Part XII

THE FOREIGN ASSISTANCE AND RELATED AID PROGRAMS

A. The Foreign Assistance Program

643. SUPPLEMENTAL APPROPRIATIONS FOR THE MUTUAL SECURITY PROGRAM FOR FISCAL YEAR 1961: Public Law 87-14, Approved March 31, 1961 (Excerpt)1

FUNDS APPROPRIATED TO THE PRESIDENT

MUTUAL SECURITY

DEVELOPMENT LOAN FUND

For an additional amount for advances to the Development Loan Fund, as authorized by section 203 of the Mutual Security Act of 1954. as amended,2 $50,000,000, to remain available until expended.

644. "IF OUR FOREIGN AID FUNDS ARE TO BE PRUDENTLY AND EFFECTIVELY USED, WE NEED A WHOLE NEW SET OF BASIC CONCEPTS AND PRINCIPLES": Message From the President (Kennedy) to the Congress, March 22, 1961 (Excerpts)

This Congress at this session must make possible a dramatic turning point in the troubled history of foreign aid to the underdeveloped world. We must say to the less-developed nations, if they are willing to undertake necessary internal reform and self-help-and

175 Stat. 23.

2 Text in American Foreign Policy: Current Documents, 1959, p. 1607.

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H. Doc. 117, 87th Cong. (text as printed in the Department of State Bulletin, Apr. 10, 1961, pp. 507-514).

to the other industrialized nations, if they are willing to undertake a much greater effort on a much broader scale-that we then intend during this coming decade of development to achieve a decisive turnaround in the fate of the less-developed world, looking toward the ultimate day when all nations can be self-reliant and when foreign aid will no longer be needed.

If our foreign aid funds are to be prudently and effectively used, we need a whole new set of basic concepts and principles:

1. Unified administration and operation-a single agency in Washington and the field, equipped with a flexible set of tools, in place of several competing and confusing aid units.

2. Country plans a carefully thought through program tailored to meet the needs and the resource potential of each individual country, instead of a series of individual, unrelated projects. Frequently, in the past, our development goals and projects have not been undertaken as integral steps in a long-range economic development program.

3. Long-term planning and financing-the only way to make meaningful and economical commitments.

4. Special emphasis on development loans repayable in dollarsmore conducive to businesslike relations and mutual respect than sustaining grants or loans repaid in local currencies, although some instances of the latter are unavoidable.

5. Special attention to those nations most willing and able to mobilize their own resources, make necessary social and economic reforms, engage in long-range planning, and make the other efforts necessary if these are to reach the stage of self-sustaining growth.

6. Multilateral approach-a program and level of commitments designed to encourage and complement an increased effort by other industrialized nations.

7. A new agency with new personnel-drawing upon the most competent and dedicated career servants now in the field, and attracting the highest quality from every part of the Nation.

8. Separation from military assistance our program of aid to social and economic development must be seen on its own merits, and judged in the light of its vital and distinctive contribution to our basic security needs.

I propose that our separate and often confusing aid programs be integrated into a single administration embracing the present Washington and field operations of

A. The International Cooperation Administration (ICA) and all its technical assistance (point 4) and other programs;

B. The Development Loan Fund (DLF);

C. The food-for-peace program (Public Law 480) in its relations with other countries, while also recognizing its essential role in our

farm economy;

D. The local currency lending activities of the Export-Import Bank;

E. The Peace Corps, recognizing its distinctive contribution beyond the area of economic development;

F. The donation of nonagricultural surpluses from other national stockpiles of excess commodities or equipment;

G. All other related staff and program services now provided by the Department of State as well as ICA.

But I am not proposing merely a reshuffling and relabeling of old agencies and their personnel, without regard to their competence. I am recommending the replacement of these agencies with a new onea fresh start under new leadership.

But new organization is not enough. We need a new working concept.

At the center of the new effort must be national development programs. It is essential that the developing nations set for themselves sensible targets; that these targets be based on balanced programs for their own economic, educational, and social growth-programs which use their own resources to the maximum.

To meet the varied needs of many nations, the new aid administration will have a flexible set of tools, coordinated and shaped to fit each national development program..

The instrument of primary emphasis the single most important tool-will be long-term development loans at low or no rates of interest, repayable in dollars, and designed to promote growth in those less-developed nations which have a real chance for ultimate selfreliance but which lack the ability to service loans from normal lending institutions. The terms of repayment will vary from as long as 50 years for those countries just starting on the road to development, to a much shorter period of time for those countries that are nearing the stage of self-sufficient growth.

A program based on long-range plans instead of short-run crises cannot be financed on a short-term basis. Long-term authorization, planning, and financing are the key to the continuity and efficiency of the entire program.

