MEETING WITH AMBASSADOR ROBERT B. KEATING 7 JULY 1987, 1230 HOURS, WORLD BANK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89B00224R001103770001-7
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 17
• Document Creation Date: December 27, 2016
• Document Release Date: August 19, 2011
• Sequence Number: 1
• Publication Date: July 6, 1987
• Content Type: MEMO

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WnWqpn D C amps
NIC 03060-85
18 June 1985
The Honorable Patrick J. Buchanan
Assistant to the President and
Director of Communications
The White House
Dear Pat,
I received a copy of Bill Middendorf's letter of May 30 to you
proposing White House backing for a conference to be sponsored by
Georgetown University on some of the themes raised in the report of the
President's Task force on International Private Enterprise. This idea
has my endorsement.
It is my belief that Third World governments are shifting away from
comprehensive central planning and toward more pragmatic and market-
oriented economic policies. This trend began in the 1970s when the LDCs
encountered tough economic times (two oil price hikes, two recessions,
high interest rates, and massive debt), and has accelerated in the 1980s,
paralleling similar changes taking place in the industrial world and
Eastern Europe. At the same time, the prospects for sizeable new amounts
of Western foreign assistance have dimmed, with funds flows increasingly
going for security assistance, humanitarian purposes and debt repayment.
This changing climate presents significant economic opportunities for
the US:
to increase the promotion of small-scale private sector
economic activity with LCDs,
to enlarge the flow of foreign direct investment,
to help state enterprises to become more efficient and
find ways to relinquish some functions to the private
sector, and
to strengthen trade, finance, and investment links with
LCDs based upon a growing mutuality of economic interest.
CONFIDENTIAL
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These forces should strengthen the West's position relative to that of
the Soviet Union in LDCs as well.
In order to implement the President's views on the role of private
enterprise, such broader initiatives must be undertaken by the Adminis-
tration, and this conference would help to define some of the mechanisms
for improvement. If there are any ways in which we can be of support,
please contact my National Intelligence Officer for Economics, David B.
Low at 351-5908.
sincerely,
Robert McFarlane
Mr
.
cc:
Ambassador J. William Middendorf, II
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r1u.. rva mow...... ~. - ......7
25 Jury 1985
INTENTIONAL PRIVATE ENTERPRISE:
WHEN WILL THE REAGAN REVOLUTION BEGIN?
Talking Points
THE SETTING
1. The President at Cancun in 1981 articulated a positive program of action
for economic development which emphasized the need to encourage LDC growth
through the private sector. The President's program, however, remains
unfulfilled for the Administration's strategy and mechanisms for carrying
out the goals are flawed.
2. Changing economic circumstances in the Third World have created a new
context for political and economic relations and new opportunities to
enhance US security interests. Many Third World leaders now recognize that
rigid Marxist-socialist models will not yield economic and industrial growth.
They are increasingly concerned with the "politics of economics" and not
the "politics of socialism,' and look to market-oriented approaches to
rebuild shattered economies. Moreover, the Soviets are not able to offer
such in the way of economic assistance, and Soviet economic and financial
constraints over the next 10 years will make Moscow even less able to
compete in non-military sectors.
THE CHALLENGE
3. The growing American economy and its private sector is an irresistable
example impelling change in the economies of both the industrial and Third
World countries. If we are able to take advantage of the economic forces
for change in the Third World, then the west's position relative to the
Soviet Union would be strengthened. In specific countries, US security
interests will often coincide with opportunities for economic support of
private sector enterprise and can be mutually reinforcing.
THE OBSTACLES
4. Our private enterprise, not government direction, created the economic
system which provides the resources we transfer to LDCs. Yet our economic
assistance generally ignores our own model of growth. Virtually all US
aid moves from US bureaucracy to foreign bureaucracy before any of it has
the opportunity to move to the private sector. Significant change in the
private sector cannot be leveraged primarily on the back of governmental
institutions.
5. AID, as currently structured, is not the solution. In fact, it is part of
the problem. Present developmental assistance efforts show little positive
correlation with private sector growth. AID's understanding of the private
sector is limited, and its resource transfers to LDC governments may support
short-term political stability but often they retard long-term growth of
private enterprise.
