Appropriations for FY2005: Foreign Operations, Export Financing and Related Programs

CRS Report for Congress
Appropriations for FY2005:
Foreign Operations, Export Financing, and
Related Programs
Updated January 21, 2005
Larry Nowels
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

The annual consideration of appropriations bills (regular, continuing, and supplemental) by
Congress is part of a complex set of budget processes that also encompasses the
consideration of budget resolutions, revenue and debt-limit legislation, other spending
measures, and reconciliation bills. In addition, the operation of programs and the spending
of appropriated funds are subject to constraints established in authorizing statutes.
Congressional action on the budget for a fiscal year usually begins following the submission
of the President’s budget at the beginning of the session. Congressional practices governing
the consideration of appropriations and other budgetary measures are rooted in the
Constitution, the standing rules of the House and Senate, and statutes, such as the
Congressional Budget and Impoundment Control Act of 1974.
This report is a guide to one of the 13 regular appropriations bills that Congress considers
each year. It is designed to supplement the information provided by the House and Senate
Appropriations Subcommittees on Foreign Operations. It summarizes the status of the bill,
its scope, major issues, funding levels, and related congressional activity, and is updated as
events warrant. The report lists the key CRS staff relevant to the issues covered and related
CRS products.
NOTE: A Web version of this document with active links is
available to congressional staff at
[http://www.crs.gov/ products/ appropri ati ons/ apppage.sht m l ].

Appropriations for FY2005: Foreign Operations, Export
Financing, and Related Programs
Summary
The annual Foreign Operations appropriations bill is the primary legislative
vehicle through which Congress reviews the U.S. foreign aid budget and influences
executive branch foreign policy making generally. It contains the largest share —
about two-thirds — of total U.S. international affairs spending.
Funding for Foreign Operations programs have been rising for five consecutive
years, although amounts approved in FY2003 and FY2004 have reached
unprecedented levels over the past 40 years. Substantial supplementals in both years
for assistance to the front line states in the war on terrorism and Afghanistan and Iraq
reconstruction, have pushed spending upward. The regular Foreign Operations bill,
signed by the President on January 23, 2004, combined with an earlier Iraq
supplemental approved in November 2003 (P.L. 108-106), bring current year
appropriations to $39.4 billion (constant FY2005 dollars), the highest level, in real
terms, since the early 1960s.
For FY2005 President Bush asked Congress to appropriate $21.32 billion. The
budget proposal was $2.05 billion, or 10.6% higher than Foreign Operations
appropriations for FY2004, excluding funds approved for Iraq reconstruction.
Despite the large overall increase for Foreign Operations, much of the added funding
was concentrated in a few areas. The FY2005 budget blueprint continued to
highlight foreign aid in support of the war on terrorism as the highest priority. Two
recently launched foreign aid initiatives — the Millennium Challenge Corporation
(MCC) and the President’s Emergency Plan for AIDS Relief (PEPFAR) — were
slated for significant funding increases. The MCC would have grown from $994
million in FY2004 to $2.5 billion for FY2005. PEPFAR would have risen from $1.6
billion in FY2004 to $2.2 billion in the FY2005 request. (Additional PEPFAR funds
were proposed in the Labor/HHS appropriation measure, bringing the total FY2005
PEPFAR request to $2.82 billion.) The FY2005 request further included substantial
increases for the Peace Corps and for debt reduction.
The FY2005 Foreign Operations debate included a discussion of several major
policy issues, including foreign aid as a tool in the global war on terrorism, the
Millennium Challenge Account, programs to combat HIV/AIDS, international family
planning programs, and Afghan reconstruction. Although no additional funds were
sought for Iraq reconstruction, attention also focused on implementation efforts for
the roughly $23.8 billion appropriated in FY2003/ 2004.
On November 18, Congress approved the Foreign Operations conference report
(Division D of H.R. 4818; P.L. 108-447). As passed, the measure provides $19.64
billion after adjusting for a required 0.8% across-the-board rescission. Although this
is $1.68 billion, or nearly 8% below the request, Congress increased amounts passed
earlier by the House and Senate, adding additional funds for the Millennium
Challenge Account and emergency appropriations for the Darfur region in Sudan.
This report will be updated to reflect congressional action on the legislation.

Key Policy Staff
^Subj^ect^Na^m^e^Telepho^ne^E-^M^a^il
^G^eⁿ^e^ral^:^Polⁱ^c^y^Is^s^u^es^an^{d Bu}^dg^et^L^a^rry^N^o^w^e^l^s^7-⁷⁶⁴⁵^lⁿ^ow^el^s^@^crs^.^l^o^c.g^o^v
^G^eⁿ^e^ral^:^Polⁱ^c^y^Is^s^u^es^C^u^rt^T^a^rn^of^f⁷^-⁷⁶⁵⁶^ct^arn^o^f^f^@^crs^.^l^o^c.g^o^v
^A^f^ri^{ca A}ⁱ^d^R^ay^m^oⁿ^d^C^ops^on^7-⁷⁶⁶¹^rcops^on^@^c^rs^.l^oc.g^ov
^A^g^en^cy^f^o^{r In}^t^e^rn^atⁱ^oⁿ^a^l^D^e^v^e^l^opm^en^t^(U^S^A^ID⁾^L^arry^N^o^w^e^l^s^7-⁷⁶⁴⁵^lⁿ^ow^el^s^@^crs^.^l^o^c.g^o^v
^C^u^rt^T^a^rn^of^f⁷^-⁷⁶⁵⁶^ct^arn^o^f^f^@^crs^.^l^o^c.g^o^v
^A^sⁱ^a^Aⁱ^{d Prog}^ram^s^T^h^om^as^L^u^m⁷^-⁷⁶¹⁶^t^l^u^m^@^crs^.^l^o^c.g^o^v
^C^eⁿ^t^ral^A^sⁱ^a^Ji^m^Nⁱ^ch^ol^7-²²⁸⁹^jⁿⁱ^c^h^o^l^@^crs^.^l^o^c.g^o^v
^D^e^bt^R^e^lⁱ^e^f^L^arry^N^o^w^e^l^s^7-⁷⁶⁴⁵^lⁿ^ow^el^s^@^crs^.^l^o^c.g^o^v
^D^e^v^e^l^opm^en^t^A^s^sⁱ^s^t^an^{ce (bi}^l^a^t^e^ral⁾^L^a^rry^N^o^w^e^l^s^7-⁷⁶⁴⁵^lⁿ^ow^el^s^@^crs^.^l^o^c.g^o^v
^C^u^rt^T^a^rn^of^f⁷^-⁷⁶⁵⁶^ct^arn^o^f^f^@^crs^.^l^o^c.g^o^v
^Dⁱ^s^a^s^t^{er A}ⁱ^d^R^h^{oda Marg}^es^s^oⁿ⁷^-⁰⁴²⁵^rm^arg^e^s^s^oⁿ^@^crs^.^l^o^c.g^o^v
^D^r^u^g^/^C^o^uⁿ^t^ern^a^rcotⁱ^c^s^Prog^ram^s^R^a^ph^ael^Perl^7-⁷⁶⁶⁴^rperl^@^crs^.^l^o^c.g^o^v
^Dru^g^/^C^o^uⁿ^t^ern^a^rcotics^,^C^o^lom^b^ia^C^oⁿⁿⁱ^{e Veillette}^7-⁷¹²⁷^cv^eillette@^c^rs^.loc.g^ov
^Ex^port^-^Im^port^Ban^k^Jam^e^s^Jack^s^oⁿ⁷^-⁷⁷⁵¹^j^j^ack^s^oⁿ^@^crs^.^l^o^c.g^o^v
^F^a^mⁱ^l^y^Pl^anⁿⁱⁿ^g^Prog^ram^s^L^a^rry^N^o^w^e^l^s^7-⁷⁶⁴⁵^lⁿ^ow^el^s^@^crs^.^l^o^c.g^o^v
^H^eal^t^h^Prog^ram^s^Tⁱ^ajⁱ^S^a^l^aam^7-⁷⁶⁷⁷^t^s^al^aam^@^c^rs^.l^oc.g^ov
^R^h^{oda Marg}^es^s^oⁿ⁷^-⁰⁴²⁵^rm^arg^e^s^s^oⁿ^@^crs^.^l^o^c.g^o^v
^H^I^V^/^A^I^D^S^R^a^y^m^on^{d C}^ops^on^7-⁷⁶⁶¹^rcops^on^@^c^rs^.l^oc.g^ov
^In^t^e^rn^atⁱ^oⁿ^a^l^A^f^f^aⁱ^r^s^Bu^dg^et^L^a^rry^N^o^w^e^l^s^7-⁷⁶⁴⁵^lⁿ^ow^el^s^@^crs^.^l^o^c.g^o^v
^In^t^e^rn^atⁱ^oⁿ^a^l^Mon^e^t^a^ry^F^uⁿ^d^(IMF⁾^M^art^y^Wei^s^s⁷^-⁵⁴⁰⁷^m^w^ei^s^s^@^crs^.^l^o^c.g^o^v
^Jon^a^t^h^an^S^aⁿ^f^ord⁷^-⁷⁶⁸²^j^s^an^f^o^rd@^c^rs^.l^oc.g^ov
^Jef^f^H^o^rn^beck^7-⁷⁷⁸²^j^h^orn^b^eck^@^c^rs^.l^oc.g^ov
^{Iraq recon}^s^t^r^u^c^tⁱ^oⁿ^C^u^r^t^T^a^rn^of^f⁷^-⁷⁶⁵⁶^ct^arn^o^f^f^@^crs^.^l^o^c.g^o^v
^L^a^tin^A^m^{erica A}^s^sⁱ^s^t^an^ce^C^oⁿⁿⁱ^{e Veillette}^7-⁷¹²⁷^cv^eillette@^c^rs^.loc.g^ov
^Mi^croen^t^erpri^s^e^C^u^r^t^T^a^rn^of^f⁷^-⁷⁶⁵⁶^ct^arn^o^f^f^@^crs^.^l^o^c.g^o^v
^Mi^ddl^{e Eas}^t^A^s^sⁱ^s^t^an^ce^Jerem^y^S^h^arp⁷^-⁸⁶⁸⁷^j^s^h^a^rp@^c^rs^.l^oc.g^ov
^Military^Aⁱ^d/A^r^m^s^Sales^R^ich^a^{rd Grim}^m^e^tt^7-⁷⁶⁷⁵^rg^rim^m^e^tt@^crs^.^loc.g^o^v
^Mu^{ltilateral Dev}^e^lopm^en^{t B}^aⁿ^k^s^(MDB^s⁾^J^oⁿ^a^th^an^San^f^ord⁷^-⁷⁶⁸²^j^s^an^f^o^rd@^c^rs^.loc.g^ov
^Mart^y^Wei^s^s⁷^-⁵⁴⁰⁷^m^w^ei^s^s^@^crs^.^l^o^c.g^o^v
^N^o^rt^h^K^o^rea^L^arry^Nⁱ^k^s^ch^7-⁷⁶⁸⁰^lⁿⁱ^k^s^c^h^@^crs^.^l^o^c.g^o^v
^Mark^Man^yⁱⁿ^7-⁷⁶⁵³^m^m^aⁿ^yⁱⁿ^@^c^rs^.l^oc.g^ov
^O^v^ers^eas^Pri^v^at^{e In}^v^e^s^t^m^eⁿ^t^C^o^rporatⁱ^oⁿ^(O^PIC⁾^Jam^e^s^Jack^s^oⁿ⁷^-⁷⁷⁵¹^j^j^ack^s^oⁿ^@^crs^.^l^o^c.g^o^v
^P^{eace C}^o^rps^C^u^r^{t T}^a^rn^of^f⁷^-⁷⁶⁵⁶^ctarn^o^f^f^@^crs^.^loc.g^o^v
^P^eacek^eepin^g^M^arj^o^{rie Brow}ⁿ^e^7-⁷⁶⁹⁵^m^b^rowⁿ^e@^crs^.^loc.g^o^v
^Nⁱⁿ^a^S^e^rafⁱⁿ^o^7-⁷⁶⁶⁷ⁿ^s^erafⁱⁿ^o@^crs^.^l^o^c.g^o^v
^R^e^f^u^g^{ee A}ⁱ^d^R^h^{oda Marg}^es^s^oⁿ⁷^-⁰⁴⁵²^rm^arg^e^s^s^oⁿ^@^crs^.^l^o^c.g^o^v
^R^u^s^sⁱ^a/^Eas^t^Eu^{rope A}ⁱ^d^C^u^r^t^T^a^rn^of^f⁷^-⁷⁶⁵⁶^ct^arn^o^f^f^@^crs^.^l^o^c.g^o^v
^T^e^rrori^s^m^R^a^ph^ael^Perl^7-⁷⁶⁶⁴^rperl^@^crs^.^l^o^c.g^o^v
^T^r^af^fⁱ^ckⁱⁿ^gⁱⁿ^Pers^on^s^F^ran^cⁱ^s^Mi^k^o^7-⁷⁶⁷⁰^f^mⁱ^k^o@^crs^.^l^o^c.g^o^v
^U^N^F^PA^L^a^rry^N^o^w^e^l^s^7-⁷⁶⁴⁵^lⁿ^ow^el^s^@^crs^.^l^o^c.g^o^v
^U^.^N^.^V^o^l^uⁿ^t^ary^C^oⁿ^t^ri^bu^tⁱ^oⁿ^s^Vⁱ^t^a^Bi^t^e^7-⁷⁶⁶²^v^bⁱ^t^e^@^c^rs^.l^oc.g^ov

Contents
Most Recent Developments..........................................1
In troduction ......................................................2
Status ...........................................................3
Foreign Operations Policy Trends and Goals............................4
Foreign Operations Funding Trends...................................6
Foreign Operations, the FY2005 Budget Resolution, and
Sec. 302(b) Allocations....................................10
Foreign Operations Appropriations Request for FY2005 and
Congressional Consideration.................................11
Request Overview............................................11
Fighting the War on Terrorism..................................12
The Millennium Challenge Corporation...........................13
President’s Emergency Plan for AIDS Relief (PEPFAR)..............13
Peace Corps.................................................14
The U.S. Emergency Fund for Complex Crises......................14
Debt Reduction..............................................14
Other Key Elements of the FY2005 Request........................14
Bilateral Development Assistance................................15
Leading Foreign Aid Recipients Proposed for FY2005................16
House Consideration..........................................18
HIV/AIDS and Other Development Aid.......................19
Family Planning/Reproductive Health.........................19
Country Aid Levels.......................................20
Iraq ....................................................20
Reductions ..............................................20
Floor Amendments........................................21
Senate Consideration..........................................22
HIV/AIDS and Other Development Aid.......................23
Family Planning/Reproductive Health.........................23
Iraq ....................................................24
Darfur ..................................................24
Country Aid Levels.......................................25
Reductions ..............................................25
Conference Agreement........................................26
HIV/AIDS and Other Development Aid.......................26
Family Planning/Reproductive Health.........................27
Darfur ..................................................27
Country and Regional Aid Levels............................28
Reductions ..............................................29
ICC and Article 98 Agreements..............................29
Continuing Resolution and Foreign Operations......................30

Foreign Aid to Combat Terrorism................................31
Anti-Terrorism Assistance (ATA)............................32
Terrorist Interdiction Program (TIP)..........................34
Counterterrorism Engagement with Allies.....................34
Terrorist Financing........................................34
Aid Restrictions for Terrorist States..........................34
Congressional Action......................................35
Millennium Challenge Account..................................37
MCC Background........................................37
MCC Implementation Steps and Issues........................39
Congressional Action......................................46
Development Assistance, Global Health Priorities, and HIV/AIDS......49
FY2005 Development Assistance Request.....................51
Congressional Action......................................53
International Family Planning and UNFPA Funding..................58
UNFPA Funding.........................................59
“Mexico City” Policy......................................62
Congressional Action......................................63
Afghanistan Reconstruction.....................................65
Current Operating Environment.............................65
U.S. Assistance for Afghan Reconstruction.....................69
FY2005 Afghanistan Aid Request............................69
Congressional Action......................................71
Iraq Reconstruction...........................................72
U.S. Assistance..........................................73
U.S. Aid Policy Structure on Iraq............................75
U.S. Reconstruction Assistance..............................76
Reconstruction Programs...................................78
Reconstruction Contract Issues..............................81
Recent Assessments of Reconstruction........................84
Congressional Action......................................85
For Additional Reading............................................87
Selected Websites................................................90
List of Figures
Figure 1. Foreign Operations Funding Trends...........................6
Figure 2. Supplemental Funding for Foreign Operations...................9
List of Tables
Table 1. Status of Foreign Operations Appropriations, FY2005.............3
Table 2. Foreign Operations Appropriations, FY1996 to FY2005............8
Table 3. Foreign Operations Significant Increases FY2005................12

Table 5. Leading Recipients of U.S. Foreign Aid........................17
Table 6. U.S. Assistance to Front-Line States in War on Terrorism..........33
Table 7. Global Counter-Terrorism Program Funding....................35
Table 8. MCC Performance Indicators for FY2005......................48
Table 9. Development Assistance Funding.............................50
Table 10. “Core” Development Assistance Funding.....................53
Table 11. Development Assistance and Congressional Action.............54
Table 12. U.S. International HIV/AIDS, Tuberculosis, and Malaria Programs
...........................................................56
Table 13. Selected Development Aid Funding Targets —
Congressional Action..........................................57
Table 14. U.S. Assistance to Afghanistan, FY2002-FY2005...............71
Table 15. Funds Committed/Pledged to Iraq Relief and Reconstruction......74
Table 16. Iraq Relief and Reconstruction Fund: Obligations, Expenditures,
and Re-Allocations............................................77
Table 17. Foreign Operations: Discretionary Budget Authority ............92

Appropriations for FY2005:
Foreign Operations, Export Financing,
and Related Programs
Most Recent Developments
On December 8, 2004, the President signed into law P.L. 108-447 (H.R. 4818),
the FY2005 Consolidated Appropriations Act, within which Foreign Operations is
included as Division D. As enacted, the measure provides $19.64 billion for Foreign
Operations after adjusting for a required 0.8% across-the-board rescission. Although
this is $1.68 billion, or nearly 8% below the President’s request, Congress increased
amounts passed earlier by the House ($19.39 billion) and the Senate ($19.61 billion).
The conference agreement is about $2.3 billion (+13%) more than the “regular”
FY2004 Foreign Operations level, but far less than the $38.78 billion total
appropriation in FY2004 that included $21.2 billion for Iraq reconstruction and other
supplemental needs.
For the “core” development and child survival accounts, including the Global
AIDS Initiative, P.L. 108-447 provides $4.36 billion (after adjusting for the 0.8%
across-the-board rescission), about $675 million higher than FY2004 and $160
million more than the request. Within these totals, H.R. 4818 provides $2.28 billion
for the President’s Emergency Plan for AIDS Relief (PEPFAR) (after applying the
rescission), roughly $80 million higher than the request and the House-passed level,
but $139 million less than passed by the Senate. (Funding for international
HIV/AIDS included in other appropriation bills brings the total to $2.92 billion, $100
million more than the request.)
On family planning and reproductive heath matters, the conference on H.R.
4818 sets bilateral assistance at $441 million, between House and Senate-passed
amounts. The bill includes $34 million for the U.N. Population Fund (UNFPA),
subject to the “Kemp-Kasten” conditions, but drops the Senate language amending
Kemp-Kasten that may have narrowed the grounds on which the Administration
could deny funding to the organization. Conferees also deleted the Senate-proposed
revision to the President’s so-called “Mexico City” conditions on bilateral family
planning assistance in a way that may have reversed the policy restrictions.
For specific countries, P.L. 108-447 provides $404 million for relief and peace
and security activities in Sudan, $85 million for Haiti, and $980 million for
Afghanistan. The Sudan amount is in addition to $95 million emergency funding for
the Darfur region approved by P.L. 108-287, the FY2005 Defense appropriation bill.
The largest reduction in the enacted appropriation falls on the Millennium
Challenge Account — reduced by $1 billion from the President’s $2.5 billion request.

The final level, however is $250 million and $380 million than amounts
recommended earlier by the House and Senate, respectively, coming only after strong
pressure from the White House. The measure further reduces funding for the Export-
Import Bank, debt reduction, the Peace Corps, and multilateral development bank
contributions, among other accounts.
Introduction
The annual Foreign Operations appropriations bill is the primary legislative
vehicle through which Congress reviews and votes on the U.S. foreign assistance
budget and influences major aspects of executive branch foreign policy making
generally.¹ It contains the largest share — about two-thirds — of total international
affairs spending by the United States.
The legislation funds all U.S. bilateral development assistance programs,
managed mostly by the U.S. Agency for International Development (USAID),
together with several smaller independent foreign aid agencies, such as the Peace
Corps and the Inter-American and African Development Foundations. Foreign
Operations also includes resources for the two newest Administration initiatives: the
Millennium Challenge Corporation (MCC) and the Global AIDS Initiative managed
by the State Department’s HIV/AIDS Coordinator. Most humanitarian aid activities
are funded within Foreign Operations, including USAID’s disaster/famine program
and the State Department’s refugee relief support. Foreign Operations includes
separate accounts for aid programs in the former Soviet Union (also referred to as the
Independent States account) and Central/Eastern Europe, activities that are jointly
managed by USAID and the State Department.
Security assistance (economic and military aid) for Israel and Egypt is also part
of the Foreign Operations spending measure, as are other security aid programs
administered largely by the State Department, in conjunction with USAID and the
Pentagon. Most recently, Foreign Operations has funded reconstruction programs in
both Afghanistan and Iraq. U.S. contributions to the World Bank and other regional
multilateral development banks, managed by the Treasury Department, and voluntary
payments to international organizations, handled by the State Department, are also
funded in the Foreign Operations bill. Finally, the legislation includes appropriations
for three export promotion agencies: the Overseas Private Investment Corporation
(OPIC), the Export-Import Bank, and the Trade and Development Agency.

¹ Although the Foreign Operations appropriations bill is often characterized as the “foreign
aid” spending measure, it does not include funding for all foreign aid programs. Food aid,
an international humanitarian aid program administered under the P.L. 480 program, is
appropriated in the Agriculture appropriations bill. Foreign Operations also include funds
for the Export-Import Bank, an activity that is regarded as a trade promotion program, rather
than “foreign aid.” In recent years, funding for food aid and the Eximbank have been about
the same, so that Foreign Operations and the official “foreign aid” budget are nearly
identical. Throughout this report, the terms Foreign Operations and foreign aid are used
interchangeably.

For two decades, the Foreign Operations appropriations bill has been the
principal legislative vehicle for congressional oversight of foreign affairs and for
congressional involvement in foreign policy making. Congress has not enacted a
comprehensive foreign aid authorization bill since 1985, leaving most foreign
assistance programs without regular authorizations originating from the legislative
oversight committees. As a result, Foreign Operations spending measures developed
by the appropriations committees increasingly have expanded their scope beyond
spending issues and played a major role in shaping, authorizing, and guiding both
executive and congressional foreign aid and broader foreign policy initiatives. It has
been largely through Foreign Operations appropriations that the United States has
modified aid policy and resource allocation priorities since the end of the Cold War.
The legislation has also been the channel through which the President has utilized
foreign aid as a tool in the global war on terrorism since the attacks of September 11,

2001, and launched Afghan and Iraqi reconstruction operations.

The appropriations measure has also been a key instrument used by Congress
to apply restrictions and conditions on Administration management of foreign
assistance, actions that have frequently resulted in executive-legislative clashes over
presidential prerogatives in foreign policy making.
Status
Table 1. Status of Foreign Operations Appropriations, FY2005
(H.R. 4818 and S. 2812)
Subcomm.HouseHouseSenateSenateConf.Conf. ReportPublic
MarkupApproval
Re por t P assage Re por t P assage Re por t Law
H ouse Senat e H ouse Senat e
7/13 7/15 9/16 9/2311/19 11/2011/2012/08

6/23 09/09 H.Rept.365-41 S.Rept.voice H.Rept.344-51 65-30 P.L.

108-599 108-346108-792 108-447
President Bush submitted his FY2005 federal budget request to Congress on
February 2, 2004, including funding proposals for Foreign Operations Appropriations
programs. House and Senate Appropriations Committees held several hearings on
the FY2005 request. The House Foreign Operations Subcommittee marked up its
draft legislation on June 23, followed by full Committee approval on July 9. H.R.
4818 passed the House, amended, on July 15. The Senate Appropriations Committee
reported its bill, S. 2812, on September 16, which was debated and amended on
September 23. The Senate passed H.R. 4818, after substituting the text of S. 2812,
as amended. Conferees reached agreement November 19 on the Foreign Operations
measure, together with eight other pending appropriation bills for FY2005. H.R.
4818, originally the Foreign Operations measure, became the vehicle for the omnibus
Consolidated Appropriations Act, 2005. Foreign Operations is included as Division
D of the act. The President signed the measure on December 8.

Foreign Operations Policy Trends and Goals
Arguably, from the end of World War II until the early 1990s, the underlying
rationale for providing foreign aid was the same as that for all U.S. foreign policy —
the defeat of communism. U.S. aid programs were designed to promote economic
development and policy reforms, in large part to create stability and reduce the
attraction to communist ideology and to block Soviet diplomatic links and military
advances. Other security assistance activities provided defense equipment and
training to American allies and friendly states, some of which faced Soviet or Soviet-
proxy threats. Aid programs also were used to help the U.S. gain access to military
bases around the world in order to forward deploy American forces.
Foreign aid programs also supported a number of secondary U.S. policy goals,
such as reducing high rates of population growth, promoting wider access to health
care, expanding the availability of basic education in the developing world,
advancing U.S. trade interests, and protecting the environment. If these secondary
goals were also achieved, U.S. aid programs could be promoted as delivering “more
bang for the buck.”
With the end of the Cold War, the United States launched expansive aid
programs in Russia and many eastern-bloc states that were previously those that U.S.
assistance tried to combat. While these and other new elements of American foreign
aid emerged, no broad consensus developed over what should be the new overarching
rationale for U.S. aid programs. Throughout the 1990s, policymakers and Congress
explored a number of alternative strategic frameworks around which to construct a
revised foreign assistance policy rationale. Not only did a policy consensus fail to
emerge, but efforts to overhaul the largely Cold War-based foreign aid legislation
also did not succeed.
During this period, the Clinton Administration emphasized the promotion of
“sustainable development” as the new, post-Cold War main strategy of those parts
of the foreign aid program under the aegis of the U.S. Agency for International
Development (USAID). Economic assistance supported six inter-related goals:
achievement of broad-based, economic growth; development of democratic systems;
stabilization of world population and protection of human health; sustainable
management of the environment; building human capacity through education and
training; and meeting humanitarian needs.
Early in the Bush Administration these goals were modified around three
“strategic pillars” of 1) economic growth, agriculture, and trade; 2) global health; and
3) democracy, conflict prevention, and humanitarian assistance. More recently, a
USAID White Paper on American foreign aid identified five “core” operational goals
of U.S. foreign assistance:
^!Promoting transformational development, especially in the areas of
governance, institutional capacity, and economic restructuring;
^!Strengthening fragile states;
^!Providing humanitarian assistance;

^!Supporting U.S. geostrategic interests, particularly in countries such
as Iraq, Afghanistan, Pakistan, Jordan, Egypt, and Israel; and
^!Mitigating global and international ills, including HIV/AIDS.²
Perhaps the most defining change in U.S. foreign aid policy came following the
September 11, 2001, terrorist attacks in the United States when American foreign
assistance has taken on a more strategic sense of importance and has been cast
frequently in terms of contributing to the global war on terrorism. In September
2002, President Bush released his Administration’s National Security Strategy that
established global development, for the first time, as the third “pillar” of U.S.
national security, along with defense and diplomacy. Also in 2002, executive branch
foreign assistance budget justifications began to underscore the war on terrorism as
the top foreign aid priority, highlighting amounts of U.S. assistance to about 30
“front-line” states in the terrorism war — countries that cooperated with the United
States in the war on terrorism or faced terrorist threats themselves. The substantial
reconstruction programs in Afghanistan and Iraq — which total more in FY2004 than
the combined budgets of all other aid programs — are also part of the emphasis on
using foreign aid to combat terrorism.
At roughly the same time that fighting terrorism became the leading concern of
American foreign aid, the Bush Administration announced other significant
initiatives that have defined and strengthened two additional key foreign assistance
goals: promoting economic growth and reducing poverty, and combating the global
HIV/AIDS pandemic. The Millennium Challenge Corporation (MCC) is a new aid
delivery concept, authorized by Congress and established in early 2004, that is
intended to concentrate significantly higher amounts of U.S. resources in a few low-
and low-middle income countries that have demonstrated a strong commitment to
political, economic, and social reforms. If fully funded, $5 billion will be available
by FY2006 to support these “best development performers” in order to accelerate
economic growth and lower the number of people living in absolute poverty.
Addressing global health problems has further become a core U.S. aid objective
in recent years. Congress created a separate appropriation account for Child Survival
and Health activities in the mid-1990s and increased funding for international
HIV/AIDS and other infectious disease programs. President Bush’s announcement
at his 2003 State of the Union message of a five-year, $15 billion effort to combat
AIDS, malaria, and tuberculosis has added greater emphasis to this primary foreign
assistance objective.
Beyond these recently emerging foreign aid goals, other prominent objectives
that have continued since the early 1990s have included supporting peace in the
Middle East through assistance to Israel, Egypt, Jordan, and the Palestinians;
fostering democratization and stability for countries in crisis, such as Bosnia, Haiti,
Rwanda, Kosovo, and Liberia; facilitating democratization and free market
economies in Central Europe and the former Soviet Union; suppressing international
narcotics production and trafficking through assistance to Colombia and other

² U.S. Agency for International Development. U.S. Foreign Aid: Meeting the Challenges
of the Twenty-First Century. January 2004.

Andean drug-producing countries; and alleviating famine and mitigating refugee
situations in places throughout the world.
Foreign Operations Funding Trends
As shown in the Figure 1, Foreign Operations funding levels, expressed in real
terms taking into account the effects of inflation, have fluctuated widely over the past

29 years.³ After peaking at over $34 billion in FY1985 (constant FY2005 dollars),

Foreign Operations appropriations began a period of decline to a low-point of $14.1
billion in FY1997, with only a brief period of higher amounts in the early 1990s due
to special supplementals for Panama and Nicaragua (1990), countries affected by the
Gulf War (1991), and the former Soviet states (1993).

Figure 1. Foreign Operations Funding Trends
³ Some of these swings in budget levels shown in the figure are not the result of policy
decisions, but are due to technical budget accounting changes involving how Congress
“scores” various programs. For example, the large increase in FY1981 did not represent
higher funding levels, but rather the fact that export credit programs began to be counted as
appropriations rather than as “off-budget” items. Part of the substantial rise in spending in
FY1985 came as a result of the requirement to appropriate the full amount of military aid
loans rather than only the partial appropriation required in the past. Beginning in FY1992,
Congress changed how all Federal credit programs are “scored” in appropriation bills which
further altered the scoring of foreign aid loans funded in Foreign Operations. All of these
factors make it very difficult to present a precise and consistent data trend line in Foreign
Operations funding levels. Nevertheless, the data shown here can be regarded as illustrative
of general trends in Congressional decisions regarding Foreign Operations appropriations
over the past 29 years.

Arguing that declining international affairs resources seriously undermined U.S.
foreign policy interests and limited the ability of American officials to influence
overseas events, Clinton Administration officials and other outside groups vigorously
campaigned to reverse the decade-long decline in the foreign policy budget. Foreign
aid spending increased slightly in FY1998, but beginning the following year and
continuing to the present, Foreign Operations appropriations have trended upward
due in large part to the approval of resources for special, and in some cases
unanticipated foreign policy contingencies and new initiatives.
While funding for regular, continuing foreign aid programs also rose modestly
during this period, supplemental spending for special activities, such as Central
American hurricane relief (FY1999), Kosovo emergency assistance (FY1999), Wye
River/Middle East peace accord support (FY2000), a counternarcotics initiative in
Colombia and the Andean region (FY2000 and FY2002-FY2004), aid to the front
line states in the war on terrorism and Iraq-war related assistance (FY2003-FY2004),
was chiefly responsible for the growth in foreign aid appropriations.
While Foreign Operations appropriations had been rising for five consecutive
years, amounts approved in FY2003 and FY2004 reached unprecedented levels over
the past 40 years. Regular appropriations approved in these two years were roughly
on par with amounts of the previous few years. But substantial supplementals of $7.5
billion and $21.2 billion, respectively, for assistance to the front line states in the war
on terrorism and Afghanistan and Iraq reconstruction, have pushed spending upward.
The regular Foreign Operations bill, signed by the President on January 23, 2004,
combined with an earlier Iraq supplemental approved in November 2003 (P.L. 108-
106) and subsequent emergency relief for Darfur, Sudan (P.L. 108-287), brought
FY2004 appropriations to $39.4 billion (constant FY2005 dollars), the highest level,
in real terms, since the early 1960s.
The enacted level for FY2005 of $19.74 billion, while less than the previous two
years, is the largest Foreign Operations appropriation, in real terms, than all other
years in over a decade. Moreover, the FY2005 total is likely to grow when Congress
considers supplemental funding for tsunami disaster relief and possibly additional
Iraq reconstruction needs.
Supplemental resources for Foreign Operations programs, which in FY2004
exceeded regular Foreign Operations funding, have become a significant channel of
funding for U.S. international activities. Due to the nature of rapidly changing
overseas events and the emergence of unanticipated contingencies to which it is in
the U.S. national interest to respond, it is not surprising that foreign aid and defense
resources from time to time are the major reason for considering and approving
supplemental spending outside the regular appropriation cycle. Supplementals have
provided resources for such major foreign policy events as the Camp David accords
(FY1979), Central America conflicts (FY1983), Africa famine and a Middle East
economic downturn (FY1985), Panama and Nicaragua government transitions
(FY1990), the Gulf War (FY1991), and Bosnia relief and reconstruction (FY1996).

