American Enterprise Institute

December 7, 2005

[Edited transcript from audio tapes]

8:45 a.m.	Registration and Continental Breakfast
9:00	Introduction:	DANIELLE PLETKA, AEI
	Opening Remarks:	Congressman JIM KOLBE (R-Ariz.)
9:50	Panel I: Getting More Bang for the Buck? U.S. Funding of NGOs
	Panelists:	JOHN GARDNER, formerly of the U.S. Agency for International Development
		CHAD DOBSON, Oxfam America JIM KAISER, Committee on Government Reform
		PAUL V. APPLEGARTH, German Marshall Fund, formerly of the Millennium Challenge Corporation
		JOHN SULLIVAN, Center for International Private Enterprise
	Moderator:	ROGER BATE, AEI
11:50	Luncheon
12:30 p.m.	Panel II: NGOs and Oil—Beyond Confrontation?
	Panelists:	MORTON WINSTON, Amnesty International
		ANDRÉ MADEC, Exxon Mobil Corporation
		NICK NICHOLS, Center for the Defense of Free Enterprise
		F. WALLACE HAYS, FWH and Associates  DANIEL F. FELDMAN, Foley Hoag LLP.
	Moderator:	JON ENTINE, AEI
2:30	Adjournment

Proceedings:

Danielle Pletka:  Good morning everybody.  I’m Danielle Pletka.  I’m the Vice President for Foreign and Defense Policy Studies at the American Enterprise Institute.  Two years ago, the Federalist Society and the American Enterprise Institute joined forces to create NGOWatch.org, and you can see our website up on the screen.  The impetus came from a growing recognition of the influence of nongovernmental organizations, international institutions, within corporations and in our own country.  At the time, we were roundly denounced for assaulting this most holy of holies.  The attacks had very little to do with what we were doing.  Our first conference was headlined by a former Labor Party member of Parliament in Australia outraged at the lack of democratic accountability within NGOs.  He certainly had no political ax to grind.

But there are questions to ask.  Do NGOs have a political agenda?  Who is being served, for example, for coordinated culture divestment?  Who is an arbiter of ethical investing?  Which NGOs are accredited to the UN?  Do they affect sovereign decision making?  Those are the questions we asked, and we are going to continue to ask them.  Within weeks, our site was getting more traffic than we had ever anticipated, and to [indiscernible] to what are clearly pent up expectations, we effectively closed down a lot of NGO watches for the last few months in order to radically revamp the site.  We brought in a young man, Flavius Mihaies, to run it.  Visit it, please.  Let the Federalist Society and AEI know what you think of it.  It’s meant to be a clearinghouse for information to NGOs as the centers of US assistance, to NGOs in the international community, to the corporate world and beyond.  It’s not about taking shots.  It is about transparency.  We’re very proud of the work that has gone into it, and we hope it will be a useful tool.

To roll out this new site and revitalize the debate that brought 1,000,000 hits to NGOWatch.org in the months after its launch, we’re holding what I think is a fantastic conference here today.  And there are few people I could have wished for better than the man who has agreed to open our conference today.  Congressman Jim Kolbe is serving his eleventh term in the United States House of Representatives.  He is the Chairman of the Subcommittee on Foreign Operations, export financing related programs.  I shouldn’t even have to look at my paper as a former authorizing staffer.  I should remember that off the top of my head.  We knew who was important.  The House Appropriations Committee.  Foreign Ops is the subcommittee which funds most US foreign aid programs, including the Agency for International Development, the Peace Corps, development banks including the North American Development Bank, the overseas private investment corporations, child survival and disease programs, US emergency refugee migration assistance, and it also funds the State Department’s international narcotics intervention and counterterrorism.  So it’s a big portfolio, indeed.  In other words, if you’re talking about foreign aid, this is the man in the House of Representatives who is in charge.

More and more, US foreign aid is parceled out to NGOs.  In most instances, that’s all for the good.  In others, questions have arisen.  But the world over, subcontracting to private aid giving outfits is the trend.  Are they effective?  Are they serving our interests?  To answer these and other questions, it’s my great pleasure to introduce Congressman Jim Kolbe.

Jim Kolbe:  Thank you.  To add to all these gigantic questions that you have, that you posed here this morning, your mentioning the cell phones, I certainly should remember myself never to leave on my cell phone with an experience I had a few months ago when I was at the White House in a meeting where we were being briefed and briefing the President.  And he, of course, dislikes cell phones immensely, and I’d forgotten to turn my cell phone off.  And just when he turned to me and asked me a question, my cell phone rang, and the President said, well, go ahead and answer it, it might be an important call.  So probably not that important.

In any event, I hope that the million hits on the site here will not suddenly dwindle to zero after the remarks that I have to give you today, but I am delighted to be here.  I think this really is an important subject and one that is worth our taking some time to consider, your time to consider and to think about.  Because I think, in the end, it can only be to the good.  NGOs that are upfront and doing good things certainly have nothing to fear from having an examination.  Those that might be more reluctant may have more to hide here.  Certainly, the accountability of NGOs is something that those of us in government, I think, have a responsibility to look at a lot more closely than we have in the past.

As representatives of NGOs, you play a vital role in the delivery of foreign assistance for the United States.  Since President Harry Truman announced his initiative to dedicate US funds for technical assistance to developing countries almost 57 years ago, US foreign assistance has become an important foreign policy and national security tool for our country, and NGOs have played an important part in delivering that assistance. 

So as we consider how effective our foreign assistance programs are, including the role that NGOs play in the implementation and administration of that foreign assistance, it’s important, I think, that we focus on what is the objective.  We ought to start with what’s the foreign assistance objectives that we’re trying to achieve.

All of us want to have a foreign assistance program that is effective, but how do you measure effectiveness?  Well, if we’re in the business world, we measure effectiveness as achieving the objectives that we set at the lowest possible cost.  By looking at the bottom line or the outcomes that we have of investments, shareholders can judge whether their investment or their input is a good use of their money or not.  Market indicators give the shareholders hints as to the likely outcomes of their investments with stock prices.  I think these midpoint indicators can be considered the outputs or signals as to whether a business is on the right track or not.  So you’re hearing a little bit, I guess, of the MBA in me coming out here today, as I refer to inputs and outputs and outcomes as providing a framework for measuring effectiveness of foreign assistance programs.

Just as in the private for-profit business sector, in the development world and the world of NGOs and in government we have inputs, we have outputs, and we have outcomes.  And we have them in various sectors, and they indicate whether our tax dollars are being invested soundly.  The inputs or funds that are invested to achieve our desired foreign policy objectives are usually measured by dollars, the amount of dollars that we’re putting in.  The outcomes are also usually measured by objective indicators, such as that of improved health, improved education, the spread of economic prosperity or democracy.  For example, we know over the last 20 years that the health of women and children in development countries has improved, improved very definitely, very measurably. 

Objective measurable indicators demonstrate that fewer women are dying in childbirth, that more children are living beyond their fifth birthday, and that globally people are living longer and that they’re living healthier lives.  So, therefore, we can conclude that we have demonstrated successful, measurable measurements that produce better health standards in the development world.

The output or the market indicators of these outcomes are not always so easy to measure.  The ambiguity of outputs presents a challenge when determining whether a program is effective or not.  In education, we know that enrollment and literacy rates around the development world have improved.  Once you get past the literacy or graduation rates, improvement in the quality of education is a lot harder to measure.  And we certainly know that objectively from here at home in the great debate which continues to rage in the United States about how do we measure the quality of the education programs in this country.  Well, when you get overseas it’s equally or even more difficult to measure.  We know that more children are attending school when we build a new one.  What we don’t know as easily or with as easy measurements is whether or not the teachers are delivering quality education or sometimes even if students are attending the classes.

To truly measure the impact of US-funded interventions, we need to look at the outputs that are related to education.  Perhaps a study of student test scores or attendance rates.  These are challenging to develop because they are often country based.  They have cultural aspects to them.  They require surveys and observations that are often very costly in terms of staffing that is required to do those kinds of measurements.  Outcomes, when it comes to democracy or measuring democracy building or democratic institutions, is often even more difficult to quantify.  We’ve certainly witnessed the spread of democracy in former Soviet countries in recent years, but I think we also know that instinctively that, in many cases, some of those countries haven’t gone the direction that we would like.

But how do we actually measure those things?  It may lead us to believe that our investment in democracy programs have been worthwhile when we see what has happened in some of these countries.  But how can we measure along the way to make sure that our assistance has directly impacted these changes, that it’s had an impact?  Or has it just happened despite or without or involvement?  How do we know that we’re on the right track, that our investments have any impact at all? 

The answer, quite simply, is we don’t really know very well.  The devil is in the details, in this case in the outputs.  While indicators are becoming more precise, we still have not employed them scientifically to determine the right combination of inputs to bring about desired outputs and ultimately the outcomes.  The diversity of geography, of culture, governance and international relations in each of the developing countries makes it difficult to isolate the impact of US foreign assistance.

