Foreign operations, export financing, and related programs appropriations for fiscal year 1994 : hearings before a subcommittee of the Committee on Appropriations, United States Senate, One Hundred Third Congress, first session, on H.R. 2295 ...

628 Pages·1994·25.2 MB·English

by  United States. Congress. Senate. Committee on Appropriations. Subcommittee on Foreign Operations, Export Financing, and Related Programs

S. Hrg. 103-430, Pt. 1
Senate
Hearings
Before the Committee on Appropriations
1
Y 4. AP 6/2: S. HRG. 103-430/
PT, 1
ForeigD Operations, Export, ,f.jiuiici.ii
Foreign Operations,
Export Financing,
and Related
Programs
Appropriations
Fiscal Year 1994
103d CONGRESS, FIRST SESSION
H.R. 2295
PART
1 (Pages 1-613)
NONDEPARTMENTALWITNESSES
m
4
es4

S. Hrg. 103-^30, Pt. 1
FOROGN OPERATIONS, EXPORT HNANCING, AND
REUTED PROGRAMS APPROPRIATIONS FOR
nSCAL YEAR 1994
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
UNITED STATES SENATE
ONE HUNDRED THIRD CONGRESS
FIRST SESSION
ON
H.R. 2295
AN ACT MAKING APPROPRIATIONS FOR FOREIGN OPERATIONS, EXPORT
FINANCING, AND RELATED PROGRAMS FOR THE FISCAL YEAR END-
ING SEPTEMBER 30, 1994, AND FOR OTHER PURPOSES
Part 1 (Pages 1-613)
Nondepartmental witnesses
Printed for the use of the Committee on Appropriations
U.S. GOVERNMENT PRINTING OFFICE
68-609cc WASHINGTON : 1994
ForsalebytheU.S.GovernmentPrintingOffice
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ISBN 0-16-043943-4
COMMITTEE ON APPROPRIATIONS
ROBERT C. BYRD, WestVirginia, Chairman
DANIEL K. INOUYE, Hawaii MARK 0. HATFIELD, Oregon
ERNEST F. HOLLINGS, South CaroUna TED STEVENS, Alaska
J. BENNETT JOHNSTON, Louisiana THAD COCHRAN, Mississippi
PATRICKJ. LEAHY. Vermont ALFONSE M. ITAMATO, New York
JIM SASSER, Tennessee ARLEN SPECTER, Pennsylvania
DENNIS DeCONCINI, Arizona PETE V. DOMENICI, New Mexico
DALE BUMPERS, Arkansas DON NICKLES, Oklahoma
FRANK R. LAUTENBERG, New Jersey PHIL GRAMM, Texas
TOM HARKIN, Iowa CHRISTOPHER S. BOND. Missouri
BARBARA A. MIKULSKI, Maryland SLADE GORTON, Washington
HARRY REID. Nevada MITCH McCONNELL, Kentucky
J. ROBERT KERREY. Nebraska CONNIE MACK, Florida
HERB KOHL, Wisconsin CONRAD BURNS, Montana
PATTY MURRAY, Washington
DIANNE FEINSTEIN, California
James H. English, StaffDirector
Mary S. Dewald, ChiefClerk
J. Keith Kennedy, Minority StaffDirector
Subcommittee on Foreign Operations, Export Financing, and Related
Programs
PATRICKJ. LEAHY. Vermont, Chairman
DANIEL K. INOUYE, Hawaii MITCH McCONNELL, Kentucky
DENNIS DeCONCINI, Arizona ALFONSE M. I^AMATO, New York
FRANK R. LAUTENBERG, New Jersey ARLEN SPECTER, Pennsylvania
TOM HARKIN. Iowa DON NICKLES. Oklahoma
BARBARAA. MIKULSKI. Maryland CONNIE MACK, Florida
DIANNE FEINSTEIN, California PHIL GRAMM, Texas
Professional Staff
Eric D. Newsom
Tim Rieser
James Bond
(Minority)
Administrative Support
Fred Kenney
(H)
CONTENTS
Tuesday, June 15, 1993
Page
Nondepartmental witnesses 1
Material submitted subsequentto conclusion ofhearing 489
(in)

FOREIGN OPERATIONS, EXPORT FINANCING,
AND RELATED PROGRAMS APPROPRIA-
TIONS FOR FISCAL YEAR 1994
TUESDAY, JUNE 15, 1993
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:07 a.m., in room SD-138, Dirksen
Senate Office Building, Hon. Patrick J. Leahy (chairman) presid-
ing.