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M PROPOSALS FOR CHMM
6. The Peterson Commission in 1972, the Reagan Transition Team in 1980-81,
the Carlucci Commission of 1982# a portion of the President's Task Force'
on International Private Enterprise in 1984, and otherss, have ~dte.
that AM is the wrong institution
resouraces be out the transferred from AID to an
These groups have proposed tt OPIC tor (e environment which understands the private sector the Administr expanded is
or a US International Developme
prepared to do this, the President's Cancun goals will not be fulfilled.
(AID'S legislation and institutional orientation reflect the dominance
of the humanitarian aspect of development assistance, and it seems
reasonable that AID should continue to be predominantly a humanitarian
institution.)
THE OPTIONS
the
7. In order to implement an Administration commitment to change,
President can:
a. Appoint a new head of the International Development Corporation
Agency (IDCA) which was established by Reorganization Plan No. 2
of 1979 to be a focal point for international issues affecting US
relations with developing countries. This already established
position would offer the opportunity to implement the President's
Cancun goals, to develop strategies and modalities fors eimula inngg~ly
private enterprise in the Third World, and to support effecti
US private sector investments in LDCs. (The AID Director is currently
Acting Director of IDCA.)
b. Appoint a special assistant to the President for International Private
Enterprise. This would be an alternative choice which would allow
attainment of the goals expressed in Option 1.
c. Appoint a new director of AID who would blunt the current policy drift
which is counter to many of the president's private sector objectives.
The new director, however, would be confronted with a staff that does
not understand the private sector and bureaucratic inertia or resistance
to change would consume a great deal of time.
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~~oAPtB~A'~STSR/C~c3#tj.{/~~~3ZR;T~~,t3:~ :1~+iEvA?t I, G :4tu~IAN~A+tJ+/7RINR .1.25AZ SECTJO I OF
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TO: ROBERT C. MCFARLANE, THE WHITE HOUSE
VADM JOHN M. POINDEXTER
FROM : AMBASSADOR ROBERT B. KEATING
SUBJECT: THE REAGAN REVOLUTION IN DEVELOPMENT ASSISTANCE
(THE FOLLOWING EVALUATION IS THE RESULT OF OVER TWO DECADES
OF CLOSE ENCOUNTERS OVERSEAS WITH AID PROGRAMS WHOSE LARGE
OVERHEAD COSTS AND IMPRECISE RESULTS WITH RESPECT TO U.S.
OBJECTIVES OFTEN PUZZLED AND CONCERNED ME. I HAVE OBSERVED
AND INTERACTED WITH THESE PROGRAMS IN THE COURSE OF EXTENSIVE
EXPERIENCE GRAPPLING WITH THIRD WORLD DEVELOPMENT PROBLEMS AS:
STAFF ENGINEER WITH THE WORLD BANK; DIRECTOR OF THE CHILE-
CALIFORNIA PROGRAM; SENIOR ADVISOR TO THE INTER-AMERICAN
,DEVELOPMENT BANK; DIRECTOR GENERAL OF THE MINISTRY OF PUBLIC
WORKS IN ZAIRE; SENIOR CONSULTANT TO U.S. INDUSTRIES IN AFRICA,
LATIN AMERICAN AND SOUTHEAST ASIA; U.S. AMBASSADOR TO MADAGASCAR
AND THE COMOROS, AND. CHAIRMAN OF THE NSC-DIRECTED THIRD WORLD
HUNGER STUDY.)
IN THE PAST TEN YEARS, CHANGING CIRCUMSTANCES IN 'THE
THIRD WORLD HAVE CREATED A NEW CONTEXT FOR ECONOMIC AND
POLITICAL RELATIONS AND NEW OPPORTUNITIES FOR U.S. FOREIGN POLICY.
WE HAVE SO FAR FAILED TO CAPITALIZE ON THE POTENTIAL OF THESE
CHANGES, THEY CREATE AN UNPRECEDENTED OPPORTUNITY FOR THE
UNITED STATES TO BUILD TIES TO THE THIRD WORLD BASED ON ENERGING
MUTUALITY OF ECONOMIC INTERESTS. A REAGAN REVOLUTION IN DEVELOP-
MENT ASSISTANCE IS NEEDED IF WE ARE TO MEET THESE CHALLENGES.
