gather it is a little more than $632 million just for South Vietnam. Is that right?

Dr. HANNAH. Let me answer preliminarily and Bob specifically. When the President's budget came forward before the cease-fire, the figure that was put in for supporting assistance in Indochina was $732 million. Well that was supporting assistance worldwide. When the cease-fire came along, no one could tell exactly what ought to be the program for assistance in individual countries, so the decision was made to divide $732 million in two pieces. One hundred million dollars was for supporting assistance. The definition of supporting assistance is those programs that are designed to achieve short range political and military purposes. That was the congressional definition. In recent years it has been Vietnam, South Vietnam, Laos, Cambodia, Thailand, Jordan, Israel, Malta, Spanish bases, et cetera.

A request of $100 million was made for supporting assistance. The reconstruction, rehabilitation, humanitarian assistance, in the three Indochina countries, South Vietnam, Laos, and Cambodia is $632 million.

Mr. Nooter indicated there had been some thinking that the sum may be too small for South Vietnam. It is $475 million for South Vietnam.

Senator PELL. Of that fund what rough percentage would be handled through voluntary agencies?

Mr. NOOTER. Of the $632 million?

Senator PELL. Yes.

Mr. NOOTER. About 4 million in Cambodia would be all that we have specifically, although it could be that during the year some additional amounts in Vietnam's refugee program might be made available. Senator PELL. How much will be handled through international organizations?

Mr. NOOTER. None of that amount.

Senator PELL. Right.

Mr. NOOTER. Some portions of it will be handled through multilateral funds or arrangements as we do in both Cambodia and Laos but that would not be through multilateral organizations as such.

SOVIET AND CHINESE ECONOMIC AID TO NORTH VIETNAM

Senator PELL. How much economic aid is North Vietnam getting from the Soviet Union and China? What is your rough estimate? Mr. NOOTER. The last estimate I saw on that about a year ago was something like $500 million a year in economic aid. I do not know how good those figures are but that was the intelligence estimate which I saw.

Senator PELL. I did not realize it was that much.

AID EMPLOYEES AND CONTRACT WORKERS IN VIETNAM

How many AID employees and contract workers are there in Vietnam now?

Mr. NOOTER. We will have 680 AID direct hire and, as we call it, PASA, or other Government employees, in Vietnam by June 30. That number, incidentally, is down quite a bit from the beginning of the year. It was about 979 at the beginning of the year. Contractor employees will be 128 at the end of the year.

U.S. AID TO NORTH VIETNAM

Senator PELL. Could you give me any idea or the committee any idea what your thoughts are with regard to aid to North Vietnam. Will that be handled through you or through who and how much will it be. Mr. NOOTER. I think it is premature to talk about amounts. I would expect that it would be handled through AID and in connection with the Indochina request, probably in addition to the Indochina request. that is before you this morning.

Senator PELL. Do you see North Vietnam getting as much as South Vietnam, more or less?

Mr. NOOTER. I do not think I would want to speculate on that at this time. I do not think it would be useful, nor in fact has any decision been made on that point.

Senator PELL. Perhaps a decision has been made, but you are not at liberty to release it.

Dr. HANNAH. On this one, Senator, as you know, the economic commission made up of the three representatives of the United States and three representatives of North Vietnam met for 2 or 3 weeks in Paris and then was interrupted. Maury Williams who is Deputy Administrator of AID is the U.S. Chairman. They met all week last week and they start meeting again today and it was anticipated this would take about 15 days of meetings when they started. They have had five or six and so it is hoped he may get back within the next 2 weeks.

NO IMPOUNDMENT OF APPROPRIATED FOREIGN AID FUNDS

Senator PELL. Have any funds that have been appropriated for foreign aid been impounded?

Dr. HANNAH. No.

Senator PELL. No.

Because we do find when they are for domestic purposes they do get impounded and we wish the impoundment ax fell evenly.

ADMINISTRATION POSITION ON S. 848

Do you have any reaction to a bill introduced suggesting if either side in Southeast Asia break the treaty that the aid be withdrawn until restored by the President? Are you familiar with S. 848? There is no reason why you should be?

Mr. NOOTER. Yes, I think it would probably be better to submit an administration position on that since it has implications that go beyond the AID program.

Senator PELL. I would be grateful if you would. [The information referred to follows:]

EXECUTIVE BRANCH COMMENT ON S. 848

The Executive Branch opposes this amendment. If enacted at this time, it would apply to only two parties: the Government of South Vietnam and the Royal Lao Government. It could not apply to the Government of North Vietnam until and unless the U.S. establishes a program of assistance for that country. Also it probably would never apply to the Viet Cong, the Pathet Lao or to the insurgents who may sign ceasefire agreements in Cambodia because these parties are unlikely to be offered U.S. assistance. Thus, whether intended or not, S. 848 would not apply uniformly to all parties in Indochina.