Present: Senators Leahy, DeConcini, and Feinstein.
NONDEPARTMENTAL WITNESSES
STATEMENT OF BRUCE RICH, ON BEHALF OF THE ENVIRONMENTAL
DEFENSE FUND
OPENING REMARKS OF SENATOR LEAHY
Senator Leahy. Good morning. I thank all ofyou for being here,
and I am sorry that it is as crowded a time as it is. We have 46
witnesses scheduled today on issues ranging from the environment
to our Military Aid Program. Because of the schedule, I have
changed slightly the starting time this afternoon so that it will ac-
commodate a vote before the Senate.
I would note on the schedules the starting and stopping time. We
will have to keep to that. Of course, your whole statements will be
put in the record. I do not want to cut you off because this may
be the last ti—me we will be able to do it this way.—But I only men-
tion the time and I would ask vour cooperation ^because we will
stop at the time shown, both in the morning and the afternoon, and
anybody who is not heard, unfortunately, will have their statement
put in the record. So I do not want you to feel any pressure from
all the people sitting behind you, but we will go ahead.
Today, we start with Mr. Rich, Bruce Rich from the Environ-
mental Defense Fund.
SUMMARY STATEMENT OF BRUCE RICH
Mr. Rich. Thank you, Mr. Chairman, for the opportunity to ap-
pear here today before the Subcommittee on Foreign Operations. I
am testifying on behalf of three national environmental organiza-
tions, the Environmental Defense Fund, the National Wildlife B'ed-
eration, and the Sierra Club. Together, these organizations have
more than 5.7 million members and supporters nationwide.
(1)
On behalf of our organizations, first of all, I would like to thank
you very much, Mr. Chairman and the members ofthe subcommit-
tee, for the leadership role that you have shown over the years in
promoting environmental and social concerns in our multilateral
and bilateral assistance, and most recently for your letter of June
7, 1993, to the President of the World Bank calling for a creation
of £m independent review or appeals commission to look at con-
troversial projects and for a more open information policy. Those,
ofcourse, are recommendations that we have endorsed also.
Mr. Chairman, you stated on April 27 that you had to wonder
whether the World Bank could be trusted to use the public's money
wisely and effectively. We have asked ourselves that question, too.
We have seen over the past year alarming evidence of the World
Bank's lack of the most basic accountability and sense of respon-
sibility for the environmental and social impacts of its projects. We
have concluded that it would be environmentally, socially, and eco-
nomically irresponsible to continue to appropriate funds for the
IBRD or IDA without some evidence of far reaching reforms in the
way the bank does business.
Senator Leahy. Have you seen any evidence ofthat so far?
Mr. Rich. Well, very little. In fact, over the past year, I have to
say we have seen evidence of a real regression. And I think it is
the environmental problems, they are just a leading indicator of
more systematic mismanagement or lack of management. It is just
an indicator of really grave problems that the place is just not to-
tally under control.
But we do recognize that the new administration sees the need
for reforms, and that alternatives to help Africa's macroeconomic
crisis have to be found before cutting IDA's support for African
economies.
So what we are recommending is that for the coming fiscal year
that the Congress should appropriate enough IDA funds to con-
tinue to support Africa, but there should be requirements for com-
prehensive reports by the Treasury on the progress the Bank
makes in instituting a number offundamental reforms that we dis-
cuss in more detail in our statement.
