Mr. HOAGLAND. I was going to refer to fertilizer investment in India. Particularly in fertilizer production, the problem is a live, current problem. It isn't so much Indian resistance to the construction of fertilizer plants. It is the problem of working out all the parts of the transaction. There is not complete satisfaction with the positions the Indian Government has taken on these things although they have made some very positive moves forward in the last 6 months. Mr. FARBSTEIN. I also understand there was resistance by the Indian Government to proposed housing projects where local labor was going to be used, where local products would be used in building and the American company wanted to go down there with the building blocks. I would like for you to check if it is possible to learn how many applications for loans have been turned down by our Government for local excess currency where American firms have sought to engage in some industry within a foreign country. Also if you have any knowledge how many different projects have been resisted by any foreign governments where applications have been sought for consent; and if there has been resistance why has there been resistance by the foreign government, and if we have turned down any companies that sought to use excess currencies in foreign countries why have we done that? I would like to get a picture of whether or not the statements contained in your memorandum here that we have made $40 to $50 million or $90 million worth of local currency loans are actually so. Also I would like to get the names of the companies to whom these various loans were made and for what purposes they were made. And whether or not these are profitmaking companies or whether these are solely non-profit-making companies. I would like to know what is happening to all this Cooley money that has been building up and why it has been building up to the degree it has. You have a billion dollars around, probably a billion dollars in India and Pakistan and the United Arab Republic, hundreds of millions of dollars and nothing is being done, when I know there are American companies that want to go into these various countries and use some of those funds and they meet with resistance all the way down the line. Mr. HOAGLAND. I would be glad to furnish the information that you have asked for but I would like to comment, if I may, Mr. Chairman, that of the funds that we have accumulated in the excess currency countries, by no means all of it, a small portion of it is available for financing of business ventures under the Cooley program. Even in that small proportion I believe we have more than enough funds available in these excess countries to handle the demand. I am not aware that any significant cutback has occurred in excess currency countries, because companies with good projects have not been able to go forward because of our lack of currency. We have done nearly $200 million of lending of this kind. I wish we had funds of this kind in countries other than these excess countries. The demand, I believe, is being met except clearly for cases in which countries would be resisting the project, whether it is local currency financing or dollar financing. 7 In India, for example, and in other countries the country is concerned about whether the industry that is coming in is going to contribute to the solution of its own balance-of-payments problem. If the industry is one which is going to sell its products locally and not help the country export this creates a special problem for countries who have a severe balance-of-payments problem. I think we would be sympathetic with that since we are working with them trying to solve it. Mr. FARBSTEIN. In what category would you put housing? Mr. HOAGLAND. Housing is an activity that would not cause an inflow to the country of foreign exchange. The question the country has to resolve in connection with housing is what priorities it wants to apply in the allocation of its own resources. The currency is a claim on its resources and it has to decide whether its people need housing more than they need fertilizer, whether its people need housing more than they need something that will contribute to other improvements in their agriculture. This is a matter of great policy importance in any country and where the countries are severely underdeveloped it is a hard choice. Mr. FARBSTEIN. In other words, every country has a veto as to whether or not any of that local currency can be used. We could keep on piling up zillions of it and it still could not be used, is that not a fact? Mr. HOAGLAND. That is technically correct. It assumes that we have no voice or influence with the country as a result of our relations with them and the presence of an AID program and I think that restores the balance to an important extent. (The following information has been supplied for the record:) COOLEY LOAN PROGRAM 1. From January 1, 1962, through December 31, 1965, AID has authorized 180 Cooley loans in the amount of $196 million (U.S. dollar equivalent). A tabulation of these loans, showing country, borrower, amount, industry, purpose, and authorization date, is set forth in table A. 2. In the period January 1, 1962, to February 18, 1966, AID received a total of 135 applications that did not result in Cooley loans being made. A tabulation of these applications, showing country, industry and purpose, amount requested, and the reason the loan was not made, is set forth in table B. In preparing this tabulation AID has defined an application as a submission containing the following information: A specific request for a Cooley loan in a specific amount; identification of the putative borrower; a description of the project to be financed; where eligibility depends on U.S. affiliation, the identification of a presumably eligible U.S. business firm; where it does not, a description of how the export of U.S. agricultural products would be increased; and identification in reasonable detail, by amounts and sources, of the other capital to be invested in the project. 3. No Cooley loan applications have been fully formally disapproved by the Indian Government. When a loan proposal includes features that may be contrary to that Government's policy with regard to Cooley loans, it is the practice of AID to discuss (or request the prospective applicant to discuss) the proposal informally with the Indian Government in order to get its concur rence before an application is prepared. Normally the Indian Government would question the use of Cooley funds for working capital, loans to U.S. companies for purchase of equity stock, projects involving a debt-equity ratio of more than 2 to 1, projects in industries not considered by that Government to be of a developmental nature, and projects for which local financing is available on comparable or appropriate terms. 4. With regard to housing, it is our understanding that the Government of India has not generally favored housing projects with United States or other foreign participation because it has not been persuaded that the services provided by the foreign interests-generally know-how, since labor and material are provided locally-have been worth the foreign exchange cost of royalties and dividends, etc., payable to the foreign interests. Rather it believes (or has believed in relation to the proposals presented to it) that adequate knowhow in the construction of housing can be procured from Indian sources and paid for in local currency, without any drain on its foreign exchange resources. Because of this view, no housing project proposals in India have matured into applications for Cooley or other U.S. loans. We do not know how many housing proposals by U.S. interests have been presented to, and received unfavorable consideration by, the Government of India. |