Foreign Relations of the United States, 1961–1963, Volume IX, Foreign Economic Policy

185. Memorandum From the Managing Director of the Development Loan Fund (Coffin) to the Staff of the Development Loan Fund⁰

Washington, July 21, 1961.

SUBJECT

• Transition to the Program for International Development

Although Congress has not yet passed the necessary legislation and the new Agency for International Development remains to be established, we have already, for all intents and purposes, embarked on the President’s program for the Decade of Development.¹ The period which we are all now going through provides an opportunity for all concerned to contribute to the transition to the new program.

I wish first of all to commend the staff for the many constructive activities which have recently been taken to facilitate the transition. We are offering to assist in the efforts soon to begin to evaluate the responses to the outgoing cable No. CG 1066 which has asked the field missions for preliminary recommendations on the aid approach to be taken in each country under the new program.² We are also identifying and preparing an inventory of policy and procedure decisions that will be required. We are cooperating in developing development lending procedures which will prevail in the period prior to the time when there is a final decision made by the new agency. We are also evaluating the backlog of loan applications we now hold.

The actions which the DLF takes between now and when AID is established can have an important bearing on the shape of the new program. We can contribute to the solution of the many important policy and procedural questions that are involved in the transition to the new program. Conversely, we can also conduct ourselves in such a way to avoid prejudicing future policies and procedures. Finally, the development lending function continues to form a most important part of the economic assistance program of the U.S. Government—an importance which does not permit us to stand still.

More specifically, DLF can contribute to the transition in the following three ways:

1. The DLF staff, which has developed an expertise in lending for economic development, should take the opportunity to distill from four years of lending experience considerations which should bear on the procedures and policies of the new Agency for International Development.

2. In responding to inquiries and new applications, it can couch its replies so as to indicate the new context and the new considerations which will be brought to bear in evaluating specific loans.

3. In evaluating proposals already on hand and in communicating with applicants, it can indicate the changed concepts and bases for evaluation that are now taking effect.

In making our contributions it will be necessary to bear in mind the central features of the new AID program. Perhaps the most important of the new concepts is that each activity, whether of a loan or grant nature, will be undertaken as a part of a total country approach or program. In following the approach or program for each country, it will be necessary to relate each activity to a priority goal, program or national development plan. In selecting countries for assistance as well as activities to be supported, priority consideration will be given to those making a reasonable self-help effort in terms of mobilizing all available resources by means of sensible planning, budgeting and other measures; undertaking measures to reduce dependence on external resources; tapping the energies and spreading benefits of development to the entire population; and exhibiting honesty in the administration of public affairs. Moreover, we will be seeking ways to use particular financing as leverage for obtaining improvement along the following lines. In the case of loans, which will now be on a largely dollar repayable basis, we will need to consider the capacity of each economy to service debt rather than the character of each activity to be financed.

There are a number of ways immediately available to us which can give us a basis for proceeding consistent with the criteria of the new program. The staff should keep in close touch with the materials developed in the course of Congressional consideration of the foreign aid program and specifically the funds programmed for the Fiscal Year 1962. Each staff member should familiarize himself with the red-covered presentation to Congress entitled “The Act for International Development—A Program for the Decade of Development; Objectives, Concepts and Proposed Program.”³ In addition, as they become available, I suggest that the staff also obtain and read this year’s testimony on the International Development and Security Act before the Senate Foreign Relations Committee and the House Foreign Affairs Committee, and in particular my statement on June 22, 1961 before the House Committee on Foreign Affairs.⁴

Additionally, the staff should take into account existing country commitments, which, of course, are tentative as to amount pending final action by the Congress (e.g., India). We must also have the views of the Department of State, ICA, the Program Development Task Force, and the field from the standpoint of the criteria enumerated above.

In addition to the above guidelines, I am confident that the ingenuity of the staff, with which I have been impressed, will make it possible for us to make the turnaround and effectuate a rapid integration of our activities into the new foreign aid program.

Frank M. Coffin

0. Source: Washington National Records Center,RG 286, AID Administrator Files: FRC 65 A 481, Development Financing, FY 1962. No classification marking. Attached to the source text is a July 24 memorandum from Joseph S. Toner to Labouisse, noting that the memorandum was distributed to the DLF staff on July 21. The source text bears the handwritten marginal comment: “Noted H.L. by PYJ[ones].” Jones was Labouisse’s Executive Assistant.
1. In his special message to the Congress on March 22, President Kennedy referred to the 1960s as the “crucial Decade of Development.” For text, see Public Papers of the Presidents of the United States: John F. Kennedy, 1961, p. 205.
2. See footnote 2, Document 114.
3. Not found.
4. Reference is to International Development and Security: Hearings Before the Committee on Foreign Relations, United States Senate, Eighty-Seventh Congress, First Session (Washington, 1961), Parts 1 and 2, and The International Development and Security Act: Hearings Before the Committee on Foreign Affairs, House of Representatives, Eighty-Seventh Congress, First Session (Washington, 1961), Parts 1-3. Coffin’s testimony is ibid., Part 2, pp. 821-892.