engagement amid austerity
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Engagement Amid AusterityA Bipartisan Approach to Reorienting the International Aairs Budg
By John Norris and Connie Veillette
With Casey Dunning and William McKitterick May 2012
www.americanprogress.org www.cgdev.o
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Engagement Amid AusterityA Bipartisan Approach to Reorienting
the International Aairs Budget
By John Norris and Connie Veillette
With Casey Dunning and William McKitterick May 2012
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Working Group on Aid Priorities amid Declining Resources
In November 2011 he Cener or Global Developmen, or CGD, and he Cener or American Progress, or CAP,
ormed a Working Group on Aid Prioriies amid Declining esources. Ta groups work inorms his repor.
Te working group was a diverse selecion o expers and praciioners who came ogeher o oer independen
policy recommendaions on craing an inernaional aairs budge ha advances imporan reorms, maximizes
he mos benecial U.S. programs, mainains core operaional capabiliies, and idenies areas o lesser prioriy
and unding. Te recommendaions in his repor were developed hrough consulaive meeings, one-on-one
inerviews, lieraure reviews, and working group deliberaions.
Te working groups co-chairs, Connie Veillete o he Cener or Global Developmen and John Norris o he
Cener or American Progress, auhored he nal repor based on he oucomes. All opinions in this report are
those o the co-authors and do not necessarily relect the endorsement o the working group members in
whole or part.We are paricularly hankul or he signican research assisance o Casey Dunning and William
McKiterick o CGD.
Working group members
Co-Chair: Connie Veillette, Direcor, ehinking U.S. Foreign Assisance Program, Cener or Global Developmen
Co-Chair: John Norris, Execuive Direcor, Susainable Securiy and Peacebuilding Iniiaive, Cener or
American Progress
Gordon Adams, Disinguished Fellow, Budgeing or Foreign Aairs and Deense Program, Simson Cener
Rodney Bent, Direcor, Unied Naions Inormaion Cenre
Steve Berry, Presiden and CEO, ural Cellular Associaion
Amanda Glassman, Direcor, Global Healh Policy Program, Cener or Global Developmen
Richard Greene, Vice Presiden or Sraegy, PAE
Jeremy Konyndyk, Co-Direcor o Policy and Advocacy, Mercy Corps
Jim Kunder, Senior esiden Fellow, German Marshall Fund
Clay Lowery, Vice Presiden, ock Creek Global Advisors
Sarah Margon, Associae Direcor, Susainable Securiy and Peacebuilding Iniiaive, Cener or American ProgressLarry Nowels, Independen Consulan
Paul OBrien, Vice Presiden or Policy and Campaigns, Oxam America
Beth Tritter, Managing Direcor, Glover Park Group
Noam Unger, Fellow, Global Economy and Developmen Program, Brookings Insiuion
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ContentsContents 1 Introduction and summary
9 Trends shaping Americas approach to the world
13 Key budget areas deserving protection
17 Reorm 1: Make bilateral economic
and security assistance more selective
37 Reorm 2: Transition PEPFAR to country ownership
43 Reorm 3: Overhaul U.S. ood assistance
47 Reorm 4: Create an international aairs
realignment commission
51 Conclusion
53 Glossary
61 About the authors
62 Endnotes
65 Country assistance proiles
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Introduction and summary
U.S. governmen spending on oreign aairs will ace signican pressures in
he coming years under almos any scenario. A divisive poliical environmen,
coninuing worries abou a sluggish economic recovery, concerns over rising
budge decis and naional deb, and upcoming elecions make i dicul or
policymakers o reach agreemen on budge prioriies. Ta uncerainy will have
ar-reaching consequences.
Tis biparisan repor is oered in he spiri o rying o deermine how we as anaion can make he mos ecien and eecive use o scarce resources, reorm
our oreign aairs insiuions, and deend our core naional ineress amid such
major budge uncerainy.
I is imporan o underscore he imporance and value o he inernaional aairs
budge in advancing U.S. ineress while a he same ime conducing reasonable
coningency planning or he possibiliy o sharply reduced unding in he near
and medium erm. I is ideal or Congress and he adminisraion o reach a sen-
sible 10-year budge plan ha includes boh cus and revenues while proecing
our core ineress boh domesically and inernaionally.
In ha ligh, i is worh menioning he recenly passed yan Budge o emerge ou
o he House o epresenaives. (Tis budge plan was issued aer he nal working
group meeings were conduced, and so he opinions on i are solely hose o he
auhors.) Te budge plan would slash some $31.6 billion rom 2012 levels ou o
he oreign aairs accouns in jus our years. By any reasonable esimaion, such an
approach would decimae our naions abiliy o eecively advance our ineress
overseas, and such budge calculaions canno be jusied based on a deliberae
analysis o our needs and oreign policy prioriies as a naion.
In conras, we hope ha our repor can be used o begin a pracical conversaion
even as he high-sakes budge batle is waged and allow policymakers o boh
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ideniy areas ha require susained or even increased resources in order o main-
ain U.S. global leadership as well as areas o lesser prioriy.
Te Unied Saes is no alone in rying o beter balance is approach o inerna-
ional aairs a a ime o declining resources. A number o our key European allies
have also reviewed heir approach o diplomacy and developmen in recen yearsin hopes o beter ocus.
Cenral o his challenge is undersanding several imporan developmens ha
will shape Americas engagemen in he coming years. Tese mega-rends include
enormous pressures on he ederal budge, coninued globalizaion, he increas-
ingly imporan role ha privae philanhropy plays in
inernaional developmen, and a likelihood ha he major
sae-building exercises o Iraq and Aghanisan over he las
decade will be a hisorical anomaly.
Almos every major sudy and review o our oreign aairs
insiuions and spending prioriies has idenied areas o dys-
uncion and operaions ha need signican reorm. Eors
such as he Obama adminisraions rs-ever Quadrennial
Diplomacy and Developmen eview and a Presidenial
Sudy Direcive on Global Developmen are imporan seps
orward on reorm. Ye enormous work remains, and he
execuive and legislaive branches do no agree on he under-
pinnings o eecive inernaional engagemen.
Te Cener or Global Developmen and he Cener or
American Progress esablished he senior-levelWorking
Group on Aid Prioriies amid Declining esources o help
policymakers and concerned ciizens se sensible priori-
ies or inernaional aairs spending in he Funcion
150 accoun: he Sae, Foreign Operaions, and elaed
Agencies appropriaions bill conaining spending on global
economic, diplomaic, and humaniarian programs by he
Sae Deparmen, Unied Saes Agency or InernaionalDevelopmen and he Millennium Challenge Corporaion
among ohers, and ood aid accouns in he agriculure
appropriaions bil l.
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Every U.S. president since Harry Truman has seen
economic and security assistance abroadwhich
made up about 1 percent o the ederal budget in
recent yearsas essential to Americas national
interests even though oreign aid traditionally lacks
strong deenders in Congress. In act, Republican
presidents have overseen the largest increases in
oreign assistance. To be sure, oreign assistance is an
imperect tool, but it also is a core part o Americas
strategy to increase the number o stable, ree-market
democracies around the world. Such countries makebetter trading partners and better allies, and are an
abiding source o stability.
Nations need not be aid recipients orever. In the
1960s nations across Latin America and Asia were
dismissed as perennial basket cases yet countries
in both regions combined sensible reorms with a
jump-start rom U.S. assistance programs to achieve
dynamic, lasting growth. Ten o the 15 largest
importers o American goods and services, including
countries such as South Korea, Taiwan, and Singapore,
graduated rom U.S. oreign aid programs according
to the United States International Trade Commission.1
Why oreign aid is important
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Te working group was comprised o a highly biparisan group o policy expers
wih long experience in epublican and Democraic adminisraions, Congress,
nongovernmenal organizaions, philanhropy, and he privae secor. Te work-
ing groups co-chairs, Connie Veillete o he Cener or Global Developmen and
John Norris o he Cener or American Progress, auhored he nal repor based
on he oucomes o he working groups deliberaions. All opinions in his reporare hose o he co-auhors and should no be seen as refecing he endorse-
mens o he working group members in whole or par.Te recommendaions
were developed hrough consulaive meeings, one-on-one inerviews, lieraure
reviews, and working group deliberaions.
Te working group reviewed he enire inernaional aairs budge, which
encompasses he operaions o he Sae Deparmen, he U.S. Agency or
Inernaional Developmen and he assisance programs hey manage, ood
aid programs, and he programs o many smaller and specialized U.S. agen-
cies. Approximaely wo-hirds o he 150 accoun is made up o economic andsecuriy assisance provided by boh he Sae Deparmen and USAID. (Tis
repor does no cover aid appropriaed by he Deparmen o Deense, hough
he Deense Deparmen delivers some Sae Deparmen securiy assisance.)
Since his is he larges share o he inernaional aairs budge, he core o our
recommendaions cener on how o improve his assisance.
Given he rapid imerame o his exercise we ocused on areas oering he grea-
es promise or reorm. Tis repor is no a comprehensive review o every single
aciviy carried ou hrough he 150 accoun. We hope o urher ariculae and
explore some o he key issues in his repor going orward.
