Foreign Relations of the United States, 1964–1968, Volume IX, International Development and Economic Defense Policy; Commodities

145. Report of the President’s General Advisory Committee on Foreign Assistance Programs¹

Washington, October 25, 1968.

DEVELOPMENT ASSISTANCE IN THE NEW ADMINISTRATION

[Here follow pages 1–21 of the report.]

2. Expanded multilateral assistance

The Committee recommends that the United Sates enlarge the share of its development assistance provided through multilateral agencies as rapidly as larger flows can be managed effectively and as other industrialized countries will participate.

The role of multilateral agencies in the development assistance process has grown in recent years. Cost-sharing among advanced countries through those agencies has been promoted by the United States, and the contributions of the other countries have increased. As shown in Table 3, net multilateral flows are now about $1.3 billion, approximately a sixth of the combined total of multilateral and official bilateral assistance. Only about two-thirds of the multilateral total comes from current official contributions, however, the remainder being provided from private borrowings and drawing down past contributions.

Table 3

MULTILATERAL DEVELOPMENT ASSISTANCE FLOWS TO LESS DEVELOPED COUNTRIES

(Disbursements, net of repayments, in $ millions)

	Calendar year
	1963	1965	1967
Official contriutions1	364	450	770
Private purchases of multilateral securities	-31	247	280
Other multilateral outflow2	469	349	238
Total Multilateral Flows	802	1,046	1,288
Official bilateral, D.A.C. Countries	5,707	5,753	6,203
Total Multilateral Plus Official Bilateral	6,509	6,799	7,491
Private investment3	2,575	3,980	4,110
Total Development Assistance Flows	9,084	10,779	11,601
Multilateral Flows By Agency
World Bank Family	431	569	694
Inter-American Development Bank	75	109	146
Asian Development Bank	—	—	—
African Development Bank	—	—	—
European Economic Community Institutions	67	116	143
United Nations	229	252	305
Total	802	1,046	1,288

The World Bank family provides over half of net multilateral flows, divided more or less evenly between hard-term loans of the Bank itself and easy-term loans of the International Development Association (IDA). The UN agencies provide about a quarter, almost all of it for technical assistance. The rest goes through the Inter-American Development Bank, supported largely by the U.S. and limited to the Latin American countries, and the European Economic Community institutions, limited to associated countries in Africa and Europe. The Asian Development Bank and the African Development Bank are just getting into operation.

There are some significant differences among these agencies. The World Bank family has a very high quality staff, well-established stand-ards of operation, and a clear capacity to expand its operations if additional funds were available, particularly for IDA. The UN has difficulties in coordinating independent agencies and allocating funds objectively—difficulties that are only gradually being overcome. The regional development banks face in different ways the problem of accommodating sound standards with borrower control, and the Asian and African Banks must still build staff and experience.

The Committee believes that the United States should increase its contributions to competent international banks, along with other contributors, as rapidly as the banks are prepared to undertake the additional responsibilities. This approach will take advantage of the experience and acceptability of the multilateral agencies, avoid some of the Congressional and diplomatic tribulations of A.I.D., and put pressure on all advanced countries to share in the development assistance system.

A particular problem arises because of the size and wealth of the United States. Our share in the GNP of the D.A.C. countries exceed 50 percent, but if our share in the financing of the multilateral banks increased to more than half, their multilateral character would be weakened. The Committee endorses three possibilities for meeting this problem. First, the United States should offer to raise its share in the next replenishment of IDA from 40 to 45 percent, and to forego special balance of payments protection. Second, the U.S. should be willing to contribute shares at a proportion higher than 45 percent to Special Funds administered by the regional development banks. Third, if the World Bank and IDA will agree to accept Special Funds for particular countries, the U.S. should be prepared to make transfers of bilateral assistance funds in appropriate cases, where the advantages of multilateral administration are strong.

The Committee recognizes that bilateral assistance has important special strengths which make a combination of multilateral and bilateral programs desirable in the world system. As noted above, A.I.D. has played a leadership role in relation to both the other advanced nations and the multilateral institutions. Other larger donor countries, particularly Germany, France, Japan, and Italy, are committed to bilateral programs, because of distinctive geographical interests and problems of domestic political support. The United States has mutual interests with most of our present large-scale aid recipients that are better developed on a bilateral basis. Our ability to work with them in the future is an important part of the rationale for development assistance. Finally, starting from where the multilateral agencies now are, doubling their rate of disbursements over the next five years would be a considerable management achievement. But as shown in Table 5 below,² even this would still leave a need for bilateral assistance programs larger than at present.

The Committee emphasizes that an equally important aspect of multilateralism is closer coordination of all assistance to individual countries through various forms of consultative groups of aid-supplying countries. There are now eighteen such groups—in India, Pakistan, Ceylon, Turkey, Greece, Morocco, Tunisia, Nigeria, Ghana, Sudan, East Africa, Colombia, Ecuador, Peru, Malaysia, Thailand, Indonesia, and Korea. They cover close to half of worldwide development assistance. Some are still weak. But where the staffs of multilateral institutions have provided leadership, supported by the U.S., such groups have permitted reasonably objective negotiation of the types and amounts of assistance that are most needed, the terms on which it should be made available, and the economic policy measures that should be adopted.

The multilateral agencies, however, need to strengthen themselves as development agencies to take full advantage of these opportunities. In particular, the World Bank should play a more energetic role as leader in consultative groups, provide more program loans, and encourage self-help through country programming. It should take the lead in debt rescheduling negotiations, offer more high-level technical assistance to the planning process in host countries, and establish small field staffs in major aid-receiving countries. It would be helpful if it modified its procedures to accept Special Funds for individual countries. Under its new president the Bank is moving along several of these lines. Further steps would strengthen the promising trends in multilateral cooperation already under way.

[Here follow pages 25–43 of the report.]

1. Source: Johnson Library, National Security File, Subject File, Foreign Assistance Programs—President’s Advisory Committee on (Perkins) [1 of 3], Box 17. No classification marking. The source text comprises pages 21–24 of the Committee’s 43-page report. For another extract from the report, see Document 79. For additional documentation on this Committee, under the chairmanship of James A. Perkins, see Documents 32 ff.
1. Net of principal repayments only; excludes contributions from non-D.A.C. members.
2. Difference between disbursements and receipts of multilateral organizations, largely disbursements out of prior years’ official contirbutions and private investments, but net of contributions, investments and repayments from less developed countries.
3. Includes direct investment, reinvested earnings, net private export credits, and portfolio investment.
2. Not printed.