In addition to its various publications, the Office of Small Business assists the many U.S. firms that seek help on specific problems through correspondence and personal contact. Claims of discrimination or cases of violations of standing ICA regulations designed to ensure equal bidding opportunity among potential suppliers are investigated promptly. Close liaison is maintained with ICA missions abroad to assure adequate bidding deadlines and the use of U.S. standards in commodity specifications.

The committee will note that, consistent with the legislative mandate of section 504 of the act, the above-mentioned services are not addressed solely to "small business" firms but are made available to the American business community as a whole. That is to say, the informational services afforded by the Office of Small Business are furnished to all firms in the United States requesting them.

On the other hand, the activities of the Office of Small Business do serve to assist "small, independent enterprises" in particular. It is the small independent enterprise with limited financial and manpower resources and limited means for marketing and sales research which relies most heavily on the informational services of our Office of Small Business.

II. ENCOURAGEMENT OF AMERICAN SMALL BUSINESS INVESTMENT ABROAD

Turning now to the second area of ICA activities of interest to this subcommittee that of encouraging small business investment abroad-I would like to touch briefly on our activities and developing plans.

In virtually every country in which ICA operates assistance programs, one of the most important and striking characteristics is the urgent demand for rapid economic growth. In country after country, we are struck by the need for increasing the amount of private investment both by local business and by foreign investors in order to accelerate the process of development.

Attention to this subject is considerable. Witness the study now being given to the Boggs bill (H.R. 5) and the work being done in connection with the report entitled "Expanding Private Investment for Free World Economic Growth" which was prepared in response to section 413 (C) of the Mutual Security Act. This report, prepared by Mr. Ralph I. Strauss, is a comprehensive discussion of many of the techniques which can be used, such as tax incentives, guaranties, Government lending arrangements, special contracting techniques, and other financing devices-all addressed to existing problems inhibiting U.S. private investment abroad. We in ICA, in cooperation with the Department of Commerce and other agencies active in this field, are moving to place greater emphasis within our regular country programs and to undertake new activities which will foster and facilitate increased U.S. investment abroad. To this end we have recently established in ICA the new office of the Deputy Director for Private Enterprise.

Again, ICA's efforts in this regard are addressed to the business community as a whole. Whatever the particular techniques, however, we are convinced that a sound program to encourage private investment must take into account not only the community of larger firms, but American small business as well.

There are various reasons why this is important. First, a flow of American investment abroad should, to the maximum extent possible, reflect the diversity of the American economy. It is in this very diversity in size, in activity, in outlook that so much of the strength of the American free enterprise system resides. Second, small business may be more readily adaptable to operation in many countries where markets, skills, and resources are limited in certain fields of production. Third, even in certain less-developed countries which for many reasons have shown some antipathy toward private foreign investment, the concept of small business investment may have considerable appeal.

Specifically, what do our activities encompass in this area?

Investment guaranty program

First, I would like to mention the ICA investment guaranty program which we administer under the authority contained in section 413 (B) of the Mutual Security Act. Under this program, guaranties against nonconvertibility, expropriation, and war risks are issued on new investments by American citizens abroad. General guaranty agreements are in effect with 42 countries, and additional agreements are now under discussion with a number of countries. As of June 23, 1959, ICA has issued 302 individual guaranty contracts amounting to $422.6 million.

Over half of the investments for which guarantees have been issued are of $200,000 or less. This kind of protection is particularly important to small-business firms desirous of investing abroad because of their relatively limited ability to assume the potential financial risks in foreign investment.

Particular effort is made to inform the American business community of the protection against certain political risks which is offered through ICA's guaranty program. These efforts include:

(1) The preparation of a pamphlet guide written especially for those interested in making relatively small investments which was circulated widely in the business community;

(2) Travel by staff membersof ICA's Investment Guaranties Division to the major cities in the United States where interviews are held with local businessmen and business groups; and

(3) Talks by Investment Guaranties Division officials to hundreds of businessmen at numerous American conventions.

Information on investment opportunities

Secondly, I would like to stress that ICA efforts in this regard are not limited to encouraging U.S. foreign investment which may lead to the issuance of an ICA investment guaranty. They are much broader and more general in scope and are designed to increase the general level of U.S. investment abroad irrespective of whether the ICA guaranty program is involved. These efforts include:

(1) The dissemination of foreign investment opportunities reported by U.S. Embassies and ICA missions abroad, previously through the medium of the Office of Small Business' extensive mailing list, and more recently through Department of Commerce and Small Business Administration channels; and

(2) Periodic reporting to foreign countries through their Embassies here and our ICA missions overseas of American firms interested in investing abroad.

Investment incentive program

A third and new effort in the private investment field in which substantial small business participation is expected is the proposed activity under the investment incentive program planned for the current fiscal year. Funds in the amount of $5 million have been requested as part of the mutual security program to permit the U.S. Government to respond effectively where developing countries demonstrate an interest in and a need for help in encouraging private investment-local and foreign. These funds will be used in selected countries to finance special programs and projects to supplement local efforts in developing and strengthening private enterprise institutions. In this undertaking ICA will use many of the technical assistance techniques it has tried successfully in its regular programs. Specific program activities will include:

(1) The use of specially qualified teams and consultants to advise countries that demonstrate interest in formulating comprehensive programs for stimulating private industry.

(2) The financing of survey contracts with American economic and engineering consulting firms to identify specific opportunities for local and foreign investment in particular countries. The findings would be made available to the local business community through local organizations and to the American business community through the Commerce Department. In this connection ICA will review already completed surveys to explore additional possibilities for bringing together these opportunities and local and foreign investors.