Furher, U.S. conribuions o mulilaeral insiuions, such as he World Bank
and he Unied Naions, represen a vial means or he Unied Saes o engage he
world. Tey also make an impac on secors or counries where our bilaeral pres-
ence is less infuenial and represen an imporan complemen o bilaeral assisance
programs. We welcome a closer examinaion o hese mulilaeral conribuions, and
a number o oher donors and organizaions have also begun examining where heir
mulilaeral dollars can bes be direced o make he greaes impac.2
Our work idenied our ideas ha would undamenally ransorm how we con-
duc diplomacy and developmen. None o hese ideas is wihou conroversy, and
all would require signican change o be insiued.
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Behind all o our ideas is he belie ha Americas approach o diplomacy and
developmen requires signican modernizaion. Our engagemen and dol-
lars should be ocused where hey are going o make a lasing dierence, and
we have oen been oo slow o recognize and admi where engagemen and
invesmens have litle reurn. Bu we also argue srongly or increased, no
decreased, invesmens in raining our inernaional aairs personnel and eelha universal diplomaic represenaion very much remains in he naional
ineres. Working group members agreed ha Americas invesmens in diplo-
macy, developmen, and inernaional rade are exremely valuable and any
cus should no undermine our sraegic prioriies or values. We ideniy bud-
ge areas ha should be proeced.
Here are our ideas ha have he greaes poenial or eeciveness and ransorm-
ing how his counry engages he world.
Make economic and security assistance more selective
In 2012 he Unied Saes is delivering bilaeral assisance hrough he iner-
naional aairs accoun o 146 naions wih 103 o hese receiving economic
assisance and 134 receiving securiy assisance.3 Tese eors are ar oo diuse,
undisciplined, and unocused, and we could achieve much more by concenraing
economic and securiy assisance where hey will be mos eecive and curail-
ing resources where hey will no. Tis idea may sound simplisic, bu i would be
revoluionary in conras o how aid is currenly disbursed.
Our counry-by-counry analysis o economic and securiy assisance included in
his repor was subjecive bu highly daa-inormed, aking ino consideraion a
counrys commimen o reorm, is capaciy o achieve lasing developmen and
sabiliy, is need, and is sraegic imporance o he Unied Saes. In a limied
number o cases we argue or prioriy invesmens based on immediae confic
prevenion eors or o ensure ha a counry ha enjoyed signican posconfic
invesmen does no slide backward. We made he daa we used or each counry
readily available as par o his repor o encourage urher debae on hese issues.
(see Counry Proles secion)
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Bilateral economic assistance
We argue or a major shi away rom 103 recipien counries o susaining or
increasing invesmen in 53 core counries over a ve-year period. Tis includes
increasing invesmen in 32 high-prioriy counries and holding unding levels fa
in 21 counries where here is a coninued imperaive or engagemen bu morelimied expecaions. Eigheen counries would graduae rom U.S. bilaeral eco-
nomic assisance wihin a ve-year period; 11 counries would see heir programs
eliminaed because hey are small, expensive o operae, or peripheral-ineres
counry programs; and 21 poor-perorming counries would see economic assis-
ance largely limied o suppor or democraic and civil-sociey groups, humani-
arian relie, and PEPFA unding. Eleven USAID missions could be closed or
consolidaed as par o his realignmen.
Bilateral security assistance
We argue ha aid should be ocused on 72 core counries raher han 134 recipi-
ens, wih increased invesmen in 45 high-prioriy counries and fa unding lev-
els in 27 counries where here is a coninued imperaive or engagemen bu more
limied expecaions. Assisance would be curailed in 62 counries, including 30
ha should be able o graduae rom U.S. securiy assisance wihin he nex ve
years, 15 where securiy assisance is relaively small or peripheral o our naional
ineres, and 17 we deem o be poor perormers.
Transit ion PEPFAR to countr y ownershipTe Presidens Emergency Plan or AIDS elie, or PEPFA, coninues o be
a very large porion o U.S. inernaional aairs spending. Sared by Presiden
George W. Bush in 2003 o help provide prevenion, reamen, and care services
o counries suering high HIV/AIDS burdens around he world, he iniiaive
represens he larges healh commimen ever by one counry o comba a single
disease inernaionally.
Te Obama adminisraion esablished PEPFA Parnership Frameworksve-
year join sraegic rameworks or cooperaion beween he U.S. governmen,
he parner governmen, and oher parners o comba HIV/AIDS in he hos
counry. Tese parnership rameworks acknowledge ha PEPFA recipien
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counries need o share much more o he burden moving orward. Tis creaed
some conroversy, bu sharing coss, paricularly wih upper-middle-income
PEPFA recipiens (Boswana, Caribbean egional, Cenral America egional,
Dominican epublic, Namibia, and Souh Arica) should be acceleraed as par
o a well-managed and ransparen plan ha will allow hos counries and privae
philanhropy o work ogeher wih he Unied Saes o keep momenum going inhe batle agains HIV/AIDS.
Tis also recognizes ha PEPFA Parnership Frameworks can provide a
model or how o oser counry ownership and ranser nancial responsibil-
iy o recipien counries while changing he program isel rom an emergency
humaniarian program o more o a long-erm, susainable, and inegraed
approach o healh and developmen.
Overhaul U.S. food assistance
A web o oudaed laws and regulaionscargo preerence, limiaions on local
and regional purchase, and moneizaionvasly increase he cos and reduce
he eeciveness (and imeliness) o our ood aid. Food mus be purchased in he
Unied Saes and shipped on U.S.-fagged vessels. Some o he ood can hen be
sold on local markes o raise cash ha NGOs use or developmen projecs.
Numerous sudies show he inheren ineciencies o his process. Overhauling
hese resricions could save axpayers billions o dollars and make ood aid pro-
grams more eecive and ecien. Food aid is a classic example o an area where
smar reorms would make programs work beter and save a grea deal o money.
Create an I nternational Affairs Realignment Commission
Finally, he adminisraion, in consulaion wih Congress, should appoin a com-
mission o underake a sorely needed overhaul o our oreign aairs agencies and
operaions based on he very successul model o he Deense Base ealignmen
and Closure Commission, or BRC.
aher han ocus on physical insallaions, as BRC did, an Inernaional Aairs
ealignmen Commission would have he wri o no only look a he physical
presence o U.S. embassies, consulaes, and USAID missions around he globe
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bu more imporanly recommend regulaions ha could be eliminaed, programs
and projecs ha are no longer necessary, or even insiuional consolidaion or
sreamlining. In essence, he commission would help shepherd a long-overdue
rewrie o he Foreign Assisance Ac o 1961, he aniquaed legislaion guiding
he auhoriies, use, and allocaion o U.S. oreign assisance.
Te presiden would appoin commissioners in consulaion wih Congress, and
he commissioners would base heir recommendaions on he broad sraegic
guidance esablished in he Quadrennial Diplomacy and Developmen eview
and hrough subsequen consulaions. Te presiden could accep or rejec he
commissions recommendaions in heir enirey. I rejeced, he commission
would have a se period o amend and resubmi. Te commissions nal repor
would have he orce o law i Congress did no rejec i.
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Trends shaping Americas
approach to the world
In looking a how bes o reshape Americas inernaional engagemen, i is use-
ul o underscore rends ha will aec how we conduc oreign aairs in he
years o come. Tese rends will shape he resources we will have available or
oreign aairs while guiding he areas where he Unied Saes should ocus is
diplomaic and developmen eors.
Four in paricular sand ou.
Funding
Tis repor is driven by an undersanding ha ederal spending on inernaional
aairs will be under considerable pressure or a number o years and ha here con-
inues o be an unusually high degree o uncerainy in oreign aairs agencies bud-
ges. Te inernaional aairs baseline budge ell by more han 14 percen beween
2010 and 2012, hough his decline is even lower when unds rom he Overseas
Coningency Operaions accoun or Aghanisan, Pakisan, and Iran are included.
While he presidens 2013 budge shows a sligh increase rom 2012 levels,
oreign aairs spending will coninue o be under a high degree o scruiny going
orward and will oen be pited agains cus in domesic programs. As noed ear-
lier, he House-passed 2013 budge would decimae unding or he oreign aairs
agencies. While i is no suppored by eiher he Senae or he adminisraion, i
is equally unlikely ha any siting epublican presiden would suppor such deep
cus o our oreign aairs archiecure.
Te Join Selec Commitee on Deci educions inabiliy o reach an agreemeno reduce budge decis over 10 years will require sequesraionor auomaic
cuso unds beginning in 2013 unless Congress and he adminisraion can
reach a deal beore hen. Te Congressional Budge Oce esimaes ha i seques-
raion goes ino orce, he resuling across-he-board reducion in discreionary
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programs such as inernaional aairs would be abou 8 percen in 2013. Tose
cus would cause signican disrupions in our inernaional programs and would
bes be avoided by a sensible biparisan 10-year agreemen o reduce he deci
ha included boh cus and revenues.4
Securing a deal o avoid sequesraion will be highly challenging given he sarkly di-eren approaches o he House and Senae. Furher, even i an agreemen is reached,
cus in inernaional aairs are very possible as par o such a deci reducion pack-
age, even i no on he same scale as hose conained wihin sequesraion.
