Special Message to the Congress on Foreign Aid.

To the Congress of the United States:

I. We live in a turbulent world. But amid the conflict and confusion, the United States holds firm to its primary goal--a world of stability, freedom and peace where independent nations can enjoy the benefits of modern knowledge. Here is our difference with the Communists--and our strength. They would use their skills to forge new chains of tyranny. We would use ours to free men from the bonds of the past.

The Communists are hard at work to dominate the less-developed nations of Africa, Asia, and Latin America. Their allies are the ancient enemies of mankind: Tyranny, poverty, ignorance and disease. If freedom is to prevail, we must do more than meet the immediate threat to Free World security, whether in Southeast Asia or elsewhere. We must look beyond--to the long-range needs of the developing nations.

Foreign assistance programs reach beyond today's crises, to offer:

Strength to those who would be free;

Hope for those who would otherwise despair;

Progress for those who would help themselves.

Through these programs we help build stable nations in a stable world.

II. Acting on the experience of the past four years, I am presenting a program which:

--Is selective and concentrated;

--Emphasizes self-help and the fastest possible termination of dependence on aid;

--Provides an increasing role for private enterprise;

--Improves multilateral coordination of development aid;

--Reflects continuing improvement in management.

Specifically, for Fiscal Year 1966 I recommend:

--No additional authorizations for development lending or the Alliance for Progress; existing authorizations for those purposes are adequate;

--Authorizations of $1,170 million for military assistance;

--$369 million for supporting assistance;

--$210 million for technical cooperation;

--$155 million for contributions to international organizations;

--$50 million for the President's contingency fund; and

--$62 million for administrative and miscellaneous expenses.

I am also requesting a special standby authorization for use if necessary in Vietnam only.

My appropriation request for FY 1966 under these authorizations is for $3,380 million. $1,170 million will be used for military assistance; $2,210 million is for the other categories of aid.

This is a minimum request, the smallest in the history of the foreign aid program. It is $136 million less than requested last year, and will impose the smallest assistance burden on the American people since the beginning of the Marshall Plan in 1948.

This minimum request reflects my determination to present to the Congress the lowest aid budget consistent with the national interest. It takes full account of the increasing efficiency of the assistance program, and the increasing availability of assistance funds from international agencies in which the costs are shared among a number of countries.

I believe that in carrying out this program the American people will get full value for their money. Indeed, we cannot afford to do less. Russia and Red China have tripled their promises of aid in the past year. They are doing more than they have ever done before; the competition between them has led to increased efforts by each to influence the course of events in the developing nations.

If, during the year, situations should arise which require additional amounts of U.S. assistance to advance vital U.S. interests, I shall not hesitate to inform the Congress and request additional funds.

III. I am requesting $1,170 million for the Military Assistance Program. This is an increase of $115 million over the total appropriation for military assistance for the current fiscal year. In order to meet urgent requirements in Southeast Asia during FY 1965, we cut back programs in other countries which are under pressure. Some of the FY 1966 appropriation will be needed to make up what we have left undone.

Still, the program is highly concentrated. Nearly three quarters of the money will go to eleven countries around the great are from Greece to Korea. Vietnam alone will absorb an important share.

Military assistance makes it possible for nations to survive. It provides a shield behind which economic and social development can take place. It is vital to our own security as well. It helps to maintain more than 3 1/2 million men under arms as a deterrent to aggression in countries bordering on the Sino-Soviet world. Without them, more American men would have to be stationed overseas, and we would have to spend far more for defense than we now do.

IV. As a supplement to Military Assistance, I am requesting $369 million for Supporting Assistance--economic aid which is directly related to the maintenance of stability and security. Eighty-eight percent of the money will be used in Vietnam, Laos, Korea and Jordan.

V. The world's trouble spots--the Vietnams and the Congos--dominate the headlines. This is no wonder, for they represent serious problems. Over $500 million of the current request for military and supporting assistance will be deployed to meet the frontal attack in Vietnam and Laos.

