INTERNATIONAL DEVELOPMENT AND SECURITY

WEDNESDAY, MAY 31, 1961

UNITED STATES SENATE,

COMMITTEE ON FOREIGN RELATIONS,

Washington, D.C.

The committee met, pursuant to notice, at 10 a.m., in room 4221, New Senate Office Building, Senator J. W. Fulbright (chairman) presiding.

Present: Senators Fulbright, Sparkman, Humphrey, Gore, Lausche, Church, Wiley, Aiken, Capehart, Carlson, and Williams.

The CHAIRMAN. The committee will come to order, please.

(S. 1983 and a letter from the President, dated May 26, 1961, follow :)

[S. 1983, 87th Cong., 1st sess.]

A BILL To promote the foreign policy, security, and general welfare of the United States by assisting peoples of the world in their efforts towards economic and social development and internal and external security, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

PART I

CHAPTER 1-SHORT TITLE AND POLICY

SEC. 101. SHORT TITLE.-This part may be cited as the "Act for International Development of 1961".

SEC. 102. STATEMENT OF POLICY.-The Congress of the United States reaffirms its belief that peace in the world increasingly depends on wider recognition, both in principle and in practice, of the dignity and interdependence of man, and that the survival of free institutions in the United States can best be assured in a worldwide atmosphere of expanded freedom. To this end, the United States has in the past provided assistance to help strengthen the forces of freedom by aiding peoples of less developed countries of the world to develop their resources and improve their living standards, to realize their aspirations for justice, education, dignity, and respect as individual human beings, and to establish responsible governments. The Congress declares it to be a primary necessity, opportunity, and responsibility of the United States, and consistent with its traditions and ideals, to renew the spirit which lay behind these past efforts, and to help make a historic demonstration that economic growth and political democracy can go hand in hand to the end that an enlarged community of free, stable, and selfreliant nations can reduce world tensions and insecurity. In addition, the Congress declares that it is the policy of the United States to support the principles of increased economic cooperation and trade among nations, freedom of navigation in international waterways, and recognition of the right of all private persons to travel and pursue their lawful activities without discrimination as to race or religion. Accordingly, the Congress hereby affirms it to be the policy of the United States to make assistance available under this part in scope and on a basis of long-range continuity essential to the creation of an environment in which the energies of the peoples of the world can be devoted to constructive purposes, free of pressure and erosion by the adversaries of freedom. It is the

sense of the Congress that assistance under this part should be complemented by the furnishing under any other Act of surplus agricultural commodities to the maximum extent possible, and that increased disposal be made of excess property and stockpile materials under this part and other Acts.

In order to achieve these basic goals, to the extent practicable, assistance should be based upon well-conceived plans; be directed toward the social as well as economic aspects of economic development; be responsive to the efforts of the recipient countries to mobilize their own resources and help themselves; be cognizant of the external and internal pressures which hamper the transition to growth; and should emphasize long-range development assistance as the primary instrument of such growth. In order continually to increase the effectiveness of development assistance, intensive research should be carried on into the techniques of such assistance. Since economic and political stability are indispensable to economic growth and to social progress, it is further the policy of the United States to provide assistance to countries and areas in order to support or promote such stability. The Congress also recognizes the important contribution of the United Nations and its specialized agencies, and of other international organizations and agencies, to the attainment of these goals, as well as to relief of human distress and to scientific progress, and declares that it is the policy of the United States to provide for contribution to those activities of such organizations and agencies which are directed toward such objectives and goals. Finally, the Congress urges that all other countries able to contribute join in a common undertaking to meet the goals stated in this part.

CHAPTER 2-DEVELOPMENT ASSISTANCE

TITLE I-DEVELOPMENT LOANS

SEC. 201. GENERAL AUTHORITY.-(a) The President is authorized to make loans repayable in United States dollars on such terms and conditions as he may determine, in order to promote the economic development of less developed countries and areas, with emphasis upon assisting long-range plans and programs designed to develop economic resources and increase productive capacities. In so doing, the President shall take into account (1) whether financing could be obtained in whole or in part from other free-world sources on reasonable terms, (2) the economic and technical soundness of the activity to be financed, (3) whether the activity gives reasonable promise of contributing to the development of economic resources or to the increase of productive capacities in furtherance of the purposes of this title, (4) the consistency of the activity with, and its relationship to, other development activities being undertaken or planned, and its contribution to realizable long-range objectives and (5) the extent to which the recipient country is showing a responsiveness to the vital economic, political, and social concerns of its people, and demonstrating a clear willingness to take effective self-help measures. Loans shall be made under this title only upon a finding of reasonable prospects of repayment.