Te realiy is ha aer 10 years o relaively srong growh in inernaional aairs
spending ollowing Sepember 11, considerable bel-ighening is ahead and
indeed has already begun.
We can ake lessons rom he decline in resources ha also occurred in he 1990s
as policymakers sough a peace dividend rom he end o he Cold War. Terewas a high-prole debae abou eliminaing USAID as an agency and olding is
surviving uncions ino he Sae Deparmen. Te eor o eliminae USAID was
ulimaely rebued, bu rom 1990 o 1997, aid unding ell by one-hird.
In hindsigh, unding decreases were no well managed, wih cus o USAIDs
operaing expenses ar oupacing program decreases. As a resul o hese und-
ing cus, boh in operaing expenses and o he oreign aairs accouns generally,
sang and experise, especially a USAID, declined precipiously. USAID began
o look more like a conracing agency han a hub o experise on developmen.
Domesic governmen agencies lled in some gaps, bu his also served o urher
ragmen Americas approach o developmen as more and more ederal acors
played a role in promoing developmen wihou a coheren overarching rame-
work and sraegy or heir eors. Te Sae Deparmen also ook on a greaer
role in developmen decisions.
As aid programs began o increase in he 2000soreign assisance increased
some 38 percen beween 2001 and 2007USAID ound isel shor on sa and
experise, making i more relian on using large conracs requiring less hands-on
managemen and oversigh.
USAIDs lack o resources mean ha new pro-gramsPEPFA and he Millennium Challenge Accounwould no be par
o is porolio, urher muddying leadership on aid issues. Te Deparmen o
Deense ook on greaer roles in civilian programs in many confic and poscon-
fic environmens, hough is personnel had almos zero raining in designing and
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implemening such programs, leading o repeaed and expensive misakes on he
ground in places like Iraq and Aghanisan.
I he Unied Saes is o avoid compounding he problems o an already subopi-
mal aid archiecure, a ar more selecive approach o aid makes eminen sense no
mater wha he budge batle oucome is.
Continued globalizationTe ac ha he world is increasingly inerconneced and inerdependen a
almos every level is no news.Ye, and somewha ironically, U.S. oreign aairs
agencies are no always he quickes o come o erms wih his. wo poins are
paricularly imporan here.
Firs, he recen global nancial crisis highlighed he need or srong and accoun-able governmen insiuions when dealing wih economic shocks ha spread rap-
idly rom one counry o he nex. Bu srenghening governmen insiuions has
never been a srong sui o he Unied Saes or mos oher donors or ha mater.
Tis remains somehing o a blind spo and oo many U.S. assisance programs
coninue o ocus on micro-level condiions while ignoring he broader condiions
or developmen and sabiliy.
Te second par o globalizaion worh noing is ha virually every communiy
across he Unied Saes now has an unprecedened web o links, ies, and con-
cerns wih oher pars o he world. Bu our oreign aairs insiuions are slow o
embrace and harness he deph o hese connecions a a ime when we desper-
aely need an eecive consiuency supporing sensible inernaional engagemen.
The rise of private philanthropy
Ocial governmen economic assisance is a smaller and smaller porion o he
overall developmen engagemen he Unied Saes provides. U.S. privae economic
engagemen wih developing counriesa combinaion o U.S. privae philan-hropic giving and U.S. privae capial fowswas $106.7 billion in 2009, $77.9 bil-
lion more han oal U.S. ocial developmen assisance ha year.5 A new generaion
o philanhropiss, such as Bill Gaes and Warren Buet, willing o pu billions o
dollars ino developmen has undamenally alered he landscape.
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By and large his is an incredibly posiive developmen, and i should allow he
U.S. governmen o beter ocus on areas where is srenghs are he greaes. Ta
said, i also poses new challenges in coordinaion, sraegy, and approach, and
boh privae donors and governmen ocials have much o learn rom each oher.
In general, governmen assisance programs need o be shied o beter doveail
wih he increasingly imporan role o privae philanhropy and privae capial.
We should avoid fighting the past war
Te Unied Saes dramaically alered many o is diplomaic and develop-
men pracices as a resul o massive invesmens over he las decade in Iraq,
Aghanisan, and Pakisan.6 All are deeply roubled engagemens and hisorical
anomalies, and he Unied Saes is unlikely o be engaged in such massive sae-
building exercises on a regular basis. Tis is why i would be a misake o overly
ocus our diplomacy and developmen on preparing or he las warno he nexone. Te Inernaional Aairs accoun needs o be reoriened wih an eye oward
he uure, wih more o an emphasis on crisis prevenion han sae rebuilding.
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Key budget areas
deserving protection
I is vial ha we no only ideniy areas where we can achieve reorm and savings
bu also dene core ineress ha deserve absolue proecionand perhaps even
greaer undingin he budge.
Tis paper refecs he views o is wo auhors, bu he working group endorsed
many core areas. All members agreed ha robus diplomaic and developmen
capaciy are in he naional ineres and represen ools ha he nex presiden,
whaever his pary, will nd indispensable. All working group members elsrongly ha even as specic cus are idenied, i is essenial o mainain or
srenghen a number o prioriy areas even during a period o budge sress.
Key areas deserving proecion are discussed below.
Universal diplomatic presence
Te Unied Saes has long ried o mainain diplomaic presence in every coun-
ry around he globe. Te ew excepions o his rule are he mos confic-orn or
despo-ridden saes where he Unied Saes is orced o manage is diplomaic rela-
ions rom aar or a relaively shor period o ime. Bu mainaining embassies, even
when hey are small oces, enails considerable expense boh in keeping up and
securing he physical embassy or consulae and in relaed sang coss and benes.
I would be easy o hand-pick a lis o counries where i is less han compelling or
he Unied Saes o mainain an embassy. Ye he working group agreed ha he
Unied Saes benes remendously rom universal represenaion, which under-
scores our willingness and abiliy o engage wih riends, allies, and even oes aroundhe world. Ending universal represenaion would make i ar harder o advance
Americas ineress a a ime when he inerconnecion o saes is deeper han ever.
In addiion, universal represenaion is also crucial in looking ou or Americans
ineress and saey as hey work and ravel in every corner o he world.
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Supporting development, democracy, and stability
Te sraegy behind economic and securiy assisance programs is compelling:
Te greaer he number o sable, ree-marke democracies around he world, he
more secure, prosperous, and dynamic our naion becomes. Direcly promoing
susainable economic developmen, democraic values, proessional civilian-conrolled miliaries, and well-uncioning civil socieies is hereore vial or he
Unied Saes even when oreign aairs spending will be cu.
Tere is a robus debae abou which assisance programs bes achieve hese
goals. Bu here is broad recogniion ha lasing developmen only works when
he recipien counry is genuinely commited o change and growh. Te Unied
Saes needs o keep supporing such long-erm developmen eors, bu i needs
o do a ar beter job ocusing such assisance in hose saes where i will help spur
lasing change, as is argued elsewhere in his repor.
Operating expenses
I is impossible o carry ou eecive diplomaic and developmen programs
wihou commensurae operaing expenses. Ta may sound sel-eviden, bu in
previous bous o budge cuting, Congress showed a endency o proec unds
or programs while slashing unds or people who design, oversee, and implemen
such programs. Figure 1 makes clear here is a sharp disconnec beween opera-
ing expenses and program unds a USAID.
Te resul o keeping operaing expenses ighly consrainedeven when
program expenses are expandingis o leave USAID as litle more han a con-
racing agency wih less and less experise and knowledge abou how develop-
men programs should be designed and where hey could bes be conduced o
advance he naional ineres.
Te compulsion o cu operaing expenses while proecing program unds is
undersandable. I is easier or policymakers o cu budges or sa han o cu
programs ha comba malaria, promoe economic growh, or deliver humaniar-ian assisance. Bu he las decade clearly augh us ha developmen works bes
when i is conduced wih good parners commited o reorm and heir own
people. Funding programs wihou he experise o manage hem is a recipe or
wased money, a lack o accounabiliy, and programs increasingly divorced rom
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FIGURE 1
Cutting the workforce but not the programs
USAID foreign service permanent workforce and USAID managed program dollars, 1970-2012
(inflation adjusted 2008 dollars)
$20
$15
$10
$5
$0
Billions
4
3
2
Workf
1970 1980 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Fiscal year
Program levels
Workforce
USAIDs permanent Foreign Service workforce declined 58% from 1970. Source: United States Agency or International Develop
pracical realiy. Tis repor spells ou areas where a more selecive approach o
invesmens could also achieve considerable operaing expense savings.
Crisis prevention
ecen insiuional reviews such as he Quadrennial Diplomacy and
Developmen eview ocused on improving he Unied Saes capaciy o preven
crises beore hey erup. Bu oreign aairs agencies need o do more.