Indeed, $500 million may not be enough. I am therefore requesting for FY 1966 an additional standby authorization for Military or Supporting Assistance which would be used only in Vietnam and only in case we should need more funds to protect our interests there. Any program which would make use of this additional authorization will be presented to the authorizing committees of the Congress concurrently with the appropriation request.

Our past investment in the defense of the Free World through the Military Assistance and Supporting Assistance Programs has paid great dividends. Not only has it foiled aggression, but it has brought stability to a number of countries. Since the beginning of this decade, the funds used each year for military aid and supporting assistance have been sharply reduced. Today, we are spending $1 billion less on these accounts than we did in 1960 and 1961.

VI. Military security in the developing world will not be sufficient to our purposes unless the ordinary people begin to feel some improvement in their lives and see ahead to a time when their children can live in decency. It follows that economic growth in these regions means as much to our security as their military strength. That is an important reason why the United States has taken the lead during the past few years in organizing, on an international basis, a program of development assistance.

Of course, such assistance is and must be concentrated where it will contribute to lasting progress. Experience has demonstrated that certain requirements need to be met by the developing countries if such progress is

to occur,

They need to undertake sound measures of self-help--to mobilize their own resources, eliminate waste, and do what they can to meet their own needs. And they need to avoid spending their resources on unnecessary armaments and foreign adventures. Our aid can contribute to their economic and social progress only if it can be provided within a framework of constructive and sensible policies and programs.

Fortunately, most of the developing countries recognize the relationship between the wise use of their own resources and the effectiveness and availability of external aid. It is a cardinal principle of U.S. policy that development assistance will go to countries which have undertaken effective programs of self-help and are, therefore, able to make good use of aid. During FY 1964, for example, sixty-four percent of our development assistance went to seven such countries: India, Nigeria, Pakistan, Tunisia, Turkey, Brazil and Chile. In other countries as well, including a number of smaller countries, sound self-help efforts are making it possible for us to provide effective development aid.

With development assistance we seek to help countries reach, as rapidly as possible, the point at which further progress is possible without external aid.

A striking example of how, through self-help, a developing country can reach the point where it can carry on without concessional aid is the Republic of China. Little more than ten years ago, Free China faced enormous security and development problems. The prospects for economic growth looked dim. But in only ten years, as a result of determined self-help supplemented by effective U.S. aid:

--per capita Gross National Product has risen 45 percent;

--saving accounts for one-fifth of the National Income;

--exports have tripled;

--industrial output has tripled;

--the private share of output has doubled, and now accounts for two-thirds of all industrial production;

--agricultural production has increased by 50 percent.

Free China has also joined other nations as a good cash customer for U.S. exports, particularly agricultural commodities.

This remarkable cooperative effort has brought the Republic of China to the point where it no longer needs AID assistance. Fiscal Year 1965 marks the end of this successful program.

I am requesting $580 million as our FY 1966 aid commitment to the Alliance for progress. This is an increase of $70 million over last year's appropriation.

Impatient expectations of this great joint undertaking have sometimes in the past blinded us to its achievements--achievements which now touch the lives of nearly half of the 200 million people of Latin America. Increasingly, however, the people of the United States have come to recognize what the Alliance means.

To date, as a result of U.S. assistance in support of the Alliance, --over 75,000 teachers have been trained; --nearly 10,000,000 school books have been put in circulation;

--over 12,000,000 children are now participating in school lunch programs--an increase of over 8,000,000 in the past 2 1/2 years;

--development banks and other credit institutions which support the private sector have been established in fifteen countries;

--over 300,000 houses have been or are being built;

--savings and loan associations, nonexistent a few years ago, have now accumulated and are investing local deposits of $75 million;

--25 of our own states have joined the Partners for the Alliance Program--they bring to bear a vital people-to-people effort on our relationships with Latin America;

--40 U.S. colleges and universities are working to modernize teaching and training in Latin America.

