Mr. MAFFRY. It depends. The general rule is 75-25. Senator AIKEN. Yes. Mr. MAFFRY. In order to get long-term capital into these projects, Senator Aiken, it is necessary to give the institutional investors such as insurance companies, pension funds, a full guarantee. Senator AIKEN. May I ask another question? Mr. MAFFRY. Yes. OWNERSHIP OF LOCAL CORPORATIONS Senator AIKEN. Are these ventures incorporated as corporations of the country in which they operate? Mr. MAFFRY. Yes, sir. Senator AIKEN. They are? Mr. MAFFRY. Yes, sir. Senator AIKEN. Rather than as branch organizations of the United States. Take Chile-I notice the Parsons & Whittemore $46,900,000 project cost in Chile, Industrias de Celulosa Arauco. What percentage of that corporation is owned by Parsons & Whittemore and what percent by the Chilean Government or other Chilean investors? Mr. MAFFRY. I am sorry, I do not have those details before me, Senator Aiken. Senator AIKEN. Does Chile require a 51-percent ownership for corporations in that country? Mr. MAFFRY. It is a Chilean corporation, it is a joint venture. I cannot give you the exact proportions. Parsons & Whittemore, to the best of my knowledge, entered into it as the manager of the project. I am not sure that it has itself a direct interest in it. Senator AIKEN. Here is another pertinent question. The cost of the project is almost $47 million. Mr. MAFFRY. That is the total. Senator AIKEN. Suppose Parsons & Whittemore owned 49 percent and Chilean investors 51 percent of the stock. In the event of expropriation or the insurance becoming due, would Parsons & Whittemore collect $46,900,000 for themselves and the Chilean Government or would they collect on a percentage of the American investment? Mr. MAFFRY. They would collect whatever portion was subject to guarantee. RECOVERY OF LOSSES INCURRED THROUGH FOREIGN BANKS Senator AIKEN. We had a case last year which generated quite a lot of interest when a newly formed bank set up another bank in Korea, incorporated under the laws of Korea as a Korean bank, not as an American subsidiary. I understand the American bank owned 51 percent of the stock, or a majority of the stock anyway. If that new bank made loans which then went sour would they be able to collect that percentage of the loss which represented their majority interest in the bank? It got a little complicated for us so we threw it out last year. Mr. MAFFRY. I do not think it works that way, Senator Aiken. If the investment of the U.S. parent in his Korean subsidiary were guaranteed, then there would be a liability to the U.S. Government. But this would not attach to loans made by the Korean bank to its borrowers. Senator AIKEN. Now, in the Korean bank the American company owned the majority of the stock. Mr. MAFFRY. Yes. IS FOREIGN INVESTOR GUARANTEED? Senator AIKEN. But take a country where the American bank owned 35 percent and incurred a loss, then would they recover the loss for the foreign investors as well as themselves or should they recover simply that proportion of the loss which represented their proportion of the investment? Mr. MAFFRY. Senator, the principle here is that guarantees are extended only to eligible investors, and this means in fact U.S. investors, not foreign investors. So that the element in these total project costs that consists of foreign investment is not subject to guarantee in the first instance. Senator AIKEN. Of course, we have to look out for grandchildren, I think, if you know what I mean. You do not know where that would stop. Senator JAVITs. Would the Senator yield? Would you yield for a moment? Senator AIKEN. Yes. The chairman, I am sure, will recognize the Senator from New York. Senator SYMINGTON. Senator Javits. Senator JAVITS. I want to get a yes-or-no answer to the Senator's question, because I think the answer is "No," the foreign investor would not reap the benefit of the investment guarantee. Mr. MAFFRY. That is correct. Senator JAVITS. Because the guarantee is only the U.S. portion. Senator AIKEN. Seventy-five percent, or 51 percent, say. Mr. MAFFRY. Yes. Senator SYMINGTON. What is the percentage? Mr. MAFFRY. Up to 75 percent. Senator SYMINGTON. Up to 75? Mr. MAFFRY. And the general division is that the long-term investors, which are institutions, get 100-percent guarantee, and the shortterm investor such as my own bank take the unguaranteed portion. Senator AIKEN. The Korean bank however participates in setting up a bank in Burma or some other country, and owns 51 percent of that stock. Mr. MAFFRY. It does not work that way. The guarantee attaches only to the direct U.S. investment in a foreign enterprise. Senator AIKEN. We want to know how it does work. Senator JAVITS. I think that is the important thing, Mr. Chairman. The answer to Senator Aiken's question is, no; the foreign investor does not get the benefit of any U.S. guarantee