(The following information was later supplied :)

OFFICIAL ECONOMIC FLOWS TO LDC'S IN RELATION TO GNP RANKING OF DAC COUNTRIES-PRELIMINARY

Senator MCGEE. Would it be relevant to this picture if we included the proportion of capital investment in foreign countries that was U.S. investment? Is that a possible figure to get?

Dr. HANNAH. We can try it. I am not sure we have adequate figures. We probably will have to get it from Commerce or somewhere else but we will be glad to get it where we can and include it. Senator MCGEE. If you could, get that and the proportionate figures in terms of trade likewise around the world. In other words, world economic activity. I think that perhaps might make a very meaningful point; namely, that our stake in the economic development in the world may be considerably larger than that of a lot of other parts of the world and it may at least be a partial explanation of why such a large measure of the load falls on us from time to time.

So I would ask for those inclusions in the record. (The following material was later supplied :)

U.S. FOREIGN INVESTMENT AND FOREIGN TRADE
AS A PERCENT OF THE WORLD TOTAL

In 1966, the last year for which fairly firm data is available, the direct foreign investment (book value) of free world developed countries totaled $89.6 billion. (This figure is estimated to represent about 95 percent of all free world foreign investment.) The U.S. share was $54.6 billion or 61 percent. A rough estimate for 1968 puts the total for all developed free world countries at $100 billion, of which U.S. direct foreign investment is $64 billion.

Many countries, even developed ones, do not publish this kind of information, so that all figures can only be estimates. It is possible, therefore, that the U.S. share could be as high as 75 percent.

The value of U.S. exports was about $34.7 billion in 1968. This is 19 percent of total free world exports (excluding exports to the U.S. itself), which are estimated at $179.9 billion.

ARRANGEMENT FOR SUPPLYING ARMS TO POORER COUNTRIES

Senator MCGEE. Let me turn to a military assistance program that always seems to get us more deeply concerned, and I think

understandably so in many ways. Has any thought been given to trying to work out with the Russians, for example, as a starting point, at least, an arrangement to eliminate terms under which arms supplies would be given to the poorer countries of the world? Secretary ROGERS. No, Senator.

Senator MCGEE. It has occurred to some of us there might be some merit in this. This is again an issue that often beclouds other significant parts of the aid program.

I am mindful that if we don't supply some of that military assistance, these countries are going to get it some place else anyway and, this way, we might have some control over narrowing it or limiting or keeping it down to size, if possible. But I would think that there might be something to be gained in trying to work out an understanding along that line.

Secretary ROGERS. Senator, when I say no, I mean no in a formal sense. Over the years the Department has from time to time and we have since we have been in office, discussed the possibility of limiting the supply of arms to certain areas of the world. For example, we have had some preliminary discussions about limiting the supply of arms to the Middle East. But so far we haven't had any affirmative response from the Soviet Union. So when I say no, I am speaking about in a formal sense, not in this sense. But I think the suggestion is a good one, and if we do make any progress in arms limitation talks or in other talks, or if the suggestion that was made by the Foreign Minister of the Soviet Union recently indicates, as we proceed down the road that there is any possibility along these lines, we certainly will propose it.

Senator MCGEE. I can understand that it would have some secondary relevance to the disarmament talks, but I would think if you are talking now about military assistance to some of the conspicuously poorer countries in the world, that this would still have dimensions quite independent of the basic arms control questions that would be under consideration in Geneva.

Secretary ROGERS. Yes, what I was suggesting is that there doesn't seem to be any affirmative response on the part of the Soviet Union about the limitation of arms sales to other nations of the world. Now, if we find that there is some willingness to discuss this subject we would be glad to discuss it with the Soviet Union.

UNILATERAL NOTIFICATION TO THE U.N.

