comes from those U.S. interests who will be, if not primary, at least major beneficiaries of the so-called loans. I just suggest this to you as you study this problem, to keep your eyes open.

Secretary KENNEDY. I shall do that.

Senator GORE. Thank you, Mr. Chairman.
The CHAIRMAN. Senator Mundt.

TOTAL UNITED STATES AID TO INDIA AND PAKISTAN

Senator MUNDT. Would it be possible for you to prepare us a table showing the total amount as of the last, say, 2 fiscal years of aid from all sources, to which the United States contributes, to Pakistan and India? It is very difficult for us to know just how much those countries are doing for themselves and how much they are leaning of our country, and the international community. We pick it up in this area. We pick it up in food for peace. We pick it up in military aid, we pick it up in economic aid and I would like to see for one time a listing of all the aid received in the last fiscal year by India and Pakistan from all sources in which we participated.

If they can con some other country into giving them something. all right. But anything we participate in, I think we ought to see it in one package before us at one time.

Secretary KENNEDY. I will be glad to prepare a table.

Senator MUNDT. Thank

(The information referred to follows:)

ASSISTANCE TO INDIA AND PAKISTAN FROM THE UNITED STATES AND
INTERNATIONAL ORGANIZATIONS TO WHICH THE UNITED STATES CONTRIBUTES

U.S.S.R. AND EASTERN EUROPEAN AID TO INDIA AND PAKISTAN

The CHAIRMAN. While you are doing it can you add what the Russians are doing in these countries. I am curious.

Secretary KENNEDY. It may be hard to find out.

Senator MUNDT. It may be hard to find out. I am curious too, if we can find it out. But we should know, I think, what we are doing. It would be easier for each of us to evaluate these things.

(The information referred to follows:)

India.
Pakistan..

21

ECONOMIC AID TO INDIA AND PAKISTAN FROM THE U.S.S.R. AND EASTERN EUROPE

Senator MUNDT. My major difficulty with IDA down through the years has been that increasingly it appears to me that what is really a grant masquerades under the nomenclature of a loan.

Senator GORE. And a bank.

Senator MUNDT. And a bank. It is not something that we should really be doing, certainly in our direct aid programs. We finally have gotten away from direct aid and we got it cleared up. There is a difference now between a grant and a loan in our direct aid, but now it looks like we are coming around on these multilateral programs to the same old masquerade party. If you give a country a 10-year period of nonpayment, a grace period, and then charge them three-quarters of 1 percent interest when a South Dakota farmer is paying 734 interest, it doesn't make sense. I don't have to tell a distinguished banker like you what the interest rates are in this country.

Senator GORE. Will the Senator yield? I think you had better inquire about the interest rates of the loans again. The legislature in my State just raised it to 10 percent. If the Senator's State hasn't caught up with the parade I am sure it will soon.

Senator MUNDT. We are more thrifty out there in South Dakota. We have a maximum, but in any case there is a great discrepancy. Plus the fact when they do start to amortize these loans it is what, 1 percent a year?

Secretary KENNEDY. Yes, 1 percent annually for 10 years, while in the remaining 30 years 3 percent is repaid annually.

FINANCIAL ARRANGEMENTS CRITICIZED

Senator MUNDT. Now, I agree with the major thrust of your hypothesis when you say if you make the loan too hard it defeats its own purpose. But it seems to me you have many country miles of difference between that hypothesis and what we actually do. The first 10 years they pay nothing, not even interest, not even so-called service charge, and when they do start picking it up, they only pay what, three-quarters of 1 percent?

Secretary KENNEDY. They pay the service charge of three-quarters of 1 percent all the way through, including during the grace period, on the amounts disbursed.

Senator MUNDT. I would certainly like to bet you my last year's South Dakota pheasant license or last year's straw hat that if many of us could be around here 50 years from now, it is going to be a dismal collection record when you take into account the human frailties which you know exist. The fellow with a shaky little underdeveloped country, for example, who negotiates a loan for a project. And 8 years from then gets bitten by a cobra and dies. Then 2 years before the

28-208-69

repayment program begins his successor takes over. He is scrimping along with a tough budget and it comes repayment time and he says "my predecessor agreed to that, I didn't agree to that. We simply can't tax our people to pay 1 percent of amortization." This is a nominal three-quarters of 1 percent interest, but you run into a lot of problems. But if you make a commitment, then they have to begin making some kind of amortization payments and set up a bookkeeping procedure to get good budgetary habits. I don't want to make it prohibitive for them to get a loan and the benefits from it. but between that and the lengths to which IDA has gone, it seems to me there is some median ground in which we could come up with a more rational and reasonable financial arrangement than we have If we had done that, it would have been a long, hard pull.

With a lot of effort, we finally got a fairly reasonable approach now in our direct American aid. But if we finally make a reform in our direct American aid, and then nullify it in the aid we crank through the multilateral programs, it seems to me we have engaged in a lot of wasted effort. That is my problem.

Secretary KENNEDY. Well, Senator, on that point, each of these loans are made on a project-by-project basis. They are analyzed carefully, studied, considered in the light of what is needed in the country from an economic and social standpoint. It is an effort to get some of those countries that have an income of under $300 per capita, which is a pretty small income, on an economic basis so that they can move along.

I am sure there will be losses in this kind of loan. I don't think there is any question about that. It is not the kind of a loan that you would make in a bank and that is why the World Bank takes it out of their normal lending. But it is paid in hard currency when it is repaid, provided they can make the payments.

It is surely to me better than an outright gift or grant because it does put discipline on them to make payments. It is supervised as they go along. Payments are made as the project goes through, and I was impressed as I looked at some of the loans, and as I looked at some of the projects, that they are actually doing things.