Table 2. Foreign Operations Appropriations, FY1996 to FY2005
(discretionary budget authority in billions of current and constant dollars)
FY1996FY1997FY1998FY1999FY2000FY2001FY2002 FY2003FY2004FY2005
nominal $s12.4612.2713.1515.4416.4116.3116.5423.6738.7819.74
constant FY0514.6414.1515.0217.3918.0417.5317.5224.6039.4419.74
$s
^No^te:^FY1999^ex^clu^d^es^{$17.861 billion}^f^o^{r th}^{e IMF. FY2003 in}^clu^d^es^{$2.475 billion}^an^{d FY2004 in}^clu^d^es^{$19.42 billion}ⁱⁿ
^s^u^pplem^ent^a^l^a^p^p^r^o^p^rⁱ^a^tⁱ^on^s^f^o^{r Iraq recon}^s^tru^c^tion^.^FY2005^is^th^{e en}^{acted lev}^e^{l an}^{d in}^clu^d^es^{$100 m}^illion^f^o^{r C}^a^ribbean
^h^u^rrican^{e relief}^prov^{ided in}^P^.^L^.^108-^{324, th}^e^Military^C^oⁿ^s^tru^c^tion^{appropriation}^{bill f}^o^{r FY2005.}
But after a period of only one significant foreign aid supplemental in eight years,
beginning in FY1999 Congress has approved Foreign Operations supplemental
appropriations exceeding $1 billion in each of the past six years. Relief for Central
American victims of Hurricane Mitch, Kosovo refugees, and victims of the embassy
bombings in Kenya and Tanzania in FY1999 totaled $1.6 billion, and was followed
in FY2000 by a $1.1 billion supplemental, largely to fund the President’s new
counternarcotics initiative in Colombia. As part of a $40 billion emergency
supplemental to fight terrorism enacted in September 2001, President Bush and
Congress allocated $1.4 billion for foreign aid activities in FY2001 and FY2002.
Another $1.15 billion supplemental cleared Congress in FY2002 to augment Afghan
reconstruction efforts and assist other “front-line” states in the war on terrorism.
Until FY2003, these additional resources accounted for between 7% and 11%
of total Foreign Operations spending. The $7.5 billion Iraq War supplemental for
FY2003, however, went well beyond these standards, representing nearly one-third
of the FY2003 Foreign Operations budget, and was surpassed, as noted above, only
by FY2004 supplemental appropriations, which more than doubled the Foreign
Operations budget for the year.

Figure 2. Supplemental Funding for Foreign Operations
40
35
30
25
20
15
10
5
0
'9 8 '9 9 '0 0 '0 1 '0 2 '0 3 '0 4
Sup plem ent a l Regu lar
Data Notes
Unless otherwise indicated, this report expresses dollar amounts in terms of
discretionary budget authority. The Foreign Operations Appropriations bill
includes one mandatory program that is not included in figures and tables —
USAID’s Foreign Service retirement fund. The retirement fund is scheduled to
receive $43.9 million for FY2004.
In addition, funding levels and trends discussed in this report exclude U.S.
contributions to the International Monetary Fund (IMF), proposals that are enacted
periodically (about every five years) in Foreign Operations bills. Congress
approved $17.9 billion for the IMF in FY1999, the first appropriation since
FY1993. Including these large, infrequent, and uniquely “scored” IMF
appropriations tends to distort a general analysis of Foreign Operations funding
trends. Although Congress provides new budget authority through appropriations
for the full amount of U.S. participation, the transaction is considered an exchange
of assets between the United States and the IMF, and results in no outlays from the
U.S. treasury. In short, the appropriations are off-set by the creation of a U.S.
counterpart claim on the IMF that is liquid and interest bearing.

Foreign Operations, the FY2005 Budget Resolution, and
Sec. 302(b) Allocations
Usually, Appropriations Committees begin markups of their spending bills only
after Congress has adopted a budget resolution and funds have been distributed to the
Appropriations panels under what is referred to as the Section 302(a) allocation
process, a reference to the pertinent authority in the Congressional Budget Act.
Following this, House and Senate Appropriations Committees separately decide how
to allot the total amount available among their 13 subcommittees, staying within the
functional guidelines set in the budget resolution. This second step is referred to as
the Section 302(b) allocation. Foreign Operations funds fall within the International
Affairs budget function (Function 150), representing in most years about 65% of the
function total. Smaller amounts of Function 150 are included in four other
appropriation bills.
How much International Affairs money to allocate to each of the four
subcommittees with jurisdiction over the International Affairs programs, and how to
distribute the funds among the numerous programs are decisions exclusively reserved
for the Appropriations Committees. Nevertheless, overall ceilings set in the budget
resolution can have significant implications for the budget limitations within which
the House and Senate Foreign Operations subcommittees will operate when they
meet to mark up their annual appropriation bills.
On May 19, 2004, House and Senate conferees agreed to a budget framework
for FY2005 (S.Con.Res. 95) that included $821 billion in discretionary budget
authority. The discretionary budget authority target for the International Affairs
function, out of which Foreign Operations programs receive their funding, was
$29.28 billion, $2.2 billion or 7% less than the President’s request. If the conference
recommendations were followed during the appropriation process, it was likely that
the Administration’s proposal for Foreign Operations could not be fully met.
The House and Senate Appropriations Committees, however, can choose to
allocate the $29.28 billion among the four subcommittees proportionally different
than what the President proposed or to alter the overall amount for foreign policy
activities. Depending on other competing priorities, the final allocations can diverge
significantly from those assumed in the budget resolution.
Complicating decisions related to the 302(b) allocation process was the lack of
a final vote on the FY2005 budget resolution’s conference agreement. The House
passed the measure on May 19 (216-213) and “deemed” the $821 billion
discretionary budget authority cap included in the budget resolution as guidance for
the Appropriations Committee. The resolution, however, remained pending in the
Senate where disagreements focused on the size of the deficit, budget enforcement
mechanisms, and extending existing tax cuts, matters unrelated to international
affairs funding issues. While Congress can, and did proceed with consideration of
appropriation bills without finalizing the budget resolution, the lack of broad
consensus on overall spending levels can make it more difficult to pass each of the

13 appropriation measures.

On June 2, the House Appropriations Committee released its 302(b) allocations,
providing $19.39 billion for Foreign Operations. The amount is $1.93 billion, or
9.1% less than the President’s request. The Senate Appropriations Committee
announced its subcommittee allocations on September 8, making available the
identical amount for Foreign Operations as approved by the House panel. The
reduction for Foreign Operations in both houses was the largest for any of the 13
subcommittees when compared to the Administration’s recommendation.⁴
As approved in H.R. 4818, the omnibus Consolidated Appropriation Act, 2005,
the final total amount for Foreign Operations exceeds the level previously allocated
for the bill. This is largely the result of a White House-congressional agreement to
add funds for the Millennium Challenge Account and to include $93 million in
“emergency” funding — an amount that does not count against the allocation cap —
for relief and peacekeeping activities in the Darfur region of Sudan. The final regular
Foreign Operations measure provides $19.64 billion. This compares with the $19.39
billion allocated under the earlier 302(b) allocations for Foreign Operations.
Foreign Operations Appropriations Request for
FY2005 and Congressional Consideration
Request Overview
On February 2, 2004, President Bush asked Congress to appropriate $21.32
billion for FY2005 Foreign Operations. The budget proposal was $2.05 billion, or
10.6% higher than Foreign Operations appropriations for FY2004, excluding funds
approved for Iraq reconstruction. (Including Iraq reconstruction funds, the FY2005
request is significantly smaller than the FY2004 total of $38.7 billion.) Foreign
Operations, together with requests for Defense and Homeland Security, were areas
proposed for the largest growth in spending under the FY2005 appropriation request.
Despite the large overall increase for Foreign Operations, much of the added
funding was concentrated in a few areas. The FY2005 budget continued to highlight
foreign aid in support of the war on terrorism as the highest priority, with a one-third
increase for anti-terrorism programs. In addition, two recently launched foreign aid
initiatives — the Millennium Challenge Corporation (MCC) and the President’s
Emergency Plan for AIDS Relief (PEPFAR) — were slated for significant funding

⁴ In issuing the subcommittee allocations, House and Senate Committees also compared
FY2005 levels with amounts enacted for FY2004. In the case of Foreign Operations, the
Committees compared their $19.39 billion recommendation for FY2005 with the $17.48
billion total approved in the regular Foreign Operations appropriation bill (enacted in P.L.
108-199). Using this point of measurement, the FY2005 allocation was $1.9 billion, or
10.9% higher than FY2004 levels. However, because Congress approved a large Foreign
Operations supplemental prior to enactment of the regular, various baselines for FY2004
could be used in drawing comparisons between the two years. Since the FY2004
supplemental included some amounts that had been previously earmarked in House- and
Senate-passed regular — Pakistan and Afghanistan aid, for example — one method would
be to include those levels in the FY2004 regular baseline.

increases. The MCC would grow from $994 million in FY2004 — its first year of
operation — to $2.5 billion for FY2005. PEPFAR, also in its first year, would rise
from $1.6 billion in FY2004 to $2.2 billion in the FY2005 request. (Additional
PEPFAR funds were proposed in the Labor/HHS appropriation measure, bringing the
total FY2005 PEPFAR request to $2.82 billion.) After failing to win congressional
approval the past two years for a new Complex Foreign Crises contingency fund, the
White House again proposed $100 million. The FY2005 request further included
substantial increases for the Peace Corps and for debt reduction, primarily for the
Democratic Republic of the Congo.
Combined, funding for these major elements of the Foreign Operations request
totaled $5.23 billion, or nearly 75% higher than for FY2004. By contrast, the $16.1
billion proposed for all other Foreign Operations activities was $183 million, or 1.1%
less than FY2004 amounts.
Table 3. Foreign Operations Significant Increases FY2005
FY2004Enacted*FY2005RequestFY2005 +/-FY2004
Foreign Operations$19.270$21.31810.6%
Significant increases for FY2005:
Anti-Terrorism programs$0.096$0.12833.3%
Millennium Challenge Account $0.994 $2.500 151.5%
Emergency Plan for AIDS Relief$1.600 $2.100 31.3%
Peace Corps $0.308 $0.401 30.2%
Complex Crises Fund — $0.100 —
Debt Reduction$0.094$0.200112.8%
Total significant increases FY2005$2.998$5.229 74.4%
Foreign Operations, Less Significant$16.272$16.089-1.1%
Increases
^*^{FY2004 ex}^clu^d^es^{$18.44 billio}ⁿ^{appropriated f}^o^{r Iraq recon}^s^tru^c^tion^,^bu^tⁱⁿ^clu^d^es^oth^e^r^am^ouⁿ^t^s^,
^l^a^rg^el^y^f^o^{r A}^f^g^h^aⁿⁱ^s^t^an^{, Pak}ⁱ^s^t^an^{, an}^{d L}ⁱ^beri^{a, prov}ⁱ^d^{ed i}ⁿ^{a s}^u^ppl^em^en^t^a^l^m^eas^u^r^{e (P.L}^{. 108-}^106).
Fighting the War on Terrorism
Since the terrorist attacks in September 2001, American foreign aid programs
have shifted focus toward more direct support for key coalition countries and global
counter-terrorism efforts. In total, Congress has appropriated approximately $40.74
billion in FY2002-FY2004 Foreign Operations funding to assist the approximately
30 “front-line” states in the war on terrorism, implement anti-terrorism training
programs, and address the needs of post-conflict Iraq and other surrounding
countries. Roughly half of all Foreign Operations appropriations the past three years
has gone for terrorism or Iraq war-related purposes.

The FY2005 budget continued the priority of fighting terrorism with $5.3
billion, or 25% of Foreign Operations resources assisting the front-line states. This
total was down slightly from the roughly $5.7 billion appropriated for FY2004,
although FY2004 included a sizable supplemental for Afghanistan and a few other
front-line states. Anti-terrorism training and technical assistance programs also
would rise by 33% above FY2004 levels. There were no funds requested, however,
for Iraq reconstruction.
The Millennium Challenge Corporation
The largest funding increase for FY2005 was for the Millennium Challenge
Corporation (MCC), a new government entity established on February 2, 2004. The
MCC is designed to radically transform the way the United States provides economic
assistance, concentrating resources on a small number of “best performing”
developing nations. The request for FY2005 was $2.5 billion with a promise that the
MCC will grow to $5 billion by FY2006 and remain at least at that level in the future.
Congress appropriated $994 million for the MCC’s first year of operations in
FY2004, below the President’s $1.3 billion request. The Administration said that the
added MCC funding would be in addition to, and not a substitute for, existing U.S.
economic aid. A number of international development advocates, however, remain
concerned that given the tight budget environment, trade-offs between regular
economic programs and the MCC might be required. The MCC’s Board of Directors
announced on May 6 that 16 countries had qualified for FY2004 MCC resources and
will be invited to submit program proposals. The selection for FY2005 took place
on November 8, adding one additional country.
President’s Emergency Plan for AIDS Relief (PEPFAR)
In his January 2003 State of the Union address, President Bush pledged to
substantially increase U.S. financial assistance for preventing and treating
HIV/AIDS, especially in the most heavily affected countries in Africa and the
Caribbean. The President promised $15 billion over five years, $10 billion of which
would be money above and beyond current funding. Most, but not all PEPFAR
funds are included in the Foreign Operations bill; the balance is provided in the
Labor/HHS appropriation measure. For FY2005, the President requested in total
$2.8 billion for this international HIV/AIDS initiative — $2.2 billion in Foreign
Operations — up from the $2.4 billion enacted for FY2004 ($1.6 billion in Foreign
Operations). Some observers continued to express concern that the FY2005 request,
like FY2004, fell short of the anticipated $3 billion per year implied in the
President’s speech. Some further questioned the Administration’s proposal that only
$200 million of the total would go to the Global Fund to Fight AIDS, Tuberculosis,
and Malaria. Congress boosted the President’s $200 million request in FY2004 for
the Global Fund to $550 million, although $87.7 million could not be transferred
because of a congressional requirement that the U.S. contribution cannot exceed one-
third of total donations to the fund.

Peace Corps
The $401 million request for the Peace Corps — 30% more than in FY2004 —
was an effort to continue the President’s long-term plan of having 14,000 Americans
serving in the Peace Corps by FY2007. While supportive of the multi-year initiative,
Congress has not fully funded the phased-in expansion the past two years. The
FY2005 request would keep the President’s program on pace for the 14,000 volunteer
level in FY2007.
The U.S. Emergency Fund for Complex Crises
The Administration proposed to establish within the Executive Office of the
President a $100 million contingency fund allowing the United States to respond
quickly to unforseen complex foreign crises. The resources would not be used to
address victims of natural disasters, but rather would support peace and humanitarian
intervention in conflict situations, including acts of ethnic cleansing, mass killing, or
genocide. In the past, Congress has been reluctant to approve this type of
contingency fund over which it can apply little oversight. The Administration had
asked lawmakers to launch the Complex Crisis Fund with $150 million as part of the
FY2003 Iraq War supplemental. Congress, however, chose to defer consideration
of establishing the Fund until the FY2004 appropriation cycle, in which the funding
was also denied.
Debt Reduction
The Administration proposed to double the amount enacted for debt reduction
in FY2004. There were three components to the request: $105 million to cancel a
portion of bilateral debt owed by the Democratic Republic of the Congo under the
Heavily Indebted Poor Country (HIPC) initiative; $75 million as a contribution to the
HIPC Trust Fund to make up for unanticipated shortfalls in implementing the
program; and $20 million for the Tropical Forestry Conservation debt relief activity.
Congress approved in FY2004 the same amounts for the HIPC Trust Fund and the
Tropical Forestry Conservation program, but rejected debt relief funding for the
Congo.
Other Key Elements of the FY2005 Request
Beyond these specific and prominent issues, the Foreign Operations proposal
for FY2005 sought to increase aid activities in a few areas while cutting resources for
several programs. Significant appropriation increases included:
^!Export-Import Bank resources would increase from $39 million to
$167 million, allowing the Bank to guarantee about $11.98 billion
in loans, compared to an estimated level of $11.5 billion in FY2004.
^!Foreign Military Financing funds would increase by about $400
million, or 9%, largely due to increases proposed for Israel and
Pakistan, Poland, and the Philippines.

^!Contributions to the World Bank and other international financial
institutions would grow by $110 million, or 8%, covering all
scheduled U.S. payments to the multilateral development banks, plus
clearing $59 million of U.S. arrears owed to these institutions.
For a few Foreign Operations accounts, comparisons between FY2005 and
FY2004 were affected by amounts approved in FY2004 supplemental spending. In
these cases, the FY2005 request was less than totals provided in FY2004, but higher
than levels enacted in the regular Foreign Operations bill. In other words,
supplemental spending approved in P.L. 108-106, largely for Iraq and Afghanistan
reconstruction, pushed FY2004 amounts higher than the FY2005 submission. The
Economic Support Fund — economic aid to strategically important countries —
was set at $2.5 billion for FY2005, 18% less than the FY2004, but 19% higher than
provided in the regular Foreign Operations measure. Likewise, International
Narcotics and Law Enforcement spending of $359 million proposed for FY2005
was 13% less than FY2004 totals, but nearly 50% more than enacted in the regular
appropriation.
For several other Foreign Operations accounts, the FY2005 submission
represented a reduction below amounts approved in FY2004 in which supplemental
appropriations were not a factor. Assistance to Former Soviet states and Eastern
Europe, collectively, would decline by $65 million, or 6% from FY2004 levels. The
request reflected a reorientation in the former Soviet aid account to focus more on
Central Asian states, linked to the war on terrorism, and to continue the process of
graduating Russia and Ukraine from U.S. aid roles.
Bilateral Development Assistance
Assessing the Administration’s request for bilateral development and health
assistance was complicated due to the addition of a new “core” development aid
account for international HIV/AIDS funding and the transfer of resources into this
new account from the Child Survival/Health line item. Collectively, the three “core”
bilateral development aid accounts — Development Assistance, Child
Survival/Health, and the Global AIDS Initiative — would increase in FY2005 by
about $500 million, or 14%. But because HIV/AIDS resources would grow by
roughly $600 million, the FY2005 request for most other development and health
activities was below FY2004 enacted amounts. Further complicating comparisons
between FY2005 and FY2004 was the Millennium Challenge Corporation (MCC)
that may add considerable amounts of bilateral development aid resources for non-
HIV/AIDS programs once MCC “compacts” are signed and funded. In short, overall
development aid spending, including the MCC, rose about 43% under the FY2005
request, although the impact on specific development programs could not be
determined due to the uncertainty over how MCC allocations would affect specific
sectors.
At the country level, however, it was clear that nations which had been named
as HIV/AIDS focus countries or are selected for MCC support — 27 countries in all
— would see a sharp increase in bilateral development assistance from the United
States. Uganda and Zambia, for example, two HIV/AIDS focus countries, were

projected to receive in FY2005 double and triple the amounts of U.S. assistance
provided in FY2003, respectively. Mozambique, a nation that was also an
HIV/AIDS focus country and had qualified to submit an MCC program proposal,
could also see U.S. aid triple between FY2003 and FY2005. But for the more than
40 other bilateral development aid recipients, levels would remain mostly unchanged
under the FY2005 budget, and in some cases decline from FY2003 and FY2004
amounts.
Table 4. Summary of Foreign Operations Appropriations
(Discretionary funds — in millions of current dollars)
Bill Title & ProgramFY2003EnactedFY2004RegularFY2004SuppFY2004TotalFY2005 Request
Title I - Export Assistance369(119) — (119)6
Title II - Bilateral Economic Aid15,29711,44120,87632,31714,364
Development/Child3,1753,689 — 3,6894,199
Survival/Global AIDS
Iraq Relief & Reconstruction2,475 — 19,42219,422 —
Israel/Egypt1,5071,049 — 1,049895
Millennium Challenge Acct — 994 — 9942,500
Title III - Military Assistance6,3984,4543374,7915,151
Israel/Egypt4,3783,439 — 3,439 3,520
Title IV - Multilateral Aid1,610 1,703 — 1,7031,797
Total Foreign Operations23,67417,47921,21338,69221,318
Total, without Iraq Recon.21,19917,4791,79119,27021,318
^Source:^Ho^u^s^{e A}^p^p^r^o^p^r^iatioⁿ^s^Co^m^m^{ittee an}^d^{CRS calcu}^latioⁿ^s^.
Leading Foreign Aid Recipients Proposed for FY2005
While Iraq is the largest current recipient of U.S. assistance, Israel and Egypt
remain the largest regular U.S. aid recipients, as they have been for many years. In
the aftermath of the September 11 terrorist attacks, the war in Iraq, and the initiation
of the President’s Emergency Program for AIDS Relief (PEPFAR), foreign aid
allocations have changed in several significant ways. The request for FY2005
continued the patterns of aid distributions of the past two years, with the new feature
of several PEPFAR countries joining the list of top recipients. Table 5 lists those
nations that have received an average of more than $100 million from the United
States in FY2004 and requested or earmarked for FY2005. Countries are listed in the
order of the combined amounts for those two years.
Since September 11, the Administration has used economic and military
assistance increasingly as a tool in efforts to maintain a cohesive international
coalition to conduct the war on terrorism and to assist nations which have both
supported U.S. forces and face serious terrorism threats themselves. Pakistan, for

example, a key coalition partner on the border with Afghanistan, had been ineligible
for U.S. aid, other than humanitarian assistance, due to sanctions imposed after India
and Pakistan conducted nuclear tests in May 1998 and Pakistan experienced a
military coup in 1999. Since lifting aid sanctions in October 2001, the United States
has transferred over $1.9 billion to Pakistan. Jordan, Turkey, Indonesia, the
Philippines, and India also are among the top aid recipients as part of the network of
“front-line” states in the war on terrorism.
Another major cluster of top recipients are those in the Andean region where the
Administration maintains a large counternarcotics initiative that combines assistance
to interdict and disrupt drug production, together with alternative development
programs for areas that rely economically on the narcotics trade.
A new dimension in U.S. aid allocations — the impact of the President’s
international HIV/AIDS initiative — can also be seen in amounts allocated for
FY2004 and proposed for FY2005. Uganda, Ethiopia, Kenya, Zambia, South Africa,
and Nigeria, all PEPFAR focus countries, are now among the leading recipients of
U.S. assistance. This list will further change once the Administration announces aid
packages for Millennium Challenge Account qualifying countries, perhaps adding
several additional countries that receive more than $100 million in U.S. assistance.
Missing, or falling at the bottom of the list of top recipients, are several
countries in the Balkans and the former Soviet Union — Serbia and Montenegro,
Kosovo, Russia, Ukraine, Armenia, and Georgia — which have seen levels decline
in recent years. Turkey, a leading recipient in most years over the past 25 years, also
falls well down the list as a result of a congressionally-directed reduction in military
aid.
Table 5. Leading Recipients of U.S. Foreign Aid
(Appropriation Allocations; in millions of current dollars)
F Y 2002Tot a l F Y 2003Tot a l F Y 2004Regular F Y 2004Supp F Y 2004Tot a l F Y 2005Estimates^a
Iraq252,485 — 18,43918,439 —
Israel2,7883,6822,624 — 2,6242,580
Egypt1,9562,2041,865 — 1,8651,836
Afghanistan 527 590 405 1,364 1,769 980
Colombia406602574 — 574566
J ordan 355 1,556 459 100 559 462
Paki stan 1,045 502 190 200 390 700^b
Sudan^c7113839310 403^c499^c
Uganda^d83146146 — 146236
Kenya^d7885128 — 128222
Peru197204170 — 170164
Ethiopia^d105408160 — 160167
Bolivia134171152 — 152159

F Y 2002Tot a l F Y 2003Tot a l F Y 2004Regular F Y 2004Supp F Y 2004Tot a l F Y 2005Estimates^a
South Africa^d6873107 — 107186
Indonesia137161127 — 127161
Nigeria^d6673101 — 101177
Zambia^d575786 — 86173
Liberia 5 29 11 203 214 39
Serbia &165152135 — 13596
Montenegro
Philippines13115396 — 96131
India80139111 — 111100
Russia164156105 — 10596
^Sources^:^U^.^S^.^D^e^part^m^eⁿ^t^of^S^t^at^e;^con^f^eren^{ce report}^on^H^.^R^.^4818.
^No^te^:^C^o^uⁿ^t^ri^es^{are l}ⁱ^s^t^e^{d i}ⁿ^{order of}^t^h^{e com}^bⁱⁿ^{ed F}^Y^{2004 t}^o^t^a^l^an^{d F}^Y^{2005 es}^tⁱ^m^at^e.
^No^te^:^F^Y^{2002 i}ⁿ^cl^u^d^es^f^uⁿ^d^s^al^l^o^cat^{ed f}^r^om^t^h^{e reg}^u^l^{ar F}^o^rei^gⁿ^O^p^eratⁱ^oⁿ^s^appropri^a^tⁱ^oⁿ^,^pl^u^s^f^uⁿ^d^s
^drawⁿ^f^r^om^t^h^{e Em}^erg^eⁿ^c^y^R^e^s^pon^s^e^F^uⁿ^d^appropri^a^t^e^{d i}ⁿ^P.L^.^107-³⁸^an^d^al^l^o^cat^ed^f^r^om^t^h^e
^F^Y^{2002 S}^u^ppl^em^en^t^a^l^A^ppropri^a^tⁱ^oⁿ^(P.L^{. 107-}^{206). F}^Y^{2003 i}ⁿ^cl^u^d^es^f^uⁿ^d^s^al^l^o^cat^{ed f}^r^om
^t^h^e^reg^u^l^ar^F^o^rei^gⁿ^O^p^eratⁱ^oⁿ^s^appropri^a^tⁱ^oⁿ^(P.L^{. 108-}^{7) an}^{d al}^l^o^cat^ed^f^r^om^t^h^e^F^Y²⁰⁰³^Iraq
^{War S}^u^ppl^e^m^eⁿ^t^a^l^(P.L^{. 108-}^11). ^F^Y^{2004 reg}^u^l^{ar appropri}^a^tⁱ^oⁿⁱⁿ^cl^u^d^es^am^ouⁿ^t^s^al^l^o^cat^ed
^f^r^om^t^h^{e C}^oⁿ^s^o^lⁱ^d^at^{ed A}^ppropri^a^tⁱ^oⁿ^s^{, F}^Y^{2004 (P.L}^{. 108-}^{199). F}^Y^{2004 s}^u^ppl^em^en^t^a^lⁱⁿ^cl^u^d^es
^f^uⁿ^d^s^al^l^o^cat^{ed f}^r^om^t^h^{e P.L}^.^108-^106.
^{a. F}^Y^{2005 es}^tⁱ^m^at^es^{are bas}^e^{d on}^t^h^{e A}^d^mⁱⁿⁱ^s^t^ratⁱ^oⁿ^’^s^requ^es^t^,^as^m^odi^fⁱ^{ed by}^C^oⁿ^g^r^es^s^t^h^rou^g^h
^earm^a^rk^s^an^{d di}^rectⁱ^v^esⁱⁿ^cl^u^d^{ed i}ⁿ^t^h^{e con}^f^eren^{ce report}^on^H^.^R^.^4818.
^{b. FY2005 es}^tim^{ate f}^o^{r P}^a^kⁱ^s^t^an^a^s^s^u^m^e^s^th^{at th}^e^A^d^mⁱⁿⁱ^s^t^ration^w^{ill ex}^ercis^e^th^{e au}^th^ority^g^r^an^ted
^by^C^oⁿ^g^r^es^sⁱⁿ^th^{e con}^f^eren^{ce report on}^H.R^.⁴⁸¹⁸^{to tran}^s^f^{er $150 m}^illion^f^r^om^{prior y}^{ear ESF}^an^d
^{FMF appropriation}^s^{. Oth}^e^rw^is^{e, th}^{e total}^f^o^{r P}^a^kⁱ^s^t^an^w^{ill be u}^p^{to $150 m}^illion^les^s^.
^{c. A}^m^ouⁿ^t^s^f^o^{r Su}^danⁱⁿ^{FY2004 i}ⁿ^c^l^ud^{e $256 m}^illion^f^o^{r th}^{e em}^erg^eⁿ^c^yⁱⁿ^Darf^u^r^{. T}^h^{e FY2005}
^es^tim^{ate f}^o^{r Su}^danⁱⁿ^clu^d^es^{$404 m}^illion^,^as^{directed in}^th^e^con^f^eren^{ce report on}^H.R^.^{4818, plu}^s^$95
^m^illion^{appropriated earlier in}^P^.^L^.^108-^{287, th}^{e DOD s}^p^en^din^g^{bill f}^o^{r FY2005.}
^d.^PEPF^A^R^reci^pi^en^t^s^.^A^m^ouⁿ^t^s^f^o^{r F}^Y^{2004 an}^{d F}^Y^{2005 i}ⁿ^cl^u^d^{e es}^tⁱ^m^at^es^f^o^r^H^I^V^/^A^I^D^S^res^o^u^r^ces^.
House Consideration
The House began consideration of the FY2005 foreign aid budget request on
June 23 when the House Foreign Operations Subcommittee approved a $19.39
billion measure, $1.93 billion, or 9% below the President’s $ 21.32 billion request.
The full House Appropriations followed by reporting the bill (H.R. 4818) on July 13
without making funding changes to the Subcommittee’s draft. The House approved
H.R. 4818 on July 15 (365-41) after adopting several amendments, none of which
altered the overall amount provided in the bill.
The House-passed measure was about $2 billion higher than the FY2004 regular
Foreign Operations spending bill, excluding supplemental appropriations, but only

$115 million larger than total Foreign Operations for FY2004, when just Iraq
reconstruction funds are excluded. (FY2005 totals for Foreign Operations were
augmented by an emergency-designated $95 million in P.L. 108-287, the DOD
appropriation bill for FY2005, providing additional humanitarian aid to refugees in
the Darfur region of Sudan; and $100 million for hurricane relief aid for Caribbean
nations approved in P.L. 108-324, the FY2005 supplemental measure.)
HIV/AIDS and Other Development Aid. H.R. 4818, as passed by the
House, fully funded the $2.2 billion request for the President’s Emergency Plan for
AIDS Relief (PEPFAR). (Funding for international HIV/AIDS included in other
appropriation bills brought the Administration’s total FY2005 request to $2.8
billion.) Included in the PEPFAR appropriation was $400 million for the Global
Fund to Fight HIV/AIDS, Tuberculosis, and Malaria (Global ATM Fund), $300
million more than the President’s request. (The President requested an additional
$100 million for the Global ATM Fund in the Labor/HHS/Education appropriation.)
The bill further required the same allocations for malaria and tuberculosis programs
as provided in FY2004, reversing a proposal to reduce both activities in the
President’s request.
In other key decisions concerning bilateral development assistance, H.R. 4818:
^!provided $4.34 billion for the three “core” bilateral development
aid accounts, up by $138 million from the request, and by nearly
$650 million from FY2004 levels.
^!increased basic education programs to $400 million, almost 20%
more than the request and the earmark for FY2004.
^!restored funding for vulnerable children programs to $28 million
from the Child Survival account, the same as FY2004 but $18
million more than proposed for FY2005.
^!set trade capacity building funds at $517 million across the entire
bill, $194 million of which would come from the Development
Assistance account.
^!directed the Administration to restore proposed development
assistance cuts to countries in Africa.
Family Planning/Reproductive Health. On population aid issues, the bill
set bilateral family planning assistance at $432 million, $33 million above the
request, and funding for the U.N. Population Fund (UNFPA) at $25 million. UNFPA
contributions, however, would be subject to restrictions that resulted in a U.S.
suspension of UNFPA support in FY2002 and FY2003. During the July 9 markup,
the House panel defeated an amendment (26-32) by Representative Lowey that would
have provided $25 million for UNFPA programs only in Iraq, Afghanistan, Tanzania,
Jordan, Kenya, and Pakistan. None of the funds would have been available for
UNFPA activities elsewhere, including those in China, where evidence of coercive
family planning practices prompted the Administration to deny funding to UNFPA
the past three years. The State Department announced on July 16, 2004, that once
again it had found UNFPA to be in violation of the “Kemp-Kasten” provision in the
Foreign Operations spending bill.

The House proposal further included $105 million for the U.N. Development
Program (UNDP), $15 million more than requested, and $125 million for UNICEF,
$5 million more than proposed.
Country Aid Levels. For selected countries, H.R. 4818 provided amounts at
or above the President’s request, with a reduction proposed for Turkey:
^!Israel — $2.58 billion, as requested.
^!Egypt — $1.84 billion, as requested.
^!Afghanistan — $977 million, $48 million more than requested.
^!Jordan — $460 million, as requested.
^!Cyprus — $13.5 million, as requested.
^!Turkey — no funding for the $50 million economic aid request.
^!Lebanon — $35 million in economic aid, $3 million above the
request.
^!East Timor — $22 million in economic aid, up from $13.5 million
proposed.
^!Indonesia — military training (IMET) funds may be provided if the
Secretary of State determines that Indonesia is cooperating in the
FBI’s investigation of the August 2002 murders of two Americans
and an Indonesia.
^!Sudan — $311 million, with no funds available for the government
in Khartoum until it takes steps to resolve the crisis in Darfur.
^!Pakistan — $150 million in military aid, half the amount requested,
but with an authority to allow a transfer of an additional $150
million from other accounts.
^!Cuba Democracy Program — $9 million, as requested.
^!Haiti — $74.5 million in economic aid, $50 million higher than the
request.
Iraq. The President did not request additional reconstruction funds for Iraq and
H.R. 4818 did not include any further appropriations. The House proposal, however,
authorized the United States to take the lead in a multilateral effort to cancel a
significant amount of Iraq’s outstanding debt and to use previously appropriated Iraq
reconstruction funds to cover the cost of any such debt relief. The bill further
reconstituted the Coalition Provisional Authority Inspector’s General office that has
been monitoring Iraq reconstruction resources. The CPA IG expired with the transfer
of authority in Iraq on June 28 and the Administration had planned on merging these
oversight responsibilities into the State Department’s Office of Inspector General.
The House measure would place the Iraq reconstruction IG in the Department of
State, but as a entity reporting directly to the Secretary of State. Further, the House
bill made the Secretary of State responsible for oversight of all Iraq reconstruction
activities, replacing the CPA.
Reductions. The largest reduction recommended by the H.R. 4818 was to cut
by half — to $1.25 billion — the President’s request for the Millennium Challenge
Corporation (MCC). The MCC received a $994 million appropriation for FY2004,
with an Administration plan to expand the program to $2.5 billion in FY2005 and $5

billion in FY2006. A reduction like that proposed by the House would likely result
in smaller and/or fewer grants being awarded to MCC qualified countries.
Other accounts reduced by House action, when compared with the President’s
request, included:
^!Peace Corps — $330 million (-$71 million).
^!Emergency fund for Complex Crisis — no funding provided.
^!International Narcotics/Law Enforcement — $329 million (-$30
million).
^!Non-Proliferation/Anti-Terrorism — $382 million (-$33 million).
^!Debt reduction — $105 million (-$95 million). Most of the
reduction would be taken from the $105 million request for the costs
to cancel debt for the Democratic Republic of Congo.
^!World Bank, International Development Association (IDA) —
$850 million (-$211 million). This action would deny the
Administration $200 million pledged to IDA if the World Bank
successfully implemented certain management reforms.
Floor Amendments. During House debate on July 15, Members considered
a number of amendments, some controversial and strongly opposed by the
Administration. Of particular concern to the Administration was a proposal by
Representative Lantos to shift $570 million in military aid funds for Egypt to
economic assistance. Proponents of the amendment argued that external security
threats facing Cairo did not warrant such a large — $1.3 billion — annual military
aid package from the United States, and that economic challenges confronting Egypt
were of more immediate concern. In a letter to House Members, Secretary of State
Powell expressed strong opposition, arguing that U.S. military support of Egypt is a
“cornerstone” of the Camp David Accords and contributes to regional peace, efforts
to combat terrorism, U.S.-Egyptian military cooperation. The reduction of U.S.
military grants that are anticipated to be used for the purchase of previously ordered
American-made defense items might result in the cancellation of some prior contracts
by Egypt, according to the Secretary. The House defeated the Lantos amendment

131-287.

