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

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

Washington, October 25, 1968.

DEVELOPMENT ASSISTANCE IN THE NEW ADMINISTRATION

I. RECOMMENDATIONS IN BRIEF

The President’s General Advisory Committee on Foreign Assistance Programs is profoundly convinced that vigorous cooperation with the developing countries of Asia, Africa, and Latin America in their slow climb toward better living conditions is in the basic interest of the United States. Yet in America today a mood of malaise and withdrawal is enfeebling U.S. development assistance efforts. In our judgment, reestablishment of the U.S. role as a pace setter in peaceful development cooperation is a historic imperative.

Accordingly the Committee recommends that the new Administration coming to office in January 1969 take steps to reorganize and revitalize U.S. development assistance. The Administration should offer a fresh program of new activities and new emphases, while building on the demonstrated strengths of the present system. We believe that the following elements provide such a program.

1. The U.S. will continue to need a strong development assistance agency. The Administration should propose to the next Congress a new authorization act for a streamlined successor to the present Agency for International Development. A new name in keeping with our recommendations might be the Development Cooperation Fund. The new agency should be authorized to use three main instruments: long-term loans on liberal terms for capital assistance, grants for technical assistance, and grants for reconstruction and emergency assistance. We urge that in using these instruments the new agency carry forward three features of present A.I.D. policy: comprehensive country analyses as the basis for providing U.S. assistance and encouraging self-help, integration of capital and technical assistance tools, and coordination of sales and grants of agricultural products with other forms of assistance.

2. The U.S. should expand contributions to multilateral agencies as rapidly as their managements can handle additional resources competently, and as other industrialized countries can be persuaded to go along. Contributions to Special Funds of multilateral banks, and transfers of funds for particular countries to be administered by multilateral agencies, are attractive arrangements for doing so. Closer coordination of all assistance to individual developing countries through consultative groups of donor countries is also highly desirable. The U.S. should welcome the leadership of a strengthened World Bank in providing more assistance and coordinating bilateral programs.

3. Military assistance should be separated from development assistance by transfers to the Defense Department budget, while remaining under the policy guidance of the Secretary of State. Reconstruction and emergency assistance grants should be provided for Vietnam, Laos, and Thailand for the duration of hostilities, and for early reconstruction in Southeast Asia. Beyond this, such funds should be available for only a limited number of countries where there is an emergency or security rationale, and for a limited period of transition to a development effort.

4. An Overseas Investment Corporation should be established to take over the present investment guarantee and investment promotion functions of A.I.D., and to undertake new initiatives for more rapid expansion of private investment to less developed countries. The corporation should have authority to raise capital funds at government-guaranteed rates, and to lend directly to high-risk private ventures which are important for development and which have the potential to be commercially viable. At the same time, the U.S. should liberalize present balance of payments restrictions on direct investment in manufacturing and processing industries in less developed countries.

5. U.S. assistance should focus on support for these important movements in the less developed world: (a) extending the “green revolution” in food grain production through all areas of agriculture and marketing; (b) expanding population and family planning programs to the limit of host governments’ ability to proceed; (c) strengthening scientific and professional personnel and institutions; (d) increasing individual opportunities for education and improving the relevance of education for national needs; (e) broadening participation by the general population in both responsibilities and benefits of development.

6. The U.S. should, in its own interest, undertake to restore total development assistance in all forms to at least the share of our national income reached in 1965, and to expand assistance in the future as our income and tax revenues rise. Reasonable estimates of needs are well above these levels. The largest increases should be achieved by expanding flows through competent multilateral institutions and private investment. To meet the over-all objective, however, appropriations for the new development assistance agency ought to rise above those A.I.D. received prior to the deep cuts of Fiscal Years 1968 and 1969. Moreover, greater international attention should be focused on fitting assistance terms to individual countries’ debt servicing capacities.

7. The Administration should give prompt study to longer-term innovations, which go beyond measures recommended here. Among the possibilities are: devoting to development assistance some of the Special Drawing Rights which will be created by the International Monetary Fund; government commitments to subsidize interest payments on bonds issued for the International Development Association; and additional funds in the World Bank family for commodity diversification programs in countries whose primary export earnings are seriously depressed. The U.S. should intensify international discussions of such possibilities, with the aim of putting the world’s development assistance system on a firmer foundation.

[Here follows a detailed discussion of the Committee’s recommendations. All the members of the Committee signed the report except George Meaney who chose to dissociate himself from it.]

1. Source: Washington National Records Center, RG 286, Perkins Committee—President’s General Advisory Committee on Foreign Assistance Programs—C. Tyler Wood Files—CY 66 thru CY 70. No classification marking. An attached October 28 letter from James A. Perkins, Chairman of the Committee, transmitted the report to President Johnson. The letter reads in part: “The experience of serving on the Committee has been a rich and rewarding one for all the members. We cannot help but be disturbed, however, at the increasing difficulty in securing public support for U.S. foreign assistance. Because of our deep concern, we have attempted, over recent months, to consolidate our ideas about ways in which foreign assistance programs could be strengthened.” The source text comprises pp. 1–3 of the 43-page report. For another extract, see Document 145.