velopment of the countries to the south of us, and who is ever-increasingly conscious of how important, to our own well-being, their own well-being has become. Should you consider it necessary, I would be willing and ready to appear in person before your committee to testify on the subject outlined.

Please accept my thanks for giving me this opportunity of presenting my views on this matter.

Respectfully yours,

MANUEL NORIEGA.

Senator BENNETT. The next witness is Mr. H. R. Pape, general manager, Altos Hornos de Mexico, S. A., Monclova, Coahuila, Mexico. Mr. Pape, although not present, is in Washington and since we will meet this afternoon we will pass over his name at this point.

We will now call Mr. M. H. Maiwandwal, counselor of the Afghanistan Embassy. Will you give your full name, for the record? STATEMENT OF MOHAMMED H. MAIWANDWAL, COUNSELOR OF AFGHANISTAN EMBASSY, WASHINGTON, D. C.

Mr. MAIWANDWAL. My name is Mohammed H. Maiwandwal. I am counsel of the Afghanistan Embassy.

Senator BENNETT. Do you have a prepared statement?

Mr. MAIWANDWAL. Yes.

Senator BENNETT. Would you like to read it?

Mr. MAIWANDWAL. Yes.

Senator BENNETT. You may proceed.

Mr. MAIWANDWAL, Mr. Chairman, I welcome this opportunity to appear before your committee and tell you something of the successful working relationship between my government and the Export-Import Bank of Washington, and of the Helmand Valley project, which is of such vital importance to my country.

The Royal Kingdom of Afghanistan lies at the crossroads of Asia, with Iran on the west, Pakhtunistan on the west and south, and the Soviet Union on the north.

From around 2500 B. C. when Aryan tribes entered the land now called Afghanistan and developed what scholars believe may prove to be the seat of Aryan culture, tide after tide of invasion swept over the country, mainly as great movements of conquest from the north and west seeking the riches of India.

Cyrus the Great, Darius, Alexander, Genghis Khan, all crossed the rugged Afghan barrier to India. The present kingdom emerged in the 18th century from a long struggle for national independence and internal security and, after fighting three wars with the British, Afghanistan threw off the last vestiges of foreign control immediately following World War I. At about the same time the movement to integrate and modernize the country, which had begun about the turn of the century, was intensified and, although it suffered a severe check toward the end of the twenties in consequence of internal political disturbances, has been gaining strength ever since.

Today Afghanistan still stands at one of the world's great crossroads. Our ceaseless struggle for independence, the heritage of intense individualism which goes with the history of a pastoral people in a mountainous land, and our strong Moslem faith have combined to make us one of the most freedom-loving nations of the world.

Our task in carrying out our obligations to ourselves and to the free world is enormously complicated by the fact that we are a landlocked

country with extremely limited natural resources and a culture and way of life which even today knows little of western progressive methods. It is in that connection that the full significance of our relationship with the Export-Import Bank emerges.

During the war years Afghanistan was able to accumulate a sizable amount of foreign exchange. Careful plans were laid to use this asset to initiate a basic program of economic development. The attack was to be a two-pronged one. In the north industries were to be developed by state support of private enterpreneurs in such fields as cotton textiles, sugar manufacture, soapmaking, coal mining, and so forth.

In the south along the river valley of the great Helmand, which rises in the northeast of Afghanistan and cuts through the country to the southwest some 500 miles to the border of Iran, a great agricultural area was at long last to be brought back from the carnage left by the passage of the hordes of Genghis Kahn some 700 years before. The program was begun simultaneously in the north and south, and a contract was made with the Morrison-Knudsen Co. of the United States for design and construction of the Helmand Valley irrigation works. Construction went forward on all fronts, with particular success in the north, where the projects were localized and the problems easier to cope with.

