U.S. foreign aid to East and South Asia: selected recipients.(CRS Report for Congress)

Updated October 8, 2008

 
Contents 
 
Overview 
   New Approaches to Foreign Aid 
     Critiques 
   Funding Trends 
   Foreign Aid Restrictions 
   The FY2008 and FY2009 Budgets 
   Regional Comparisons 
East Asia 
     Taiwan and Singapore 
   Foreign Aid Restrictions 
     Lifting Sanctions on Indonesia 
     September 2006 Military Coup in Thailand 
   Chinese Aid to Southeast Asia 
Country Aid Levels and Restrictions--East Asia 
   Burma 
   Cambodia 
   People's Republic of China (PRC) 
   East Timor (Democratic Republic of Timor-Leste) 
   Indonesia 
     Resumption of Military Assistance 
     2004 Tsunami Relief 
   Laos 
   Malaysia 
   Mongolia 
   Philippines 
   Thailand 
     September 2006 Military Coup and U.S. Aid Sanctions 
     Other Programs 
   Vietnam 
South Asia 
     Foreign Aid Restrictions 
     Disaster Assistance 
Country Aid Levels and Restrictions--South Asia 
   Bangladesh 
   India 
   Nepal 
   Pakistan 
     Lifting of Foreign Aid Restrictions 
   Sri Lanka 
     FY2008 Appropriations 
Appendix. Selected Acronyms for U.S. Foreign Aid 
   Accounts and Programs 

Overview

New Approaches to Foreign Aid

The United States acts to advance U.S. foreign policy and national security goals and respond to global development and humanitarian needs through its foreign assistance programs. Following the September 2001 terrorist attacks, foreign aid gained importance as a "vital cornerstone," along with diplomacy and defense, in U.S. national security strategy. (1) The Bush Administration reoriented foreign assistance programs, particularly to "front line" states in the war on terrorism. For many countries, the U.S. government directed not only increased security and military assistance but also development aid for counterterrorism efforts, including programs aimed at mitigating conditions that may make radical ideologies and religious extremism attractive, such as cycles of violence, poverty, limited educational opportunities, and ineffective or unaccountable governance.

In 2007, the Bush Administration restructured U.S. foreign aid programs to better serve the goal of transformational development, which places greater emphasis on U.S. security and democracy building as the principal goals of foreign aid. (2) Toward these ends, the new Strategic Framework for U.S. Foreign Assistance divides aid programming among five objectives: peace and security; governing justly and democratically; investing in people; economic growth; and humanitarian assistance. The Millennium Challenge Account (MCA), established in 2004, promotes these objectives by rewarding countries that demonstrate good governance, investment in health and education, and sound economic policies.

Critiques. According to some analysts, recent U.S. foreign policy trends have weakened programs and institutions that specialize in basic development. Some policy-makers have expressed concern that transformational development and MCA funding priorities have taken resources away from traditional programs, particularly in countries that contain lesser security threats to the United States or where governments do not meet various U.S. performance criteria. Other analysts argue that promoting democracy in some countries prematurely may result in a waste of aid. (3) According to one study, insufficient funding for foreign assistance objectives has reinforced a "migration of foreign aid authorities and functions to the Department of Defense." (4)

Funding Trends

Foreign operations appropriations declined from a peak in 1985 to a low in 1997, after which they began to grow again. Many of the fluctuations in aid flows over the past 25 years can be attributed to U.S. foreign policy responses to events such as natural disasters, humanitarian crises, and wars and to U.S. military assistance and other security initiatives in the Middle East. Since 2001, U.S. assistance to front line states in the global war on terrorism and Iraq war- related funding have propelled foreign aid funding to new highs.

Other sources of growth include the Millennium Challenge Account (MCA) and the President's Emergency Plan for AIDS Relief (PEPFAR). (5) Four Asia-Pacific countries are eligible to apply for MCA assistance--East Timor, Mongolia, Sri Lanka, and Vanuatu--while two countries--Indonesia and the Philippines--have been designated as "threshold," qualifying them for assistance to help them become eligible for MCA funds. In October 2007, the Mongolian government and the Millennium Challenge Corporation (MCC) signed a five-year, $285 million agreement. Vietnam is the largest Asian recipient of Global HIV/AIDS Initiative (GHAI) funding under PEPFAR ($118 million between 2005 and 2007).

The war on terrorism has reoriented foreign assistance priorities in Asia and accelerated a trend toward increased aid to the region that began in 2000. Throughout the 1990s, U.S. assistance to Asia fell due to the ebbing of Cold War security concerns, nuclear proliferation sanctions, and favorable economic and political trends. For example, the withdrawal of U.S. military forces from the Philippines, nuclear proliferation and other sanctions against Pakistan, and the reduced need for economic assistance, particularly in Southeast Asia, contributed to declines in U.S. aid levels. The Asian financial crisis of 1997-98 reversed the downward trend, as USAID funded a regional economic recovery program for Indonesia, the Philippines, Thailand, and Vietnam.

Since the war on terrorism began in 2001, Pakistan, India, the Philippines, and Indonesia became the foci of the Bush Administration's counterterrorism efforts in South and Southeast Asia, due to their strategic importance, large Muslim populations, and insurgency movements with links to terrorist groups. These countries have received the bulk of the increases in U.S. foreign aid (non-food) to Asia (excluding Afghanistan), although funding for aid programs in India and the Philippines reached a peak in 2006 and fell in 2007 and 2008. Beginning in 2004, both Indonesia and the Philippines received new funding for education programs in order to promote diversity, non-violent resolution of social and political conflict (Indonesia), and livelihood skills among Muslims residing in impoverished and conflict-ridden areas (southern Philippines). See Figure 1.

