Kim Reichert

Rockridge High School
Taylor Ridge, Illinois
Teacher: Barbara Downey

Foreign Aid and the Millennium Challenge Account
By Kim Reichert
12^th grade

Today in the United States we are offered limitless opportunities. Our education and medical fields are well advanced, and our scientific research has led to technology that was unimaginable just ten years ago. What would it be like, though, to live in a nation the total opposite of the United States? What if people were forced to go days on end without a decent meal and their living conditions were no better than those of our pets? It may seem extreme, but there are nations in the world where these conditions exist. It is our duty as a blessed nation to help those in need. As a prosperous country, we can more than increase our commitment in foreign aid. The proposed Millennium Challenge Account, or MCA, is a step in the right direction to a better future for everyone.

One of the main requirements when proposing a new foreign aid program is to increase funding to those countries in need. During the planning stage, the MCA was designed to increase its core development assistance by fifty percent over the next three years. This would result in an annual increase totaling five billion dollars by the year 2006. With this extra money countries would be ensured of starting from a strong position. However, if this plan is implemented, there will be a decrease in funds in other areas of the United States’ budget where it is also needed. This concern is important but should not threaten this initiative. In 2002, only 0.108 percent of our budget was directed to foreign aid. This is certainly a miniscule amount. Increasing our foreign aid contribution is not going to impact the United States significantly, whereas it will make an enormous difference to those nations in need.

After deciding that a new foreign aid initiative was needed, the method of selecting the countries to receive this aid had to be chosen. Sixteen indicators were subsequently selected as a means of identifying worthy countries. In order to be eligible for aid, nations are required to meet only fifty percent of the requirements in eight of the sixteen categories. This shows that the criteria do not demand perfection in any one area. Instead, there is room for the improvement that will be made through the help of the MCA. However, based on this system, there is always the possibility that a country that really needs the help could be disqualified. A perfect example of this is the fact that as many as six countries have already been eliminated from eligibility during the first year. This is due to their low score in the area of corruption. Still, this system seems to be fair. As in the MCA, it is important that fair and realistic guidelines be set to determine qualifying countries. If the program is to succeed, these guidelines must be followed and exceptions should not be made. If exceptions were made, then where would it end? There must be a cutoff point somewhere. Also, not being eligible may motivate a country to make changes so they would be eligible the next year. This would be a great start and would prove that the country could reform its ways. Then the MCA would be able to assist the nation and create an even greater success.

Another strength of the MCA is the sense of ownership that is gained by the nation in need. The countries that are eligible for foreign aid will write a proposal stating how they plan to use the financial assistance. This way the nation can choose what problems it wants to focus on and not have the United States dictate it for them. In the past the United States has only allowed countries to have financial assistance if the money were used for purposes determined by the United States. However, control over how the aid can be used is not entirely relinquished under the MCA. The United States will still have veto power if the purposes stated are not seen as being necessary or useful. This way the United States is still able to make sure the money is put to good use, and the nations are also allowed to have a say in what they wish to change. If countries are permitted to set their own goals, they are more likely to put all their effort towards reaching that goal. It guarantees a higher rate of success if the people strongly believe in what they are working for. However, opponents of the MCA may say that the United States will not be able to insure that the aid money is used properly. The United States would need to include a caveat against this if the MCA is put into effect.

Finally, the organizational structure of the MCA is an improvement over previous foreign aid programs. It will be run by an independent government corporation. This way, the oversight board chaired by the Secretary of State and the corporation’s staff, which includes both government and non-government agencies, can help strengthen MCA’s operations. It will have the best of both worlds. The support of the government will be behind its operations, without any of the usual political complications. In response to this, an argument could be made that the separation into two agencies will lead to a lack of coordination and overlapping functions. However with good organization and communication this will not be allowed to happen. Professionals designed the program, and if they were careful to include proper checks and balances, the MCA will run flawlessly.

The Millennium Challenge Account will be a giant step forward in the United States’ foreign aid policy. This increase in funds, improved selection process, enhanced ownership to the nations in need, and better organization will all help create a much stronger program than existed in the past. I truly believe that the MCA will be a success, and that the countries in need around the world will agree with this assessment.

Questions

1. President Bush claimed that most funds for development do not come from international aid. He mentions three things that do fund development. What are they?

Funding for development comes from domestic capital, foreign investment, and, especially, from trade.

2. President Bush reminded his audience that successful development in a third world country requires more than funds. What two items did he mention in this regard?

The foundation of development is security, because there can be no development in an atmosphere of chaos and violence. Also, successful development requires citizens who are literate, healthy, and prepared and able to work.

3. When is money sometimes counterproductive, according to President Bush?

When nations refuse to enact sound policies, progress against poverty is nearly impossible. In these situations, more aid money can actually be counterproductive, because it subsidizes bad policies, delays reform, and crowds out private investment.