In 1949 it became apparent that no matter how courageously the Afghan people might sacrifice current living standards in an attempt to pull themselves up by their own bootstraps, foreign exchange resources of the country were not sufficient for the job. Yet, to maintain essential political and economic balance in the country, both developments had to go forward. It was at that time that an application was made to the Export-Import Bank of Washington which resulted, in late 1949, in the conclusion of a loan agreement for $21 million to cover the cost of United States equipment, materials, and services required to construct two major dams and the completion of a major system of canals in the central section of the Helmand River Valley.

Under the terms of that loan agreement, the Arghandab Dam has been completed, which forms an irrigation reservoir capable of storing about 350,000 acre-feet of water or enough to cultivate over 130,000 acres in the Arghandab Valley.

The Kajakai Dam is virtually completed and forms a reservoir with a gross capacity of 1,900,000 acre-feet which can be used for irrigation of about 700,000 acres in the main Helmand Valley.

Finally, the Boghra Canal system is nearing completion to service 150,000 acres of agricultural land in the center of the valley. This great accomplishment in less than 3 years has been a cooperative venture with the heaviest burden of actual work falling upon the American contractor, Morrison-Knudsen, and with an Afghan Valley Development Board receiving substantial technical assistance from TCA. Besides providing the funds, the role of the Export-Import Bank has been one of constant checking on overall planning and detailed inspection and guidance of the work.

The equivalent of over $40 million has gone into this great project thus far-nearly half of that sum from the Government of Afghanistan-and the works today stand as a symbol of a successful AfghanAmerican attack on the basic problem of underutilization of natural

resources in the Middle East and Asia. One-fourth of the land area of Afghanistan will be directly affected by the project and approximately one-sixth of its 12 million people. The present works represent the first of three basic investment stages and, when completed, this great river development will not only go far toward putting Afghanistan well on the road to economic stability and progress, but will stand as everlasting proof of American-Afghan friendship and goodwill.

The contribution of the bank to this endeavor cannot be measured in money terms. Afghanistan lacks technical and administrative skills required in the design and inplementation of such a project, and only through close and continuous work with the staff and officers of the bank, both in Washington and in Kabul, has a beginning been made in overcoming the many problems which harass such an undertaking. During the last 3 years 3 major bank missions have been sent to Afghanistan for detailed talks with Cabinet officials working directly on the project. In a world in which economic progress is a requisite for world peace and internal security of small nations strug gling to work out their own destiny, the direct expression of the United States interest in the welfare of its allies could scarcely find finer expression than in the assistance which is being rendered Afghanistan in this project. Thank you very much, Mr. Chairman.

Senator BENNETT. Thank you. I have just one observation. This is a loan made to the Government of Afghanistan rather than to a private organization?

Mr. MAIWANDWAL. It is to the Government of Afghanistan.
Senator BENNETT. Do you have any questions?

Senator PAYNE. If I understand it correctly, that has brought about the possibility of the utilization of about 1,200,000 acres of land there that otherwise would not have been of productive use?

Mr. MAIWANDWAL. It is for that purpose.

Senator PAYNE. It is helping now to elevate and bring up the standard of living in the country?

Mr. MAIWANDWAL. It is helping.

Senator BENNETT. Thank you very much, Mr. Maiwandwal.

I should like to put into the record at this point the statement of Dr. Antonio Tonello of the Instituto Mobiliare Italiano, Washington, D. C., which has been submitted by him for the record without other testimony.

(The material referred to follows:)

STATEMENT OF DR. ANTONIO TONELLO, INSTITUTO MOBILIARE ITALIANO, WASHINGTON, D. C., ON LOAN FROM THE EXPORT-IMPORT BANK OF ITALYSEPTEMBER 1951

INTRODUCTION

Negotiations for a credit from the Export-Import Bank of Washington on behalf of the Italian economy, for purposes of production and exports, were motivated by Italy's dire necessity-the country having issued from the war to face grave hardships-to increase as rapidly and as much as possible its exports of industrial goods. In view of the decline in the payment balances of some items and the increased necessity for importing foodstuffs, the exportation of manufactured goods became a matter of prime urgency to the Italian economy in point of its foreign trade.

