ASIA AND NEAR EAST

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
Development Assistance	$199,768,788	$196,453,000	$230,799,000
Child Survival and Disease	$77,300,000	$83,226,000	$92,512,000
Economic Support Fund	$2,199,646,832	$2,148,300,000	$2,069,900,000
FREEDOM Support Act	---	$6,000,000	---
P.L. 480 Title II	$260,100,000	$143,878,000	$106,642,000

INTRODUCTION: The Asia and Near East (ANE) region spans more than half the globe, is home to more than one-third of the world's population (excluding China), and encompasses some of the world’s fastest growing and poorest economies. The region includes economies in transition and crisis, governments ranging from democratic to autocratic, and is a center of transnational environmental, health, and population problems.

The countries of the ANE region remain central to U.S. national security, foreign policy, and economic interests. For over four decades, the Arab-Israeli conflict and maintaining secure access to the energy resources of the Persian Gulf, have been key foci of U.S. foreign policy. The tensions between Pakistan and India that were exacerbated by nuclear testing have added greatly to U.S. national security concerns over the spread of weapons of mass destruction and regional peace and stability in South Asia. The Asian financial crisis continues to pose a threat to global economic stability, and has slowed democratic reform and economic progress throughout this region.

U.S. NATIONAL INTERESTS: USAID programs in the ANE region respond to critical bilateral and regional development needs and are uniquely structured to support key U.S. foreign policy interests:

• Stimulate economic recovery in Asia;
• Secure a comprehensive peace settlement in the Middle East;
• Strengthen trade and technology links, and foster investment and agricultural development;
• Consolidate democracies, strengthen participation and governance, and reduce gender disparities, and
• Improve the global environment, stabilize world population, and protect human health.

DEVELOPMENT CHALLENGES:

The developing countries in the ANE region constitute the fastest growing regional market for U.S. merchandise exports. Between 1987 and 1997, this market expanded at more than 12% per year. In 1998, however, the financial crisis in East Asia dramatically reduced U.S. exports to this region (Figure 1)¹ and employment of U.S. workers among American exporting industries. The financial crisis highlights the urgent need to restore economic health and to institute reforms that will ensure greater transparency and accountability in both government and business transactions in East Asia. USAID programs will place a strong emphasis on anti-corruption work and political liberalization in Thailand, Philippines, Indonesia, and Cambodia.

Since the mid-1980s, a number of ANE countries have experimented with more democratic forms of government. The Philippines, Bangladesh, Mongolia, Jordan, and Morocco have all shifted to governments with some level of transparency. Even in Vietnam and Indonesia, where formal political institutions remain relatively unchanged and where civil liberties are restricted, some laws have been improved and new non-state organizations have emerged. According to a 1997 Freedom House international survey, ANE countries rank slightly higher than the world average on overall freedom (Figure 2). However, there remains considerable need for improvement. The survey rated 3 countries as "free" (Mongolia, Israel, Philippines), 7 as "partly free" (Bangladesh, India, Jordan, Morocco, Nepal, Pakistan, Sri Lanka), and 8 as "not free" (Cambodia, Egypt, Indonesia, Lebanon, China, Vietnam, Yemen, West Bank/Gaza).

The ANE region faces overwhelming health challenges and population pressures. At current growth rates, the region's population will double to 3.5 billion by 2026. Each year more than 36 million people are added to the region's population. Of the world's 585,000 maternal deaths that occur each year, over 50% take place in ANE countries (Figure 3), with 70% of those occurring in India. HIV/AIDS is spreading so rapidly that Asia surpassed Africa in 1996 as the principal center of the HIV/AIDS epidemic. Meanwhile, human rights violations associated with illegal trafficking in women and children contribute to increased transmission of HIV/AIDS. In addition to implementing programs that seek to reduce fertility rates and maternal mortality, slow the spread of HIV/AIDS, and monitor the spread of infectious diseases, such as tuberculosis, USAID has launched the Initiative to Combat Trafficking of Women and Children, to support prevention programs for at-risk women and girls.

Industrialization helped fuel the region’s exceptional economic growth and, in turn, accelerated urbanization. While economic growth created more diversified economies, generated millions of jobs and improved incomes, it also contributed to severe environmental problems. Industries and municipalities dump untreated solid and liquid wastes onto the land and into rivers and bays. The use of outdated industrial technologies, and dependence on fossil fuels for energy and transportation have caused severe air pollution that translates into local health problems and contributes to global warming. USAID programs target these problems in three ways: (1) link developing industries with U.S. suppliers of modern, less polluting technologies, (2) help national and municipalities overcome water, sewerage and solid waste management problems, and (3) help governments promote investment in cleaner fossil fuel technologies, renewable energy and improved efficiency in the transport and power sectors.

Given the size and diversity of the ANE region, these challenges and ANE’s programs are best examined in the context of three subregions: the Middle East and North Africa, South Asia, and East Asia.

Middle East and North Africa: USAID's programs in this subregion support the achievement of a comprehensive peace settlement in the Middle East by addressing four key development challenges:

• resolve chronic water shortages;
• change protectionist policies to stimulate economic growth;
• reduce high fertility rates, and
• strengthen weak democratic processes and institutions.

