grams. To the extent that their development can be accelerated, supporting assistance can be reduced. Some have already made considerable progress in this direction. We expect that three countries [deleted] should be able to dis pense completely with further supporting assistance after fiscal year 1962. They will rely for further development on Food for Peace and development lending from both the United States and other free world sources. The transition will be financed through terminal grants of supporting assistance in fiscal year 1962. SUPPORTING ASSISTANCE COMMITMENTS IN RELATIONSHIP TO U.S. MILITARY BASES In certain countries [deleted] U.S. military forces presently are utilizing vital military facilities. [Deleted.] In order to enable U.S. forces to continue to be able to use effectively these strategically located air and sea bases, it has been necessary for the United States either to make specific commitments of assistance as part of the base-rights agreement or otherwise to make clear that assistance will be forthcoming. [Deleted.] SUPPORTING ASSISTANCE NEEDED BY OTHERS Five countries [deleted] would be faced with the distinct possibility of economic disintegration if supporting assistance were not provided. A reoriented assistance program has just been initiated in Bolivia on the basis of the findings of a presidential task force. [Deleted.] A multilateral effort to rehabilitate the mining industry is being undertaken which should create the basis for some economic progress. [Deleted.] Our Western European allies are sharing the cost of supporting some countries. TUNISIA Helped by the support we have provided over the past years, the Tunisians have been successful in stabilizing the country and addressing fundamental problems. [Deleted.] Some grant assistance is proposed in fiscal year 1962 to assure an orderly transition to the new long-range development program which should be inaugurated before the end of that year. Agreement has been reached on the dispatch of a team to Tunisia in the fall to review the development program now in preparation. PREVENTING ECONOMIC DEPENDENCE ON SOVIET BLOC In three countries [deleted] along the Asian perimeter of the Sino-Soviet empire and a fourth [deleted] in the Near East, the primary U.S. objective is to prevent the absorption of weak nations into the Communist bloc through growing economic dependence. The dimension and direction of future assistance to Laos is obviously dependent on the outcome of the Geneva meetings. The other three are receiving substantial aid on attractive terms from the Soviet Union and Communist China. The United States is not attempting to outbid Communist offers. We propose to direct our aid into projects which will both contribute significantly to the progress of the countries and satisfy needs to which the governments concerned attach high priority. The future of these programs will inevitably be affected by political developments. We would wish to help these countries develop sound long-range programs for their economic and social growth and offer substantial development loans for programs that have reasonable chance of successful implementation. Senator LONG. May I ask a question at this point, Mr. Chairman? The CHAIRMAN. Yes, sir. NEED FOR ASSURANCE THAT AID IS ACHIEVING DESIRED OBJECTIVES Senator LONG. What concerns me about questions of this sort is the absence of a working agreement and some way of being sure that these people are doing with their aid what we think should be done if we are going to supply it. What improvement do you have in this program over the previous year, if any, to assure that this money is going to be used in a way that actually will result in achieving some objective consistent with the efforts we set out to support? Mr. LABOUISSE. Senator, is your question directed to the entire program, not necessarily supporting assistance? Senator LONG. These particular countries would be a good illustration of the kind of countries I have in mind. We fail to see that we have any firm agreement, that we have the right to know what happens to this money. As you know, in some of these countries there have been all sorts of criticisms about the way the money was handled, what happened to it, allegations that it has not reached the rank and file of people, that they did not understand it, and that they did not feel they benefited by it. That is why I raise the question with respect to these countries here. I see two of them in particular that occurred to me as illustrations. You have used the word "sovereignty" to indicate that the sovereign rights of the countries give them the right to take money without telling you what happens to it. AFGHANISTAN AS A SPECIFIC CASE Mr. LABOUISSE. [Deleted.] Well, in Afghanistan the program that we are financing is largely one of building a road. [Deleted.] In 1954, I think it was, because of border troubles between Pakistan and Afghanistan, it was cut off, and