the support for and reform of these programs. Ranking Member Lindsey Graham (R-SC) 1. How does USAID deliver aid when security is basically nonexistent? Shah: o USAID spends around 15% of total costs in Afghanistan on security. o It is particularly dangerous for U.S. personnel to visit projects. o Thinks that USAID can effectively provide aid given the current security picture. 2. Are you pleased with the results the U.S. has achieved through PEPFAR and malaria initiatives? Shah: o Very pleased. PEPFAR has reached more than 6 million patients.

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Plan to get countries to transition out of USAID programs such as South Africa taking on more direct financial responsibility for HIV/AIDS programming. o Graduated out of 22 countries in terms of overall global health programs. Are the people in Africa appreciative of what the U.S. does? Shah: o Absolutely. Believe that it has been a good investment. The U.S. is doing through USAID, private sector, faith-based groups, etc. the whole partnership between the public and private sector is the right way to go. What will sequestration do to foreign assistance programs? How will it affect how the U.S. projects soft power? Shah: o Sequestration will be very detrimental to U.S. foreign assistance objectives. o In short term, have had to decrease USAID staffs ability to get out to see programs in the field to provide adequate accountability and oversight. What can the U.S. do to help Jordan and other countries in the region deal with the Syrian refugee problem? Does the U.S. need to do more? Shah: o U.S. provided $300 million in extraordinary support to Jordan to help them integrate refugees. o It is important to also recognize Americas longstanding partnership with Jordan. o

Sen. John Boozman (R-AR) 1. Everyone is concerned about protecting food security for the poorest of the poor, so that is positive. 2. Can you talk about phasing out of programs in countries? These are great success stories because they show that U.S. programs have actually worked. Shah: o These tradeoffs were made to focus staff and resources in places where better results can be found or when countries dont need the technical support that USAID provides. 3. Can you talk about some of the progress of USAID Forward reforms? One of the key elements is creating new partnerships to work with more sustainable, local partners. In the past year, USAID has identified 1,200 of these partners. Chairman Patrick Leahy (D-VT) 1. How can NGOs use USAID Open Initiative to partner with USAID? How is USAID reaching out to new partners? Shah: o USAID has several new initiatives: Development Innovation Ventures fund. Grand Challenges for Development initiative. Local sustainability efforts. o USAID Open will provide a good user interface for people and allow USAID to learn from these smaller groups will be up and running July 1, 2013. 2. Bill Gates is coming to talk to Senate Subcommittee on State, Foreign Operations, and Related Programs about his efforts to stop polio. Gates is committing $1.8 billion additional 5

to combat polio. Shouldnt the U.S. be doing more than $32 million if one individual can provide $1.8 billion? Shah: o USAID is working with CDC to combat polio as a more whole of government approach to make best use of funds. ARTICLES AND REPORTS AlertNet May 7: Aid convoys roll slowly in Syria despite urgent need (AlertNet, 5/7/13) Aid workers responding to the crisis in Syria continue to be mired by bureaucratic challenges. The conflict has increased humanitarian needs more than sixfold in the past year, leaving one in three people needing help. Al Jazeera May 2: Humanitarian disaster unfolds in South Sudan An estimated 250,000 in the regions on the border between Sudan and South Sudan are bearing the brunt of the famine resulting from international conflict between the two countries. Fighting has destroyed farmland and Sudan is blocking international humanitarian assistance. BBC May 6: Syria crisis: UN's del Ponte says evidence rebels "used sarin" A UN investigator said that there was strong, concrete suspicions but not yet incontrovertible proof that rebels had used sarin. She was surprised by the investigation because many accusations of chemical weapons use have been lobbed at the government. Guardian May 8: New emissions plan could energise global climate talks, says US envoy At a Berlin climate summit, the U.S. proposed to let countries draft individualized emission reduction plans rather than mandating a common goal. The intent would be to use peer pressure to encourage countries to bring about change yet keeping change feasible.
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