lack of schooling, and a host of other afflictions and miseries which tragically weaken children and their societies." Of these millions of children growing up under appalling conditions, he added, "They consitute such a large proportion of the world population that we would be justified to speak of a ‘global emergency'. The only possible remedy, accelerated general development, is well beyond the scope of UNICEF, but UNICEF has an important catalytic contribution to make to this process".

We trust that you, the members of this committee, will respond to the needs of children and approve this modest contribution of $15 million to aid for the world's children as an expression of our faith in the future.

Thank you.

Senator MCGEE. Thank you very much, Mrs. Van Valkenburgh.

EFFECT OF POPULATION STATISTICS ON CONTRIBUTIONS

I want to ask you first what other ingredients you thought ought to measure a nation's formula for contribution. You were mentioning in your testimony that population comparisons alone are inadequate or inappropriate.

Mrs. VAN VALKENBURGH. Well, I think what I said was that not population alone is inadequate but I think what I was trying to point out, Senator, is that it isn't just the developed countries that are contributing to the central account at UNICEF. The developing counries themselves, those who are receiving assistance are contributing also 12 percent of the budget and I think this is significant of itself because that is their literal recognition of the assistance that UNICEF is giving them.

Senator MCGEE. So that it is the other side of the coin in a way that the capability of a country to participate in terms of its resources surely ought to play an even higher role than sheer population statistics that we sometimes fall back on.

Mrs. VAN VALKENBURGH. Yes; I think that is true.

Senator MCGEE. There might even be a good case made for heavier contributions just because it is right. We don't very often inject that in this day and age.

Mrs. VAN VALKENBURGH. That is the one we would like to inject always, sir.

Senator MCGEE. I think that is one of the inspiring ones here.

ATTACKS ON UNICEF PROGRAM

Would you care to observe for the committee whether the solicitations that you make in volunteer ways are seriously affected by the few witch-hunting groups that have taken you on?

They look for the witches especially around Halloween, I suppose. Mrs. VAN VALKENBURGH. That is right, sir.

Senator MCGEE. Can you measure the impact that those anti groups have on your efforts or not?

Mrs. VAN VALKENBURGH. The organization which deals with the fundraising is the U.S. Committee for UNICEF.

Senator McGEE. Yes.

Mrs. VAN VALKENBURGH. And I would say the reply, of course, never catches up with the attack, but that in the last few years in spite of the attacks which continue, that the U.S. Committee for UNICEF with the help, I might say, of the President recently by pro

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claiming October 31 Trick or Treat Day, and the Congress going along so very well in such a cooperative fashion, that this has had a really good effect on the trick or treat program.

Now in the greeting card program the same thing happens, the attacks are there, and the replies seldom catch with it, they don't get the same attention but, generally speaking, I would say the U.S. public has become very well educated to the needs and to the program and to the truth of, what can I say, the replies to these really outrageous charges.

Senator MCGEE. Sometimes the attackers supply their own answers, I suppose, as far as the more sophisticated of our citizenry are concerned. They might even be useful to keep around just because they are so utterly lacking in any kind of compassion and they are so ridiculous in the bugs that they see beneath everything that it might have, to borrow a phrase from our colleague from Rhode Island who was just in here, a counterproductive affect from their point of view. But I think that the program itself has withstood with dignity these nearly illiterate assaults or certainly excessively emotional assaults on what is, it seems to me, a very substantive and notable program. Mrs. VAN VALKENBUGH. I would certainly hope so, sir, and I think that it might be perhaps appropriate to tell you that in this last year the U.S. Committee for UNICEF turned over more than $7 million to UNICEF which were the proceeds from the trick or treat and the greeting card programs and that is up.

Senator McGEE. Yes.

Mrs. VAN VALKENBURGH. So it has been a steady increase all along. Senator MCGEE. You have two dedicated collectors in the McGee family who look forward to that evening's indulgence.

Mrs. VAN VALKENBURGH. Good.

Senator McGEE. Senator Case.

