<html><body>The Road Ahead Aid to Iraq and Afghanistan October 22, 2003 Transcript prepared from a tape recording <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText>10:15 a.m.</DIV></TD> <TD> <DIV class=BodyText>Registration</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>10:30</DIV></TD> <TD> <DIV class=BodyText>Introduction:</DIV></TD> <TD> <DIV class=BodyText> Christopher DeMuth, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Remarks:</DIV></TD> <TD> The Hon. Andrew Natsios, U.S. Agency for International Development</TD></TR> <TR> <TD> <DIV class=BodyText>Noon</DIV></TD> <TD> <DIV class=BodyText>Adjournment</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR></TBODY></TABLE> Proceedings: MR. DeMUTH: Ladies and gentlemen, could we please come to order? Andrew Natsios is, of course, the administrator of USAID, the Agency for International Development. His detailed biography is in the package of materials that have been passed out. He has been for well over a decade now one of the most knowledgeable, sensible, passionately engaged and effective individuals involved in the cause of international economic development and has had a very distinguished tenure at the center of a succession of high-priority issues since becoming head of USAID in May of 2001. He is back in the thick of things now in the urgently important issue of the reconstruction of a free Iraq. He is on his way to the airport where he will be attending the conference in Madrid concerned with aid to Iraq and the issue of its relations with debtor nations. He then goes to Sudan and several other nations where USAID is involved in large and momentous projects. With the issue of aid and reconstruction and security aid to Iraq at the forefront in Washington this week, we're delighted that he would take his time on the way to the airport to come by and give this presentation on reconstructing Iraq and Afghanistan. One of the great things about Administrator Natsios is that he has not become self-important as the head of a big Washington agency. PowerPoint presentations are usually for staff, but he is going to be giving us a PowerPoint presentation as part of his remarks this morning. Please give a warm welcome to Andrew Natsios. [Applause.] ADMINISTRATOR NATSIOS: Thank you very much, Chris. Should I leave this here like this? MR. DeMUTH: Yes. ADMINISTRATOR NATSIOS: Okay, good. I thought I would never get to the point where I used PowerPoint presentations, but this is a complicated subject, and thought for clarity's sake that in this case we would do that. Next slide, please. These are general reconstruction objectives in all countries in the aftermath of a major conflict--civil war, international war, state failure--and they are out of the research that I've done. I wrote a book on this in 1996 or '97, and there is a pattern that has emerged in the last 14 years of what we do and how we do it from the perspective of USAID and American foreign policy. Without going through all of this in detail, but let me just go through the critical elements here. The equilibrium in a society is usually disrupted in a major way by mass population movements, and if people are not resettled back in their homes, it becomes a serious problem. The largest displacement of population up until the end of the war with Taliban and Al-Qaeda was in Afghanistan in the whole world. A massive portion of the population was not living in their home villages, and that meant that warlords had more power, not less, because when traditional patterns are disrupted in a village by population movements, it means the traditional leaders of the village and family no longer control their kids, particularly their young boys, which are, of course, the cannon fodder for warlords in any country anywhere in the world, I might add, North or South. Economic activity is always the key to successful reconstruction. You can only do so much reconstruction without a private market economy producing jobs and absorbing surplus labor. People will find something to do. And we'd rather have them in productive activities through a private market economy, getting a salary, where their standard of living improves, than joining a militia or out on the streets in terms of crime. Civil society is a more amorphous thing, but it is sort of a Tocquevillian view that I have of why some societies are remarkably stable. I've argued with my friends from the developing world that Americans are not better than people in other countries; we simply have an unusual mix of highly resilient institutions that have been built up over 200 years that allows the gifts of the people to be used better than they would under an unstable system. Civil society is sort of the foundation upon which a stable government is built. That's the Tocquevillian view. He didn't call it civil society. He called it a country of associations. And he associated the religious institutions with this and, most importantly, local government. Even though that's government, it's local government which is different from the national government. Essential services make a difference to the survival of people, water, sanitation, education, health, roads. Food security is simply being able to get enough to eat to survive. That's one--of all of these requirements, that's the one thing you have to have. You have food insecurity on a massive scale, you have mass starvation, and the country will literally collapse into chaos. We believe in AID, the President believes, Secretary Powell believes, that countries are best governed by democratic institutions, not necessarily exactly modeled after our own, because, I would argue, all our institutions aren't perfect; and, finally, not least of which is public order. DDRR is the demobilization and disarmament of other competing military forces, whether they're militias or warlord armies, in any country after a conflict. Very important that this take place. It takes a long time to do it. It's not easy to do. It's beginning now in Afghanistan in a way that I think we're very pleased with. So let me--these are general objectives, but let me now specify what we've done specifically in both Iraq and Afghanistan. In Iraq, these are Jerry Bremer's and the CPA's objectives. We work for Jerry Bremer. The AID mission director Lou Luck (ph), who's a career Foreign Service officer, ran our mission in Jordan, speaks Arabic, ran large infrastructure projects in Jordan. That's why we chose him. And he's used to working in places that are unstable. He was in Haiti for a while as the mission director. These are the four objectives of the CPA for the country, and I think they're self-evident. And AID is working in all of the--the second, third, and fourth, and I will go through some very interesting ways in which we are addressing the security issue in Iraq that do not involve troops but will, in fact, improve the security of public services, which is important to winning the hearts and minds of the Iraqi people for the effort. And I'll give you one example. There are two kinds of security required in the aftermath of a conflict. One kind is linear security and the other is point security. Point security is protecting a building or an institution, a physical facility. Linear security is protecting a highway that might be 300 miles long, or a transmission line, electrical transmission, that might be 300 or 400 miles long, or a water canal, let's say. That's much harder to do because of the amount of troops you need to do it. And so we are moving as much as we can of public infrastructure off of linear security to point security. Now, how do we do that? The water and