Progress in Securing Peace in the Middle East

The U.S. provides global leadership to the Middle East peace process, and USAID is making significant contributions to this rapidly evolving, albeit extremely fragile endeavor. USAID actively supported the January 1996 elections in the West Bank and Gaza. In this history-making event, the Palestinians elected their first democratically chosen, self- governing authority. USAID also provided budgetary support through the multi-donor fund to sustain the flow of health and education services and to facilitate the transition of responsibility for key social services to the Palestinians in the West Bank and Gaza. Based largely on the Palestinian Authority's success in tax collections and other revenue generating, USAID budgetary support is expected to be phased out in FY 1996. USAID has also helped strengthen commercial relations among the West Bank and Gaza, Israel, and Arab nations; create jobs through loans to small businesses; upgrade water systems in Rafah, Nablus and Ramallah; and significantly reduce sewage flooding in Gaza City.

In Egypt, the U.S.-Egyptian Partnership for Economic Growth and Development, launched by Vice President Gore and Egypt's President Mubarak in September 1994, is transforming the economic relationship between the U.S. and Egypt from that of donor and recipient, to one of partners. USAID's leadership has focused the combined efforts of the U.S. Government and the private sector to promote more export-oriented economic growth, to help Egypt emerge as an economic base for regional trade and an expanding global market, and to support Egypt's efforts to finance a greater share of its own development.

In Jordan, a USAID-funded road linking Amman to the Dead Sea and the crossing points to Israel and the West Bank contribute to increased regional economic interdependence. The road is the principal conduit for goods and tourists between Amman and Israel as well as the West Bank and Gaza. Overland visitors to Jordan using the new road increased from a total of 42,000 in 1994 to 35,000 during the first six months of 1995 alone.

Progress in Strengthening Trade and Technology Linkages

The thriving investment climate in the region is buttressed by selective USAID assistance. Five ANE countries receiving USAID assistance -- Indonesia, Philippines, India, Israel, and Egypt -- each purchased $3 billion or more of U.S. goods in 1995 (see Figure 2). These countries also received a total of $5.6 billion in U.S. foreign investment in 1994, and U.S. investors received $2.3 billion in earnings on past investment. USAID plays an important catalytic role in this dynamic region by supporting key sectoral reforms and investments that increase incomes and create a growing demand for U.S. agricultural products, and environmental, telecommunications and energy technologies.

USAID provided targeted assistance for the liberalization of trade and investment policies to Indonesia and the Philippines, two key members of the Asia-Pacific Economic Cooperation (APEC) forum. APEC is the major forum for U.S. Government efforts to reform the trade and investment policies of countries in the region. This assistance, complementing that of the government and other donors, supported the analysis and adoption of the May 1995 package of trade reforms in Indonesia. These reforms immediately reduced the average tariff rate from about 20% to 15% and committed Indonesia to a pre-announced schedule of tariff reductions. These changes result in most tariffs dropping to only 5% by 2003. Another significant reform is the recent decision to eliminate the non-tariff barrier on soybean meal imports -- an area in which USAID advisors have done considerable work -- which lowered poultry prices to Indonesian consumers through lower feed costs, and opened up a $200 million market to U.S. soybean exporters. Similar USAID efforts underway in the Philippines helped that government liberalize the foreign exchange market, reduce average tariff rates from 20% to 16%, commit the country to a single tariff of 5% by 2004, remove import quotas on 840 items, and open new opportunities for private investment in infrastructure and telecommunications.