(b) The authority of section 610 may not be used to decrease the funds available under this title, nor may the authority of section 613 (a) be used to waive the requirements of this title.

SEC. 202. CAPITALIZATION.-(a) The President is authorized to issue, during the fiscal years 1962 through 1966, notes for purchase by the Secretary of the Treasury in order to carry out the purposes of this title. The maximum aggregate amount of such notes issued during the fiscal year 1962 shall be $900,000,000, and the maximum aggregate amount of such notes issued during each of the fiscal years 1963 through 1966 shall be $1,600,000,000: Provided, That any unissued portion of the maximum amount of notes authorized for any such fiscal year may be issued in any subsequent fiscal year during the note issuing period in addition to the maximum aggregate amount of notes otherwise authorized for such subsequent fiscal year. Such notes shall be redeemable at the option of the President before maturity in such manner as may be stipulated in such notes, and shall have such maturity and other terms and conditions as may be de termined by the President. Payment under this subsection of the purchase price of such notes and repayments thereof by the President shall be treated as public-debt transactions of the United States Government.

(b) United States dollars which are derived directly or indirectly on or after the effective date of this Act from payment of obligations under which the United States Government may require payment exclusively in United States

dollars and which were created under (1) an Act to promote the defense of the United States, as amended (22 U.S.C. 411 et seq.), (2) the Surplus Property Act of 1944, as amended (50 U.S.C. App. 1622 et seq.), (3) Public Law 79-569 (22 U.S.C. 2861, 286m), (4) the Economic Cooperation Act of 1948, as amended (22 U.S.C. 1501 et seq.), (5) the German and Japanese Government and relief in occupied areas programs, and (6) loans under the Mutual Security Act of 1954, as amended (22 U.S.C. 1750 et seq.) (other than military assistance), shall be available for use for purposes of this title, notwithstanding the provisions of any other Act referred to in this subsection. In the case of any such payments which, were it not for the provisions of this subsection, would have been used to retire notes or obligations issued to finance the activity from which the payments were derived, the President shall assume such notes or obligations, together with any interest accrued and unpaid thereon, in an amount equivalent to such payments. (c) Except as otherwise provided in this part, the United States dollar assets of the Development Loan Fund which remain unobligated on the date prior to the abolition of the fund shall be available for use for purposes of this title.

SEC. 203. FISCAL PROVISIONS.—(a) All receipts from loans made under and in accordance with this title shall be available for use for the purposes of this title. Such receipts and other funds made available under this title for use for the purposes of this title shall remain available until expended.

(b) The President is authorized to incur in carrying out the purposes of this title obligations which may not at any time exceed the sum of (i) all funds made available and all funds authorized to be made available pursuant to the authority, and subject to the fiscal year limitations, provided in section 202(a), and (ii) all other funds made available pursuant to this part for the purposes of this title.

(c) In carrying out the purposes of this title, the President shall prepare annually and submit a budget program in accordance with the provisions of sections 102, 103, and 104 of the Government Corporation Control Act, as amended (31 U.S.C. 847-849).

SEC. 204. REPORTS.-At the close of each quarter of the fiscal year, the President shall submit to the Committee on Foreign Relations and the Committee on Appropriations of the Senate and the Speaker of the House of Representatives a report of activities carried out in such quarter under this title, including appropriate information as to the amount of loans made under section 201(a), and notes issued under section 202 (a), as well as any undertakings which have committed the United States Government to future obligations and expenditures of funds.

SEC. 205. DEVELOPMENT LOAN COMMITTEE.-The President shall establish an interagency Development Loan Committee, consisting of such officers from such agencies of the United States Government as he may determine, which shall, under the direction of the President, establish standards and criteria for lending operations under this title in accordance with the foreign and financial policies of the United States.