Among other amendments considered, the House approved proposals that:
^!banned the use of funds by any U.S. government official to request
the United Nations assess the validity of U.S. elections
(Representative Buyer; 243-161);
^!prohibited Export-Import Bank support for any entity or its corporate
parent is incorporated or chartered in Bermuda, Barbados, the
Cayman Islands, Antigua, or Panama (Representative Sanders; 270-

132);

^!banned Economic Support Fund (ESF) assistance to countries that
are party to the International Criminal Court (ICC) and do not sign
an Article 98 agreement with the United States pledging American
soldiers serving in their country will not be surrendered to the ICC.

Current law prohibits U.S. military aid to such countries, although
with a waiver that has been used by President Bush for reasons of
national interest and for countries that are in the process of
considering the ratification of Article 98 agreements. The ESF ban
linked to Article 98 agreements did not include a waiver authority.
(Representative Nethercutt; 241-166);
^!prohibited funds in the bill for assistance to Saudi Arabia. H.R.
4818 included $25,000 in military training funds for the Saudis. The
Administration expressed strong opposition to the amendment
(Representative Weiner; 217-191).
^!barred the use of funds to send more than 50 U.S. government
employees to a conference outside the United States (Representative
Garrett; voice vote);
^!prohibited the use of funds for any contract that contravenes the
Small Business Act (Representative Kilpatrick; voice vote);
^!restricted the use of funds for Turkey in contravention of existing
law concerning the prevention and punishment of genocide
(Representative Schiff; voice vote);
In addition to the Lantos amendment, the House also rejected proposals that
would:
^!cut funding to the World Bank’s International Development
Association by $359 million, transferring $290 million of the funds
to USAID child survival and maternal health programs. The
reduction for the World Bank equaled the amount of a recent Bank
loan to Iran, opposed by the Administration and congressional
proponents of the amendment (Representative Sherman; (111-312);
^!cut funding to the World Bank’s International Development
Association by $425 million, transferring $250 million of the funds
to the Millennium Challenge Corporation and $90 million to the
Global AIDS Initiative (Representative Kennedy; 133-288);
^!add $5 million for agriculture, irrigation, and rural infrastructure
programs in Africa (Representative Jackson-Lee; 164-243).
An amendment by Representative Farr to limit the number of U.S. military personnel
in Colombia to 550 or less was offered but withdrawn.
Senate Consideration
The Senate Appropriations Committee reported its Foreign Operations bill (S.
2812), on September 15, 2004, legislation amended and passed by the full Senate as
H.R. 4818 on September 23. The measure totaled $19.6 billion, $1.7 billion, or 8%,
below the President’s $21.32 billion request for FY2005. The Senate bill included

$19.39 billion in discretionary budget authority, representing the measure’s funding
allocation, plus $225 million in “emergency” appropriations for global HIV/AIDS
programs and to strengthen the African Union’s peacekeeping mission in Darfur,
Sudan. H.R. 4818, as passed by the Senate, was about $2.2 billion higher than the
FY2004 regular Foreign Operations spending measure, excluding supplemental
appropriations, but only $340 million larger than total Foreign Operations for
FY2004, when Iraq reconstruction funds are excluded. (FY2005 totals for Foreign
Operations were augmented by an emergency-designated $95 million in P.L. 108-
287, the DOD appropriation bill for FY2005, providing additional humanitarian aid
to refugees in the Darfur region of Sudan; and $100 million for hurricane relief aid
for Caribbean nations approved in P.L. 108-324, the FY2005 supplemental measure.)
HIV/AIDS and Other Development Aid. The Senate bill included $2.42
billion for the President’s Emergency Plan for AIDS Relief (PEPFAR), $220 million
higher than the request. Funding for international HIV/AIDS included in S. 2810,
the Departments of Labor-HHS-Education appropriation bill, brought the Senate-
recommended level to over $3.1 billion. The Administration total request was about
$2.8 billion. Included in the Senate-passed PEPFAR appropriation was $400 million
for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria, $300 million
more than the President’s request. Another $150 million for the Global ATM Fund
was included in S. 2810, bringing the total in both bills to $550 million.
Key funding levels for other bilateral development assistance, the Senate
measure:
^!provided $4.46 billion for the three “core” bilateral development
aid accounts (including “emergency”-designated funds), up by $411
million from the request, and by nearly $1 billion from FY2004
levels.
^!set basic education programs at $335 million, slightly below the
$338 million request.
^!restored funding for vulnerable children programs to $30 million
from the Child Survival account, $19 million more than proposal for
FY2005.
^!increased by about 75% — to $275 million — funds for other
infectious diseases, including malaria and tuberculosis, above the
request. S. 2812 earmarked $200 million for other infectious
diseases from regular Child Survival/Health account funds, plus an
additional $75 million of the “emergency” designated money for
malaria control programs.
Family Planning/Reproductive Health. On population aid and
reproductive heath matters, the Senate bill set bilateral family planning assistance at
$450 million, $50 million above the request. The Senate further included $34
million for the U.N. Population Fund (UNFPA). S. 2812, however, modified two
controversial provisions associated with family planning funding that could have had
the effect of reversing current Administration policy. The first amended the “Kemp-
Kasten” restrictions that resulted in the withholding of U.S. funds to UNFPA the past
three years. The amendment would have narrowed somewhat the grounds on which
the Administration could find UNFPA in violation of the restrictions by stating that

an organization must directly support coercive abortions or involuntary sterilizations
in order to be denied U.S. support. The Senate measure further added new text
stating that no organization could be denied funds solely because the government of
a country engages in coercive practices.
S. 2812 also revised the President’s so-called “Mexico City” policy that
prohibits foreign non-governmental organizations (NGOs) from receiving U.S. funds
if they perform or promote abortion as a method of family planning, whether or not
such activities are supported with U.S.-provided resources. The Senate language
stipulated that foreign NGOs could not be declared ineligible for U.S. aid for
conducting any health or medical services with non-U.S. government funds so long
as the practices did not violate laws in the country in which the services were
provided or would not violate U.S. law. The provision (Sec. 599C of S. 2812)
further provided that foreign NGOs would not be subject to conditions associated
with the use of non-U.S. government funds for advocacy and lobbying activities that
were more restrictive than those applied to American NGOs.
Iraq. The President did not request additional reconstruction funds for Iraq and
the Senate bill did not include any further appropriations. The Senate proposal,
however, authorized the use of $360 million from previously appropriated Iraq
reconstruction funds to cancel about $4 billion, or roughly 95% of debt owed by Iraq
to the United States. The authority to use $360 million was requested on September
14 as part of a larger package to transfer $3.46 billion approved last year for water
and electrical projects in Iraq in order to augment resources for security and law
enforcement, oil production, employment generation, election support, and other
development activities. Because Congress placed limits on how much of the $18.4
billion Iraq reconstruction supplemental (P.L. 108-106) could be re-programmed for
other purposes, the Administration also sought changes in existing transfer
authorities. Changes to re-allocation limits recommended in the Senate’s version of
H.R. 4818 would have permitted some, but not all of the Administration’s proposed
reprogramming. Specifically, the Senate bill increased from 10% to 20% the amount
that any particular program sector could be reduced in order to add resources to
another activity. The White House proposed, however, to transfer nearly 45% of the
original amount of funds for water and sewage provided in P.L. 108-106.
Darfur. H.R. 4818, as passed by the Senate, provided over $615 million for
humanitarian and other relief assistance to the Darfur region of Sudan, plus $75
million for the rapid expansion of the African Union’s monitoring and peacekeeping
mission in Darfur. The latter funds, designated as emergency spending, were added
during floor debate as an amendment offered by Senator Corzine. The
Administration’s request had assumed roughly $394 million for relief aid, drawn
from the refugee and disaster aid accounts. Senate increases in these humanitarian
aid accounts, plus authority to transfer up to $150 million from unspent Iraq
reconstruction funds supporting relief efforts in Darfur, raised the estimated total for
the region in the Senate bill to $690 million — $615 million for humanitarian
programs $75 million for peacekeeping. These funds were in addition to $95 million
emergency Sudan funding approved earlier in P.L. 108-287, the Defense Department
appropriation bill for FY2005.

Country Aid Levels. Beyond Sudan, S. 2812 provided funding at or above
the President’s request, in a number of cases:
^!Egypt — $1.84 billion, as requested.
^!Israel — $2.58 billion, as requested.
^!Jordan — $460 million, as requested.
^!Lebanon — $35 million in economic aid, $3 million above the
request.
^!Armenia — $86 million, $19 million above the request.
^!Cyprus — $13.5 million, as requested.
^!Georgia — $121 million, $13 million more than proposed.
^!Russia — $93 million in economic aid, $13.5 million higher than
requested.
^!East Timor — $22 million in economic aid, up from $13.5 million
proposed.
^!Indonesia — supported the $152 million request, but endorsed
increased spending for economic, political, and social reforms and
to counter the activities of Islamic extremists in the country.
Military training (IMET) funds could be provided if the Secretary of
State determined that Indonesia was cooperating in the FBI’s
investigation of the August 2002 murders of two Americans and an
Indonesian.
^!Mongolia — endorsed the $13 million request.
^!Philippines — $55 million in military financing, $25 million higher
than proposed.
^!Afghanistan — $929 million, as requested.
^!Pakistan — endorsed the full $700 million economic and military
aid request; provided authority for use of up to $200 million of
economic aid for cancelling debt owed by Pakistan.
^!Kenya — $10 million in ESF assistance, $2 million above the
request, in support of anti-corruption programs.
^!Liberia — $70.5 million, $38 million more than requested, adding
$30 million to help rebuild the Liberian military and $8 million for
various development activities.
^!Sierra Leone — $12.3 million, an increase of $4 million from the
request.
^!Somalia — $5 million in economic aid, $4 million more than
proposed.
^!Sudan — See above.
^!Haiti — $92.5 million, $65.5 million higher than the request.
Reductions. The largest reduction recommended by the Senate was to cut by
more than half — to $1.12 billion — the President’s $2.5 billion request for the
Millennium Challenge Corporation. The MCC received a $994 million appropriation

for FY2004, with an Administration plan to expand the program to $2.5 billion in
FY2005 and $5 billion in FY2006. As with a similar House-passed reduction for the
MCC, the size of this cut would have likely resulted in smaller and/or fewer grants
being awarded to MCC qualified countries.
Other accounts reduced by Senate action, when compared with the President’s
request, included:
^!Export-Import Bank — $157 million (-$10 million).
^!USAID operating expenses — $600 million (-$23 million).
^!Peace Corps — $310 million (-$91 million).
^!Emergency fund for Complex Crisis — $20 million (-$80
million).
^!International Narcotics/Law Enforcement — $329 million (-$30
million).
^!Debt reduction — $95 million (-$105 million).
^!World Bank, International Development Association (IDA) —
$820 million (-$241 million).
^!African Development Fund — $75 million (-$43 million).
Conference Agreement
On November 18, 2004, Congress approved the Foreign Operations conference
report (Division D of H.R. 4818). The President signed the measure on December
8 (P.L. 108-447). As passed, the act provides $19.64 billion after adjusting for a
required 0.8% across-the-board rescission. Although this is $1.68 billion, or nearly
8% below the President’s request, P.L. 108-447 increases amounts passed earlier by
the House ($19.39 billion) and the Senate ($19.61 billion). Additional funds were
added for the Millennium Challenge Account and $93 million was designated as an
“emergency” appropriation for relief and peacekeeping support in the Darfur region
of Sudan. The emergency funds do not count against the regular Foreign Operations
allocation. The enacted level is about $2.3 billion (+13%) more than the “regular”
FY2004 Foreign Operations level, but far less than the $38.78 billion total
appropriation in FY2004 that included $21.2 billion for Iraq reconstruction and other
supplemental needs.
(FY2005 totals for Foreign Operations were augmented by an emergency-
designated $100 million for hurricane relief aid for Caribbean nations approved in
P.L. 108-324, the FY2005 Military Construction and supplemental measure.)
(Unless noted otherwise, amounts for specific programs and countries discussed
below are the levels specified in the Foreign Operations division D of H.R. 4818, and
are subject to an across-the-board reduction of 0.8%, as also provided in H.R. 4818.)
HIV/AIDS and Other Development Aid. The Foreign Operations portion
of P.L. 108-447 provides $2.28 billion for the President’s Emergency Plan for AIDS
Relief (PEPFAR) (after applying the rescission), roughly $80 million higher than the
request and the House-passed level, but $139 million less than passed by the Senate.

(Funding for international HIV/AIDS included elsewhere in P.L. 108-447 as part of
other appropriation bills brings the total to $2.92 billion, $100 million more than the
request.)
Although both House and Senate bills required that $400 million of the total
HIV/AIDS funding in Foreign Operations be provided to the Global Fund for
HIV/AIDS, Tuberculosis, and Malaria, the conference agreement includes $250
million. This level will be supplemented with the carry-forward of $87.8 million
from FY2004 and $100 million from the Labor/HHS/Ed appropriation measure, thus
bringing the total U.S. contribution to the Global Fund to $487.8 million in FY2005,
less the 0.8% rescission. The carry-forward appropriations could not be transferred
to the Global Fund in FY2004 due to a congressionally-added requirement that U.S.
support to the Fund could not exceed one-third of total contributions from all donors.
Without the authority to use these funds in FY2005, the $87.8 million would have
become available for bilateral HIV/AIDS programs.
For other key bilateral development assistance programs, P.L. 108-447:
^!provides $4.36 billion for the three “core” bilateral development
aid accounts (after adjusting for the 0.8% across-the-board
rescission), about $675 million higher than FY2004 and $160
million more than the request.
^!sets basic education programs at $396.8 million, after making the
rescission deduction, 17% more than the $338 million request.
^!restores funding for vulnerable children programs to $30 million
from the Child Survival account, $19 million more than proposed for
FY2005.
^!increases by about one-third — to $198.4 million (rescission
adjusted) — funds for other infectious diseases, including malaria
and tuberculosis, above the request. The enacted measure does not
include the $75 million added by the Senate in emergency-
designated appropriation for malaria, although the final text of H.R.
4818 provides $90 million for malaria programs, 50% higher than
requested.
Family Planning/Reproductive Health. As passed, H.R. 4818 sets
bilateral family planning aid assistance at $441 million, a level between House and
Senate-passed amounts. The bill includes $34 million for the U.N. Population Fund
(UNFPA), subject to the Kemp-Kasten conditions, but drops the Senate language
amending Kemp-Kasten that might have narrowed the grounds on which the
Administration could deny funding to the organization. Conferees also deleted the
Senate proposed revision to the President’s so-called “Mexico City” conditions on
bilateral family planning assistance in a way that may have reversed the policy
restrictions.
Darfur. P.L. 108-447 provides $404 million for relief and peace and security
activities in Sudan, including the Darfur region. This level falls between the $311
million and over $690 million included in House and Senate-passed bills,
respectively. Although the enacted agreement deletes the Senate proposal to provide
$75 million in emergency funding for the African Union’s peacekeeping mission in

Darfur and authority to transfer up to $150 million from unspent Iraq reconstruction
funds for relief efforts in the region, the conferees intend that $75 million of the total
be used in support of African Union operations in Darfur. Previously, Congress
approved an additional $95 million in emergency Sudan funding in P.L. 108-287, the
Defense Department appropriation bill for FY2005.
Country and Regional Aid Levels. The conference agreement, to a greater
extent than previous Foreign Operations measures, sets out specific country
allocations from several economic and military aid accounts. In most cases,
conference allocations match the President’s request, although with some
modifications, higher and lower, than proposed. H.R. 4818 further specifies that
funding for Africa that is drawn from the Development and Child Survival accounts
should be restored to levels provided in FY2004, rather than the lower amounts
proposed for FY2005. Selected country aid levels include:
^!Egypt — $1.84 billion, as requested, but with the addition of
Senate-proposed language that democracy and governance programs
in Egypt shall not subject to the approval of the government.
^!Iraq — no funding, as proposed; see discussion, however, under the
Continuing Resolution section.
^!Israel — $2.58 billion, as requested.
^!Jordan — $460 million, as requested.
^!Lebanon — $35 million in economic aid, $3 million above the
request.
^!Saudi Arabia — bans aid ($25,000 requested) unless the President
certifies that the Saudis are cooperating in efforts to combat
terrorism and that U.S. assistance will help in that effort. The House
had passed a similar aid prohibition, but without a Presidential
waiver.
^!Armenia — $86 million, $19 million above the request.
^!Cyprus — $13.5 million, as requested.
^!Georgia — $110 million, $2 million more than proposed.
^!Russia — $90 million in economic aid, $10.5 million higher than
requested.
^!Turkey — deletion of $50 million in requested military aid.
^!East Timor — $22 million in economic aid, up from $13.5 million
proposed.
^!Indonesia — $138 million estimated available in economic and
military aid, a reduction of about $14 million from the request.
Conferees dropped $10 million for police training in Indonesia and
conditioned the transfer of military aid (FMF) on a Secretary of State
certification that the Indonesian military was supporting counter-
terrorism activities and addressing several human rights problems.
Military training (IMET) funds are conditioned on Indonesia’s
cooperation with the FBI’s investigation of the August 2002 murders
of two Americans and an Indonesian.
^!Philippines — $129 million, as proposed.

^!Afghanistan — $980 million, about $50 million above the request.
^!Pakistan — $700 million, as proposed, although the total would
include the transfer of $150 million from prior-year economic and
military aid funds.
^!Haiti — $85 million, $60.5 million higher than the request.
Reductions. The largest reduction in P.L. 108-447 falls on the Millennium
Challenge Account — reduced by $1 billion from the President’s $2.5 billion request.
The final level, however is $250 million and $380 million more than amounts
recommended earlier by the House and Senate, respectively, coming only after strong
pressure from the White House. The $1 billion cut from the request, however, will
strain MCC operations to fully fund programs in 17 countries that are potentially
eligible in FY2004 and FY2005.
Other accounts reduced in the enacted measure, when compared with the
President’s request, include:
^!Export-Import Bank — $100 million (-$67 million), although
conferees noted that with large prior-year balances remaining, Exim
Bank operations should continue at anticipated levels.
^!USAID operating expenses — $618 million (-$5.4 million).
^!Peace Corps — $320 million (-$81 million).
^!Emergency fund for Complex Crisis — $0 (-$100 million).
^!International Narcotics/Law Enforcement — $329 million (-$30
million).
^!Debt reduction — $100 million (-$100 million).
^!World Bank, International Development Association (IDA) —
$850 million (-$211 million).
^!African Development Fund — $106 million (-$12 million).
ICC and Article 98 Agreements. The approved legislation retains similar
text as passed by the House barring ESF assistance to countries that have not signed
an Article 98 agreement with the United States. Such Article 98 agreements pledge
that the country will not surrender American soldiers serving in their country to the
International Criminal Court.
The conference measure, however, adds certain waiver authorities so that fewer
countries will be affected by the aid restriction. NATO members, major non-NATO
allies, a group that includes Jordan, and Taiwan are specifically exempted. Critics
of the amendment when it passed the House in July were especially concerned about
the status of Jordan, a key Arab state receiving substantial amounts of ESF
assistance, but has not ratified an Article 98 agreement. The enacted bill further
stipulates that this restriction will not affect a country’s eligibility to receive
Millennium Challenge Account funding. Bolivia, Lesotho, and Mali are potential
MCA recipients, but do not have a ratified Article 98 agreement. Even with these
exemptions, several countries, including Cyprus, Ecuador, and Peru, might face ESF
aid suspension due to this provision.

Continuing Resolution and Foreign Operations
With the beginning of the new fiscal year on October 1, Foreign Operations,
along with several other funding measures, operated through November 20 under the
terms of H.J.Res. 107, a Continuing Resolution. In addition to temporarily funding
Foreign Operations programs for the next seven weeks, the Continuing Resolution
enacted into law several provisions that had been pending in House and/or Senate-
passed versions of H.R. 4818.
The most significant was the approval of a September 14 request by the White
House to re-allocate $3.46 billion of the $18.4 billion Iraq reconstruction aid package
passed by Congress last year (P.L. 108-106). In this earlier appropriation measure,
Congress had limited the extent to which the Administration could shift funds among
major reconstruction sectors. Among other changes, the President proposed adding
$1.8 billion for security and law enforcement, $360 million to cover the costs of
cancelling about $4 billion of Iraqi debt owed the United States, and $180 million
more for governance and election support programs. Offsetting these additions, the
re-allocation called for reductions in the electrical and water sectors. House- and
Senate-passed versions of H.R. 4818 had authorized the use of funds for debt relief,
and the Senate measure, which was approved after the September 14 re-allocation
request, accommodated some, but not all, of the re-allocation proposal. The
Continuing Resolution effectively approved the Administration’s full request,
including the debt relief authorization and the re-allocation of funds.
In other Foreign Operations-related matters addressed in H.J.Res. 107, the
Continuing Resolution:
^!increased USAID operating expenses for managing the Iraq
reconstruction operation from $29 million in P.L. 108-106 to $119
million;
^!authorized the Overseas Private Investment Corporation to operate
in Iraq; and
^!allowed the Millennium Challenge Corporation to extend assistance
in FY2005 to countries that narrowly missed qualifying for the
program in hopes of strengthening their chances for selection in the
future. Existing law approved this authority only for FY2004.
Selected Major Issues in the FY2005 Foreign
Operations Debate
While the Foreign Operations appropriations bill can include virtually any
foreign policy issue of interest to Congress, the annual debate usually focuses on
several major policy and spending issues. For FY2005, substantial debate focused
on the following.

Foreign Aid to Combat Terrorism
Since the September 11, 2001 terrorist attacks and the initiation of military
operations in Afghanistan and Iraq, combating global terrorism has become one of
the top priorities of American foreign assistance. Secretary of State Powell has
continued over the past two years to emphasize at numerous congressional hearings
that fighting terrorism is the most important objective of the Foreign Operations
budget requests.
Although there is disagreement regarding the extent to which foreign aid can
directly contribute to reducing the threat of terrorism, most agree that economic and
security assistance aimed at reducing poverty, promoting jobs and educational
opportunities, and helping stabilize conflict-prone nations can indirectly address
some of the factors that terrorists use in recruiting disenfranchised individuals for
their cause.
Foreign aid can be programmed in a number of ways that contribute to the war
on terrorism. Assistance can be transferred, as has occurred in Pakistan and
Afghanistan, to bolster efforts of a coalition-partner government, to counter domestic
dissent and armed attacks by extremist groups, and to promote better health care,
education, and employment opportunities to its people. Security assistance can
finance the provision of military equipment and training to nations facing threats
from their own internally-based terrorist movements.
As illustrated in Table 6 below, the United States provided through FY2004
more than $19.4 billion to 26 so-called “front-line” states in the global war on
terrorism since the September 11, 2001 terrorist attacks. (“Front-line” states are
those nations cooperating with the United States in the global war on terrorism or are
facing terrorist threats themselves.) When combined with roughly $21 billion
appropriated for Iraq reconstruction assistance enacted in FY2003 and FY2004
supplementals, total funding for bilateral terrorism-related country assistance is more
than $40 billion. This is slightly more than half of the nearly $79 billion approved
by Congress for worldwide Foreign Operations spending since September 11. For
FY2005, the Administration requested $5.45 billion for the “front-line” states. Based
on passage of the FY2005 appropriation, the estimated level for this year will be
slightly less, largely due to reductions in aid to Turkey.
Although increased levels of foreign aid are only one sign of the importance the
United States assigns to the support provided by these front-line states, the amounts
allocated since September 11 are in sharp contrast to the $3.4 billion provided to
these 26 countries prior to the attacks in regular FY2001 appropriations. The
FY2005 proposal, for example, was 60% higher than foreign aid allotted prior to
September 11. Additional economic and military assistance has been particularly
evident in a few countries, including Jordan, Pakistan, Afghanistan, Turkey, the
Philippines, Kyrgystan, Tajikistan, Uzbekistan, Oman, Yemen, and Djibouti. For
FY2005, Pakistan, the Philippines, Georgia, Indonesia, and Morocco are scheduled
to receive the largest increases among the front-line states.
Congress has been supportive of additional foreign aid resources aimed at
countering terrorism. Nevertheless, some warn that the United States needs to be

cautious about the risks of creating a close aid relationship with governments that
may have questionable human rights records, are not accountable to their people, and
are possibly corrupt. Some Members have been especially critical of Administration
efforts to include in aid proposals for “front-line” states legislative language that
would waive all existing restrictions and prohibitions on the transfers. Instead, these
critics argue, the Administration should specifically identify any obstacles to
proceeding with a country aid program and seek a congressional waiver for those
particular problems. For example, in late 2001 the Administration wanted to provide
Pakistan with $600 million in fast-disbursing economic aid. Instead of providing a
blanket waiver of legislative obstacles, Congress approved in P.L. 107-57 specific
waivers of aid prohibitions that applied to countries that engaged in missile
proliferation, whose leaders came to power through a military coup, and which were
behind in debt payments to the United States.
Beyond substantial amounts of bilateral aid for “front-line” states, the Foreign
Operations appropriation bill funds several global programs specifically aimed at
anti-terrorism efforts overseas.
Anti-Terrorism Assistance (ATA). Since FY1984, the State Department
has maintained the ATA program designed to maximize international cooperation in
the battle against global terrorism. Through training, equipment transfers, and
advice, the ATA program is intended to strengthen anti-terrorism capabilities of
foreign law enforcement and security officials. Since its initiation in 1984, over
23,000 officials from 112 countries have participated in ATA projects. ATA funding
is included within the Foreign Operations account of Non-proliferation, Anti-
terrorism, Demining, and Related Programs (NADR).
Resources for the ATA program rose sharply following September 11, growing
from $38 million in FY2001 to $96 million in regular FY2004 funding. (Congress
further provided $35 million in FY2004 supplemental appropriations for expansion
of ATA programs in Afghanistan, including protection of Afghan President Karzai.)
For FY2005, the State Department sought $128.3 million for ATA programs,
up one-third from regular FY2004 levels. Most of the new request — $105 million
— would continue on-going training programs for officials from the “front-line”
states, an Afghan Presidential Protection activity, and special programs in Pakistan
and Indonesia. New for FY2005, in-country programs were proposed for Colombia,
Malaysia, Kenya, the Philippines, and the tri-border region of Brazil, Paraguay, and
Argentina.

Table 6. U.S. Assistance to Front-Line States in War on Terrorism
($s — millions)
F Y 2001^a F Y 2001^a F Y 2002 F Y 2003 F Y 2004 F Y 2005
P re-9/11 Post-9/11 Enacted Enacted Estimate Estimate
Egypt1,992 — 1,9562,2041,8651,836
Afghanistan 32 194 492 590 1,769 980
Paki stan 5 993 153 502 390 700
Jordan229 — 3551,556559462
Kenya^b86 — 7894144222
Ethiopia^b144 — 103408174167
Indonesia133 — 137161128161
India138 — 174139111131
Philippines49 — 13115396129
Georgia109 — 1249886110
Armenia93 — 981028080
Bangladesh127 — 113948064
Uzbeki stan 31 80 80 53 48 52
Morocco17 — 18162052
Azerbaijan41 — 56594951
Kazkhstan51 2 56514240
Turkey220 2331,02114539
Kyrgzstan36 4 81464338
Tajikistan30 — 94373236
Yemen5 — 30172928
Oman1 — 26822622
Tunisia5 — 561212
Turkmenistan9 — 201099
Djibouti1 — 34466
Malaysia1 — 1212
Algeria0 — 2111
TOTAL 3,367 1,293 4,619 7,545 5,945 5,430
^S^o^u^rce:^U.S^.^De^pa^rtm^e^{nt o}^f^S^t^a^t^e^a^{nd CRS}^c^a^l^c^u^la^tio^{ns. Co}^untrie^s^a^r^e^liste^dⁱⁿ^o^r^de^{r o}^f^the^siz^e^o^f^aⁱ^{d pro}^vⁱ^de^d
^a^nd^re^que^ste^d^sinc^e^S^e^pte^m^be^{r 11, 2001. Am}^o^{unts inc}^l^ude^{funds a}^ppro^p^ria^t^e^d^fo^{r pro}^g^r^a^m^{s unde}^{r j}^u^risdic^tio^{n o}^f
^the^Fo^r^e^ig^{n O}^p^e^r^a^tio^{ns spe}^nding^m^e^a^s^ur^e^,^{plus f}^o^o^d^a^ssistaⁿ^c^e^pr^o^vⁱ^de^{d in the}^A^g^rⁱ^c^u^ltur^e^a^ppr^o^p^rⁱ^a^tio^{n bill.}
^a^.^F^Y^{2001 pre}^-^S^e^pte^m^be^{r 11 a}^r^e^a^m^o^{unts a}^llo^c^a^t^e^d^fro^m^re^g^u^la^r^F^Y²⁰⁰¹^a^ppro^p^ria^tio^ns.^F^Y^{2001 po}^st-^S^e^p^te^m^b^e^r
^{11 a}^r^e^a^m^o^{unts distribute}^d^fro^m^the^Em^e^r^g^e^nc^y^Re^spoⁿ^se^F^und,^funding^fo^{r w}^h^ic^{h w}^a^{s pro}^vⁱ^de^{d in P}^.^L^.^107-
^{38, e}ⁿ^a^c^t^e^d^{in S}^e^pte^m^be^{r 2001.}
^{b. T}^o^ta^{ls f}^o^r^{FY2004 a}^{nd FY2005 inc}^l^ude^e^s^tim^a^t^e^s^f^o^r^Glo^b^a^l^AI^{DS I}ⁿ^itia^tiv^e^f^unds.

Terrorist Interdiction Program (TIP). As one response to the 1998
bombings of American embassies in East Africa, the State Department launched the
TIP, an activity intended to restrict the ability of terrorists to cross international
borders, launch attacks, and escape. TIP strengthens border security systems in
particularly vulnerable countries by installing border monitoring technology, training
border security and immigration officials in its use, and expanding access to
international criminal information to participating nations. Like ATA, funds for TIP
are part of the NADR account in the Foreign Operations spending bill.
Since September 11, the State Department has expanded from 34 to 60 the
number of countries where it believes TIP would immediately contribute to the
global counterterrorism campaign. The $4 million TIP budget doubled for FY2001
following September 11, and grew to $14 million in FY2002. The TIP annual budget
fell back to $5 million the past two years, the same amount requested for FY2005.
Counterterrorism Engagement with Allies. Following the September 11
attacks, the United States began to conduct Senior Official Policy Workshops and
multilateral conferences in order to better respond to terrorist incidents involving
weapons of mass destruction overseas. With $3 million from emergency FY2002
supplemental spending, the State Department conducted workshops in 18 countries
as well as several regional conferences. Congress did not approve any additional
resources the past two years, but the Administration sought $500,000 in FY2005 to
continue conferences and other bilateral engagements with allies in the war on
terrorism.
Terrorist Financing. In December 2001, an interagency review group
identified 19 countries where a significant terrorist financing threat existed, and with
$3 million allocated from the Emergency Response Fund, launched a training and
technical assistance program. The State Department allocated $10 million out of the
FY2002 supplemental appropriation to expand the program, complemented with
Treasury Department contributions of about $5 million each of the past two years.
State Department funds are included in the Foreign Operations NADR account while
Treasury Department resources are drawn from the Technical Assistance program,
also funded in Foreign Operations. Counterterrorism financing activities would
expand significantly under the FY2005 request, with $7.5 million proposed from the
State Department’s NADR budget and approximately $8.5 from Treasury’s Technical
Assistance program.
Aid Restrictions for Terrorist States. Annual Foreign Operations
spending bills routinely include general provisions prohibiting U.S. assistance to
countries engaged in terrorist activities or providing certain types of support to
terrorist groups. Included in the FY2004 funding measure were two:
^!Sec. 527 prohibited bilateral U.S. assistance to any country that the
President determines grants sanctuary from prosecution to any
individual or group which has committed an act of international
terrorism or otherwise supports international terrorism. The
President could waive the restrictions for national security or
humanitarian reasons.