USAID assistance for the reform of key sectoral policies also spurs growth of incomes and jobs at the same time that it increases trade and technology links with the United States. In Sri Lanka, Indonesia, India, and the Philippines, USAID supports the development of capital markets to mobilize foreign and domestic capital and to improve the efficiency of its allocation. USAID was instrumental in establishing the automated National Stock Exchange, which has rapidly become India's largest exchange. Mobilizing capital for investment also creates jobs. Firms on the Colombo Stock Exchange in Sri Lanka created over 4,500 new jobs in 1995, for a total of 29,000 jobs since 1990 when USAID assistance to the sector began. Overall, 17% of all the jobs created in Sri Lanka's formal sector in the past year can be linked to USAID assistance. In Indonesia, USAID's technical inputs to strengthen capital markets and develop procedures for privatization have resulted in the partial privatization of Indonesia's major telephone and international telecommunications firms in 1995, with shares sold on both the Jakarta and New York stock exchanges. U.S. commercial exports to Indonesia, Sri Lanka and the Philippines have been increasing by 14- 16% per year.

In areas with persistent pockets of poverty, USAID supports investments in micro-enterprise credit, agriculture and agri-business, and rural infrastructure. These investments are designed to reduce poverty and build a sound foundation for the long-term development of future U.S. export markets. Sri Lanka, Bangladesh, and Egypt, among other ANE countries, have vibrant and successful microenterprise credit programs. Since 1992, USAID support in Bangladesh helped generate more than 70,000 jobs and increase the incomes of almost 30,000 poor women; and USAID's highly successful microenterprise program in Egypt, which has provided small loans to over 42,000 small and microenterprises since its inception in 1989, is now being replicated by other donors. By the end of 1995, USAID-supported rural electrification in Bangladesh enabled the installation of 44,000 irrigation pumps and the establishment of 160,000 small rural businesses. These businesses now provide services to many more rural farm families. Finally, USAID investment in infrastructure and improved agribusiness systems in Mindanao, one of the poorest regions in the Philippines, has enabled family incomes in that region to increase at 6% per year, twice the national average.

Bangladesh, depended heavily on food aid, and prior to 1992, never commercially imported significant amounts of grain. USAID-supported privatization of the grain trade and the fertilizer sector, coupled with expanded irrigation, has enabled Bangladesh to become largely self-sufficient in rice and has made it profitable for Bangladeshi grain traders to buy $115 million of U.S. wheat over the past three years.

Progress in Combatting Global Population, Health and Environmental Problems

Rapid population growth and severe environmental degradation in the ANE region have serious global impact. USAID encourages an integrated approach that involves linkages among sectors and development partners in addressing these concerns. In dealing with population and health issues, USAID supports mechanisms that facilitate investments in education, family planning, health and nutrition. Likewise, in the environmental arena, USAID actively engages in linking environmental management programs with economic growth, health and democracy initiatives.

Impressive gains have been made in reducing total fertility rates in ANE countries, which represent some of the most populous in the world and contribute significantly to global population and health status (see Figure 3). To reduce fertility, contraceptive prevalence rates (CPR) must increase. A CPR of 50% or higher indicates a successful family planning program. Indonesia has reached 55%; Philippines, over 50%; and Bangladesh and Egypt, over 45%. The level of contraceptives obtained from private sector sources indicates a broad acceptance of family planning, a willingness to pay for services, and the government's commitment to provide a policy framework that supports access to quality services. Sixty-eight percent of married couples who use contraceptives in Egypt, 33% in Morocco, and 28% in Indonesia currently receive them from private sector sources.

In child survival, USAID has helped support immunization programs in many countries. The global goal of 85% coverage of all children under age one was reached by Morocco in 1995. Egypt surpassed that goal in 1990 and has sustained 90% coverage, which is evidence that the systems are in place and being institutionalized. Several countries also are beginning to achieve sustainability in vaccine procurement. Morocco, the Philippines and Bangladesh have all subscribed to the UNICEF-led Vaccine Independence Initiative, and are procuring vaccines using national revenues. India now produces and supplies 65% of its annual requirement of the diptheria/pertussis/tetanus (DPT) vaccine and 100% of measles vaccine. In 1995, as part of the Asia regional effort to eradicate polio, USAID supported India's effort to immunize more than 90% of children under age three. This is a significant achievement, since India reports almost 58% of the world's polio cases, and is responsible for 75% of the world's polio importations. Malnutrition and micronutrient deficiencies such as vitamin A, iron and iodine are underlying causes of high maternal and child mortality and morbidity. In Nepal, vitamin A capsules are distributed twice yearly by 14,000 female community health volunteers to 1.8 million at-risk children. Nutrition training of women's NGOs in Indonesia resulted in a five-fold increase of vitamin A coverage to 70% in targeted locations and an increased awareness and consumption of vitamin A and nutritionally rich foods.