Water supply and demand are at the heart of bilateral development issues and regional concerns for sustainable peace. Water demand in Jordan is projected to exceed supply by 78% by 2000, and in West Bank/Gaza, Palestinians have access to only one-third the minimum water needed by households according to World Health Organization standards. In response, USAID is making significant investments in water-related programs throughout the subregion to improve supply, quality and efficient use of freshwater resources. In addition, USAID’s regional program is helping resolve specific water disputes that inhibit more efficient use of scarce resources, within Jordan, Egypt, West Bank/Gaza, and more recently, Lebanon and Morocco.

Generally, countries in the subregion have maintained protectionist economic policies that include high average tariffs and cumbersome regulations. These policies inhibit economic efficiency and foreign investment. USAID programs are helping governments and the private sector remove these impediments to trade and investment, and improve economic opportunities and incomes, especially for the poorer segments of society. Complementary activities are expanding access to finance by micro-enterprises. By strengthening national economies and improving the climate for both large and small-scale businesses, these efforts are helping reduce the disparities that can fuel violence and political instability.

The countries in the subregion have some of the highest fertility rates in the world. Stabilizing population improves prospects for development, and is especially important for containing growth in demand for water and increasing education and employment opportunities. By extending knowledge and availability of contraception and reproductive health services, and by integrating health and family planning interventions, USAID's programs in Morocco, Egypt, Jordan, and now in the West Bank/Gaza, improve maternal and child health and reduce fertility. These programs are further expanding services to rural populations and focusing on newly married couples.

Government and political institutions in the subregion are undergoing significant changes. In Egypt, the people are beginning to express democratic aspirations. In Morocco and Jordan, the traditional monarchies are showing signs of democratization, while in West Bank/Gaza the Palestinian Authority and the Palestinian Legislative Council are beginning to understand their respective roles in a democratic system. Working with NGOs and governments in Lebanon, Egypt, Morocco and West Bank/Gaza, USAID’s programs are helping decentralize authority, encourage tolerance and respect within societies, improve transparency and accountability in governments and private institutions, and improve respect for universal human rights and rule of law.

South Asia: USAID programs focus on four principal development challenges in this poorest subregion of the world:

• stabilize population growth, improve child and maternal health, and slow the spread of HIV/AIDS;
• improve the economic, educational and political opportunities for women;
• improve the environmental performance of industry-led economic growth, and
• strengthen financial sectors to serve as the foundation for economic growth.

The population of South Asia is about 1.5 billion, many of whom live in large urban areas. The U.N. projects that five of the world's largest cities will be in South Asia by the year 2015. In spite of general trends toward lower fertility, population growth rates are still high in northern India, Pakistan, Nepal and Bangladesh. The HIV/AIDS epidemic is spreading rapidly in South Asian countries. In India alone there are an estimated 3 - 5 million HIV cases. USAID programs aim to stabilize population growth and protect human health by: (1) expanding access to quality maternal-child care and family planning services, (2) improving monitoring to warn of growing resistance to antibiotics by selected infectious diseases, and (3) developing effective responses to the spread of HIV/AIDS. These programs enable couples to make informed and safer decisions about child bearing, and help slow the spread of HIV/AIDS and other infectious diseases.

South Asia statistics show some of the greatest differences between men and women in terms of life expectancy, literacy, educational attainment and income in the world in South Asia. In addition, the low status of women and the low value placed on female children has led to a disproportionately high death rate among infant girls, mainly as a result of neglect and malnutrition. USAID programs address these gender disparities by expanding opportunities to improve women’s literacy and social and economic empowerment and reducing the trafficking in women and children. These improvements are essential to reduce fertility and infant mortality, increase women’s participation in the economy, and expand democracy.

Rapid industrialization and economic development have exacerbated pollution problems that threaten local health and contribute to global warming. USAID is leading donors in the development of win/win approaches to reduce industrial pollution, mitigate the growth of greenhouse gases, and improve the economic efficiency of energy and industrial processes. These programs focus on the development of policies and incentives that encourage private sector investment in cleaner energy and industrial technologies.

USAID programs work to increase incomes and generate employment opportunities by: (1) advocating stable, market-oriented financial policies, and (2) expanding availability and access to capital through stronger and more diverse stock and bond markets and microfinance institutions. These measures are stimulating increasing investment, both local and foreign, in productive enterprises that create jobs and income.

East Asia: Programs in East Asia focus on the need to:

• strengthen economic institutions to face the challenges of globalization, and improve opportunities for disadvantaged populations;
• strengthen evolving democratic processes and institutions;
• improve management of natural resources and environmental performance in the energy and industry sectors;
• slow population growth and the rapid spread of HIV/AIDS, and improve maternal and child health;
• address the root causes of the Asian financial crisis and the need for a social safety net.