^!Sec. 543 prohibited U.S. aid to a government which provides lethal
military equipment to a country that the Secretary of State has
determined is headed by a terrorist supporting government. The
President could waive the requirement if it is important to U.S.
national interests.
Despite these restrictions, however, certain types of humanitarian foreign assistance
can be provided “notwithstanding” other provisions of law, which would override the
terrorism restrictions. Disaster and refugee relief, child survival and HIV/AIDS
programs, emergency food and medicine, and demining operations are among the
categories of U.S. assistance that could potentially be provided to a country that
would otherwise be ineligible.
Table 7. Global Counter-Terrorism Program Funding
($s — millions)
^Program^FY03^Ena^c^t^e^d^FY04^Reg^u^la^r^FY04^Supp.^FY04^To^t^a^l^FY05^Request^FY05^Hou^s^e^FY05^Sena^t^e^FY05^Co^nf.
^Aⁿ^tⁱ^-^T^e^rrori^s^m^Aⁱ^d^65.6^96.4^35.0^131.4^128.3^111.0^128.3^120.0
^T^e^rrori^s^t^In^t^e^rdi^c^tⁱ^oⁿ⁵^.0^5.0^—^5.0⁵^.0^5.0⁵^.0^5.0
^En^g^a^g^e^m^eⁿ^t^w^ith^A^llies^—^—^—^—⁰^.⁵⁰^.5⁰^.⁵⁰^.5
^T^e^r^r^o^rⁱ^st^Fi^na^ncⁱ^{ng -}^5.0⁵^.0^—^5.0⁷^.5^7.5⁷^.5^7.5
^{State Departm}^eⁿ^t
^T^e^r^r^o^rⁱ^st^Fi^na^ncⁱ^{ng -}^5.0⁵^.0^—^5.0⁸^.5^10.0⁸^.5^10.0
^T^r^e^a^s^ur^y^D^e^p^a^r^t^m^e^nt
Congressional Action. In general, Congress, with slight reductions,
supported funding levels proposed by the Administration under the objective of
fighting the war on terrorism. The conference agreement on H.R. 4818 itemizes
amounts for the largest accounts out of which most aid for the “front-line” states is
drawn — Economic Support Fund (ESF), aid to Eastern Europe (SEED), support for
the former Soviet Union (FSA), and Foreign Military Financing (FMF). Conferees
set levels for “front-line” states $58 million below requested amounts. Most of the
reduction comes from the elimination of $50 million in economic aid proposed for
Turkey. Conferees also cut direct FMF funding for Pakistan from $300 million
requested to $150 million, although with the authority to transfer up to an additional
$150 million from prior year funds.
These decisions track generally with recommendations made in the House-
passed version of H.R. 4818, which also reduced amounts for Turkey and Pakistan,
with a transfer authorization for the latter. The Senate-passed measure, on the other
hand, proposed increasing military aid totals for several East Asia and Pacific “front-
line” states to over twice as much as proposed by the executive branch. For example,
under the Senate plan the Philippines would have received $55 million in FMF
assistance, compared with $30 million proposed. Indonesia, which was not slated by
the Administration for FMF aid in FY2005, would have received $6 million, under

certain conditions. The conference agreement sets Philippine FMF at $30 million
and Indonesia FMF at $1 million, subject to restrictions.
Counter-Terrorism Programs. H.R. 4818, as passed by Congress on
November 20, also funds each terrorism-specific program, as noted in Table 2, at or
near the requested level. The conference agreement reduces Anti-Terrorism
Assistance to $120 million, an amount between House- and Senate-passed levels, but
increases Treasury Department budget for combating terrorist financing to $10
million, as recommended by the House.
Terrorism-Related Aid Restrictions. The conference agreement also
continues for FY2005 two standard Foreign Operations provisions that ban, with a
Presidential waiver, bilateral U.S. assistance to countries that grant sanctuary from
prosecution terrorist individuals or groups, or otherwise supports international
terrorism. (Sec. 527). The approved measure further prohibits aid, which can be
waived, to a government providing lethal military equipment to a country that the
Secretary of State has determined is headed by a terrorist supporting government.
(Sec. 542).
Other War on Terrorism Provisions. The conference agreement also
retains, with modifications, two terrorism-related provisions added during House
floor debate and opposed by the Administration in their original form. The first,
which had been sponsored by Representative Nethercutt and approved 241-166
during debate in July, prohibits Economic Support Fund (ESF) assistance to countries
that are party to the International Criminal Court (ICC) and do not sign an Article 98
agreement with the United States pledging that American soldiers serving in their
country will not be surrendered to the ICC. Current law (the American
Servicemembers’ Protection Act; Title II of P.L. 107-206) prohibits U.S. military aid
to such countries, although with a waiver that has been used by President Bush for
reasons of national interest and for countries that are in the process of considering the
ratification of Article 98 agreements. The Nethercutt amendment did not include
waivers regarding ESF aid cut-offs.
The conference measure, however, inserts waivers, exempting NATO members,
major non-NATO allies, a group that includes Jordan, and Taiwan. Critics of the
amendment when it passed the House in July were especially concerned about the
status of Jordan, a key Arab state receiving substantial amounts of ESF assistance,
but has not ratified an Article 98 agreement. The conference agreement further
stipulates that this restriction will not affect a country’s eligibility to receive
Millennium Challenge Account funding. Bolivia, Lesotho, and Mali are potential
MCA recipients, but do not have a ratified Article 98 agreement. Even with these
exemptions, several countries, including Cyprus, Ecuador, and Peru, might face ESF
aid suspension due to this provision.
The second provision included by conferees bars any aid for Saudi Arabia unless
the President certifies that the Saudis are cooperating in efforts to combat terrorism
and that U.S. assistance will help in that effort. The House had passed a similar aid
prohibition, sponsored by Representative Weiner and approved 217-191, but without
including a Presidential waiver. H.R. 4818 includes $25,000 in military training
funds for the Saudis, a token amount that allows the Saudis to purchase additional

military training under the International Military Education and Training (IMET)
program. Supporters of the amendment argued that given Saudi Arabia’s oil
revenues and their view that the Saudi government is not a reliable partner in the war
on terrorism, the United States should not be providing any form of foreign
assistance. Opponents of the amendment as originally drafted, including the
Administration, contended that this largely symbolic cut-off of foreign aid would
undermine counter-terrorism cooperation with the Saudis and more general Middle
East peace efforts.
Millennium Challenge Account⁵
In a speech on March 14, 2002, President Bush outlined a proposal for the
United States to increase foreign economic assistance beginning in FY2004 so that
by FY2006 American aid would be $5 billion higher than three years earlier. The
funds, referred to as the Millennium Challenge Account (MCA), is managed by a
new Millennium Challenge Corporation (MCC) providing assistance through a
competitive selection process, to developing nations that are pursing political and
economic reforms in three areas:
^!Ruling justly — promoting good governance, fighting corruption,
respecting human rights, and adhering to the rule of law.
^!Investing in people — providing adequate health care, education,
and other opportunities promoting an educated and healthy
population.
^!Fostering enterprise and entrepreneurship — promoting open
markets and sustainable budgets.
If fully implemented, the initiative would represent one of the largest increases in
foreign aid spending in half a century, outpaced only by the Marshall Plan following
World War II and the Latin America-focused Alliance for Progress in the early
1960s. It would also represent a fundamental change in the way the United States
invests and delivers economic assistance.
MCC Background. The concept is based on the premise that economic
development succeeds best where it is linked to free market economic and
democratic principles and policies, and where governments are committed to
implementing reform measures in order to achieve such goals. The MCC differs in
several fundamental respects from past and current U.S. aid practices:
^!the size of the $5 billion commitment;
^!the competitive process that will reward countries for past actions
measured by 16 objective performance indicators;
^!the pledge to segregate the funds from U.S. strategic foreign policy
objectives that often strongly influence where U.S. aid is spent; and
^!the requirement to solicit program proposals developed solely by
qualifying countries with broad-based civil society involvement.

⁵ For a more in-depth discussion of the original MCA proposal and issues debated by
Congress in 2003, see CRS Report RL31687.

The new initiative, which Congress authorized in January 2004 (Division D of
P.L. 108-199), would phase in over a three-year period, beginning in FY2004.
During the first year, MCC participation was limited to the 74 poorest nations with
per capita incomes below $1,415 and that are eligible to borrow from the World
Bank’s International Development Association. The list expanded in FY2005 to
include all countries with a per capita income below $1,465 (adding another 13
nations). Beginning in FY2006 and beyond, all lower-middle income countries with
per capita incomes below roughly $3,035 may compete for MCC resources.
Country selection is based largely, but not exclusively, on the nation’s record
measured by 16 performance indicators related to the three categories of good
governance, economic freedom, and investing in people. Countries that score above
the median on half of the indicators in each of the three areas qualify. Emphasizing
the importance of fighting corruption, the indicator for corruption is a “pass/fail” test:
should a country fall below the median on the corruption indicator, it will be
disqualified from consideration unless other, more recent trends suggest otherwise.
(See table below for a complete list of the 16 performance indicators.)
Administration officials, since announcing the MCC initiative in 2002, said that the
selection process would be guided by, but not necessarily bound to the outcomes of
the performance indicators. Missing or old data, general trends, and recent steps
taken by governments might also be taken into account when annual decisions are
made.
Eligibility to receive MCA assistance, however, does not necessarily result in
an aid grant. Once selected, countries are required to submit program proposals —
referred to as MCA Compacts — that have been developed through a broad-based,
national discussion that includes input from civil society. The focus of program
submissions may vary among countries in size, purpose, and degree of specificity,
and will be evaluated by the Corporation for, among other things, how well the
Compact supports a nation’s economic growth and poverty reduction goals. Only
those Compacts that meet the MCC criteria will be funded. It is expected that
successful Compacts will support programs lasting three to five years, providing a
level of resources roughly equivalent to the largest providers of assistance in the
country. This will most likely result in a significant increase of U.S. economic
assistance to MCA participant countries.
To manage the new initiative, the Administration proposed, and Congress
authorized, the creation of a Millennium Challenge Corporation (MCC), an
independent government entity separate from the Departments of State and the
Treasury, and from the U.S. Agency for International Development (USAID). The
MCC plans for an eventual staff of about 200, drawn from various government
agencies, non-governmental organizations, and the private sector, and led by a CEO
confirmed by the Senate. A Board of Directors, chaired by the Secretary of State and
composed of the Secretary of the Treasury, the USAID Administrator, the U.S. Trade
Representative, and the Corporation’s CEO, oversees operations of the MCC and
makes the country selections. Four additional Board members, two of which have
yet to be submitted for confirmation to the Senate, are drawn from lists submitted by
Congressional leaders.

For FY2004, the Administration sought $1.3 billion for the MCA’s first year,
a level reduced by Congress to $994 million. The FY2005 budget proposed $2.5
billion, with a commitment for a $5 billion program in FY2006.
MCC Implementation Steps and Issues. The passage of legislation on
January 23, 2004 authorizing and funding the MCC for FY2004 (Division D of P.L.
108-199) launched a period of at least 90 days during which the new Corporation
would form, issue required reports, consult with Congress and the public, and select
first year participant countries. Within 10 days of enactment, the Board of Directors
held its initial meeting to establish the program, and over the following weeks the
Corporation identified “candidate” countries for FY2004, published the criteria and
methodology to be used for country selection, solicited public comments, issued
guidelines for Compact proposals, and, on May 6, 2004, selected 16 countries to
participate in the MCA’s first year of operations. This was followed on November
10 with the selection of FY2005 eligible MCA countries, an action that added one
new participant to the FY2004 list. An additional 13 countries have also been named
as threshold nations — those that just missed qualifying as eligible countries.
Continuing implementation matters that will unfold in the months ahead will
include the relationship of MCC programs with those operated by USAID, how the
Corporation and USAID will support threshold countries to better prepare for future
performance reviews, and the awarding of MCA grants — in the form of Compacts
— to MCA eligible countries.
Establishing the Millennium Challenge Corporation. On February 2,
2004, the Board of Directors met, agreed to Corporation by-laws, and approved
Under-Secretary of State Larson as the interim CEO. Subsequently, the President
nominated Paul Applegarth to be the permanent MCC CEO, an individual confirmed
by the Senate on May 5. CEO Applegarth has held various international and
development positions over the past 30 years, primarily in the private sector. Most
recently, he was the Managing Director of Emerging Markets Partnership, serving as
the COO of Emerging Africa Infrastructure Fund in 2002.
Naming FY2004 Candidate Countries. Also on February 2, the MCC
Board issued a list of 63 “candidate” countries that would be reviewed for possible
selection as MCA participants in FY2004. These countries, according to authorizing
legislation, must be eligible for assistance from the World Bank’s International
Development Association, have a per capita income of $1,415 or less, and not be
otherwise ineligible to receive U.S. assistance. The latter condition eliminated
twelve countries — Burma, Burundi, Cambodia, Central African Republic, Cote
d’Ivoire, Guinea-Bissau, Liberia, Serbia, Somalia, Sudan, Uzbekistan, and Zimbabwe
— that were statutorily barred from receiving American aid.
Publishing the Selection Criteria and Methodology. Pursuant to
reporting requirements set in the MCC legislation, the Corporation on March 5, 2004,
sent to Congress an overview of the criteria and methodology that would be used to
determine the eligibility of the 63 candidate countries in FY2004. The report
suggested that there would be relatively few and only minor changes to the criteria
and methodology that had been outlined 15 months earlier. The same 16
performance indicators, as listed in Table 8 below, would be utilized. In a few cases,

data sources shifted from international institutions to national governments. This
was especially true in cases where existing data for an indicator were old or
incomplete.
Although the Corporation did not alter any of the original 16 performance
indicators, it attempted to address additional criteria added by Congress in P.L. 108-
199 through the use of supplemental data and qualitative information. While the
legislative authorities broadly match criteria proposed by the Administration,
lawmakers included four additional matters on which to evaluate a country’s
performance. These relate to the degree to which a country:
^!recognizes the rights of people with disabilities;
^!supports a sustainable management of natural resources;
^!respects worker rights; and
^!makes social investments, especially in women and girls.
Given the range and diversity of suggestions offered throughout the public and
congressional debate of the MCC, many observers were surprised that the
Corporation did not propose more substantive changes to the criteria and
methodology. Some questioned how seriously the Administration considered
alternative approaches and whether the Corporation would be open to future
revisions.⁶ (During the public comment period and at congressional oversight
hearings, some suggested that existing data sources needed to be refined or new
surveys created in order to specifically measure a country’s commitment on the four
criteria added by Congress.
After further study of the criteria and methodology, the Corporation announced
on August 26, 2004, a revised set of performance indicators that will be used for the
FY2005 selection process. The MCC will lower the inflation rate threshold from
20% to 15%, making it somewhat more difficult to pass this test (only 6 of the 63
candidate countries failed this test for FY2004). An indicator measuring girls’
primary education completion rates will replace a broader measure used in FY2004
that did not disaggregate primary education graduation by gender. As noted above,
including the means to measure country performance on key women and girls issues
is one of the requirements added by Congress during deliberation on MCC
authorizing legislation.
The Corporation, further indicated that it will explore additional criteria and
methodology changes for FY2006. Under consideration are options to:
^!lower the inflation level to 10%.
^!identify a measurement related to natural resource management; the
MCC has created a working group to study possibilities.
^!review other possible indicators that would better measure trade
barriers that are linked with economic growth.

⁶ See, for example, Steve Radelet, et al., A Comment on the Millennium Challenge Account
Selection Process, Center for Global Development, March 9, 2004.

^!develop a more comprehensive indicator than the current Days to
Start a Business to gauge a government’s commitment to
entrepreneurship and private-sector ownership.
^!consider additional gender-relation indicators.
Country Selection for FY2004. On May 6, the MCC Board of Directors
determined that 16 countries would be eligible for FY2004 MCA funding and invited
each to submit program proposals:
Armenia Madagascar
BeninMali
BoliviaMongolia
Cape VerdeMozambique
Georgi a Ni caragua
Ghana Senegal
HondurasSri Lanka
LesothoVanuatu
As expected, the selection process raised a number of questions and concerns. The
Administration had previously said that the Board would be guided by, but not
entirely bound to, the outcome of the performance indicator review process; that
Board members could apply discretion in their selection. Performance trends,
missing or old data, and recent policy actions might come into play during selection
deliberations, officials noted.
The final selection reflected decisions that both strictly followed the
performance indicator outcomes and applied Board discretion to take into account
other factors. Ten of the countries complied with the stated criteria: performing
above the median in relation to their peers on at least half of the indicators in each
of the three policy clusters and performing above the median on corruption. The
Board also examined whether a country performed substantially below average on
any single indicator and whether their selection was supported by supplemental
information. Each of the ten countries also passed these additional tests.
For ten other countries, however, some discretion was applied by the Board. In
three cases — Cape Verde, Lesotho, and Sri Lanka — the countries met the criteria
but fell significantly below average on one indicator, yet were still selected by the
Board due to recent policy changes or positive trend lines. For three others —
Bolivia, Georgia, and Mozambique — the Board deviated from a strict application
of the selection criteria because of evidence that the governments were taking
corrective actions in the deficient areas.
On the other hand, the MCC Board chose not to select four countries that
technically met the performance criteria but fell substantially below the median on
one or more indicator. In each of these cases, the Board did not believe that the
government was taking any action to improve its performance. Although Bhutan,
Mauritania, and Vietnam passed the corruption hurdle and half of the “ruling justly”
indicators, they scored very low on the measurements for Political Rights and Civil
Liberties, and in Vietnam’s case, on the Voice and Accountability indicator. A fourth

country — Guyana — was also not selected despite passing the necessary hurdles.
It scored particularly low on the Fiscal Policy measurement.
It has been long assumed by MCC officials and close observers of the MCA
initiative that when the country selections were announced, there would be
disagreements and possible surprises in the final list, especially if the Board exercised
its discretionary authority as it did for FY2004 participants. Representative Lowey,
for example, expressed her view at a May 13 House Appropriations Committee
hearing that East Timor, which failed to pass the “economic freedom” hurdle in part
due to missing data on two of the indicators, should have been selected. CEO
Applegarth responded that East Timor is a new nation and that it was premature to
conclude that it was a “high-performing” country. He acknowledged, however, that
East Timor should be given close consideration in the future if the current trend lines
continue.
Besides East Timor, some suggested that Kenya should have been included
because of its new government’s commitment to education and anti-corruption
efforts. USAID Administrator Natsios acknowledged at the hearing that Albania was
a “close call,” failing because it scored slightly below the median on corruption. Like
Albania, Malawi and Moldova would have qualified on the basis of performance if
not for slightly failing scores on corruption. Several small island states, including
Kiribati, Sao Tome, and Tonga, were not selected even though the absence of data
for several categories may have played a role.
Despite these questions over specific country eligibility, the selection process
appeared to have satisfied two major concerns that have been consistently expressed
over the past year. Based on earlier analysis, some argued that Africa would be
under-represented in the final selection process, with perhaps as few as three regional
states participating. In fact, eight, or half of the first year qualifying nations, were
from Africa. Selection of countries that would give the appearance of geostrategic
considerations was a concern of many who view the absence of security-related
factors from MCA decision-making as one of the most attractive features of the
initiative. Had the Board used its discretionary powers to select Indonesia, for
example, some critics would have likely charged that the decision stemmed more
from Jakarta’s role in the war on terrorism than on strict policy performance.
Indonesia passed all necessary hurdles except for corruption.
Country Selection for FY2005. Meeting on November 8, the MCC Board
of Directors made its selection of FY2005 eligible countries:
ArmeniaMali
BeninMongolia
BoliviaMorocco
Georgi a Mozambique
GhanaNicaragua
HondurasSenegal
LesothoSri Lanka
Madagascar Vanuatu

The Board chose one new country for FY2005 — Morocco — while 15 of the 16
nations included for FY2004 were determined eligible again for FY2005. Cape
Verde was not selected due to the fact that its per capita GNI exceeded the $1,465
ceiling. Cape Verde, however, remains eligible for MCA support using FY2004
funds. Board selections represent both a high degree of continuity between FY2004
decisions as well as a sharp difference in the degree to which it applied its
discretionary authority for qualifying or denying countries for FY2005.
The fact that each country (except Cape Verde) selected for FY2004 MCA
participation was also declared eligible for FY2005 should not be surprising, given
the nature of the MCA concept. The Board identified in May 2004 what it
determined to be the 16 “best performers” based on the assumption that these
countries had, and would continue to express, a strong commitment to the types of
economic, governance, and social policy reforms measured by the MCC. Absent a
substantial negative development since May, there was a presumed expectation that
these same countries would score well in a subsequent performance comparison with
their income peers. Moreover, except in some extreme situations, evidence of a slide
in policy performance as measured through the various data sources would likely lag
behind the actual policy shift and not be reflected in the immediate data updates.
In addition, two other factors that may not apply in future years seem to have
affected the outcome for FY2005. First, with the selection dates for FY2004 and
FY2005 coming only six months apart — rather than one year, as should be the case
in the future — it was likely that the data would indicate less change than might be
the case if the comparisons occurred over a longer period. Between May and
November, several of the data sources upon which the 16 performance indicators are
based did not update or revise their figures. As a result, the review of countries for
FY2005 was based on much of the same data and rankings as had been the case for
the FY2004 selection.
Moreover, the addition of 13 new countries for consideration in the FY2005
round had the effect for at least six of the indicators of lowering the median against
which countries were compared. Because of this, if a country scored well — above
the median — in the FY2004 selection decision, it was likely that it would score the
same or better in the review for FY2005 where medians declined. For example, in
May Bolivia fell exactly at the median on the corruption indicator. But in November,
when the median for corruption dropped somewhat after new countries were added,
Bolivia scored above the median even though Bolivia’s score on corruption did not
change. This phenomena is unlikely to be repeated again to the same extent since
countries in the low-income group will be added or subtracted only if their economy
grows beyond the per capita income ceiling or U.S. foreign aid sanctions are applied
or lifted since the last review. The net effect is that the core set of low-income
countries competing for MCA selection is unlikely to change as much as it did in
FY2005, thereby reducing the extent to which the median will be altered simply
because of the addition of new countries.
Despite the degree of continuity between FY2004 and FY2005 in the selection
of eligible countries, the MCC Board departed somewhat from the previous round
by not selecting a large number of countries that technically met the MCA

performance criteria. Many observers may raise questions over the FY2005
selections regarding the countries that were not selected rather than those that were.
As noted above, in May 2004, the Board chose not to select four countries —
Bhutan, Guyana, Mauritania, and Vietnam — although each passed the minimum
number of indicators. The Board decided to exclude these four because they scored
“substantially below” the median on one or more measurements, although without
defining precisely what represented a mark “substantially below” the median.
For FY2005, the Board did not select 10 countries that met the criteria,
including three of the four left out of the FY2004 round (Mauritania did not meet the
minimum qualifications). In addition, for FY2005 Burkina Faso, China, Djibouti,
Egypt, Nepal, the Philippines, and Swaziland met the minimum standards but were
not selected. Thus far, the Corporation has offered little explanation as to why these
countries were not chosen. It appears, however, that scoring “substantially below”
— perhaps in the lowest 25^th percentile — has become a de-facto criteria for
exclusion. For example, the Corporation’s CEO Paul Applegarth commented that
the Philippines, a country that passed 13 of the 16 indicators, did not qualify because
Manilla scored “substantially below” the median on tests for health expenditures and
fiscal policy, and that more recent trends indicated the fiscal policy situation was
deteriorating further. Each of the other nine nations that met the minimum
qualifications but were not selected also had one score in the 25^th percentile, although
the Corporation has not commented on whether this was the reason for not choosing
them.
Another possible reason for limiting the number of qualifying countries in the
FY2005 round might be due to anticipated funding reductions. The Administration
had requested combined FY2004/FY2005 appropriations of $3.8 billion, but may
have available 25%-30% less, depending on the outcome of congressional debate on
the FY2005 budget. Corporation officials have said that reduced funding would lead
to fewer countries assisted and/or smaller grants per country, a situation that would
be complicated further by qualifying additional nations.
Instead, the Board of Directors invited three of these 10 countries to participate
in the Threshold Program, intended to help “near-miss” nations take steps to
strengthen areas that would help them qualify for full MCA assistance in the future.
Burkina Faso, Guyana, and the Philippines may now apply for Threshold Program
assistance.
Another Board departure in the FY2005 selection process was to avoid using its
discretionary authority to qualify countries that did not meet the minimum
performance indicators. In May, the Board chose three nations — Bolivia, Georgia,
and Mozambique — that did not pass the so-called “hard-hurdle” of corruption. The
latter two again qualified despite falling below the median on corruption, while
Bolivia did not require an exemption after the median dropped below its score with
the addition of new countries. For FY2005, five nations — Malawi, Moldova,
Paraguay, Tanzania, and Ukraine — passed the required number of performance
indicators, except corruption. Although Malawi, Paraguay, and Tanzania are
Threshold Countries, none of the five were chosen for full MCA status.

“Threshold” Countries and U.S. Assistance. In order to encourage non-
qualifying countries to improve in weak areas, the United States will help
governments that are committed to reform to strengthen performance so that they
would be more competitive for MCA funding in future years. Congress provided in
authorizing legislation that not more than 10% of MCA appropriations ($99.4 million
in FY2004) could be used for such purposes, stating that the funding could be made
available through USAID. The MCC set aside up to $40 million for countries that
just missed qualifying for FY2004 funding and will announce an amount for FY2005
following enactment of new appropriations.
The Corporation has made two announcements regarding the selection of
Threshold Countries. On September 30, the Corporation named seven participants:
Albania, East Timor, Kenya, Sao Tome and Principe, Tanzania, Uganda, and Yemen.
Five weeks later, on November 8, the MCC added six more nations for FY2005:
Burkina Faso, Guyana, Malawi, Paraguay, the Philippines, and Zambia. According
to the Threshold Program Policy guidance issued by the Corporation, the program
will assist countries make policy reforms and institutional changes in areas where
they failed to meet the MCA performance criteria. If the Corporation, in consultation
with USAID, determines that the concept paper shows sufficient commitment to
reform and a promise of success, the country will prepare a Threshold Country Plan
that specifically establishes a program schedule, the means to measure progress, and
financing requirements, among other considerations. USAID is charged with
overseeing the implementation of Threshold Country Plans, including working with
countries to identify appropriate implementing partners such as local, U.S., and
international firms; NGOs; U.S. government agencies; and international
organizations. Like regular MCA Compacts, funding is not guaranteed for each
country selected for the Threshold Program, but will be based on the quality of the
Country Plan.
Role of USAID and the Future of Agency Programs in MCA
Countries. As noted above, how USAID would participate in the MCA initiative
has been a continuing concern of Congress and various policy analysts. Legislation
authorizing the MCC requires the Corporation’s CEO to coordinate with USAID and
directs the Agency to ensure that its programs play a primary role in helping
candidate countries prepare for MCA consideration. Corporation and USAID
officials have said there will be close collaboration between the two entities, although
the precise nature of the relationship has yet to be made public. USAID maintains
missions in 14 of the 17 eligible countries might be expected to support MCC
programs, through contracting, procurement, and monitoring tasks.
Another question is how USAID will adjust its own programs in MCA
countries, especially where the Agency maintains relatively small activities in
relation to other donors. Since the goal is to provide resources that will make MCA
programs among the largest aid operations in a country, it is likely that USAID
spending will fall well below amounts provided through MCC Compacts. For
example, in Mongolia, where U.S. aid programs have totaled $10-$12 million
annually in recent years, the United States was the fourth largest bilateral donor in
2002, representing less than a quarter of the size of Japan’s economic aid
disbursements. In Ghana, Senegal, and Sri Lanka, USAID maintains larger programs
but spends far less than other countries and multilateral agencies.

Like other issues involving USAID, this question remains under review.
USAID Administrator Natsios told the House Appropriations Committee on May 9,

2004, that the Agency would not withdraw from or cut programs in MCA countries,

but would not increase spending either. He said, however, that USAID would work
to ensure that its programs operate in an integrated way with MCA-funded activities.
Funding Issues and the FY2005 MCC Request. As mentioned above,
Congress appropriated $994 million for FY2004 MCC programs and considered a
$2.5 billion request for FY2005. This was by far the largest increase sought by the
Administration in the Foreign Operations appropriations proposal and viewed by
many observers as one of the most vulnerable items in an increasingly difficult
budget environment.
A growing concern raised by some Members of Congress was whether sufficient
funds would be available to support MCC programs in every country selected,
especially if the Board continues to make exceptions and qualifies more countries
than meet the strict criteria. Representative Kolbe, chairman of the House Foreign
Operations Subcommittee, speculated at a May 9 hearing that, based on recent Board
decisions, by 2006 as many as 40 countries might have qualified. This, he believed,
could not be fully supported with likely funding levels and might raise country
expectations that could not be met, thereby undermining program incentives.
MCC officials point out that qualification for the program does not mean that
a government will receive funding. That decision will be based on the quality of the
Compact proposals and it is possible that the Corporation will not finalize
agreements with all eligible countries. A March 2004 GAO report estimated that the
MCC could adequately fund 8-13 Compacts with an appropriation of $3.5 billion (the
combined FY2004 enacted and FY2005 amounts). This suggests that, even if
Congress fully funds the pending proposal, the Corporation will not be able to
support programs in all 16 countries approved for FY2004 and those selected for
FY2005. If Congress reduces the $2.5 billion request, the MCC may face increasing
difficulties funding Compacts of a sufficient size that will have a meaningful impact
on a country’s economic growth and poverty reduction goals. This may lead to
further congressional examination of the Board’s selection process and consideration
of ways to limit the number of countries selected in the future.
Congressional Action. Foreign Operations bills passed in both the House
and Senate (H.R. 4818) made substantial reductions to the President’s MCC request
for FY2005. The bill, as approved by the House, reduced by half the President’s $2.5
billion proposal. In cutting the MCC proposal, the House Appropriations Committee
noted that its decision resulted solely from the constrained budget environment in
FY2005 and the need to address other Administration and Congressional priorities.
The executive branch, in its Statement of Administration Policy on H.R. 4818 issued
prior to House debate, expressed its “disappointment” over the level of MCC funding
and urged Congress to increase resources. During floor consideration on July 15, the
House defeated (41-379) an amendment by Representative Paul to eliminate all MCC
appropriations.
The House Committee, in its report on H.R. 4818, also expressed concern over
Corporation plans to enter into multi-year Compacts without committing total

funding for these programs in the year the Compact is signed. This, the Committee
believed, would obligate future Congresses to fund prior year contracts.
Consequently, the bill requires the MCC to only sign Compacts for which complete
funding is available from existing appropriations. The House Committee also
recommended that Compacts be limited to a 3-4 year period rather than a 3-5 year
duration envisioned by the MCC.
The Senate measure proposed a more significant cut to the President’s MCC
request — to $1.12 billion. Despite the reduction, the Senate Appropriations
Committee noted its strong support for the program and re-emphasized some aspects
of the MCC set out in authorizing legislation. The Senate panel requested a report
on how the MCC will monitor and evaluate program Compacts, recommended that
the Corporation use funds to identify a source of data to measure country
performance with respect to people with disabilities, and urged the MCC to use the
expertise of higher education institutions and to eliminate from Compact proposals
elements that would have an adverse environmental impact. The Senate Committee
further noted that rural electrification should be regarded as a significant part of a
country’s rural development goal.
Following strong pressure from the White House to increase MCC funding
above House- and Senate-passed levels, conferees settled on $1.5 billion for the
MCC in FY2005. Like the House bill, the conference agreement requires that the
MCC fully fund multi-year compacts selected in FY2004 and FY2005. The measure
further amends MCA authorizing legislation, adding a more specific definition of the
performance criteria related to “investing in people.” In the future, this category will
extend to government policies promoting health, education, and other factors
contributing to the well-being and productivity of its citizens, including access to
affordable housing.
The combination of a reduced appropriation and the requirement for funding
FY2004 and FY2005 compacts with existing appropriations may significantly limit
the number and/or size of program proposals the Corporation can support in the first
two years.

CRS-48
Table 8. MCC Performance Indicators for FY2005
^{Ruling Jus}^t^ly^Iⁿ^ves^t^{ing in}^People^E^c^onom^{ic Freedom}
^nt^ro^{l o}^f^Co^rrupt^ioⁿ^P^{ublic P}^r^im^a^r^y^Educa^t^io^{n Spending}^a^s^{% o}^f^G^D^P^{Country Credit Rating}
^u^r^{ce: W}^o^r^l^d^B^aⁿ^k^Iⁿ^stitu^te^So^ur^c^e^s^:^N^a^tⁱ^o^na^l^go^ve^rⁿ^m^e^nt^s^Sou^r^{ce: In}^s^titu^tion^a^{l In}^v^e^s^t^{or Mag}^azin^e^{, Septem}^{ber 2004.}
^t^t^p^:^/^/^www.^wo^r^l^d^b^aⁿ^k^.^o^r^g^/^wbⁱ^/^g^o^v^e^rⁿ^aⁿ^c^e^/^g^o^v^d^a
ⁱⁿ^dex^.^h^t^m^l^]
^{ice a}^{nd Acco}^unt^a^b^ilit^y^Pri^m^{ary G}ⁱ^rl^s^’^E^d^u^c^ati^oⁿ^C^o^m^p^l^e^ti^on^R^a^te^Inf^l^a^t^ioⁿ^(m^u^s^t^{be bel}^o^w^15%⁾
^u^r^{ce: W}^o^r^l^d^B^aⁿ^k^Iⁿ^stitu^te^So^ur^c^e^s^:^W^o^r^l^d^B^a^{nk a}ⁿ^d^U^N^E^SCO^So^u^r^{ce: Mu}^ltip^le
^t^t^p^:^/^/^www.^wo^r^l^d^b^aⁿ^k^.^o^r^g^/^wbⁱ^/^g^o^v^e^rⁿ^aⁿ^c^e^/^g^o^v^d^a
ⁱⁿ^dex^.^h^t^m^l^]
^e^{nt E}^f^fectivenes^s^Pu^b^lⁱ^c^E^x^p^eⁿ^dⁱ^tu^{re on}^Heal^th^as^%^{of G}^D^P^Fis^c^{al Policy}
^u^r^{ce: W}^o^r^l^d^B^aⁿ^k^Iⁿ^stitu^te^So^ur^c^e^s^:^N^a^tⁱ^o^na^l^go^ve^rⁿ^m^e^nt^s^So^ur^c^e^:^N^a^tⁱ^o^na^l^go^ve^rⁿ^m^e^nt^{s a}ⁿ^d^I^M^{F W}^o^r^l^d^E^c^oⁿ^o^mⁱ^c
ⁱ^{ki/CRS-RL32311}^t^t^p^:^/^/^www.^wo^r^l^d^b^aⁿ^k^.^o^r^g^/^wbⁱ^/^g^o^v^e^rⁿ^aⁿ^c^e^/^g^o^v^d^aⁱⁿ^dex^.^h^t^m^l^]^O^u^t^l^ook
^g/w
^s^.or^f^L^a^w^Im^m^uniza^tⁱ^oⁿ^Ra^t^e^s:^DP^{T a}^{nd M}^e^a^s^les^Tra^d^{e Po}^licy
^le^ak^u^r^{ce: W}^o^r^l^d^B^aⁿ^k^Iⁿ^stitu^te^So^u^r^{ces: W}^o^r^l^d^Health^Or^g^aⁿⁱ^zatioⁿ^So^ur^c^e^:^T^h^e^H^e^rⁱ^t^a^ge^Fo^und^a^tⁱ^o^n,^Iⁿ^d^e^{x o}^f^E^c^oⁿ^o^mⁱ^c
^t^t^p^:^/^/^www.^wo^r^l^d^b^aⁿ^k^.^o^r^g^/^wbⁱ^/^g^o^v^e^rⁿ^aⁿ^c^e^/^g^o^v^d^a^F^r^eedom
^://wikiⁱⁿ^dex^.^h^t^m^l^]^[^h^t^t^p^:^/^/^www.^h^e^rⁱ^t^a^g^e^.^o^r^g^/^r^e^s^e^a^r^c^h^/^f^e^a^t^u^r^e^s^/ⁱⁿ^d^e^x^/^]
^h^ttp
^{il Libert}^ies^Reg^u^la^t^o^ry^Po^licy
^r^{ce: Freedom}^Hou^s^e^So^u^r^{ce: W}^o^r^l^d^B^aⁿ^k^Iⁿ^stitu^te
^t^t^p^:^/^/^www.^f^r^e^e^d^o^m^h^o^u^s^e^.^o^r^g^/^r^e^s^e^a^r^c^h^/^f^r^e^e^w^o^r^l^d^/^[^h^t^t^p^:^/^/^www.^wo^r^l^d^b^aⁿ^k^.^o^r^g^/^wbⁱ^/^g^o^v^e^rⁿ^aⁿ^c^e^/^g^o^v^d^a^t^a^2002/ⁱⁿ
^t^a^bl^e2004.pdf^]^d^e^x.^ht^m^l^]
^D^ays^{to S}^t^{art a Bu}^sⁱⁿ^e^s^s
^r^{ce: Freedom}^Hou^s^e^So^ur^c^e^:^W^o^r^l^d^B^a^nk
^t^t^p^:^/^/^www.^f^r^e^e^d^o^m^h^o^u^s^e^.^o^r^g^/^r^e^s^e^a^r^c^h^/^f^r^e^e^w^o^r^l^d^/^[^h^ttp^://r^r^u^.w^o^r^ld^b^aⁿ^k^.^o^r^g^/^Doⁱⁿ^g^B^u^sⁱⁿ^ess/Ex^p^l^o^r^eT^o^pⁱ^cs/Star
^t^a^bl^e2004.pdf^]^tin^g^B^u^sⁱⁿ^ess/Co^m^p^ar^eA^ll.asp^x^]