the sewerage system, which is critically important to life, because basically Iraq is a giant--except for the North, is a giant desert. The only thing that makes life livable are two rivers, the Tigris and Euphrates Rivers. Without those rivers, there would not be 27 million people in Iraq. Okay? And the river system is critically important to the survival of people in the country. That's where they get their water from. And if the river is polluted, then their water is polluted because the two are directly connected to each other. What we're doing now is installing individual generators through the Bechtel contract in each of the water and sewer pumping stations. We've done this--we're almost finished with Baghdad now. So if the power grid goes down because of sabotage or any other reason, it will have no effect on the water and sewer system. Before this, if they went down, the whole system went down. I was in Baghdad for six days in June, and the electricity went down, there was no water, and the sewer system didn't work anymore. And so to the extent possible, then all we have to do is protect the pumping stations, which have their own individual generators, as opposed to the whole electrical transmission line, in order to provide water and sewer services. So that just gives you a sense of how reconstruction can affect and be affected by the security situation. Next slide, please. There are about 2,400 projects underway in the CPA computer management information system. About 1,900 of them are AID projects. And of the $2.5 billion Congress approved in the first supplemental, 80 percent of it, $2 billion, has been spent by AID. We've obligated almost all the $2 billion--which is, by the way, the largest effort we've undertaken since the Marshall Plan. AID, by the way, this little logo here, dates back before the creation of AID by President Kennedy to the predecessor agency, which was, of course, the Marshall Plan, and that little handshake there and the flag and all that goes back to the later stages of the Marshall Plan. It's an important thing because I draw a parallel for Iraqis between the Marshall Plan and what we are engaged in in Iraq. Iraq is not an underdeveloped country. It is a sophisticated, developed country. It had the most advanced educational system in the Arab world in the early '80s. It has collapsed, virtually, because of no investment. It had a highly sophisticated health system. Child mortality rates were declining during the '80s. And then once Saddam went to war with Iraq, things--I mean went to war with Iran, things began to deteriorate because all of the money for public services was diverted to the military. And as a result of that, all of the systems began to deteriorate, and you see the evidence of it everywhere in the country. So these are the areas we're working in. You'll note--it's not in the newspapers because--and I'm not being critical, but the media reports things that don't work. They report bad news, in all areas, regardless of the administration, for all countries. I mean, that's just the nature of the news media. And so the fact that there were no riots, no demonstrations, no reports of mass starvation in the food system is not a reportable event on the front pages of a newspaper. We went to the World Food Program, which is the finest logistics system in the world for food. It's a UN agency. AID gives perhaps, with USDA, half to two-thirds of the food they get each year that goes to WFP. It's led by an American. In fact, the last two executive directors were Americans. We went, talked with them, and asked them whether, should there be a conflict, they would take over the management of the food distribution system, because Iraq operates under a system similar to the one used by the Soviet Union and China and North Korea until a few years ago. It's a public distribution system. Everybody gets a ration twice a month from this system--theoretically. I say theoretically because the reporting from the international system and the community and the press was this is one of the most efficient systems in the whole world, everybody was equal. I deeply doubted it. However, I did not have evidence. We now have evidence. The NGOs went village by village and compared the public distribution list with the census track in the town. And in some cities and in some villages, 20 percent of the population was not on the list. And we asked them, Why were you not on the list? They said, Because we were regarded as suspect politically, and so we were removed from getting food, which is why our children are malnourished. So that this was used not only to feed people but as a means of control. It was a political tool in the hands of the regime for people who were opponents of Saddam. Everybody knew if you opposed Saddam, you wouldn't eat. And since the markets are not robust in food, you basically were cut off from large amounts of food. We have now added everyone back in. People are--there's no political statement being made through the food system. The UN will now transition out of, in November, managing this system, and the Ministry of Trade will run the whole thing. And WFP will stay involved to train people on contracts and all that. We've set up missions across the country. We work through intermediary organizations. That's how AID does its work. NGOs, private businesses, private contractors, universities, trade associations, agricultural cooperatives, local NGOs, local community groups, and we do this all over the world. There is an illusion that most of our money goes there governments. In fact, 82 percent of our money goes through these institutions worldwide. Only 18 percent is, in fact, through government, and that's in countries where we have a geostrategic interest like Egypt, Jordan, or Pakistan, or Israel. So the money that we're spending, the $2 billion, went through a set of firms, mostly private for-profit companies, and a number of UN agencies we also engaged in certain tasks, like the World Food Program running the food distribution system, which they've done an admirable job in. We are involved in working with and for Jerry Bremer in the economic governance area, because if they do not have the legal and regulatory infrastructure, people will not invest in the country, in spite of the oil. And so it's very important that they have a stable--a new and stable currency was just issued last week. We worked on that, on small business credit, on a uniform commercial code, a national employment program--that does not mean public employment; it simply means how can we stimulate the private sector economy and get out of its way to produce private sector jobs--banking reform, because if you don't have a banking system, it's very hard to get capital into the country to invest; tax and customs policy; the budgeting system--there's no accounting system in many of the ministries; there is, in fact, no budget. The entire health budget for the whole country in Iraq, prior to the conflict, was $10 million for 27 million people. $10 million. It's now $200 million. The child mortality rates in Iraq were higher than India or half of Sub-Saharan Africa. There were 131 per 1,000. Thirteen percent of the kids died before they were five years old in Iraq. In Jordan, the child mortality rate is 27 per 1,000. In India, it is 102. In Afghanistan, it's 250; it's one of the highest in the world. In the U.S. or Wester Europe, it's 10. So 10 versus 131 in Iraq, versus 103 in India, versus 250 in Afghanistan. That gives you the range. Four or five hundred thousand kids died needlessly in Iraq. Saddam successfully blamed the sanctions regime--not the