(3) Technical assistance in establishing and strengthening local institutions supporting private investment such as industrial development centers, development banks, small industry lending institutions. and others.

(4) Training of foreign government officials and business leaders in techniques to stimulate private investment, such as plant-leasing arrangements, industrial districts, loan guarantees, small business legislation and so on; and possibly

(5) Detailed investigation by American operating or investment companies of specific new ventures which are judged by ourselves and the host country as sufficiently high priority to warrant such assistance.

For the reasons earlier mentioned the desirability of reflecting the diversity of the American economy in our programs; the suitability of smaller U.S. firms to many of the project activities we are engaged in in the less-developed countries-we expect that the direct and immediate participation of American small business in this new program will be substantial. Moreover, in a more general way, success in these efforts to strengthen the private business communities abroad will serve to increase investment opportunities for all American firms. I should like to make clear at this point, Mr. Chairman, that many of the activities of the sort described above have been carried on during the past decade within the context of ICA's regular country programs. It is now our purpose, however, to give greater emphasis

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and a clearer identity to these efforts in the future. Thus, the establishment of the new Office of Private Enterprise and our appropriations request for the new investment incentive program.

In summary then, much is being done by ICA to assist small business in the field of international trade. Since the establishment of the Office of Small Business, ICA has endeavored, with notable success we believe, to assure full and equal opportunity to American firms to participate in ICA-financed procurement. ICA activities in this respect have been of particular value to American small business which has but limited resources to search out knowledge of such opportunities on its own. Similarly, the participation of small business in the ICA investment guarantee program and other investment activities encouraged by ICA is substantial.

Looking ahead, we would expect an increasing activity by American small business in international trade as ICA's efforts to increase private investment abroad take hold.

Finally, Mr. Chairman, you asked in your letter for our views as to obstacles which may be precluding small business participation in foreign trade and for corrective measures which may be necessary. It is our view that such obstacles as do exist are peculiar to small business in a matter of degree rather than of kind. It is true, of course, that the smaller businessman is less able to venture into the foreign fields than are his larger competitors. Larger firms are equipped with marketing and sales research staffs, they have greater financial resources with which to stand losses, and they have well-established contacts in foreign markets. Some of the ICA activities I have mentioned today are directly responsive to the generic handicap of the smaller businessman in this respect and have, we believe, assured him equal opportunity to participate in the ICA program along with larger firms.

Now, we would be happy to try to answer any questions you may have.

Mr. YATES. How does the small businessman go about trying to find out what you have-through the information devices you just testified to?

Mr. SACCIO. We have done quite a considerable job to make known throughout the business community the fact that these informational services are available, and we put out any number of bulletins, and, as I have stated in my statement, we have used the facilities of the Department of Commerce and Small Business Administration to spread this information as broadly as possible.

Mr. YATES. How much of your money was spent in the acquisition of capital goods last year, have you any idea, in this country, for example?

Mr. SACCIO. Capital goods?

Mr. YATES. Well, don't you buy capital goods in this country?

Mr. SACCIO. We certainly do, but, of course, a large part of our financing is not only capital, but raw material supplies and things of

that kind.

I couldn't give you a breakdown between capital goods, as such, and commodities generally speaking.

Mr. YATES. I am trying to find out whether there is any breakdown by large and small industry in terms of the actual product that was supplied to your agency last year.

Mr. SACCIO. Well, that would be difficult to tell.

Mr. YATES. Do you have a purchasing division ?

Mr. SACCO. Not as such.

Mr. YATES. How do you go about buying your various products ? Mr. SACCIO. We have two general divisions of our activities which may be helpful in giving an answer to your question, which I will describe to be helpful.

One we define as project, and the other as nonproject activity.

On a project, our purpose is to accomplish something with a definite physical plant, such as a road or a dam. On the nonproject side, we are financing the purchase of commodities on which we are not dictating the end use, it is just to get the commodity into the country to be used in the economy, and to be distributed through the regular course of private channels of trade.

Now, we may give a purchase authorization, say, for steel in a country. Well, that goes to the Government; the Government subauthorizes it to the local importer, the local importer purchases the steel in the market.

Mr. YATES. Is this the same procedure that has always been followed since the start of the Marshall plan? As I recall at the time I was a member of the Marshall Plan Appropriations Subcommittee 10 years ago and we were furnishing economic help to the countries in Europe the country would authorize the purchase of a necessary item through a governmental corporation.

Is this the same type of procedure you are describing?

Mr. SACCIO. It is essentially the same, except that the vast part of it was done that way, whereas in the less developed countries there has been a tendency to go in for projects more than just for the supply of foreign exchange for the purchase of commodities.

The difference, of course, is based on the fact that the Western Europeans were perfectly capable of doing this themselves, and could decide whether they wanted to refurbish a plant and go through the purchase authorizaton route rather than having us tell them what plant to build.

Mr. YATES. I remember that at that time we made inquiry about the participation of small business in the programs, and it wasn't a vary great participation. Of course there wasn't great pressure at the time because of the fact we had to rebuild much of Europe.

I was wondering whether or not that is the same attitude today. Mr. SACCIO. Well, I would say, Mr. Chairman, that our prime objective, here, of course is to help the country to develop economically. This is a general statement.

Mr. YATES. We all subscribe to that. We are interested in trying to find out a better way in which small business may make its contribution today.

Mr. SACCIO. I realize that, and to answer your first question specifically, we feel that the best we can do, the most effective thing we can do for small business is to be sure that this information gets out to them, and usable by them and in a form usable by them so they can participate.

Our rules and regulations of course require that commodities that are purchased are purchased on a fair basis. Products that are purchased in connection with projects are the subject of competitive bids