Maternal mortality remains exceptionally high in many USAID-assisted countries. USAID addresses this by stressing the importance of prenatal care, with the result that high-risk pregnancies are identified and increasing numbers of births are attended by trained personnel. In Egypt, the percentage of women receiving prenatal care rose from 14% in 1988 to 53% in 1993, and the percentage of births assisted by trained personnel increased from 25% in 1991 to 65% in 1993. In Nepal, USAID assistance financed the development of a simple, home delivery kit that helps ensure basic hygiene during delivery. This kit surpassed expected sales by more than 400%.

Asia is expected to overtake Africa as the global epicenter of the HIV/AIDS epidemic by the year 2000. Therefore, USAID is implementing a well-coordinated regional response with host countries, NGOs, and other partners (see Figure 4). In countries where HIV/AIDS poses a threat, education and prevention programs are now in place. Programs include increasing access to and use of condoms, improving knowledge and practice of HIV/sexually transmitted infection (STI) risk-reduction behaviors, addressing cross-border HIV transmission, and promoting better STI case management. Significant USAID investment in Thailand already has resulted in a sustained decline in sexually transmitted disease rates over the last three years and, for the first time during this past year, a slowing of the rise in HIV incidence.

In parallel with the population and health problems, the ANE region faces a variety of environmental challenges that imperil the sustainability of its rapid economic and social development. USAID's environmental program focuses on developing solutions to environmental problems that yield simultaneous and direct economic, public health, and democratic benefits, as well as environmental results.

USAID and its partners spearheaded a new approach to forest and biodiversity conservation by promoting decentralized, community-based, natural resource management. This approach aims at linking generation of income and enhancing public input into decision-making and civil society to the conservation and sustainable use of biodiversity (see Figure 5); it also benefits women who are the primary users of forest and agricultural products. With USAID leadership, precedent-setting new laws and policies have been developed in the Philippines, Indonesia,Nepal, and India. In the Philippines, forest areas under community management increased from 19,600 hectares in 1994 to 69,000 hectares in 1995, plus an additional 148,000 hectares are now protected under indigenous communities' resource rights. Similarly, in Nepal, USAID's support to 600 community forest user groups in 16 districts improved management and productivity of 50,000 hectares of forestland, with the value of biomass produced from community forests now increasing by $8 million annually.

In combatting global greenhouse gas emissions, USAID's efforts center on enhancing energy efficiency, managing demand, and developing new renewable energy sources. USAID programs in improved forest management also serve to prevent green house gasses (e.g. carbon) from being released into the atmosphere (see Figure 6). In Egypt, USAID's assistance has been instrumental in reducing the amount of energy leakages by about 13% between 1990 and 1994, yielding concurrent reductions in sulfur dioxides, nitrous oxides, carbon dioxide, and particulate matter. In India, the world's second fastest- growing greenhouse gas producer, USAID's efforts are helping to increase the portion of power generated by clean, efficient technologies, and thereby, decrease the volume of greenhouse gas emissions per unit of power generated. These undertakings translate into major opportunities for U.S. exports of clean technology.