4. Describe the Millennium Challenge Account and include in your description what is anticipated from donors and recipients.

President Bush developed the Millennium Challenge Account in 2002 as a means of increasing the United State’s financial assistance to developing nations. Specifically, this funding will provide people in developing nations with the help they need to take advantage of the opportunities available to them in the world economy. The United States will lead by example and increase its core development assistance by fifty percent over the next three years, resulting in an annual increase of five billion dollars by the year 2006. The number of countries eligible to compete for this funding will also increase over this period. In the Millennium Challenge Account, developed nations will provide greater contributions to developing nations. In return for this aid, the recipients are expected to fight corruption in their respective countries, support human rights, and follow the rule of law. Also, nations that invest in better health care, better schools and broader immunization will be rewarded. Specific criteria have been developed to determine what countries currently meet the expectations to qualify for this aid.

5. What are the three broad standards that President Bush expects the leaders of the developing nations to adopt?

President Bush expects the leaders to adopt ruling justly, investing in their people, and encouraging economic freedom.

6. Describe President Bush’s challenge to development banks and explain why or why not you favor it.

President Bush is challenging other developmental banks to adopt the same approach that the U.S. is following. To do so, they should all adopt a growth agenda, increase their support for private sector enterprises, and focus more on education. President Bush’s challenge also includes having the developmental banks provide up to half of the funds devoted to poor nations in the form of grants instead of loans. I agree with this challenge, and it only makes sense to do so. President Bush realizes that not much will be accomplished by one nation. However, if all of the developmental banks around the globe band together for this project, the world will be a better place. It requires more money and effort to create a bigger impact. I think that having some of the funds being distributed in the form of grants is a better idea than having them all be loans. This way, the countries will understand that this money must be used for improvement and that it cannot be wasted while also being able to invest it. I also am glad to see that money is not the only focus. Having more attention put on education is a much needed improvement.

7. What percentage of our national income (GNP) do you think the United States government committed to foreign aid in 2002? First answer this question and then use the Internet to find the answer.

I think that the United States contributed seven percent of our national income to foreign aid during 2002. However, the actual amount is only .108 percent.

8. Describe and defend a “Me First” attitude. (Use your head – you won’t find the answer in the required reading.)

This kind of attitude is where someone first considers themself before worrying or caring about another person. It is a selfish way of thinking, but it is often the case when someone is in trouble. Instead of helping this person out, the “me first” attitude person doesn’t worry about it because it is not their problem. I do not agree with this attitude. Everyone needs to realize that we are living in this world together. At some time a problem will arise for you and having someone help you with it could be all you need. If we refuse to have a kind spirit and offer our assistance then we can only expect the same in return. This will get us nowhere and eventually lead to many setbacks.

9. Describe and defend a “Mutual Benefit” attitude. (Use your head – you won’t find the answer in the required reading.)

“Mutual Benefit” describes two parties in an agreement where they both benefit. For example, when the U.S. helps a country with financial aid, we gain an ally. The other country, in return, is able to use the money to prosper. This attitude is much better than the “me first” attitude. With this way of thinking, assistance is offered and can help many people. It is an excellent way of problem solving and will not lead to further problems. Both parties are helped and receive benefits from the agreement.

10. Describe three unsuccessful foreign aid programs operated by the U.S. government or private American citizens. (Do not use the programs discussed in the testimony of Faith Action for People-Centered Development Policy included in your required reading. Conduct research using the Internet. Duplicate examples from the same class will not be accepted.)

1.) The pauperization of the U.S. trust territory of Micronesia is a direct result of foreign aid. We acquired Micronesia as a trust territory in 1945 following its liberation from the Japanese. Outside private investment was discouraged because of the fear that it would reduce the people to cheap labor. Instead, the people of Micronesia were given free food, clothes, and other supplies. One result of this was that many local stores went bankrupt. It also undermined the incentive to work. Not surprisingly, Micronesians preferred to accept the donations and avoid actual work, which sacrificed real economic progress. As this pattern continued, Micronesia was caught in a vicious circle. The more the economy deteriorated, the more aid it received; and the more aid it received, the more the country deteriorated. Between 1947 and 1985 this territory of less than 150,000 people received $2.4 billion, and its inhabitants were eligible for close to 500 government programs.

2.) In Zaire, rebels ended a 32-year dictatorial regime of its leader, Mobutu Sese Seko. London’s Financial Times estimated that Mobutu stole around $4 billion from foreign aid, most of which came from the International Monetary Fund. This amount equals almost half of all the foreign aid that Zaire received between 1970 and 1994. Amazingly, the IMF was well aware of the loss of its funds but still continued to lend them money. Mobutu used most of the money to buy lavish estates in France and establish huge secret bank accounts in Switzerland, Luxembourg and other places. His power was also kept through bribes and other buying support. At the same time, Zaire went on an economic downfall. Its real per capita income is forty percent lower today than when Mobutu took power.