To complicate this analysis of effectiveness even further, we have different types of macro outcomes that are desired from foreign assistance dollars.  The examples I used a moment ago reflect a longer term development outcome.  In the case of emergency disaster assistance, such as the South Asian tsunami or the recent Pakistan earthquake – and I was just in Kashmir last week – we want our dollars to achieve a pretty quick impact.  We want it to save as many lives as possible to alleviate as much suffering as possible.  It’s more expensive.  The outcomes are shorter term.  The leakage and the costs of that are going to be greater, so it requires different considerations when we try to determine the effectiveness of our dollars when we’re looking at disaster relief.

So as a result, in order to really assess effectiveness, we need to take what indicators we have available to us now, apply them as consistently as possible to desired outcomes, and then we have to search for better indicators, constantly looking for what are the indicators – the performance indicators – that we can use in future reviews that will give us an even better analysis on how effective the dollars that we’re investing are.  Our greatest challenge, it seems to me, comes from defining and measuring these outputs precisely, but this is important. 

It’s important for us in Congress to know where our money is being spent in these times of tighter budgets, and I think we’re going to see the 150 account have more difficulties in the near future.  So these are not just things that are nice to do from an academic standpoint.  They’re real.  They are things that Congress needs to know if we’re going to perform our oversight function and make sure the dollars are being allocated correctly in the future.

Let me turn to that part of the equation where I have the most influence, which is the inputs that go into this part of the calculation, which is the money.  NGOs have, without doubt, become a very, as I said at the outset, a very important part of playing an important part in our foreign assistance, in the implementation of foreign assistance.  The number of international development focused NGOs has increased steadily since the 1960s.  The phenomenon of NGOs being used to the extent they are today came as USAID staff was downsized disproportionately to the program funds that were applied by the agency.  In 1968, for example, USAID staff in Vietnam totaled 2,300 people.  In 1971, the number was 800.  And four years later in 1975, there were zero people in Vietnam.  Today, 2004, last year, there were 12 USAID people in Vietnam.

Of course, the role that Vietnam plays in US foreign policies is vastly different than it was in the 1960s or the early 1970s, but I use this figure to illustrate the constant ballooning and shrinking of staff in the agency, which often causes a great deal of difficulty in terms of management.  In its 1963 plans that were presented to Congress, USAID said that it was focused on the plan to be an agency with about 15,000 employees.  That was 1963. 

Today, the total number of employees is about 7,000 without a proportionate decrease in program accounts.  In fact, the program accounts have increased substantially.  So without staff to directly implement the programs, USAID has no choice but to turn – and this doesn’t mean it’s a bad choice – but there is no alternative but to turn to the NGO community for implementing the development assistance.

So before we decide whether it’s the right model to use for foreign assistance implementation, let me just suggest what I think might be other implementation models.  In addition to NGOs, which are commonly considered not-for-profit entities, there are for-profit companies, as you well know, that win very large contracts with USAID.  In Iraq and Afghanistan, we have contracts to single shareholder-owned companies that have been awarded that are worth billions of dollars.  As foreign assistance has become, frankly, a more lucrative field, a bigger part of our foreign policy objectives, we’ve seen a noticeable increase in the number of companies that are seeking contracts from USAID and the other agencies.  The State Department also does foreign assistance, as well, and a number of others do.

Some countries in the aid business, including many of those in Europe, don’t rely heavily on NGOs, but others rely entirely on NGOs.  Many of the countries in Europe, and this is in my experience as I’ve traveled around the world, rely much more heavily on much more direct budget support to foreign governments.  This approach is used sparingly in the United States and is generally abjured by Congress with some notable exceptions.  The US provides direct cash grants to a few countries, such as Israel and Egypt, but, by and large, most of our assistance we have done in the form of project kinds of assistance.

In the past, we used to provide budget support for a number of countries, but found that the funds were much more difficult to track, much less subject to oversight, and, frankly, more prone to abuse by the countries that were receiving the cash grants.  Another method is targeted budget support to help governments in achieving a specific end or to support a specific sector.  The Millennium Challenge Corporation in part is using this tool to fund country compacts, although implementers of the funds also include NGOs and private companies.  So we do have a model today that is getting up and running.  We have a former Chief Executive of that here with you today that will be discussing some of these issues today.

Grants or contracts with local NGOs, that is NGOs outside the United States, fall under the NGO category, but it’s quite different than using a US-based NGO which, according to US law, must file an accounting of its finances, records of their accounting and their finances.  Local NGOs are managed and owned by the residents of the recipient country, and they employ almost all of the local staff.  They’re not required to meet the same kind of accounting and reporting standards that we would have here in the United States and that you would have to use in order to qualify as an NGO or perhaps that they have to use in their own country.

And finally, there’s third party procurement.  This mechanism involves grants to international organizations, such as the United Nations, the World Bank, other multilateral development banks, the World Food program.  This can also take the form of a multi-donor-funded pool of money to impact a certain sector, such as HIV AIDS, and the more recently established Global Fund is a good example of that model.

So of all these models that I’ve mentioned, what is the right one or the right combination that’s needed to achieve the best results at the lowest cost?  Well, the answer is all of the above or, if it suits you better, none of the above because I don’t think we are going to ever be able to use a cookie cutter approach to foreign assistance.  Each country, each situation, each objective that we’re trying to achieve requires a different look and sometimes a different mix of the kinds of organizations that we’re going to use to achieve the objectives that we have in our foreign policy.

So I hope today in this discussion that you’re going to have here today that we’ll learn something and you’ll share with me some of the recommendations and the results of the discussions that you have as to what model works best in some of the different situations that you’ve been exposed to.  This could be very helpful to us as we begin to move into the process of writing the 2007 foreign operations budget.  While measuring the success or failure of foreign assistance dollars isn’t going to always be black or white, it is important to remember that simply throwing money at the problem isn’t necessarily going to solve it.  Whether it’s an NGO, whether it’s the agency itself, USAID, or a contractor, a for-profit contractor bringing assistance to a developing country, we have to put into place the tools that are needed for that country to sustain a prosperous economy and to provide opportunities for its own citizens to be able to prosper.

One key element accomplishing this is, in my view, through trade liberalization.  Now, it comes as no surprise to many of you in this room to hear these words come from my mouth.  Many of you know the oft-repeated mantra that I have used over and over again, and that is trade, not aid.  But repetition of it doesn’t make it less true. 

Just imagine for a moment, just imagine if Sub-Saharan Africa had an additional one percent of the world market in trade, one percent of the world’s trade.  That would mean the region would have $70 billion more resources flowing into it in the form of income and revenue earned from that one percent additional trade.  That’s about $15-20 billion more than all the foreign assistance that goes to Sub-Saharan Africa from all the countries of the world, the United States, Europe, Japan and elsewhere, from all the OECD countries.  So open markets coupled with foreign assistance dollars for health care and education is going to allow countries not only to dig themselves out of debt, but I think to create their own economic opportunities, thus becoming prosperous nations that have a seat at the global table.  That’s when true democracies are born, and that has to be the ultimate test of effectiveness.

So we have not only the models that we discussed, the ways in which we can deliver development assistance, but let us always keep in mind that probably the most effective tool is the private sector that can do more to bring about prosperity in a country than anything that we can talk about here today with government agencies or NGOs or for-profit organizations.  But all this is a part of the mix, and you’re an important part of this decision making process.  And so, I look forward to the suggestions and recommendations that we hear from you today.  Thank you very much.

Danielle Pletka:  Okay, let me lay out the guidelines.

Jim Kolbe:  Okay.

Danielle Pletka:  The Congressman has graciously agreed to answer some questions.  Just to reiterate what our guidelines are, if everybody would be kind enough to wait for the microphone, identify yourself, do as a question, don’t make a statement.  Thank you.

Jim Kolbe:  Oh, they can make a statement.  They’ll make a statement anyhow.

Danielle Pletka:  All right, make it really short.  I always say make your statement in the form of a question.

Jim Kolbe:  Yeah, make the statement in the form of a question.  Okay.

Danielle Pletka:  There you go.

Jim Kolbe:  It’s open here.  Yes, ma’am.  The microphone is on its way to you there.

Audience Member:  Good morning, I’m Margaret Goodman with World Learning, and thank you very much for this very useful outline.  One factor I’d like to toss into the accountability issue, that I don’t think you mentioned directly, is the fact that foreign aid so much operates at the margins.  I was just looking at the education sector, and I think the estimate is a total investment of $1.5 billion in education globally, of which $350 million comes from US foreign aid.  That’s a pretty tiny percentage, and so, again, as you’re looking at that accountability, that issue of how do you separate out that small what you hope is generally a catalyst from the much bigger picture of inputs over which you don’t necessarily have control.

Jim Kolbe:  Well, I think you put your finger on what is another difficulty in providing the kinds of measurements and having the kinds of measurements that you need to have because, as you say, it’s at the margins.  And so, the tiny amount of money, using education as the example, the tiny amount of money that’s spent by foreign assistance in education is not going to have a huge impact one way or the other in the total picture of a country’s education because it’s going to be a small amount that we’re spending, whatever the developing country might be.

So what you have to do is come up with measurements to say is this – you used the term catalyst.  Are these dollars making a difference in greater proportion to the objectives of what you want to achieve in education than they would be if simply providing the dollars to supplement teachers’ salaries, for example?  What are our objectives here?  Are we trying to change the curriculum in a country?  Are we trying to change the gender input so that we have more women in schools? 

