New US foreign aid director sees greater role for private enterprise

By , Business and financial editor of The Christian Science Monitor

Can American private enterprise do more to lift up the world's poor? Multinational corporations are already doing much to boost the economies of developing countries through their investments, technology, and skilled management. But M. Peter McPherson, newly appointed administrator of the Agency for International Development (AID), the body which dispenses US bilateral foreign aid, believes "a larger proportion" of the private sector can be brought into the development process.

In the foreign policy area, few subjects have been so controversial as foreign aid. Mr. McPherson's plan to further boost US capitalism in third-world countries seems bound to invite further attacks.

Certainly the communists and other leftists will brand such a program as "capitalist imperialism."

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But McPherson emphasized in an interview here that he did not want the United States to be "culturally and economically arrogant." Washington will not be stopping foreign aid to such "socialist" poor nations as Tanzania or Burma, he said. Nor will it require a "private ownership test" for US-backed foreign aid projects. Indeed, he will be happy to work with cooperatives.

Nonetheless, it is clear that McPherson --one a Peace Corps volunteer in Peru -- will be putting something of a greater private enterprise emphasis on the $1. 7 billion US foreign aid program. For example, he says he recently turned down a loan to a government-owned manufacturing facility. In another nation, the government was going to share ownership of a new chain of marketing outlets for farm products with a cooperative.

"I said, 'Wait a minute, we don't need the government involved in this,'" he told his subordinates. AID officials then went back to the developing country to alter the project so only the cooperative was involved. "It wasn't a big deal," McPherson said.

The AID administrator hopes, by working quietly behind the scenes and being "sensitive to the culture of the place," to keep his emphasis on private enterprise from becoming a big political issue in developing nation.

Noting that "we have more options than we have money." McPherson indicated he will be selecting foreign aid projects with a free-market flavor. A self-described "conservative," he believes that a free market, without government price controls, generally is more effective for stimulating production and development.

In any case, some two weeks ago he set up a committee under Mrs. Elise Dupont , wife of Pierre Dupont, governor of Delaware, to draft a program for encouraging further involvement of private enterprise in development abroad.

"The world," he says, "is moving in the direction of market economies." In some countries in the third world, the enterprises may be structured along the lines of the Yugoslav model where the workers own the enterprise. Such enterprises, he noted, must still meet the test of the market, their success hanging on their ability to sell their products to consumers.

The US government some years ago set up the Overseas Private Investment Corporation to insure some of the risks in the event of expropriation or nationalization of US direct investments abroad. McPherson believes that the government may be able to devise some other kinds of assistance to American firms trading abroad or investing overseas, or to the private sector in a developing nation.

As a theoretical example, arising perhaps from his farm background in Ohio, McPherson suggested there may be a way for the US hybrid seed industry to close itself in developing nations where such highly productive seeds would be useful. Agribusiness often acts as a farm extension service in this country as it goes about selling its fertilizer, seed, and other products. These firms, he said, "can and ought to play some important role in third world countries."

McPherson was in Hawaii recently to attend a meeting of the Asian Development Bank, the first ever held in the United States. He and other US officials have been assuring the gathered officials from Asia and donor industrial countries that the Reagan administration does not intend to retreat from foreign aid.

The Reagan budget for fiscal 1982, McPherson noted, calls for a $200 million increase over the fiscal 1981 aid allotment. This, however, is less of an increase than provided for in the fiscal '82 budget proposed by former President Carter before he left office.

McPherson noted that foreign aid, by stimulating economic developm ent, has been a source of political stability in third-world countries.

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