Geting he agencies more adroi a crisis prevenion will require signican inves-
mens in coninued and new raining or personnel and a reshaping o he insiu-
ional ehos a he oreign aairs agencies, which are risk averse. Prevening crises
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requires sensible unding, srong eld-driven analysis, a willingness o inervene a
key momens, and a broad undersanding o he insiuional levers, pressures, and
incenives ha can be brough o bear on a poenial crisis siuaion.
I is welcome ha crisis prevenion is a key goal or our oreign policy esablish-
men on a rheorical level. ranslaing ha rheoric ino realiy, however, willrequire dynamic leadership and susained invesmens a a ime when even radi-
ional program areas are coming under he knie.
We now move o our recommendaions or reorm.
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Reform 1: Make bilateral economic
and security assistance more selective
Reorm 1: Make bilateral ecoomic ad security assistace more selective | Ceter or global Developme
Presidenial candidaes hroughou U.S. hisory have oen been quick o criicize
U.S. economic and securiy assisance abroad. Ye every single presiden since
World War II, once in oce, deended assisance programs or one simple reason:
Tey are an essenial ool o U.S. oreign policy. Equally, no presiden advocaed
reducing he U.S. diplomaic presence. As long as he Unied Saes remains a
global leader, is presiden will rely on diplomacy and developmen o help pro-
moe a world in which U.S. ineress and ideals can hrive.
Whoever occupies he Oval Oce in 2013 will have o employ boh diplomaic
and developmen ools or he Unied Saes o mainain is global leadership. Bu
boh ools need sharpening regardless o budge dynamics.
Tis approach or reorming economic and securiy assisance is based on
several principles:
Our assistance programs should be structured to reward and strengthen
countries that are reorm-minded, good allies, open to business, and willing to
make hard choices to advance their own people.We should look a all o our
economic and securiy assisance programs as invesmens in creaing he nex
generaion o donors and rade parners.
Working in ewer countries will allow us to increase investments in those making
promising reorms so that our aid makes a diference and helps cement lasting change.
And our considerable invesmen in mulilaeral insiuions lessens he need or our
bilaeral assisance programs o be acive in such a large number o counries.7
Aid programs that are ineicient, ineective, outdated, or better carriedout by other partners should be ended. Poorly perorming counrieshose
unwilling o implemen economic growh reorms or ha rejec principles o good
governance and human righsare no good invesmens or economic assisance
and should only receive securiy assisance when here is a compelling reason.
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Assistance programs should ocus on sectors in which the U.S. has a compara-
tive advantage over other donors. I is imporan o recognize wha he U.S. does
well, is more capable o doing han ohers, and should coninue doing. We believe
hese areas o comparaive advanage are humaniarian assisance, global healh,
and ood securiy. Cos savings ha we ideniy in his repor could equally be
used o ocus on hese areas, or o conribue o reducing budge decis.
The United States can only maintain its leadership position and stabilize its
budget by more eectively and selectively using diplomacy and development.
I canno, nor should i, rely primarily on he Deense Deparmen o projec
U.S. infuence and power.
While we believe in a universal diplomaic presence, we do no endorse universal
economic and securiy assisance. U.S. oreign assisance programs are oo disbursed
across counries and secors o be ruly eecive. Aid allocaions are oen made in
ways ha resul in doing a litle bi here and here in an eor o curry small mea-sures o diplomaic avor. Secor choices are oen allocaed no by wha we do well,
bu as an eor o placae key acors in Congress and he aid communiy.
As o scal year 2012 he Unied Saes provides economic assisance o 146 coun-
ries, wih 103 o hese receiving economic assisance and 134 receiving securiy
assisance. Tis means every counry on earh has roughly a 75 percen chance o
receiving U.S. economic or securiy assisance, which only underscores he undis-
ciplined naure o he aid porolio.
O oal economic assisance allocaed in scal year 2012, one counry,
Aghanisan, consumes roughly 15 percen o U.S. economic assisance. Te op
10 recipiens represen abou 50 percen o oal bilaeral aid. Te remaining 50
percen is allocaed among 93 counries, some receiving as litle as $492,000.
Selective economic assistance
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Principles to guide more focused and selective U.S. economic assistanceSquaring wo compelling needsachieving cos savings and mainaining eec-
ive U.S. global engagemenmay seem a odds, bu as long as we concenrae
our resources where hey are likely o be mos eecive and reduce hem where
hey are no, we can achieve boh.
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Te Presidens Policy Direcive on Global Developmen, which sudied he role
o U.S. economic assisance, called or greaer ocus and seleciviy in delivering
economic assisance, which we dene here as he ollowing 150 bilaeral accouns:
Developmen Assisance; Global Healh Programs; Economic Suppor Fund;
Assisance or Europe, Eurasia, and Cenral Asia; and he nonemergency porions
o he Food or Peace accoun. Te adminisraion advocaes a more seleciveapproach or hese programs, bu progressas refeced in he 2012 and 2013
budgesis limied. Aid programs were eliminaed in only ve counries in 2012,
bu none are zeroed ou in 2013.
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Congress and the White House oten dier on oreign policy and spending priorities, and these dierences are regu-
larly reected in the annual appropriations bill or the State Department, Foreign Operations, and Related Agencies.
As Congress increasingly has been unable to pass oreign policy authorizing legislation, it has come to rely almost
exclusively on its critical role in the appropriations process to assert congressional preerences and to inuence policy.
A casual review o any recent State-Foreign Operations bill shows that the bills now include more policy directives
than spending. A 2011 study calculated that Congress included specic country and sector directives or 66.5 per-
cent o total bilateral economic assistance in the 2010 bill. Just 3 percent o the Economic Support Fund was let to
the discretion o the secretary o state.
When Congress includes directives at the country and sector level, it makes it more difcult or any administra-
tion to respond exibly and to adjust its approach to changes in conditions on the ground. The Arab Spring is only
one recent example where increased exibility could have improved the U.S. response. USAID missions are otenorced to engage in extended contortions to make their country programs match up with congressional directives
dictated rom thousands o miles away. And sector earmarkswhether or programs in water, agriculture, micro-
nance, or other issuesrun counter to the concept o designing development approaches in shared partnership
with the host country and holding the host country accountable or results.
Congress moved in 2011 to reduce the number o earmarks and change requirements to recommendations, using
sot earmarks rather than hard ones. Sot earmarks are statements o preerred policy and approaches rather
than directives. Yet some appropriators quickly expressed rustration that the administration did not treat all o
their requests as directives.
In short, Congress still needs to move urther away rom micro-managing the oreign assistance accounts. At thesame time, administrations need to do a better job o communicating with the Hill and engaging Congress in a
genuine dialogue on policy approaches.
Congress as policy activist or micro-manager?
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Managing inernaional programs in he ace o anicipaed deep budge cus can
be approached in wo ways: a reducion in all programs and counry allocaions
or a major reorienaion o approach and ocus. Te ormer would spread he pain
evenly bu mos cerainly dilue eeciveness. Good programs and prioriy coun-
ries would ace he same cus as bad programs and parners o lesser imporance.
And such an approach cerainly would no accomplish high-impac developmenwhile perpeuaing a major weakness o he U.S. approach: rying o do oo much
in oo many places wih limied eec.
Te alernaivea major reorienaionis poliically challenging. Bu making
our aid programs more selecive and ocused would make hem ar more eec-
ive and beter-posiioned o achieve he changes ha bes serve our naional
ineress. We should concenrae on eeciveness while mainaining he U.S.
commimen o be a world leader.
I should be noed ha achieving greaer seleciviy where aid is provided and greaerocus on programmaic comparaive advanage will be impossible i Congress con-
inues o heavily earmark unds a he counry and secor level. Earmarks, wih heir
associaed requiremens o noiy Congress in order o reprogram unds, grealy
reduce fexibiliy and responsiveness and ulimaely undermine aid eeciveness.
Te ollowing are recommendaions o beter guide budgeing around
seleciviy and ocus.
Be clear on why aid is provided and when it will end
Incorporate benchmarks into development strategies. Te Unied Saes does
no have exi sraegies or is economic and securiy assisance programs. I is
indeed dicul o end aid allocaions o longime recipiens even when counries
are clearly ready o ransiion o aid. Perversely, many in governmen eel ha
ending assisance sends a negaive message abou he bilaeral relaionship raher
han signaling he enormous progress made on he ground.
Having a plan wih clear benchmarks and goals would allow boh Washingonand assisance recipiens o ocus on wha needs o be accomplished raher han
simply judging he U.S. commimen by aid unding levels. When he counry
mees is goals, he wihdrawal o aid demonsraes ha he aid was successul
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and U.S. engagemen should evolve ino oher areas like rade and commerce. Te
benchmarks should be clearly ideniable and measurable, and compor wih he
principle o counry ownership, developed joinly wih he recipien counry.
Delineate development and diplomacy. Developmen and diplomacy are power-
ul ools o U.S. global engagemen. Tey should be complemenary bu disinc.As hey have become confaed, i is more dicul o end programs ha are under-
perorming or are no longer necessary.