THE CHANGING ECONOMIC CIRCUMSTANCES
SOCIALIST SYSTEMS. WHICH HAVE DOMINATED THE ECONOMIES OF
DEVELOPING COUNTRIES FOR SEVERAL DECADES HAVE FAILED TO ACHIEVE.
ECONOMIC GROWTH. THEY HAVE EMPHASIZED URBAN DEVELOPMENT AT
THE EXPENSE OF THE COUNTRYSIDE AND ITS AGRICULTURE; DRIVING
FARMERS INTO MERE SUBSISTENCE. CENTRAL PLANNERS SET UP
INEFFICIENT STATE ENTERPRISES AT ENORMOUS COST, BANKRUPTING
THEIR ECONOMIES. TIMES GOT TOUGHER I N THE SEVENTIES. TWO OIL
HIKES, TWO RECESSIONS, ACCUMULATED DEBT AND HIGH INTEREST RATES
ALL MADE DEVELOPMENT MORE DIFFICULT. WITH THE FAILURE OF
PRODUCER CARTELS AND OPEC'S CURRENT PROBLEMS, DEVELOPING COUNTRIE
NOW REALIZE-THEY HAVE LESS COLLECTIVE POWER THAN EARLIER IMAGINED
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= E:L~b'KTtxi`'POR"G~$YS?OUF. QF?~ ~RcIR CE3:y0t9iC~~?T.F tUL'~PIV.,-A ND
HAVE 'FINALLY ftR, ;'N t .1O$ -#3Y,i -LD.I ;M.~t~ )S ,. DE Lt} t ,,CD~I;G: _P. r S?, `-? `j~~~4' -.
' . Y . f., I!" L T..-wr.liri?t~: ~is.;ili~~i
PERCEIVED THAT T}iE SOVIET UNION AND ITS' CLIENT
STATES ARE DISMAL EXAMPLES OF AGRICULTURAL AND INDUSTRIAL
'PRODUCTIVITY. UNABLE TO SUPPLY MUCH ECONOMIC ASSISTANCE,. THE
&)VIET UNION HAS HAD TO BIND THEM TO ITS SIDE WITH SUPPLIES OF
SURPLUS MILITARY EQUIPMENT. MEANWHILE, WESTERN DEVELOPMENT
AGENCIES BUILT PONDEROUS BUREAUCRACIES AT HOME AND ABROAD TO
ADMINISTER RURAL WELFARE TO THE POOREST OF THE POOR, WITHOUT
CONTRIBUTING TO ECONOMIC GROWTH.
IN THIS DARK LANDSCAPE, THERE IS LIGHT AND IT COMES FROM
AN EXPANDING AMERICAN ECONOMY W. UCH STANDS AS A MODEL AND
PULLING ENGINE FOR WORLD "ECONOMIC GROWTH. AMONG DEVELOPING
-COUNTRIES, THOSE WITH THE MOST OPEN ECONOMIES :AND CLOSEST TIES
WITH THE UNITED STATES (E.G., THE ASEAN COUNTRIES) HAVE MOST
EFFECTIVELY OVERCOME THE LAST DECADE'S ADVERSE ECONOMIC CIRCUM-
STANCES. TECHNOLOGIES FROM U.S. -SPONSORED RESEARCH ARE OPENING
A NEW ERA OF PRODUCTIVITY FOR THIRD WORLD FARMERS. BECAUSE OF%
OIL CONSERVATION, OPEC'S CARTEL IS BROKEN WITH THE PROSPECT THAT
DEVELOPING COUNTRIES CAN NOW AFFORD PESTICIDES, FERTILIZERS AND
FUEL FOR IRRIGATION AND MACHINERY. UNDERNEATH THE SURFACE
OF STATE REGULATION, BURGEONING SECOND ECONOMIES ARE BREAKING
OPEN OLD CONTROLS, CAUSING CENTRALLY-DIRECTED ECONOMIES TO
CHANGE. THIRD WORLD LEADERS, ONCE ENAMORED OF SOCIALIST
MODELS, ARE NOW BETTING ON MARKET-ORIENTED POLICY CHANGES IN
FOUR CRITICAL AREAS:
AGRICULTURAL PRICES
MARKETING REFORM AND LIBERALIZATION
INPUT SUPPLY AND DISTRIBUTION
PRIVATE SECTOR INVOLVEMENT IN AGRICULTURE AND INDUSTRY
IMPLICATIONS FOR U.S. POLICY
THE GROWING AMERICAN ECONOMY IS AN IRRESISTABLE FORCE
IMPELLING CHANGE IN THE ECONOMIES OF THE THIRD WORLp. IN A
SYSTEM OF FREE TRADE, THE UNITED STATES AND DEVELOPING NATIONS
ARE INEXTRICABLY TIED TOGETHER BY THE MUTUALITY OF ECONOMIC
INTERESTS.
