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ANALYSIS-Fixing aid critical to bolster U.S. leadership

WASHINGTON, Jan 25 (Reuters) - As President Barack Obama moves to rebuild America's global leadership, he faces growing calls to revamp the way the country hands out foreign aid and make U.S. assistance more strategic and effective.

Leading Democrats and Republicans say they want to rewrite legislation governing foreign aid that dates back nearly 50 years. Development experts describe the current system as ineffective, chaotic and underfunded, spread among more than 20 agencies and 50 programs with no clear lines of authority.

In addition, the Bush administration's reaction to the Sept. 11 attacks refocused U.S. aid to allies in the war on terrorism, with the lion's share going to Iraq and Afghanistan. The Defense Department has taken on roles performed previously by the main development agency, USAID, which has lost influence, funding and staff.

Rep. Howard Berman, a senior Democrat who heads the House of Representatives Foreign Affairs Committee, vows to press for a new Foreign Assistance Act of 1961 signed by President John F. Kennedy.

"We need to massively clean up that law, but even more importantly, achieve certain goals which I would put as restoring the capacity of our assistance programs and our diplomatic programs," he said.

Berman said USAID had become severely understaffed and lacked the technical expertise to tackle the complex nature of threats facing the world, such as climate change.

"We have both militarized and privatized our diplomacy and our foreign assistance, because we don't have enough skilled personnel to play the role that historically they played," Berman told Reuters.

CHANGING GUARD

On the second day of her new job, Secretary of State Hillary Clinton visited the main U.S. development agency and promised a new era in American diplomacy that includes more effective development.

"It is essential that the role of USAID and our other foreign assistance programs be strengthened, and be adequately funded, and be coordinated in a way that makes abundantly clear that the United States understands and supports development assistance," Clinton said.

Obama has pledged to double foreign aid to $50 billion by 2012, but there are concerns he will be pressured to spend resources at home instead as an economic crisis deepens.

Steve Radelet, a senior fellow at Washington's Center for Global Development, said the Obama administration could address the operational problems and effectiveness of the U.S. development agency even if funding was tight.

"With the financial crisis, resources are going to be difficult to come by for everybody, but that does strengthen the case for streamlining and making every dollar for foreign assistance more efficient and building a strong professional agency," Radelet said.

He warned against reducing foreign aid, saying it would stop vital assistance and send the wrong message when Washington is being blamed for causing the economic crisis.

World Bank President Robert Zoellick pressed Obama on Friday to pledge $6 billion of an $825 billion U.S. economic stimulus package to a global "vulnerability fund" for poor countries hit by the financial crisis.

"With this modest step, the United States would speed up global recovery, help the world's poor and bolster its foreign policy influence," Zoellick wrote in a New York Times editorial. "For less than 1 percent of America's stimulus package, President Obama can lead the G-20 (countries) in London and reintroduce America to the world."

BUSH LEGACY

Former President George W. Bush increased foreign aid to $23 billion in 2006 from $12.6 billion in 2001, most of it in a dramatic shift of resources to the war on terrorism. He also implemented other highly regarded programs such as the President's Emergency Plan for AIDS Relief, or PEPFAR, which won worldwide praise for both its size and impact on a disease that kills more than 2 million people a year.

As politicians and development groups look to fix foreign assistance, experts say it will require a thorough overhaul.

A new coalition of development, foreign policy and private sector groups called the Modernizing Foreign Assistance Network has presented Obama's transition team with four proposals for reforming U.S. aid.

The network proposed that Washington draft a national strategy for global development, design a new foreign assistance act, create a Cabinet-level post focusing on development, and integrate policies on foreign assistance. (Editing by Peter Cooney)

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