TITLE II-DEVELOPMENT GRANTS

SEC. 211. GENERAL AUTHORITY.-The President is authorized to furnish assistance on such terms and conditions as he may determine in order to promote the economic development of less developed countries and areas, with emphasis upon assisting the development of human resources. In so doing, the President shall take into account (1) whether the activity gives reasonable promise of contributing to the development of educational or other institutions and programs directed toward social progress, (2) the consistency of the activity with, and its relationship to, other development activities being undertaken or planned, and its contribution to realizable long-range development objectives, (3) the economic and technical soundness of the activity to be financed, and (4) the extent to which the recipient country is showing a responsiveness to the vital economic, political, and social concerns of its people, and demonstrating a clear willingness to take effective self-help measures.

SEC. 212. AUTHORIZATION.-There is hereby authorized to be appropriated to the President for use beginning in the fiscal year 1962 to carry out the purposes of section 211 not to exceed $380,000,000, which shall remain available until expended.

SEC. 213. ATOMS FOR PEACE.-The President is authorized to use, in addition to other funds available for such purposes, funds available for the purposes of section 211 for assistance, on such terms and conditions as he may determine, designed to promote the peaceful uses of atomic energy outside the United States

SEC. 214. AMERICAN SCHOOLS AND HOSPITALS ABROAD.-(a) The President is authorized to use, in addition to other funds available for such purposes, funds made available for the purposes of section 211 for assistance, on such terms and conditions as he may specify, to schools and libraries outside the United States founded or sponsored by United States citizens and serving as study and demonstration centers for ideas and practices of the United States.

(b) The President is authorized to use, notwithstanding the provisions of the Mutual Defense Assistance Control Act of 1951 (22 U.S.C. 1611 et seq.), foreign currencies accruing to the United States Government under any Act for the purposes of subsection (a) of this section, and for assistance, on such terms and conditions as he may specify, to hospitals outside the United States founded or sponsored by United States citizens and serving as centers for medical treatment, education, and research.

SEC. 215. VOLUNTARY AGENCIES.-In order to further the efficient use of United States voluntary contributions for relief and rehabilitation, the President is au thorized to use funds made available for the purposes of section 211 to pay transportation charges from United States ports to ports of entry abroad, or, in the case of landlocked countries, to points of entry in such countries, on shipments by the American Red Cross and United States voluntary nonprofit relief agencies registered with and approved by the Advisory Committee on Voluntary Foreign Aid.

TITLE III-INVESTMENT GUARANTIES

SEC. 221. GENERAL AUTHORITY.-(a) In order to facilitate and increase the participation of private enterprise in furthering the development of the economic resources and productive capacities of less developed countries and areas, the President is authorized to issue guaranties as provided in subsection (b) of this section of investments in connection with projects, including expansion, modernization, or development of existing enterprises, in any country or area with the government of which the President has agreed to institute the guaranty program. Each such project shall be approved by the President and by the gov ernment concerned.

(b) The President may issue guaranties to United States citizens, or corpora tions, partnerships, or other associations in which the majority beneficial interest is held by United States citizens

(1) assuring protection in whole or in part against any of all of the following risks:

(A) inability to convert into United States dollars other currencies, or credits in such currencies, received as earnings or profits from the approved project as repayment or return of the investment therein, in whole or in part, or as compensation for the sale or disposition of all or any part thereof,

(B) loss of investment in the approved project due to expropriation or confiscation by action of a foreign government, and

(C) loss due to war, revolution, insurrection, or civil strife accompanying war, revolution, or insurrection, or due to any sanction which is imposed by any government against the government of the area where the project is located and which materially adversely affects the continued operation of the project:

Provided, That the total face amount of the guaranties issued under this paragraph (1) outstanding at any one time shall not exceed $1,000,000,000; and

(2) where the President determines such action to be important to the furtherance of the purposes of this title, assuring against loss in whole or in part of a loan investment due to nonpayment for any reason, or assuring against loss in whole or in part of any other form of investment due to such risks as the President may determine, upon such terms and conditions as the President may determine: Provided, That the total face amount of the guaranties issued under this paragraph (2) outstanding at any one time shall not exceed $100,000,000.

(c) No guaranty shall exceed the value of the investment made in the project with the approval of the President plus actual earnings or profits on said invest

ment to the extent provided by such guaranty, nor shall any guaranty extend beyond twenty years from the date of issuance.