Te Quadrennial Diplomacy and Developmen eviews use o he erm develop-
men diplomacy is a case in poin. Tis urn o phrasewhich conveys he view ha
developmen is a ool o diplomacy raher han a ool o U.S. oreign policymakes i
much harder o be selecive abou where we direc boh economic and securiy assis-
ance. Almos every diploma wans o mainain an aid program in he counry where
hey are posed, eeling ha i will buy good will. Bu we need a ar more sraegic
approach where leadership in Washingon, in consulaion wih Sae and USAID o-cers in he eld, direcs aid o hose selec locales where i will really make a dierence.
USAID shows a greaer, albei sill limied, willingness o end aid programs and
close missions han Sae. American diplomas need o be sucienly alened ha
hey can represen our naional ineress in a oreign capialeven i ha counry
no longer seems like a wise place o pu increasingly scarce aid dollars.
A he same ime, diplomacy can be used o advance developmen, especially
when developmen hinges on changes in governmen policieswhich is oen
he case. Tese are opporuniies o ampliy orms o U.S. engagemen and should
become hallmarks o he relaionship beween developmen and diplomacy.
Create a State Department strategic und. In some counries assisance or
purely diplomaic reasons is jusied, such as in a counry ha is a poor develop-
men parner bu plays a key role in combaing errorism. In hese cases he Sae
Deparmen should have a separae aid accoun. Te curren Economic Suppor
Fund, or ESF, is co-managed by Sae and USAID and, while is unds can suppor
developmen aciviies, is primary purpose is no developmen. ESF was creaed
o suppor sraegically imporan counries ha migh no oherwise qualiy oraid. Tis disincion has been los as ESF has become a general po o unds given
regardless o wheher a counry receives oher economic assisance. Over ime
many counries have received boh ESF and developmen assisance.
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Te ESF und should be eliminaed and replaced wih a Sae Deparmen accoun
or sraegic counries. Curren ESF unds used or developmen aciviies should be
ranserred o he Developmen Assisance accoun wih he remaining unds con-
siuing he new Sae und.8 Te new und should be allocaed by counry o cover
increased amouns or he curren Ambassador Funds, wih ambassadors making he
key recommendaions on how bes o use hose unds o accomplish U.S. objecives.9
Focus on U.S. comparative advantage: Health, food security, and
humanitarian assistance
Almos every observer o U.S. aid programs believes hey lack ocus, and here is
nary an aciviy in which he Unied Saes does no have a program. Tis is why he
adminisraion and Congress mus joinly provide leadership ocusing bilaeral pro-
grams where here is a comparaive advanage. Cos savings idenied in his repor
could be used o urher srenghen U.S. programs.
We ideniy healh, ood securiy, and humaniarian
assisance as areas in which he Unied Saes has
considerable resources, experience, and experise.
Tey should orm he oundaion o secor pro-
grams. Furher, U.S. aid programs should work in
no more han hree secors in each counry o more
eecively ocus resources. We do no believe his
approach devalues he principle o counry owner-
ship bu insead pus U.S. resources where hey will
have he greaes impac.
Healh is a global public good rom which all
naions bene, and he Unied Saes is a long-
sanding leader in healh including disease research,
echnology, pharmaceuicals, and general medical
sciences. I has increased healh aid in he iner-
naional aairs budge nearly six-old, rom $1.38
billion in 2001 o $7.85 billion in 2011. In somerecipien counries i dwars he assisance oher
donors provide. Te Global Healh Iniiaive, an
Obama eor o inegrae PEPFA and oher
healh programs under a more holisic umbrella,
The Millennium Challenge Corporation is a leader in part-
nering with countries around the principle o country
ownership. It has also taken on work in key sectors, such as
inrastructure, that other U.S. agencies have largely aban-
doned. Initially designed to work with countries poised to
make signicant gains in economic growth, it has selected arange o aid partners along the income spectrum with some
compact countries decades away rom aid graduation.
The MCC model is a good complement to a redesigned U.S.
aid system and should continue. But it should rethink its
compact partners and ocus on helping countries graduate
completely rom U.S. economic assistance.
Further, i the presidents 2013 budget request is approved,
MCC unding will have remained at $898 million or three
straight yearsquite a distance rom the $5 billion President
George W. Bush promised. At this level the MCC will need to
be even more selective about compact partners.
The Millennium Challenge Corporation
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has enjoyed biparisan suppor. In addiion, U.S. privae philanhropy is deeply
involved in he healh secor and boh U.S. public- and privae-secor involvemen
is sensible, and allows or greaer cumulaive impac in he long run.
Promoing global ood securiy is also a U.S. prior-
iy consisen wih is hisorical leadership in hiseld. A growing global populaion projeced o
reach around 9 billion in 2050,10 changing dies ha
require increased agriculural inpus, volailiy in
uel prices, and he uncerainy o climae change all
conribue o he need o increase producion, sa-
bilize prices, and do so in a susainable ashion. Te
Unied Saes enjoys an elaborae nework o agricul-
ural universiies, research insiuions, and privae-
secor eniies ha bring a wide range o experise
o bear on hunger and promoing lasing economicgrowh hrough ood securiy.
Equally, he Unied Saes excels in responding o
humaniarian disasers wheher naural or manmade.
Humaniarian assisance should remain a he ore-
ron o aid eors given he U.S. miliarys reach and
capaciy, he generosiy o he American people, and
he poenial or building goodwill. Te Unied Saes
is generous in providing such assisance and is also
excepionally good a iin no small par because
emergency assisance programs are largely spared
he hicke o bureaucraic regulaions ha oen bog
down developmen programs. Te American public
deeply suppors such humaniarian programs, and hey refec our aih and belie
ha we can assis he leas orunae in heir momen o need.
And while we see healh, ood securiy, and humaniarian relie as our greaes
comparaive advanages, his does no mean ha none o hese areas should be
improved, as is discussed laer wih regard o ood aid programs and PEPFA.
Economic growh has been and should remain a U.S. prioriy. I he ranks o
he impoverished are o be signicanly reduced, i will come hrough growh.
Bu economic growh coninues o be an elusive goal or many counries wih
Suggesting that our greatest comparative advantage
or bilateral assistance is in health, ood security, and
humanitarian assistance needs to be taken in context.
saying that these three areas should be the greatest o
or bilateral economic assistance unding. The environ
education, microenterprise, democracy activities, or a
other activities are not unimportant.
We remain committed and inuential in these sectors th
our bilateral aid and also by contributions to multilatera
agencies such as the Global Environmental Facility and
Global Partnership or Education. And as the United Sta
consolidates its oreign assistance portolio, it should co
channeling more unds through multilateral organizatio
maintain these commitments and to do so more eectiv
Bottom line: We are urging ewer activities in ewer
countries, with much sharper lines drawn between wh
we are trying to achieve through bilateral assistance,
multilateral institutions, and work that could be bette
supported by other donors or institutions.
What about other sectors?
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disagreemens among donors and parner counries on he assormen o
inervenions ha will enable i.
We are no challenging he goal o economic growh in ideniying healh, ood secu-
riy, and humaniarian assisance as areas o U.S. comparaive advanage. aher we
nd hese hree areas are elds where he Unied Saes has he resources, experience,and experise o conribue o economic growh.
Use data to make decisions about aid
Te link beween aid allocaion and a recipien coun-
rys need and capaciy is oen weak because poliical
dynamics and budge process ineria infuence aid
decisions. Like an old ship wih oo many barnacles,
aid budges are no horoughly scrubbed rom yearo year or even decade o decade. New programs are
sared even as oudaed ones linger on pas heir pur-
pose. Counry allocaions are adjused up or down
based on las years level. Unless a major even is
occurring, such as he Arab Spring, adjusmens are
oen largely peruncory.
Clearly he lis o counries receiving U.S. economic
assisance needs a much more eecive scrub han i
has been given o dae, and ha review needs o be
daa-inormed while sill recognizing poliical and
securiy imperaives.
ecen adminisraion atemps o be more selecive
are uneven. Te 2012 budge eliminaed develop-
men assisance o ve counries and closed hree
missions. Te 2013 reques reduces unding o a
number o counries, mosly in PEPFA bilaeral
unds, bu here is litle evidence ha hose cusrefec a sysemaic assessmen o counry need or
capaciy.12 And no USAID mission closures were
proposed as par o he 2013 budge reques.
In our country-by-country analysis o where we should direct
economic and security assistance, we weighed a series o data
and actors on the recipient countrys political climate, busi-
ness environment, need, willingness to tackle corruption, and
amount o aid and investment received rom other sources.
We considered the ollowing indicators against a countryscurrent assistance level: gross national income per capita
2010; Freedom in the World reedom status 2011; Human
Development Index 2011 rank; Transparency International
Corruption Perceptions Index 2011; Doing Business Index
2012; population living on less than $2 per day; Worldwide
Governance Indicators Rule o Law percentile rank 2010; WGI
Government Eectiveness percentile rank 2010; net ofcial
development assistance per capita; net oreign direct invest-
ment; and military expenditure as a percent o GDP.15
In addition, we included a broad range o more subjectiveconsiderations, including short- and long-term strategic
interests, political support, and the traditional strength o the
bilateral relationship.