Complementing these efforts, USAID champions policy initiatives to reduce industrial and urban pollution. Indonesia and Egypt have adopted new pollution standards; Sri Lanka, and soon the Philippines, will have improved monitoring, enforcement, and incentive systems for pollution reduction; and Indonesia, Sri Lanka, Jordan, the Philippines, Morocco, and India now have voluntary factory audit programs. Several USAID-assisted, long-term construction projects to address urban pollution were completed in Egypt in 1995, resulting in improved access to sewerage and wastewater treatment for an additional 1.2 million people in Cairo and Suez and potable water for 3 million more people in Cairo. Over 22 million Egyptians now benefit from improved water and wasterwater systems. In Indonesia, during the last seven years, more than 3.5 million people in urban slums have improved access to potable water and sewerage services as a result of USAID assistance. Similarly, over the last decade, Morocco's modern sewerage and potable water systems have reduced water-borne diseases and flooding for over 600,000 people (70% of whom are below the country's median income level). These activities result in cleaner air and water, directly benefiting public health, child survival and economic development.

Water resource management is an important political issue and another environmental area of particular concern to the sustainable development of the ANE region. In the Middle East countries and in South Asia, water management issues -- availability, access, allocation, and appropriate use -- can lead to destabilizing regional conflicts. USAID continues to develop mechanisms to encourage the judicious use of water. PastUSAID support in the irrigation sector in Egypt resulted in the improvement of irrigation systems, and an increase in farmer participation and control over water delivery. In Nepal, the doubling of agricultural production occurred through the successful transfer of state-managed irrigation systems to water user associations. Improved water-use efficiency resulted from the employment of new technologies in one of Morocco's largest irrigation zones.

Progress in Strengthening Governance and Democratic Participation

Due to the tremendous political diversity among and within the countries of the ANE region, USAID provides important assistance to the peaceful transition to and consolidation of democratic states and society. USAID also assists more developed democracies to strengthen political participation at the local level, and promotes the empowerment of women in economic and social fora.

USAID supported the history-making January 1996 elections in West Bank and Gaza, where Palestinians elected their first democratic governing body. USAID financed the formation of more than 40 local groups that organized a domestic elections monitoring team; trained 15,000 Palestinians in voting techniques, with a focus on women, rural citizens, youth and former political prisoners; funded international observers; and provided technical assistance to the Elections Commission. In Cambodia, USAID's recent aid has focused on rebuilding the legal system of the country destroyed by genocide, civil war, and foreign occupation. Specifically, USAID assistance is helping Cambodia with the reform of the law (commercial and penal codes), developing a system of legal aid for the poor, building up human rights groups, strengthening the new Cambodia Bar Association, and helping maintain press independence. In Mongolia, USAID is supporting the civil society and the judiciary as pluralistic checks to the government and parliament which are still dominated by the country's former communist rulers. An important result is the recent establishment of the Women's Coalition, which joins 20 women's NGOs for the purpose of influencing the critical parliamentary elections that will be held in June 1996.

In Indonesia and Egypt, major ANE countries where USAID is encouraging democratic transitions, NGOs are supported to strengthen the rule of law. In 1995, USAID-supported NGOs in Indonesia pushed for a reduction in telephone rates, an improved labor regulation, the removal of the symbol for ex-political detainees from identification cards, legislation for new mechanisms for alternative dispute resolution to improve conservation practices, the breaking of the East Timor coffee cartel, and heightened activism by the National Human Rights Commission. In Egypt, with USAID's support over the last two years, a number of NGOs have become increasingly effective in representing their constituencies (such as water-user groups).

In the Philippines and Bangladesh, where previous USAID assistance laid the foundation for a strong civil society, the mushrooming of competent and genuine people's organizations and community associations now provides the constituency base for policy and legislative reforms. In the Philippines, USAID is continuing its assistance to the government's path-breaking effort to devolve political power and resources to the localities. In Bangladesh, USAID piloted a program of alternate dispute resolution and mediation for 4,000 cases in 15 communities.