We think that some cuts should be made in the IBRD at the very
least to send some sort of a message. You, Mr. Chairman, 2 years
ago, wrote the Secretary ofthe Treasury setting down benchmarks
in certain key areas such as energy efficiency, treatment offorcibly
resettled populations, forestry protection, environmental assess-
ment, and so on, and indicated that by mid-1993 if there were not
major improvements it would be appropriate to start cutting IBRD
appropriations. Frankly, we think that the record has been overall
just abominable and in some ways a regression. And we think that
would be called for at the very least.
We do not have much time. I would like to citejust two examples
among many which are discussed in my statement. Brent's state-
ment, and together with other information we have produced, of
how great this regression is at the Bank. I think the most impor-
tant indication is the Bank's response to the "Wapenhans" report,
which is one of the reports that you cited in your statement April
That report was prepared internally in the Bank. It looked at the
entire $140 billion outstanding loan portfolio of the Bank. It con-
cluded, one, that over the past decade the number ofunsatisfactory
projects has increased to 37.5 percent from 15 percent; two, that
nearly four-fifths of the financial conditions in World Bank loan
agreements, 78 percent, are not being complied with; three, that
Bank staff have very little faith in th—e entire economic appraisal
process and project preparation process I quote:
* * * that according to an internal staff survey only 17 percent of Bank staff
interviewed felt that analytical work during project preparation was compatible
witii the achievementofproject quality.
And the report cites a pervasive culture ofapproval for loans.
Well, what has been the response? Twofold. One, earlier this
year, the Bank management issued directives calling for a weaken-
ing of the Bank's policies, which are going to be reissued in more
general, less binding form, changed from operational directives to
operational policies.
Second, a document called "Next Steps" was prepared. Next steps
took nearly 1 year to prepare, and it was so bad that the executive
directors sent it back for major revisions. The U.S. Director of the
Bank, in a board meeting in May, said the expected actions are not
concrete to be monitorable, and that people hostile to the Bank
would view them quite simply as not a serious response to these
problems.
Well, that is the record. On the other hand we have seen
Senator Leahy. You are on Mr. Blackwelder's time.
PREPARED STATEMENT
Mr. Rich. OK. Well, let me finish then and thank you again. And
in addition, we have called for alternatives supporting the Inter-
American Foundation, Appropriate Technology International, the
African Development Foundation, small scale foreign aid organiza-
tions that the Grovemment supports that really do reach the poor,
and in terms of Africa, calling for a reexamination of major debt
relief for Africa. Endorsing the Trinidad terms, for example, would
do a lot to relieve the macroeconomic pressures on the impover-
ished African Nations.
Thank you, very much.
Senator Leahy. Thank you.
[The statement follows:]
STATEMEhfT OF BRUCE M. RICH
I IniroUucuonandSummary
Mr.Chairman,thankyoulorIhcopponuniiyloicslilytodayhclorciIkSenateSuKi)iiiinntccon
l-orcJanOperations. Expon Financing, and related matter:;. I am Bnjcc M. Rich. Senior Attorney wiiJi
ihe EnvinmmeniaJ Delensc Fund(EDR. and Directorol EDFs hitcmaiional Pmgram. I am lesiilying
loday hehalfo» EDF. the NationaJ Wildhfe Federation (NWR. and the Sierra Cluh. EDF is a pubhc
interestenvironmental researchandadvcKacyorganizationwithover2(M).(XX)membersnationwide. Tlie
NationalWildlifeFederationisthelargestconservationorganizationintheWesternworldwithmorethan
- millionmembers,andtheSierraCluhhasoverWMl.tXX)membersandsupponers. MystatementrcHccLs
ihc contributionsofmy colleagues at EDF. Scott Hajosi. Korinna Hona. Steve Schwanzman and Lori
l.dall.