sanctions regime. There were no oral rehydration salts. Most of these kids died from diarrheal disease from filthy water. No money was invested in cleaning the water up, one; two, those salts could have saved most of those kids' lives. UNICEF told me they were not allowed to take the stuff out of the warehouses and distribute it to the public distribution system. They could not get it out, and they couldn't train women. They were not allowed to do it. And so these are some of the areas in terms of the economic side that we're working on. Next, please. This is what we're working on in terms of infrastructure. Because it's a developed country, they have the infrastructure. This is not a matter of creating for the first time. This is repairing what's already there. Very little of this is from damage from the war. It was carefully targeted. There are some bridges out from the war, but not many. The roads actually are in good shape because they were kept in good shape for military purposes. The port of Um Qasr was in terrible condition. It has not been dredged fully since 1983, from before the Iran-Iraq war. We took out 19 wrecked ships and 250 pieces of unexploded ordnance and took out 23 football fields of silt out of it. It is now capable of handling almost any major ship, and it is now up to what it was in the early 1980s. The grain elevators have been repaired, they're functioning. It's the major ports of the country. I opened it officially June 17th, but within the last month, work is basically completed. All we have to do is make sure the silt is taken out because this is an expensive port to run because the Tigris/Euphrates River deposits huge amounts of silt into the harbor, and if you don't constantly dredge it, it will fill up, and you will not be able to bring big boats in, big ships in. Basra now has the first reliable electricity since before the Iran-Iraq war. They used to have about four or five hours a day, and they have--most of the day they have power. There are a variety of reasons for that. We've been repairing the facilities in the South. But one thing that I'm intrigued with is the focus this past summer on unrest in the cities. And there was unrest. All of the major political unrest in Iraq took place in the last 200 years, according to a couple of scholars that I've talked to, in July and August. And I did not understand that until I went there in June. Now, June was not the summertime. It was the spring. It was 125 degrees Fahrenheit when I was there, in Baghdad, in Basra, the entire central and southern part of the country. And that is not the summertime. In the summertime, in Basra it goes up to 140 degrees. The air conditioning, when it's on, lowered the temperature to 103 degrees. That was regarded as a livable temperature. Okay? People don't like it when it's that hot, no matter how long they've lived there. And if the fans aren't working in the schools, kids pass out in the schools. I mean, in July and August they're not in school, but even in June, when they are, it's 125 degrees in those classrooms. Without the ceiling fans working, they are not livable. People--parents simply don't send their kids to the schools. So we've had to work on the electrical system because that's critical to make the fans work and the air conditioners work so that institutions can function. We are now up to--at least we were two weeks ago, of megawattage produced in the country, of what it was prior to the war. Now, we've taken several large plants offline that have not been repaired in several years for preventative maintenance, and they are now--they will be put back online very shortly. But the system does not have a preventative maintenance system in place--or it didn't. We now are putting one in place, and we hope to get--the plan is, an elaborate plan, plant by plant, to get generation up to 6,000 megawatts, which it has not been in many years, by June of next year, because electrical power will begin to--it always peaks in the summertime. But as more factories go back online, we will need more power. We've repaired 1,700 pipe breaks in Baghdad. We're now repairing--we've repaired 70 of the 90 waste pumping stations, sewage treatment plans--sewerage pumping plants in Baghdad. In many areas, there were lakes of raw sewage in the streets because the pumps weren't working. We've completed almost all of the work now on Baghdad International Airport, which is modeled after, physically, De Gaulle Airport in Paris. I've been through it. It's a huge, modern airport. It's just it had not been open in 15 years, and it was deteriorated and there was damage to it. So that's been all done, a new tower, new equipment put in. We've done a couple of bridges, but the focus has been on these other things, and only about 6 percent of the people in Iraq had telephones before the war. This is a very interesting subject because in totalitarian regimes, they don't like people talking to each other. And so cell phones are a big thing now. People can talk to each other, and there is a robust private market developing for electronic equipment. You can see the disks for satellite television. They're all over Baghdad now, and they're all being sold in the markets freely, because we don't put any restrictions on that. Next, please. This gives you a sense of where the infrastructure projects are arrayed in the country. If you saw the key down here, you'd see we're building three airports--Basra, Urbil in the North, in the Kurdish area, and Baghdad. Basra may actually open up faster than Baghdad because of security concerns, even though it's not quite as big an airport as Baghdad is. Some people say, Well, how come you don't have any symbols on the western part of the country? That's because that's desert and not many people live in the desert, except the Bedouins. So there's no population there to service with these infrastructure requirements. Next, please. In the area of food and agriculture, they have, as I mentioned, not only a public distribution system, but a quasi-Soviet-style system for controlling agricultural production. Seventy percent of the land is owned by the state. It's leased out to the farmers. But the country, the Ministry of Agriculture controlled all inputs. Seed, pesticides, herbicides, fertilizers--all were controlled by the state. And so basically while you could have a private farm, you didn't own anything, and the inputs were controlled by the state, and you don't own the land, particularly the most productive land. The consequence of that is that their yields are among the worst in the world. Only North Korea has as bad yields, from what I can see. Half a ton per hectare, which are comparable to North Korea's. India, for example, has among the highest yields. They have seven metric tons per hectare. India, okay? So you can see the damage done by a Soviet-style system to their--it's not a market-based economy. Prices were set by the state for sale of things. There are no incentives to improve the land, to fix the irrigation system, because it's an irrigated agricultural system. And we need to do a lot of work, working with the Iraqi ministries, one, to privatize the agricultural economy, because they could produce--this is probably one of the potentially richest agricultural areas in the Middle East because of the river system. I saw some areas around Alhila, which is, of course, ancient Babylon, and there are some beautiful pine groves--not pine groves, palm groves, date palm trees, that could be much more productive if we applied scientific agricultural technology to it. We just awarded our agricultural reform contract to DAI last week, I