Senator MCGEE. What would be the disposition if the United States were to resort to unilateral notification to the U.N. that this is what we are doing for such and such country in military assistance in the hopes that this might remove a little of the traditional suspicions and invite, perhaps, the Russians to be a little less hostile toward the idea? Would this be a conceivable way of taking some initiative in it? Secretary ROGERS. I think it would be much preferable to just broach the subject directly, and to see if the Soviet Union is interested in responding affirmatively. I am not sure that we have any success in sort of putting pressure on the Soviet Union in terms of world opinion. I think that is more an American concept.

Senator MUNDT. Would the Senator yield on that point?

Senator MCGEE. I would be glad to.

Senator MUNDT. I think this unilateral suggestion based on at least one historic demonstration cannot be sustained. We tried it in Egypt. We got involved in a fight or misunderstanding over the Aswan Dam and the Russians moved in. We discontinue supplying arms and guns and ships, and the Russians move in. And I remember something Andrei Vishinsky told me in the Kremlin when I was with Averell Harriman a long time ago, when asked, "What is the Communist policy?" He said, "We sit down in all the empty seats."

I am afraid where we leave a vacuum they will move in.

FILING ASSISTANCE FIGURES WITH U.N.

Senator MCGEE. Perhaps I didn't make my proposal clear. My proposal was that we file with the U.N. what it is that we were giving to X country, not to withhold it from that country.

Senator MUNDT. I see, I misunderstood you. Thank you.

Senator MCGEE. I think possibly I did not make it clear. I don't think it would jeopardize us in any way and it might be taken as a significant gesture that could allay some of the negative aspects of it. Secretary ROGERS. Senator, we also have to keep in mind that there are many nations that supply military equipment other than the United States and the Soviet Union.

Senator MCGEE. Indeed there are. Indeed the problem of control might be more considerable with several of the others rather than with the Soviets in fact, but because the Soviets and the United States do so much of this, I thought it might have some measurable psychological advantage if we were to do so and the lesson wouldn't have to be confined to the Soviets. Anybody can read the list in the U.N. who wanted to and hopefully it might encourage others to follow suit. I think the real question would be whether this would involve any serious risks.

Secretary ROGERS. Let us consider your suggestion, Senator.

DETERMINING CURRENT BUDGET REQUEST

Senator MCGEE. One other question. In the preparation of the new program, and the budget request this year, was this figure arrived at in terms of what, in the best judgment of your people, the United States ought to be doing in the world in terms of foreign aid or was this perhaps a figure that they thought had the best chance of getting 51 votes in the Senate?

Secretary ROGERS. Well, I think the way you asked the question it answers itself, Senator.

This budget request is what the administration thinks is the appropriate request for this year. It was carefully considered by the National Security Council and by the President, and it does represent his conviction in terms of economic and military assistance.

Senator MCGEE. And that, I have forgotten the fraction that Dr. Hannah suggested, that this was one-fourth, was it one-fourth of one percent of the American gross national product?

Dr. HANNAH. That is correct.

Senator MCGEE. Was that the figure you used?

Dr. HANNAH. That is correct, for economic aid, the AID program. Senator MCGEE. That this is the kind of figure we ought to be thinking about in terms of economic development for the rest of the world?

Dr. HANNAH. No, I think this is what we really should be thinking about for the year we are now in under the present circumstances. Of course there was a group in the U.N. some years ago which came up with the notion, and it was a slogan that seemed to be a popular notion, that it was appropriate for the developed countries of the world to spend in assisting the underdeveloped countries approximately 1 percent of their GNP. This has now been in effect for a 10year period. This is the 10th year of the first 10 years. They are now coming up with their planning for the second decade and they are talking about whether it should be 1 percent or some other figure. Some of the countries of the world have taken the 1 percent as a total and have really met it.

Of course immediately on our side, the point is made that for some of the developed countries, that do not take care of the costs of their own defense which really live under the American defense umbrella-that it is important that this be given some weight.

I think the one-quarter of 1 percent of our present level is too low. But I think if we are going to come up with some kind of a formula that is comparable with the rest of the world, there are some other factors that must be given some weight-the percentage of the cost of defense of the free world to be borne by this country, some differentiation between soft and hard loans, some method of dealing with money that is invested by people in private enterprise who are expecting a profit, and so on. That is a long answer to a simple question.