OnbehalfofEDF.NWF.andtheSierraCluh.I firstwouldliketothankyou.Mr.Chairman,and
themembersoftheSubcommittee,torthe leadersliipmlcthis Subcommitteehasi;ikenoverthe yearsin
pnimotingenvironmental andsrKiaJconcerns inourmultilateral and bilateral foreign assistance.
MystatementwilladdressFY 1994appmpriationsforihcWorldBank,aixlAfricanDevelopment
Bank, theGlobalEnvironment Facility,aswell asthe United Nation Envininment Pmgram.ilie Uncsco
World Heritage Fund and Center, and needed support for U.S. uovermnent elfons to cn.suie U.S.
leadershipincarryingout initiativeslaunched at the EarthSummit in Rio last June.
Mr.Chairman,youstatedon.Apnl27that \ouhadtowonderwhctiicrtheWorld Bankcanbeimslcd
10u.sethepublic'smcmeywisely andelfectively. We have askedourselvesihatquestionI(M). We have
seenoverthepastyearalarmingevidenceofIheWorld Bank'slackoftticmostbasicaccountabilityand
senseofresponsibilityfortheenvironmentalandsocialimpactsofitsprojects.EDFandanumberofother
national environmental groups have concluded ihat it would f>e cnvininmcntally. socially, and
economically irresponsible to continue lo appmpriate for funds for cither the IBRD or IDA wiihout
ovidctKeoffarreachingreformsinthewaythe Bankdoesbusiness. Butwe alsorecognise ihat Ihenew
administration sees the need for reforms in the Bank, and lliat alternatives to help .Alricas macm-
jconomic crisis should be found ficforc cutting IDA support for African cci)nomies--ihough there is
increasingevideiKe Ihat IDA isnotdoing Africa, andespeciallylite poorinAfrica, muchg<MKi.
Wesuggest,therefore,thatforFY 1994theCongressappn)priaieenough IDA fundstocontinue
lo support Africi with requirements forcompreheasivc reporting by ifie Trexsury Department on the
pntgrcss Ihe Bank makes ininsiituiing a numberof fundamental reforms discussed in detail later. We
recommendthat forFY 1994tfuithe AppropriaiioasCommitteecutaponionofIBRD lundinc.asyou.
Mr. Chairman, indicated would be anoption in the letterthat you sent tothe SecretaryofIheTreasury
nearlytwoyearsago.onJune25. 1991.The heartofneeded reforms lies inmajorinstitutional changes
tomakeprojectquality, notpushingmoney,theoverarching priorityofIhe Bankand reformstoensure
independent review of Bank projects and public access lo most Bank dcKuments. Ii is important to
rememberthattheCongresshasbeencallingforreformsalongthesegeneral linesinIheWorld Bankfor
nearlyadecade. Afterone year, ifthese reformsare notin place, we believe that notonecentmoreof
U.S. taxpayers' moneyshould golosupportthe Bankuntil thingschange.
I will cntKlude my statement with ihe endorsement of our organizations for increased
appropnations for several institutions supported by the U.S. Ihat we believe arc very cusi-elfeclive in
pnimotingenvironmentalsustainabilityandsocialequity. TheseagerKies--iheInter-AmericanandAfrican
Development Foundations,and AppropriateTechnology Iniemational-do noi finance large government
bureaucracies, but have a mandate lo a.ssisl community groups, non-goveniiiienial orcani/aiions and
^lnallcrbusinessesandenterprises.
II. The World Bank
ForFY 1994the Administration is requesting appropriationsofover$l..1 billionl<irllic World
BankanditscoiKCSsioiiallendingainiiaie.theInternationalDevelopmentA.s.socialioiUlDA). Since 19X5
ihis Subcommittee has played a lead role in enacting legislation ihat has instnictcd ihe Treasury
Department to promote key environmental reforms in the Bank and iltc ihrec regional muliilaieral
development banks. In ihc case of ilic Wortd Bank, it has cea.scd fin:uiciiig a lew ol its most
cnvin)nmcniallydestructiveprograms,suchasgiganticcolonizationprojectsintropical forests,and.witJi