An increase in the exportation of industrial goods was found to be technically feasible provided it were possible to have the immediate availability of the needed raw materials in the required quantities. The productive capacity of the factories-notwithstanding the serious damage wrought by the war-was still

considerable; but, as the country is naturally lacking in almost all the raw materials called for in modern industry, it had to assure above all those industries which were direct or indirect exporters of raw materials essential for manufacturing goods intended for export. It is also true that industrial equipment likewise was in need of modernization-aside from the necessity of rebuilding manufacturing facilities which had been destroyed in the war-but the most urgent need was that for replenishing the supply of raw materials.

Within the framework of the operations of the Export-Import Bank of Washington-founded in 1934 and organized in the year 1945 as a permanent public institution of the United States-transactions of this scope appeared practicable as a means of meeting the requirements of Italy's immediate postwar economic conditions. The purpose of the Bank was, in fact, "to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States or any of its Territories or insular possessions and any foreign country or the agencies or nationals thereof." As a general rule, the bank granted credits only in order to finance the purchase of materials and machinery produced or manufactured in the United States and pay for the technical services of American concerns and American citizens. Financing by the Export-Import Bank comprised two types of operations: Credits granted to individual exporters from the United States for the purpose of facilitating the sale abroad of specific materials or equipment; and credits granted to a foreign government, bank, or firm, made available for a given period of time in order to facilitate the purchase of particular materials, equipment, and services in the United States. As a rule the Export-Import Bank required that a bank or foreign government provide a guaranty in all such operations.

The fact that the bank in Washington was in a position to tender its services to foreign governments, to branches and divisions of foreign governments, as well as to foreign concerns and foreign nationals, was a circumstance of keen interest from the Italian point of view, inasmuch as thereby the services of the bank became available to Italian industry, either direct or through the agency of the Italian Government or any agencies that the latter should designate.

Through the good offices of the Government of the United States, which had repeatedly and tangibly evidenced its desire to hasten the economic reconstruction of Italy, the Italian Government communicated with the Export-Import Bank in Washington and obtained from the latter, in the year 1947, on behalf of Italian industry, the offer of a loan of approximately $100 million.

Final negotiations together with the undertaking and handling of the loan were thereupon committed to the Istituto Mobiliare Italiano in Rome, an official entity, which has been functioning as a medium-term credit institution in Italy since 1931.1

At the time of the International Credit Conference sponsored by the Associazione Bancaria Italiana (Italian Banking Association), the Istituto Mobiliare Italiano took occasion to prepare a memorandum setting forth the concepts underlying the loan of the Export-Import Bank and the operations therewith connected, the principles and procedures governing such operations, and the results that had been obtained.

The Istituto Mobiliare Italiano views the action of the Export-Import Bank as offering an encouraging example of international cooperation in banking, in helping to finance the exports of one country-the United States of America-by granting credits that are made available to the import industries of another country-Italy-through the facilities of a specialized banking institution in each of the respective countries.

Because the results have been truly satisfactory-even from the broad and farsighted viewpoint of the Export-Import Bank which, in fact, was able at once to envisage the practical procedures conducive to proper utilization of the loan it had granted the Istituto Mobiliare Italiano, with a mind to one of the problems posed for consideration of the International Credit Conference (among the agenda dealing with the financing of international commerce), trusts that the memorandum herein submitted by way of information will merit the attention of those who attended the Conference. The present memorandum is furthermore intended as a tribute from the Istituto Mobiliare Italiano to the distinguished representatives from the credit and financial world of the various countries who met in Rome on the occcasion of the International Credit Conference and, very particularly, as a tribute to the Export-Import Bank of Washington and to its directors, whose efforts and initiative are a conspicuous example of that international economic cooperation the encouragement of which has been one of the objects of the International Credit Conference.

