AMENDMENT OFFERED BY MR. PAYNE 1 Page 21, line 3, strike "The Compact" and insert the following: (1) IN GENERAL.-The Compact Page 21, beginning on line 6 and all that follows through line 3 on page 22, redesignate paragraphs (1) through (7) as subparagraphs (A) through (G), respectively. Page 22, after line 3, insert the following: (2) LOWER MIDDLE INCOME COUNTRIES.-In addition to the elements described in subparagraphs (A) through (G) of paragraph (1), with respect to a lower middle income country described in section 203(b), the Compact shall identify an appropriate contribution from the country relative to its national budget, taking into account the prevailing economic conditions, toward meeting the objectives of the Compact. Such contribution shall be in addition to government spending allocated for such purposes in the country's budget for the year immediately preceding the establishment of the Compact and shall continue for the duRATION OF THE COMPACT. Mr. PAYNE. Mr. Chairman, let me say that when the Millennium Challenge Account was announced several years ago, there was a goal by many of us who were hoping that 50 percent of the fund could be set aside for Africa. As we moved forward, we found that this sort of a quota was not acceptable, even though 39 of the 81 IDA countries are in Africa, even though 300 million people in Africa live on less than $1 a day, and 39 countries have people living under $460 a year. So we were willing then to say there is no need in fighting that fight, even though we thought it was a very noble battle. The lower-income countries were brought into the MCA account in the third year, as we know. Incidentally, currently over 40 percent of development assistance today as we speak go to lower-income countries currently, almost half of development assistance. So the poorest of the poor really are not benefiting even in our foreign assistance programs as we see it today. Be that as it may, I do have an amendment. Since lower income lower middle-income countries are added, I would simply like to say that many proponents of the lower- and middle-income countries argue that there are large pockets of poverty in these countries, and that is true. However, data shows that lower- and middle-income countries as a whole have significant greater resources to finance their development, including access to larger flows of private capital and the ability to generate domestic revenue. And as I mentioned, 40 percent of current_development assistance goes to the Colombias, the Jordans, the Egypts, et cetera, although depending on the country, the amount may be more or less in different countries. For instance, South Africa, who may already be spending a great deal on development in education, for example, may have less additional funds to contribute to this end. South Africa and Namibia also have significant percentages of their population who live in poverty, and their per capita income is more a reflection of the inequity in the distribution of wealth in those countries. So there are a number of complicated issues that we do have in the whole search to have these funds be used most expeditiously. If the MCA is to include lower- and middle-income countries, there should be a requirement that the qualifying countries in the lower middle-income category match MCA resources or, first of all, do not diminish what they are currently putting into programs of this nature that makes them qualify. But secondly, there should be a match, not dollar for dollar, but there should be an additional amount that should go if they are in the 20 percent, which will qualify in the third year. It is less complicated than I am saying it evidently, believe me. So the actual amount over and above what they currently spend would be negotiated by the country and the MCC within this compact. This would provide an incentive to lower- and middle-income countries to allocate more domestic spending for development purposes and adopt better policies, and would ultimately provide greater country ownership. Such a requirement would help ensure sustainability of the development, financing lower- and middle-income countries in a shorter duration as local resources could be used over a shorter period of time to replace donor resources. What we are saying is, regardless, that the amount would be negotiated that the lower- and middle-income countries would simply be added to do one, not take away from their current spending, but also, add a bit to this. So I would just urge support of the amendment. And with that, I yield back. Chairman HYDE. The gentleman from Wisconsin, Mr. Green. Mr. GREEN. Thank you, Mr. Chairman. I think one of the dangers that we have today is adding inflexible restrictions to the compact process. I don't believe this amendment does that. I think this amendment is appropriate because it makes the suggestion to the CEO that they should take into account such things, and, where appropriate, they should look for a home country contribution, which I think makes eminent sense, and I think it is an excellent amendment, and I support the gentleman's work. Chairman HYDE. Thank the gentleman. Mr. Lantos. Mr. LANTOS. Mr. Chairman, I want to commend my friend from New Jersey, and I think it is an excellent amendment, and I urge all my colleagues to vote for it. Chairman HYDE. I am pleased to support this amendment. It requires the government of a recipient lower middle-income country to provide the same level of commitment from their own resources in investing in its people in 2006 as it did in 2005. It has been negotiated with both sides and is certainly acceptable. And I thought I heard Mr. Faleomavaega seeking attention. Mr. FALEOMAVAEGA. Thank you, Mr. Chairman. I support the amendment. But by way of definition, I am trying to determine at least in going through the provisions of the proposed legislation, what is a lower middle-income country? Does this equate to the same as the least developed country by definition, or are we on an entirely different measurement standard here? I am trying to gauge the extent of the gentleman's amendment. What does it make reference to, least developed countries, or are we measuring them in terms of per capita income growth? I am trying to get a clear picture. Chairman HYDE. You sit very close to Mr. Payne and ask him to answer your question. Just lean over and ask him. Mr. PAYNE. The lower-income countries are in the third year. First year is IDA countries. Second year is $1,435, which is what the per capita income is. And the lower middle-income countries is $2,475 annually-2,975 annually. So that is the lower middle-income countries, which in the poorest of the poor, is a pretty good level of standard. So that is the lower middle-income. Mr. FALEOMAVAEGA. I thank the gentleman. I want to make sure we are at that standard. When you put the word "middle," is it middle class, lower middle class. Mr. PAYNE. The upper lower class. Chairman HYDE. The question occurs on the amendment offered by the gentleman from New Jersey. All in favor, say aye. Opposed, nay. The ayes have it, and the amendment is agreed to. The Chair recognizes Mr. Menendez for purposes of an amendment. Mr. MENENDEZ. Thank you, Mr. Chairman. I have amendment 1 at the desk. Chairman HYDE. The clerk will report the amendment. The CLERK. Amendment offered by Mr. Menendez. In section 203(b)(1) of the bill, strike "for fiscal year 2006” and Mr. MENENDEZ. Mr. Chairman, I ask that the amendment be considered as read. Chairman HYDE. Without objection, the amendment will be considered as read. 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