Development Assistance, Global Health Priorities, and
HIV/AIDS
A continuing source of disagreement between the executive branch and
Congress is how to allocate the roughly $3 billion “core” budget for USAID
development assistance and global health programs. Among the top congressional
development aid funding priorities in recent years have been programs supporting
child survival, basic education, and efforts to combat HIV/AIDS and other infectious
diseases. The Administration has also backed these programs, but officials object to
congressional efforts to increase funding for children and health activities when it
comes at the expense of other development sectors. More recently during the
FY2003 and FY2004 budget cycles, some Members of Congress argued that it has
been the executive branch that has added funds for Administration priorities by
cutting resources for other development activities.
In years when Congress has increased appropriations for its priorities, but not
included a corresponding boost in the overall development aid budget, resources for
other aid sectors, such as economic growth and the environment, have been
substantially reduced. This was more problematic during the mid-to-late 1990s when
world-wide development aid funding fell significantly. In more recent years, and
especially for FY2003 and FY2004, Congress increased overall development
assistance so that both congressional and executive program priorities could be
funded without significant reductions for non-earmarked activities. Nevertheless,
Administration officials continue to argue that such practices undermine their
flexibility to adjust resource allocations to changing global circumstances.
In 2001, the Bush Administration set out revised USAID core goals for
sustainable development programs focused around three “spheres of emphasis” or
“strategic pillars” that include Global Health, Economic Growth and Agriculture, and
Conflict Prevention and Developmental Relief. The Administration further
introduced a new initiative — the Global Development Alliance (GDA) — in an
effort to expand public/private partnerships in development program implementation.
Under the initiative, USAID identifies good development opportunities being
conducted by private foundations, non-governmental organizations, universities, and
for-profit organizations, and provides parallel financing to leverage resources already
committed to these activities. USAID officials envisioned that the agency would
become much more of a coordinating and integrating institution to expand and
enhance development efforts of these non-governmental development partners.
Although it started out as a much more ambitious project — USAID requested $160
million for FY2002 — the GDA has received relatively modest funding allocations,
with a high of $20 million in FY2002, declining to $15 million in FY2004. USAID
seeks $10 million for FY2005.
Underscoring the importance of the debate over funding allocations of
development aid resources has been an elevation by the Administration of the value
of foreign economic assistance as an instrument of U.S. foreign policy since the
terrorist attacks of September 11, 2001. Congress has approved two Presidential
foreign aid initiatives — the Millennium Challenge Account (MCA) and the
President’s Emergency Program for AIDS Relief (PEPFAR) — that are increasing

funding significantly for development assistance programs. Moreover, the
President’s September 2002 National Security Strategy established global
development, for the first time, as the third “pillar” of U.S. national security, along
with defense and diplomacy.
For FY2005, the President proposed another substantial increase in overall
development assistance, although the programs were configured differently than they
have been in the past and the additional resources were heavily concentrated in a few
activities where about 30 countries would receive the greatest benefits. Although
development activists, including numerous non-governmental organizations (NGOs),
strongly support these rising foreign aid budgets, they have also raised questions
about the degree of resource concentration and whether the Administration is
committed to a broad-based, worldwide development strategy. While country
participants in the two new foreign aid initiatives — PEPFAR, which concentrates
resources in 15 “focus” countries, and the MCA, for which 17 have been selected in
FY2004 and FY2005 — are likely to see development aid from the United States
grow significantly, the outlook for the other 30-40 recipients of American economic
assistance is a projection of flat or slightly lower levels of aid. The Administration
further has said that MCA funding would be in addition to, not a substitute for
continuing “core” development activities. Critics have charged that the FY2004 and
FY2005 budget requests violated that pledge by cutting amounts for “core” programs.
Table 9. Development Assistance Funding
($s — millions)
^FY²⁰⁰³^Actua^l^FY²⁰⁰⁴^E^s^ti^m^a^te^FY²⁰⁰⁵^Request^FY^{05 +}^/^{- FY}⁰⁴^{$ %}
^U^S^A^I^D^“C^{ore D}^e^vel^o^p^m^en^{t” Program}^s^:
^Econ^omⁱ^c^G^r^ow^t^h^a^$1,151.2^$1,152.7^$1,121.0⁽^$31.7)^-²^.8%
^Glo^b^a^{l Health}^b^$1,705.4^$1,824.2^$1,420.0⁽^$404.2)^-^22.2%
^Dem^o^cr^acy^/Coⁿ^f^lict/Hu^m^an^itarⁱ^an^a^$213.9^$211.7^$208.0⁽^$3.7)^-¹^.7%
^{Subtotal, “Core Developm}^ent”^$3,^070.5^$3,203.5^$2,749.0⁽^$454.5)^-14.2%
^{Global A}^I^{DS In}^itiativ^e^—^$488.1^$1,450.0^$961.9^—
^Millenⁿⁱ^u^m^C^h^allen^g^e^A^ccouⁿ^t^—^$994.0^$2,500.0^$1,506.0^—
^T^O^T^A^L^,^D^e^vel^o^p^m^en^{t A}ⁱ^d^$3,^070.5^$4,685.6^$6,699.0^$2,013.4^43.0%
^So^urce^{: USA}^I^D.
^a.^USA^I^D’^s^“^s^tr^ateg^ic^p^illar^s^”^f^o^r^Ecoⁿ^o^m^{ic Gr}^o^w^th^an^d^Dem^o^cr^acy^co^r^r^e^sp^oⁿ^d^to^th^{e Dev}^e^lo^p^m^en^t
^A^{ssistance acco}^{unt in title I}^I^o^f^{annual Fo}^r^e^{ign Op}^er^atio^{ns ap}^p^r^o^p^r^iatio^{ns b}^ills.
^b^.^USA^I^D’^{s “}^s^tr^ateg^{ic p}^illar^”^f^o^r^Glo^b^a^{l Health}^co^r^r^esp^oⁿ^d^s^to^th^e^Ch^ild^Su^r^v^iv^al^an^d^Health^P^r^o^g^r^a^m
^Fund^acco^{unt in title I}^I^o^f^{annual Fo}^r^e^{ign Op}^er^atio^{ns ap}^p^r^o^p^r^iatio^{ns b}^ills.

Development activists and policy analysts have further expressed concern
regarding the recent diffusion of development aid policy implementation among
multiple agencies. To some, this raises questions over the ability to coordinate
foreign aid activities, present a coherent policy approach, and design an overall
development assistance strategy. (See, for example, testimony on evolving U.S.
foreign aid policy before the House International Relations Committee on February
26, 2004.) A number of analysts note that large segments of policy making and
implementation responsibilities have shifted from USAID, the principal American
aid agency for over 40 years, to a new State Department office that will coordinate
PEPFAR, and to the Millennium Challenge Corporation that was established in
February 2004 and manages MCA resources.
FY2005 Development Assistance Request. For “core” development
assistance — programs that match the current structure of USAID’s “strategic
pillars” and Foreign Operations appropriation accounts for Development Assistance
and Child Survival and Health Program Fund — the Administration proposed $2.75
billion, as shown in Table 9. This represented a $455 million, or 14% reduction from
amounts for FY2004. This comparison on its own, however, is somewhat
misleading. It does not reflect the large amount of funds — $1.45 billion —
requested for the State Department’s Global AIDS Initiative office, a large portion
of which in previous years would have been counted within USAID “core”
development aid budget. It also does not include the $2.5 billion request for the
Millennium Challenge Corporation. Adding these amounts to the traditional USAID
“core” accounts, the total development aid request for FY2005 was $6.7 billion, or

43% higher than FY2004.

Perhaps a more informative analysis of the FY2005 proposal is to look below
the total figures and compare funding levels recommended for individual components
of development assistance. This comparison, as illustrated in Table 2, presents a
mixed picture of the FY2005 budget proposal. Under the category of Economic
Growth, Agriculture, and Trade, funding for agriculture and environment would
decline in FY2005. Basic education programs have been an especially high priority
for Congress during the past decade. The Administration’s proposal would cut basic
education slightly from current the development assistance budget, and overall,
taking into consideration other economic aid accounts, proposed $314 million, or $10
million less than enacted for FY2004. The category for Democracy, Conflict, and
Humanitarian programs was also reduced slightly for FY2005.
Under the third category of Global Health, which corresponds to the Foreign
Operations appropriation account of Child Survival and Health, the FY2005 request
was mixed. Although HIV/AIDS funding was reduced by over $300 million, this cut
was more than compensated by a $1.45 billion proposal for the State Department’s
Global AIDS Initiative. The Administration, however, proposed a sizable reduction
in the U.S. contribution to the Global Fund to Fight AIDS, Tuberculosis, and Malaria
— $400 million in FY2004 to $100 million in FY2005 — for funds drawn from
Foreign Operations.
For all other programs under the Global Health category, the FY2005
represented a reduction. Sizable cuts were proposed for vulnerable children activities
and for other infectious diseases, including malaria and tuberculosis. Family

planning and reproductive health were also reduced, representing the first time the
Bush Administration had proposed a funding level less than its budget request the
previous year. Across all Foreign Operations accounts, including Child Survival,
Economic Support Fund, East Europe, and former Soviet states, the FY2005 request
was $399.2 million, down about $30 million from estimates for FY2004. In his three
previous budget submissions, President Bush had requested $425 million for family
planning activities.
International HIV/AIDS. By far, the largest growth area for development
assistance was for HIV/AIDS prevention, treatment, and care programs (Table 3).
Resources requested under the Foreign Operations bill for HIV/AIDS in FY2005,
including funds for malaria and tuberculosis, totaled $2.2 billion, a 37% increase
over $1.6 billion appropriated for FY2004. Moreover, the Administration sought
another $623 million for international HIV/AIDS from non-Foreign Operations
accounts, most importantly for the Centers for Disease Control and Prevention
funded under the Labor/HHS/Education appropriation bill. The total request across
all appropriation measures for FY2005 was $2.82 billion.
A contentious issue that has arisen during congressional debates in the past two
years has been the President’s proposal for an annual $200 million contribution to the
Global Fund to Fight AIDS, Tuberculosis, and Malaria — $100 million each from
Foreign Operations and Labor/HHS/Education. For FY2003, Congress increased the
U.S. contribution to $350 million and subsequently authorized “up to” $1 billion for
FY2004 in P.L. 108-25, the United States Leadership Against HIV/AIDS,
Tuberculosis, and Malaria Act of 2003. The FY2004 appropriation for the Global
Fund was $550 million, while the President proposed $200 million in FY2005.

Table 10. “Core” Development Assistance Funding
($s — millions)
^St^ra^t^e^gⁱ^{c “}^P^illa^r”^FY²⁰⁰¹^Actua^l^FY²⁰⁰²^Actua^l^FY²⁰⁰³^Actua^l^FY²⁰⁰⁴^Ena^c^t^e^d^FY²⁰⁰⁵^Request
^E^c^on^omⁱ^c^$844.3^$1,031.6^{$1,151.2 $1,152.7}^$1,120.9
^G^r^ow^th^/^A^gri^c^u^l^tu^re/^T^r^ad^e
^A^g^ri^cu^l^t^u^re^$160.4^$201.9^$258.8^$268.4^$268.0
^En^vⁱ^ron^m^en^t^$274.1^$285.6^$302.5^$293.7^$275.0
^T^r^{ade &}^In^v^e^s^t^m^eⁿ^t^/^E^con^G^r^ow^t^h^$246.6^$331.8^$313.2^$313.2^$316.0
^Basⁱ^{c Edu}^catⁱ^oⁿ^f^o^{r C}^hⁱ^l^d^ren^$102.8^$150.0^$216.6^$216.8^$212.0
^Hⁱ^g^h^e^{r Edu}^catⁱ^oⁿ^an^{d T}^r^aiⁿⁱⁿ^g^$60.4^$62.3^$60.1^$60.6^$49.9
^G^l^ob^al^Heal^th^$1,214.5^$1,^347.5^$1,705.4^$1,824.1^$1,420.0
^C^hⁱ^l^d^S^u^rvⁱ^v^al^/^M^at^ern^a^l^H^eal^t^h^$295.4^$337.0^$321.9^$327.8^$325.0
^V^u^lⁿ^erabl^e^C^hⁱ^l^d^ren^$29.9^$25.0^$26.8^$28.0^$10.0
^H^I^V^/^A^I^D^S^(bi^l^a^t^e^ral⁾^$289.3^$395.0^$587.7^$513.5^$500.0
^{Global Fu}ⁿ^d^f^o^{r A}^I^{DS, T}^B^{, &}^$100.0^$40.0^$248.4^$397.6^$100.0
^Malaria
^O^t^h^e^{r In}^f^ectⁱ^o^u^s^Dⁱ^s^eas^es^$123.7^$165.0^$154.5^$183.9^$139.0
^F^a^mⁱ^l^y^Pl^anⁿⁱⁿ^g^$376.2^$385.5^$366.1^$373.3^$346.0
^Dem^o^{cracy, Conflict, &}^$156.5^$146.4^$213.9^$211.5^$208.0
^Hu^m^aⁿⁱ^tari^an
^D^e^m^o^cracy^&^L^o^cal^G^o^v^e^rn^an^ce^$131.3^$119.4^$139.0^$159.4^$164.0
^H^u^m^aⁿ^Rⁱ^g^h^t^s^$25.2^$27.0^$26.8^$25.0^$17.0
^C^oⁿ^f^lⁱ^c^t^—^—^$48.1^$27.1^$27.0
^[G^{lobal Developm}^{ent Alliance]}^{[ — ]}^[^$20.0]^$14.9^[^$15.0^]^[$15.0^]
^T^O^T^A^L^,^D^e^vel^o^p^m^en^{t A}ⁱ^d^$2,215.³^$2,525.5^$3,085.4^$3,188.3^$2,748.9
^Source:^USA^I^D.
^No^te:^A^m^ouⁿ^t^sⁱⁿ^th^is^{table ref}^l^{ect lev}^e^ls^{allocated f}^r^om^USA^I^D’^s^“^c^{ore” dev}^e^lopm^en^{t aid accou}ⁿ^t^s^:
^Dev^e^lo^p^m^en^{t A}^ssistan^{ce an}^d^th^{e Ch}^ild^Su^r^v^iv^{al an}^d^H^e^a^l^t^h^P^r^o^g^r^a^m^Fuⁿ^d^{. I}ⁿ^ad^d^itioⁿ^to^fⁱ^g^u^r^es
^s^h^owⁿ^h^e^{re, f}^uⁿ^d^s^{are draw}ⁿ^f^r^om^ot^h^e^{r econ}^o^mⁱ^{c ai}^d^prog^ram^s^—^Econ^omⁱ^c^S^u^pport^F^uⁿ^d^,^ai^d^t^o
^Eas^t^ern^Eu^{rope, an}^{d f}^o^rm^er-^S^ov^{iet as}^sⁱ^s^t^an^{ce — th}^{at are co-}^m^an^ag^{ed by}^USA^I^D^aⁿ^d^t^h^e^State
^Dep^a^r^t^m^eⁿ^t^.^Fo^r^activ^{ities su}^ch^{as b}^a^{sic ed}^u^catioⁿ^an^d^g^l^o^b^a^{l h}^ealth^{, m}^o^{st f}^uⁿ^dⁱⁿ^g^co^m^e^s^f^r^o^m^th^ese
^“^c^ore”^dev^e^lopm^en^t^accouⁿ^t^s^.^In^oth^e^{r areas}^{, h}^o^w^e^v^e^{r, es}^pecially^econ^o^mⁱ^{c g}^r^ow^th^{, ag}^ricu^ltu^re,^an^d
^dem^o^cracy^,^a^sⁱ^{zable am}^ouⁿ^t^of^res^o^u^r^ces^is^drawⁿ^f^r^om^th^es^eⁿ^oⁿ^-^“^c^ore”^accouⁿ^t^s^.^C^o^m^p^lete^data
^f^o^r^all^y^ears^acros^s^{all accou}ⁿ^t^s^{are n}^o^{t cu}^rren^tly^av^a^ilable.^C^oⁿ^s^equ^eⁿ^tly^{, it is}^on^ly^pos^sⁱ^{ble to draw}
^com^p^aris^on^s^f^o^{r “}^c^{ore” dev}^e^lopm^en^{t aid res}^o^u^r^ces^.
Congressional Action. Following recommendations made earlier in House-
and Senate-passed FY2005 Foreign Operations bills, the conference agreement on
H.R. 4818 boosts the President’s request for the two “core” development aid
accounts, increases spending for HIV/AIDS programs beyond the executive’s
recommendation, but reduces sharply the proposed Millennium Challenge Account
budget. As shown in Table 11, in total, the final Foreign Operations measure cuts the

President’s overall $6.7 billion request by about $850 million, or 12.6%. The $1
billion reduction to the MCA appropriation makes up most of the cut, but is off-set
by nearly $120 million increases for each of the Child Survival/Health and
Development Assistance accounts (+8% and +9%, respectively). The Global AIDS
Initiative — those HIV/AIDS funds managed by the State Department’s Special
Coordinators Office — also falls by $75 million from the request, a level, however,
that is more than off-set with HIV/AIDS funding increases in the Child
Survival/Health and other Foreign Operations accounts.
Table 11. Development Assistance and Congressional Action
($s — millions)
^FY²⁰⁰³^Actua^l^FY²⁰⁰⁴^Estⁱ^m^a^t^e^FY²⁰⁰⁵^Request^FY²⁰⁰⁵^Hou^s^e^FY²⁰⁰⁵^Sena^t^e^FY²⁰⁰⁵^Co^nf.*
^{USAID “}^C^o^{re Dev}^e^lo^pm^ent”^Acco^unts:
^C^hⁱ^l^d^S^u^rvⁱ^v^al^/^H^eal^t^h^(reg^u^l^ar)^$1,704.⁶^$1,824.2^$1,420.0^$1,^648.5^$1,550.0^$1,537.6
^C^hⁱ^l^d^S^u^rvⁱ^v^al^/^H^eal^t^h^(em^e^rg^en^cy⁾^—^—^—^—^$150.0^—
^D^e^v^e^l^opm^en^t^A^s^sⁱ^s^t^an^ce^$1,380.0^$1,^376.8^$1,329.0^$1,429.0^$1,460.0^$1,448.3
^{Subtotal, “Core Developm}^ent”^$3,084.6^$3,215.9^$2,749.0^$3,077.⁵^$3,160.0^$2,985.9
^{Global A}^I^{DS In}^itiativ^e^—^$488.1^$1,450.0^$1,260.0^{$1,450.0 $1,373.9}
^Millenⁿⁱ^u^m^C^h^allen^g^e^A^ccouⁿ^t^—^$994.0^$2,500.0^$1,250.0^$1,120.0^$1,488.0
^T^O^T^A^L^,^D^e^vel^o^p^m^en^{t A}ⁱ^d^$3,084.6^$4,698.0^$6,699.0^$5,587.⁵^$5,730.0^$5,847.8
^So^urce^{: Ho}^u^s^{e an}^d^Sen^a^{te A}^p^p^r^o^p^r^iatioⁿ^s^Co^m^m^ittees.
^*^F^Y^{2005 am}^ouⁿ^t^s^{are redu}^{ced by}^an^acros^s^-^t^h^e-^{board res}^cⁱ^s^sⁱ^on^of^0.8%^.
As approved, the conference agreement provides $2.28 billion in Foreign
Operations for the President’s Emergency Plan for AIDS Relief (PEPFAR)
(rescission-adjusted), roughly $80 million higher than the Administration’s request
and with a somewhat different allocation of funds among various HIV/AIDS
accounts and activities. This is slightly higher than the level passed earlier by the
House but less than the $2.42 billion approved by the Senate. The Senate level had
included $150 million in “emergency”- designated appropriations that conferees did
not adopt.
Much attention throughout the debate centered on the level of funding for the
U.S. contribution to the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria
(Global ATM Fund). The President proposed a total of $200 million — $100 million
each from Foreign Operations and Labor/HHS/Ed funding measures. House- and
Senate-passed bills had provided $500 million and $550 million respectively, with
$400 million coming from the Foreign Operations bill in each case. Conferees,
however, lowered these amounts for the Global ATM Fund to a total level of $435
million, made up from the following sources:

^!$248 million from FY2005 Foreign Operations (rescission adjusted)
^!$99.2 million from FY2005 (Labor/HHS/Ed (rescission adjusted)
^!$87.8 million carry-over from unspent FY2004 Foreign Operations
The carry-over funds from FY2004 were available because, under law, the
Administration could not transfer last year the full $546.7 million appropriation.
Congress has set a cap on the total U.S. contribution that cannot exceed more than
one-third of total transfers from all donors. For FY2004, this limited the U.S.
payment to the Global Fund to $459 million.
Another element of the PEPFAR initiative is support for bilateral malaria and
tuberculosis programs, funding for which the Administration proposed cutting from
$155 million last year to $104 million in FY2005. The conference agreement on
H.R. 4818 rejects the President’s recommendation, increasing appropriations to $170
million. Earlier, the House had proposed at least the same amount as provided in
FY2004 for malaria and tuberculosis, while the Senate had included $$175 million.
As detailed in Table 12, total funding in FY2005 for all PEPFAR components
proposed in four appropriation measures (Foreign Operations, Labor/HHS/Ed,
Agriculture, and Defense) is $2.92 billion, 24% higher than last year and 3.5% more
than the President’s $2.82 billion request. The total is adjusted for the 0.8%
rescission and includes the $87.8 million carry-over from FY2004 for the Global
Fund.

Table 12. U.S. International HIV/AIDS, Tuberculosis, and Malaria
Programs
(millions of current dollars)
^Program^FY²⁰⁰²^Actua^l^FY²⁰⁰³^Actua^l^FY²⁰⁰⁴^E^s^ti^m^a^te^a^FY²⁰⁰⁵^Request^FY²⁰⁰⁵^Hou^s^e^FY²⁰⁰⁵^Sena^t^e^FY²⁰⁰⁵^Co^nf.^a
^USA^I^{D C}^h^{ild Su}^rv^iv^al/Health^accouⁿ^t^$395.0^$587.6^{$513.4 $500.0 $330.0}^$350.0^$347.2
^f^o^{r HIV/A}^I^{DS -}^reg^u^l^ar
^USA^I^{D C}^h^{ild Su}^rv^iv^al/Health^accouⁿ^t^$50.0^$248.4^$397.6^$100.0^$400.0^$250.0^$248.0
^fo^r^t^h^e^G^l^o^b^a^l^Fund^{- r}^e^gul^a^r
^USA^I^{D C}^h^{ild Su}^rv^iv^al/Health^accouⁿ^t^—^—^—^—^—^$150.0^—
^fo^r^t^h^e^G^l^o^b^a^l^Fund^{- e}^m^e^r^ge^nc^y
^U^S^A^I^D^G^l^obal^F^uⁿ^d^C^a^rry^-^o^v^e^r^—^—^($87.8)^b^—^—^—^$87.8^b
^USA^I^{D C}^h^{ild Su}^rv^iv^al/Health^accouⁿ^t^$165.0^$129.0^$155.0^$105.0^$155.0^$175.0^$168.6
^f^o^{r T}^B^&^Mal^a^ri^a
^U^S^A^I^D^ot^h^e^{r econ}^o^mⁱ^{c as}^sⁱ^s^t^an^ce^$40.0^$38.2^$53.2^$40.0^$53.5^$40.0^$53.1
^Fo^r^e^igⁿ^Militar^y^Fin^aⁿ^cⁱⁿ^g^—^$²^.⁰^$¹^.⁵^$²^.⁰^$²^.⁰^c^$2.0^$2.0
^State^{Dept. Global A}^I^{DS In}^itiativ^e^—^—^{$488.1 $1,450.0 $1,260.0}^$1,450.0^$1,373.9
^{Subtotal, Foreign}^Operations^{$650.0 $1,005.2}^{$1,521.0 $2,197.0 $2,200.}^{5 $2,417.0}^$2,280.6
^C^D^C^G^l^obal^A^I^D^S^Prog^ram^$143.⁸^$182.6^{$291.9 $142.8 $142.8}^$118.8^$123.9
^{CDC I}ⁿ^terⁿ^atioⁿ^a^{l A}^p^p^lied^P^r^ev^en^tioⁿ^{$11.0 $11.0}^$11.0^$11.0^$11.0^d^$11.0^d^$11.0^d
^R^e^s^earch
^C^D^C^In^t^e^rn^atⁱ^oⁿ^a^l^T^B^&^Mal^a^ri^a^$15.0^$15.8^$17.9^$15.9^$15.9^d^$15.9^d^15.9^d
^N^I^H^In^t^e^rn^atⁱ^oⁿ^a^l^R^e^s^earch^$218.2^$278.6^$323.5^$355.0^$355.0^d^$355.0^d^$355.0^d
^G^l^o^b^a^l^Fund^c^o^nt^rⁱ^b^u^tⁱ^o^{n fr}^o^m^$125.0^$99.3^{$149.1 $100.0 $100.0}^$149.1^$99.2
^NIH/HHS
^D^O^L^A^I^D^Sⁱⁿ^t^h^{e Work}^pl^ace^$8.5^$9.9^$9.9^$0.0^$0.0^$10.0^$2.0
^{Subtotal, L}^a^bor/HHS/E^d^$521.⁵^$597.2^$803.3^$624.7^$624.7^$659.8^$607.0
^{DOD HIV/A}^I^{DS p}^r^ev^en^tioⁿ^ed^u^catioⁿ^$14.0^$7.0^$4.2^$0.0^$10.0^$0.0^$7.5
^w^ith^A^f^rⁱ^can^m^ilitarⁱ^es
^U^S^D^A^S^ectⁱ^oⁿ^{416(b) F}^{ood A}ⁱ^d^{$25.0 $24.8}^$24.8^$0.0^$0.0^$25.0^$24.8
^T^O^T^A^L^,^al^l^ap^p^r^op^ri^ati^oⁿ^s^$1,210.5^$1,634.²^{$2,353.3 $2,821.7}^$2,^835.2^$3,101.8^$2,919.9
^S^o^u^rces^{: Ho}^use^a^{nd S}^e^na^te^Appro^p^ria^tio^{ns Co}^m^m^itte^e^s^{, De}^pa^rtm^e^{nts o}^f^S^t^a^t^e^a^{nd HHS}^{, US}^AI^{D, a}^{nd CDC.}
^a^.^F^Y^{2004 a}^{nd F}^Y^{2005 e}^s^tim^a^t^e^s^a^r^e^a^d^j^u^ste^d^fo^{r re}^quire^{d a}^c^r^o^ss-^the^-^bo^a^r^{d re}^sc^issioⁿ^{s o}^f^{0.59% a}^{nd 0.8%, re}^spe^c^tiv^e^l^y^.
^{b. Re}^fle^c^t^{s the}^a^m^ouⁿ^t^t^h^a^t^c^o^{uld no}^{t be}^traⁿ^sfe^rre^{d to}^the^Glo^b^a^l^F^{und in F}^Y^{2004, but tha}^t^ha^{s be}^eⁿ^c^a^rrie^d^o^v^e^{r fo}^{r a}
^c^o^ntributio^{n in F}^Y^2005.
^c.^No^t^earm^a^rk^ed^;^es^tⁱ^m^at^ed^am^o^uⁿ^t^b^a^s^e^d^oⁿ^t^o^t^a^l^F^M^F^ap^p^r^o^p^ri^atⁱ^oⁿ^.
^{d. No}^{t e}^a^r^m^a^r^k^e^d^{; e}^s^tim^a^t^e^d^a^m^o^{unt ba}^se^{d o}ⁿ^to^ta^{l f}^unding^f^o^r^HI^V/AI^{DS in the}^L^a^bo^r^/^{HHS/Ed a}^ppr^o^p^rⁱ^a^tio^{n bill.}

In other key decisions concerning bilateral development assistance, House and
Senate measures provide amounts shown in Table 13.
Table 13. Selected Development Aid Funding Targets —
Congressional Action
($s millions)
^FY²⁰⁰⁴^a^FY²⁰⁰⁵^FY²⁰⁰⁵^FY²⁰⁰⁵^FY²⁰⁰⁵
^Estⁱ^m^a^t^e^Request^Hou^s^e^Sena^t^e^Co^nf.
^E^c^on^omⁱ^c^G^r^ow^th^/^A^gri^c^u^l^tu^re/^T^r^ad^e
^T^r^{ade C}^a^paci^t^y^Buⁱ^l^dⁱⁿ^g^$503.0^—^$517.0^—^$507.0
^Mi^croen^t^erpri^s^e^$180.0^—^$200.0^$195.0^$200.0
^b
^Iⁿ^t’^{l Real P}^r^o^p^e^r^t^y^Fo^uⁿ^d^atioⁿ^—^—^$2.0^$1.0
^Pl^an^t^Bi^ot^echⁿ^o^l^o^g^y^R^&^D^$25.0^—^—^$40.0^—
^D^aⁱ^r^y^D^e^v^e^l^opm^en^t^$21.0^—^$21.0^$21.8^—
^Iⁿ^{tl Fer}^tilizer^Dev^e^lo^p^.^Cen^t^er^{: “}^C^o^r^e”^—^—^$²^.³^$²^.³^c^$2.3^c
^Wom^eⁿⁱⁿ^D^e^v^e^l^opm^en^t^/^L^eaders^hⁱ^p^$11.0^—^$15.0^$15.0^$15.0
^Basⁱ^{c Edu}^catⁱ^oⁿ^f^o^{r C}^hⁱ^l^d^ren^$324.6^$338.0^$400.0^$335.0^$400.0
^A^m^eri^can^S^c^h^ool^s^&^H^o^s^pⁱ^t^a^l^s^A^b^road^$19.0^$16.0^$20.0^$22.0^$20.0
^C^o^l^l^a^boratⁱ^v^{e R}^e^s^earch^S^u^pport^Prog^ram^—^—^$28.0^$28.0^—
^Bi^odi^v^e^rsⁱ^t^y^—^—^$110.0^d^$175.5^d^$165.0^d
^Wat^e^{r C}^oⁿ^s^erv^a^tⁱ^oⁿ^/^C^l^ean^Wat^e^r^$100.0^—^—^$100.0^$100.0
^En^erg^y^C^oⁿ^s^erv^a^tⁱ^oⁿ^/^C^l^ean^En^erg^y^$180.0^—^—^$180.0^$180.0
^G^l^ob^al^Heal^th
^C^hⁱ^l^d^S^u^rvⁱ^v^al^/^M^at^ern^a^l^H^eal^t^h^$330.0^e^$325.0^e^$330.0^e^$345.0^e^$345.0^e
^Vaccin^e^F^uⁿ^d^$60.0^—^$65.0^$65.0^$65.0
^Iodiⁿ^e^D^e^fⁱ^ci^en^cy^Dⁱ^s^o^rders^$3.5^—^$3.0^$3.0^$3.0
^Mi^cron^u^t^ri^en^t^s^$30.0^—^$30.0^$30.0^$30.0
^f
^Polⁱ^o^Eradi^catⁱ^oⁿ^$25.0^—^$32.0^$32.0
^V^u^lⁿ^erabl^e^C^hⁱ^l^d^ren^$28.0^e^$10.0^e^$28.0^e^$30.0^e^$30.0^e
^Blⁱⁿ^{d C}^hⁱ^l^d^ren^$1.5^—^$1.7^$1.7^$1.7
^H^I^V^/^A^I^D^S^(bi^l^a^t^e^ral⁾^$1,031.0^$1,971.0^$1,630.0^$1,840.0^$1,771.0
^Mi^crobi^ci^des^$22.0^—^$30.0^$32.0^$30.0
^In^tern^ation^a^{l A}^I^{DS Vaccin}^e^In^itiativ^e^$26.0^—^g^$28.0^$27.0
^U^N^A^ID^S^$26.0^—^g^$28.0^$27.0

^FY²⁰⁰⁴^a^FY²⁰⁰⁵^FY²⁰⁰⁵^FY²⁰⁰⁵^FY²⁰⁰⁵
^Estⁱ^m^a^t^e^Request^Hou^s^e^Sena^t^e^Co^nf.
^G^l^obal^F^uⁿ^d^f^o^{r A}^I^D^S^{, T}^B^{, &}^Mal^a^ri^a^$321.2^h^$100.0^$400.0^$400.0^$337.8^h
ⁱ^e
^T^u^bercu^l^osⁱ^s^$70.0^$54.0^$85.0^$80.0
ⁱ^c
^Mal^a^ri^a^$85.0^$60.0^$90.0^$90.0
^F^a^mⁱ^l^y^Pl^anⁿⁱⁿ^g^/^R^e^produ^ctⁱ^v^e^H^eal^t^h^$432.0^$399.2^$432.0^$450.0^$441.0
^Dem^o^{cracy, Conflict, & Hum}^a^nitarian
^T^o^rt^u^r^{e T}^r^eat^m^eⁿ^t^C^eⁿ^t^ers^—^—^$12.0^$15.0^j^$10.0
^L^eah^y^{War V}ⁱ^ctⁱ^m^s^F^uⁿ^d^—^—^—^$14.0^—
^S^o^u^rces^:^Ho^use^a^{nd S}^e^na^te^Appro^p^ria^tio^{n Co}^m^m^itte^e^s^{; US}^AI^D.
^{* Note}^:^Unl^e^{ss o}^t^herwⁱ^s^{e no}^t^e^{d, am}^o^unt^{s are fo}^{r act}ⁱ^vⁱ^t^y^f^undi^ng^l^e^v^e^l^s^acro^{ss al}^l^F^o^rei^g^{n Operat}ⁱ^{ons acco}^unt^s.
^Am^o^{unts r}^e^f^l^e^c^t^pr^o^g^r^a^m^f^unding^ta^r^g^e^t^{s spe}^cⁱ^fⁱ^e^dⁱⁿ^Ho^use^a^nd^Se^na^te^Fo^r^e^ig^{n Ope}^r^a^tio^{ns bills a}^{nd Co}^m^m^itte^e
^repo^{rts. T}^a^rg^{ets are no}^{t set fo}^{r all}^pro^g^r^am^{s in each bill}^o^r^{in the Adm}ⁱ^nistrati^on^’^s^{request, but ar}^{e selectiv}^ely
^ideⁿ^tif^ie^{d, o}^f^te^{n to}^e^s^ta^{blish m}ⁱ^nim^u^m^a^m^o^{unts f}^o^r^de^v^e^lo^pm^eⁿ^{t a}ⁱ^{d a}^c^tiv^itie^{s o}^f^spe^cⁱ^a^l^c^o^ng^r^e^ssioⁿ^a^l^im^po^r^t^aⁿ^c^e^.
^a^.^Am^o^{unts fo}^{r F}^Y^{2004 a}^{nd F}^Y^{2005 c}^o^nfe^r^eⁿ^c^e^a^g^re^e^m^eⁿ^{ts a}^r^e^no^{t a}^d^j^u^ste^d^to^re^fle^c^t^the^a^c^r^o^ss-^the^-^bo^a^r^d
^re^sc^issioⁿ^o^f^{0.59% a}^{nd 0.8%, re}^spe^c^tiv^e^l^y^.^T^h^e^re^sc^issioⁿ^{s m}^a^y^o^r^m^a^y^no^{t ha}^v^e^be^eⁿ^a^pplie^{d to}^indivⁱ^dua^l
^coⁿ^g^res^sⁱ^oⁿ^al^earm^a^rk^s^o^r^reco^m^m^eⁿ^d^a^tⁱ^oⁿ^s^.
^{b. Ho}^use^{bill pr}^o^vⁱ^de^{s suf}^fⁱ^cⁱ^eⁿ^{t f}^{unds to}^e^xpa^{nd the}^pr^o^g^r^a^m^w^o^r^l^dw^ide^.
^c^.^Iⁿ^a^dditio^{n, the}^Se^na^te^{bill a}^{nd c}^o^nf^e^r^eⁿ^c^e^a^g^r^e^e^m^eⁿ^{t pr}^o^vⁱ^de^{$1.7 m}^illio^{n f}^o^r^{R&D a}^c^tiv^itie^s.
^{d. Am}^o^unt^applⁱ^e^{s o}ⁿ^l^y^t^o^reso^{urces draw}^{n fro}^m^t^h^{e Dev}^e^l^o^pm^ent^Assi^st^{ance F}^{und acco}^unt^.
^e.^Am^o^uⁿ^t^ap^p^lⁱ^e^s^oⁿ^l^y^t^o^res^o^u^r^ces^d^r^awⁿ^fro^m^t^h^{e C}^hⁱ^l^d^S^u^rvⁱ^v^al^an^d^Heal^t^h^acco^uⁿ^t^.
^f^.^Ho^use^{bill r}^e^c^o^m^m^e^{nds m}^o^r^e^f^unding^thaⁿ^{in FY2004.}
^g^.^Ho^use^{bill inc}^l^ude^{s UNAI}^DS^{funds in a}^m^o^{unts fo}^{r bila}^te^ra^{l HI}^V/AI^DS^pro^g^r^a^m^s.
^{h. FY2004 Glo}^b^a^l^{Fund a}^m^o^{unts a}^r^e^r^e^duc^e^d^by^{$87.8 m}^illio^{n, m}^o^ne^y^tha^t^w^a^{s c}^a^r^rⁱ^e^d^-^o^v^e^r^a^{nd a}^dde^{d to}^FY2005
^Glo^b^a^l^F^{und a}^ppro^p^ria^tio^ns.
^{i. Ho}^use^{bill pr}^o^vⁱ^de^{s no}^{t le}^{ss tha}ⁿ^{FY2004 f}^unding^le^v^e^ls.
^j^.^Se^na^te^{bill inc}^l^ude^{s a}^{ll V}ⁱ^c^tim^o^f^T^o^r^t^ur^e^a^c^tiv^itie^{s, inc}^l^uding^T^r^e^a^t^m^e^{nt Ce}^nte^r^s.
The House Appropriations Committee also addressed in its report on H.R. 4818
the Administration’s concern that earmarks reflecting congressional priorities,
particularly among health and education programs, reduced flexibility in providing
sufficient resources for other development activities, especially in the area of
economic growth. The House panel said it regards economic growth as USAID’s
most important long-term goal, and that while the Committee continues to
recommend higher spending for health programs in the near-term, it encourages
USAID to increase funds for economic growth activities.
International Family Planning and UNFPA Funding
U.S. population assistance and family planning programs overseas have sparked
continuous controversy during Foreign Operations debates for nearly two decades.
For FY2005, the Administration requested $399.2 million for bilateral international
reproductive health and family planning programs, an 8% decrease from the $432
million FY2004 appropriation. The request also proposed $25 million, placed in
“reserve” as part of the Foreign Operations spending bill’s International
Organizations and Programs account, that could be made available to the U.N.