The Inter-American Committee for the Alliance for Progress (CIAP), established to provide even closer ties for mutual economic effort, successfully completed its first review of country performance under the Alliance. The work of this Committee is further evidence that the governments and people of Latin America are accepting increasing responsibility for their own development. The failure of Castroism is becoming clearer each day. More and more, Latin America is facing up to the fundamental problems of poverty, a rapidly growing population, and financial disorder. Increasingly, more and more of these countries are moving towards economic viability and self-sustaining growth.

The Alliance is taking hold. The war on poverty in Latin America is under way. We in the United States are proud of the way our Good Neighbors to the South are meeting the challenge of development. We are proud, too, of the role the United States is playing in this great effort and pledge our steadily enlarged support.

The problem of food requires special mention.

Growing population and rising standards of living increase the demand for food. Production in most developing countries is barely keeping pace. In some countries, it is actually falling behind.

In the years ahead, if the developing countries are to continue to grow, they must rapidly enlarge their capacity to provide food for their people. Up to a point, they can and should improve their ability to buy some of their food from abroad. For the most part, however, they must expand and diversify their own production of food. This will require many things: changes in traditional methods, abundant use of fertilizer, greater incentives for producers, and, frequently, changes in pricing practices and more effective organization of distribution.

To meet their needs for food, the developing countries will need help.

We, in the United States, are uniquely equipped to give it.

We are rightly proud of our dynamic and progressive agriculture, with its record of success which contrasts so sharply with the agricultural failures of the Communist countries. We must use our agricultural abundance and our extensive technical skills to assist the less-developed countries to strengthen their ability both to produce and to buy agricultural commodities and, more generally, to support rural development.

We can and must mount a more comprehensive program of technical assistance in agriculture engaging the United States Department of Agriculture, our state universities and land grant colleges, and the most creative of our people in agriculture, marketing and industry.

At the same time, we can help meet the food needs of the developing nations through our Food for Peace Program under Public Law 480. Even under the most favorable conditions, it will be a number of years before the developing countries can produce and import on commercial terms all the food they need. In the interim, our own agricultural plenty can help provide for the hungry and speed the day when these countries can stand on their own feet and pay for their food imports on commercial terms--as happened in the case of Japan and Europe.

VII. We are placing increasing emphasis on the role of private institutions and private enterprise in the development process, and we shall continue to do so.

Foreign aid cannot succeed if we view it as a job for government alone. For government can only do a small part of the job. We must bring to bear on the problems of the developing world, the knowledge and skills and good judgment of people from all walks of American life. The Agency for International Development provides the means for utilizing the resources of private business, of our universities and colleges, of farm groups, labor unions, banks, cooperatives, savings and loan associations, and professional groups.

I am happy to report that most A.I.D.-financed capital projects and a large and growing part of technical assistance are already administered by contract with private American firms and institutions.

In this connection, the privately managed International Executive Service Corps has an important role to play. I welcome the interest of business executives in serving overseas.

The Advisory Committee on Private Enterprise in Foreign Aid established by the 88th Congress has been meeting for a number of months. It is working hard. We are looking forward to their report which we hope will suggest new ways of enlarging the role of the private sector in the aid program.

To mobilize additional private capital, and the skills which go with it, I am asking the Congress to enact an investment tax credit. I am also asking for expanded authority in connection with the investment guaranty program of the Foreign Assistance Act. However, such measures to encourage the flow of capital to the developing world can do only a part of the job. The lessdeveloped countries must pursue policies that will create new opportunities for their own businessmen and a favorable climate for investors from abroad.

We are making a special effort to encourage private enterprise in the developing countries, through

--technical assistance for private enterprise;

--productivity centers and schools of business administration for training in management and new techniques;

--commodity loans to provide materials and parts for private business;

--loans to industrial development banks and agricultural credit banks;

--loans to private business.

All of these programs have one object-to get private enterprise more heavily engaged in the task of development.

VIII. We will persist in our efforts to put more aid on a multilateral basis, to improve the coordination of bilateral aid, and to increase the share of the burden borne by other Free World nations.