...

I recommend, therefore, an authorization for the new aid agency of not less than 5 years, with borrowing authority also for 5 years to commit and make dollar repayable loans within the limits spelled out below. No other step would be such a clear signal of our intentions to all the world. No other step would do more to eliminate the restrictions and confusions which have rendered the current foreign aid program so often ineffective. No other step would do more to help obtain the service of top-flight personnel. And in no other way can we encourage the less-developed nations to make a sustained national effort over a long-term period.

... I am asking the Congress for a total foreign aid budget of new obligational authority no greater than that requested in the rockbottom budget previously submitted ($4 billion) despite the fact that the number of new nations needing assistance is constantly increasing; and, though increasing such authority for nonmilitary aid while reducing military assistance, this budget provides for a level of actual expenditures on nonmilitary aid no greater than reflected in the previous budget ($1.9 billion). (These figures do not, of course, reflect Public Law 480 operations.)

The $4 billion previously requested for fiscal year 1962 will be reallocated under this new program as follows:

Military assistance will be reduced from the $1.8 billion requested to $1.6 billion, as discussed below.

Economic assistance, with a much greater portion going to development loans, a small increase in development grants, and a reduction in sustaining grants, will total $2.4 billion.

Of this, $1.5 billion will be contained in the usual annual appropriation of new obligational authority to finance the part of the program that is not suitable for dollar development loans: grants for education, social progress and institutional development, the Peace Corps, and sustaining aid. Nine hundred million dollars will be available for long-term low or interest-free development loans to be repaid in dollars, financed through an authorization of public debt borrowing authority which would also provide no more than $1.6 billion for each of the succeeding 4 years. Also to be made available for such loans. under the new system of full coordination will be the unappropriated dollar funds now coming in in repayment of the principal and interest on certain previous loans to foreign governments (United Kingdom, ECA [Economic Cooperation Administration], GARIOA [Government and Relief in Occupied Areas], and others—but not the ExportImport Bank).

The economic programs I am recommending in this message cannot succeed without peace and order. A vital element toward such stability is assurance of military strength sufficient to protect the integrity of these emerging nations while they are advancing to higher and more adequate levels of social and economic well-being.

I shall therefore request the Congress to provide at this time $1.6 billion for provision of military assistance. This figure is the amount required to meet the U.S. share in maintaining forces that already exist, and to honor firm existing commitments for the future.

I am frank to say that we cannot now say with precision whether this amount will meet the minimum level of military aid which our basic security policy might demand this year. The emergence of new crises or new conflicts may require us to make an even greater effort. However, while I have mentioned in this message the amount to be allocated to military assistance, those funds, while coordinated with

Doc. 644

the policies of the new agency, will not be administered by it and should not be included in its appropriation. In order to make clear the peaceful and positive purposes of this program, to emphasize the new importance this administration places on economic and social development quite apart from security interests, and to make clear the relation between the military assistance program and those interests, I shall propose a separate authorization for military assistance with appropriations as part of the defense budget. Moreover, to the extent that world security conditions permit, military assistance will in the future more heavily emphasize the internal security, civil works, and economic growth of the nations thus aided. By this shift in emphasis, we mean no lessening of our determination to oppose local aggression wherever it may occur. We have demonstrated our will and ability to protect free world nations-if they so desire-from the type of external threat with which many of them are still confronted. We will not fall short on this.

REQUEST FOR A FIVE-YEAR AUTHORIZATION OF FUNDS FOR THE FOREIGN ASSISTANCE PROGRAM: Letter From the President (Kennedy) to the Speaker of the House of Representatives (Rayburn), May 26, 1961 *

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645. OPERATIONS OF THE DEVELOPMENT LOAN FUND DURING THE PERIOD JANUARY 1-JUNE 30, 1961: Report of the National Advisory Council on International Monetary and Financial Problems, May 10, 1962 (Excerpt)'

LOAN COMMITMENTS

Through the medium of loans, credits, and guarantees, the Development Loan Fund continued to provide financial assistance for social and economic projects in the developing areas of the free world while at the same time supporting and encouraging the growth of private enterprise in these areas. In the half-year period under review, the DLF authorized new loans and guarantees in the equivalent of $207 million, an amount substantially below that authorized in the two preceding semiannual periods. As in earlier periods, the bulk of these funds were approved for productive projects in Asia and Africa (See table 14.)

White House press release dated May 26, 1961; the Department of State Bulletin, June 19, 1961, pp. 977–979.

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Part IX of the NAC report; H. Doc. 402, 87th Cong., pp. 25-27.