believe. That was, by the way, full and open competition for that. And we are working on the southern marshes. Now, this is not--some people said, Why are you wasting money on protecting the birds? It is not a question just of the environment. Saddam Hussein committed genocide against the people, the Marsh Arabs. If any of you want to read about the Marsh people, there's a book by Wilfred Thesiger, the last of the great British explorers, who died about a month ago at 93 years old. He wrote a book about his seven years living among the Marsh people in the 1950s. It's called "The Marsh Arabs." It's a great classic. I forced many--not forced. I've suggested many of our senior staff read the book because it is one of my favorite books. It's an evocative and beautiful book. Ninety percent of the marshes have been drained. It had one of the richest fishing grounds in the entire Arab world, salt water or fresh water. This is fresh water. And that industry has been completely destroyed now. A lot of the protein supply in southern Iraq was from those marshes, from the fishing industry. One of the reasons there's malnutrition in the South is because there's not enough protein in the diet. Why is that? The marshes were destroyed. And they went in and slaughtered the people in the villages. I went to one village--I went into the marshes myself. We've sent teams in since June to see what we can do to help the marsh people because they're the poorest people in the country and, next to the Kurds, the most pro-American in the entire country by far, because they know what Saddam did to their country, to their area, the marshes, and--I mean, it wasn't even indirect. It was not just he destroyed their livelihoods. They told me they--the people come in and machine-gun the whole villages and kill everybody. They poisoned the water supply for the villages, and whole villages would just die, literally. There are about 250,000 of them, we think, left and they are in need of assistance. Most importantly, though, these marshes were the aquifers, they fed the aquifers for the entire water supply for the entire water supply for the southern part of the country, which is now endangered as a result of the marshes being drained. We know, the Iraqis are telling how to restore the marshes, so this can be done. We've had some hydrologists from Duke University go in and take samples, and they're telling us now which of the marsh areas can be restored and which are beyond restoration and need to be left as they are. They're basically desiccated. They look like--they don't even look like deserts, because deserts are beautiful. These were just--they're ugly. They look like the moon, is what they look like. I went up to one of the marsh sheikhs in one of the villages, and I said, Are there any wild boar here? Because Wilfred Thesiger talks about the thousands of wild boar, who used to actually be enemies of the marsh people because they would gore people and kill them. And I said, Are there any of the wild boar left? And he said, No, the last wild boar died when you Americans came. I said, Do you mean our troops? He said, No, the last wild boar was Saddam Hussein and you killed him when you came to the country. This is before we knew that Saddam was probably still alive. And they all laughed, and I said, Tell me what he did to you. And they went into very sad detail, very disturbing stories. Local government is critical to the building of a new democracy. Robert Dahl in his book "Polyarchy," written 35 years ago, argues that for a country with no democratic tradition, the best way to begin democratic--the building of a democratic culture--in local government, not in the national government. The civil affairs units--I'm a retired civil affairs officer in the army--with our democracy and governance people have gone village by village, neighborhood by neighborhood, and set up these advisory councils, and a lot of entertaining stories. Chris Milligan is one of our career Foreign Service officers, D&G officer, democracy and governance. And he went to this one city south of--a medium-sized city south of Baghdad to give out the beginning, a very small grant, $10,000, $20,000. It's not the amount of money. We can't keep the money. We help them spend it, so it's accounted for. But the whole question is they have to decide how to spend the money, and they have to get volunteers to help us, whether it's to prepare wells or rebuild a road, to build a health clinic, whatever it is they want to do. But they have to make the decision themselves and use democratic procedure to do it. Well, he went to this one city, and he sat through a yelling match, really almost people throwing punches, for three hours. And he finally said, "You know, I don't think you're really ready yet to make a decision so I'm not going to make a grant here. I'm going to go to the next city, and I'll come back in two weeks." And the chairman of the council got very upset, and he said, "Do not leave, please do not leave. If you leave, they'll kill us." And Chris said, "Who is going to kill you?" He said, "The people will kill us. That's what democracy is. If you don't do what you're supposed to do, the people kill you. People have power now. They didn't have power before." And he said, "No, no, they defeat you and they remove you from office if they don't like what you're doing. They don't kill you. That's not what democracy is about." Well, he said, "Please don't leave. It will cause a furor in the city because everybody knows you're here to give this grant. We have to make a decision." And he said, "Then, make a decision." So they all sat down and they decided, I think it was to do the wells in the town. And the grant was made and the wells were repaired. But the point was here people don't know what democracy is. And when people make quotes about--in the polling data on whether they like democracy, they have no idea what that means. It is interesting for Western Europeans and the United States or Canadians who have 200 years of tradition in this to talk about this. But for a country that's been ruled by--you know, Ken Pollack says in "The Threatening Storm," this is not a garden variety of dictatorship. It's not an autocratic--it's a totalitarian regime that controlled every aspect of life. If you were on a corner talking to someone for more than a couple of minutes, you were arrested, tortured, and then asked why you were talking. It could have been your brother. I mean, random torture just to terrorize the population on a massive scale. And so the population is traumatized, and part of what we saw in the explosion, the insecurity and all that in May and June, was a function of the society being controlled in such an oppressive and brutal way for so long. All of a sudden the controls are gone. The fact that so much of the country is peaceful right now is a commentary on the strength of local institutions, the mosques, the more moderate sheikhs in the villages. They are keeping order in a democratic way, small "d," in an informal way, by consensus building and agreement. There's a wonderful story on one of the first of these local government councils I just have to tell you. We've made 830 grants, small grants, to these councils to do these things, and it's building up a democratic culture at the local level. I would suspect that when the constitution is written, a congress or parliament is chosen, you're going to see a lot of the people on these councils elected to parliament. That's where the natural--that's what's naturally going to happen, is the people in the local government--that's what happens in the United States. Two-thirds--it