ALTHOUGH BUDGETARY CONSTRAINTS WILL REQUIRE CUTS IN OUR
DEVELOPMENT ASSISTANCE, ECONOMIC GROWTH IN THE UNITED STATES
AND THE FREE WORLD IS CREATING PRIVATE INVESTMENT CAPITAL THAT v
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17 PRQPERLY ENCOURAGED, COULD HELP TURN AROUND THE ECONOMIES OF
`??b1'tJELORSNG'L`Or:~fiT I'ES ':,.TKdRA? oR..D::LEARER ARE, ItJCUASFNGLY
}..
??:: AttA IE-WOF,:TNI~a?.'pAP:;REc3GNLt TH~1'T:,rHEI R .:.CON: E'CQt;Jf9IC. ~ ` .? !>i ?;:ti:?. ~::.
SALVATION LIES IN THE 'WEST't*"W;ITK' -THg E-AS'T' PttOV1?DI'fluu"'L'f"I~LE' IM ': }' ' '
THE WAY OF CREDIBLE NATION-BUILDING ALTERNATIVES.
THE SOVIET BLOC HAS FEW REAL RESOURCES TO COUNTER THESE
ECONOMIC AND POLITICAL TRENDS. IT IS NOT ABLE TO PROVIDE MUCH
OF A GROWTH MARKET FOR THIRD WORLD EXPORTS. THE SUPPLY OF
SOVIET OIL TO FAVORED DEVELOPING COUNTRIES WILL DIMINISH WITH
FALTERING DOMESTIC PRODUCTION AND INCREASING NEEDS AT HOME.
?FZREIGN EXCHANGE STRINGENCIES WILL KEEP MOSCOW FROM PROVIDING
HARD CURRENCY LOANS. DOMESTIC SHORTAGES OF GOODS AND SKILLED
MANPOWER WILL LIMIT COMMODITY AND PROJECT AID. IN SUM, SOVIET
DOMESTIC ECONOMIC AND FOREIGN FINANCIAL CONSTRAINTS WILL MAKE
MOSCOW EVEN LESS INCLINED TO ACCEPT COSTLY NEW BURDENS LIKE
CUBA AND VIETNAM. IN TRIMMING OUTLAYS THROUGHOUT THEIR EMPIRE, '
TEY ALSO MUST PARE ECONOMIC SUPPORT FOR CLIENT STATES.
AT THE SAME TIME, THIRD WORLD LEADERS ARE UNEASY ABOUT
THEIR ABILITY TO STAY IN POWER DURING THE DIFFICULT PERIOD OF
TRANSITION TO A HEALTHIER ECONOMY. THIS GIVES GREATER EMPHASIS
TO SECURITY ISSUES IN EAST-WEST COMPETITION FOR THE THIRD WORLD.
MOSCOW WILL HAVE TO RELY MORE HEAVILY ON SHIPMENTS OF ARMS TO
SUSTAIN ITS INFLUENCE. THE UNITED STATES HAS A GREAT ADVANTAGE
IN SECURITY ASSISTANCE BECAUSE IT CAN TAILOR SUCH PROGRAMS TO
MEET REAL DEFENSE NEEDS. IF THE PRICE IS RIGHT, THE WEST IS
PREFERRED FOR THIRD WORLD SECURITY ASSISTANCE.