Now, I don't know what the 50-year record will show, but I think that they are doing some good, and it is not a large amount in relation to other things that we are doing in the world. You might comment on some of the projects if you would, Mr. Oliver, you have a list there of all of the areas. Just for the record I think it would be good to——

USE OF IDA FUNDS

Senator MUNDT. We will be glad to have them.

Mr. OLIVER. Mr. Chairman, Mr. Secretary, Senator Mundt, the IDA funds in the past were used in the beginning very much as other bank resources were used, for the development of what is called the capital infrastructure of the countries themselves, their roads, railroads, hydroelectric installations. The design was to bring these countries up to the minimum standard needed for the development that should take place from the point of building up their capital infrastructure.

Now, we are in the process of shifting the utilization of IDA funds a little bit more toward the basic needs of the people in a second stage of

development, I would say, concentrating on education to a greater degree than before, though not to exclude the capital infrastructure use of IDA funds by any means, but to add to that utilization the purposes of education and there is also a new emphasis on agricultural productivity.

I think we are all seeing now in a clearer way than in the beginnings of our experience with development assistance the prime need for decided improvement in agriculture, not only for export purposes, though that is an important one, but also to help meet the great needs of the populations of these countries in future and to improve, wherever possible, the nutritional standards of these countries as well.

There has been reference here to India, for example. The work that has been done in India on improving the food supply that India can itself produce for its people, the work that the international assistance agencies have done elsewhere, such as the miracle wheat developed in Mexico, all point to very promising new avenues of development assistance. That, without going into the actual distributions to particular countries, Mr. Secretary, would be my response to this opportunity you gave me.

IDA LOANS TO LATIN AMERICA

Senator MUNDT. Does IDA make loans to Latin American countries? Mr. OLIVER. There are very few at the present IDA availabilities, Senator. As you may know, I was in charge of our bilateral development assistance to Latin America for nearly 2 years. It came as somewhat of a revelation to me, I must admit to you, to look at a world bank atlas

Senator MUNDT. Atlas?

Mr. OLIVER. Atlas, of poverty. This is a map prepared by the World Bank where the areas of the countries are in relation to population rather than to the actual territorial extension of these particular states, and the map is colored from light tan for countries with a gross national product per capita of less than $100 a year, to a fairly light green for the truly prosperous countries of the world. To me, who had worked in Latin America, it came as a revelation to see that in world terms there is only one little spot of tan in the Western Hemisphere, that is Haiti.

Now, I think I know

Senator MUNDT. Haiti?

Mr. OLIVER. I think many of you know what the conditions of poverty are in the Western Hemisphere but yet when you look at the world you come away with a feeling that we are much better off here. That is what I wanted to say in reference to IDA's activity in the Western Hemisphere.

Senator MUNDT. I heard you say earlier that IDA made a loan to Mexico.

Mr. OLIVER. No, sir; I said that the international development agencies as a group had financed a food development utilizing a technological development-a new strain of wheat developed in Mexicothat was very useful in text with improving

Senator MUNDT. I just heard you mention Mexico.

Mr. OLIVER. No; I don't mean to imply that Mexico itself had received IDA credits, I am sorry, I didn't want to give that impression. Senator MUNDT. We ought to get the record straight.

Mr. OLIVER. The lending of IDA to Latin America has totalled $117.5 million. This is 6.4 percent of the total IDA credits, and is 17 separate loans.

The point I wanted to make by referring to this is that most of IDA's utilization up until recently has had to be in countries with a gross national product per capita of $250 or less. The cutoff target is a little higher than that now, $300, but you see in the Latin Americar countries most of them hit a little bit above that.

Now, we could, if we had additional funds in IDA we can begin lending more in Latin America to those countries that fall below $300 gross national product per capita, and there are 10 or 11 of those countries that could be beneficiaries of IDA loans.

Senator MUNDT. I have a couple of other questions I would like to ask you because you have been in this field of financing much longer than Mr. Kennedy and you can probably give me the answers.

COUNTRIES CONTRIBUTING TO IDA

There are 18 contributing countries, is that right?
Mr. OLIVER. That is right.

Senator MUNDT. Why not 19 or 22 or 21? Is it your feeling or the feeling of the 18 that they are the only "have" countries, with a sufficient "have" so they can do some sharing with the rest of the world.

Mr. OLIVER. My personal impression, is, sir, that that list is a pretty complete one as to the countries that are in a position to make any significant assistance effort in favor of other countries.

There are some countries in Europe, for example-we normally think of all Western Europe as completely developed-but if you look at the indicia, you will find that there are a few countries in Europe that are, well, not as well off as, say the most prosperous Latin American country in the Western Hemisphere.

Senator MUNDT. Were any invited to come in who turned you down? Mr. OLIVER. Sir?

Mr. HIRSCHTRITT. May I add a remark, sir? These countries that are contributing in the second replenishment are the part I countries, which are considered to be the economically more advanced members of the World Bank and IDA. There are other countries, part II countries which are the developing countries who have contributed originally largely in their own currencies. A number of these countries are beginning to make their funds available for use elsewhere.

Senator MUNDT. You get me confused, and I want to get clarified. Mr. HIRSCHTRITT. Yes.

Senator MUNDT. We have 18 contributing countries.

Mr. HIRSCHTRITT. Eighteen contributing members to the second replenishment.

Senator MUNDT. How many to the first replenishment?

Mr. HIRSCHTRITT. Eighteen.

Senator MUNDT. That is what I thought. You have got 18 contributing members?

Mr. HIRSCHTRITT. That is right.

Senator MUNDT. Now, are you saying that in addition to those
Secretary KENNEDY. In addition thereto.

Senator MUNDT. You have some more?