Population Fund (UNFPA). UNFPA could receive the funds, however, only if the
President determines that the organization meets certain conditions.
Although funding considerations have at times been heatedly debated by
Congress, the most contentious family planning issues addressed in nearly every
annual congressional consideration of Foreign Operations bills have focused on two
matters: whether the United States should contribute to the U.N. Population Fund
(UNFPA) if the organization maintains a program in China where allegations of
coercive family planning have been widespread for many years, and whether
abortion-related restrictions should be applied to bilateral USAID population aid
grants (commonly known as the “Mexico City” policy).
UNFPA Funding. The most contentious issue usually concerns the abortion
restriction question, but most recent attention has focused on UNFPA and a White
House decision in July 2002 to block the $34 million U.S. contribution to the
organization. During the Reagan and George H.W. Bush Administrations, the United
States did not contribute to UNFPA because of concerns over practices of forced
abortion and involuntary sterilization in China where UNFPA maintains programs.
In 1985, Congress passed the so-called Kemp-Kasten amendment which has been
made part of every Foreign Operations appropriation since, barring U.S. funds to any
organization that supports or participates “in the management” of a program of
coercive abortion or involuntary sterilization. In 1993, President Clinton determined
that UNFPA, despite its presence in China, was not involved in the management of
a coercive program. From 1993 through the end of the decade, in most years
Congress appropriated about $25 million for UNFPA, but added a directive that
required that the amount be reduced by however much UNFPA spent in China.
Consequently, the U.S. contribution has fluctuated between $21.5 million and $25
million.
For FY2002, President George W. Bush requested $25 million for UNFPA.
Congress provided in the FY2002 Foreign Operations bill “not more than” $34
million for UNFPA. While members of the Appropriations Committees said it was
their intent to provide the full $34 million, the language allowed the President to
allocate however much he chose, up to a $34 million ceiling. The White House
placed a hold on UNFPA funds in January 2002 because new evidence suggested that
coercive practices were continuing in Chinese counties where UNFPA concentrates
its programs. A September 2001 investigation team, sponsored by the Population
Research Institute, concluded that a consistent pattern of coercion continued in
“model” UNFPA counties, including forced abortions and involuntary sterilizations.
Refuting these findings, a UNFPA-commissioned review team found in October
2001 “absolutely no evidence that the U.N. Population Fund supports coercive family
planning practices in China or violates the human rights of Chinese people in any
way.” (See House International Relations Committee hearing, Coercive Population
Control in China: New Evidence of Forced Abortion and Forced Sterilization,
October 17, 2001. See also testimony of Josephine Guy and Nicholaas Biegman
before the Senate Foreign Relations Committee, February 27, 2002.)
Although most observers agree that coercive family planning practices continue
in China, differences remain over the extent to which, if any, UNFPA supports
involuntary activities and whether UNFPA should operate at all in a country where

such conditions exist. Given the conflicting reports, the State Department sent its
own investigative team to China for a two-week review of UNFPA programs on May
13, 2002. The team, which was led by former Ambassador William Brown and
included Bonnie Glick, a former State Department official, and Dr. Theodore Tong,
a public health professor at the University of Arizona, made three findings and
recommendations in its report dated May 31, 2002.
Findings:
^!There is no evidence that UNFPA “knowingly supported or
participated in the management of a program of coercive abortion or
involuntary sterilization” in China;
^!China maintains coercive elements in its population programs; and
^!Chinese leaders view “population control as a high priority” and
remain concerned over implications of loosening controls for
socioeconomic change.
Recommen d a ti on s:
^!The United States should release not more than $34 million of
previously appropriated funds to UNFPA;
^!Until China ends all forms of coercion in law and practice, no U.S.
government funds should be allocated to population programs in
China; and
^!Appropriate resources, possibly from the United States, should be
allocated to monitor and evaluate Chinese population control
programs.
Despite the team’s recommendation to release the $34 million, Secretary of
State Powell decided on July 22, 2002, to withhold funds to UNFPA and to
recommend that they be re-directed to other international family planning and
reproductive health activities. The State Department’s analysis of the Secretary’s
determination found that even though UNFPA did not “knowingly” support or
participate in a coercive practice, that alone would not preclude the application of
Kemp-Kasten. Instead, a finding that the recipient of U.S. funds — in this case
UNFPA — simply supports or participates in such a program, whether knowingly or
unknowingly, would trigger the restriction.
The team found that the Chinese government imposes fines and penalties on
families that have children exceeding the number approved by the government, a
practice that in some cases coerces women to have abortions they would not
otherwise undergo. The State Department analysis concluded that UNFPA’s
involvement in China’s family planning program “allows the Chinese government
to implement more effectively its program of coercive abortion.” (The full text of the
State Department’s analysis is online at the State Department’s website,
[http://www.state.gov/g/prm/rls/other/12128.htm]. The State Department’s
assessment team report is also online, [http://www.state.gov/g/prm/rls/rpt/

2002/12122.htm] .)

Critics of the Administration’s decision opposed it not only because of the
negative impact it may have on access to voluntary family planning programs by
persons in around 140 countries where UNFPA operates, but also because of the

possible application of the determination for other international organizations that
operate in China and to which the U.S. contributes.
For FY2003, the President proposed no funding for UNFPA, although $25
million was requested in “reserve” for the account from which UNFPA receives its
funding. Presumably, this could have been made available to UNFPA if it was found
not to be in violation of Kemp-Kasten. Following several legislative attempts to
reverse the Administration’s denial of UNFPA — in both FY2002 supplemental
appropriations and regular FY2003 Foreign Operations measures — Congress
approved in P.L. 108-7, the Consolidated Appropriations Act for FY2003, a
provision allocating $34 million to UNFPA, the same as in FY2002, so long as
several conditions were met. The most significant requirement was that the President
must certify that UNFPA is no longer involved in the management of a coercive
family planning program.
Following the July 2002 determination, the Administration transferred to
USAID $34 million from FY2002 appropriations and $25 million from FY2003 that
would have otherwise been provided to UNFPA in order to fund USAID bilateral
family planning programs for which UNFPA has no involvement. The State
Department’s justification of its September 25, 2003 letter to Congress regarding the
FY2003 resources noted that the “factual circumstances” do not support making a
determination that UNFPA no longer supports or participates in the management of
a program of coercive abortion or involuntary sterilization. Section 572 of the
FY2003 Foreign Operations Appropriations required the President to issue such a
statement before restoring U.S. funding to UNFPA. These transferred funds,
however, remained unspent due to “holds” placed on them by Members of Congress.
The intent in placing the “holds” by some Members was to keep the money available
for UNFPA in the event that circumstances changed and the Administration would
make UNFPA eligible once again.
In the FY2004 Foreign Operations enacted bill (Division D of P.L. 108-199),
Congress earmarked $34 million for UNFPA, subject, however, to the Kemp-Kasten
conditions. The conference agreement further directed how the previously withheld
money would be disbursed, thereby resolving a long-standing dispute over whether
to commit these resources to other development programs or place them in a reserve
account in case UNFPA again became eligible for U.S. support. The FY2004
appropriation specified that the $34 million withheld in FY2002 shall be used for
family planning programs in twelve countries, including Congo, Ethiopia, Uganda,
Haiti, and Russia. The $25 million in FY2003 funds that was earmarked for, but not
transferred to, UNFPA would be made available for vulnerable children and for a
new initiative within the Child Survival and Health account assisting young women,
mothers, and children who are victims of trafficking in persons.
On July 16, 2004, the State Department announced that it had again found
UNFPA to be in violation of the Kemp-Kasten amendment and would not provide
the $34 million designated in the FY2004 appropriation measure. In a statement, the
Department said that the United States has been urging UNFPA and China to modify
the organization’s program in a manner that would permit U.S. support to resume.
The State Department found that no key changes had occurred in UNFPA’s programs

that would permit a resumption of U.S. funding under the conditions of the Kemp-
Kasten provision.
“Mexico City” Policy. The debate over international family planning policy
and abortion began nearly three decades ago, in 1973, when Congress added a
provision to the Foreign Assistance Act of 1961 prohibiting the use of U.S.
appropriated funds for abortion-related activities and coercive family planning
programs. During the mid-1980s, in what has become known as the “Mexico City”
policy (because it was first announced at the 1984 Mexico City Population
Conference), the Reagan Administration, and later the George H. W. Bush
Administration, restricted funds for foreign non-governmental organizations (NGOs)
that were involved in performing or promoting abortions in countries where they
worked, even if such activities were undertaken with non-U.S. funds. Several groups,
including International Planned Parenthood Federation-London (IPPF-London),
became ineligible for U.S. financial support. In some subsequent years, Congress
narrowly approved measures to overturn this prohibition, but White House vetoes
kept the policy in place. President Clinton in 1993 reversed the position of his two
predecessors, allowing the United States to resume funding for all family planning
organizations so long as no U.S. money was used by those involved in abortion-
related work.
Between 1996 and 2000, the House and Senate took opposing positions on the
Mexico City issue, actions that repeatedly held up enactment of the final Foreign
Operations spending measures. The House position, articulated by Representative
Chris Smith (N.J.) and others, supported reinstatement of the Mexico City policy
restricting U.S. aid funds to foreign organizations involved in performing abortions
or in lobbying to change abortion laws or policies in foreign countries. The Senate,
on the other hand, rejected in most cases House provisions dealing with Mexico City
policy, favoring a position that left these decisions in the hands of the
Administration. Unable to reach an agreement satisfactory to both sides, Congress
adopted interim arrangements during this period that did not resolve the broad
population program controversy, but permitted the stalled Foreign Operations
measure to move forward. The annual “compromise” removed House-added Mexico
City restrictions, but reduced population assistance to $385 million, and in several
years, “metered” the availability of the funds at a rate of one-twelfth of the $385
million per month.
In FY2000, when the issue became linked with the separate foreign policy
matter of paying U.S. arrears owed to the United Nations, a reluctant President
Clinton agreed to a modified version of abortion restrictions, marking the first time
that Mexico City conditions had been included in legislation signed by the President
(enacted in the Foreign Operations Act for FY2000, H.R. 3422, incorporated into
H.R. 3194, the Consolidated Appropriations Act for FY2000, P.L. 106-113).
Because the President could waive the restrictions for $15 million in grants to
organizations that refused to certify, there was no major impact on USAID family
planning programs in FY2000, other than the reduction of $12.5 million in
population assistance that the legislation required if the White House exercised the
waiver authority.

When Congress again came to an impasse in FY2001, lawmakers agreed to
allow the new President to set policy. Under the FY2001 Foreign Operations
measure, none of the $425 million appropriation could be obligated until after
February 15, 2001.
Subsequently, on January 22, 2001, two days after taking office, President Bush
issued a Memorandum to the USAID Administrator rescinding the 1993
memorandum from President Clinton and directing the Administrator to “reinstate
in full all of the requirements of the Mexico City Policy in effect on January 19,
1993.” The President further said that it was his “conviction that taxpayer funds
should not be used to pay for abortions or to advocate or actively promote abortion,
either here or abroad.” A separate statement from the President’s press secretary
stated that President Bush was “committed to maintaining the $425 million funding
level” for population assistance “because he knows that one of the best ways to
prevent abortion is by providing quality voluntary family planning services.” The
press secretary further emphasized that it was the intent that any restrictions “do not
limit organizations from treating injuries or illnesses caused by legal or illegal
abortions, for example, post abortion care.” On February 15, 2001, the day on which
FY2001 population aid funds became available for obligation, USAID issued specific
policy language and contract clauses to implement the President’s directive. The
guidelines are nearly identical to those used in the 1980s and early 1990s when the
Mexico City policy applied.
Critics of the certification requirement oppose it on several grounds. They
believe that family planning organizations may cut back on services because they are
unsure of the full implications of the restrictions and do not want to risk losing
eligibility for USAID funding. This, they contend, will lead to higher numbers of
unwanted pregnancies and possibly more abortions. Opponents also believe the new
conditions undermine relations between the U.S. Government and foreign NGOs and
multilateral groups, creating a situation in which the United States challenges their
decisions on how to spend their own money. They further argue that U.S. policy
imposes a so-called “gag” order on the ability of foreign NGOs and multilateral
groups to promote changes to abortion laws and regulations in developing nations.
This would be unconstitutional if applied to American groups working in the United
States, critics note.
Supporters of the certification requirement argue that even though permanent
law bans USAID funds from being used to perform or promote abortions, money is
fungible; organizations receiving American-taxpayer funding can simply use USAID
resources for permitted activities while diverting money raised from other sources to
perform abortions or lobby to change abortion laws and regulations. The certification
process, they contend, closes the fungibility “loophole.”
Since reinstatement of the Mexico City policy in early 2001, several bills have
been introduced to reverse the policy, but except for language included in the Senate
FY2004 Foreign Operations appropriations bill (S. 1426), none has passed either the
House or Senate, and no measure has been enacted into law.
Congressional Action. The Conference agreement on H.R. 4818 provides
$441 million for bilateral family planning/reproductive health programs, between

levels passed earlier by the House ($432 million) and the Senate ($450 million). The
approved amount for FY2005 is $42 million, or about 10% higher than the
Administration’s request.
Conferees further earmarked $34 million for UNFPA — $25 million drawn
from the International Organizations and Programs (IO&P) account and $9 million
drawn from the Child Survival/Health account. The entire $34 million is subject to
Kemp-Kasten restrictions. If the President determines that UNFPA is ineligible for
U.S. funding under Kemp-Kasten, the conference agreement directs the
Administration to transfer the $25 million IO&P account funds to the Child
Survival/Health account for USAID-managed family planning, maternal and
reproductive health programs. Conferees further specified that FY2004 funds
previously earmarked for UNFPA be spent on anti-trafficking programs ($12.5
million) and family planning and maternal and reproductive health activities ($12.5
million). After declaring UNFPA ineligible for FY2004 funds, the Administration
had signaled that it would re-program the entire $25 million for anti-trafficking
programs.
Previously, House- and Senate-passed Foreign Operations bills had provided
$25 million and $34 million, respectively, for UNFPA. The Senate measure also
directed that the $25 million withheld from UNFPA for FY2004 shall be available
for USAID bilateral family planning/reproductive health activities in 15 specific
nations. In addition, a floor amendment sponsored by Senators Leahy and Bingaman
specified that if UNFPA is not eligible for U.S. funds in FY2005, the $34 million
earmark may not be available for any other purpose unless specified in subsequent
legislation. An earlier attempt in the House, sponsored by Representative Lowey, to
make the UNFPA contribution available only for programs in Iraq, Afghanistan,
Tanzania, Jordan, Kenya, and Pakistan, countries which restrict or prohibit abortion,
was defeated by the House Appropriations Committee (26-32).
Conferees also rejected two Senate provisions that were strongly opposed by the
Administration and which in previous years prompted veto threats by the President.
The first provision passed by the Senate but dropped in conference amended the
Kemp-Kasten language in a way that would narrow somewhat the grounds on which
the Administration could find UNFPA in violation of the restrictions. The Senate
text stated that an organization must directly support coercive abortions or
involuntary sterilizations in order to be denied U.S. support, adding the word
“directly” to the condition. The amendment further included new text stating that no
organization can be denied funds solely because the government of a country engaged
in coercive practices. This presumably was an indirect reference to China, intending
to establish a policy that UNFPA could be declared ineligible for U.S. funding
exclusively because of coercive practices by Chinese family planning officials.
The second Senate amendment would have revised the President’s “Mexico
City” policy that prohibits foreign non-governmental organizations (NGOs) from
receiving U.S. funds if they perform or promote abortion as a method of family
planning, whether or not such activities are supported with U.S.-provided resources.
The Senate-passed language stipulated that foreign NGOs could not be declared
ineligible for U.S. aid for conducting any health or medical services with non-U.S.
government funds so long as the practices did not violate laws in the country in

which the services were provided or would not violate U.S. law. The provision
further provided that foreign NGOs would not be subject to conditions associated
with the use of non-U.S. government funds for advocacy and lobbying activities that
were more restrictive than those applied to American NGOs. It is generally assumed
that the Mexico City policy ban on advocacy and lobbying would be found to be a
constitutional violation of the right of free speech if it were to be applied to a U.S.
NGO.
Afghanistan Reconstruction⁷
The conditions in Afghanistan for reconstruction represent a challenging mix
of ongoing security concerns, infrastructure destruction, and humanitarian needs that
require a robust and sustained intervention. While the hunt for Al Qaeda forces
within Afghanistan continues, transitional and reconstruction assistance are well
underway. So far, the international community has continued to provide large
amounts of aid and resources for the reconstruction effort. A long-term commitment
will likely be necessary to ensure that a stable, democratic Afghanistan emerges. The
outcomes of international donors conferences since January 2002 indicate a
continued, strong willingness on the part of the international community to assist in
the restoration of Afghanistan. However, reconstruction costs are estimated by some
to be more than $15-$30 billion over the next decade.
The 9/11 Commission Report praises the U.S. efforts in Afghanistan thus far,
but emphasizes the need for a sustained, long-term commitment by the United States
and the international community to Afghanistan’s stability and security. Recognizing
that Afghanistan remains vulnerable to illicit drug production and terrorism, the
Commission is far-reaching in its recommendations, which include a call for greater
security and participation by international forces, more effective, robust
counternarcotics activities, and increased flexibility in allocating money for relief and
reconstruction.
Current Operating Environment. Key developments since September 11,
2001 and the collapse of the Taliban focus on three main pillars: First, the
development of plans for security including military operations by U.S. and other
coalition forces in Afghanistan; the presence of an International Security Assistance
Force (ISAF); the establishment and training of an Afghan National Army and a
police force; the demobilization of private militias; and the formation of provincial
reconstruction teams. Second, establishing the political framework through the Bonn
Conference and Afghanistan Interim Administration (AIA), the loya jirga and
Islamic Transitional Government of Afghanistan (ITGA), the constitutional loya
jirga and approval of a new constitution, presidential and parliamentary elections,
and renewed diplomatic ties with the international community. Third, the creation
of a strategy for reconstruction beginning with the Tokyo Reconstruction Conference
in January 2002. The current operating environment continues to highlight the
importance of these three themes and the work that remains to be done to assure
Afghanistan’s recovery.

⁷ This section was prepared by Rhoda Margesson.

The most serious challenges facing Afghanistan today are the lack of security
and growing trafficking in narcotics. An ongoing insurgency involving remnants of
the Taliban, particularly in the southeast, has created insecurity and slowed
reconstruction there. Moreover, former commanders maintain control over their own
areas throughout the country and continue fighting with their rivals, making difficult
the extension of control by the national government, the provision of aid, and
progress on reconstruction. With an estimated half of its GDP ($2.3 billion)
generated through drug trafficking, there are growing concerns that Afghanistan
could become a “narco state.”
Under Operation Enduring Freedom (OEF) in Afghanistan, the United States
has approximately 17,000 troops and the coalition is contributing another 2,000
troops. The ISAF, created by the Bonn agreement, has around 9,000 troops from 26
nations as well as 10 non-NATO countries. ISAF force levels increased from 6,400
to help secure the October 9, 2004 elections, with 2,500 additional troops sent from
Spain and Italy. The supplementary Italian troops are currently attached to the
NATO Response Force (NRF) but the NRF as an entity will not deploy. NATO
assumed command of ISAF in August 2003. The core of ISAF is the Kabul
Multinational Brigade which is now led by “Eurocorps,” a rapid response force
within NATO composed of forces from France, Germany, Spain, Belgium, and
Luxembourg. Because of ongoing threats to Afghanistan’s internal security, there
were calls for ISAF expansion and deployment to other cities. In October 2003, the
U.N. Security Council formally backed an expansion of ISAF outside of Kabul by
adopting Resolution 1510.
U.S. forces, with other nations, are continuing to train a new Afghan National
Army (ANA) that it is hoped will ultimately allow the Kabul government to maintain
security on its own and enable foreign forces to depart Afghanistan. The targeted
size of the army is 70,000, but it is expected to take a number of years to achieve full
strength. The ANA had 15,000 troops deployed in time for the presidential elections
on October 9, 2004. The ANA has established a presence in 16 of Afghanistan’s 34
provinces. With the continued fighting and insecurity, the Japan and U.N.-led process
of demobilization and integration of up to 100,000 private militiamen has also been
slow. Estimates of the number of fighters to be disarmed under the program has
varied over time. In June 2004, regional leaders identified about 60,000 total to be
demobilized. Just prior to the elections, about 15,000 had been disarmed. A related
program is the surrender and cantonment of heavy weapons. The United States and
Germany are training a national police force (as of October numbering about 28,000
trained nationwide) while the United Kingdom has taken the lead on reducing
narcotics production and trafficking.
Ensuring a secure environment for reconstruction gained greater attention with
an initiative by the Pentagon to expand the role of the U.S. military in Afghanistan.
In December 2002, DOD announced that it would be setting up “provincial
reconstruction teams” (PRTs), composed of U.S. combat and civil affairs officers.
The PRT is a military-run enclave established to create stability, promote
reconstruction, and extend the reach of the central government. The U.S. PRTs are
intended to have 50-100 military personnel, interagency civilian representatives and
a representative from the Interior Ministry of the central government. Under the
Coalition, the United States operates thirteen PRTs in Gardez, Ghazni, Herat,

Parwan, Qandahar, Jalalabad, Khost, Qalat, Asadabad, Tarin Kowt, Lashkar Gah,
Sharana, and Farah. Also under the coalition, New Zealand is leading a PRT in
Bamiyan.
Germany took over the first ISAF PRT (from the United States) in Konduz in
February 2004 with a heavier military presence of more than 250 military personnel.
NATO expressed an intent to take over another 5 PRTs in the North and Northeast
of the country and made specific commitments at the June 2004 Istanbul summit.
Germany has set up an ISAF PRT in Faizabad (to operate as a satellite to the PRT in
Konduz). The U.K.-led PRT in Mazar, which originally operated under the
coalition/OEF, is now part of ISAF (as of July 2004) and has added three satellites
in Sari Pol, Samangan, and Shebergan. With support from Norway and Finland, the
UK has also established a new ISAF PRT in Meymaneh; another is to be set up in
Baghlan and led by the Netherlands. In total, there are three new ISAF/NATO PRTs
(over the existing Konduz and Mazar PRTs) and several new satellites, with
approximately 500 additional personnel. Although NATO nations appear committed
to the Afghanistan mission, personnel and equipment shortages plague the
organization’s ability to build up its presence in Afghanistan. The new pledges for
ISAF operations to address staffing and equipment shortages, originally announced
in December 2003, have not yet been met, although the first military transport plan
for ISAF, contributed by Portugal, arrived in late July 2004.
The United States is focused on PRTs in the South and East. U.S. plans call for
up to 34 Coalition or ISAF PRTs (one in each province), with the possibility of
satellite PRTs within some provinces. Regional Development Zones (RDZs)
grouping several PRTs are also under discussion.
The PRT concept has received mixed reviews from the aid community. Some
organizations see a positive impact on security and as a result, an increase in
reconstruction activity in the PRT area of operation. Others accept the PRT concept
as a practical reality of providing assistance in Afghanistan, albeit with some
concerns about the civil-military relationship. And still others do not want to
associate with any military force because doing so might compromise their neutrality
and impartiality and increase the possibility of a targeted attack.
Factional fighting and increased criminal activity have undermined relief and
reconstruction operations. In some cases, where operations were directly targeted,
this has led to the temporary suspension of U.N. activities or withdrawal of aid
agencies from certain areas. The Afghan Nongovernmental Organization Security
Office (ANSO) keeps a database to record national security incidents and to provide
more effective, timely information and situation assessments to the aid community.
The strength and influence of the central government is viewed as a key factor
that will determine the success of the intervention and assistance on the part of the
international community. The road map of the political transition was laid out in a
United Nations-sponsored conference of major Afghan factions held in Bonn,
Germany, in late November 2001. The transitional government appears stable, but
there are major tensions within factions of the national government and between the
central government and provincial leaders. The Constitutional Loya Jirga adopted
a new constitution in January 2004. Karzai sought to hold timely national elections

to validate his leadership and counter charges that he sought to monopolize power.
Northern Alliance leaders sought simultaneous parliamentary elections so that a
parliament could serve as a check on presidential authority. In keeping with the Bonn
agreement, national elections were scheduled for June 2004. After several
postponements, the presidential election took place on October 9, 2004, and the
parliamentary elections are expected to take place in April 2005.
A joint Afghan-United Nations Committee (with the U.N. Assistance Mission
in Afghanistan — UNAMA) registered voters through the Joint Election
Management Body (JEMB), an Afghan-U.N. Committee established in July 2003.
As of the close of the registration process in September 2004, UNAMA reported that
10.5 million voters had registered, a number equal to the original assessment of the
number of eligible voters. About 42% of those registered were women. Early on the
pace of registration was greatly affected by insecurity, particularly in the southeast.
The registration rates then took a sharp jump, increasing concerns that some Afghans
may have registered more than once.
On May 25, 2004, President Karzai endorsed the major election law to govern
the elections. Eighteen candidates were certified by the JEMB to run in the
presidential elections. Apparently Afghan refugees in Pakistan and Iran were
registered and included in the national elections. Fears of election-related violence
and voter intimidation by factional commanders made election security a key concern
of the United States and international community. Election security missions
involved the Coalition, ISAF, the ANA, and Afghan national police force.
On October 9, 2004, the vote was conducted under tight security and observed
by about 400 international monitors from the Organization for Security and
Cooperation in Europe (OSCE) and other groups, such as the International
Republican Institute (IRI). There were only minor, scattered insurgent attacks during
the voting — far less violence than was expected — and turnout was reported to be
heavy and the voting orderly. Fears of widespread intimidation of voters by factional
militiamen were not realized, although there were some reports of such activity on
election day. The major threat to the election was an announcement on election day
by 15 challenging candidates that they would boycott the results due to widespread
fraud — primarily an alleged failure of indelible ink to prevent multiple voting.
After a day of discussions and refutations by some of the international observers,
most of the challengers — including the most prominent challenger Yunus Qanooni
— agreed to drop their objections and allow an independent commission to
investigate the alleged irregularities. On November 3, Karzai was declared the
winner with 55.4% of the vote, thereby avoiding a runoff.
In parts of the country, humanitarian and reconstruction assistance still operate
on parallel tracks. Highlights of the progress on reconstruction achieved in
Afghanistan so far include the return of 3 million refugees, the enrollment of 2.9
million children in school, the participation of some women in the workforce and
politics, and the completion of Phase I of the Kabul-Kandahar highway, just to name
a few. The United Nations High Commissioner for Refugees (UNHCR) continues
to assist refugees and the internally displaced, although some have raised concerns
that the infrastructure may not yet be able to support this many returnees.

Apart from security problems, the current operating environment presents a
number of other urgent challenges. The collapsed infrastructure, rugged terrain and
extreme weather are significant factors with regard to access, food aid, health care,
and basic logistics. Reconstruction efforts must be understood in the context of the
differences among the regions and the political and security situation throughout the
country. The international recovery and reconstruction effort is immense and
complicated, involving the Afghan government, numerous U.N. agencies, bilateral
donors, many international organizations, and countless non-governmental
organizations (NGOs). Intended outcomes of the reconstruction process identified
by the international community and the Afghan government include political stability
and security, access to basic services, and adequate standard of living for the Afghan
people, economic growth, and, in the long term, independence from foreign aid.
So far, the international community has continued to provide significant
amounts of aid and resources for the reconstruction effort. Among contributions by
other countries, Italy is providing advice on judicial reform and the United States,
Japan and Saudi Arabia have together been financing the rebuilding of the Kabul-
Qandahar-Herat major roadway. Discussions continue about how to assess the
progress, pace, and effectiveness of reconstruction efforts, and whether sufficient aid
is available. Some experts are concerned about absorption capacity and whether
additional funds can be allocated quickly and effectively. Others argue that the lack
of human capacity combined with insufficient security, rather than the amount of
funding, are the main obstacles.
U.S. Assistance for Afghan Reconstruction. Since September 11, the
United States has provided nearly $3.3 billion for reconstruction efforts in
Afghanistan, making Kabul one of the largest recipients of American foreign aid. At
the International Conference on Reconstruction Assistance to Afghanistan held in
Tokyo in January 2002, the U.S. pledged $297 million, drawn from existing sources
— either from the $40 billion Emergency Terrorism Response supplemental (P.L.
107-38) that was passed shortly after the September 11 attacks or from regular
FY2002 appropriations. The sixty-one countries and twenty-one international
organizations represented at Tokyo pledged $4.5 billion, with some states making
pledges over multiple years and commitments to be carried out in different time
frames.
Since the Tokyo pledging conference, through supplemental and regular
appropriation bills, Congress has approved about $3 billion for Afghanistan, with
most coming in three emergency supplemental measures for FY2002-2004. The
Afghanistan Freedom Support Act of 2002 (P.L. 107-327, S. 2712), signed by the
President on December 4, 2002, authorized U.S. reconstruction efforts with $3.3
billion over four years. Included was $2 billion for humanitarian, reconstruction, and
enterprise fund assistance through FY2006 and $300 million in drawdown from U.S.
military stocks of defense articles and equipment for Afghanistan and other countries
and organizations participating in restoring Afghan security. The legislation also
included a Sense of Congress that calls for an expanded International Security
Assistance Force with an authorization of an additional $1 billion over two years.
FY2005 Afghanistan Aid Request. For FY2005 appropriations, the
Administration requested $929 million for Afghanistan, plus an additional $300

million for military drawdowns. The appropriations request covered several
categories of aid:
^!Development programs would remain at FY2004 levels in FY2005,
with resources targeting agriculture ($45 million), private sector
growth and investment ($31 million), environment ($28 million),
primary education ($24 million), child and maternal health ($13
million), reproductive health ($7 million), and democracy building
($20 million) programs. The Administration said that a significant
amount of these funds would support activities benefitting women
and girls.
^!Economic Support Fund assistance, requested at $225 million,
would support infrastructure repair and rehabilitation, as well as
technical aid for strengthening governmental institutions.
^!Counter-narcotics and Law Enforcement programs totaling $90
million would emphasize three areas: continued training of the
national and border control police; improving the judicial sector; and
counter-narcotics law enforcement, poppy eradication, alternative
development.
^!Anti-terrorism/Demining funds for FY2005 ($17.5 million) would
continue to finance President Karzai’s protective detail, strengthen
border control capabilities, and remove landmines in new areas of
Afghanistan.
^!Military assistance, proposed at $401 million in FY2005, roughly the
same as FY2004, would continue efforts to train and equip the
Afghan National Army (ANA).
^!Peacekeeping funds ($24 million) would pay the salaries of ANA
soldiers while in training and upon graduation.