[FIGURE 1 OMITTED]

Both the Bush Administration and Congress have supported increased funding for the Department of State's Human Rights and Democracy Fund (HRDF). Spending for HRDF increased from a yearly average of $13 million in 2001-2002 to $31 million in 2003-2005. The Fund received $71 million in both FY2006 and FY2007. In addition, the U.S. government provided a total of $65 million for National Endowment for Democracy (NED)-administered HRDF programs between 2003 and 2007. Approximately one-third of the Democracy Fund has been allocated to Asia, mostly for rule of law and civil society programs in China. (6)

Foreign Aid Restrictions

In the past decade, the United States has imposed restrictions on nonhumanitarian development aid, Economic Support Funds (ESF), (7) and military assistance to some Asian countries in order to pressure them to improve performance related to democracy, human rights, weapons proliferation, foreign debt payments, and other areas. These countries include Burma, Cambodia, China, Indonesia, Thailand, and Pakistan. However, the United States continues to fund nongovernmental organizations (NGOs) that run development and democracy programs in some of these countries. Most sanctions on aid to Cambodia, Indonesia, Thailand, and Pakistan have been lifted. The Consolidated Appropriations Act for FY2008 placed human rights conditions upon portions of the U.S. military assistance grants to Indonesia, the Philippines, and Pakistan.

The FY2008 and FY2009 Budgets

The Administration's FY2008 budget request for the East Asian countries that are covered in this report ($453 million) represented a slight increase compared to FY2007 ($442 million). With the exception of Indonesia and Vietnam, assistance to most East Asian countries is to decrease or remain about the same in 2008 compared to 2007. The budget request for Indonesia included large increases in Development Assistance (DA) and Foreign Military Financing (FMF). Global HIV/AIDS Initiative funding for Vietnam is to grow by 36% in FY2008, from $63 million in FY2007 to $86 million.

The FY2008 budget raised assistance to South Asian countries by 8% (from $900 million in FY2007 to $974 million). This reflected greater funding for Bangladesh (mostly Development Assistance) and Pakistan (ESF). In addition, for FY2008, the Administration requested new funding for law enforcement enhancement activities in Nepal and Sri Lanka. Regional Development Mission Asia programs (an estimated $13.7 million in FY2008) support public health efforts, improved water and sanitation services, trade, environmental preservation, and investments in energy efficiency, renewable energy, and clean technologies in East and South Asia.

The Consolidated Appropriations Act, 2008 (H.R. 2764, signed into law as P.L. 110-161), Division J, made some changes to the Administration's request. These revisions included additional ESF for democracy and humanitarian activities for Burma; funding for democracy, rule of law, and Tibet programs in China as well as U.S.-China educational exchanges; and increased FMF for the Philippines. The spending measure also imposed new restrictions on FMF for Sri Lanka.

FY2009 Continuing Resolution

The House and Senate passed the continuing resolution (CR), H.R. 2638 (Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009), on September 24, 2008 and September 27, 2008, respectively. The bill was signed into law as P.L. 110-329. The House and Senate approved $36.6 billion and $36.7 billion, respectively, for Department of State and Foreign Operations in FY2009, compared to $32.8 billion enacted in FY2008. The CR for FY2009 continues most funding through March 6, 2009, at FY2008 levels.

For further information, see CRS Report RL34552, State, Foreign Operations, and Related Programs: FY2009 Appropriations, by Susan B. Epstein and Kennon H. Nakamura.

Regional Comparisons

Africa remained the largest regional recipient of Child Survival and Health (CSH) and Development Assistance (DA) funding in FY2007. (8) The largest regional recipients of Economic Support Funds in FY2007 were Near East Asia (Middle East) and South and Central Asia (mostly to Afghanistan, with a large portion going to Pakistan as well). The largest recipient of military assistance, by far, was Near East Asia followed by South and Central Asia. (9) These rankings were the same as those for FY2006. See Table 1 and Figures 2-4.

East Asia

Since 2001, foreign aid spending in East Asia has grown markedly, largely due to counterterrorism efforts in the Philippines and Indonesia. The Philippines, a Major Non-NATO Ally, and Indonesia, a democratizing nation with the world's largest Muslim population, are home to several insurgency movements and radical Islamist organizations, some with ties to Al Qaeda, such as the Abu Sayyaf Group (Philippines) and Jemaah Islamiyah (Indonesia). USAID's programs in East Asia also aim to address the conditions that may give rise to radical ideologies and terrorism, such as poverty and unemployment, lack of education, failing governments, political disenfranchisement, and violent conflict. In October 2003, the Bush Administration launched education programs in Muslim communities in the Philippines and in Indonesia as part of its regional counterterrorism efforts.

Among East Asia and the Pacific (EAP) countries (excluding the Pacific Island nations), (10) in FY2007, Indonesia was the largest recipient of U.S. foreign aid, particularly ESF, health, and development assistance (CSH and DA), followed by the Philippines. The Philippines was the region's largest beneficiary of Foreign Military Financing (FMF) and International Military Education and Training (IMET). Counter-narcotics and law enforcement assistance (INCLE) were provided to Indonesia, the Philippines, Laos, and Thailand. Indonesia, Cambodia, and the Philippines were the largest recipients of Non-proliferation, Anti-terrorism, Demining, and Related Programs (NADR). (11) Vietnam, as one of 15 focus countries under the President's Emergency Plan for AIDS Relief (PEPFAR), received $118 million from the Global HIV/AIDS Initiative (GHAI) account between 2005 and 2007 and is to receive $86 million in 2008. See Figures 5 and 6.

U.S. assistance also finances several EAP regional programs. Estimated funding for such programs in FY2007 was $27 million, a slight decrease from that provided in FY2006. Most of the funding--approximately 75%--supports economic growth efforts. In addition, the United States contributes …