U.S. moving ahead on foreign aid reform


WASHINGTON - With countries from Bolivia to Bangladesh competing for a rich new flow of foreign aid from the United States, the Bush administration and Congress are moving ahead with a fundamental overhaul of programs to assist developing nations.

The new approach - an experiment intended to create competition among applicants, who must demonstrate their worthiness to receive financing - has won support in Congress. But it has already drawn criticism from those who say that some recipients of aid under existing programs may be shortchanged.

This month, the board of the new Millennium Challenge Account met for the first time to lay the groundwork for grants that President Bush has promised will total $5 billion annually by 2008. In the first year, perhaps no more than 15 nations will win awards.

All but five countries in Latin America, for example, are ineligible for the Millennium Challenge because their per capita incomes are too high.

At the same time, because of cuts proposed in overall foreign aid to the region, some of these nations, such as El Salvador and the Dominican Republic, could experience cuts of 10 percent in development aid in the fiscal year 2005, which begins Oct. 1.

African countries such as Senegal and Ghana that respect civil liberties stand to benefit under the new program, according to budget analysts; the war-ravaged nations of Sudan and Somalia, however, do not.

The new account, like a second new program, the president's five-year, $15 billion global effort to fight AIDS, is up against foreign aid spending that is constrained by tight budgets and by unusually heavy outlays on assistance to Iraq and Afghanistan.

Critics of the Millennium Challenge Account are warning that it may produce inequities, handsomely rewarding a handful of nations while leaving some of the most economically needy countries to compete for much smaller amounts of traditional aid.

Advocates say the two initiatives are prototypes in a broad administration effort to retool the foreign aid system, which spends nearly $18 billion a year on projects as diverse as feeding programs and state-to-state economic support.

Rep. Henry J. Hyde, an Illinois Republican who is the chairman of the International Relations Committee and an important backer of the new approach, wants to place a performance-driven Republican imprint on such aid.

Congressional distaste for foreign aid, which usually suffered in favor of spending on domestic programs, has eased greatly since the Sept. 11 terrorist attacks, which highlighted the dangers posed by weak and neglected states, Hyde's aides said.

"For too long, U.S. foreign assistance programs have been adrift without an overall strategy, and without reasonable standards of accountability," Hyde said. The Millennium Challenge Account and the AIDS fund can serve as models for future aid reforms, he said.

But some advocates for development and relief agencies accuse the administration of turning its back on some of the neediest countries to pay for the new strategy.

Mary E. McClymont, the chief executive officer of InterAction, the largest alliance of American-based relief groups such as CARE and Save the Children, said the administration, in its new budget proposal, has cut $400 million from traditional aid and development accounts - including money for child survival and family planning - to defray its new costs.

"The administration's budget is robbing Peter to pay Paul," she said. "The Millennium Challenge Account will fund select, top-performing countries. That is good. But what about all the other poorer, weaker countries that could become failed states?"

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