USAID's Women in Politics (WIP) program supports the political empowerment of women through a regional network and through country-specific programs. In the past year, the network held regional workshops that discussed strategies for putting gender issues on the national policy agenda and created a cross-cultural curriculum for training women political leaders. In Thailand, in 1995, the WIP program trained more than 1,000 women in five northern provinces before the local elections. Of the 289 women who ran, two-thirds had received training and 109 were elected, increasing the share of female office-holders in these provinces from 1% to 14%. For its success in increasing the involvement of women in the political and judicial processes in Thailand and in other countries in the ANE region, the WIP program has been adopted as an Agency model worldwide.

Progress in Reducing Gender Disparities

More and better education for girls is a powerful factor that enhances women's ability to obtain higher-paying jobs. Separate studies found that a single additional year of schooling resulted in a 16% increase in yearly earnings for Moroccan women, and in a 26% increase in hourly wages for Thai women. Further, ANE countries with higher levels of female education have lower rates of child mortality and lower fertility rates. This is especially true when female education is accompanied by widespread availability of mother and child health services, family planning information, and modern contraceptive methods. In Pakistan, an additional year of school for 1,000 women is estimated toincrease their wages by 20% and to prevent 60 child deaths, 500 births, and three maternal deaths. In both Egypt and Morocco, USAID is initiating girls' education programs to redress widespread disparities: in Egypt, only 34% of adult females are literate versus 63% of adult males, and in Morocco, about 70% of women are illiterate and only 48% of girls nationwide attend school.

In Nepal, USAID activities addressed the three critical dimensions of women's empowerment: the total number of literate adult women increased by 30% in one year as a result of accelerated nonformal education classes implemented by USAID-supported NGOs and the Ministry of Education; the number of women learning about their legal rights exceeded expectations by 45% and the number seeking legal redress using the services of USAID- supported legal aid clinics increased ten-fold; and the number of Grameen-type loans to women for microenterprise activities more than doubled.

USAID activities in both the environmental and democracy sectors also offer unique opportunities to address gender disparities. USAID leadership in advancing community forest management benefits women, who are the primary users of forest and agricultural products. Many community forest user groups in Nepal and Indonesia are now managed by women. In the democracy sector, USAID assistance has helped establish the only independent garment workers' union in Bangladesh, with over 40,000 members, predominantly women. Members of this union, as well as many of the one million plus non-member garment workers who benefit from union activities, are becoming increasingly aware of their legal rights and gaining access to better wages and other benefits.

PROGRAM AND MANAGEMENT CHALLENGES

Through support for policy and institutional reform that is required for economic growth, effective population and health service delivery, democratic governance, and environmental management, USAID programs promote the four areas that have the greatest impact on sustainable development in the region. The best examples of development success in the region are countries with outward-looking economies, expanding trade, increased participation by both men and women in the market place, better access to government and public policy institutions, increased investments in the quantity and quality of social services (especially health and education), and higher environmental quality standards. These countries are more likely to engage in constructive dialogue to resolve regional conflicts and manage internal strife. In the face of declining resources, USAID's challenge is to maintain the provision of quality technical assistance and ideas -- the very aspects of the U.S. development assistance relationship most valued by the host countries and USAID partners. The provision of technical expertise and ideas is also the very means by which USAID advances U.S. foreign policy priorities.

Resource Allocations

Resource allocations in Asia and the Near East reflect U.S. national foreign policy interests, performance of ANE country economies and USAID programs, potential markets for U.S. exports, and ANE country contributions to global problems such as population growth, carbon dioxide emissions and HIV/AIDS infection. Overall, USAID has devoted fewer resources to ANE countries over the past several years, with the exception of Egypt, Israel and West Bank and Gaza. On average, across the entire region, USAID now provides less than 8% of total development assistance.

An important resource in the ANE region is the Economic Support Fund (ESF). In addition to the support for Israel and Egypt, ESF is used to assist the democratic transitions underway in Cambodia and Mongolia, programs in Jordan, Lebanon, the West Bank and Gaza, regional activities linked to the Middle East peace process, and the resolution of differences over access to South Pacific tuna fisheries for U.S. vessels.