used to be. I don't know what it is now. But it used to be that two-thirds of Congress are former state legislators, and two-thirds of state legislators are former local officials. That's the way our system has worked for a long time. I don't know what the data is now. That's 20-year-old data. But this does work. Now, one last story. Um Qasr was the first part of the country liberated by the British, and the British soldiers set up the first of these local councils. It's a Shia area. They hate the Baathist Party because of the massacres. Absolutely hate them. And one night, a council had been elected, and one of the men on the council was the senior teacher in the high school for English. Anybody who spoke English in Basra--I mean, in Um Qasr, in the port, learned it from this guy. He's an older man. I met him when I was there in June. And apparently there was a mob of men with torches saying we're going to burn down all the houses of all the Baathist Party members in this city, many of whom had run away, and we're going to take them all out for what they did to us. And he talked them down. He said: "The Americans and the British have come now, and they believe in a thing called the rule of law. Let me explain to you what that means. It means you don't go out and execute people. You have trials. You have evidence. You have lawyers. You have judges that can't be bribed. And you go through a process, a legal process." And he said, "Now, we have no experience with this, but look at what their countries are versus what we have been through. Do you want to repeat what Saddam did to us so we can do it to them, to the Baathist Party? Or do you want to have the rule of law where people aren't afraid of arbitrary violence against them?" And he quoted from the Koran and said, "Let's leave the past in the past." And he calmed them all down, and they put the torches out, and they went home. We were expecting mass atrocities across the country, and they did not take place. We actually had an elaborate plan to prevent mass massacres, either side, after the war was over. And it didn't take place. And it's not because our plan worked. It's because the Iraqis constrained themselves. It's a very interesting phenomenon. I asked a guy to describe to me what happened, because I heard the incident from our own officers who were there when this scene took place. And he described exactly what was in our reporting. So it was a moving--and this sort of thing is happening across the country. Local leadership is beginning to emerge. Did that make it into the media? No. It didn't happen. They didn't do the--they didn't do the burning down of the houses, so it didn't become a big thing. Do you report on something that didn't happen? Could have happened, though. We've also rebuilt the ministries. Many of the ministries were looted or destroyed, and so all of them--40 of them have been rebuilt so that at least 100 people can go back in each ministry and begin to rebuild the rest of the ministries so that they're functional. Next, please. In education, we've had some of our greatest successes. We've rebuilt now over 1,600 schools, printed through, working with UNICEF, 5.6 million new math and science textbooks that have been purged of all vitriol against neighboring states, against the United States, against Western Europe, against Turks, against the Iranians, against the Israelis, and which had Saddam's picture on everything. And so these are simply mathematics and science textbooks with no political commentary in them. We've also furnished--I would have brought one with me--1.5 million high school schoolbags with a calculator in them, a compass, paper, pencils. Now, this may seem like--you know, why talk about something like that? Apparently, there wasn't much paper in any of the schools, or pencils, particularly in the Shia area of the South, which is 60 percent of the population. There was only one book for six students, one total. Only one book for six students, and the books were all printed in the early '80s when they were still investing in education. And so we have invested in things that are visible signs of the revival of the educational system, which, as I said, was one of the finest in the Middle East at one point. In the health area, we've immunized--we've done 4.2 million vaccinations. Oral rehydration salts have been distributed to all the health clinics in the country, and women are being taught if your kid gets severe diarrhea, this is what you do. We're working on the malnourishment problem. And we're now beginning to rebuild 70 health clinics through the construction contracts we have. Next, please. This gives you a sense, if you could see this--are there copies here of the slides? You have those, okay. Without going into the detail, this just gives you some provincial-level projects we're working on. Next, please. People ask, Well, how many do you have there? What are they doing? As of yesterday, there were 72 AID staff. You know, we keep gradually increasing the number, and we're beginning to hire Iraqis. Interestingly enough, most of them are women with advanced degrees--engineers, Ph.D. epidemiologists. It's very interesting the number of women who are very enthused in Baghdad to join us and in the regional offices. About 600 people work for the for-profit companies that have our contracts, and the NGOs do not report on how many staff they have in the country, but we think it's around 100. And they in turn supervise 55,000--at one point this summer. This was a statistic from August. I don't know what it is now. We don't keep weekly reports on the number of Iraqis working on these construction projects. But you don't rebuild 1,600 schools with a couple of people. It was a massive undertaking. And we're now rebuilding the water, Sweet Water Canal between the Tigris River and Basrah. That's the primary source of water for the South, and that canal was silted up, full of weeds and debris, and the water was not moving very rapidly, and so the water pressure is down in the city, and that's being cleaned up. That's going to require a lot of people. So 55,000 Iraqis were working instead of being on the streets. One thing that will improve security is people working, and the second thing is kids in school. We don't do just kids in school because it's good for education. We do it for security purposes. That means they're not running out in front of tanks. They're not in the streets maybe throwing rocks at their--if they have nothing else to do, which happens in the United States. And so the more we can order kids, particularly high school students, high school boys--and I have my own boys, so I know you have to keep them busy or they can get into trouble anywhere in the world. And once school opened, that is one source of insecurity that disappeared. Getting people back to work is another source of security. This a force protection measure for our troops to have this many people employed. Ambassador Bremer, there was a huge controversy about contracts earlier in the year. I have to tell you it's been obviated by time. Bremer said, "I want all of the contracts possible to go to Iraqi firms." Of the 150 Bechtel subcontractors, 107 are Iraqi companies employing these people. Why? Because we want them working. In Afghanistan, which is one of the poorest countries in the world, lowest per capita caloric intake prior to two years ago, highest maternal mortality rates--that means death rates among women who are pregnant--with Sierra Leone, those are the two highest in the world. Two hundred and fifty women per 100,000 died in child birth or child birth-related. Just the comparable