3.) In 1994 President Clinton signed an agreement with North Korean President Kim Il-sung that North Korea would temporarily halt its nuclear weapons program and return to non-proliferation negotiations in Geneva. This agreement was signed on October 21, 1994 and became known as the “Agreed Framework.” Some of the key components of this document include:

· The U.S. and N. Korea would cooperate in fully replacing N. Korea's graphite-moderated reactors with light-water reactors (not capable of plutonium production) by 2003. Graphite-moderated reactors were to be shut down until converted.

· To offset energy lost due to the powering down of N. Korea's graphite-moderated reactors, the United States agreed to supply N. Korea with up to 500,000 tons of heavy oil for heating and electricity production annually, until all reactors had been converted.

· N. Korea agreed to return to compliance with all international nuclear non-proliferation agreements and to eventually stabilize, store and dispose of all spent nuclear fuel already produced.

· Both the U.S. and N. Korea would work to achieve full normalization of political and economic relations.

By 2000, the United States contribution of food and other forms of humanitarian aid to North Korea had amounted to over $61 million. However, on October 16, 2002 North Korean government officials admitted their country had secretly continued the development of nuclear weapons in violation of the Agreed Framework.

11. Describe three successful foreign aid programs operated by the U.S. government or private American citizens. (Do not use the programs discussed in the testimony of Faith Action for People-Centered Development Policy included in your required reading. Conduct research using the Internet. Duplicate examples from the same class will not be accepted.)

1.) At the Horizonte Azul Street Girls Center one hundred abandoned girls between the ages of eight and fifteen are being helped. This is done by a U.S. non-governmental organization known as World Learning and is helped by an Angolan organization called NGO. They have come together to create a community resource center for educational and professional training for abandoned female street children and teenage girls. This center offers standard primary classes from grades one to four, adult education, and extra-curricular classes in computer science, human rights, sewing, crocheting, and health education. This EDDI funded activity allowed USAID/Angola to achieve many important steps in creating private-public alliances in Angola. The center’s vocational training program, created by a contribution from Chevron-Texaco, has been very successful, with 82% of its girls graduating after one year, and five girls being selected to attend an exclusive private school. Also, the teachers at this center benefited from training about children with trauma, children’s rights, and adult literacy education. With these types of training, the staff is now better prepared to understand and assist children with their needs and psychological demands in a proper manner. This project also greatly contributes to reducing female literacy, alleviating poverty, and providing greater access and opportunities for women in the development process.

2.) International Aid, a Christian relief and development agency that responds to Biblical mandates by providing and supporting solutions in health care began over twenty-one years ago. Over these past years they have provided assistance and medical support to missionaries worldwide. They have also partnered with churches throughout the United States to reach devastated countries. International Aid began as an agency to support missionaries but now serves a global network of mission hospitals, clinics, orphanages and churches around the world. Some of the major assistance programs have included: rehabilitation efforts in Kosovo, emergency relief and development programs in Honduras, refugee relief in Rwanda and Bosnia, and hospital and orphanage restoration in Romania.

3.) On December 23, 2002, there was a briefing at the State Department. The conference was to cover the objectives of the American reconstruction effort in Afghanistan and discuss many of the things that have already been accomplished. The following are the most interesting or important examples of the United States’ assistance.

· Seventy percent of the food that has gone to Afghanistan in the last fourteen months has come from the United States. This equals approximately $200 million worth of food.

· To equalize the number of girls and boys in schools, families were given a monthly ration of vegetable oil, a valued commodity in Afghanistan, if the family made sure that their girls were in school.

· The irrigation system that was built in the 18th century is being rebuilt. Most of the system was destroyed during the Soviet civil war and never rebuilt. What was not destroyed then was later destroyed by the Taliban. Today, the United States has over 6,000 water and irrigation projects across the country.

· 7,000 tons of seed was introduced last year and another 5,000 tons was delivered recently. Over a three-year cycle, twenty percent of the seed stock of Afghanistan will be replaced with a new variety of wheat that will increase yields by 80 to 100 percent and is drought resistant. This is important since 70 percent of the people living in Afghanistan are farmers or herders.

· The broadcast system for Radio Afghanistan was completely rebuilt last March and April. Along with this, the United States has trained 200 Afghan radio journalists and distributed 30,000 radios around the country so that all villages have at least one radio.

· The schools and colleges were rebuilt. Ten million textbooks were produced for grades 1 through 12. However, this was not enough, and another six and a half million textbooks are being printed for the opening of school in March. Also, 1,300 teacher trainers were trained and they can now go back to the villages and train the teachers.

12. Steve Radelet, Senior Fellow at the Center for Global Development, believes we can do both – take care of our own people and lend a helping hand to citizens of less developed countries. Explain why you think we can or cannot offer aid to both.