It would be an unfair and inappropriate remedy for alleged violations of the Peace Agreement and the ICCS Procotol: unfair because it does not apply to all parties involved; inappropriate in that one of the four signatories to the Paris Agreement would appear to be called on to attempt to monitor the performance of the other three signatories even as the ICCS attempted to carry out the same task. The authority of the ICCS could thus be undermined by such an outside monitoring element.

The Bill is also unduly vague. It would apply to parties to a future agreement affecting Cambodia, but we do not know the terms of such an agreement or even the identities of all the parties that might be involved.

The exception for humanitarian assistance administered and distributed under international auspices or by United States voluntary agencies would not be sufficient to meet the needs of refugees, war victims and orphans of South Vietnam. The withholding of bilateral humanitarian assistance, administered by the United States Government or by the Government of the Republic of Vietnam, based on a finding which could be overturned only by an Act of Congress, would serve to penalize these refugees, war victims and orphans whose needs are not met by multilateral or U.S. voluntary agencies.

QUESTIONS FOR THE RECORD

Senator PELL. There is a rollcall vote going on so if you will excuse me I will leave some questions for the record that maybe you could respond to and I thank you for coming up. There will be another open ssesion of the committee at 10 a.m. tomorrow morning to hear nongovernmental witnesses. If there are any particular questions you would like asked of Mr. Paddock, be sure that we have them before then so they can be asked. I thank you very much for coming up. The meeting is recessed until 10 a.m. tomorrow morning.

[Additional questions and answers follow:]

RESPONSES OF DR. HANNAH TO QUESTIONS SUBMITTED BY THE CHAIRMAN FOR THE

RECORD

1. S. 2026 would authorize a total of $718 million for programs in several specific subject areas in the next fiscal year.

Question a. Could these funds be used on either a loan or a grant basis? What are AID's intentions as to a breakdown between loans and grants if the bill is approved?

Answer. Yes, the funds could be used on either a loan or grant basis. We currently plan to use $350.2 million for development loans and $367.8 million for development grants.

Question b. How will AID's activities under the authority of S. 2026 differ from current programs if the bill is approved? Won't you continue to do what you already planned to do—how does this approach compare with AID's current plans?

Answer. AID's activities will still be based upon the FY 1974 Congressional Presentation. Therefore, they will not change under the authority of S. 2026. Also since the $718 million provided in the bill is very close to the amount requested by AID the program can be expected to correspond closely to the splits among functional categories as shown on page A-3 of the Congressional Presentation.

Question c. Will AID personnel levels be any different under S. 2026 than is contemplated under the current program? If so, how?

Answer. We have not yet studied in detail personnel requirements under S. 2026. Management of the Export Development Credit Fund will have the most significant personnel implications. Other programs and directions proposed in the bill will tend to accelerate staff changes now underway in A.I.D. For Fiscal Year 1974, we would not expect any substantial change from the staffing levels contained in our presentation.

2. S. 2026 would authorize an export subsidy program which would finance exports of about $1 billion a year for the next five years.

Question a. What government agency would administer this program? ExportImport Bank, Commerce, A.I.D.?

Answer. It is the position of the Executive Branch that the Fund be managed by AID or a successor agency. However, the Fund should be administered in competition with the Export-Import Bank. All decisions should be based on a determination that Export-Import financing is inappropriate and Fund financing is appropriate, with attention to the different policy objectives of the two programs. The Fund's policy is to aid the lower income countries by assisting imports from the U.S. Exim's policy is simply to aid in financing U.S. exports. Question b. What interest rate would be charged on the exports—is any minimum rate required?

Answer. The minimum rate specified in the Bill is 2% during a ten-year grace period, and 3% during pay-out-the same as section 201 (d) of the Foreign Assistance Act. In appropriate cases loans could be made on harder concessional terms that those ordinarily extended under subsection 201(d) of the Foreign Assistance Act, if that appears to be appropriate, particularly in connection with the establishment of a reserve which can be drawn upon in cases of bad debts. The minimum rates currently applied are consistent with the degree of concessionality which the Agency feels is appropriate in lending to the poorer countries, and with the OECD recommendation on terms for development loans extended to the poorer countries.

Question c. How much would be needed each year to subsidize a 3% interest charge?

Answer. The amount of interest subsidy required depends on assumptions about the terms of the loans, maturity of the loans extended, the interest rate at which borrowing can occur, as well as the number of years the fund is run and the amount of loans made each year. Under the assumptions that:

(a) $1 billion worth of loans are made annually for five years,

(b) the interest rate for borrowing is 7%,

(c) that loans are made for a 40 year period with a 10-year grace,

(d) that the interest rate for lending is 2% during the grace period and 3% thereafter,

then the interest subsidy would reach a maximum of $250 million per year. The amount of annual subsidies needed under these terms would start from a level of $50 million and gradually build up, reaching their maximum on the fifth year and remain constant for a number of years and decline thereafter.

Question d. How can you be sure that the exports financed will net additional exports instead of sales that would have taken place anyway?