THE CHALLENGE OF THE INTERIM PERIOD
THIRD WORLD GOVERNMENTS, ONCE DOMINATED BY SOCIALIST
ECONOMIC SYSTEMS, ARE NOW ATTEMPTING IO LIBERALIZE THEIR
ECONOMIES AND MAKE THEM MORE EFFICIENT. THEY HAVE AGREED TO
THE POLICY REFORMS STIPULATED BY THE IMF, AND HAVE MADE PROGRESS
TOWARDS &CTTER ECONOMIC AND FINANCIAL MANAGEMENT. BUT RE-
STORING GROWTH TO STAGNANT ECONOMIES IS A DIFFICULT AND LENGTHY
TASK. MOREOVER r THE ACTUAL IMPLEMENTATION OF CRITICAL POLICY
MEASURES, LOANS AND PROJECTS HAS SLIPPED IN MANY OF THESE COUNTRIES.
T (IS MEANS THAT EVEN LONGER PERIODS OF ECONOMIC AUSTERITY MUST BE
ENDURED BEFORE HEALTHIER ECONOMIES CAN EVOLVE, I N SOME
INSTANCES UP TO FIVE YEARS.
WE MUST ALSO RECKON WITH THE POLITICAL VULNERABILITY OF
THIRD WORLD LEADERS WHO HAVE TAKEN THE HARD POLICY DECISIONS.
WHILE SETTING I N MOTION NEW REFORM MEASURES WHICH WILL YIELD
POSITIVE RESULTS SEVERAL YEARS HENCE, THESE LEADERS MUST
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SIMULTANEOUSLY CONTEND WITH URGENT POLITICAL AND SOCIAL
PRESSURES EXERTED BY THE INTERIM PERIOD OF ECONOMIC HARDSHIP.
-ISLED....~ORRECTLY, SUCH PRESSURES COULD DERAIL EFFORTS
TO wRESTOR ; EdbNJ01 '1'C?GR10WTH A:A0" CfZ'EA.T.E .:TNiE.: 114C O?F114 SFABLUTY,,. f' .
1HI CH
-
i T11r .: WT?14.i .v ?.v v.:.v a,a~.ti.:? r.a.war'. w..~~r~ Z~?~. ?-i r'~
.: ~,i.L ~. a.?a.+p '.~Q~,y ~~ .f~?SM:~a rsO .1!p ~,lt
THE CHALLENGE TO U.S. FOREIGN POLICY IS TO 'AVE THESE
LEADERS STAY ON COURSE AND NOT YIELD TO SHORT-TERM POLITICAL
EXPEDIENCY AT THE EXPENSE OF THEIR COUNTRIES' FUTURE ECONOMIC
INTERESTS. AT THIS POINT IN HISTORY, WE HAVE, IN MANY tHIRD
WORLD COUNTRIES, A MAJOR SUNK INVESTMENT IN THE, FORM OF WORLD
BANK LOANS, IMF STAND-BY ARRANGEMENTS AND COMMERCIAL FINANCING
THAT WILL BE LOST IF POLICY CHANGES ARE NOT UPHELD AND ECONOMIC
GROWTH RENEWED. IN THIS CONTEXT, THE NEW ECONOMIC POLICY
INITIATIVE TO SUPPORT POLICY REFORM IN SEVERAL AFRICAN
COUNTRIES OVER THE NEXT FIVE YEARS WILL HELP BRIDGE THE GAP
BETWEEN ECONOMIC STAGNATION 'AND RECOVERY. PLACED ALONGSIDE
THIS WILL BE THE- KEATING-GROUP "FOOD FOR PROGRESS" PROPOSAL
WHEREBY USG-OWNED FOOD STOCKS WILL BE USED FOR A FOUR-YEAR
PERIOD TO REDUCE THE FOOD RISK TO THIRD WORLD GOVERNMENTS
UNDERTAKING AGRICULTURAL PRICE AND POLICY REFORM.