figure in the United States, it's 20 per 100,000 women die in child birth or child birth-related illnesses. I have a lot more control in Afghanistan, in terms of the AID program. We work for Ambassador Bremer, and there's a much larger structure. And this is a traditional AID mission. It reports to the ambassador. I report daily on both Iraq and Afghanistan to both Secretary Powell and to the interagency process. These have been our six objectives since the war with the Taliban and al Qaeda, the big war stopped. We're still, we've got obviously problems in the Southeast, along the Pakistani border. That continues. You can see these are similar to the first ones I mentioned that we generally use worldwide. Full participation, by the way, down here in the bottom means implementation of the Bonn Accords, the implementation of the agreement on the political future for the country. We've had a huge program there, but not on the scale of Iraq. It's $800 million we've spent over two years, $400 million a year. The beginning of it was a relief effort. We shipped in 400,000 tons of food because a famine was beginning that predated September 11th because of four or five years of drought and civil war. We did a massive infusion of resources with other donor governments and with U.N. agencies into the agricultural system, and I have to tell you it does work. The first year we had an 82-percent increase in wheat production. This year we now have the largest wheat harvest in the history of Afghanistan--in fact, it's so big that wheat prices are depressed. There's a big debate as to whether or not we should sort of encourage some purchases by the national government just in case there's a drought next year, but we're having that debate. But the fact is that the country now produces enough food to feed itself and export some, and we're going to get some of the wheat farmers to start getting into export crops like nuts, and vegetables and fruits. And they had vast vineyards. It's very interesting. I said, "Well, you eat raisins, right?" And they said, "No, we made wine. We had wineries all over Afghanistan." I said, "I thought this was a Muslim society." And they said, "Well, we are a Muslim society, but we had wineries, and we're going to rebuild them now that the Taliban was gone." But that was quite intriguing. The Taliban cut down all of the orchards and all of the vineyards and burned them. In the whole Somali Plain north of the city I watched, and it was a horrifying thing because it was one of the richest agricultural areas of Central Asia. Because it was a Tajik area, that's why they burned it down. The al Qaeda was based in one of the four subclans of the Pashtun. So there's an ethnic element to this. I asked, "Has this whole area gone--" this is like 100 miles of this "--is this dead?" And they said, "No, no, no. The roots are still alive. If we rebuild the irrigation system, which is 200-300 years old, all of this will come back to life in about three years." And you can see it now all coming back to life because we've been repairing the irrigation system. It's very exotic. There are pomegranate trees, quince bushes, and olive trees, and vineyards, apple orchards. The best apples outside of the United States I have ever seen were Afghan apples. They were quite astonishing. We worked with the central bank to launch a new currency. If you ask the governor of the central bank what role the U.S. government played, we played a central role in helping them launch it. Karzai has said that it's his most successful accomplishment. It's a stable currency. It's been accepted, and it's replaced the three or four other currencies that existed in the country. We're working now with Ashraf Ghani, where we have hundreds of people in the Finance Ministry who are paid as AID employees to work with him on building a national budgeting and accounting system on banking reform, on investment law, on Customs, which will be the primary source of revenue for the country. We've printed 250 million textbooks. AID has printed 250 million textbooks, working with the University of Nebraska, for all Afghan children in Grades 1 through 12. One way we're getting girls back into school--only about 6 percent of the girls were in school under Taliban. Now, about a third of them are in school--very interesting, positive incentives work better than negative incentives, and the positive incentive is very simple. We gave everyone who had their girls in class the whole month, at the end of the month, they get an extra ration of vegetable oil, which is a prized commodity in cooking. And it's remarkable how much the attendance rates go up when they want the vegetable oil. So it's improving the nutritional conditions in the rural areas, but it's also making sure that the girls go back to school, which is a good bulwark against the more extreme elements that we've had to deal with in al Qaeda and Taliban. We're going to build a thousand schools-- we've already rebuilt 200 of them--by 2006. Those are the health clinics. We built 121 health clinics and another 400 will be built or rebuilt, which will provide about 40 percent, about 35 percent of all of the health clinics required. Europeans are doing the rest or the Japanese. This is an integrated approach in Afghanistan. We have weekly donors meetings, and donors sit down with the international institutions, and we coordinate what we're going to do versus what they're going to do. We now have 134 USAID expatriates who are paid for AID. They're not all Americans. The two people working on the Constitutional Commission as advisors, one is an Australian and the other is Kenyan. It's not always necessary to have an American there, as long as we have someone from outside the country who does not have a vested interest in what's happening, to advise, and they make the decisions. We are not writing the Constitution for them. It's their Constitution. It's got to be acceptable in their society or it's not going to work. We can't impose something on the outside. Ownership of reconstruction is a critical factor in the survival of the country and the success of the reconstruction effort. We have 879 Afghan professional staff that we are paying in the different ministries. And I asked one of the ministers, who is a friend of mine, "Who are these people?" He said, "They're nine people that you're paying the salaries of in my ministry. They are my senior management team. We've now laid off 25 percent of the employees who had no skill sets. They were just put there by Taliban. We've laid them off. We've reorganized. We now are going through training so that my ministry can actually produce public services." And he said, "Those nine people you have are critically, they're all Afghans, they all have college degrees, and may have even worked in the international system or in other countries as part of the diaspora." We also launched Radio Afghanistan so that the entire Loya Jurga that chose Karzai last year would be broadcast in the entire country. The entire country listens to the radio at night. It is a radio culture. And the way that Karzai has been very powerful is we've made arrangements for him to speak once a week to the Afghan people. Now, what we're doing is building, through seed money, private radio stations across the country so there's competition. We don't want one government-run radio station to be the only source of news in the country. And newspapers are appearing across the country. You can see them if you go on the streets. We're working on implementing the Bonn Agreement. We've set up women's centers in each of the provinces, not all of them, but many