You need to have specific measurements that you have there and look and see whether the dollars we’re spending, for example, are objective as to raise the number of girls going to school from one-third to one-half of the number of boys going to school.  I can use this kind of examples having just come from Afghanistan last week where we’re seeking to get those kinds of objectives there.  You can look and see whether the dollars that you’re spending are achieving that.  You set that very specific example.

So you focus those dollars on providing education for girls.  It doesn’t mean you don’t care about education for boys, but you’re trying to focus it on doing a specific target or specific objectives.  You have to have the objectives and the measurements for that as specific to – you have to have your measurements, I should say, specific to what the objectives that you’ve set for that.  But I quite agree that what we do in the way of this foreign assistance is going to be marginal.  It’s around the edges, and that’s why it’s very, very important to be very specific and clear about what we’re trying to achieve with that and then the measure for that.  Not as perfect an answer, as direct an answer, as perhaps you’d like, but I think it gets at the heart of what I think we have to do when we’re looking at how we spend those dollars.

Another question?  Okay, we’ve got – everybody’s anxious to get on with the panel, I think, here.  Let me just once more say thanks very much for this chance to be here and have this discussion with you, and I hope to get you thinking about some of these issues as you go into your discussion today.  Thanks very much, Danielle.

Danielle Pletka:  Well, I think you’ve satisfied everybody.  Thank you very much.  If everybody would stay seated, we’ll start our next panel shortly.

[break in session as panel gathers]

Roger Bate:  Well, I know that two of our speakers are here.

[speakers continue to gather for panel]

Roger Bate:  Okay, well, I was going to go in the order we have written down, but we’re missing two speakers, so I’m going to change that order a little.  Good morning, ladies and gentlemen.  It’s a pleasure to add my welcome to that of Danni Pletka, and I would particularly like to thank the Congressman, who has unfortunately stepped out, but in his push for agricultural subsidies - ah, John, excellent, we will be able to go in the order of the program, excellent – and also his calling for measurement, for output measurements for aid because I think that is absolutely critical.  I’d also like to thank John Ensign and Flavius, who has already been thanked, for putting this event together.

My name is Roger Bate.  I’m a Resident Fellow here at the American Enterprise Institute, and I work on international health and, in particular, on Southern Africa.  So I’m very interested in the machinations of aid and its effectiveness, and this panel, I’m sure, will be of great interest to me personally.

Both in practical terms and from reading of the secondary literature, I can attest that the formative aid is notoriously difficult to do, and in many places there’s very little measurement at all.  That has been, no doubt, historically widespread failure, corruption and counterproductive policies enacted by governments the world over as a result of aid and in demands for that aid.  But aid consists, I would argue, for at least two reasons.  First, the most important, because it can work, especially in short run humanitarian situations.  And I witnessed firsthand – we have all of our speakers, excellent.  I’ll carry on.  I can reduce my babbling now.  That’s good.

I was in Indonesia and Sri Lanka earlier this year and saw firsthand the very good work that was being done by NGOs and of aid-type delivery devices, private organizations, for-profit private-owned organizations.  And the second reason – the first reason is that aid can work. 

The second is because I think the desire to help, perhaps like Nepal, will always be with us.  But how do we do it?  How do we actually get that aid and that support to developing countries with the failure, as I’ve mentioned, of many poor country governments to deal well with the populations concerned, as well as with the aid that they have received and demanded?  The NGO community has filled the void, in many instances very successfully and others less so.

And what is interesting is, I think, how vastly that the NGO community has expanded into those various different voids in the provision of humanitarian roles, wide ranging roles, such as the provision of long term medical care, infrastructure development, but also to business development advice and even lobbying at international forum.  And no doubt next week’s Hong Kong World Trade Organization meeting will have an enormous number of NGOs lobbying there.  So how to success how these non-government actors perform in various activities and how perhaps their activities can be improved in the future with special reference to US funding of those activities.

We have five excellent speakers.  I’ve got four or five because I wasn’t sure how many we were going to have here today since I was scrounging up things.  I’m assuming that you can all read and that you all have the package in front of you, so I’m going to be very rude and not actually introduce them properly because I think you’d much rather hear what they have to say than me basically read out their fantastic achievements.  We will go in the order of the program, which has been nicely laid out here. 

And so, we will start with John Gardner.  So without further ado, I will let John kick off, and we will hear all the presentations.  I will try and keep the speakers relatively brief because I know we have some very intelligent and interesting people in the audience.  And I’m sure that they’ll want to bat things back and forth between them, so be as brief as you can at the start.

John Gardner:  Thanks very much.  As the leadoff here, as it were, there are just any number of things that I could talk about with respect to NGOs and with respect to USAID’s involvement with NGOs and, obviously, given my background, with a lot of the legal questions surrounding NGOs.  Let me just start and apologize for the extremely basic nature of this introductory remarks to say that, for those of you who don’t know the broad history of the USAID, it started with the Marshall Plan and then kind of went through a period in the 50s and was revived in 1961 when USAID was actually established as a separate institution.

 And this is the time of the Alliance for Progress in Latin America.  This is the time of what some of us like to call John Kenneth Galbraith’s USAID.  The Soviets were building the Aswan Dam in Egypt.  Why can’t build things, too?  And a lot of infrastructure and things like that, but very much focused on a lot of working with governments.

Well, needless to say, this had its own problems, not least questions about use and accountability of funds, as well as dealing with some pretty grouchy governments around the world.  So for a variety of very good reasons, I think USAID has really made the shift in recent decades, if you will, at this point to working more with NGOs, both US NGOs and, increasingly, and one of the things I want to talk about today, is working with local NGOs. 

We’re not, as Andrew Natsios used to say, we’re not trying to build capacity in Washington, we’re trying to build capacity in the developing world, and there is a lot to that.  So that’s kind of the 25-cent potted history of USAID and, by the way, in the question time, obviously with last week’s announcement that Andrew is leaving, if anybody wants to kind of hear thoughts on the USAID after Natsios, I’m happy to take questions on that, as well.

One of the things that I had to work with, that I had to work on as General Counsel of USAID, was the increasing threats that we saw from the governments ranging from Kenya to the Stands to now Russia to have much more restrictive laws on NGO application in their country.  In a way, this is a symbol of the success of NGOs because, frankly, governments are seeing them as a threat.  Governments do not want the United States to fund NGOs working in particular areas, democracy, anti-corruption, governance issues being kind of the top of that list, if you will.

And we, as the USG, thought that was a terrible idea, A, because just we’re trying to promote constitutions which guarantee freedom of expression, freedom of peaceable assembly, freedom of the right to redress governments and other constitutional protections that we enjoy here.  Second, I think, because it obviously would serve to operate as a restriction on US funding and a restriction on what we can do.  It is broadly the case that we do not do activities in a country that are not done with the consent of the government.  We have strategic objective agreements we negotiate with governments on any number of areas, economic reform, health, things like that. 

Obviously, there are a couple of areas where it comes very close to the line.  We obviously find IRI, NDI, ISIS, on election activities.  You think of the country Zimbabwe and whether they even want to have US or EU election monitors in their country.  So there are some things that are very close to the line on that point, but I think the broad thing to take away from this is that we want to work with the government in terms of development objectives, but obviously USAID, like any organization, would rather have the broadest choice of potential partners, grantees, contractors with whom to work, and some of these laws restricts that. 

One slightly happier example of this is the country of Indonesia, and I was fortunate to be in Indonesia in February 2002.  Regrettably, it was the time of the Jakarta floods, but it was a good time for the visit because right at that time the DPR was working on a revision to the laws governing the NGOs, the Yayasans, in Indonesia.  And quite by accident, they had some provisions on board membership and governance and liability that, frankly, would have been very deleterious. 

I read the text of the law and was asked my opinion by the people in the embassy, and I said, quite frankly, if I were an Indonesian citizen, I would no longer serve as a board member of a Yayasan.  Because you have a group like World Vision which has developed tremendous indigenous local capacity in a group like that, but, if the board members are supposed to have personal liability if somebody drives a truck off the road, that’s the kind of thing that would truly damage the growth of NGOs and civil society in these countries.

Out of the various things I could talk about today, just given Roger’s injunction on time, I wanted to focus on two things that I was specifically very directly involved with in my time at USAID.  The first is the global fund for AIDS, TB and malaria, and the second is terrorism financing, and for reasons that’ll become clear, both are deeply, deeply connected to the issues we’re talking about today.  For those of you who don’t know, the Global Fund was started in 2001 at the G8 Summit in Genoa, as a result of the Okinawa G8 Summit in 2000 and as a result of President Bush’s commitment in May 2001 to make the first grant to a global fund.  Interestingly, it was supposed to only be for AIDS. 

This President has decided he wanted it to be for TB and malaria, too, which is why it is a global fund now for all three diseases.  And it was mean to be a unique public-private partnership.  Rather than simply having a board composed of member states, the board would include representatives of the private sector, of NGO North – NGOs from development countries – NGO South – NGOs from – I’m sorry, from developed countries, NGO South from developing countries, and there would be a representative of private foundations, as well as an encouragement for private foundations to give money to the work of the Global Fund.