Program Transitions and Graduations

A focus on sustainability and transition is central to ANE program management. As sectors in USAID-assisted countries reach a level of performance that appears to be sustainable by indigenous public and private institutions, USAID will initiate steps to determine the country's capacity and readiness to graduate from U.S. assistance. Such steps are based on a number of factors, including the maturity of the sector systems to produce information, products, and services that are sufficiently well-valued by the population so that enough national resources are committed to ensure their continued existence.

Indonesia and Morocco are two examples of mature health and family planning programs where USAID is preparing transition plans for an orderly disengagement of support in this sector (see Figure 7). Both countries are characterized by committed governments that have recognized both the crucial role that demographic balance plays in economic development and also the need to integrate population considerations into national socio-economic planning. These countries allocate significant resources to the population and health sector, have instituted cost-recovery schemes, and support a growing private sector. Each country has developed both national and international training programs, and so serve as important training resources within the region.

Another key USAID transition plan objective in Indonesia is to promote continued economic growth while moving to a relationship which emphasizes sustainable, mutually beneficial linkages between the United States and Indonesia. USAID's long-standing economic growth assistance has contributed to Indonesia's strong economic performance in recent years and has leveraged other donor and private resources as a result.

USAID also continues to evaluate different management approaches to address the changing realities and opportunities in the region. Through the United States-Asia Environmental Partnership, USAID seeks to link the energies and expertise of the U.S. private sector with emerging demands for such skills in developing countries. The export of clean technologies benefits U.S. business and U.S. national interests in seeing reduced greenhouse gases and pollution and more efficient use of non-renewable energy resources. Finally, USAID will evaluate ways of providing support through alternative mechanisms -- with private sector entities, NGOs, host countries, and other donors -- to reduce both the levels of USAID financing and oversight.

External Debt

The ANE region is relatively less encumbered by debt than other regions, although it varies considerably by country and sub-region. In assessing the burden of external debt, comparisons are often made with the level of exports. In East Asia, the Middle East and North Africa sub-regions, the net present value of future debt service is roughly 92% of the region's exports, significantly lower than Eastern Europe (128%), sub-Saharan Africa (151%) and Latin America (228%). By contrast, the ratio for the South Asian sub-region is much higher at 206% of exports. The most heavily indebted ANE countries relative to the size of their economies are Jordan and Vietnam. The U.S. forgave approximately $660 million of Jordanian debt owed the U.S. in two tranches during 1994-95; a small amount remains to be forgiven.

FY 1997 PROGRAM

The total development assistance request for Asia and the Near East is $318,200,000. Economic growth activities account for $54,800,000, or 17.4% of the total. About $56,200,000 of economic funding will be invested in child survival interventions, girls' primary education, and a highly focused HIV/AIDS program. Population and related health activities will continue to be our biggest global investment at $163,800,000 (51.2%), respectively. Funding willemphasize institutional and financial sustainability, particularly for mature programs, and transition planning in some sectors for two of the most successful countries. Environment programs account for $73,100,000 (22.8%) and support programs that would prevent further environmental degradation. USAID democracy and governance activities, which focus on strengthening local institutions and organizations, total $26,500,000 (8.3%).

Economic Support Funds, requested at $2,178,400 are for the most part, directly linked to the Middle East peace process and will support development activities in West Bank and Gaza, Egypt, Lebanon, and Jordan. In addition, a smaller amount is targeted at two countries in transition, Cambodia and Mongolia, and for U.S. treaty undertakings for access to South Pacific tuna fisheries.

P.L. 480 Title II food aid, totaling $131,364,000 is proposed $18,800,000 for India, $96,075,000 for Bangladesh, $7,411,000 for Afghanistan, $7,725,000 for Northern Iraq, and $1,353,000 for Pakistan.