Afghanistan was thrown more into the Soviet orbit. In 1958 I think this was rectified, and we started to help in the construction of the road. The Corps of Engineers is now in there working. We have also invested some money in the development of the Helmand Valley, which is a multipurpose dam and irrigation project. [Deleted.] The question of whether or not you can bring about enough economic development in Afghanistan to make it feel that it does not have to rely on anyone, is questionable. I don't know how long it would take for this to come about. Senator LONG. What I have in mind is that when the Federal Gov ernment aids the construction of roads in any State of the Union, you have to have a set of plans and specifications and estimates as to wha that road would cost, and the State would expect to follow certain standards, including competitive bidding, and if it didn't do this, the money would be withheld. Now, my impression is that this road is one we are paying for completely. In that case it seems to me we ought to have some way of assuring ourselves that we are getting dollar-for-dollar value. Mr. LABOUISSE. I think we do have assurance in this case, Senator. We have the U.S. Corps of Engineers supervising this operation, in Afghanistan. Senator LONG. They are actually constructing it? Mr. LABOUISSE. They are providing the supervisory services. And I believe it is an American concern which is doing the construction. I can check this. Senator LONG. Under a contract with that Government? Mr. LABOUISSE. Under a contract with us. Senator LONG. An American firm is constructing this project under a contract with the U.S. Government? Mr. LABOUISSE. This is before my time. The Corps of Engineers made the contract with American firms. Senator LONG. I believe you had some more supporting data that might be made a part of the record. (The information referred to is as follows:) CONTRACTORS EMPLOYED ON REGIONAL TRANSIT PROJECT In 1958, in order to encourage Afghanistan's trade with the free world, United States assistance was provided to improve the transit route between Afghanistan and Pakistan. Afghanistan's portion of the project covers United States financ ing for preparation of design engineering, specifications and cost estimates, supervisory engineering, construction contract services, and imported materials and equipment. Segments of the project include: reconstruction of the Kabul to Kandahar road, a distance of about 320 miles, paving of the Kandahar to Spin Baldak road, a distance of about 70 miles; construction of a bridge over the Tarnak River; construction of an extension of Pakistan's North Western Railway from Chaman across the Afghan border near Spin Baldak; and construction of terminal facilities at Spin Baldak. 1. Under a participating agency service agreement executed November 1960, the U.S. Army Corps of Engineers was delegated authority to administer the project on behalf of ICA, including responsibility for supervisory engineering and authority to issue bid invitations, award, and execute construction contracts. 2. Ken R. White, Consulting Engineers, Inc.: This contract was executed in March 1959. The contractor is responsible for preparing detailed engineering designs, specifications, and cost estimates for the project, except for the 5-mile • rail spur from Chaman to Spin Baldak, which is to be engineered by the North Western Railway of Pakistan. 3. A. L. Dougherty Overseas, Inc.: This contract was executed in April 1960. The contractor was employed to service and rehabilitate a large quantity of U.S. Government excess roadbuilding equipment shipped to Afghanistan for use in construction on the project. The contract terminated in February 1961. 4. A. L. Dougherty Overseas, Inc.: This contract was executed in August 1960. The contractor is employed to pave the existing road from Kandahar to Spin Baldak and construct a bridge over the Tarnak River. 5. Engineering design work for the Kabul to Kandahar Road have been completed. Proposals in response to bid invitations issued by the Corps of Engineers were received on May 27, 1961, with the expectation that the construction contract will be awarded and executed in June 1961 for the first two of six segments for which funds are available. PROVISIONS FOR EVALUATING AND CHECKING PROJECTS Mr. COFFIN. Senator, what used to be section 517 in existing legislation will be section 611 in this legislation. This section provides for any project that we be satisfied of its technical soundness before we begin, that we audit and make end-use checks, that we must be entitled to investigate as the projects goes along, and that we also bring this under our evaluation of all programs. The section starts no agreement or grant which constitutes an obligation in excess of $100,000 shall be made unless *** Then it requires planning, engineers, cost estimates. It specifies actions the host country must take in order to make a project