And there was, at the time, an observer seat, now since elevated to a full voting seat, for representatives of the communities living with the diseases.  Why was this important?  Because the whole structure of the Global Fund, at least as we understood it and a number of the other major donors understood it, was to say the only way we can have real progress in these diseases is if we get off the typical government model of money goes from western donors to governments, governments sit on the money, can’t figure out what to do with it, and the money doesn’t get spent or it gets spent badly. 

Instead, for those countries which had not already engaged in a collaborative process, the idea here was to have the countries, as a condition of applying for and receiving Global Fund money, engage in a collaborative process with civil society, with representatives of the communities living with the diseases, with a variety of groups that were affected by them, to come up with a national strategy to fight the diseases.  And that strategy was meant to be reflected in whatever proposal was put forward to the Technical Review Panel for funding.

There were some checks and balances built into this.  Every member of the so-called country coordinating mechanism had to sign the grant application or it would be rejected by the TRP.  That was meant to be a check to try to strengthen the role of civil society here.  There was a push to include private sector representation on some of the CCMs, and those of you who follow the activities of a company like Engle American in Southern Africa or Coca-Cola in Central Africa know why this is important.  A, there is a clear economic interest here for these companies that don’t want to see their workers become sick.  B, sometimes they just have tremendous expertise and organization in distribution networks and things like that that can really be of benefit to the nation as a whole, as it plans its activities.

I don’t want to spend a lot of time going back and forth on the Global Fund.  We can do that in the Q&A if you want to.  But suffice to say that that high vision of the role of civil society, I think at least from the perspective of the US government, has not been achieved.  There are some country coordination mechanisms – Zambia comes to mind, somewhat surprisingly Haiti, a couple of other countries – that have really seized the vision and, in some cases, have even said the principle recipient of the funding is not just going to be the National Ministry of Health and the Ministry of Finance but will, in fact, be a private sector entity or a civil society entity or, as in the case of Zambia, a faith-based entity and trying to really build the role of faith-based organizations around the world in helping to combat these diseases, too.

But frankly, too often I think what we’ve seen in the CCMs is government dominance.  In some cases, there has been severe pressure, blackmail almost, against members of civil society and against representatives of the diseases who are serving on the CCM who felt their contributions are not valued and this constant pull back towards the old government model of, well, let’s just get money from the west, from the UN, to the national health ministries and kind of see what happens, as opposed to a much more collaborative model, which we felt and still feel holds the best promise of success.

The politics of this are absolutely fascinating.  You go to a Global Fund board meeting, and it tends to be the United States occasionally supported by some of the other western delegations – Japan and Italy come to mind – working with civil society, working with representatives of the three disease, against, frankly, the rest of the Western Europeans in the UN, which has not played a helpful role in this organization, to put it mildly.  And we’ve been disappointed with that. 

I think we have tried to push continually for greater involvement of NGOs in civil society in the Global Fund, and I hope that effort will continue.  And I think that, over time, as these programs become evaluated, the virtue of that approach will be seen as countries which have followed the model more closely are, frankly, achieving greater success in addressing the crises of these diseases.

Well, let me balance that out with the other issue I want to talk about today, which is terrorism financing.  For some time, the United States government had been engaged in an interagency effort going back to the Clinton Administration about ways to insure that US tax dollars were not inadvertently diverted to terrorism financing.  Unfortunately, we live in a world where we have to worry about these sorts of things.  I don’t like it.  No one likes it, but it is a reality.  And the terrorists have proven themselves to be very smart in how they hide money and how they launder money, and it’s a reality that we all have to deal with.

A year after September 11th, quite frankly, a number of us at AID, which is the agency that has been most exposed on this issue simply because most US tax dollars go into foreign groups or to foreign sub-grantees comes from USAID, decided that we would ask our grantees to sign a certification that they would take appropriate steps to insure that the money was not going to be diverted to terrorism financing.

 This was not popular, as you can understand, in the NGO community, and I will say that we, and me personally, initially made a mistake.  We were trying to be as precise as possible in the definitions of the requirements and of the responsibilities for the people who were being asked to sign this, but then we got the complaint, why do we have to hire a US lawyer to get an AID grant.  So we went back and, working with colleagues at State and Justice, decided that what we would do was to internationalize certification, that, for purposes of the certification, the definition of terrorism in the UN convention was sufficiently similar, if not identical, to that contained in the US law and the duties of member states and citizens of member states under UN Security Council Resolution 1373 certainly covered whatever we were talking about.  So as a way of trying to encourage non-US NGOs to participate, either as grantees or sub-grantees, we internationalized the certification so that it is now based not solely on US law, but really on UNSCR 1373 and on the definitions in the UN Convention.

Broadly speaking, we have had great success in encouraging our grantees and partners to adopt this.  I think they understand the nature of, A, what we’re trying to do to insure that US tax dollars are not diverted, and I assure you, for those of you who are concerned about levels of foreign assistance, I assure you that, if there were to be an inadvertent diversion of funding to terrorist organizations, that would cause tremendous harm to the cause of those who would like to increase levels of foreign assistance.  Support for the foreign aid program, which is never high, would plummet, so there is clearly an instrumental reason for this, as well as a legal reason.

And second, very importantly, the certification was made worldwide.  Again, we live in a world where terrorism is not solely a phenomenon of the Middle East.  It is not solely a phenomenon of any one region of the world or any one group or any one cause, and I think this helped people understand that this is not anything against anyone specific, but simply an attempt to try to protect US tax dollars.  I know I’m getting close to 15 – well, I’ve got one minute left, okay.

So, as I say, this was not done as anything vindictive against NGOs, but it was very definitely designed to say this is a new world in which we’re living.  And the government, as well as the NGOs, if it’s truly going to be a partnership, then we have to work together and be concerned about what happens to money when it reaches the field.  I was very pleased to note that the World Bank has adopted a somewhat similar certification. 

There’s a lot of interest in this issue now generally.  Some friends from the International Monetary Fund actually called me to regret they couldn’t come this morning because there was a conference on anti-money laundering activities in International Programs at the Fund this morning.  So it’s going to be something that’s more important as we go forward and something that I truly felt was part of my responsibility to the American people while I served at USAID.  Thanks.

Roger Bate:  For those people who’ve come in late, there are plenty of seats here at the front if you would come and sit down.  And while you’re doing that, I’ll ask a question, because they’ll be moving non-rapidly, just for the audience’s benefit.  Can you give an idea of USAID’s budget, and just a bare figure will do, and how it splits between contracts for for-profit organizations, as opposed to grants or contracts with not-for-profit NGOs in what most people conceive of as traditional NGOs.  How is that split?  It’s a 30-second answer.

John Gardner:  All right, the 30-second answer is huge and constantly shifting.  Is it Tuesday or Wednesday?

Roger Bate:  It’s Wednesday.

John Gardner:  It’s Wednesday, all right.  The thing to know is that the foreign aid budget has doubled in the last four years.  Obviously, that has a great deal to do with three things – Iraq, Afghanistan and the President’s AIDS program, which would include the grants to Global Fund and PETFAR work and things like that.  It’s managed by different agencies, but that’s the broad takeaway in terms of the direction of foreign assistance funding. 

Your second question, let me assure everyone in this room there are no targets.  I know we get accused of that.  We do not sit there - the procurement people and the mission directors do not sit there and say, hmm, let’s design a program.  Do we want this to go to a contractor or a grantee?  It’s not the way it works.  Obviously, you have something like the Iraq program and, when you’re talking about a major rebuilding thing, there are only a couple companies that can do that. 

That’s much more of a contract mechanism than a grant mechanism.  If you’re talking about building a micro enterprise facility in Kenya, sure, that’s something where both mechanisms could work, and we would be happy to receive proposals.  We – I don’t work there any more.  But AID would be happy to receive proposals for either.  So that doesn’t really answer your question, but it gets to the point that –

Roger Bate:  I must say, there’s no intent to [indiscernible].  I just wondered if you could just give a rough breakdown.  Roughly, what is USAID’s budget and what’s the split?

John Gardner:  It’s $16.8 was kind of a good figure that we were using at one point.

Roger Bate:  Okay, right.

John Gardner:  But again, that includes a multitude of things.  Money is transferred from agency to agency.  It’s hard to speak –

Roger Bate:  Most people, when said and done, the American people think that far more money is spent on foreign assistance than in fact is.

John Gardner:  That is correct.

Roger Bate:  So one figure on Wednesday, $16.8 billion.

John Gardner:  $16.8 is a nice figure, and it could change tomorrow.

Roger Bate:  And roughly, contracts versus grants?

John Gardner:  Again, we don’t keep figures on that.  Okay?  You’d have to look at that from a mission level and –

Roger Bate:  And you no longer work there.

John Gardner:  And I don’t work there anymore.

Roger Bate:  Okay, so let’s move on.

Chad Dobson:  Thanks.  I’m Chad Dobson, the Policy Director for Oxfam America and wanted to thank our colleagues for inviting us.  It’s an important question.  But rather than talk about the general things, I’d like to talk a little bit about us and what we’re doing because there are so many NGOs that it’s hard for us to say anything about others.  So I’m going to give you the thumbnail and then try to make good contributions.

Oxfam was started 60 years ago after the war – after the second World War – and it was started with actually a humanitarian organization and disaster relief organization to provide emergency food in the Balkans.  And it came out and was started by Quakers and Anglicans in Oxford, England.  And the name naturally comes from Oxford Famine Relief, and the postal service got tired of writing Oxford Famine Relief, so we became Oxfam.  We’ve been saddled with that name ever since. 