AID'S CURRENT STANDING

Senator MCGEE. No, I appreciate your response, Dr. Hannah. One of the tragedies, it seems to me, is that at the time, at the very moment, that we have brought the aid program around to its tightest form of operation is that moment in which it stands in the lowest repute in the public eye, and stands to win the fewest voices of support in the Congress. The Congress has enforced these limitations. I suppose in a sense the tragedy is compounded by the fact that the evidences of need, and again, the widening of the gap between the very rich and the very poor nations, the problems of the future, that it finds us doing our least rather than our most, I would hope that as this new assessment is underway, and the various efforts that will be spelled out in the course of this coming year that we can readdress ourselves to a much more meaningful and, I think, more responsible target area in terms of what we can do best in the economic field.

Mr. Chairman, that is all of the questions I care to ask.
The CHAIRMAN. Senator Williams.

Senator WILLIAMS. Thank you, Mr. Chairman.

Mr. Secretary, one of the advantages of being at the end of the line is that most of the questions have been asked and answered. I did have a couple of questions in connection with the proposal for the new Overseas Private Investment Corp. that you propose to set up.

COLLECTIONS IN INVESTMENT GUARANTY PROGRAM

Could you tell us again what the results have been under our investment guaranty program as of this date, that is, how much do we have on hand, collected from premiums and how much was paid out?

Dr. HANNAH. We have accumulated something over $100 million in reserves, approximately $60 million of this from net collected and the rest from past appropriations for reserves. This program stands on its own feet in the sense that it has been able to pay its operating expenses and meet claims liabilities. The balance, net of claims and operating expenses, is held in reserve to pay insurance and guaranty claims, its own costs which means, after taking whatever losses we have encountered, we still have a substantial balance.

We have a cumulative insurance coverage at the moment of about $6.6 billion. We have had one sizable guaranty loss but the experience has been pretty good. If the Congress goes along with our recommendation, as we hope they will, and authorizes this corporate entity to be known as OPIC or something else, with more than half of the directors private citizens appointed by the President, and the rest of it is spelled out in the legislation, we expect to transfer the people who are now working on that aspect of our operation to the new corporation, and to divide the accumulated reserves on the most national basis, so that there will be a substantial allocation to this new corporation.

INITIAL CAPITAL IN OPIC

Senator WILLIAMS. Then as I understand your plan, if it is approved, the turnover of the $100 million assets that you have created thus far over to this new corporation

Dr. HANNAH. We are going to turn over to OPIC what is appropriate to turn over out of the accumulated reserves and these allocations have been tentatively agreed upon.

Senator WILLIAMS. How much is that?

Dr. HANNAH. I do not have the figures in my head. I would be glad to put something in the record on the financing of the corporation, as well as the number of personnel and staffing, et cetera.

(The following information was later supplied:)

EXECUTIVE LEVEL AND SUPERGRADE POSITIONS PROPOSED FOR OPIC

Ability to attract the top management and staff commensurate with the responsibilities of OPIC is essential. Equally essential is the ability of management to separate key personnel in case of unsatisfactory performance. Accordingly, the Bill would authorize a total of 40 positions (out of a full staffing pattern of 160) excepted from Civil Service rules and regulations. The balance of the authorized ceilings would be fully subject to Civil Service. Of the 40 excepted positions, the top 20 (12% of the full complement of 160) would be allocated as follows:

A President and Executive Vice President, appointed by the President of the United States, compensated at Executive Levels III ($40,000) and IV ($38.000) respectively.

Three senior Vice Presidents, appointed by the Corporation and compensated at Executive Level V ($36,000) would be responsible for the major organizational components of OPIC (investments and project development, investment insurance, finance and administration).

Up to fifteen senior positions, appointed by and serving at the discretion of the Corporation, could be compensated at salary levels between GS-16 and GS-18 ($25,044 to $33,095 under the Federal pay bill effective July 1969).