feasible-legislation, rights-of-way, and things of that sort. SUPERVISION OF YEMEN PROJECT I might add that in Yemen, where we are also engaged in a supporting project, the Bureau of Public Roads itself is doing the work. Senator LONG. The Bureau of Public Roads is actually letting the contract? Mr. COFFIN. It is supervising the work with its engineers there in the field. Senator LONG. Is the program in Yemen primarily the highway program? Mr. COFFIN. In Yemen it is not only roads, but also water supply. [Deleted.] We have a program which involves bringing water to the people in this very arid country. It is not only a sound project, but it has good public impact. RESURVEY OF BURMA PROJECT Mr. LABOUISSE. [Deleted.] In Burma we are trying to cover the estimated costs of a road survey. We committed ourselves, some time ago, [deleted] for some of the costs for the construction of a highway from Rangoon to Mandalay. As I understand it the original survey ended up by proposing a road which would cost [deleted] a much larger amount of money-and I think much too fancy a road. The government of the country was unwilling to finance the difference and we said we couldn't undertake it. So it is being resurveyed now. Our estimate for this country is the cost of that operation. Senator LONG. Thank you. VALUE OF AFGHANISTAN PROJECT Mr. COFFIN. If I may, Mr. Chairman, I would like to add that in Afghanistan, although it is right under the belly of the Soviets, and although the Soviets have spent a great deal of money in that country, they are far from able to claim it for their own. Senator SYMINGTON. What country are you talking about? TERMINATION OF AID IF CONDITIONS NOT MET Senator LONG. Let me ask you this. Have we ever taken the initiative and stopped aid to a country because it was not complying with our conditions, or because we thought that corruption in government was interfering with the effectiveness of the program? I Mr. LABOUISSE. Senator, I frankly don't know. I would have to review the records of decisions in the times before I came here. know that there are cases in which aid has stopped. I just don't know the circumstances. I can follow up and find out. In certain cases in which a postaudit revealed actions of which we don't approve, we have gotten refunds of the money which had been advanced. But whether we pulled out of a country completely(The information referred to is as follows:) TEMPORARY CESSATION OF AID TO LAOS, 1956-58 An example of withholding assistance to a country would be the case of Laos before the monetary reform of 1958. For some period prior to the monetary reform the U.S. Government was concerned over windfall profits made by means of illegal practices in connection with the commercial import program. Because of restrictions on importation of certain goods and severe limitations on financing invisible payments and money transfers, a black market for kip developed, whereby kip was bought and sold at rates substantially below the official rate of 35 kip to $1. This discrepancy between the official and open market rates for the kip provided an incentive for favoritism, diversion, reexports, and other abuses in the import program. As early as December 1956, cash grant aid to Laos was suspended pending assurances that such irregularities would not recur. This suspension came at a time when the Lao army was in actual combat with Pathet Lao. This indicates, therefore, the seriousness with which the U.S. Government viewed these abuses, and the severe corrective measures we were willing to adopt. On January 1958 release of dollars was made conditional upon monetary reform. Because of continued abuses and reluctance on the part of the Lao Government to act on monetary reform, cash grants and counterpart releases were stopped on July 1. On October 10, 1958, after 2 years of continuous U.S. effort, including a year of intensive negotiations and recourse to cessation of aid, a monetary reform program was adopted for Laos which provided for a new exchange rate of 80 kip to $1, which continues today. At the same time a system of free convertibility was put into effect which permitted the elimination of the cumbersome import licensing system that had contributed to most of the earlier abuses. Monetary reform also resulted in a more realistic and more favorable exchange rate for U.S. aid dollars. Senator LONG. Have we just held up the money? Let me illustrate with Federal aid to States. When the Federal and the State Government could not agree on how to handle a Federal aid program, the Federal Government just held up its share of the money. A simple example is a road just 20 miles south of my home. The State said they would acquire more right-of-way, but there was a local controversy going on. The State has to handle it with its own citizens. But because it has not been cleared up to the satisfaction of the Federal Government, they are just holding up the money for that leg of the road. |