So it started in England.  It’s a confederation now of 12 different national organizations primarily in the north, so there are Oxfams in Belgium, Ireland, the UK, Germany, France, the United States, two in Canada because both the French speakers and the English speakers need one, Australia, New Zealand and Hong Kong.  And next year, I think Mexico will join.  There is a confederation of about 5,000 employees, and we have a budget of about half a billion dollars operating in something like 100 countries.

Thinking about the question about the efficiency, effectiveness and what we do well, I think that there are some things actually we have learned how to do, but it’s taken 60 years to do that, and that is actually delivery of water and sanitation in an emergency way.  And we’ve been doing that for about 60 years now, so now, today, we probably deliver water and sanitation in Darfour for about a quarter of a million people a day. 

There are other things, of course, that we do.  We do traditional development assistance.  Yep, traditional development assistance, and we’ve been doing that for about 20 years.  I think that we say that development is rocket science because we think that it is, opposed to what some people say, it’s one of the most difficult things to do.  And it’s quite clear to us that our quality of our work varies significantly from country to country and place to place.

The final thing that we’ve started doing in the last 10 years is policy work, and, because we felt really that what happens – the kinds of things that sometimes lead to humanitarian emergencies and the relationship also to traditional development may also have policy implications in New York, Washington, London or other places.  So the model we have for work now is an attempt to try to integrate these kinds of three things, and I would say that, since we probably are at about as 60 percent as effective at doing policy work as we are at doing emergency relief, and partially it’s a function of the amount of time, we know what to do.

Oxfam American is the part of the confederation that I represent.  It is 30 years old.  We had a budget last year of about $40 million.  We don’t take US government money.  Partially, I think it’s because, if we asked for it, they probably wouldn’t give it to us, so it just saves us some work there.  Or if they gave it to us one year and after we complained about something, they’d probably take it away the next year. 

So we don’t take government money.  Of that $40 million, 95 percent of it is small contributions or some of them not so small from individuals, and five percent of it is foundation money.  Of course, we are a (c)(3), so we’re not-for-profit, so we do our accounting.  So we’re actually in some kind of way using taxpayer money anyway.  If you look at it, we are subsidized because of the tax situation, and so we have responsibility more to the government because of that.  Then, of course, we have responsibility for our dollars to be as effective as we can.

We have six percent of our budget is used for monitoring and evaluation, and there is always a struggle with a new organization around when you’re putting money out.  Is that the right amount?  Can we find the learning we actually need to within the system to deliver that?  And how does that count against the value of actually getting the money out to the recipients where we need it?  And it’s always a tradeoff.  On the tsunami, for example, and the report I see that’s out there I’ll mention, we are taking nine percent of the money internally.  That’s the [indiscernible], and I suspect that, for internal cost of management of the money, that puts it about $278 million for the tsunami relief in the family.  But I suspect that the actual administration for the tsunami money will be closer to 25 percent, but because the issue was so important, so big, as a corporation we decided that nine percent was going to be the limit.  So then it’d have to come out of other kinds of things.

Anyway, the three things that I actually wanted to talk about was, one, the tsunami report, which is out here.  Of course, it’s the anniversary now of the tsunami, and so this is our report to anybody who wants - it’s also on our website – to talk about how we are actually spending the $278 million that we received from private donations.  There are several issues that we learned from our work there. 

One is that no one was prepared to deal with the size either of the funds that came in or the disaster and that there were no good standards for how to work together in a quick kind of way.  We’ve been very careful about doing careful assessment work before we start programs, and we find in Natchay [phonetic] and other places that this was no time to do assessment work.  And so, you get on the ground, you start doing things, and you find out you have to respond immediately.  And it’s not traditionally what we do or what we are trying to do.  So where there’s traditionally a protocol about how you get involved and what you’re doing, you go into a place and all of a sudden you find you can’t do it.  So we’ve been trying to learn what it is we can learn from those things.

The other thing is coordination.  In Sri Lanka, we found that we are working with about 700 other NGOs operating in Sri Lanka on the tsunami, and you would find that people all had the same – it’s a small country, and that may not be where the money should go, but that’s what we had.  So coordination among the donors was a very difficult thing, and one of the nice things that came out of the tsunami experiences that happened is that there now is a monthly meeting of donors working on this.  And it’s the first time that – there probably have been other things, but it’s the first time I know, and this is something that has been created just because of the necessity to do it, as well as the computerization of the projects the money is going toward.

Now, this is all infrastructure that had to be created that didn’t exist before the tsunami existed.  So it’s an attempt that we are having to try to understand the system better, figure out what the mistakes were, what we can do better and how to move forward.  There will be at the end of next year Price Waterhouse Cooper and a whole bunch of other folks will be doing independent assessment of the work, and that will be available.  So we are hoping to have – we expect to try to provide leadership on accountability and openness on how monies are expended and effectiveness of the program.  But I can tell you it’s very difficult, and this is particularly a place where the question about how much you put into monitoring and evaluation versus delivery in the field is difficult.

We’re expending to expend the $278 million over about a five-year period because after you put the money in initially there’s a whole bunch of growth and things that need to be done.  And Oxfam has said we won’t play on returning people to poverty.  Many of the people living in situations affected by the tsunami were not doing very well in the first place, and so the commitment is that people should be better off after the experience than before. 

And we’ve been struggling with a number of very unusual kinds of things for us.  We were approached by the World Wildlife Fund who said, at least in Natchez [phonetic], what we were finding was rainforest was being cut down to supply new timber.  So the question was what are the standards that need to be developed for use of wood in reconstruction?  And it took us, I think, about six months to develop those standards.  So we find that we’re never prepared to do the kind of thing when there’s a crisis.  So you get in, you make sure the people have food and housing and water and sanitation, which is, like I say, what we know how to do, and then you figure out how to do the best you can.  Anyway, the report is out there.  We’re interested in comments.  In a year, there’ll be a new audited report that you may find of interest.

The second thing I would like to mention is that, if you’re looking to see effectiveness, one of the things you have to do is you have to know what the standards are.  And so, in 1997, with the Red Cross and a number of other humanitarian organizations, we put together something called a Steer Project, and what it lists is the humanitarian charter and minimum standards in disaster response.  So it’s about an inch-and-a-half thick now, and it is basic standards for working disaster area. 

But I hate to say this, we’ve been around 60 years, and we started this thing in ’97.  And this is the new one that came out, and just from last year it is significantly redone, there’s specific areas in here dealing with gender, people affected with chronic diseases like HIV AIDS.  And so, every time we redo it, which is about every two years, we find that the knowledge has changed and it’s very difficult.  Anyway, if anyone is interested, we publish it, and you’re welcome to it.

Of course, it’s a voluntary kind of thing, and, when you’re in Sri Lanka and you have the 700 NGOs, you’re exited to have 1,000 flowers bloom, but you also are interested in professionalization.  And so, all we think that we can do is offer it as a resource for the community, and, those who want to use it, we’re appreciative, and others may find more effective or different approaches to do that.

The third thing that I’d like to mention, and it goes to one of the interesting issues, is a report we did before OECD’s meeting on aid effectiveness that they had in Paris in May.  And it really looks to issues associated with aid in general, but, of course, it’s important for this group because, as we pointed out, a significant number of contractors or delivery of aid services for government are government.  So it is a little report we did called [indiscernible] or Milestone looking at – it was our contribution for the discussion in Paris on aid effectiveness.  And I’d just like to mention a few things about that.

Let me go back to this first for one second.  I always forget that, of course, it’s not enough to have standards.  I wish it were.  I remember when the World Bank did its evaluation of compliance with its resettlement program.  The bank has very good standards on resettlement, and, in fact, it says that people need to be at least as well off as they were before after resettlement.  Of the nearly 300 projects that the bank had done looking at resettlement, only two were found to be in compliance with their own standards. 

So the question of going from the development of the standards to being able to comply with them in difficult situations is very difficult, and we should never underestimate that.  It’s important though to have the data so you can go back and find out what was wrong, and I commend the bank for having the nerve to do the study so that they knew what some of the problems were.  I’m not sure – it’s a hard job.

Anyway, on the Paris report, some of the things we found.  And you remember that Oxfam, we do humanitarian relief, and we deal with poverty alleviation.  What we found was, among other things, was that only 20 percent actually of aid money was going to the poorest among us, and we think that’s a problem.  Forty percent actually of aid money across the board from the OECD countries was tired.  What I mean by that is it was going back to the countries.  It was a situation we deal with here in our own country and Italy, 70 percent of the money is tied.  And I remember the joke that wasn’t much of a joke.

 The Secretary of the Treasury testified actually before Mr. Kolbe once about the World Bank and the contributions to the bank, and the member of Congress said to the Secretary, why should we be involved in the World Bank?  And the answer was, we put $2 billion in it, we get $2.5 billion out.  So the question is, and I think it’s especially important for a group in this country who use money from the government, whether or not, in fact, it is most important to have this money circulated through American-based NGOs or whether or not one should have a different model, an untied model, of delivery. 