directly, indirectly, by new subsidiaries or anything else. You go through to the substance of the investment. Senator AIKEN. That is for us to write into our legislation.. Senator JAVITS. That is a fact, that is what is done. As Mr. Maffry says, it is only a guarantee to the eligible borrower and the eligible borrower is a U.S. personality. The fact that a U.S. personality has an interest in some foreign entity does not change the extent of his guarantee which is only to the extent of his interest. Mr. MAFFRY. That is correct. Senator SYMINGTON. Senator Javits. HEARING OTHER WITNESSES Senator JAVITS. I would suggest, Mr. Chairman, respectfully, that we hear the other two witnesses. That was the purpose of calling them as a panel. Senator SYMINGTON. Senator McGee, have you any question of Mr. Maffry? Senator McGEE. No. Senator SYMINGTON. Gentlemen, I have to leave. Senator McGee was kind enough to say he would chair. That in no sense means I do not have a deep interest in this matter. I have another hearing that I must go to, and regret that my friend, General Draper, was held up so I could not listen to him. Senator McGee, would you take over. Senator JAVITS. Mr. Chairman, we have not yet heard from Mr. Dennison and Mr. Ritchie. Could we hear now from them? Then I will have some questions to the panel. I should not think we would be over 15 minutes at the most for everybody. Senator MCGEE (presiding). Yes. Let us try to finish by 12:30. We do have a succession of further witnesses now that total some nine or 10, and I hope we can achieve a measure of equity in seeing that everybody's cause gets its opportunity for fair representation. For that reason, we would appreciate hearing whatever expediting summaries or digests of the critical points that might be made. This applies to all the witnesses. Mr. Dennison. STATEMENT OF CHARLES S. DENNISON, VICE PRESIDENT, INTERNATIONAL MINERALS & CHEMICAL CORP., NEW YORK, N.Y. Mr. DENNISON. Senator, I will attempt to speak at my Manhattan pace, Senator Javits, to get it over with. One, I did join with Mr. Jaffry and others of the industrial community working on OPIC. Many of us for years have thought we needed a more flexible, more realistic mechanism for the private sector to work abroad, and this is the result of a cross-community effort involving the NAM, CED, the Chamber of Commerce, and I believe that OPIC can represent a significant step ahead. GREEN REVOLUTION IN AGRICULTURE I would now like to say why it is needed. I would like to get out of Washington and the States and to the countries. And my point of emphasis is going to be this extraordinary development in agriculture which is now entitled the "Green Revolution" from plant genetics, from rice in Los Banos in the Philippines and in Mexico. People, responsible observers, consider this to be potentially of the same magnitude of importance as the Marshall plan. It is an extraordinary development in terms of the welfare, of the economic developments, the social structure and the politics of the underdeveloped countries. Today we are beginning to realize that agriculture is a system, it is a system that starts with the soil, with the inputs, and it ends with the consumer. It is a sytsem that requires the right inputs, the right techniques and after harvest it requires the proper treatment, protection, and marketing and it is conceived as such. To govern the system we have to have the right price policies and proper credit. Now, today the private sector is working closely with international institutions, with the U.S. Government, with Ford and Rockefeller to find out how this system works because it is essentially a commercial system, and we are finding new ways in which the skills of the private sector can be linked with government in all phases of this system so that it functions more effectively. And I would say that throughout Asia, also in Latin America, and later in Africa, the role of the private sector will be infinitely more important in the years ahead, not with huge investments in the classic extractive sense but in the modern marketing and technical sense. We know more about processing of food, we have developed the idea of food products, we have developed the ideas of management solution to local marketing problems. Since many of these countries in Asia today are taking advantage of these new rice varieties, they are all headed for self-sufficiency in rice. This was caused by the famine threat. We now face the prospect that unchecked this could cause an immense glut and this, in turn, could depress rice prices all through Asia and seriously interfere with regional trade. WORK OF PRIVATE SECTOR Again the private sector is working actively today through the AgriBusiness Council, through advisory committees in Rome, to get the international rice trading organizations like Cargill, et cetera, to calculate