No one indicator, piece o data, or piece o political intel-
ligence is sufcient or a wide-angle view, but these indica-
tors provide enough insight on need and capacity to make
inormed decisions through a process that is data-inormed
without being mechanistic. The outcome is a categorization
o countries that sheds light on where aid should be ocused
because it has a greater probability or success and impact,
where aid is likely necessary but may yield limited results, and
where aid is probably not a wise investment.
The actors we weighed
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In general, unding was reduced, someimes dramaically, in a number o counries o
allow or he creaion o a und o mee he needs o he Arab Spring and o allow or
deb reducion or Sudan. Bu hese cus were oen across he board and no ocused.
Many inernaional donors are also reexamining heir programs during his period
o budge auseriy and greaer concern or eecive aid. Several donors scaledback aid recipiens and secors. Sill ohers decided o pull ou o or grealy reduce
heir presence in middle-income counries.13
Doing so presens a moral dilemma. While hese counries may be growing, some
sill have sizeable impoverished populaions.14 Insead o rewarding hem or imple-
mening good policies and making heir own commimen o developmen, some
donors are cuting o assisance ha could be counerproducive. A he same ime
i is myopic o coninue aid wihou recognizing hese counries growing abiliy o
ake on more responsibiliy or heir own developmen. aher, a counrys income
should guide he ype and ocus o aid, puting some on a seeper pah o ransiionrom aid and a reoriened relaionship ouside o an aid ramework.
Wha ollows is our selecion o counries ino wo broad caegories: coninued or
expanded assisance, and curailed assisance. Tere is room or healhy debae on our
selecions, and hey were oen debaed a lengh as we pu he repor ogeher. We
oer his as an illusraive approach in he hope ha i leads o a more inormed dis-
cussion o resource allocaion and a sharper debae abou where our aid dollars work.
Continued or expanded economic assistance
Seleciviy and ocus, as called or in he Presidens Policy Direcive on Global
Developmen, means scaling back he number o recipiens and reocusing
resources or greaer impac. As a resul, even as aid o some counries is reduced
or phased ou, here may be good reasons o expand aid elsewhere in a more
ocused manner. A number o counries in he coninued or expanded assisance
caegory could graduae rom U.S. assisance wihin 5 o 10 years.
Wihin his caegory we ideni y prioriy invesmen counries and hose or
which we have limied expecaions.
Prioriy invesmen counries are he highes prioriy or economic assisance
because hey exhibi boh need and a capaciy and commimen o develop-
men. Some are also included because o heir sraegic imporance o he Unied
Saes, bu hey sill demonsrae a reasonable capaciy o bene rom assisance.
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In some cases we argue or invesmens based on immediae confic prevenion
eors or o ensure a counry ha enjoyed signican previous posconfic inves-
mens does no slide backward.
Te32 prioriy invesmen counries by region include:Priority investment countries
AricaBenin; Burkina Faso; Cote dIvoire; Ghana; Kenya; Lesotho; Liberia; Mali*;
Mozambique; Senegal; Sierra Leone; South Sudan; Tanzania; Zambia
East Asia and the Pacifc Burma; Indonesia; Mongolia; Philippines
Europe and Eurasia Georgia; Macedonia; Moldova
Near East Lebanon; Tunisia; West Bank and Gaza
South and Central Asia Bangladesh; Kyrgyz Republic; Nepal
Western Hemisphere Dominican Republic; El Salvador; Guatemala; Honduras; Peru
*We made this categorization prior to an attempted coup and military seizure o power in Mali. The lack o a democratically elected leaderwould afect our categorization o Mali and its associated unding levels.
Counries or which we have limied expecaions will likely coninue o receive
signican assisance largely based on shor-erm imperaives including securiy
and oher geopoliical concerns bu where here are red fags wih he bilaeral
relaionship or he behavior o he recipien counrys governmen. Tis assisance
will probably no drive developmen, given he poor supporing environmen on
he ground, and we do no recommend increased assisance o hese counries
unil condiions change. aher developmen assisance could be replaced by a
new Sae Deparmen sraegic und, as we suggesed earlier.
In this section we propose countries that should be given expanded assistance,
those whose assistance should be kept level, and those whose assistance can be
constrained. Importantly, these judgments are based on their current and requested
levels o unding. So by saying that Benin is a priority investment country and that
we have limited expectations or the Democratic Republic o the Congo, we are not
saying that Benin is more important than the Democratic Republic o the Congo orshould receive more unding than the Democratic Republic o the Congo. We are
arguing that based on current unding trends, conditions on the ground, and the
likelihood o assistance being eective, Benins relatively small allocation could be
larger while Nigerias considerable unding deserves to be kept at.
More about our methodology
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Te 21 limied expecaion counries by region include:
Limited expectation countries
AricaBurundi; Democratic Republic o Congo; Ethiopia; Guinea; Malawi; Niger;
Rwanda; Uganda; Zimbabwe
East Asia and the Pacifc None
Europe and Eurasia Kosovo; Ukraine
Near East Egypt; Iraq; Jordan; Yemen
South and Central Asia Kazakhstan
Western Hemisphere Bolivia; Cuba; Ecuador; Haiti; Mexico
Curtailed assistanceWihin his caegory we ideniy counries ha can be pu on a one- o ve-year
aid graduaion rajecory, counries wih small or expensive-o-operae programs,
and poor perorming counries.
Te graduae in one o ve years caegory includes counries ha are well posi-
ioned o graduae rom U.S. assisance in he near o medium erm based on
declining need and growing capaciy. In some cases his would be a more expedi-
ious cessaion o aid while in ohers i would be more gradual. In eiher case he
relaionship should ransiion rom one largely based on aid o ha o rade and
oher areas o cooperaion. For emerging donors his may mean exploring some
rilaeral cooperaion aciviies.
Te 18 counries we rank as graduaing in one o ve years by region include:
Graduate in one to ive years countries
Arica Botswana; Namibia; Nigeria; South Arica
East Asia and the Pacifc China; Thailand
Europe and EurasiaAlbania; Armenia; Cyprus; Ireland (International Fund); Montenegro;
Poland; Russia
Near East None
South and Central Asia India; Sri Lanka
Western Hemisphere Barbados and Eastern Caribbean; Brazil; Colombia
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In a number o counries, aid programs are oo small o have much eec, con-
duced in naions where our ineress are largely peripheral, or oo expensive o
operae given heir size (see he nex secion on eliminaing small and oudaed
programs and closing and consolidaing missions or a discussion on mission
closure). Some counries in his caegory should have heir aid reduced while
ohers should see i managed rom a regional mission wih a de minimus counrypresence. Inclusion in his caegory is no a commenary on a counry s general
willingness o reorm bu speaks more direcly o making ocused invesmens ha
will aec a large number o people.
Te 11 counries in he small, expensive-o-operae, or peripheral-ineres counry
programs by region include:
Small, expensive-to-operate,
or peripheral-interest country programs
Arica None
East Asia and the Pacifc Laos; Marshall Islands; Micronesia; Papua New Guinea; Timor-Leste
Europe and Eurasia Bosnia and Herzegovina; Serbia
Near East Morocco
South and Central Asia None
Western Hemisphere Guyana; Jamaica; Paraguay
Poor perorming counries do no srike us as good developmen parners,
because o poor governance, corrupion, or an absence o a commimen o
developmen. In his period o limied resources, U.S. aid dollars could be beter
spen elsewhere. Generally humaniarian aid and assisance o democraic and
civil sociey groups are more appropriae in hese counries. PEPFA unding
should also be coninued. In some cases, he privae secor could ake over eco-
nomic aid unil he governmen shows a greaer willingness o parner wih he
Unied Saes in a developmen relaionship. Oher counries could bene rom
Saes sraegic und. Pakisan and Aghanisan, boh special cases wih high
sraegic ineres bu numerous governance issues, should see reducions unilrelaions ge on more solid ooing.
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Te ollowing are he 21 counries we rank as poor perorming counries by region:
Poor perorming countries
AricaAngola; Cameroon; Chad; Djibouti; Madagascar; Mauritania; Somalia;
Sudan; Swaziland
East Asia and the Pacifc Cambodia; Vietnam
Europe and Eurasia Azerbaijan; Belarus
Near East None, with caveats
South and Central Asia Aghanistan; Maldives; Pakistan; Tajikistan; Turkmenistan; Uzbekistan
Western Hemisphere Nicaragua; Venezuela
Eliminate small and outdated programs and close and consolidate missions
End outdated programs. Some programs have oulived heir purpose. An exam-
ple: Te Assisance o Europe, Eurasia, and Cenral Asia, or AEECA, accounencompassed wo earlier pos-Cold War aid accouns or Easern Europe and
ormer Sovie republics. As o 2012 i includes unding o $627 million or 22
counries, many o which have atained middle-income saus.