And as I’ve said, the standard across OECD countries is about 40 percent.  Italy and the United States - Italy likes to build dams – Italy and the United States is about 70 percent.  And whether or not that’s the most effective of actually delivering aid – we used to find at least at the bank, and Mr. Kolbe talked about this, if you ask the Treasury Department where the money went into the bank, they couldn’t tell you where the money went, but they could tell you by congressional district who got the contracts.  And that’s the situation, I think, we find ourselves in.

In the report, we discovered that there were eight – this is OECD countries – that there were 80 separate agencies, and that they were responsible for 35,000 aid transactions a year of less than $1 million.  Now, what that means for a country trying to deal with this is extraordinary.  Two years ago, we looked at Senegal, and we found Senegal had 50 missions from the bank in that year.  The strain on a government to try to deal with the aid that’s being offered, whether or not it’s from the UN, the bank, us, AID, is extraordinary, and the ability to handle that and deal with it is difficult.

There’s also generally a cost and pledge gap between what is pledged and what is delivered.  What you see is you go to a meeting and governments raise their hand and say, well, this is what we are pledging, and then you look a year later and you say where we are.  In Africa, we found that 14 percent on program aid was not delivered, 26 percent on project aid was not delivered, and 25 percent of all of it was delivered at least six months late.  So it’s hard to make a plan and to deal with either the largess from countries – and I’m not – we know how complicated it is, so it’s not a critique.  It’s the awareness of the problem.

Finally, there is lack of transparency on this, and the report calls for a way for us to – not a way for us to look at it, but to demand that we find a way, and I think that applies to both the NGOs, the governments and institutions.  The final thing I’d mention is that, as we look at Iraq, for example, and what we’re doing in Iraq, our head of office was shot in Iraq, so we decided to leave the country.  So in a world where there is increasing violence, what I have to think about, where we’re going to operate and what we’re going to do, if we can’t make sure that there’s security for our staff, it makes it difficult for us to operate.  And it means that we probably will have less NGOs and more Haliburtons doing the delivery of services, and I think that we need to be aware of that and what that really means for these countries.  Thanks.

Roger Bate:  I have one question.  You mentioned the performance evaluation of Price Waterhouse Coopers, and I realize I’m asking you to speak about other NGOs here.  But isn’t that unique?  Are there any other NGOs that you know of that are actually putting in that kind of tsunami performance evaluation, I mean independent [indiscernible; cross talking]?

Chad Dobson:  I don’t know on the tsunami, but it’s not uncommon for large NGOs to be very concerned and to be doing – and certainly we always want a performance evaluation, as well.

Roger Bate:  And I do actually have a follow-up question.  The World Wildlife Fund certification logging, did that actually delay logging for six months?  Did that actually have an impact on rebuilding the fund?

Chad Dobson:  No, because we couldn’t do that when we got on the ground.  But I can tell you in the reconstruction that we’re doing now, we’re using it.  So delivery –

Roger Bate:  I’m sure we’ll have question about that.  Okay, over to you.

Jim Kaiser:  First of all, I’d like to thank the American Enterprise Institute for allowing us to speak today.  I’m counsel with the Committee on Government Reform in the US House of Representatives, to the Criminal Justice Drug Policy and Human Resources.  I’d first like to give an overview.  First, I’ll explain our nature of involvement in investing and doing oversight work with domestic and foreign NGOs that receive federal funding to do international relief and aid. 

Then I will get into, in particular, our most recent investigation of a domestic NGO that’s been receiving substantial funds under the Leadership Act to carry out HIV and AIDS relief.  And from that particular circumstance and our experience with that organization and the dialogue that we’ve had, try to draw a few concrete proposals as to how USAID within this narrow area might better try to manage and work with and collaborate with NGOs, domestic and foreign, that carry out HIV and AIDS relief.

Our focus on the subcommittee, particularly over the last year in doing oversight, has been on monies allocated underneath the leadership acts to domestic and foreign NGOs, as I mentioned, and in your packet there, you have a letter we sent out about two months ago that, with collaboration of USAID, led to the withdraw of that particular NGO of receiving any further federal funds.  More specifically, our investigation has focused on enforcing public law 108-25, which is an anti-prostitution, sex trafficking law passed in 2003, enforced on international organizations.  That became effective, and just this year it was enforced on domestic NGOs operating internationally.

First, I’d like to start off by mentioning the law a little more specifically to flush out the US policy in the area.  National Security Presidential Directive 22, which was put out December 16, 2002, states that, in reference to prostitution and sex trafficking internationally, “Our policy is based on the abolitionist approach.  Trafficking persons, the US government opposes prostitution and any related activities, including pimping, pandering or maintaining brothels, as contributing to the phenomenon of trafficking persons.”  In other words, that’s the law and that’s a certain administration interpretation of the law and the policy that the administration has decided to proceed in respect to this law.  And therefore, that’s basically our charge is to see that this law is enforced appropriately in accordance with congressional intent behind this law.

To get into the concrete, I kind of represent the front line in trying to hold – I should say, our committee, doing oversight, and our subcommittee, more particularly, is the frontline on trying to hold NGOs accountable across the board.  And as I said, our focus is focused on this particular provision, and our most recent investigation deals with a very large NGO, CARE USA, which for this particular year received – this was confirmed in person over the phone about three weeks ago – they received $40 million of PETFAR money for this particular year.  And this anti-prostitution and sex trafficking law applies directly to this money.

I’d like to say, in respect to CARE, CARE is a very large organization that does a lot of work all throughout many countries in many different areas, and our investigation is very narrow, and it focuses explicitly on the PETFAR money they’re receiving and the way they’re using that money, particularly in India and Bangladesh, but more specifically in India, in dealing with the high risk HIV AIDS community of prostitutes.

Now, I mentioned the law, and I’m going to get into the details of our investigation.  We have evidence – documentation – that CARE has been funding for some time an organization commonly referred to as Durbar DMSC [phonetic].  It’s an Indian organization, and its official website on the first page states that its primary purpose is to explicitly advocate the legalization of prostitution and to advocate and seek that sex work be acknowledged as, in general, regular employment that should have all the other benefits that would be accorded to any type of job.

The nature of CARE’s involvement is that it’s listed on their website as a funding organization.  They have been receiving funds from CARE USA, particularly CARE India, which it’s all part of one organization.  And in our dialogue with CARE, to get into the details, we’ve had a number of conversations, and the results of our most recent dialogue has been that their position is that this is a gray area because they claim their involvement with this organization in funding this organization is for tuberculosis and basically for provision of medical services. 

There is a preclusion in the one limitation dealing with the anti-sex trafficking law that allows for medical care, however our understanding and position as representing Congress of the point and purpose of that preclusion is that any group, any NGO, even faith-based, are allowed to provide medical care directly to prostitutes, and that’s not to be construed as supporting prostitution.  If you don’t have that preclusion then, in other words, it’s impossible for any NGO under this law to provide any type of education, prevention, medical care at all.

CARE’S position, first of all, we understand CARE is not explicitly advocating the legalization of prostitution.  However, from that organization’s perspective, as far as from what their policy analysts have described to us, they feel the best way to reach the prostitution demographic is to collaborate formally with organizations that are advocating the legalization of prostitution.  And they say that without this collaboration, they’re not able to most effectively reach and provide prevention with these groups.  Obviously, we do not believe that that represents an abolitionist policy that would say that the US federal government and federal taxpayers do not want their money being used in any way to support any organization that is for the legalization of prostitution.

Now, I’d like to make a general comment more broadly speaking as far as accountability.  The real concern is what message does this type of funding being given to an organization like Urbar [phonetic] send internationally?  The US presence of foreign aid being given to this type of organization represents American people and their taxpayer money and the manner in which that our government decides to collaborate in these governments and with these demographics. 

There are many, many non-profit, non-governmental organizations, faith-based organizations that work with the prostitute community, that do rescue work, as you’ll see in the letter that I’ve included in materials, that work with this community.  There are plenty of NGOs that are in compliance with this law that we could be funding, and we’ve written a letter today that’s going out today, a copy of which will be at the front desk to USAID once again asking them to investigate CARE’s collaboration with this group and hopefully to see some type of enforcement on this law.

What have we learned?  Another general comment on accountability, our office does a tremendous amount of work with drug prevention and drug treatment domestically.  The dramatic difference between the level of accountability that we have with drug prevention non-governmental organization here in America compared to what we have with international organizations is just extremely dramatic.  It’s very competitive here in the United States for drug prevention programs, but, when it comes to accountability and competing for these grants, these organizations have to show statistics that, for instance, for drug prevention that their programs are effectively preventing youth from using drugs over a period of time.  This is the type of accountability that we have on the domestic level with, for instance, drug prevention.

When it comes to foreign NGOs, particularly with HIV AIDS in the area that we’ve been dealing, accountability is on a much more substantive level.  We’re just trying to insure that there’s a substantive compliance with federal laws dealing with prostitution and sex trafficking.  And I’m sure you can see that that’s a much more fundamental level of accountability, and yet in our dialogue to some of the people you deal with in organizations who have been receiving substantial amounts of money for a very long time, their attitude is to the federal government, which represent in our office as far as doing oversight, is that we don’t know what’s going on on the ground and that we don’t really have the best – we don’t have the best understanding of how to deal with these organizations and deal with these issues. 