of them, working through the Ministry of Women's Affairs. Now, this is very interesting. This is a map of the road system of the country. And what's happened is this is, people wonder what is coordination when the donors do work together. The different colors represent different donors doing different things. The green--do you see the green there from Kabul to Kandahar--that's the AID-Japan-Saudi road. It's 80-percent AID. This is the famous road that we're building. The president told me a year ago, "You are going to build a road." I was afraid the $175 million was going to be cut out of all of the rest of our programs, so I was not enthused until he said, "I don't want to cut any of the education and health programs. I'll give you new money," and we got the new money. The first phase will be finished by December 31st, and the second phase will be finished next spring. We'll put shoulders on it and the second layer of asphalt. We are overbuilding this road so, if there's no maintenance on it for a number of years, it will still be functional. That road was built first by President Eisenhower, by AID's predecessor agency in 1959. It has not been touched since 1959. It took two days to go 365 kilometers. It now takes seven hours. This is extremely, extremely popular in the Pashtun heartland. And no one, interestingly, we've lost nine security guards who worked for the Ministry of the Interior, but no one from the Taliban or al Qaeda has attacked anybody actually building the road. We have huge asphalt plants we've had to set up to pave this. And one of my engineers said to me the other day, he said, "Andrew, they could have blown up with a mortar round each one of those asphalt plants every single day, and they have not done it" And the only explanation--this guy has been around for years. We brought him back from retirement. He did the anti-communist insurgency effort in Norther Thailand. He said, "Even the Communists like the AID roads, and clinics, and schools in Northern Thailand, and they could have killed me every day for five years, and they never touched me. Why? Because they wanted the stuff built." And he said, "I believe that why we're getting our security guards killed because they're seen as Karzai's people, and the Taliban does not want Karzai to get credit for it." And Karzai is the one that asked the president to have us build it, so he is going to get credit for it one way or the other. But they haven't touched any of our workers. They haven't shot a mortar round even close to an asphalt plant because we think they want this built as badly as Karzai does. The other red goes out to Harat is an extension of this that we'll work on this with the Japanese and the Saudis. The Europeans are doing with the World Bank the top half of the circle and some of the roads in between. So this is an international effort. We have the most visible because it's happening right now, because I was given a deadline of December 31st, is the green part of it because we're far beyond all of the other activities because Karzai wanted it done through the heartland of the Pashtuns. Now, I have become much more enthusiastic about infrastructure since the president told me that I was going to build this road, and we were going to do this in 13 months. We have done a reassessment among the development ministers, my counterparts in Canada, Japan and Europe, about the fact that the banks and the aid agencies, all got out of the business, and the U.N., of building roads. I've got to tell you, as we review the research, they're very expensive to build. That's why people stopped building them. But the fact of the matter is they affect commerce, they affect law enforcement, they affect health, they affect education, they affect agricultural markets, and moving around inputs, moving around surplus. It's very interesting. This Ring Road existed for years, even though it's in horrendous condition-- if you see the second--see here--that's 50 kilometers, 50 kilometers from here to here and 50 kilometers from here. That's where we start--two-thirds of the population of Afghanistan lives within 50 kilometers of that road, and that is not an accident. Over the years, people have moved toward the road. Why? For obvious reasons. The road that we're building right now, the first length of this road from Kabul to Kandahar, on the left side--do you see that there?--a third of the entire population of the country lives within 50 kilometers of that road. So this is having a profound effect on a third of the population of the country, which is why no one is shooting the workers, at least we pray they won't. This is an attempt to show the geographic dispersion of some of the projects in different categories. You'll note that in the Southeast area there aren't many because there aren't many people, and that's desert. And there are Bedouin--they're not called Bedouin, they're called Kuchis, live in that area. They are among the poorest people in the country, but there aren't a lot of them. This is the provincial dispersion of projects. We have 789 projects. If any of you want it, we can get you a list of every single project we've done. Half of them are complete. The other half are ongoing that we've spent the $800 million through, and you can see exactly what they are. We're building a municipal court building, and we're building a power plant. We're building the generators that produce the power for Kandahar right now. Is that it? Let me just give you one little note as to why Afghanistan, this good news is not being seen. Eighty-five percent of the Afghan people are farmers or herders. They live in the rural areas. Most reporters in Iraq and in Afghanistan are in the capital city. You don't see this going on in Kabul because Kabul is a city, and so people don't go out, and there are reasons why they don't go out. The notion that the entire country is insecure and the Taliban is there is bologna. The Taliban would not dare show up in much of the country because they would be killed in two minutes--they are hated so much. They're in the ethnic base that they came from. One of the four subclans of the Pashtuns is the base of support. The other subclans, by the way, don't like the Taliban. So they're in the areas that their population base is in, and that's where the worst conflict is, and it is very serious. However, that's not the majority of the country. Ninety percent of the country is not under these circumstances, and remarkable stability is returned to large parts of the country, and you can see that in the marketplaces, you can see that by the NGO and the government ministries being able to function, and the reconstruction effort that's ongoing. I'd be glad to answer, I have just a few minutes for questions. MR. DeMUTH: Yes, ma'am? If you could wait for a mike and introduce yourself, briefly. QUESTION: Jerash Amdeen [ph], the Kurdistan regional government representative in Washington. Mr. Natsios, thank you for a powerful PowerPoint presentation. ADMINISTRATOR NATSIOS: I'm glad you're here today. QUESTION: And thank you for putting our area under your wing, adding it to the Northern part, and you've done a great job. My question is that your presentation is very good here. Now, what are you doing to present it to the Iraqi people because they are the ones who need to know what you're doing for them. In 1958, the Iraqi coup d'etat took place. The government then was very unpopular because, in spite of the fact that they were spending 75 percent of the oil revenue to reconstruct the country, the people didn't know anything about it. I have other questions, but I want to be fair. ADMINISTRATOR