Te presidens 2013 reques would eliminae AEECA, bu i does no produce
considerable savings. Insead AEECAs unding is reduced by jus 18 percen
and he remaining unds are ranserred o oher accouns such as he Economic
Suppor Fund, he Inernaional Narcoics Conrol and Law Enorcemen
accoun, and he Nonprolieraion, Ani-errorism, Demining, and elaed
Programs accoun. As noed in he previous secion, many AEECA counries
could have heir assisance ended in he near o medium erm. Some counries o
sraegic ineres can have programs unded hrough Saes sraegic und.
Oher small and oudaed programs, including he Inernaional Fund or Ireland
and Assisance o Schools and Hospials Abroad, are largely conduced in coun-
ries ha are very well o, and should be eliminaed.
Close and consolidate missions.Eliminaing small programs goes hand in handwih closing and consolidaing missions. According o he F Y 2013 reques, 19USAID missions had adminisraive coss exceeding 15 percen o he value o
aid provided.16 Counries wih missions above his hreshold warran urher
scruiny o ensure cos eeciveness. USAID program unding in hese counries
should eiher be increased in he case o prioriy counries or he mission
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should be closed or consolidaed in he case o graduae and peripheral ineres
counries. In some regions such as Easern Europe and Lain America, aid dollars
have declined bu sang levels appear o no have ollowed sui. A number o
aid missions in hese regions can be closed and i necessary consolidaed ino a
regional oce. In many cases i may be worhwhile o replace ull aid missions
wih a developmen atach or counselor.
Closing missions has immediae coss including ending leases and erminaing he
employmen o Foreign Service naionals. Tese coss are emporary and exraordi-
nary. As such hey should be included in a separae accoun or his specic purpose.
Under our review he ollowing 11 missions could be considered or closure over
he nex ve years: Albania, Angola, Brazil, Djiboui, Jamaica, Morocco, Nicaragua,
Paraguay, Serbia, Sri Lanka, and imor-Lese.
Develop trilateral cooperation with emerging donors
Several middle-income aid recipiens have sared assisance programs o heir
own in souh-o-souh cooperaion. Noable examples include India, Souh Arica,
and o a lesser exen Brazil, all o whom receive U.S. economic assisance bu
are also donor naions hemselves. As discussed elsewhere in his repor, hese
counries are in a posiion o ake over more o he programs he Unied Saes
currenly unds. A he same ime i would be wise or he Unied Saes o say
engaged wih hem as emerging donors.
One way o do his is hrough rilaeral cooperaion, in which a donor counry, an
emerging donor, and a developing counry work ogeher. Tis oers many oppor-
uniies o improve eeciveness and reduce coss. I can be used o leverage und-
ing rom emerging donors, capialize on exising parnerships, and ake advanage
o regional experise. I can also help emerging donors develop aid approaches
ha conorm o bes pracices and Paris/Accra/Busan principles, especially coun-
ry ownership, ransparency, and local capaciy building.17
Economic assisance o India, Souh Arica, and Brazil hrough he developmenassisance accoun oals $156.1 million. PEPFA unding, which all hree receive,
is discussed in anoher secion o his repor. As aid unding is reduced, missions
in each could be scaled back accordingly, or closed and replaced wih a develop-
men atach, a USAID ocial atached o he U.S. embassy or embedded in he
hos counrys aid agency.
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Selective security assistance
U.S. securiy assisance, like economic aid, should be beter ocused around clear
objecives and direced oward counries where i can make a lasing dierence.
For he purposes o his repor, we dene securiy assisance as Foreign Miliary
Financing; Inernaional Miliary Educaion and raining; Nonprolieraion, Ani-errorism, Demining, and elaed Programs; Inernaional Narcoics Conrol and
Law Enorcemen; Peacekeeping Operaions; and Pakisan Counerinsurgency
Capabiliy Fund accouns as provided in he Sae and Foreign Operaions
appropriaions bill. Te Sae Deparmen oversees his assisance, hough he
Deense Deparmen carries ou he acual provision o some o his aid and
raining. Tis repor does no include miliary assisance budgeed purely hrough
he Penagon because i is no a componen o he 150 accoun.
Te Unied Saes provides securiy assisance or a variey o purposes and in
dieren poliical environmens: raining securiy orces, nancing miliary equip-men, working wih law enorcemen on he illegal narcoics rade, and cooper-
aing on nonprolieraion issues. In a large number o cases, aid is provided o
improve miliary-o-miliary conacs.
Ye oo oen we provide securiy assisance wihou a sensible discussion o is
meris. Tis occurs or wo reasons.
Firs, he Sae Deparmen, hough ormally in charge o overseeing his porolio,
does no inves in he human capial and raining o ensure i has he experise
o do his job properly. As a resul, Sae Deparmen approval and auhorizaion
o securiy assisance hrough hese accouns is oen pro orma. Tis, combined
wih a general congressional endency o ignore scruiny o anyhing broadly
dened as deense, means ha our securiy assisance programs and heir respec-
ive goals, accomplishmens, and shorcomings receive very litle oversigh.
Second, oreign miliaries and he securiy assisance o hose miliaries are no
examined wih he counrys governance in mind. Far oo oen governance is
reaed as an aerhough in providing securiy aid. Also, hard quesions abou
wheher such assisance will really help improve governance are oo oen noconsidered excep peruncorily.
Yes, having miliary-o-miliary conacs ha are enhanced by U.S. miliary
raining is oen useul and can build imporan relaions and some measures
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o lasing rus. Bu i is equally rue ha he U.S. axpayer should no be
underwriing securiy assisance o a counry whose leadership is openly despoic
or o naions o litle or no sraegic signicance. Securiy assisance will be money
poorly spen i a recipien counry is wildly corrup, undemocraic, or unwilling o
embrace even he mos basic reorms oward ree markes and ree governmen.
In shor, securiy assisance should no escape scruiny given he push or greaer
budge auseriy. And, similar o economic assisance, we argue ha securiy assis-
ance is spread oo hinly across oo many counries. I would be ar more eecive i
concenraed in high-perorming counries and key sraegic concerns while reduced
in more peripheral naions ha have proven hemselves
poor parners. Seleciviy has no been he byword o he
U.S. governmen approach o dae: In 2012, 134 counries
received securiy assisance hrough he 150 accoun.
We applied a similar seleciviy process o securiy assis-ance as o economic aid, ideniying where aid should
be mainained or expanded and where i may be limied
or oudaed. Some counries represen greaer securiy
challenges and signicance o U.S. naional ineress han
ohers. And in imes o budge auseriy, i is imporan o
ocus on where assisance will have he greaes impac.
In many cases, bu cerainly no all, counries ha are
good parners on he developmen ron are also places
where we should be srenghening he hos counrys
miliary capaciy and proessionalizaion. Tis also makes
i more likely ha counries will graduae compleely
rom he need or securiy and economic aid over ime.
Te wo sides o he aid ledger are oen relaed.
Developmen rarely works amid insabiliy and confic,
and assisance ha proessionalizes securiy orces can
conribue o beter governance. Beter governmens, sup-
pored by economic assisance, are also ar more likely obe dependable and sable securiy parners over ime.
Wha ollows is our selecion o counries ino wo
broad caegories: coninued or expanded assisance,
One hundred and twenty-six countries received
International Military Education and Training, or IMET, in
scal year 2012. The program seeks to proessionalize or-
eign militaries and to strengthen military-to-military ties.
While the 2013 budget request shows a $3 million decline,
only one nationGuinea-Bissauis zeroed out. Whats
more, wealthier nations such as Argentina, Bahrain, Brazil,
Poland, Portugal, Saudi Arabia, and Turkey also receive IMET
grants even though they are quite capable o covering the
training costs o their military personnel.
Countries remain on the IMET list or a simple reason: It
makes them eligible or reduced rates on education and
training associated with the Foreign Military Sales and
IMET programs. (The Foreign Military Sales program is
the United States government-to-government method
or selling U.S. deense equipment, services, and train-
ing.) IMETs goal is to improve the proessionalism o
oreign militaries. It is not, nor should it be, to provide
discount rates to countries that can easily aord these
services. We recommend that IMET be provided to onlythose countries with the greatest need and that the link
between IMET and the purchase o training at dis-
counted rates be severed.
All over the map: InternationalMilitary Education and Training
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and curailed assisance. As wih economic assisance here is room or debae on
our selecions. We oer his illusraive approach in he hope ha i leads o a more
inormed discussion o resource allocaion.
Continued or expanded assistance
Wihin his caegory we ideniy prioriy invesmen counries and hose or
which we have limied expecaions.
Prioriy invesmen counries should be given a higher prioriy or securiy assis-
ance han heir curren budge allocaions because o heir sraegic imporance,
heir need or such aid, and heir capaciy o achieve lasing sabiliy. Decisions
on securiy assisance need o be aken wihin a broader ramework o eecive
governance and he probabiliy ha such assisance will conribue o sabiliy and
enhanced parnerships on securiy issues.