A growing proportion of economic assistance is directly administered by international financial institutions such as the World Bank, I.D.A., and the Inter-American Bank. In the past four years, such multi-national institutions increased their capital assistance to the developing nations by 50%. We, in turn, are prepared to increase our contribution to those organizations--as rapidly as other members do so. It is essential that these institutions maintain their international character.

To strengthen multi-national aid, and further to strengthen the Alliance for Progress, I urge the Congress promptly to approve the three-year authorization of $750 million which constitutes the United States contribution to the Fund for Special Operations of the Inter-American Development Bank.

Besides channeling aid through multilateral institutions, we are increasingly relying on international consortia and consultative groups to coordinate our bilateral aid with that of others. India, Pakistan, Turkey, Nigeria and Tunisia are among the countries where such arrangements have been established, in most cases under the auspices of the World Bank. The Inter-American Committee for the Alliance for Progress (CIAP) is fast becoming a most useful forum for the coordination of assistance to Latin American countries.

In addition to these arrangements in support of individual countries and regions, the United States consults regularly with other major donor countries and international agencies in the Development Assistance Committee of the Organization for Economic Cooperation and Development.

All in all, in FY 1966, 85% of U.S. development loans in Asia and Africa will be committed under international arrangements. All U.S. aid to Latin America is made available within the international framework of the Alliance for Progress.

We are continuing to urge other donors to give more aid on better terms.

Since 1960, new commitments of bilateral economic assistance by other Free World nations have increased by 50%. In the past year, the United Kingdom has organized a Ministry of Overseas Development. Canada has undertaken a program of lending on terms which are more liberal than ours.

We are particularly concerned about the terms of aid. The burden of debt borne by the developing countries is rising. Their accumulated public foreign debt now runs to about $30 billion. The volume of repayments comes to nearly $5 billion per year and it is rising by 15% each year. This is a heavy load for nations with small resources struggling to raise the capital they need for economic and social betterment.

We will continue to emphasize in our discussions with other donors during the coming year the need to improve the terms on which aid is extended.

IX. Tight, effective management is essential for a tight, effective aid program.

I am especially pleased to report to the Congress about the progress being made by the Administrator of the Agency for International Development in improving the management and operations of the program. The result is greater efficiency for less money.

In keeping with our government-wide economy program, the Agency:

--Cut direct hire employment during FY 1964 by 1200; the downward trend has continued during the past six months;

--Cut superstructure and overhead: during the past 18 months, separate AID organizations in 13 countries and 27 positions at the Mission Director and Deputy level have been eliminated;

--Streamlined management procedures. Since the Congress adopted the unified approach to the organization of assistance which is reflected in the 1961 Foreign Assistance Act, our aid programs have been better coordinated, better planned, and have better served the requirements of United States foreign policy.

We are giving continuing attention to the problem of improving the Agency's personnel structure and achieving the highest possible quality in our staff. We expect to do so in the context of a program which is designed to strengthen the personnel capabilities of all the foreign affairs agencies of the government.

AID has made great progress in reducing the effect of economic assistance on our balance of payments.

The bulk of our assistance--well over 80%--now takes the form of U.S. goods and services, not dollars. Dollar payments abroad have sharply declined. In 1960, the dollar drain to other countries which resulted from the aid program measured over $1 billion. This year and next the drain is expected to be less than $500 million. Moreover, a significant part of this is offset by interest on and repayment of past United States loan assistance.

X. In my Message on the State of the Union, I spoke of the need to create a harmony between man and society--a harmony which will allow each of us to enlarge the meaning of his life and all of us to elevate the quality of our civilization. This summons is not-and cannot be--addressed to Americans alone. For our own security and well-being, and as responsible free men, we must seek to share our capacity for growth, and the promise of a better life, with our fellowmen around the world.

That is what foreign aid is all about. We have pledged our strength--economic and military--in defense of those who would be free and in support of those who would join in working toward a stable, prosperous world.

I call upon the Congress to join with me in renewing this pledge and to provide the tools to do the job.

LYNDON B. JOHNSON

The White House

January 14, 1965