And information does not come forth, and essentially we’re just told that it’s a gray area and that the issue is in litigation.  George Schwartz and his team have filed suit in Washington, DC District and New York asserting that the condition placed on the foreign money and the money under the leadership act is unconstitutional, and that’s basically what their response has been.

Now, to get into some concrete suggestions, which is what I was asked to do today, my only experience is in the area of which I’ve been speaking.  The first suggestion I would say, and this is my main concern, is the conditions of the particular anti-prostitution and sex trafficking law, the reach of its enforceability is to the grantee and it’s the sub-grantee.  And the grantee is supposed to certify that it’s in [indiscernible] and that it has an explicit policy opposed to prostitution. 

Okay?  That’s what CARE has certified is that it has a policy explicitly opposed to prostitution.  That’s the language of the law.  And basically, what we’re asserting is that you cannot have such a policy and, at the same time, be funding an organization that’s the legalization of prostitution.  But the problem is that, when the grantee gets that money and then it distributes it to a sub-grantee, once that sub-grantee then redistributes once again to a sub-sub-grantee, the reach of the law is over.  There’s no longer the ability of the USAID to enforce those conditions on that money. 

So what you see in a number of – which my colleague has mentioned – dodgy governments, they set up these shelter government entities that first receive the money, then redistribute to a sub-grantee, and then they, once again, redistribute to sub-sub-grantees.  And at that point, all conditions on the money that the US government placed on that money is gone, on top of the fact that some of these certain dodgy governments have unique agreements with our government as far as limiting the types of provisions and conditions you can place on money.

So our first suggestion to USAID in this particular circumstance would require that any sub-grantee be primarily a direct service non-governmental organization.  In other words, they focus on actually providing direct service to the target group for that money, to prostitutes, to anyone who is at high risk for HIV and AIDS, because that will limit – basically if you restrict sub-grantees from being organization that, once again, are more umbrella groups that redistribute the money, then – and that’s probably one of the safest legal ways to do so that we used in the whole drug prevention area.  It’s very common, the direct service percentage that’s required for different types of programs.

Another suggestion, and this is our greatest frustration, is when you ask USAID – and they have been collaborating with us.  I don’t want to give the impression that they’re not onboard with trying to enforce this.  They’re under suit, number one.  Number two, their ability to access information from these foreign governments that then wants to redistribute the money is very limited.  And it’s very frustrating to us when we ask AID who are the grantees of this money. 

Who are the end receivers that are providing the actual service?  And as far as they can go is the grantee and the sub-grantee.  Beyond that, they could be general responses.  We don’t know in certain circumstances.  Now, that’s not across the board, but that is in certain circumstances.  And another suggestion we would like to give is to use the Internet, which the DA, for instance, is doing with precursor controls with pseudo ephedrine.  With methamphetamine, we require that any convenience store or retail store or pharmacy, that they register online with the DA.  They just have to go to the website, there’s a form there that they have to basically read through. 

There are conditions that are on that that AID could include the anti-prostitution and sex trafficking conditions in this form, and then they have to provide basic information, where are they located, and paste, for instance, their mission statement of their organization, and then submit that to USAID so that USAID at least has an understanding of who is getting this money so that if they do decide or we decide to investigate and do further follow-up and holding these organizations accountable, we’re able to do that.

I’d like just to conclude my comments and say that we do believe that there are many organizations, non-governmental organizations, internationally that the government can collaborate even within these areas.  However, more basic background research needs to be done before AID gives out grants, and it can’t be presumed that organizations such as CARE that have been receiving aid for such a long time don’t have certain areas in which we have certain questions about.  So thank you very much, and I appreciate it.

Roger Bate:  Thank you very much, Jim.  That was fascinating, a lot of stuff in there I had no idea about.  I’ve got at least 15 questions going around in my head, but I’m going to save them.  Probably other people have got better questions, and I haven’t got a concise one.  I’m going to hand over to Paul.

[TRANSCRIPTIONIST NOTE:  Paul Applegarth’s microphone frequently cuts out as if he’s moving away from it as speaking.  There are areas where his speech is indiscernible.]

Paul Applegarth:  Thank you, Roger.  Before I begin, I do want to acknowledge Jim Kolbe’s presence and remarks.  It was mentioned, but he was also responsibility for funding Millennium Challenge.  He’s a friend and was very helpful and really had insight into a lot of the issues we’re talking about today and providing future directions for foreign assistance and how to really make it effective in reducing poverty, having results on the ground, and promoting [indiscernible].  As some of you may not know, he announced publicly last week that he was going to be stepping down at the end of the term.  That represents a major loss to the causes that we’re here to talk about today.

There’s one bit of good news for him.  He emphasized the importance of trade over aid in terms of effectiveness for countries.  I am now the Senior Fellow with the German Marshall Fund.  We just yesterday released the results of a major opinion survey, transatlantic survey, probably the first time that issues around trade and development have been asked transatlantically in six different countries, same question, same time. 

The results are fascinating, but one of them was that his message there is getting through.  The vast majority of the respondents understand that trade is more effective than aid.  And a bit of a promotion, if you go to the GMF website, you can see the top line results.  I think you’ll find it quite interesting around the whole range of these issues.

Now, moving to the topic today, the US funding of NGOs and effectiveness, when I was first asked to be on the panel I said, well, why are you asking me to be on the panel?  The Millennium Challenge didn’t generally fund NGOs, and we really can’t talk about aid effectiveness and operations because we, as a general rule, did not use NGOs to implement within the country. 

So with that caveat, let me talk in other ways, and some as a bit of a consumer because NGOs were very helpful with what we were doing and trying to do.  And so I’m going to talk about why I particularly valued the input and the assistance of NGOs on the grounds that, as a consumer myself, I might be able to point to some non-traditional ways in which NGOs can contribute to poverty reduction and effective development assistance.

I also am using the NGO term very broadly and apologize in advance to those of you who say, well, wait a minute, why is Paul lumping me together with that lot over there?  They’re very different than us, and I’d certainly want to be identified with them.  I’m taking the term literally, non-government organization other than private sector, so that would include think tanks, aid deliverers and a variety of other people.  And clearly some of you, I’m going to suggest, are already being done by NGOs and maybe all of them are by some NGOs, so this is not a general critique.

I did value the role of NGOs and the existence of NGOs, first in providing constructive advice and assistance.  There is a level of expertise and intellectual capital in the NGO community about what’s going on in country and, ultimately, what works on the ground.  I’m going to suggest later that that expertise there needs to be more flow back into the policy setting and priority setting community.  But they were certainly assistive to us in these areas, and that ranged from the indicators – one of the Millennium Challenge indicators initially was primary school completion rates – to the assistance of some NGOs leading Women’s Edge and interaction.  We got the data to show a linkage that girls’ primary school completion rates was more important to drive our development, and that’s something we wanted to measure.  So we specifically measured [indiscernible] an indicator as a result of NGO activity.

More broadly, both Freedom House and Transference [phonetic] International actually did a lot of the [indiscernible], two indicators for Millennium Challenge.  Their work there, absolutely invaluable in terms of having data so that you could measure countries in terms of their performance and succeed objectives, which was to really encourage countries to adopt policies that really had an impact on poverty reduction and impact on growth.

They were also quite valuable in terms of external communication, education of particularly the Hill and the press.  I think [indiscernible], Bread for the World, [indiscernible] and to some extent others, the role of particularly when you’re trying to be a change agent to change the model.  It [indiscernible] education, and you can’t educate when its people turn over.  There’s a common, constant reeducation, the education need, reeducation need.  The presence of some NGOs in that role continuing a process, quite important.

Third was some good policy work.  We had some stuff that Chad mentioned about what works and what doesn’t work, quite important in helping MCC think about its own operations and what should be done or not.  In terms of results on the ground within the countries, I think – and I’ve said this probably a number of times – I think if you go back and look at the difference on the work of the pro-democracy NGOs, whether it’s MDI or IRI 15 years ago, I believe the correlation between that on the ground policy work and countries being selected for Millennium Challenge matter in terms of focusing throughout the rule of law, anti-corruption, democracy.  Madeleine Albright has actually volunteered to try to have some work done around this.  I haven’t seen any results, but I hope she’s doing that because my statement is purely impressionistic, but I do think there is a correlation and it would be nice to demonstrate it.

Second, NGOs helped a lot in participating in and helping stimulate the consultative process within the country.  Those of you who know something about Millennium Challenge know that we really had a country-driven model of setting priorities and run a broad-based consultative process within the country.  Those NGOs had presence on the ground to help do that and to get involved in particularly the civil society, but also, to some extent, parliamentarians, members of the press and the private sector.

Their global networks and on the ground presence were also very helpful for us in getting a second view on the effectiveness of those consultations.  It was a good double check as an alternative source of information from what we observed indirectly from NCC staff or from other counterparts.  On indirect conservations, we had a little separate pipeline in countries.  Ken Hackert [phonetic], who was a member of the board of Millennium Challenge, [indiscernible] Service was quite helpful [indiscernible] CRS network.  This was not limited to CRS network in terms of providing alternative views, again, information coming back to people who were trying to operate in the area, a very valuable role, and a range of other things.