Senator CASE. No; I don't have any comments. I appreciate your presentation. I must say so far as my own experience goes, and it is quite limited, I had always thought UNICEF was about as safe as motherhood as far as being for something is concerned.

Thank you.

Mrs. VAN VALKENBURGH. Thank you very much, Senator.

Senator MCGEE. I have no further questions.

Mrs. VAN VALKENBURGH. Thank you very much.

Senator MCGEE. Thank you very much.

Mr. NESS. Mr. Chairman.

Senator MCGEE. Yes; you may proceed in whatever way best serves your purposes, but I would remind you again that your full statement will appear in the record.

STATEMENT OF GORDON L. NESS, PRESIDENT AND BOARD

CHAIRMAN, NESS INDUSTRIES, INC., PALO ALTO, CALIF.

Mr. NESS. I understand. Having traveled from California to appear I would like the opportunity to present a condensed version.

Senator McGEE. Yes.

Mr. NESS. And we have additional technical matters which we presented as an addendum.

Senator MCGEE. Very fine.

Mr. NESS. I am Gordon Ness, president and chairman of the board of directors of Ness Industries, Inc.

I am grateful for the opportunity of appearing before your committee with a few thoughts and comments on the American foreign aid program, and on the foreign aid bill introduced by your chairman at the request of the administration.

Ness Industries is an electronics company with several facets. We provide management and finances for new electronics corporations and we also provide offshore, that is overseas, manufacturing facilities for manufacturers, for U.S. manufacturers who must reduce portions of their costs in the highly competitive labor areas of intensive manufacturing in order to compete in the world market, and I might add in order to increase their exports and, therefore, increase the balance of trade.

LOSING SHARE OF TOTAL WORLD MARKET

An example of this is the U.S. computer manufacturers who were rapidly losing their share of the total world market through competition from countries where labor costs were lower, notably Japan and West Germany. In order to meet this competition the U.S. manufacturer automated where possible; however, no manufacturer was able to successfully automate the production of computer memories, which requires the hand stringing of miniature ferrite cores. Today all manufacturers of computer memories have overseas manufacturing operations which now allows them to compete favorably for the sales of the complete computer, thus insuring the continued employment in the United States of all those responsible for research and development and manufacturing of the balance of the computer system.

MANUFACTURING PLANT IN INDONESIA

Last month we opened a manufacturing plant in Indonesia, after 212 years of negotiations with the Indonesian Government. It is our firm conviction that our operations in Indonesia are not only important to U.S. manufacturers in allowing them to compete in the world market and thereby improve our balance of trade, but are also important to the United States, since we will be providing employment and technological training for the citizens of Indonesia, thus helping to stabilize the Indonesian economy. We need only to look at the importance of the contribution of electronics technology and manufacturing in the stabilization of the economies of Japan, Taiwan, and Korea to be able to draw a parallel.

We, Ness Industries, have had to wait an additional year in the establishment of our facilities since we are a small business and have not had adequate resources to fund this program until now. We did check with AID last year to see if some loan funds were available but found that they had already been committed. We were told that possibly more funds would be available this year but it would take at least 6 months, and then we would not be sure. As a result, we decided

not to delay the program any longer and we have funded the program ourselves. However, we are now concerned that some changes may be made in the insurance provisions of the AID program, and I would like to discuss this aspect in a little bit more detail later.

Mr. Chairman, I have often heard it said that U.S. foreign aid does not have an American constituency. My principal reason for being here is to attempt to refute that impression. I am an American who believes in foreign aid—first and foremost on simple and moral grounds. I believe that a great country can no more be indifferent to hunger and misery abroad than it can be indifferent to poverty at home. A moral nation must do the best it can to help, and the fact that even our best efforts cannot always produce perfect results is not, I submit, an argument against our foreign aid program. Nor need we be ashamed of what we have accomplished; from the economic miracle of the rebirth of Europe launched by the Marshall plan to the speectacular takeoffs of Taiwan and Korea, we have had our successes.

