US Nears Overhaul Of Foreign Aid Effort

IN 1986 the United States government wanted to do the right thing by the Philippine people, who had just ousted dictator Ferdinand Marcos and elected Corazon Aquino to be their leader in a stirring display of civic courage. So Congress sent money: $210 million in assistance for 1987.

The problem was that, at the same time, the US was reducing its quota on imported Philippine sugar. That move cut $89 million from Philippine export earnings, in effect reducing the value of US aid by 42 percent.

This example - taken from a recent Brookings Institution study - shows both the promise and problems of the way the US goes about trying to lift up poorer countries.

The US is willing to help, but sometimes the right-hand agency does not know what the left-hand department is doing. The US foreign aid effort often seems haphazard, with no clear goals or central leadership.

With the advent of a new administration, foreign aid seems set for an overhaul. Both government officials and outside experts are calling for change, with many of them pushing two points:

* Greater coordination between US aid and international economic policies.

* Reorganization of the major US aid-dispensing arm, the Agency for International Development (AID).

"The current program has run out of steam," concludes a new report by a group of independent development experts.

The White House appears receptive to rejigging foreign assistance. In his American University speech on trade last week, President Clinton stressed that US exports would benefit from the steady economic expansion of the developing world.

US aid policies must do more "to support environmentally responsible, sustainable development," Mr. Clinton said.

Part of the problem is that in the new world order it's more difficult to identify exactly what US aid policies are. Once US assistance to the developing world was largely limited to direct foreign aid. Today, it's a crazy quilt of bilateral aid, trade policies, debt forgiveness, and money channeled through multilateral institutions such as the UN, notes Duke economics professor Anne Krueger, author of a new Brookings study on the US and developing countries.

Inevitably, larger US economic goals clash with development efforts. As the sugar example shows, that is particularly true in the area of trade, where US industries often cry foul at the inroads made by cheap foreign producers.

While Clinton officials say they want to help third-world economies, their talk on trade has been tough enough to indicate that this crosscurrent clash may well continue. "I remain hopeful," Professor Krueger says.

True coordination of US aid policies would probably require a fundamental change in the way the government does business. One group outside government has proposed just that, in a white paper that was submitted to Clinton aides during the transition.

A Development Coordination Group in the Office of the President could bring order from assistance chaos, according to the white paper. Composed of second-tier officials from the State Department, Treasury, Commerce, etc., the group might prove particularly effective if headed by Vice President Gore, says the report, which was produced by a group of development experts under the auspices of the Overseas Development Council. AID reorganization plan expected

The US agency most responsible for nonsecurity assistance foreign aid might also stand some renovation. In recent years, AID has been criticized for poor controls over aid projects and a an overall lack of focus.

State Department officials are now reviewing AID's status, with an eye toward recommending reorganization in about two months. The exact nature of the changes is not yet set, though Secretary of State Warren Christopher said last month that AID "has to have fewer tasks and more specific targets."

Currently AID is organized as the State Department itself is, with geographically based bureaus. The foreign aid white paper suggests replacing these with three divisions. The first, an operations division, would fund development programs around the world on a competitive basis. It would act less like an arm of the government and more like a foundation.

The second division would focus on scientific cooperation, tapping the latest in technology and adapting it for development needs. The third division would focus on the most pressing foreign assistance problem: aid for Eastern Europe and the former Soviet Union.

Creating sustainable development would seem an obvious foreign aid objective, but it hasn't always been the case, claims one expert. "In the past foreign aid programs were often conceived with cold war geopolitical goals in mind," says Christine Contee, an Overseas Development Council fellow.