NATSIOS: We have not done a good job communicating, which is why I am beginning to give speeches here because people don't know here in the United States or in Europe, for that matter, it's not known. So my first job is here, and then I'm going back to Iraq in I think a month or two--I think a month--and we will be trying to do that. But Ambassador Bremer has set up a new communications system so that he can get the message out better on a daily basis. We have not done a good job. But there is something to tell now that's quite impressive. QUESTION: Thank you. Mary Ellen Connell from the Center for Naval Analyses. The USAID was very helpful in Afghanistan in the 1960s and put a lot of effort into helping with the universities. In fact, Ashraf Ghani and many of the people in government right now are products of that system. ADMINISTRATOR NATSIOS: I know, yes. QUESTION: I notice USAID has given a number of grants for universities, support of universities in Iraq. Are you planning to do the same in Afghanistan? ADMINISTRATOR NATSIOS: We have a multilateral system in Afghanistan. I hope after the Pledging Conference in Madrid we will have the same in Iraq. We're doing basically all of the things in Iraq that go on in reconstruction. We are not doing everything in Afghanistan because there are other donors. The Japanese have agreed to take on certain higher institutions of learning. Mrs. Ogata and I agreed that she would take on the TV stations, reconstruct the TV stations, since they use Japanese equipment, and we would do the radio stations. So we've divided up the responsibility. Europeans are putting a lot of money, as I understand it, bilaterally through the EU, in some of the United States. We rebuilt the Teachers College, we built I think one of the agricultural schools, but again it's a division of labor. We chose to focus on primary and high school education, and other donors are doing other things. So the answer is, if there's a need, we'll fill it. However, other donors are involved, and it's being distributed, the work. Yes, sir? QUESTION: Thank you. Martin Rossetti with U.S. News & World Report. With Iraq-- ADMINISTRATOR NATSIOS: Are you going to report the good things that we've done? QUESTION: Of course, I always do. In Iraq, how do you expect your agency is going to be working with this new Project Management Office in Baghdad? And given what you've been talking about here today, do you see the need for this new office to be set up? ADMINISTRATOR NATSIOS: Well, if they're going to spend $20 billion, there is a need for the office. We cannot possibly spend $20 billion. We can't do it. Our budget, when I started, in the last year of the Clinton administration, was $7.8 billion. That's how much AID spent all spigots. Last year, we spent $14.9 billion with the same business systems and the same staff. We've almost doubled our budget. You know, we can't spend all of that money. We can spend some of it-- I said in my testimony maybe $5 billion of it--in areas that we're expert in. We're not experts in how you rebuild militaries. We're not experts in the oil system. I mean, that's none of our business. That's a DOD function. So we have to have coordination because, even though it sounds like these things are unconnected, security is directly related to our work. So we don't want to do it, but we need to know what they're doing in what areas and how the progress is being made, and you need a coordinating function. That's what the purpose of the PMO is. We, from the beginning, supported the creation of the PMO. We support it now. It is not a replacement for any of the operating agencies that are actually doing contracting and grantmaking to NGOs or U.N. agencies. It is a coordinating mechanism to make sure everybody is working off the same strategy--Ambassador Bremer's strategy. We support it. It's a good idea. It makes great sense. One more question. The lady right here. QUESTION: Hello. [?] German Press Agency. Could you just give us an idea of what you expect to come out of the Madrid Conference, and if the money that is donated for other countries is actually going to be administered by a fund run by the World Bank and the U.N., how is the coordination going to take place? ADMINISTRATOR NATSIOS: Let me deal with the coordination question first. The way this works, in all countries dealing with reconstruction, is there is a general plan for reconstruction put together, and donors take pieces of it out and say, "I will do this." Just like Mrs. Ogata and I made an agreement two years ago that she would take the, JIKA [ph] would take on--she's now the head of JIKA. At that time, she was just the head of Afghan reconstruction--she would do the television station and we would do the radio station. Well, that's what the donors do, but they do it in the country. They don't do it in the capital. Normally, these agreements are made in the field, which is the best place to do it. The people who are actually running the programs need to make these decisions in a decentralized way. But typically the donors meet once a week in most of these functions. The head of the Donor Coordination Office in the CPA is the former finance minister from Poland. I met with him when I was there. I seconded staff to him. I think he also may have been foreign minister at one point or in the Foreign Ministry. He's a very able guy. We're very impressed with him. He is creating the template that will allow coordination mechanisms to take place. Now, there may be agreements made beyond that at Madrid. I don't know. I'm not engaged in those negotiations, but the donors are pledging a very large amount of money, contrary to the predictions. This is not a small amount. This will be a very robust response by the donor community. We already have $3- to $4 billion that have been publicly announced in just bilateral assistance to reconstruct Iraq. It is in the interests of the Middle East and of the rest of the world for there to be a stable, democratic, free Iraq that's prosperous with a market economy. It's in everybody's interest--not quite everybody's--most people's interest that it happen. And I think the Europeans know that, regardless of what people may have thought in Europe about the war. The fact is where we are right now, and it's important that we make this is a success. Now, what was the second question that you asked--or the first question? QUESTION: [Off microphone.] [Inaudible.] ADMINISTRATOR NATSIOS: What expected to come out of Madrid. Well, I've been talking since June with my counterparts and the other AID agencies informally. We already have four countries that have--we never announced it, but we all pledged money to restore the marshes because it's so important to the economy, it's so important to the poorest people in the country, and we now have, I don't want to announce the countries because they'll get upset that I'm stealing thunder, but it's four other countries that are in with us technically. You can talk to the U.N. agencies and the NGOs about it. And we've got a whole plan put together. I expect there will be similar multinational plans put together in specific sectors with specific things, like the rebuilding of the school systems or the universities or the water system because we can't do everything ourselves. We need other countries to participate as we do in other emergencies, in other conflict areas of the world. The international system does work, and we need simply to organize it the way we have successfully in other cases, and I think it will work again. Thank you very much. [Applause.] [Whereupon, the proceedings were adjourned.]</body></html>