Table 14. U.S. Assistance to Afghanistan, FY2002-FY2005
($s millions)
^FY²⁰⁰²^FY²⁰⁰³^FY²⁰⁰⁴^FY²⁰⁰⁴^FY²⁰⁰⁴^FY²⁰⁰⁵^FY²⁰⁰⁵
^Actua^l^Reg^u^la^r^Supp*^Reg^u^la^r*^To^t^a^l^Req.^Co^nf.
^D^e^v^e^l^opm^en^t^/^H^eal^t^h^39.7^89.9^—^171.0^171.0^172.0^a^.
^Dⁱ^s^a^s^t^{er rel}ⁱ^e^f^191.0^94.0^—^35.0^35.0^—^a.
^F^{ood ai}^d^159.5^47.4^—^—^0.0^—^a.
^R^e^f^u^g^{ee rel}ⁱ^e^f^—^55.0^—^72.0^72.0^—^a.
^Econ^omⁱ^c^-^E^S^F^105.3^216.5^825.0^75.0^900.0^225.0^225.0
^Aⁿ^ti-^ter^r^o^rⁱ^sm^/^43.4^33.0^63.8^—^63.8^17.5^a^.
^D^e^mⁱⁿⁱ^ng
^Nar^c^o^tics/L^a^w^66.0^0.0^220.0^—^220.0^90.0^a^.
^En^f^o^rcem^en^t
^Military^aid^57.3^191.3^364.0^50.6^414.6^400.8^400.8
^P^eacek^eepin^g^23.9⁹^.9^b.^—^0.0^24.0^a^.
^Oth^e^r^—^—^—²^.⁰²^.0^—^—
^T^O^T^A^L^686.1^737.0¹^,472.8^405.0^c^1,876.4^929.3^980.0
^*^F^Y^{2004 S}^u^ppl^em^en^t^a^l^t^o^t^a^l^sⁱⁿ^cl^u^d^{e f}^uⁿ^d^s^appropri^a^t^e^{d i}ⁿ^P.L^.¹⁰⁸^-^{106, pl}^u^s^f^uⁿ^d^s^t^r^an^s^f^{erred i}ⁿ^F^Y^{2004 t}^o
^A^f^g^h^aⁿⁱ^s^t^an^f^r^om^t^h^e^Em^erg^eⁿ^c^y^R^e^s^pon^s^e^f^uⁿ^d^{. A}^m^ouⁿ^t^s^f^o^{r F}^Y^{2004 R}^e^g^u^l^{ar A}^ppropri^a^tⁱ^oⁿ^s^ref^l^ect^l^e^v^e^l^s^provⁱ^d^ed
ⁱⁿ^t^h^{e C}^oⁿ^s^olⁱ^d^at^{ed A}^ppropri^a^tⁱ^oⁿ^s^A^c^t^,^{2004 (P.L}^{. 108-}^199).
^{a. T}^h^{e FY2005 con}^f^eren^{ce ag}^reem^en^{t prov}^ides^{a total of}^$980^m^illion^f^o^{r A}^f^g^h^aⁿⁱ^s^t^an^{, bu}^{t ex}^{cept f}^o^{r ESF an}^d^FMF,
^doesⁿ^o^{t s}^p^ecif^y^th^{e accou}ⁿ^t^s^f^r^om^w^h^ich^th^{e f}^uⁿ^d^s^s^h^ou^{ld be draw}ⁿ^.
^{b. T}^h^{e FY2004 s}^u^pplem^en^{tal prov}^{ided $50 m}^illion^f^o^{r peacek}^eepin^g^activ^itiesⁱⁿ^both^{Iraq an}^{d A}^f^g^h^aⁿⁱ^s^t^an^.
^{c. T}^h^{e C}^oⁿ^s^olⁱ^d^at^{ed A}^ppropri^a^tⁱ^oⁿ^s^A^c^t^,^{2004, ear}^m^a^rk^{ed $405 m}^illioⁿ^f^o^{r A}^f^g^h^aⁿⁱ^s^t^an^{. T}^h^{e s}^p^eci^fⁱ^{c accou}ⁿ^t
^allocation^s^lis^{ted in}^th^{e con}^f^eren^{ce report’}^s^Stat^em^en^{t of}^Man^a^g^e^rs^{, h}^o^w^e^v^e^{r, totaled $403 m}^illion^.
Congressional Action. The conference agreement on H.R. 4818 provides at
total of $980 million for Afghanistan in FY2005, about $50 million more than
proposed by the Administration and recommended by the Senate. The figure is
slightly higher than the House-passed level of $977 million. Other provisions
included in the approved Foreign Operations measure:
^!$2 million for the Independent Human Rights Commission and other
human rights groups (proposed by the Senate);
^!$2 million for reforestation activities (proposed by the Senate);
^!$50 million for Afghan women and girls (proposed by the Senate;
the House proposed $60 million);
^!$2 million for medical, rehabilitation, reconstruction, and other aid
to Afghan communities and families that have suffered loses due to
military operations (similar to Senate proposal);

^!members of the Afghan National Army should be vetted for
involvement in terrorism, human rights violations, and drug
trafficking.
On related legislation regarding bills to reform the intelligence community and
implement the 9/11 Commission recommendations, the House and Senate are
considering amendments to the Afghanistan Freedom Support Act (P.L. 107-327)
approved in 2002. Among other changes, H.R. 10 requires the President within six
months of enactment to submit to Congress a five-year strategy for development and
security needs in Afghanistan. The House bill further adds a new title to the 2002
Afghanistan reconstruction authorization Act, regarding counter-narcotics efforts in
the country. S. 2774, also requires a five-year strategy report, plus revises and adds
aid authorization levels for FY2005. In total, the bill authorizes $2.4 billion for
Afghanistan, including $500 million in development aid, $550 million in security-
related economic support, $882 million in military assistance, $410 million in
counter-narcotics and anti-terrorism funding, and $60 million for peacekeeping
purposes. These authorization amounts are more than two and one-half times greater
than the approved FY2005 appropriation for Afghanistan.
Iraq Reconstruction⁸
Following years of authoritarian rule and economic sanctions, the United States
and the international community agreed in the spring of 2003 that efforts should be
made to introduce economic reform and democratic government to post-war Iraq.
The best available estimates of the eventual cost of this Iraq reconstruction are
provided in an October 2003 World Bank and U.N. Development Group needs
assessment of 14 sectors of the Iraqi government and economy. Prepared for the
benefit of the international donors conference held in Madrid on October 23-24,
2003, it established the targets by which the adequacy of available resources will be
judged. The World Bank/U.N. assessments put the cost of reconstruction for the 14
sectors at $36 billion over four years, a figure that does not include $19.4 billion
estimated by the Coalition Provisional Authority (CPA) for security, oil, and other
sectors not covered by the Bank/U.N. assessments. Total World Bank/CPA projected
reconstruction costs through 2007 amount to $55 billion.⁹
Several potential “spigots” are available to fund Iraq reconstruction. U.S.
foreign aid appropriations were provided in FY2003 and FY2004 in two emergency
supplemental bills specifically for Iraq. International donors have also made aid
contributions. Iraqi funds, mostly derived from oil export profits, have been
employed largely to cover the “normal” operating costs of the Iraqi government, but,
where sufficient amounts are available, have been used to address reconstruction
needs. Additionally, the reduction or rescheduling of Iraqi debt repayments makes
further resources available.

⁸ This section was prepared by Curt Tarnoff.
⁹ For the full text of the report online, see the World Bank website at
[http://siteres our ces .wor l dbank.or g/ INT IRAQ/ Over vi ew/ 20147568/ J o i nt%20Needs%20
Assessment.pdf].

U.S. Assistance. In the FY2003 Emergency Supplemental (P.L. 108-11),
signed on April 16, 2003, $2.48 billion was appropriated for a special Iraq Relief and
Reconstruction Fund (IRRF) for the purpose of aid efforts in a wide range of sectors,
including water and sanitation, food, electricity, education, and rule of law. The
legislation gave the President control over the Fund, and amounts could be
transferred only to the Department of State, the Agency for International
Development (USAID), the Department of the Treasury, the Department of Defense,
and the Department of Health and Human Services, subject to the usual notification
procedures.
The FY2004 Emergency Supplemental (P.L. 108-106), signed on November 6,
2003, added $18.4 billion to the IRRF and allowed funds to go directly to the CPA
in addition to the above named agencies. While earlier funds had been used to
support a broad range of humanitarian and reconstruction efforts, the FY2004
appropriation was largely intended to have an immediate impact on the two greatest
reconstruction concerns raised since the occupation of Iraq began — security and
infrastructure. The reconstruction funds were provided entirely as grants, after the
Administration threatened to veto any measure that provided aid in the form of loans.
The legislation established an Inspector General office to monitor the use of funds
by the CPA, and included extensive reporting requirements regarding expenditures,
projects, and other sources of revenue. The bill also provided $983 million for
operating expenses of the CPA. Exceptions to the rule of full and open competition
for contracts have to be justified and notified to Congress.
On September 14, 2004, the Administration asked Congress to approve a
significant re-allocation of $3.46 billion of the $18.4 billion (see Reconstruction
Priorities below). Because the desired changes were greater than the supplemental’s
restriction on how much a specific sector — such as security or health — could be
increased (no more than 20%) or decreased (no more than 10%) from the original
congressional allocation, a simple notification to the appropriations committees was
insufficient. Congress, in passing on September 29, 2004, H.J.Res. 107, the
Continuing Appropriations Act for FY2005 (P.L. 108-309), approved the
Administration’s re-allocation proposal. (See Table 17, below, for specific details
on sector re-allocations.)

Table 15. Funds Committed/Pledged to Iraq
Relief and Reconstruction
($ millions)
F Y 2003 F Y 2004 Total
United States Assistance
2,475.018,439.0
Iraq Relief and(of which 2,418.0(of which 8,898.020,914.0
Reconstruction Fundobligated as ofobligated as of

11/17/04) 11/17/04)

DOD - Oil Repair 802.0 — 802.0
DOD - Iraq Army51.2 — 51.2
DOD - CERP — 140.0140.0
CPA/ Embassy 684.6 983.0 1,667.6
Administration
Other Agency Funds478.91.9480.8
Total U.S. Assistance4,491.719,563.924,055.6
Iraq Resources (as of 9/30/04)
U.S. Vested Funds1,724.0
U.S. Seized Funds 927.0
Development Fund for25,782.0
Iraq (DFI)
Total Iraq Resources28,433.0
Other Donors (as of 10/14/04)
Humanitarian Funds849.0
Reconstruction Grants &13,588.9
Loans Pledged at Madrid(of which at least 9,000.0 are loans)
Conference
Total Other Donor Grants & Loans14,437.9
^Source:^S^ectⁱ^oⁿ^{2207 R}^e^port^t^o^C^oⁿ^g^r^es^s^Pu^rs^u^aⁿ^t^t^o^P.L^.^108-^106,^O^c^t^{ober 2004;}^C^P^A^In^s^p^ect^or
^G^eⁿ^e^ral^R^e^port^t^o^C^oⁿ^g^r^es^s^Pu^rs^u^aⁿ^t^t^o^P.L^.^108-^{106, O}^c^t^.^{30, 2004;}^D^e^part^m^eⁿ^t^of^S^t^at^{e Work}ⁱⁿ^g
^Papers^:^{Iraq Week}^l^y^S^t^at^u^s^{, N}^o^v^.^{17, 2004;}^an^{d C}^R^S^cal^cu^l^a^tⁱ^oⁿ^s^.

Although the IRRF accounts for most U.S. reconstruction aid to Iraq, funds have
been drawn from other accounts for related purposes. Department of Defense
appropriations were used to cover the FY2003 operational expenses of the CPA and
have gone to pay part of the costs for repair of Iraq’s oil infrastructure, for training
of the Iraqi army, and towards the Commanders Emergency Response Program
(CERP). In addition to drawing from the IRRF, USAID has used its own funds to
pay for humanitarian programs in Iraq. The FY2005 Defense Appropriations, signed
into law (P.L. 108-287, H.R. 4613) on August 5, makes available up to $300 million
in additional funding for the CERP.
U.S. Aid Policy Structure on Iraq. On June 28, 2004, the Coalition
Provisional Authority (CPA), the agency established to temporarily rule Iraq and
implement reconstruction programs, was dissolved as Iraq regained its sovereignty.
The United States is continuing to provide an assistance program and, to the extent
possible, policy guidance to the Iraqi government through its U.S. embassy under
Ambassador John Negroponte. The embassy is expected to employ about 1,000 U.S.
and 700 Iraqi staff. A temporary Iraq Reconstruction Management Office (IRMO)
has been created within the U.S. embassy to supplant CPA assistance efforts. It is
being headed by Ambassador William B. Taylor, Jr., the former Coordinator of U.S.
Assistance to Afghanistan and, before that, Europe and Eurasia. The CPA’s Program
Management Office (PMO), although changing its name to the Project and
Contracting Office (PCO), continues to be responsible for program management and
contracts and remains within the Department of Defense, but will report to the
Department of State as well as to the Department of the Army. It is now headed by¹⁰
Charles Hess, the former PCO deputy.
Immediate overall responsibility for management of U.S. military activity in Iraq
belongs to General George Casey, Jr.. As commander of the multinational forces in
Iraq, Casey is responsible for establishing a new relationship between coalition forces
and the new Iraqi government and providing training and support to Iraqi security
forces. He also serves as principal military adviser to the U.S. Ambassador.
With the dissolution of the CPA which was under the Secretary of Defense, the
Secretary of State assumes responsibility for assistance. Within the State
Department, Robin Raphel is the coordinator for Iraq reconstruction.
The post of CPA Inspector General, created under the FY2004 Emergency
Supplemental legislation, has been redesignated the Special Inspector General for
Iraq Reconstruction (SIGIR) by the recently enacted DOD Authorization for FY2005
(P.L. 108-375). The SIGIR is currently Stuart Bowen, Jr. The SIGIR office has
about 83 employees examining a range of issues, including the extent and use of
competition in contracting; efficient and effective contract management practices;
and charges of criminal misconduct. The SIGIR issued his first report to Congress

¹⁰ The PCO and IRMO were established by a National Security Presidential Directive of
May 11, 2004. PCO website at [http://www.rebuilding-iraq.net/portal/page?_pageid=

35,62867&_dad=portal&_schema=PORTAL] .

on March 30, 2004.¹¹ The DOD Authorization extends the SIGIR beyond its
originally mandated December 2004 expiration and grants operational authority until
10 months after 80% of the reconstruction funds have been obligated. The SIGIR
reports to both the Secretary of Defense and State.¹²
U.S. Reconstruction Assistance. Among the key policy objectives laid
out by the Bush Administration in conjunction with the war in Iraq was the economic
and political reconstruction of the country. Discussion and debate within the United
States government and abroad have been ongoing regarding the strategy to reach
these ends utilizing reconstruction aid funds and the effectiveness of aid
implementation.
With the dissolution of the CPA, U.S. influence in post-occupation Iraq is no
longer based on dictate, but on persuasion by Ambassador Negroponte with leverage
provided by the security support of the U.S. military and billions of dollars in
reconstruction aid. U.S. efforts to “remake” Iraq have been facilitated in part by the
presence of U.S. advisers attached to each of the Iraqi ministries to provide technical
expertise. With ministries now sovereign, U.S. advisers, in the words of one Iraqi
government official, have become “consultants.” Reportedly, about 150 Americans
remain attached to Iraqi ministries.¹³
Reconstruction Priorities. Reconstruction priorities have changed over
time. The CPA’s reconstruction priorities were reflected in the FY2004
supplemental appropriation approved by Congress in October 2003. By the time of
the transition, about 22% of total funds were targeted on improving the security
capabilities of the Iraqi government, including training and equipment for police,
army, and customs personnel. About 67% of funds were aimed at improvements in
infrastructure — including electricity, oil production, water and sewerage,
transportation, and telecommunications — in order to stabilize the country by
creating jobs and stimulating the economy. Technical assistance and small-scale
grants in such areas as democratization, civil society, microenterprise, education,
economic policy, and health account for the remainder of the appropriated FY2004
funds (about 10%).
The November 2003 agreement to accelerate the hand-over of sovereignty to
Iraqis led the Administration to revise plans in January 2004 for the use of
appropriations. With the exception of the oil sector where emergency supply efforts
were cut by nearly $200 million, the broad categories of assistance were largely
unaffected. However, a number of funding changes were made within sectors. The
most significant change was an increase in the democratization effort — from $100
million to $458 million — reflecting the more intensive plan to prepare Iraqis to take
over. Increases were made as well in funding for border enforcement (from $150 to

¹¹ See [http://www.cpa-ig.org/] for a copy and for subsequent reports and audits.
¹² Inspector General Report to Congress, October 30, 2004.
¹³ “Iraqis Start to Exercise Power Even Before Date for Turnover,” New York Times, June

13, 2004. “U.S. Has Leverage, But Wants to Show Iraqis are in Charge,” New York Times,

June 29, 2004.

$300 million) and the civil defense corps (from $76 to $200 million). In addition,
roughly a third of the total appropriation — $5.8 billion, mostly intended for electric
power and water and sanitation rehabilitation — was extended out to FY2005. By
April 2004, the CPA had slightly revised its allocations, including adding $184
million for administrative expenses for operating costs of the post-June 28 U.S.
Mission in Iraq (taken from the water resources sector) and estimating a more rapid
spending plan, now leaving $4.6 billion for FY2005. The main July 2004 allocation
was a restoration of some water funding, and a decision to prorate all sectors equally
to derive funding to cover each agency’s program implementation costs.
Table 16. Iraq Relief and Reconstruction Fund: Obligations,
Expenditures, and Re-Allocations
(in $ millions)
^Sector^P.L^.^108-106^Allo^ca^tⁱ^oⁿ^(7/^22/⁰⁴⁾^O^b^lig^a^t^io^ns^(10/^12/⁰⁴⁾^Expend.^(10/^12/⁰⁴⁾^Re-^Allo^ca^tⁱ^oⁿ
^S^ecu^ri^t^y^an^{d L}^a^w^En^f^o^rcem^en^t³^,243^3,235^2,235⁸²⁶^5,045
^J^u^{stice, P}^u^b^{lic Saf}^e^ty^&^1,318^1,484⁹⁰⁸¹³⁴^1,953
^Dem^o^cracy
^El^ect^ri^ci^t^y^5,560^5,465^2,184³⁴⁰^4,350
^Oⁱ^l^In^f^r^as^t^r^u^c^t^u^re^1,890^1,701⁷²³⁵⁰^1,701
^Wat^e^{r an}^{d S}^aⁿⁱ^t^a^tⁱ^oⁿ⁴^,332^4,246⁷⁵²²⁴^2,311
^T^r^an^s^port^&^T^e^l^ecom^m^uⁿⁱ^catⁱ^oⁿ^s⁵⁰⁰⁵⁰⁰¹⁷³¹³⁴⁹⁹
^R^o^ads^,^Bri^d^g^e^s^,^&^C^oⁿ^s^t^r^u^c^tⁱ^oⁿ³⁷⁰³⁶⁷¹⁴⁵¹⁵³⁵⁹
^H^eal^t^h⁷⁹³⁷⁸⁶⁴⁵³⁴⁷⁸⁶
^Pri^v^at^{e S}^ect^or¹⁵³¹⁸³¹⁴⁰⁴⁷⁴⁸³
^E^d^uc^a^tⁱ^o^n,^Re^fuge^e^s^,^H^u^m^aⁿ²⁸⁰²⁵⁹¹³⁷²⁸³⁷⁹
^Ri^ght^s
^A^d^mⁱⁿⁱ^s^t^ratⁱ^v^{e Ex}^pen^s^es⁰²¹³²⁹²⁶²¹³
^Deb^t^Red^u^ctioⁿ^—^—^—^—³⁶⁰
^T^o^tal^18,439^18,439^7,879^1,507^18,439
^Source:^S^ectⁱ^oⁿ^{2207 R}^e^port^,^O^c^t^ober²^{004. D}^e^part^m^eⁿ^t^of^S^t^at^{e, Work}ⁱⁿ^g^Papers^:^{Iraq Week}^l^y
^S^t^at^u^s^{, O}^c^t^{ober 13, 2004.}
The September 14, 2004 Administration-proposed re-allocation of resources,
approved by Congress on September 29 in P.L. 108-309, reflects a review conducted
by the Iraq Reconstruction and Management Office and the U.S. Embassy country
team after the State Department took charge of Iraq non-military policy on June 28.
The review identified security needs, increased oil production, greater employment,
and democracy as the highest priorities, while suggesting that many large-scale
infrastructure projects were too slow and dependent on an improved security situation
to have an immediate impact. Security — mostly training and equipping Iraqi forces
— increases by $1.8 billion. Efforts to increase oil production capacity gains $450
million. Employment creation — a combination of USAID labor-intensive projects
and increased funding for the CERP — receives an additional $280 million.

Democracy programs geared toward assisting the pending elections grow by $180
million. General development programs — mostly conducted by USAID in the areas
of economic reform, private sector development, and agriculture — increase by $380
million. Presumably to demonstrate U.S. commitment to debt reduction prior to a
Paris Club discussion of the Iraq issue, the re-allocation draws on $360 million to
subsidize U.S. forgiveness of as much as $4 billion in bilateral Iraqi debt to the
United States.
In all, these sectors gained $3.46 billion of the $18.44 billion FY2004
supplemental appropriation. That amount was drawn from three sectors to which the
funds had originally been allocated — purchases of already refined imported oil (-
$450 million), water and sewerage (-$1.935 billion), and electricity (-$1.074 billion).
Most of the re-allocated funds — $2.7 billion — came out of amounts that had been
set aside for obligation in FY2005. Therefore, existing contracts are not affected by
the re-allocation.
Following this re-allocation, reconstruction aid priorities in Iraq, as determined
by the State Department, puts 33% of total FY2004 funds into security (versus 22%
previously), 16% into democratization and traditional development sectors (10%
before), and 51% into economic infrastructure (67% previously). As shown in Table
17 above, Congress, in H.J.Res. 107, the FY2005 Continuing Resolution, approved
the Administration’s re-allocation request.
Reconstruction Programs. A wide range of reconstruction project work is
underway. For a variety of reasons, not least of which is the poor security situation,
these efforts have produced a somewhat mixed picture. The Iraqi government
appears to be a functioning concern, with ministries restocked with equipment
following the massive looting that occurred after the initial invasion. Health facilities
are being rehabilitated, healthcare providers trained, and children immunized.
Neighborhood councils have been established in 445 locations throughout the
country. More than 2,000 grassroots projects have been conducted through USAID
grants ($151 million) provided to hundreds of community action groups. School
materials have been provided, schools inventoried, and thousands of schools
renovated. A broad range of economic policy reform efforts have been initiated.
Business centers have been set up throughout the country and a micro-loan program
established. A registration process for the January elections is moving forward.¹⁴
Positive claims for the success of reconstruction programs during the past 20 months,
however, have been countered by reports of slow and ineffective implementation.
Few of the 2,300 construction projects identified by the Project and Contracting
Office appear to have been completed. Objectives in critical sectors, such as oil
production and electric power generation, have not been met. Electric power in
September hovered just above the 100,000 Megawatt Hour level compared to 95,600
MW before the war (it is currently at 79,000 due to Fall maintenance needs) — the
goal has been 120,000. Oil production reached a post-war peak in late September at

2.67 million barrels/day — 2.5 million barrels/day is the rate before the war — and

¹⁴ Department of State, Working Papers: Iraq Status, November 17, 2004. USAID, Iraq
Reconstruction Weekly Update, November 12, 2004.

the goal is 2.8-3.0 million by December. Most of the Iraqi police have not yet been
trained. The one consistent bright spot among reconstruction claims — a successful
health program — is now marred by reports that acute malnutrition among children
has nearly doubled since the coalition invasion in 2003.¹⁵
A particular congressional concern has been the rate of implementation.¹⁶ One
Administration argument for the $18.4 billion appropriated in November 2003 was
the need to demonstrate progress so as to employ Iraqis and win their hearts and
minds. However, as of end of March 2004, only about $2.2 billion of that $18.4
billion had been obligated, let alone expended. As of November 17, $8.9 billion
(48%) had been obligated, and $1.8 billion (10%) expended.¹⁷ Among reasons for
the slow progress were pressures to employ open and competitive bidding for most
of the new reconstruction contracts, last year’s inter-agency disputes over control of
the funds, and a variety of federal regulations. Security concerns, however, have
been chiefly responsible for delaying reconstruction further.¹⁸ To speed up the
reconstruction process, in April CPA Ambassador Bremer initiated the Accelerated
Iraqi Reconstruction Program (AIRP) which utilizes Iraqi DFI funds ($383 million)
to get work underway in ten cities. The AIRP effort is coordinated with the use of
CERP funds (see below).¹⁹ The recent re-allocation of reconstruction funds is, in
part, intended to speed up implementation, including the expanded use of smaller
projects.²⁰ Further, Ambassador Negroponte has argued for greater flexibility in the
application of federal acquisition regulations.²¹ The FY2004 Defense Authorization

¹⁵ Department of State, Working Papers: Iraq Status, November 17, 2004. “Children Pay
Cost of Iraq’s Chaos,” Washington Post, November 21, 2004. Anthony Cordesman,
“Figures Indicate Challenging Transition Ahead in Iraq,” Scholar Statement, June 25, 2004,
and “Cleaning up the Mess,” July 7, 2004, Center for Strategic and International Studies.
“U.S. Handing Over An Unfulfilled Iraq,” Chicago Tribune, June 27, 2004. “Reality
Intrudes on Promises in Rebuilding of Iraq,” New York Times, June 30, 2004. “Death Stalks
an Experiment in Democracy,” Washington Post, June 22, 2004. “An Educator Learns the
Hard Way,” Washington Post, June 21, 2004. “In Race to Give Power to Iraqis, Electricity
Lags,” New York Times, June 14, 2004. “To Many, Mission Not Accomplished,”
Washington Post, June 3, 2004.
¹⁶ For example, see hearing on security assistance by House Foreign Operations
Subcommittee, Committee on Appropriations, April 29, 2004 and hearing on reconstruction
assistance, Senate Foreign Relations Committee, September 15, 2004.
¹⁷ Department of State, Working Papers: Iraq Status, November 17, 2004. Of the original
$2.475 billion appropriated for the Iraq Relief and Reconstruction Fund in April 2003, only
$1.504 billion, or 61%, had been disbursed by end of February 2004. The same percentage
had been expended ($1.522 billion) by June 30. Nearly all had been obligated by then.
Currently, 69% has been spent. [CPA Inspector General Report to Congress, July 30, 2004.]
¹⁸ “Inching Along, One More Piece to Rebuild Iraq,” New York Times, October 17, 2004.
¹⁹ “Accelerated Iraq Reconstruction Effort Exceeds Goals and Schedules,” PCO, Iraq, July

4, 2004. CPA-IG Report to Congress, October 30, 2004.

²⁰ “U.S. Seeks to Provide More Jobs and Speed Rebuilding in Iraq,” New York Times, July

27, 2004.

²¹ “Iraq Commanders Warn that Delays in Civil Projects Undermine Military Mission,” New
(continued...)

(P.L. 108-375) would permit such regulations to be waived for the CERP program
(sec. 1201 (c)).
While most reconstruction activities provide needed infrastructure and services,
some far-reaching economic and political policy reforms promoted by the CPA
stirred controversy in Iraq, especially as they were viewed as imposed by an
occupying administration. For example, in a move to establish an open and free
market economy and obtain revenue to meet development needs, Ambassador
Bremer approved new laws in September 2003 abolishing all curbs on foreign direct
investment except in natural resources. According to the Financial Times, the
reforms were “near universally unpopular,” Iraqi businessmen and unions fearing
they would be unable to compete.²² Such laws and regulations could face resistance
and reversal under the new sovereign government, although the interim constitution
requires approval of a majority of the government’s ministers, president, and vice-
presidents to overturn existing laws. According to the press, CPA Administrator
Bremer issued 97 legal orders in the last two weeks of the occupation.²³
On the other hand, as a result of the continuing instability and the accelerated
agreement to turn over sovereignty, some controversial positions which were favored
by Ambassador Bremer and his staff — privatization of state-owned business,
elimination of crop subsidies, and an end to the Oil for Food program’s free food
baskets — were put off entirely. Iraqi government officials would, reportedly, have
preferred that the CPA bear the burden of such potentially destabilizing decisions
rather than leave them to a new Iraqi government.²⁴
A new reconstruction concern is the effort to rapidly rehabilitate areas, such as
Fallujah, which have been the scene of intense military operations against insurgent
forces. U.S. officials argue that the post-battle reconstruction effort is as important
as the military effort to insure long-term Iraqi government control of these cities.
Nevertheless, some observers have criticized the glacial pace of the rehabilitation
effort in Najaf. In the case of Fallujah, according to State Department officials,
humanitarian supplies were pre-positioned and assessments were made of how to
restore essential services — electric power and water — prior to the completion of
the military operation. These basic assistance efforts will be followed by small
projects to repair clinics and schools. Then larger projects — many already planned
but put on hold during the long period of insurgent domination in the city — will be

²¹ (...continued)
York Times, October 17, 2004.
²² “Free-Market Iraq? Not So Fast,” New York Times, January 10, 2004. “Business Deals
May be Invalid, Experts Say,” Financial Times, October 29, 2003. “Governing Council Hits
at Minister Over Business Reform,” Financial Times, September 25, 2003. “Iraq Offering
Laws to Spur Investment From Abroad,” New York Times, September 21, 2003. “Economic
Overhaul for Iraq,” Washington Post, September 22, 2003.
²³ “U.S. Edicts Curb Power of Iraq’s Leadership,” Washington Post, June 27, 2004.
²⁴ “Attacks Force Retreat From Wide-Ranging Plans for Iraq,” Washington Post, December

28, 2003. “Iraqis Face Tough Transition to Market-Based Agriculture,” Washington Post,

January 22, 2004. “Iraq Privatization Postponed for Now,” Dow Jones Newswires, October

27, 2003.

implemented. Officials estimated a combined Iraqi-U.S. aid effort of perhaps $100
million to reconstruct Fallujah.²⁵
Commanders Emergency Response Program (CERP). Drawn from
DFI Iraqi seized assets and oil profits and Department of Defense operational funds
rather than reconstruction appropriations, the CERP contributes to the reconstruction
effort by providing “walking around money” for the roughly 1,600 U.S. military civil
affairs officers throughout Iraq. Until the recent FY2005 DOD appropriation of up
to $300 million in additional funds for the CERP, roughly $685 million — $546
million from Iraqi resources — had been made available for this purpose. Provided
in the form of small grants — over 34,512 such projects totaling $578 million as of
early October — the CERP supports a wide variety of reconstruction activities at the
village level from renovating health clinics to digging wells to painting schools. In
lieu of civilian government or NGO aid personnel, who are not present in most of
the country, commanders identify local needs and dispense aid with few bureaucratic
encumbrances. The grants have been credited with helping the military better
exercise their security missions, while at the same time meeting immediate
neighborhood development needs.²⁶ In an effort to stimulate employment, the State
Department re-allocation of assistance increases CERP funding by $86 million.
Reconstruction Contract Issues. Dozens of U.S. and international
companies and NGOs are participating in the reconstruction of Iraq. (Many
contractors are also participating in military support operations — these are not
discussed in this report). In connection with implementation of the FY2004
Supplemental, the CPA set up an Iraq Program Management Office (PMO). In
post-occupation Iraq, it is now called the Project and Contracting Office (PCO). The
PCO coordinates infrastructure construction and monitors contracting and
expenditures in six sectors — transport and communications; electricity;
buildings/health; security/justice; public works/water resources; and oil. It more
generally manages and oversees use of the non-construction funds as well.
The PCO has largely supplanted government agencies traditionally responsible
for reconstruction program contracting as it implements the bulk of the FY2004-
funded programs. The main contracting agencies implementing FY2003 programs
are the Army Corps of Engineers, responsible for oil well repair and maintenance;
the Department of State, handling police training; and the Agency for International
Development (USAID), managing the widest range of economic, social, and political
development programs. Using FY2003 funds, USAID has awarded $1.8 billion in
contracts and grants in seaport and airport administration, capital construction,
theater logistical support, public health, primary and secondary education, personnel

²⁵ Department of Defense, News Briefing, Charles Hess and Bill Taylor, November 19,

2004. “Rebuilding What the Assault Turns to Rubble,” Washington Post, November 10,

2004. “Pace of Rebuilding Najaf Causes Friction,” New York Times, October 18, 2004.

²⁶ OMB, Section 2207 Report, July 2, 2004. “Soldiering On to Rebuild Iraq,” Washington
Post, February 21, 2004. “The GI’s Weapon of Choice in Iraq: Dollars,” Christian Science
Monitor, January 29, 2004. “$126 Million Spent So Far by U.S. Military on Iraq
Reconstruction,” Department of Defense Transcript, CPA Briefing, January 14, 2004. “A
Different Street Fight in Iraq,” Washington Post, May 27, 2004.

support, local governance, agricultural development, and higher education. Utilizing
FY2004 funding, it is responsible for $2.3 billion to date, including a $1.8 billion
construction project contracted to Bechtel. USAID will continue to be responsible
for most activities related to social services, civil society, and policy reform.
Continuing security concerns in the unpredictable Iraqi environment pose
problems for firms interested in reconstruction work. A firm’s security plans are a
factor in awarding contracts. As noted earlier, a substantial proportion of contract
costs are being diverted to providing security to employees. One concern of
contractors has been the legal status of workers in the post-occupation period,
especially with regard to efforts to protect themselves from attack. Prior to the turn-
over of sovereignty, CPA Administrator Bremer signed an order providing legal
immunity to contractors while they are in the course of performing work in support
of Iraq reconstruction efforts.²⁷
Seeking to encourage economic growth and decrease unemployment, the CPA
made special efforts to insure that Iraqi business had an opportunity to participate in
contracts, including putting contract solicitations on its website and appointing
business liaison representatives. The extent to which firms plan to utilize Iraqi
services has been a factor in the awarding of new contracts. Although U.S.
government requirements could be waived for Iraqi contractors, most work for Iraqi
business has come in the form of subcontracts. The PCO claims that over 315 Iraqi
firms are currently working on U.S.-funded reconstruction projects, and that roughly

73,000 Iraqis are employed.²⁸

An Administration decision applied to the FY2003 reconstruction contracts to
waive the normal competitive bidding requirements and request bids from specific
companies which were seen to have preexisting qualifications received considerable
attention by the business community in 2003. U.S. officials explained then that only
a few select firms possessed the particular skills that would qualify them for the job
specifications for Iraq reconstruction, and that time and security clearances were also
critical factors. Other U.S. firms and foreign entities potentially excluded by “buy
America” provisions of law, they noted, could participate as sub-contractors to the
selected American firms.
Most FY2004-funded contracts are being competitively solicited, and the
FY2004 supplemental contains a provision requiring notification and justification to
Congress of any waiver of competitive rules. On December 5, 2003, Deputy
Secretary of Defense Paul Wolfowitz issued a determination and findings report,
essentially limiting eligibility for prime contracts using FY2004 funds to U.S. firms
and those of 62 countries — including Iraq, coalition partner, and force contributing
nations. His rationale for barring other countries’ firms, including Germany and
France, was that it was “necessary for the protection of the essential security interests
of the United States.” Countries excluded from prime contracts could still participate
as sub-contractors. In what has been interpreted as an effort to gain greater

²⁷ “Immunity Provision Extended for U.S. Firms with Reconstruction Contracts,
Washington Post, June 29, 2004.
²⁸ Department of State, Working Papers: Iraq Weekly Status, November 17, 2004.

international cooperation on Iraq as well as a mark of State Department control over
Iraq policy following the June 28 transition, Administration officials indicated in
mid-2004 that the limitation on country eligibility would be reversed.²⁹
The closed bidding and lack of transparency in early contracting and later
reports suggesting that U.S. and Iraqi funds are being squandered disturbed a number
of legislators. The FY2004 supplemental established an Inspector General for the
CPA. The CPA Inspector General has issued a number of audits and launched
dozens of investigations.³⁰
In particular, it was the sole source contract for oil well repair (“Restore Iraqi
Oil” — RIO project) provided to Kellogg Brown and Root (KBR), a subsidiary of
Halliburton, whose former chief executive is Vice-President Cheney, that was the
focus of media attention, raising concerns of favoritism and reinforcing suspicions
that the war was fought for oil. The repair work for this contract, conducted by KBR
for the Army Corps of Engineers, was valued at $2.5 billion to March 2004.³¹ In
summer 2003, the Corps announced that remaining oil repair work would be
competitively bid. However, KBR continued to carry out work orders on a non-
competitive basis pending a decision, finally reached on January 16, 2004, on two
new contracts collectively worth up to $2.0 billion.³² One of the new contracts —
worth up to $1.2 billion — was awarded to KBR.
KBR has also been the focus of two DOD audits — one related to its work
providing logistics support to the U.S. military under its competitively-bid LOGCAP
contract and the other for the importation of fuel for use by Iraqis under the RIO
project. In the latter case, KBR is suspected of overcharging by $61 million.³³

²⁹ “U.S. to End Ban on War Opponents From Getting Iraq Contracts,” Bloomberg,
September 8, 2004. “Wider Support Prompts U.S. Rethink on Contracts,” Financial Times,
July 21, 2004. “Pentagon Bars Three Nations From Iraqi Bids,” New York Times,
December 10, 2003. “U.S. Pressed Over Iraq Contracts Ban,” Financial Times, December

12, 2003. “Iraq Contracts Open to Canadians,” Washington Post, January 14, 2004.

