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Rise foreign aid { February 3 2003 }

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February 3, 2003
With Rise in Foreign Aid, Plans for a New Way to Give It

WASHINGTON, Feb. 2 When the Bush administration unveils its State Department budget for 2004 on Monday, it will call for the largest increase in foreign assistance in two decades. But more significantly, many experts say, it will introduce a new program that would begin overhauling the way America distributes aid to the poorest countries.

Far more than in traditional aid programs, the new program, known as the Millennium Challenge Account, will demand that recipient states be accountable for the American tax dollars they spend.

Experts say the plan, which would operate in tandem with existing aid programs, reflects an ambitious effort by President Bush to place a Republican stamp on foreign aid, much as he has tried to do with federal education programs.

In particular, the plan attempts to answer the longstanding conservative complaint that foreign aid has become global welfare: abused by corrupt regimes, squandered on ineffective projects and laxly monitored by liberal bureaucrats.

"The Millennium Challenge Account could be the leading wedge of change in the way we do foreign aid," said Nancy Birdsall, president of the Center for Global Development, a poverty research group based in Washington. "It is an effort to make the business of aid much more businesslike."

Under the plan, the administration would give more aid to a smaller number of countries that can pass a rigorous set of "performance" criteria. To be eligible, countries would have to demonstrate a desire and ability to control corruption, defend political rights, invest in education and health care and promote free trade, among other things.

Recipients would sign multiyear "contracts" that could be canceled if the countries failed to show that they were improving the quality of life for their people and making political and economic reforms. The recipients would also be subject to financial audits, much like companies that get government business.

The program would be overseen by a government corporation of about 125 employees that would report to an executive board representing the Office of Management and Budget and the State and Treasury departments. Currently, most aid programs are administered by the United States Agency for International Development, a State Department unit widely reviled by Republicans as bureaucratic and inefficient.

The new plan, along with proposals by President Bush to increase spending to fight AIDS and reduce hunger overseas, would raise foreign assistance to more than $18 billion in the 2004 fiscal year, an increase of more than $2 billion, administration officials said. That would reverse a steady decline since the mid-1980's that has reduced foreign aid, based on 2002 dollars, to pre-World War II levels, experts said.

Coming at a time when the Bush administration has been criticized overseas for saber rattling against Iraq, the new programs could help show that the United States does not base its diplomacy entirely on military power, experts said.

"There's no question this came out of a process after Sept. 11 in which President Bush and his advisers decided they needed to take some steps to exploit what can be called the soft power of the United States," Ms. Birdsall said.

But the plan has also stirred concerns among some aid groups that Millennium Challenge will drain money from other State Department programs, including one intended to encourage democratic reforms in Middle Eastern countries. Few, if any, Middle Eastern countries will be eligible for Millennium Challenge money because of corruption, high income levels or lack of democratic rights, experts and administration officials said.

Aid groups have questioned the need for creating a new bureaucracy, which they say might lack expertise and be subject to political pressures from the White House.

"This has great potential for reform," said Mary E. McClymont, president and chief executive of InterAction, an umbrella organization for 160 aid groups. "But we hope the president will hold to his promise to make sure this is used to fight poverty. It should not become a diplomatic slush fund."

In general, however, the plan has won broad support, for one major reason: After watching Republicans slash at foreign aid budgets for many years, aid groups are relieved to see a conservative president embrace foreign aid with his own program. One result, they say, could be a bipartisan consensus behind foreign assistance for the first time since the cold war.

"The big story is, the Bush administration has surprised us all and turned out to be a big promoter of aid, at least in rhetoric," said Scott B. Lasensky, an expert in foreign aid at the Council on Foreign Relations. "They've once believed foreign aid was money down a rat hole."

Senator Patrick J. Leahy of Vermont, the ranking Democrat on the Appropriations subcommittee on foreign operations, said the amount proposed by Mr. Bush was still "woefully inadequate." But he called the plan "a constructive step because it targets additional aid to counties that are committed to ending corruption, reforming their economies and building democracy."

The president's budget will call for allocating $1.3 billion to Millennium Challenge in 2004, $2.6 billion in 2005 and $5 billion annually after that. Mr. Bush had pledged to spend $1.6 billion on the plan in 2004, but administration officials said they decided the program could not spend that much money in its first year. Officials say they do not intend to cut other foreign aid programs in 2004.

Under the administration's proposed criteria, fewer than a dozen countries would be eligible for money in 2004, officials said. A country would need to show per capita annual income below $1,435 and an ability to control corruption before being considered. Countries with higher income levels would be allowed to compete in 2005.

Applicants would have to perform well in as many as 16 categories, including civil liberties and political rights, immunization rates and primary education spending, credit ratings and deficit reduction.

Among the countries considered likely candidates for aid in the first year are Uganda, Mongolia, Bangladesh, Bolivia and Indonesia, administration officials and aid experts said.

Because the list is small, recipients would get much more than the typical foreign aid grant of today, which is about $50 million a year, a senior administration official said.

Although Republicans in Congress who have opposed foreign aid are likely to support the president's proposal, they may try to trim it to control the widening deficit.

"The challenge we'll have is with a Congress that is grappling with deficits," said Sam Stratman, spokesman for Representative Henry J. Hyde, an Illinois Republican who is chairman of the House International Relations Committee and a supporter of the aid program. "The president is going to have to make the case that this kind of foreign assistance enhances American security."

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