As noed wih economic assisance, prioriy is deermined in relaion o cur-
ren unding levels. So while Albania is ranked as a prioriy counry and Egyp
a limied expecaions counry, his is no o say Albania is more imporan han
Egypsimply ha unding or Albania deserves a sligh increase while Egyp
should probably remain fa.
Te 45 prioriy invesmen counries by region include:
Priority investment countries
AricaBenin; Botswana; Burkina Faso; Ghana; Kenya; Liberia; Mali*; Nigeria;
Senegal; South Arica; South Sudan; Tanzania; Uganda; Zambia
East Asia and the Pacifc Indonesia; Mongolia; Philippines; Thailand; Timor-Leste
Europe and EurasiaAlbania; Armenia; Bosnia and Herzegovina; Bulgaria; Georgia; Macedo-
nia; Moldova; Russia; Turkey
Near East Israel; Lebanon; Libya; Morocco; Tunisia; West Bank and Gaza
South and Central Asia Bangladesh; Kyrgyz Republic; Nepal
Western Hemisphere
Colombia; Dominican Republic; El Salvador; Guatemala; Honduras;
Mexico; Panama; Peru
*We made this categorization prior to an attempted coup and military seizure o power in Mali. The lack o a democratically elected leader
would afect our categorization o Mali and its associated unding levels.
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Counries or which we have limied expecaions will likely coninue o receive
signican assisance largely based on shor-erm imperaives, including securiy and
oher geopoliical concerns. Bu here are a number o red fags wih he peror-
mance o some o hese governmens.
Te 27 limied expecaion counries by region include:
Limited expectation countries
AricaBurundi; Democratic Republic o Congo; Djibouti; Ethiopia; Gabon;
Guinea; Mauritania; Mozambique; Rwanda; Sierra Leone; Somalia
East Asia and the Pacifc Vietnam
Europe and Eurasia Azerbaijan; Kosovo; Ukraine
Near East Algeria; Egypt; I raq; Jordan; Yemen
South and Central Asia Kazakhstan; Tajikistan
Western Hemisphere Bolivia; Ecuador; Haiti; Jamaica; Paraguay
Curtailed assistance
Wihin his caegory we ideniy counries ha should be graduaed rom assis-
ance in he near erm, hose peripheral o U.S. securiy ineress, and poor per-
orming counries.
Counries ha should graduae in one o ve years are hose doing well enough o
no longer rely on U.S. assisance. Inclusion in his caegory does no mean ha oher
ypes o miliary-o-miliary or securiy cooperaion should be negleced.
Te 30 counries ha couldgraduae in one o ve years include by region:Graduate in one to ive years countries
Arica Mauritius; Namibia
East Asia and the Pacifc China; Malaysia; Singapore; Taiwan
Europe and EurasiaCroatia; Czech Republic; Estonia; Greece; Hungary; Latvia; Lithuania; Malta;
Montenegro; Poland; Portugal; Romania; Serbia; Slovakia; Slovenia
Near East Oman
South and Central Asia India
Western HemisphereArgentina; The Bahamas; Barbados and Eastern Caribbean; Brazil; Chile;
Costa Rica; Uruguay
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Counries peripheral o U.S. securiy ineress oen have small programs ha call
ino quesion wheher he level o unding will produce major resuls. Inclusion in
his caegory is no a commenary on he counrys general willingness o cooper-
ae on securiy issues.
Te 15 counries in he peripheral caegory by region include:
Small, expensive to operate,
or peripheral-interest country programs
AricaCape Verde; Central Arican Republic; Comoros; The Gambia; Lesotho;
Malawi; Sao Tome and Principe; Seychelles; Togo
East Asia and the Pacifc Marshall Islands; Samoa
Europe and Eurasia None
Near East None
South and Central Asia None
Western Hemisphere Belize; Guyana; Suriname; Trinidad and Tobago
Poor perorming counries show litle regard or governance and human righs.
In many cases securiy assisance is meried or sraegic consideraions, bu
policymakers should be aware o he perverse eec o reinorcing undemocraic
enrenched elies. Inclusion on his lis does no mean all securiy aid should be
cu bu ha here is room o reduce or revamp or beter resuls.
Te 17 poor perorming counries by region include:
Poor perorming countries
AricaAngola; Cameroon; Chad; Guinea-Bissau; Republic o Congo; Sudan;
Swaziland
East Asia and the Pacifc Cambodia; Laos
Europe and Eurasia None
Near East Bahrain
South and Central Asia Aghanistan; Maldives; Pakistan; Sri Lanka; Turkmenistan; Uzbekistan
Western Hemisphere Nicaragua
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Reform 2: Transition PEPFAR
to country ownership
Te Presidens Emergency Plan or AIDS elie, or PEPFA, is he larges
commimen by any naion in hisory o comba a single disease, and U.S. gov-
ernmen spending sill consiues a majoriy o global donor unding o comba
HIV/AIDS. Mos PEPFA unds are dedicaed o reamen, esing, and build-
ing up local healh sysems.
PEPFA is he elephan in he room when i comes o U.S. inernaional assisance
prioriies because even hough he scal year 2013 budge reques or global healhalls 3.8 percen below curren levels, his remains he larges oreign aid accoun a
$7.85 billion. Te scal year 2013 reques redirecs some o he unding radiion-
ally direced oward PEPFA o
he Global Fund o Figh AIDS,
uberculosis and Malaria. Te
Global Fund, in conras o
PEPFA, is a mulilaeral insiu-
ion suppored by a range o gov-
ernmens and privae donors.
Beween scal years 2004 and
2012, he Unied Saes spen
more han $38.6 billion on bila-
eral HIV/AIDS programs, dwar-
ing commimens in many oher
areas including unds dedicaed
o economic growh, agriculure,
and he environmen.
Bu i is equally clear ha he need
remains vas. More han 30 million
people coninue o live wih he
virus, he majoriy in sub-Saharan Source: Authors calculations.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
FIGURE 2
Funding the fight against AIDS
U.S. funding for bilateral global HIV/AIDS programs in constant dollars,
FY2004-FY2012
2004 2005 2006 2007 2008 2009 2010 2011
U.S. PEPFAR funding (in millions)
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Arica where healh sysems are poor.18 PEPFA has made an enormous dierence,
and he adminisraion recenly highlighed some imporan achievemens:19
Te Unied Saes direcly suppored lie-saving anireroviral reamen or
more han 3.2 million men, women, and children worldwide as o Sepember
30, 2010, up rom less han 2.5 million in 2009. Te Obama adminisraion hasurher pledged o pu 6 million people on reamen globally by 2013.
PEPFA direcly suppored anireroviral prophylaxis o preven moher-o-
child HIV ransmission or more han 600,000 HIV-posiive pregnan women in
scal year 2010, resuling in more han 114,000 inans born HIV ree.
Trough is parnerships wih more han 30 counries, PEPFA direcly sup-
pored 11 million people wih care, including nearly 3.8 million orphans and
vulnerable children, in scal year 2010.
PEPFA direcly suppored HIV counseling and esing or nearly 33 million
people in scal year 2010.
Debaes abou PEPFA are oen conenious and poliically charged. Suggesing
changes or aleraions in he program is challenging because no one wans o appear
less han ully commited o an eor ha so clearly saves lives. Case in poin: Te
adminisraions proposal, as embodied in he 2013 budge reques, o increase
resources o he Global Fund o Figh AIDS, uberculosis and Malaria while reduc-
ing direc unding o some PEPFA counries received a mixed welcome.
A he same ime, PEPFA may be uninenionally skewing broader developmen
by ocusing on a single disease. U.S. assisance dominaes he healh secor in he
counries ha receive he mos PEPFA unding, and i has proven challenging o
gure ou how bes o secure lasing and susainable developmen in key PEPFA
recipien counries while simulaneously combaing HIV/AIDS.20
Te quesion or PEPFA is how and a wha speed he program can be convered
rom wha is essenially an emergency humaniarian programeven hough
i was no always labeled as sucho a long-erm and genuinely susainableapproach o healh ha s wihin a broader developmen model.
I was wih his in mind ha Presiden Barack Obama announced he Global
Healh Iniiaive in 2009 wih an emphasis on aking a more comprehensive
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approach o healh issues wri large. Middle-income counries would seem he
logical place o sar or sharing he nancial load, bu he adminisraion did no
specically emphasize ha approach.
Te 2008 reauhorizaion o PEPFA also sressed he need o build more susain-
able healh oucomes and sysems. Tis included plans o iniiae ParnershipFrameworks wih PEPFA parner counries o srenghen counry capaciy, own-
ership, and leadership o HIV/AIDS programs. Tese muual nonbinding agree-
mens ouline he expeced arc o U.S. governmen suppor and how hos-counry
invesmens and policy changes can posiion governmens o assume primary
responsibiliy or HIV/AIDS in he uure.21
Parnership Frameworks provide a ve-year join sraegic ouline or coopera-
ion beween he U.S. governmen, he parner governmen, and oher parners
on service delivery, policy reorm, and coordinaed nancial commimens.
Wihin his imerame, hos counries will be beter siuaed o conrol hemanagemen, sraegic direcion, perormance
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