Now, some issues to consider going forward, and take these as constructive suggestions as somebody who is fundamentally a fan of the efforts, and I think I’ve indicated that in my earlier remarks.  But the first is to find more exclusive – try to find ways to get your insights and expertise back to the donor community, the flow back.  I’m aware of some of Oxfam’s work that I picked up when Chad was there. 

A lot of what Oxfam is trying to do is building on a policy development piece.  If you know what’s going on, you might as well get it into the policy debate because a lot of people are involved in the policy debate who don’t know what’s going on, and it would be far better to get some people who actually know what they’re talking about involved.

Secondly, somewhat more difficultly, think about your role in the priority setting process.  I believe in country ownership.  I think most of you believe in country ownership.  I think it’s fair to say that there were some NGOs who were surprised that their view of what a country ought to be doing was not immediately adopted by MCC as part of the country program.  Some of them were almost indignant that they, as an international NGO didn’t know better what needed to be going on in the country. 

Now, maybe they did, but the reality is take – having said we value your expertise, take that expertise with a bit of a grain of salt, realize there’s other things going on when you’re trying to build a consultative process in the country.  And really, sort of make sure that your views get somehow into the process.  Don’t be insulted if the country says, well, wait a minute, maybe we don’t really want you involved in the consultative process.  You’re really not local.  It’s supposed to be domestic.  Don’t be indignant about that, but think about the roles in how you can influence priority setting, but recognize if development is really going to work it’s got to be owned by the country.  They have to believe it is their priority, not dictated to them from some external agent who just simply has the money.

In terms of on the ground implementation, first it may be worthwhile to differentiate here between the different kinds of foreign assistance.  When you’re talking about disaster relief and humanitarian assistance, there’s an immediate need, and there, in terms of the impact and result, you can’t afford to think about long term capacity building if somebody is suspended from a tree in a tsunami or needs immediate shelter or maybe in food aid or other things.  There, effective immediate delivery to the beneficiary is probably the model, and these people who really have operations on the ground, effective in doing it, and clearly a lot of international NGOs have that, probably are the best means, at least in the short term, is to deliver that kind of assistance. 

Over time, I’d like to see more of it shift to local protection, but at least for disaster relief humanitarian assistance, recognize at the end of the day, no matter what we’re talking about in terms of assistance, we’re talking about the impact on people on the ground.  The people on the ground are best served, at least in the short term, in humanitarian assistance by having the aid delivered.

But in terms of the field of long term development assistance, poverty reduction, fundamentally you have to build capacity in the country, and that means delivery of the assistance, but also management of the assistance and the delivery of the assistance.  And I would suggest that international NGOs need to think more exclusively and set a good objective, the transfer of the delivery of their assistance and the management of their assistance in the country to local individuals and local institutions.  Because that’s what’s going to build the long term capacity development that allows a country to stand up on its own feet, be self reliant and also, I believe, be more effective in terms of longer term assistance and longer term poverty reduction and longer term growth.

Secondly, is incorporate explicitly results and then focus on results.  Chad talked about some of them Oxfam was doing.  It’s hard.  People are always reluctant to set up performance measures for themselves.  But recognize that that’s there, cross the Rubicon, try to set them up.  Again, Oxfam tried to do some things there.  I think some other NGOs are, as well.  The World Bank had the nerve to try to do it, as Chad mentioned, found out in only two cases they meet their own standards.  But at least they know that so the discussion, well, why?  Why did only two out of whatever it was, 800, of these things work?  Because there is not very good information on what really works on the ground. 

But if you don’t have the baseline data and you don’t know where you’re trying to go, you can’t know what works or not.  And unfortunately, within the donor and aid community, particularly in long term development assistance, there is very limited information about what actually works.  The best source of information is probably represented in this room, and that’s the NGO community.  And unlike government entities who are driven by different kinds of needs, the NGO community can set up these performance standards for itself and really does need to think about results.

And I’m not talking about just simply who gets the money, and certainly, if you don’t know who is getting the money, how can you possibly know what the effectiveness is?  Okay?  But I’m talking about what is the effectiveness.  I think it’s a shame that USAID doesn’t know whether or not contractors are getting the money or the grantees are getting the money.  I know you’re in the victim [indiscernible] just like we all are, but the reality is that ought to be an explicit objective so that people do know where is the money ultimately going and what are you getting for it. 

Okay?  This is tough stuff, some of this stuff.  They’re not getting measured in true results, and acknowledge that, recognize that.  But if the debate isn’t shifted to be focusing on results and measuring performance, we’re not going to know what really does work.  In a time of limited resources and constraints, we all have a duty to make sure the money is being used effectively to really impact the lives of people on the ground.

Third, I think there also should be explicit targets, moving away from intermediaries getting the money to making sure that grantees get a broader share of the funds.  Targets for achievement of results in terms of outcomes, not how quickly the money is spent necessarily or who gets it, but what are you getting for it?  And measured by increases for agricultural productivity [indiscernible], improvement in school graduation rates, whatever the particular area is, specifically adopting in each program outcome-based targets and trying to figure out, when you start to fail out – and you’re going to fail at it – figure out why and building in the [indiscernible] effort upfront.  That is a good use of funds to figure out what worked and why because you’re building for the future.

And finally, continuing the role to build intellectual capital, but to assist in this education process, continue to assist the Hill, educate the Hill, the Administration.  What are the changes within the Administration?  Andrew Natsios, he’s stepping down.  Andrew knows a lot was going on, informed, careful, thoughtful observer, what works [indiscernible].  It’s not clear who will come in and replace him, but there’s a constant need both [indiscernible] on the Hill, within the press and the general public to really understand better what’s working on the ground, what’s really having an impact in terms of poverty reduction and growth.

 And with that, I’ll stop.

Roger Bate:  Thank you very much, Paul.  I should say that I enjoyed Paul’s leadership with the Millennium Challenge Corporation because I think it set a lot of these things in motion because it actually tried to establish some of the targets both for growth and of other forms of social indication as to whether aid was working.  And that leads me to one question I have which is, I think one of the reasons why you were asked to be here is because MCC didn’t give money to NGOs. 

And although there is no doubt that Oxfam is sustainable and AIE is sustainable, neither organization accepting government money, and we’re, I think, two years older than Oxfam, the question really is ultimately you must have buy-in from the governments or humanitarian assistance to Zimbabwe, Sudan, for example, absolutely essential, but neither government seems to be that willing to deal with the long term problems.  So part of what I saw from MCC, and hence my question, is actually trying to not just, I suppose, pick winners, but can you just comment briefly on the importance of having government buy-in and if NGOs at some level detract from that because that’s seen as being the most palatable and easy conduit for money?

Paul Applegarth:  Well, as I say, on balance I think NGOs contributed positively and certainly the margin [indiscernible].  And some of these issues are difficult for NGOs.  You’re seeing this in the food aid debate right now, very clearly in delivery of food aid, where some NGOs are on this, to me, a surprising side of the issue.  I think I understand why they’re there, and it has to do with deliveries in terms of [indiscernible] and being Pollyanish perhaps that it’s all purely [indiscernible], but these are tough issues. 

But overall, the question of, I believe, the government buy-in and the public buy-in comes when you can demonstrate real results.  People want – are thirsty – for results.  They want to see the impact.  They don’t want to – and maybe the foreign aid doesn’t have the best reputation in the world.  They’re viewed as being not very effective, but foreign aid can’t – there are some good results in foreign aid.

Some of them haven’t worked very well, but that whole focus in saying this is what was accomplished in terms of what we’re really trying to achieve in terms of longer term development.  I think it’s a very good source in short term disaster relief and humanitarian, but, in terms of long term results, that’s where you get the government buy-in.  Show what’s been done.  Don’t have – unfortunately, as you know, the World Bank-AEI study, which said of $120 billion – over $116 billion from the United States since 1980 – with 89 countries, a third of those recipients actually declined in per capita income. 

That is not a track record upon which you attract additional funding.  I know those areas were flat, plus or minus a percent, and less than a third actually had significant increases in growth and it’d be probably pretty hard to track those increases in growth to foreign assistance.  So we’ve got to change the terms of the debate, make assistance more effective and make those success stories more public.  But to do it, you’ve got to have the data to do it.

Roger Bate:  Well, I’m sure we’ll get back to some of those discussions.  I think perhaps our last speaker will be discussing particularly on some of the private enterprise aspects of the [indiscernible].

John Sullivan:  Thank you very much, Roger, and thanks to AEI for hosting this event and inviting all of us here.  It is a fascinating subject, and it is a huge subject.  Fortunately, we’ve had a great introduction.  I join Paul and his comments on Mr. Kolbe, including the loss.  Hopefully, he’ll find a role.  If not, I’m sure some of us can go to him and suggest a role so that we don’t lose those insights and the efficiency that he has brought to the message for so many years.

It is a long morning, and I am conscious of the fact that I’m the fifth speaker on the panel and that everything has been said, but not by everybody.  So I am going to try to add some dimensions to it.  What I’m going to try to do, though, is AEI kindly provided us with a take-home exam, and I’ve tried to answer some of the questions in the take-home exam.  So I’m going to be a little bit building on Mr. Kolbe’s presentations, the remarks that were made here, and then some of our own experience in coming up with this question of looking at the role of NGOs and putting them in context.

What is our own experience?  Let me just say in the interest of full disclosure we are an NG