WE NEED AS WELL EMERGENCY RECOVERY PROGRAMS DESIGNED TO
INCREASE PRODUCTION ON SMALLHOLDER FARMS CLOSE TO URBAN
CENTERS. RECORDS IN MANY COUNTRIES SHOW THAT SUCH AREAS HAVE,
n THE PAST, PRODUCED SIGNIFICANT QUANTITIES OF FOOD BY FARMERS
CAPABLE OF QUICK PRODUCTION RESPONSE IF GIVEN A FAIR PRICE FOR
THEIR PRODUCE. OUR AMBASSADORS IN THIRD WORLD COUNTRIES
SHOULD HAVE THE AUTHORITY TO DEVELOP AND FUND, IN CONSULTATION
WITH AID TEAMS, PRODUCTION IMPACT PROJECTS WHICH WOULD HELP
UNLEASH THIS POTENTIAL BY PROVIDING INFRASTRUCTURE REPAIR AND
FARMER SERVICES ACCORDING TO LOCALLY DETERMINED NEEDS. WHILE
LONGER-TERM AGRICULTURAL DEVELOPMENT EFFORTS MUST CERTAINLY BE
MADE, THE CRISIS OF THE INTERIM PERIOD DEMANDS EMERGENCY
PROGRAMS WHICH WOULD BOOST PER CAPITA AGRICULTURAL OUTPUT AS
QUICKLY AS POSSIBLE. UNFORTUNATELY, AID IS NOT ALLOCATING
RESOURCES TO SUCH SHORT-TERM RECOVERY EFFORTS.
THE AFRICAN DILEMMA
THE LAND IS DYING IN MANY PARTS OF AFRICA. SOUTH OF THE
STEADILY ENCROACHING SAHARA DESERT, 29 OF THE WORLD'S
36 POOREST NATIONS ARE APPEALING FOR EMERGENCY AID TO WARD OFF
FAMINE. HUNGER AND EXTREME MALNUTRITION NOW THREATEN.OVER
14 MILLION PEOPLE THROUGH THE END OF 1985. A DROUGHT FAR
WORSE THAN ANYTHING HITHERTO EXPERIENCED IN THE REGION,
PLUS THE INSTABILITY OF REGIMES AND THEIR ILL-ADVISED POLICIES,
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HAVE BADLY DAMAGED AGRICULTURAL SECTORS, DRIVING MANY FARMERS
INTO.. 1ERE SUS'SISTE.NCE.:.DES.PERAxWDN. } AS SED V NG
ANQ' OVE AZIN :OF?:.r, RGFN l:'=L'PNDS .'?'.PEAS N I'5
E
ORhkQ!~EY~`FOssti.Y~?:F1}Oa;' ..; A. ~ CUTS. bos;?N '1' ES.:
f}EP.tETI Nit FARES'1'S'.'. T;. j~. ?:ALAftt1t1 i '?'R FE' ' 4': ' "T'
RAIN IS NO LONGER RECYCLED, AND IRRIGATION IS DETERIORATING.
MOREOVER, IN SPITE OF EPIDEMICS AND HIGH INFANT MORTALITY;
POPULATION PRESSURES ARE AMONG THE GREATEST IN THE WORLD
WITH NET ANNUAL GAINS OF THREE PERCENT OR MORE, OR ABOUT
20 MILLION PEOPLE A YEAR. -
.71
WHAT TO DO? WE SHALL CONTINUE, OF COURSE, TO SEND FOOD TO
FEED THE STARVING. THE PRESIDENT LAST YEAR APPROVED THE
KEATING GROUPS'S TEN RECOMMENDATIONS FOR ACHIEVING MORE RAPID
RESPONSE TO THIRD WORLD FOOD CRISES, AND A TREMENDOUS OUT-
POURING OF ASSISTANCE HAS TAKEN PLACE. BUT TODAY'S FOOD
EMERGENCY REEMPHASIZES THE NEED TO TACKLE'THE UNDERLYING
STRUCTURAL PROBLEMS OF AGRICULTURAL STAGNATION.- ARRESTING
AND REVERSING DECLINING FOOD PRODUCTION CAN ONLY HAPPEN
THROUGH FUNDAMENTAL CHANGES. IF THEY DO NOT TAKE PLACE,-
THEN WE MUST BE PREPARED TO UNDERWRITE INDEFINITELY SUB-
SAHARAN AFRICA'S SURVIVAL WITH EVER INCREASING FOOD AID
PROGRAMS, KNOWING THAI MENDICANCY TENDS TO BECOME INSTITUTION-
ALIZ9D AND PERMANENT.