(d) The President shall make suitable arrangements for protecting the interests of the United States Government in connection with any guaranty issued under section 221(b), including arrangements with respect to the ownership, use, and disposition of the currency, credits, assets, or investment on account of which payment under such guaranty is to be made, and any right, title, claim, or cause of action existing in connection therewith.

SEC. 222. GENERAL PROVISIONS.-(a) A fee shall be charged for each guaranty in an amount to be determined by the President. In the event the fee to be charged for a type of guaranty authorized under section 221 (b) is reduced, fees to be paid under existing contracts for the same type of guaranty may be similarly reduced.

(b) All fees collected under this section, all fees heretofore collected under sections 202 (b) and 413(b) (4) of the Mutual Security Act of 1954, as amended, and under section 111(b)(3) of the Economic Cooperation Act of 1948, as amended (22 U.S.C. 1509(b) (3)) (exclusive of fees for informational media guaranties heretofore or hereafter issued pursuant to section 1011 of the United States Information and Educational Exchange Act of 1948, as amended (22 U.S.C. 1442) and section 111(b) (3) of the Economic Cooperation Act of 1948, as amended, and all reserves maintained for any guaranties heretofore issued pursuant to section 202(b) of the Mutual Security Act of 1954, as amended, shall be available for meeting management and custodial costs incurred with respect to currencies or other assets acquired under guaranties made pursuant to section 221(b) of this part, sections 202 (b) and 413(b) (4) of the Mutual Security Act of 1954, as amended, and section 111 (b) (3) of the Economic Cooperation Act of 1948, as amended (exclusive of informational media guaranties), and shall be available for expenditure in discharge of liabilities under guaranties made pursuant to such sections, until such time as all such property has been disposed of and all such liabilities have been discharged or have expired, or until all such fees and reserves have been expended in accordance with the provisions of this section.

(c) In computing the total face amount of guaranties outstanding at any one time for purposes of paragraph (1) of section 221 (b), the President shall include the face amounts of outstanding guaranties theretofore issued pursuant to such paragraph, sections 202(b) and 413 (b) (4) of the Mutual Security Act of 1954, as amended, and section 111(b) (3) of the Economic Cooperation Act of 1948, as amended, but shall exclude informational media guaranties.

(d) Any payments made to discharge liabilities under guaranties issued under section 221(b) of this part, sections 202 (b) and 413(b) (4) of the Mutual Security Act of 1954, as amended, and section 111 (b) (3) of the Economic Cooperation Act of 1948, as amended (exclusive of informational media guaranties), shall be paid first out of fees and reserves referred to in section 222(b) as long as such fees and reserves are available, and thereafter shall be paid out of funds, if any, realized from the sale of currencies or other assets acquired in connection with any such guaranties as long as such funds are available, and finally shall be paid out of funds realized from the sale of notes issued under section 413(b) (4) (F) of the Mutual Security Act of 1954, as amended, and section 111 (c) (2) of the Economic Cooperation Act of 1948, as amended.

(e) All guaranties issued after June 30, 1956, shall, and all guaranties issued prior to July 1, 1956 (exclusive of informational media guaranties), may, be considered for the purposes of section 3679 (31 U.S.C. 665) and section 3732 (41 U.S.C. 11) of the Revised Statutes, as amended, as obligations only to the extent of the probable ultimate net cost to the United States Government of all outstanding guaranties. Funds obligated in connection with guaranties issued under section 221(b) of this part, sections 202(b) and 413(b) (4) of the Mutual Security Act of 1954, as amended, and section 111(b) (3) of the Economic Cooperation Act of 1948. as amended (exclusive of informational media guaranties), shall constitute a single reserve. together with funds available for obligation hereunder but not yet obligated, for the payment of claims under all guaranties issued under such sections: Provided, That funds obligated in connection with guaranties issued prior to July 1, 1956, shall not, without the consent of the investor, be available for the payment of claims arising under any subsequent guaranty. Funds available for obligation hereunder shall be decreased by the amount of any payments made to discharge liabilities under guaranties issued pursuant to section 221(b) of this part, sections 202(b) and 413(b)(4) of the Mutual Security Act of 1954, as amended, and section 111 (b) (3) of the Eco