³⁰ CPA Inspector General Report to Congress, July 30, 2004. See CPA-IG website
[http://www.cpa-ig.org/] for audit reports to date.
³¹ $815 million of this sum is Iraqi resources; $1.7 billion is from U.S. appropriations. The
figure does not include its profit margin of between 2% and 7%. U.S. Army Corps of
Engineers, March 2003 Contract Obligation Status,
[http://www.hq.usace.army.mil/cepa/iraq/oilfires.htm] .
³² Jane Mayer, “Contract Sport,” The New Yorker, February 16, 2004. “Iraq Contract
Award Delayed Again,” Houston Chronicle, December 2, 2003. “U.S. Delays Awarding 2
Iraq Repair Contracts,” Washington Post, October 30, 2003. “Bush Seeks $2.1 Billion More
for Iraqi Oil Industry,” New York Times, September 13, 2003. “Halliburton’s Deals Greater
Than Thought,” Washington Post, August 28, 2003. “Halliburton’s Iraq Role is Expanded
to Oil Products Distribution,” Financial Times, May 8, 2003, “Halliburton Contracts Total
$50 million,” Financial Times, April 12, 2003, “U.S. to Request Bids for Work on Oil
Fields,” Washington Post, April 15, 2003.”Halliburton’s Links Sharpen Bids Dispute,”
Financial Times, March 27, 2003
³³ In the former case, Halliburton is repaying the government $27.4 million in overcharges.
(continued...)

Former KBR staff have come forward with accusations of wasteful spending.³⁴ State
Department documents reportedly suggest that U.S. diplomats pressured KBR to use
the more expensive Kuwaiti contractor for fuel imports.³⁵
Recent Assessments of Reconstruction. There have been dozens of
reports and articles during the past year that have sought to analyze, criticize, and
recommend action regarding the progress of reconstruction aid. Two of the most
recent ones are indicative of the others. Reconstructing Iraq, a September 2004
report from the International Crisis Group, examines the gamut of mistakes that many
agree were made prior to and during the occupation. These include the lack of a
reconstruction plan; the failure to adequately fund reconstruction early on; unrealistic
application of U.S. views to Iraqi conditions by, for example, emphasizing
privatization policy; the organizational incompetence of the CPA; shifting deadlines,
such as the November decision to end the occupation seven months later; and the
inadequate utilization of Iraqis both in making policy and in implementing
reconstruction projects. The report draws on these failures to inform its
recommendations for the future. Recommendations for the U.S. government include
the suggestion that staff with expertise in post-conflict situations be utilized and
encouraged to serve in Iraq longer than six months; that Iraqis representing a range
of views participate in design and implementation of U.S. reconstruction projects;
that development of the Iraqi private sector be emphasized through greater use of
Iraqis as subcontractors; and that prime contractors be required to employ Iraqis as³⁶
much as possible.
Progress or Peril? Measuring Iraq’s Reconstruction from the Center for
Strategic and International Studies (September 2004 and updated on November 12)
uses polling and personal interviews to attempt to measure the status of
reconstruction from the Iraqi point of view. It finds that security is the predominant
issue in Iraqi minds, and that governance is a largely negative picture. It suggests
that U.S. efforts are too focused on national level politics and that efforts to support
local political bodies are not backed by sufficient funding. A lack of economic
opportunity fuels anger and security problems, and the level of social services is also
undermining public confidence. An improvement in social well-being — health and
education — the only bright spot that the original report highlights, is less positively
portrayed in the update. The healthcare system is now viewed as deteriorating.
Recommendations include accelerating training of security forces, increasing more
direct assistance to Iraqis, giving priority to Iraq’s employment crisis, supporting the
return of the U.N. to provide election assistance, giving precedence to aid for Iraq’s

³³ (...continued)
“Halliburton Will Repay U.S. Excess Charges for Troops’ Meals,” New York Times,
February 3, 2004. “Pentagon Asks for Probe of KBR Oil Deal,” Washington Post, January

16, 2004.

³⁴ “Halliburton Staff Called to Testify on Wasteful Spending,” Financial Times, June 16,

2004.

³⁵ “Halliburton May Have Been Pressured by U.S. Diplomats to Disregard High Fuel
Prices,” New York Times, November 11, 2004.
³⁶ International Crisis Group, Reconstructing Iraq, September 2, 2004.

judicial sector, supporting the development of more responsive Kurdish regional
governments, mobilizing the Iraqi silent majority to counter the insurgents, and
giving Iraqis a stake in the country’s oil wealth.³⁷
Congressional Action. H.R. 4818, passed by the House on July 15, did not
include additional Iraq reconstruction funding, consistent with Administration plans.
The House measure, however, addressed several other Iraq reconstruction issues:
^!provided authority for the United States to take the lead in a
multilateral effort to cancel a significant amount of Iraq’s
outstanding debt. H.R. 4818 further permits the Administration to
draw on the $18.439 billion Iraq Relief and Reconstruction Fund,
appropriated last year, to cover U.S. costs of canceling Iraq’s debt.
^!reconstituted the Coalition Provisional Authority Inspector’s General
office that has been monitoring Iraq reconstruction resources as a
separate unit within the State Department. The CPA IG expired with
the transfer of authority in Iraq on June 28 and the Administration
had planned on merging these oversight responsibilities into the
State Department’s Office of Inspector General. The House measure
would have placed the Iraq reconstruction IG in the Department of
State, but as an entity reporting directly to the Secretary of State.
^!transferred from OMB to the Secretary of State responsibility for
preparing and submitting to Congress the Section 2207 quarterly
reports on the status of Iraq reconstruction activities.
^!expressed disappointment over the slow pace of World Bank project
disbursement in Iraq and directed the Treasury Secretary to report by
January 1, 2005, on the status of such disbursements and the
deployment of personnel to staff the Bank’s offices in Iraq.
The Administration, in its Statement of Administration Policy on H.R. 4818,
expressed several concerns regarding Iraq reconstruction provisions in the bill. The
letter from OMB said the Administration opposes placement of the CPA IG
responsibility under the direction of the Secretary of State. It noted that the
Departments of State and Defense, USAID, and the CPA IG had reached an
agreement that would assure effective oversight of the reconstruction funds, and that
the House language would not be consistent with that arrangement. The
Administration further expressed concern that its proposal to permit greater
flexibility in the use of the reconstruction funds — to shift resources from one
purpose to another in larger degrees than allowed in the FY2004 supplemental
appropriation — was not included in H.R. 4818.

³⁷ Center for Strategic and International Studies, Post-Conflict Reconstruction Project,
Frederick Barton and Bathsheba Crocker, Co-Directors, Progress or Peril? Measuring
Iraq’s Reconstruction, September 2004 and the November 12 update.

The Senate measure, S. 2812, reported after the Administration submitted its re-
allocation proposal on September 14, approved the use of $360 million for cancelling
roughly $4 billion (or 90%) of Iraqi debt owed to the United States. The measure
also allowed greater flexibility in transferring funds among program sectors, although
not to the extent necessary to fully implement Administration re-allocation
recommendations.
In several ways, Iraq reconstruction provisions approved in House and Senate
versions of H.R. 4818 were overtaken by more recent legislative action. On
September 29, Congress cleared H.J.Res. 107, a Continuing Resolution for FY2005.
The measure enacted into law some elements included in H.R. 4818 and proposed
by the Administration. Specifically, H.J.Res. 107:
^!approved sector funding re-allocations, as proposed by the
Administration on September 14 (see Table 16, above for details);
^!authorized $360 million for the costs of canceling roughly $4 billion
in Iraqi debt owed to the United States; and
^!transferred responsibility for submitting a quarterly report (“section
2207 report”) on the use of Iraq reconstruction funds from OMB to
the Department of State.
Also, in the Defense Department Authorization bill for FY2005 (Sec. 1059B of
H.R. 4200, as cleared by Congress on October 9), Congress extended CPA-IG by re-
designating the office as the Special Inspector General for Iraq Reconstruction and
granting operational authority until 10 months after 80% of the reconstruction funds
have been obligated.

For Additional Reading
Overview
CRS Report 98-916. Foreign Aid: An Introductory Overview of U.S. Programs and
Policy, by Curt Tarnoff and Larry Nowels.
CRS Report RL31959. Foreign Assistance Authorization Act, FY2005, by Larry
Nowels.
CRS Report RL32090, FY2004 Supplemental Appropriations for Iraq, Afghanistan,
and the Global War on Terrorism: Military Operations & Reconstruction
Assistance, by Stephen Daggett, Larry Nowels, Curt Tarnoff, and Rhoda
Margesson.
CRS Report RL31687. The Millennium Challenge Account: Congressional
Consideration of a New Foreign Aid Initiative, by Larry Nowels.
Foreign Operations Programs
CRS Report RS20329. African Development Bank and Fund, by Raymond Copson.
CRS Issue Brief IB10050. AIDS in Africa, by Raymond Copson.
CRS Report RL32252. AIDS Orphans and Vulnerable Children (OVC): Problems,
Responses, and Issues for Congress, by Tiaji Salaam.
CRS Report RS21437. The Asian Development Bank, Martin A. Weiss.
CRS Issue Brief IB88093. Drug Control: International Policy and Approaches, by
Raphael Perl.
CRS Report 98-568, Export-Import Bank: Background and Legislative Issues, by
James Jackson.
CRS Report RL31712. The Global Fund to Fight to Fight AIDS, Tuberculosis, and
Malaria: Background and Current Issues, by Raymond Copson and Tiaji
Salaam.
CRS Report RS21181. HIV/AIDS International Programs: Appropriations, FY2002-
FY2005, by Raymond Copson.
CRS Report RL32714. International Disasters and Humanitarian Assistance: U.S.
Governmental Response, by Rhoda Margesson.
CRS Report RL30830. International Family Planning: The “Mexico City” Policy,
by Larry Nowels.

CRS Report RL30932, Microenterprise and U.S. Foreign Assistance, by Curt
Tarnoff.
CRS Report 98-567. The Overseas Private Investment Corporation: Background
and Legislative Issues, by James Jackson.
CRS Report RS21168. The Peace Corps: Current Issues, by Curt Tarnoff.
CRS Report RL30545. Trafficking in Women and Children: The U.S. and
International Response, by Francis Miko.
CRS Issue Brief IB96026. U.S. International Population Assistance: Issues for
Congress, by Larry Nowels.
CRS Report RL31689. U.S. International Refugee Assistance: Issues for Congress,
by Rhoda Margesson.
CRS Report RL31433. U.S. Global Health Priorities: USAID’s Global FY2003
Budget, by Tiaji Salaam.
Country and Regional Issues
CRS Report RL30588. Afghanistan: Post-War Governance, Security, and U.S.
Policy, by Kenneth Katzman.
CRS Report RL32489. Africa: Development Issues and Policy Options, by Raymond
Copson.
CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues, by Raymond
Copson.
CRS Report RL32337. Andean Counterdrug Initiative (ACI) and Related Funding
Programs: FY2005 Assistance, by Connie Veillette.
CRS Report RS21865. Assistance to Afghan and Iraqi Women: Issues for Congress,
by Febe Armonios and Rhoda Margesson.
CRS Report RS20749. Burma-U.S. Relations, by Larry Niksch.
CRS Report RL32250. Colombia: Issues for Congress, by Connie Veillette.
CRS Report RS21686. Conditions on U.S. Aid to Serbia, by Steven Woehrel.
CRS Issue Brief IB93087. Egypt-United States Relations, by Clyde Mark.
CRS Report RL32407. The Greater Middle East Initiative: An Overview, by Jeremy
Sharp.
CRS Report RL32294. Haiti: Developments and U.S. Policy Since 1991 and
Current Congressional Concerns, by Maureen Taft-Morales.

CRS Report RS21751. Humanitarian Crisis in Haiti: 2004, by Rhoda Margesson.
CRS Report RS21765. Iraq: Paris Club Debt Relief, by Martin Weiss.
CRS Report RL31833. Iraq: Recent Developments in Humanitarian and
Reconstruction Assistance, by Curt Tarnoff.
CRS Issue Brief IB85066. Israel: U.S. Foreign Assistance, by Clyde Mark.
CRS Issue Brief IB93085. Jordan: U.S. Relations and Bilateral Issues, by Alfred
Prados.
CRS Report RS21457. The Middle East Partnership Initiative: An Overview, by
Jeremy M. Sharp.
CRS Report RS21353. New Partnership for Africa’s Development (NEPAD), by
Nicolas Cook.
CRS Report RS20895. Palestinians: U.S. Assistance, by Clyde Mark.
CRS Report RL31759. Reconstruction Assistance in Afghanistan: Goals, Priorities,
and Issues for Congress, by Rhoda Margesson.
CRS Issue Brief IB98043. Sudan: Humanitarian Crisis, Peace Talks, Terrorism and
U.S. Policy, by Ted Dagne.
CRS Report RS21594. United States Aid to the Palestinians, by Clyde Mark.
CRS Report RL32260. U.S. Foreign Assistance to the Middle East: Historical
Background, Recent Trends, and the FY2005 Request, by Clyde Mark.
CRS Report RL32487. U.S. Foreign Assistance to Latin America and the
Caribbean, by Connie Veillette.
CRS Report RL31785. U.S. Assistance to North Korea, by Mark Manyin and Ryun
Jun.
CRS Report RS21834. U.S. Assistance to North Korea: Fact Sheet, by Mark
Manyin.
CRS Report RL31362. U.S. Foreign Aid to East and South Asia: Selected
Recipients, by Thomas Lum.
CRS Report RL32260. U.S. Foreign Assistance to the Middle East: Historical
Background, Recent Trends, and the FY2005 Request, by Jeremy M. Sharp.

Selected Websites
African Development Bank
[ h ttp://www.afdb.org/ ]
African Development Foundation
[ h ttp://www.adf.gov/]
Asian Development Bank
[ h ttp://www.adb.org/ ]
CRS Current Legislative Issues: Foreign Affairs
[ h ttp://www.crs.gov/products/bro wse/is-foreignaffairs.shtml]
Export-Import Bank
[ http://www.ex im.gov/]
Global Fund to Fight AIDS, Tuberculosis, and Malaria
[ h ttp://www.theglobalfund.org/ en/]
Inter-American Development Bank
[ h ttp://www.iadb.org/ ]
Inter-American Foundation
[ h ttp://www.iaf.gov/index /index _ en.asp]
International Fund for Agricultural Development
[ h ttp://www.ifad.org]
International Monetary Fund
[ http://www.imf.org/ ]
Overseas Private Investment Corporation
[ http://www.opic.gov/]
Peace Corps
[ h t t p : / / www.peacecorps.gov/ ]
Trade and Development Agency
[ http://www.tda.gov/]
United Nations Children’s Fund (UNICEF)
[ h ttp://www.unicef.org/ ]
United Nations Development Program (UNDP)
[ http://www.undp.org/ ]

United Nations Population Fund (UNFPA)
[ h ttp://www.unfpa.org/ ]
United Nations Program on HIV/AIDS (UNAIDS)
[ h ttp://www.unaids.org/ en/default.asp]
U.S. Agency for International Development — Home Page
[ http://www.usaid.gov/]
U.S. Agency for International Development — Congressional Budget Justification
[ http://www.usaid.gov/policy/ budget/]
U.S. Agency for International Development — Emergency Situation Reports
[http://www.usaid.gov/our_work/humanitarian_assistance/disaster_assistance/cou
ntries/fy2003_index .html]
U.S. Agency for International Development — Foreign Aid Data (“Greenbook”)
[ http://qesdb.cdie.org/ gbk/index .html]
U.S. Department of State — Home Page
[ http://www.state.gov/]
U.S. Department of State — Foreign Operations Budget Justification, FY2004
[ http://www.state.gov/m/rm/rls/cbj/2004/]
U.S. Department of State — International Affairs Budget Request, FY2004
[ http://www.state.gov/m/rm/rls/iab/2004/]
U.S. Department of State — International Topics and Issues
[ http://www.state.gov/interntl/]
U.S. Department of the Treasury — Office of International Affairs
[http://www.ustreas .gov/offices /international-affairs/index .html]
World Bank
[ h ttp://www.worldbank.org/ ]
World Bank HIPC website
[ h ttp://www.worldbank.org/ hipc/]

CRS-92
Table 17. Foreign Operations: Discretionary Budget Authority
(millions of current dollars)
ProgramFY2003Total^aFY2004Regular^bFY2004Supp^bFY2004Total^bFY2005RequestFY2005HouseFY2005SenateFY2005 Conference^c
tle I - Export and Investment Assistance:
Import Bank564.438.5 — 38.5167.0165.9 157.099.2
erseas Private Invest Corp(242.5)(211.0) — (211.0)(211.1) (211.1) (211.1)(211.6)
ade and Development Agency46.749.7 — 49.750.0 51.549.051.1
port Aid368.6(122.8)0.0(122.8)5.9 6.3(5.1)(61.3)
tle II - Bilateral Economic:
ⁱ^{ki/CRS-RL32311}velopment Assistance:^d
^g/wival & Health (CS/H)1,794.61,824.2 — 1,824.21,420.01,648.5 1,550.0 1,537.6
^s^.orival & Health - AIDS Emergency — — — — — — ^e 150.0 —
^le^akobal AIDS Initiative — 488.1 — 488.11,450.0 1,260.0 1,450.01,373.9
^://wikielopment Assistance Fund (DA)1,380.01,376.8 — 1,376.81,329.0 1,429.0 1,460.01,448.3
^h^ttp3,174.63,689.10.03,689.14,199.0 4,337.5 4,610.0 4,359.8
Famine Aid431.9254.0290.0^f544.0385.5355.5 385.5 ^g 370.0
Famine Aid - Sudan Emergency — — — — — — — ^e 17.9
ansition Initiatives49.754.7 — 54.762.8 47.550.048.6
elopment Credit Programs7.58.0 — 8.08.0 8.0 8.07.9
t Aid3,663.74,005.8290.04,295.84,655.3 4,748.5 5,053.5 4,804.2
D Operating Expenses 592.8600.540.0640.5623.4 618.0618.0613.1
D Inspector General33.134.8 — 34.835.0 35.0 35.034.7
D Capital Investment Fund42.781.716.698.364.8 64.8 59.058.5

4,332.34,722.8346.65,069.45,378.5 5,466.3 5,765.5 5,510.5

CRS-93
ProgramFY2003Total^aFY2004Regular^bFY2004Supp^bFY2004Total^bFY2005RequestFY2005HouseFY2005SenateFY2005 Conference^c
ic Support Fund (ESF)4,677.22,119.9972.0^h3,091.92,520.0 2,450.0 2,470.0 2,462.6
ⁱ
reland24.818.4 — 18.4 18.5 — 18.4
altic States521.6442.4 — 442.4410.0 375.0410.0 393.4
er Soviet Union 755.1584.5 — 584.5550.0 550.0 560.0 555.5
ergency Fund for Complex Crises — 0.0 0.00.0100.0 0.0 20.0 0.0

2,475.0 — 18,439.0^j18,439.0 — — — —

alition Provisional Authority OE — — 983.0983.0 — — — —
American Foundation16.116.2 — 16.215.2 16.219.0 17.9
ⁱ^{ki/CRS-RL32311}elopment Foundation18.618.6 — 18.617.0 18.6 20.0 18.8
^g/w295.1308.2 — 308.2401.0 330.0 310.0 317.4
^s^.or Challenge Corporation — 994.1^k — 994.1^k2,500.0 1,250.0 1,120.0 1,488.0
^le^ak
ent220.7240.3170.0410.3358.8 328.8328.8 326.2
^://wikiarcotics — Andean Initiative729.5726.7 — 726.7731.0 731.0731.0 725.2
^h^ttp^l
ration & Refugee Assistance781.9755.7 25.0 780.7729.8 756.0775.0763.8
ergency Refugee Fund (ERMA)105.829.8 — 29.820.0 20.0 50.0 29.8
Proliferation/anti-terrorism332.4351.435.0386.4415.2 382.0415.2 398.8
easury Dept. Technical Assistance10.718.9 — 18.917.5 19.0 17.5 18.8
— 94.4 — 94.4200.0 105.0 95.099.2
ilateral Economic15,296.811,442.320,970.632,412.914,364.012,816.413,107.013,144.3
tle III - Military Assistance:
Ed. & Training79.591.2 — 91.289.789.7 89.7 89.0
n Mil Financing (FMF)6,104.64,268.7287.04,555.74,957.5 4,777.5 4,777.54,745.2
ech FMF loan — 19.9 — 19.9 — — — —

CRS-94
ProgramFY2003Total^aFY2004Regular^bFY2004Supp^bFY2004Total^bFY2005RequestFY2005HouseFY2005SenateFY2005 Conference^c
eeping Operations214.374.550.0124.5104.0 104.0104.0 103.2
eeping Operations - Darfur emergency — — — — — — 75.0 ^e74.4 ^e
tal, Title III-Military Aid6,398.44,454.2337.04,791.25,151.2 4,971.2 5,046.2 5,011.8
tle IV - Multilateral Economic Aid:
- Intl Develop. Assn844.5907.8 — 907.81,061.3850.0 820.0 843.2
ank Environment Facility146.9138.4 — 138.4120.7 107.5 120.7 106.6
-Mult Invst Guaranty1.61.1 — 1.1 — — — —
Amer. Development Bank42.724.9 — 24.925.0 25.015.0 10.9
ⁱ^{ki/CRS-RL32311}elopment Bank97.3143.5 — 143.5112.2 112.259.799.2
^g/w
^s^.orelopment Fund107.4112.0 — 112.0118.0 118.0 67.0105.2
^le^akelopment Bank5.15.1 — 5.15.1 5.1 1.14.1
^://wiki for R & D35.635.2 — 35.235.4 35.4 35.435.1
^h^ttp Development14.914.9 — 14.915.0 15.0 15.014.9
anizations & Programs313.9^d319.8 — 319.8304.5 323.5328.9 325.8
1,609.91,702.70.01,702.71,797.2 1,591.7 1,462.8 1,545.0
oreign Operations 23,673.717,476.321,307.638,783.921,318.3 19,385.6 19,610.9^m 19,639.8
in P.L. 108-324 — — — — — — — 100.0
oreign Operations and P.L. 108-32423,673.717,476.321,307.638,783.921,318.319,385.619,610.9^m19,739.8
ithout Iraq Reconstruction21,198.717,476.31,885.619,361.921,318.3 19,385.6 19,610.9^m 19,739.8
^:^Hou^s^{e an}^{d Sen}^a^{te A}^ppropriation^s^C^o^m^m^{ittee an}^{d C}^R^S^adj^u^s^t^m^eⁿ^t^s^.

CRS-95
^Y^{2003 i}ⁿ^cl^u^d^es^“^r^eg^u^l^{ar” an}^{d s}^u^ppl^em^en^t^a^l^appropri^a^tⁱ^oⁿ^s^.
^m^ouⁿ^t^s^sho^wⁿⁱⁿ^t^h^e^col^u^mⁿ^f^o^{r F}^Y^{2004 “}^r^eg^u^l^{ar” i}ⁿ^cl^u^d^{e F}^o^rei^gⁿ^O^p^eratⁱ^oⁿ^s^f^uⁿ^d^s^provⁱ^d^{ed i}ⁿ^P.L^.^108-^{199, t}^h^{e C}^oⁿ^s^olⁱ^d^at^e^{d A}^ppropriation^s^A^c^{t, 2004. F}ⁱ^g^u^r^es^f^o^{r each}
^acco^uⁿ^tⁱⁿ^t^h^e^c^o^l^u^mⁿ^f^o^r^r^e^g^u^l^a^r^F^Y^{2004 F}^o^r^eⁱ^gⁿ^O^p^e^r^a^tⁱ^oⁿ^sⁱⁿ^c^l^u^d^e^a^0.^59%^a^c^r^os^s^-^t^h^e^-^boa^r^d^r^e^s^cⁱ^s^sⁱ^on^,^a^s^r^e^quⁱ^r^e^d^by^P.^L^.¹⁰^8-^{199. T}^h^{e 0.59%}^res^cⁱ^s^sⁱ^on^repre^s^eⁿ^t^e^d^a
^{$103.6 m}^illion^redu^ctioⁿ^f^o^{r reg}^u^l^{ar FY2004 Foreig}ⁿ^Operation^s^f^r^om^pre-^res^c^is^sⁱ^on^lev^e^{l of}^{$17.564 billio}ⁿ^approv^edⁱⁿ^P^.^L^.¹⁰^8-^{199. T}^h^{e F}^Y^{2004 s}^u^ppl^em^en^t^a^l^am^ouⁿ^t^s
^ref^l^ect^t^h^os^{e prov}ⁱ^d^{ed i}ⁿ^P.L^.^108-^{106, m}^aⁱⁿ^l^y^f^o^{r recon}^s^t^r^u^c^tⁱ^oⁿⁱⁿ^{Iraq an}^{d A}^f^g^h^aⁿⁱ^s^t^an^{. T}^h^{e s}^u^ppl^em^en^t^a^l^col^u^mⁿ^al^s^oⁱⁿ^cl^u^d^es^{$95 m}^illion^f^o^{r Darf}^u^r^h^u^m^an^itarian^relief
^provⁱ^d^{ed i}ⁿ^P.L^.^108-^{287, t}^h^{e D}^e^f^eⁿ^s^{e D}^e^part^m^eⁿ^t^appropri^a^tⁱ^oⁿ^s^f^o^{r F}^Y^{2005. T}^h^{e F}^Y^{2004 T}^o^t^a^l^c^o^l^u^mⁿ^r^e^p^r^e^s^eⁿ^t^s^t^h^{e s}^u^m^of^t^h^e^F^Y^{2004 reg}^u^l^{ar an}^{d t}^h^{e F}^Y²⁰⁰⁴
^s^u^pplem^en^tal.
^{ec. 122, Div}ⁱ^sⁱ^on^{J of}^P^.^L^.^108-⁴⁴⁷^requ^ires^{a 0.8%}^acros^s^-^th^e-^{board res}^c^is^sⁱ^on^f^o^{r each}^accouⁿ^t^{. A}^m^ouⁿ^t^sⁱⁿ^th^is^colu^mⁿ^{are adj}^u^s^t^{ed to ref}^l^{ect th}^{e requ}^{ired redu}^ction^f^o^{r each}
^accouⁿ^t^{. In}^{total, Foreig}ⁿ^Operation^s^f^uⁿ^d^s^w^e^{re re}^du^{ced by}^$158.4^m^illion^du^{e to res}^c^is^sⁱ^on^requ^irem^en^t.
^h^{e F}^Y^{2003 l}^e^v^e^l^f^o^{r C}^hⁱ^l^d^S^u^rvⁱ^v^al^an^{d H}^eal^t^h^(C^S^H⁾^excludes^{a $120 m}^illion^con^t^ribu^tion^{to UNIC}^E^{F. In}^{FY2004 an}^{d FY}^{2005, UNIC}^E^{F f}^uⁿ^d^s^{are in}^clu^d^{ed in}^th^e^In^tern^ation^a^l
^Org^aⁿⁱ^zation^s^an^{d P}^r^og^ram^s^accouⁿ^tⁱⁿ^{title IV. T}^h^{e FY2003 f}ⁱ^g^u^r^e^h^a^s^been^adj^u^s^t^{ed to be con}^s^is^ten^t^w^ith^th^{e FY2004 an}^{d FY200}^{5 accou}ⁿ^t^s^t^ru^ctu^r^e.
ⁿ^a^ted^{as an}^“^e^m^e^r^g^en^cy^{” ap}^p^r^o^p^r^iatioⁿ^th^{at d}^o^e^{s n}^o^{t co}^uⁿ^t^ag^ain^s^{t th}^{e b}^ill’^{s to}^{tal allo}^catioⁿ^.
ⁱ^{ki/CRS-RL32311}
^g/w^clu^d^es^{$110 m}^illion^tran^s^f^{erred f}^r^om^th^{e Iraq R}^e^lief^an^{d R}^econ^s^tru^c^tion^Fuⁿ^d^f^o^{r L}ⁱ^{beria ($100 m}^illion⁾^an^{d Su}^dan^{($10 m}ⁱ^llioⁿ⁾^{, an}^d^an^ad^d^itioⁿ^a^l^{$70 m}^illioⁿⁱⁿ^em^er^g^eⁿ^c^y
^s^.or^ation^a^{l Dis}^a^s^t^{er aid f}^o^{r th}^{e cris}^isⁱⁿ^th^{e Darf}^u^r^regⁱ^on^of^S^u^dan^an^{d in}^C^h^{ad prov}^{ided in}^P^.^L^.^108-^{287, th}^{e F}^Y^{2005 DOD A}^p^p^r^o^p^r^iatioⁿ^b^ill.
^le^ak
^.^L^.^108-^{324, th}^{e FY2005 Military}^C^oⁿ^s^tru^c^tion^{appropriation}^,ⁱⁿ^clu^d^{ed an}^addition^a^{l $100 m}^illion^f^o^r^em^erg^eⁿ^c^y^relief^f^o^r^h^u^rrican^e^vⁱ^ctim^sⁱⁿ^th^{e C}^a^ribbean^regⁱ^on^an^{d is}ⁿ^o^t
^://wiki^ref^l^{ected in}^th^is^{total. T}^h^{e $100 m}^illion^is^{added at th}^{e en}^{d of}^th^is^table.
^h^ttp
^clu^d^es^{$100 m}^illion^tran^s^f^{erred f}^r^om^th^{e Ir}^{aq R}^e^lief^an^{d R}^econ^s^tru^c^tion^Fuⁿ^d^f^o^{r J}^o^rdan^.
^h^{e A}^d^mⁱⁿⁱ^s^t^ration^’^s^{FY2005 requ}^es^{t in}^clu^d^{ed $12 m}^illion^f^o^{r th}^e^Irelan^{d Fu}ⁿ^d^an^{d th}^{e Iris}^h^Vis^a^P^r^og^ram^as^{part of}^th^{e Eco}ⁿ^o^mⁱ^{c S}^u^pport^F^uⁿ^d^.
^clu^d^es^{$210 m}^illion^tran^s^f^{erred to th}^{e In}^tern^ation^a^{l Dis}^a^s^t^{er an}^{d Fam}ⁱⁿ^e^Aⁱ^{d accou}ⁿ^t^f^o^{r L}ⁱ^{beria ($100 m}^illion⁾^an^{d Su}^dan^{($10 m}^illion⁾^{, an}^{d to th}^{e Econ}^om^ic^Su^pport^Fuⁿ^d^f^o^r
^J^o^rdan⁽^{$100 m}^illioⁿ⁾^.
^th^is^am^ouⁿ^t^{, P}^.^L^.^108-¹⁹⁹^p^r^o^vⁱ^d^e^d^{$650 m}^illion^f^o^{r th}^{e Millen}ⁿⁱ^u^m^C^h^allen^g^e^A^ccouⁿ^tⁱⁿ^Divⁱ^sⁱ^on^{D, plu}^s^{$350 m}^illion^m^o^r^eⁱⁿ^Divⁱ^sioⁿ^{H, f}^o^r^{a to}^{tal MCA}^ap^p^r^o^p^r^iatioⁿ
^of^{$1 billio}ⁿ^.^T^h^{e 0.59% acros}^s^-^th^e-^{board res}^cⁱ^s^sⁱ^on^redu^{ced th}^{e total to $994.1 m}^illion^.
^L^.^108-^{287, th}^{e FY2005 DOD A}^ppropriation^{bill, in}^clu^d^{ed an}^addition^a^{l $25 m}^illionⁱⁿ^FY2004^em^erg^eⁿ^c^y^Mig^r^ation^an^d^R^e^f^u^g^e^{e aid}^f^o^r^th^{e cr}^{isis in}^th^e^Dar^f^u^r^r^e^gⁱ^oⁿ^o^f^Su^d^aⁿ
^an^{d in}^C^h^ad.
^h^{e Sen}^a^{te total}ⁱⁿ^clu^d^ed^{$150 m}^illionⁱⁿ^“^e^m^e^rg^en^cy^{” appr}^opriation^s^f^o^{r HIV/A}^I^{DS u}ⁿ^d^{er title II an}^{d $75 m}^illion^f^o^{r P}^eacek^e^epⁱⁿ^g^uⁿ^d^er^{title I}^I^I^.^W^ith^o^u^{t th}^{e em}^er^g^eⁿ^c^y^f^uⁿ^d^s,
^th^{e Sen}^a^{te Foreig}ⁿ^Operation^s^f^uⁿ^dⁱⁿ^g^to^{tal w}^a^s^{$19.386 billion}^,^iden^{tical to th}^{e C}^o^m^m^{ittee allocation}^f^o^r^Foreigⁿ^Operation^s^.