Answer. Existing experience with development assistance has demonstrated that exports financed under the AID programs which have been tied to procurement in the US have been largely additional to other exports. A recent study by the RAND Corporation, commissioned by AID, suggests that the degree additionality for economic assistance programs in many countries is close to 100% and may average approximately 90%. The additionality is indeed higher in the poorer of the developing countries, where the US share of commercial exports is typically very lower. Thus, it is expected that the program would generate in large part additional exports instead of sales that would have taken place anyway.

Question e. Why should the US encourage poor countries to go into debt further when the debt burden of these countries is becoming more difficult to carry? Answer. The Fund will not aggravate the debt burden of the poorer countries— it will alleviate the burden. Economic development of these poorer countries requires the inflow of a substantial amount of foreign capital. It has been demonstrated that such capital inflow makes a positive contribution to economic development. To obtain this increased flow of capital, less developed countries have had to borrow on hard terms in the private capital markets or to finance their imports through export credits extended by developed countries on non-concessional terms, as their capital needs far outstripped the amount of concessional economic assistance in the last few years. As a result of having to borrow at non-concessional terms, the debt burden of some of these countries has increased quite rapidly. These countries still have substantial unmet development needs. and they will be required to borrow on either hard or concessional terms to meet these needs. The proposed program, by providing capital at concessional terms, would make it possible for developing countries to obtain their capital inflow on terms which are commensurate with their ability to repay.

Question f. Do you envision this as a commercial trade program or as a development assistance program- -or both?

Answer. Both. The Fund would be administered with particular emphasis on economic assistance objectives, to promote economic development of the poorer

countries. At the same time, the program would have the objective of increasing U.S. exports to lowest income countries. As noted above, U.S. commercial exports to the lowest income countries are quite limited. In some countries as the U.S. bilateral assistance program has declined we have also seen the decline of U.S. imports by these countries. We fully expect that the Fund could mutually benefit the U.S. and the poorer countries of the world.

[Additional AID statements follow:]

STATEMENT OF THE HONORABLE JAROLD A. KIEFFER, ASSISTANT ADMINISTRATOR FOR POPULATION AND HUMANITARIAN ASSISTANCE, AGENCY FOR INTERNATIONAL DEVELOPMENT, JUNE 26, 1973

Mr. Chairman and Members of the Committee, last year, the A.I.D. Administrator created the Bureau for Population and Humanitarian Assistance with a view to seeking more of a focus for the humanitarian aspect of A.I.D.'s wideranging work. Obviously, organization and reorganization are only limited tools in accomplishing objectives, and change takes time, but he felt that there ought to be a clearer thrust within A.I.D. in the matter of directly helping to improve the well-being of the peoples of the developing world, both in a developmental sense and in times of special trouble. He gathered into the new bureau three general areas of A.I.D. activity:

(1) Coordination of the mechanisms and resources employed by the U.S. to provide quick life-saving help in the immediate aftermath of natural or man-made disasters in the developing world.

(2) The function of seeking to find ways of strengthening and widening the cooperative role of private and voluntary groups in helping to improve the wellbeing of the least favored peoples abroad.

(3) The direction and coordination of all activities and resources authorized under Title X of the Foreign Assistance Act relating to the provision of assistance in coping with the growing population problems of the developing world. Today I am pleased to report on our progress in carrying out these activities. In the course of the last year we have organized the three functions into a coordinated unit and have redirected and strengthened the Bureau's programs within the context of A.I.D.'s new emphases, namely: (1) to encourage improvements in the lives and well-being of the least favored populations within the developing countries we assist; (2) to recognize in our operating style that the developing countries in many hoped for ways are increasingly taking responsibility for setting their own priorities and conducting their own activities; and (3) to encourage the people and leaderships of the developing countries to comprehend the essential relationship between what they hope to accomplish through development and the growing numbers of people that will have to be served by the resources and capacities reasonably likely to be available in their economic, social, and governmental systems in the critical years ahead.

Let me now turn to three specific areas of activity.

I. FOREIGN DISASTER ASSISTANCE

When the A.I.D. Administrator placed the coordination responsibility for immediate post-disaster assistance in this Bureau, his objective was to strengthen A.I.D.'s capablity to assure that whatever the U.S. Government and people undertake to do in responding to a disaster should be accomplished speedily, effectively, and in a well-coordinated way.

The American people have shown repeatedly their desire, both governmentally and non-governmentally, to help stricken people. During the past two fiscal years. A.I.D. alone administered disaster assistance amounting to $533 million, including food aid. Many additional millions in dollars, goods, and services were provided by private groups.

Obviously, each disaster requires its own specialized type of response. Some disasters are sudden; some are slow-moving. Some can be handled well by private groups; others, for logistical or special circumstances, require a governmental response. The important thing is that when governmental and private decisions are made to help a stricken people, Clear and well-coordinated methods are devised for the priority supplies and services to move speedily and that the action be adequate to the size of the problem in that case.