what the impact of this is going to be in advance; try to work back to persuade governments to improve their local distribution, to look for diversification, crop diversification, and animal husbandry. You might call it an international agreement at precrisis management, and the private sector has a very important role to play and, therefore, I believe that OPIC, which will encourage the private sector, can be most important in this emerging field which is going to affect the lives obviously of well over a billion people, because of the dimension of the agricultural field in international relations. I would like to shift just quickly now from OPIC to the overall aid bill. This is, I think, a very important transitional year, sir. Because of Senator Javits' provision in providing for a presidential task force we are going to have an assessment of the local aid picture. 32-308-69- -12 MULTILATERAL STRATEGY OF AID, TRADE AND EDUCATION Now, I am a convinced multilateralist and I believe that this country, together with other developed countries and the underdeveloped countries has an opportunity now to mount a longer range multilateral strategy of aid, trade, education assistance, and Mr. Weaver's testimony was right to the point. I think we need a new definition of how we can work more effectively. May I suggest that with the prospect of the Pearson Commission reporting in October, with the U.N. preparing for Development Decade II, 1970-80, with the post-UNCTAD talks on trade preferences getting underway, that we keep our bilateral effort at a good level this transitional year, and one of the chief reasons for that is that we are achieving this success in the key countries of Asia where hunger has been a threat, India, Pakistan, Turkey, and Indonesia. If we keep that progress until we get a new longer range strategy I think we will serve our country and the world well. Thank you. (The full statement of Mr. Dennison follows:) STATEMENT OF CHARLES S. DENNISON I am testifying before this Committee in support of the Foreign Assistance Bill. As a concerned citizen, Mr. Chairman, I consider it essential to maintain continuity in the foreign assistance program. This legislation will do so during the period in which the Administration is reappraising the nation's foreign econome and assistance policy by a Presidential Task Force. I would ask that the Committee consider my testimony in the light of my operating experience in international industrial and development activity. I am an officer of a corporation involved in the development process and a trustee of the Agricultural Development Council. I served as a member of the President's Science Advisory Committee Panel on World Food Supply and am involved with the international institutions, and academic and industrial groups concerned with economic development. I support the establishment of OPIC as an instrument for encouraging and assisting private industry and finance to deploy their skills and resources in developing countries whose investment potential does not attract the private sector. I am aware, Mr. Chairman, of the questions concerning American responsibility and capability in foreign affairs that have been raised by this Committee in a penetrating and responsible manner. I share concern about the nation's mission, its commitments and its involvement. Therefore, I will offer my thoughts on international economic development policy as a prelude to my support of the Foreign Aid Bill. We face the prospect of a world in which two-thirds of the population exists in relative poverty, relative hunger, and in relative non-productivity. And this majority of mankind is expected to double by the end of this century. In contrast, our affluent minority, largely white, is growing comparatively richer, thus widening the division of the world's peoples. The Committee knows this doleful prospect and recognizes that it is not favorable for the world as a whole, nor for the poor multitudes involved, nor for the rich industrial countries among which the United States is preeminent. I regard this as one of the two most demanding global problems before our nation, the other one being the related problem of the maintenance of peace. Much is being done and more can be done to arrest unchecked population growth and mounting global poverty and degradation. This task is not the sole responsibility of the United States, but rather of all nations concerned, rich and poor. The task of development, of nation building. must be done by the nations themselves, and the preponderance share of the resources employed must be local. This process is successfully underway in a number of countries and others are beginning to follow their example. What is required to meet this growing effort at self help is a strategy of development and trade to be agreed to by the industrial countries-the OECD |