FAVORABLE REPORT OF BILL URGED

For these reasons alone I hope that you will report favorably on S. 2347, and I hope, moreover, that the amount appropriated this year for foreign aid will not be cut from that recommended by the administration. Republican and Democratic administrations have been calling on all developed nations for many years to participate in foreign aid; they have agreed with others to a target figure of 1 percent of the GNP; and I fear that any prolonged failure on our part to come within hailing distance of that target a target set by us-is bound to produce disappointment, bitterness, and hostility. Far from giving us political leverage, foreign aid that has fallen below rational expectations is likely to hurt our relations with the poor developing countries.

It is not hypocritical to be aware of the moral necessity of foreign aid, and at the same time, of the benefits of foreign aid to American business. On the contrary, profitable private investment and private resources have made and will continue to make a crucial contribution to the economies of less developed countries. My good friend, Mr. Dennison, who appeared here earlier, and I were both U.S. delegates to the Pacific Basin Economic Cooperation Committee, and I certainly wholeheartedly support his involvement in the Overseas Private Investment Corp. and the increasing trend of private investment to increase the amount of AID type of money which is available to developing countries.

These contributions would not have been made, and will not be made without the support of a public foreign aid program. As a businessman I was therefore glad to see the increased emphasis that S. 2347 places on the contribution of "vigorous and responsible private enterprise" and on guarantees as "the principle means of mobilizing capital investment funds."

By the same token I welcome the concept of the Overseas Private Investment Corp. as a step toward greater flexibility and greater affinity with the methods of private enterprise.

CONCERN EXPRESSED ABOUT GUARANTEES

In the light of this shift in emphasis on the importance of private enterprise and the principal role of guarantees my colleagues at Ness

Industries and I are somewhat concerned with an area affected by a minor technical change in the definition of the term "expropriation" in the bill. Ever since 1961 the law has said that expropriation "includes" violation by a host government of its contract with the U.S. investor; but the bill would weaken this to "may" include.

A whole philosophy of investment guarantee and difficult questions of policy are involved in that change of definition. It can be argued that the "principles of risk management" listed as a criterion of operation for the Overseas Private Investment Corp. in the bill call for the narrowest possible insurance coverage. In that spirit AID has for many years now insisted on writing highly technical, and I believe too restrictive, clauses into the definition of expropriation in its guarantee contracts. I know that the fears from which such a restrictive policy come are not unreasonable. The Government should not be expected to indemnify a business for losses not connected with political risks. And I recognize that the line between naked expropriation and damaging, but not antiforeign, laws and regulations-a line that must be drawn-is often a difficult line to draw. Yet I submit that insurance contracts that sometimes appear to afford greater insurance protection for claims against the insuring U.S. Government than insurance protection against political risks for the insured investor tend to defeat the very purpose of the guarantee program. The best protection for the Government, and one in harmony with the program, lies in a careful and realistic evaluation of the investment for which a guarantee is sought. That is the area where the principles of risk management should play their protective role. They are misapplied when translated into unduly technical and restrictive hedges in insur

ance contracts.

MEMORANDUM ON EFFECTIVE GUARANTEE PROGRAM

Mr. Chairman, this is a technical subject, and I will not burden you further with its details. Instead I have instructed our counsel to submit to you a memorandum on these details on Tuesday morning. I respectfully wish to express my hope, however, that in your committee's report and in your markup of the bill, you might bear in mind the concerns I have mentioned, which I believe are shared by many businessmen who believe in the desirability of an effective guaranty program.

Senator MCGEE. Mr. Ness, you can rest assured that the committee will weigh the additional information also very carefully.

Mr. NESS. I appreciate that. I think in the past the AID administration of the program has perhaps taken some liberties with the express direction of Congress and the Senate of the United States in writing too restrictive clauses which really defeat the purpose of the guarantee, because an insurance which says it may protect you or may not is hardly the kind of insurance that you can tell your stockholders protects you against expropriations. We don't mind taking a business risk, that is our business. If we can't manufacture the product and train the people or develop the middle managements necessary that is our problem.

But we hope that if the government of these developing countries acts inappropriately at least we will be protected against that.