OBVIOUSLY, OUR BUDGET WILL NOT PERMIT US TO ADDRESS
PROBLEMS OF THIS MAGNITUDE WITH BROADLY-BASED DEVELOPMENT FROM
THE BOTTOM RUNG UP9 IN THE MODE OF CURRENT AID POLICY.
HELPING THE LANDLESS POOR WITH HEALTH, EDUCATION OR OTHER
SOCIAL PROGRAMS, HOWEVER LAUDABLE, WILL NOT PRODUCE BADLY-
NEEDED ECONOMIC GROWTH, PARTICULARLY DURING THE TRANSITIONAL
PERIOD TO MORE MARKET-ORIENTED ECONOMIES. WE MUST CONCENTRATE
OUR RESOURCES INTO THE AREAS WHICH MATTER MOST IF WE ARE TO
"TURN-AROUND" THE ECONOMIES OF KEY AFRICAN STATES. THIS IS
POSSIBLE IF WE REALLOCATE OUR AVAILABLE RESOURCES TO
STRENGTHEN FOOD PRODUCING CAPACITY, IF WE PUSH RIGOROUSLY
FOR AGRICULTURAL POLICY REFORM, AND IF WE HELP MOBILIZE THE
PRIVATE SECTOR TO PROVIDE AGRICULTURAL INPUTS, FOOD PRO-
CESSING, STORAGE AND MARKETING. AFRICA COLLECTIVELY HAS THE
GREATEST UNTAPPED AGRICULTURAL POTENTIAL IN THE WORLD.
SHARPLY FOCUSSED AND SKILLFULLY DIRECTED U.S. ASSISTANCE CAN
BRING THAT POTENTIAL TO FRUITION.
THE REAGAN REVOLUTION IN DEVELOPMENT ASSISTANCE
IN ITS FIRST TERM, THE REAGAN ADMINISTRATION MISSED AN
OPPORTUNITY TO MAKE AID AN EFFECTIVE INSTRUMENT OF ADMINISTRA-
TION FOREIGN ASSISTANCE GOALS. HOWEVER, THE SUCCESS OF THE
ADMINISTRATION'S ECONOMIC POLICIES NOW ENHANCES ITS ABILITY TO
GENERATE A FOREIGN ASSISTANCE PROGRAM WHICH AMERICAN PEOPLE
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CAN UNDERSTAND AND THE AMERICAN CONGRESS CAN SUPPORT. AT
THE SAME TIME., A COMPLEX OF FACTORS HAS GIVEN US ANOTHER
CH CE 'PRObpT'E}E-GONOM-lC:?GROWTH .AND= STR.Et T,}{EN:.
'CAN,IO~'A .. =.:.':
?'0 LET HE' 6CCAMt Llf ~' Y AAA TJ: IN "~S'UM;' 1~? 01~Cr~lU "YHA " t ;.~,-~- ?;s~% . :
1. CHANGING ECONOMIC CIRCUMSTANCES GIVE US NEW
OPPORTUNITIES TO BUILD LASTING TIES TO THE DEVELOPING
WORLD. -
2. WE MUST MAKE A SPECIAL EFFORT TO SUPPORT-THIRD WORLD
COUNTRIES IN THEIR DIFFICULT TRANSITIONAL PERIODS TO MORE
MARKET-ORIENTED ECONOMIES.
3. WE CANN"T. CONTINUE TO PLACE OUR AVAILABLE RESOURCES ON
UNPRODU'CTIVr., ALBEIT WORTHY DEVELOPMENT PROJECTS. THEY
MUST BE REGROUPED INTO THE AREAS WHICH MATTER MOST:
AGRICULTURAL DEVELOPMENT, POLICY REFORM AND PRIVATE SECTOR
INITIATIVES.
4. WE NEED A DISCIPLINED APPROACH TO DEVELOPMENT IMPLEMENTA-
TION. LOOKING AT AID, AS IT IS NOW CONSTITUTED, I FIND IT
EXCESSIVELY LAYERED WITH MINUTE SUBDIVISION OF LABOR WHICH
DOES NOT RESULT IN INCREASED PRODUCTIVITY. I ASK THE
FOLLOWING QUESTIONS:
A) ARE THE "FOUR PILLARS" OF DEVELOPMENT, AS
INTERPRETED BY AID; THE RIGHT ONES?