IMI's regulations were set forth in Decree-Law No. 891 of Sept. 11, 1947.

CHAPTER I. PRELIMINARY UNDERSTANDINGS

The economic situation of Italy at the end of World War II is too well known to warrant making even a summary description of it here.

Even before the war, the amounts paid by Italy to foreign markets corresponded 70 percent to imports of raw materials and industrial supplies and 20 to 25 percent to foodstuffs, with only the remainder going for finished consumption goods. On the other hand, among exports, industry and crafts accounted for approximately 45 percent, foodstuffs 20 to 25 percent, while invisible exports represented another 20 to 25 percent and industrial raw materials perhaps 10 percent.

As stated in an official report of the Italian Government it is clear that "a long blockade war, like that suffered by Italy, and the spoliation and destruction engendered by the conflict could not but lead to serious disproportion in a balance of payments such as the type described. Imports of foodstuffs and industrial raw materials were in fact due to suffer a heavy increase because of the scarcity of supplies and the disorganization of production. On the other hand, only a limited number of exports of agricultural and industrial raw materials could rapidly be resumed. Other exports were either dependent upon the importation of raw materials (finished and semimanufactured industrial products) or were hampered by production and transportation difficulties (orchard and garden products)." "Even more serious for the Italian economy than the destruction suffered was the impossibility of purchasing the large quantities of foodstuffs which the situa tion demanded and the raw materials needed to revive that segment of the nation's productive facilities which had escaped the ravages of the war."

The funds which had early been made available by the Allied Military Authorities and the Foreign Economic Administration (FEA) had, on the other hand, been only sufficient to take care of current needs in essential consumer goods.

A substantial primary contribution to Italy's economic recovery, however, was made by the UNRRA which supplied the national economy with consumer goods and raw materials amounting to $21.5 million in 1945, $380 million in 1946, and $131 million in 1947.

With UNRRA aid approaching its close and this organization, moreover, being unable in fact as well as by virtue of its object and scope to provide-in addition to actual consumption requirements-all that was needed by industry (particularly for the production of export goods), the Italian Government was soon faced with the necessity of finding other channels through which to obtain urgently needed hard foreign currency.

It was against this background of pressing difficulties which then assailed the Italian economy that the Italian Government undertook to address itself to the Export-Import Bank of Washington (Eximbank) in the hope of securing from that bank the financing that would enable it to take the first major steps toward a solution of these problems.

In the spring of 1946, the Export-Import Bank took an important initial step on Italy's behalf by granting a loan of $25 million for the purchase of cotton in the United States.

The loan made it possible for one of the largest sectors of Italian industry to procure working supplies, to bring back production to a normal level and to resume exports.

A far wider development, however, was to follow the repeated contacts occurred between the Italian representatives and the officials of Eximbank: on January 14, 1947, at the time that Italy's Premier Alcide de Gasperi was visiting Washington, Mr. William McC. Martin, Jr., president of the Export-Import Bank of Washington, informed Hon. Campilli, the Italian Minister for Foreign Trade, that the bank's board of directors had agreed to set aside the amount of $100 million to be used for purposes of a fund to finance Italian industry.

This loan should have been used for purchases within the United States in order to promote Italian exports, the increase in which was expected in time to provide the funds for repayment of the loan.

In the preliminary conversations between the representatives of the Italian Government and the Eximbank officials it was agreed that the bank, rather than deal directly with the Italian concerns operating in specific sectors of industry as would be determined, would agree to have an Italian financial institution assume the task of supervision and administration of the loan as well as ascer taining the use to be made of same by the industries and industrialists concerned. For this purpose the representatives of the Italian Government designated the Istituto Mobiliare Italiano (IMI).

Report of the delegation of the Italian Government to the V General Council of the UNRRA (United Nations Relief and Rehabilitation Administration), Geneva, August 1946.