I believe that we can offer aid to other countries while still taking care of ourselves. Compared to other countries, the United States has an abundance of everything and certainly has enough to share. Plus, we already dedicate some of our funds to foreign aid. Increasing this amount is not going to impact our country a whole lot, whereas it will make an enormous difference in other nations.

13. What do you think about Mr. Radelet’s assertion that “the administration is leaning towards a system in which eligible countries would write proposals (or business plans) describing their objectives and strategy, how they would use the money, the benchmarks used for evaluation. Giving recipient countries this responsibility is a revolutionary change in U.S. foreign assistance.”?

I think this statement is very accurate. In the past the United States has decided what their financial assistance is going to be used for. The new outlook is now allowing countries to indicate what they wish to focus on. If someone is allowed to set their own goals they are more likely to be willing to work towards those goals. It guarantees a higher rate of success if the people strongly believe in what they are working for. The only problem that I see arising with this is how the money will be monitored. The United States needs to be sure that the money is actually used towards the goals that the country states.

14. Which of Mr. Radelet’s three concerns regarding the MCA concerns you and why?

1. as more countries in this income range become eligible, there will be fewer MCA funds available for the poorest countries that are implementing sound development strategies.

2. the make-or-break requirement may unnecessarily eliminate some countries.

3. the separation of U.S. foreign assistance into two agencies could lead to a lack of coordination and overlapping functions.

I think that number one is the major concern. The whole goal of this program is for countries that need developmental assistance to receive that help. If the poorest countries are obviously making great starts at developing their nation, we need to be able to support them with the proper funds until they can do so on their own. If we allow more countries to enter the eligible range and they fail to use the assistance and be successful then the countries that were doing so have been punished.

15. There is evidence of an increase in negative world opinion towards U.S. foreign policy, not necessarily the American people. To counter this negative perception of the U.S. some people want the U.S. to concentrate more on weapons of mass assistance (WMA) and less on weapons of mass destruction (WMD). Please comment.

The negative opinion in the U.S. is not based on our weapons of mass assistance or our weapons of mass destruction. It is instead based on our foreign policy. Trying to make the world’s nations happy with us by dedicating more money to them is not going to work. They will only take our money and still be upset with our foreign policy, which includes more than just financial aid. If we wish to get rid of the negative opinion, we need to focus on our actual foreign policy. Also, our country cannot afford to get rid of our weapons of mass destruction. They are an integral part of our national defense.

16. What does the World Bank recommend as the United State’s “just and appropriate share” to reach the Millennium Development Goals by 2015? Do you think our citizens can afford that kind of increase? Defend you views.

The World Bank is recommending an additional ten to fifteen billion dollars annually. Based on my calculations, a fifteen billion dollar increase would represent a seven percent raise in the total budget outlay for the United States. As our country is currently undergoing a slowing economy along with the potential for additional costs if there is a war with Iraq, I don’t believe this would be a sound decision to make at this time. Also, if this raise were to take place, then there would be additional taxes. Once again, since our economy is experiencing troubled times and the current administration is looking to reduce taxes as a way to stimulate the economy, raising taxes would not work well.

17. What do you think about the request of Faith Action for People Centered Development Policy’s request that tax dollars be used to fund, not only government-sponsored foreign aid programs, but “that funds also go to NGOs and grassroots organizations.”?

Whereas I see that this would be a more effective way of having aid reach those who need it, there are various obstacles that would arise.. First, how would you determine what organizations received money and which ones did not? Also, along those lines, how would the government determine how much money that organization would be allowed to spend? Another good question is: how would the government track the money and know that it was being used for the purposes specified? With these three major questions and numerous others, I don’t think that allowing outside organizations to have tax money would be feasible at this time.

18. How many countries would be affected positively by health-related investments according to the Commission Macroeconomics and Health (CMH)?

The Commission indicates that 83 countries would be positively affected by health-related investments.

19. According to the CMH, how much would be gained annually between 2015-2020 due to saved lives and increased economic growth, if an increased investment were made in global AIDS and other health services?

The CMH determined that between 2015-2020 $360 billion would be gained annually due to saved lives and increased economic growth.

20. Use the Internet for your research and name the two congressmen who introduced H.R. 4524. Give a 2-line synopsis of that bill.

H.R. 4524, otherwise known as the Debt Relief Enhancement Act of 2002, was introduced by Chris Smith, a representative from New Jersey’s fourth district, along with the help of John Lafalce, a representative from Pennsylvania. In the Senate it was known as S. 2210 and was introduced by Senator Joseph Biden, Delaware. This bill’s purpose is to ensure that the Enhanced Highly Indebted Poor Countries Initiative achieves the objective of substantially increasing resources available for human development and poverty reduction in heavily indebted poor countries, and for other purposes.
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