B) ARE FINANCIAL RESOURCES TARGETED AT THE PRIORITY
AREAS OF OPPORTUNITY?
C) ARE PERSONNEL RESOURCES DEPLOYED IN A RATIONAL
MANNER CONSISTENT WITH PRIORITY TASKS?
D) DOES CURRENT AID POLICY FORMULATION EFFECTIVELY
SUPPORT U.S. FOREIGN POLICY, NATIONAL SECURITY AND
TRADE INTERESTS, WHETHER BY REGION OR COUNTRY?
E) ARE AID PROGRAMS, OTHER THAN EMERGENCY RELIEF,
COMPREHENSIBLE TO THE AMERICAN PUBLIC AND CONGRESS?
F) IS AID DECISION-MAKING PLUGGED INTO AN ANALYTICAL
FRAMEWORK WHICH EXAMINES ALL FOREIGN ASSISTANCE
INSTRUMENTALITIES IN TERMS OF OBJECTIVES AND
TRADE-OFFS?
G) HAS AID SUCCEEDED IN PROMOTING PRIVATE ENTERPRISE
IN THIRD WORLD NATIONS?
I CONCLUDE THAT THE ANSWER TO EACH OF THE ABOVE CRITICAL
QUESTIONS IS IN LARGE PART "NO". AID MUST BE RESTRUCTURED IF
NEW OPPORTUNITIES ARE TO BE SEIZED AND THE GOALS OF THE REAGAN
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 Declassified in Part - Sanitized Copy Approved for Release 2013/05/22 : CIA-RDP89B00224RO01103770001-7
ADMINISTRATION REALIZED. TO TURN THE AGENCY AROUND, WE FIRST
?.t NEED TO REMOVE THE ORGANIZATIONI;A- DISTANCE BETWEEN
'ST'ATE 'TO `ENSURE:: HAT' QTR'?FOREIGN -POL-IC1',-:NATIJtlt-"`_ '11P'IiY '`:, r?,,,.:_;;
T.S 'ARE'?:RnOPE 'MESHED. _ . ?.: .,
STABILIZE AID AS tSKFD?
AN ORGANIZATION BY FURTHER INTE'3RATItj IT
INTO THE FOREIGN SERVICE, CUTTING AWAY THE DEAD WOOD,
ATTRACTING NEW TALENT AND REWARDING PRODUCTIVE WORK WITH-
CAREER INCENTIVES. FINALLY, AID PROGRAMS MUST BE DEVISED
THAT ARE DEMONSTRABLY PRODUCTIVE AND MARKETABLE TO THE AMERICAN
PEOPLE AND CONGRESS.
KE AT I NG
CO N F I D E N T I A L
13T
12542
NNNN
?i: ri1'I:. awl. Std'?~a.J?l..
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 Declassified in Part - Sanitized Copy Approved for Release 2013/05/22 : CIA-RDP89B00224RO01103770001-7
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 Declassified in Part - Sanitized Copy Approved for Release 2013/05/22 : CIA-RDP89B00224R001103770001-7
CONFIDENTIAL
2 July 1987
THE WORLD BANK
The World Bank (the International Bank for Reconstruction and
Development) is a specialized agency of the United Nations. Its primary
goal is to foster broad-based growth in incomes and employment in member
countries by facilitating investment of capital for productive purposes,
promoting private capital investment, and when private capital is not
available on reasonable terms, to provide supplemental lending from Bank
resources. Almost all non-Communist countries are members of the Bank.
-- The Bank makes long-term loans at market rates of interest to
members using funds from member country subscriptions to the Bank's
capital stock, by selling its own bonds in international capital
markets, and by selling its own loan portfolios to private
investors.
-- IBRD loans must be guaranteed by the government of the borrowing
country and repaid in hard currency.
-- Most Bank loans finance infrastructure investment in
transportation, electric power, agriculture, water supply and
education.
Since the early 1980s the Bank also has provided some loans to promote
stable financial conditions needed before long-term development programs can
be undertaken. In this, Bank activities have come to somewhat overlap the
work of the International Monetary Fund, its sister agency.
CONFIDENTIAL
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