The subregion's current financial crisis represents a significant setback in long-term efforts to strengthen trade and investment linkages between U.S. and Asian businesses that benefit U.S. workers, businesses, and consumers. The crisis has put millions of people out of work, cut real incomes of those who still have jobs, and limited the ability of governments to meet the growing demand for social "safety-net" services. These social and economic consequences also threaten political stability. USAID has an important role in helping countries address the root causes of the crisis, especially through economic growth and democracy and governance activities. Increasing competition, transparency and accountability in capital markets and other financial sector institutions remains the focus of USAID activities. USAID is also working to liberalize international trade, increase the degree of competition within domestic economies, eliminate restraints on foreign and domestic investment, and privatize infrastructure. The needs of the poor are being addressed through programs that strengthen microenterprise finance institutions, transfer improved technologies and practices to business and agriculture, and strengthen civil society.

With the exception of the Philippines, most East Asian countries assisted by USAID have weak or nascent democratic institutions. USAID programs in Indonesia target strengthening civil society, instituting democratic elections and enhancing respect for human rights and rule of law. In the wake of political upheaval in Cambodia, USAID has redoubled its efforts to strengthen non-governmental organizations that protect and enhance human rights. The Asian financial crisis has created opportunities for programs that improve transparency and accountability in government and private institutions, strengthen NGOs, and make governments more responsive to citizen needs.

East Asia’s rapidly expanding economies fueled by industrialization and large populations have led to sprawling urbanization and placed tremendous pressure on the subregion’s forests and coastal and ocean resources. Most countries today face extensive loss of natural habitats and plant and animal species. Severe air, water and land pollution threatens health and contributes to global warming. USAID has responded to these challenges by developing innovative, participatory approaches for sustainable resource management, and by advocating policies, incentives and technology that improve industrial performance and municipal environments.

Total fertility rates vary widely in the region (2.9 - 5.8 births per woman). Several key countries have had successful USAID-led family planning programs (Indonesia, Thailand) and achieved steady declines in fertility to near replacement levels. The Asian financial crisis has seriously eroded these governments' abilities to respond to social issues, including family planning and maternal child health. Accordingly, USAID will work with these countries to develop safety nets for those least able to afford care. The more serious threat is the exponential growth of HIV, especially in Cambodia and Vietnam. USAID has developed bilateral and cross-border HIV prevention programs in response to this threat, as well as outreach and clinical services that lower risk and save lives. In countries like the Philippines and Indonesia, where the spread of HIV is considerably slower, USAID supports monitoring and evaluation of HIV and other sexually transmitted diseases, and operations and behavior research that will improve understanding of HIV transmission and how to prevent it.

PROGRAM AND MANAGEMENT CHALLENGES: Over the past five years, USAID has undertaken significant reforms to: (1) improve program performance, (2) link programs to U.S. foreign policy and national interests, (3) improve partnership with host countries and coordination with other USG agencies and international donors, and (4) improve its response to changing development challenges and new USG initiatives. USAID will continue these efforts, but declining budget levels constrain USAID’s sustainable development programs and ability to respond to unanticipated foreign policy priorities in the region.

OTHER DONORS: Excluding its assistance to Israel, USAID ranks fifth within the donor community in the level of resources it is investing in the ANE region. The leaders are the World Bank, the Asian Development Bank (ADB), the Japanese, and European Union (EU). Other significant bilateral donors in the region include Australia, Germany, and United Kingdom. USAID has worked aggressively with these donors and United Nations (UN) agencies to reach consensus on development priorities and coordinate programs in every USAID-assisted country in the region. However, partnering with other donors to deliver timely and appropriate assistance is not without problems. Other donors have their own bureaucratic processes and are just as vulnerable as USAID to changes in budgets and priorities. In spite of the problems, these efforts have paid dividends, enabling USAID to leverage considerable funding for common objectives and maintain significant influence with host countries in this time of declining budgets and staff.

FY 2000 PROGRAM: The resources requested by ANE for FY 2000 total $2,499,853,000. Of this amount, $230.8 million is Development Assistance (DA), $92.5 million is Child Survival and Disease (CSD), $2.070 billion is Economic Support Funds (ESF) and $106.6 million is PL-480 Title II. The specific results to be achieved with these funds are described in the detailed country and regional program narratives. In general, USAID will finance programs that contribute to the following results in FY 2000.

• Facilitate economic reforms that increase openness and access to markets (including capital markets).
• Help countries in the region achieve higher annual economic growth rates that generate large numbers of jobs for poor people.
• Reduce fertility and population growth, improve reproductive and maternal health, and slow the spread of HIV/AIDS.
• Improve energy efficiency, urban waste management, and water resource management, improve the management and protection of forest and coastal resources, and promote a "clean industrial revolution".
• Reduce the rate of growth of greenhouse gas emissions.
• Encourage the liberalization of authoritarian states, consolidate democracy in countries that have recently emerged from authoritarian rule, and strengthen political participation, including local, grassroots participation and the empowerment of women.
• Reduce gender disparities and the trafficking of young girls and women.
• Use humanitarian assistance resources (PL-480 Title II) to complement and expand child survival, women’s education and economic growth programs in India and Bangladesh.

¹The 1997-98 reduction in U.S. merchandise exports is based on preliminary data for the first 10 months of 1998.
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