Reforming International Development

U.S. Marines, Indonesian service members, and Red Cross employees load supplies from the U.S. Agency for International Development following the 2009 earthquakes in West Sumatra, Indonesia. Source: Wikimedia Commons.

 

Making development an instrument for driving deals that promote economic growth and prosperity at home and abroad

Summary

The Trump Administration can transform international development into an instrument for driving deals that further American interests at home and abroad by encouraging investments that:

  • Align with American security interests while also responding to local needs,
  • Focus on solvable problems,
  • Create solutions that address a market/structural failure and quickly bridge from philanthropy to market creation or expansion,
  • Encourage greater co-creation and involvement of the private sector as problem-solvers, and
  • Have clear exit strategies, quickly bridging from philanthropy to market creation or local ownership.

In the pages below we outline four examples that display aspects of each of the five attributes above. While not all of the examples directly involved USAID, USAID has replicated some aspects of these in other programs. Table 1 summarizes how these programs address the five attributes. 

Table 1: Summary of Examples and Attributes 

To succeed, the leaders in each of these examples had to display a level of creativity and innovation in how they made use of existing development funding and procurement processes. Making it easier for others to follow suit will require institutionalizing these benefits by reforming development procurement policy and regulations. We make the following recommendations for the Trump Administration as they think about reforming American foreign aid:

  1. Focus on solvable problems
  2. Address market or structural failures
  3. Plan for replication and scale from the beginning
  4. Tie funding to collaboration and coordination
  5. Insist on impact measures tied to clear exit strategies – but be patient
  6. Keep USAID outside of the State Department bureaucracy
  7. Have impact measurement report outside of USAID
  8. Reform the software and hardware of development
  9. Reform development procurement policies and regulations to make it easier to co-create with civil society and engage the private sector as problem solvers

Overview

“War,” wrote General Clausewitz, “is politics by other means.” If the purpose of war and diplomacy are to shape international events in your favor, then international development is the “long game” shaping conditions for more favorable dealmaking. In the end, that’s the consistent purpose of politics, war, diplomacy, and development: to end up with a more favorable deal for your nation’s self-interest. For decades, America has worked to shape the international system – to establish, maintain, and extend the liberal rules-based order – because it was in the national interest.

Viewed through this lens, international development becomes a critical tool in the international dealmaking toolkit.America can and should use its international development resources to shape near and long-term conditions in a country or region in favor of American national interests. As the United States is a trade and economic powerhouse, these interests tend to align with advancing economic development and prosperity in a given region or country thus aligning our self-interest with the self-interest of the host country. In essence, international development is an instrument for promoting favorable dealmaking on a win-win basis for America and the countries we want to help.

America is not alone in using development resources in this way. The Chinese, in fact, have moved to the forefront of this field seeking to fill a vacuum they perceive the West has left over the last decade. Witness their investment in the New Development Bank (aka the BRICS Bank) and the Asian Infrastructure Investment Bank. So then, what are America’s comparative advantages in this sphere of development dealmaking?

     
The Asian Infrastructure Investment Bank (AIIB) held its first annual meeting in Beijing in June 2016.
Source: UNIDO on Flickr.

The Chinese bring focus, an almost bottomless wallet, and a willingness to look the other way when it comes to human rights and corruption. China brings focus because of its command economy and willingness to pick industrial winners and losers. They bring a near bottomless wallet and a willingness to look the other way on human rights and corruption because their government doesn’t have to answer to an electorate or a watchdog press. America and the Western powers can’t compete on these terms. Nor should we.

Our comparative advantages lie in transparency, dynamism, and entrepreneurial collaboration. In fact, when touring African or Asian developing countries we don’t hear those governments or citizens say, “Oh, the Chinese are here so we don’t need the Americans.” Instead we hear, “The Chinese are here and therefore we need the Americans.” Citizens of these countries want to know how and where investments are being made, especially of their own tax dollars and they want their own people engaged in the development of their country, rather than an army of imported Chinese workers.  When we lead by example and transparently invest our development dollars we set a precedent the domestic government gets pressed to follow. Our experience in the rough-and-tumble “creative destruction”[1] of markets lets us quickly adapt to changes on the ground and dynamically improve as we go. And we know how to work and play well with others in ways that lead to results and outcomes – and ultimately to new market opportunities.

Unfortunately, the long history of development has mostly involved rich people deciding what poor people need and then inflicting it upon them. Rare are the cases where development programs have started by co-creating solutions with the people they intend to help. Rarer still are the cases that actively engage the private sector and understand how to unleash the power of markets and entrepreneurial energy to overcome problems. In fact, while many development programs talk about “sustainability” what they really seem to mean is “permanent philanthropy.” Too many development professionals still fear and actively discourage profit-making as part of the solution.

To overcome this barrier, while we don’t pick industrial winners and losers, we can choose to focus on “solvable problems” in the developing world – specific problems for which technical solutions already exist but are trapped due to a market failure, public policy shortcoming, or a need to change mindsets, beliefs, or behaviors. A recent analysis of the Sustainable Development Goals found over a dozen such “solvable problems.” One example: post-harvest loss. In excess of 30% of a farmer’s harvest (and profit) can rot or become unusable before it makes it to market. Purdue University long ago came up with a solution to part of this problem: PICS Bags (Purdue Improved Crop Storage Bags). For crops like cowpeas, PICS Bags provide protection from weevils and other pests. This American ingenuity benefits the farmer, the American companies that make the bags, the American food companies who rely on these commodities in their supply chains, and local food processors who make up these supply chains. 

To really make this approach work, however, we need to embrace a new way of reforming development programs. To date, incoming administrations have taken two main approaches: move around budget line items or move around boxes on the organization chart. Both of these tactics deal with the “hardware” of development yet fail to change the “software” of development – the culture, knowledge, skills, and attributes of the people doing development. They also fail to reform the fundamental mechanism of enacting policy: procurement. Ultimately, USAID and its counterparts are big buying machines. To reform development, first reform development procurement policy and regulations.

Here then are four case studies[2] that illustrate aspects of these approaches and how the Trump Administration might consider replicating them and reforming international development.

Co-Creating Economic Opportunity at the Bottom of the Pyramid

The Center for Strategic and International Studies (CSIS) recently released a report on “A Tale of Two Paths” outlining how some developing countries have continued to rise toward middle income status while others have fallen backward or failed to progress from being failed or fragile states. One of these “rising middle income states” has steadily improved on a number of key indicators, including reducing violence and corruption, improving human rights, rising median incomes, and growing gross domestic product. It is also a key ally in its region,  a potential source of stability, and a partner in the struggle against sectarian violence and international terrorism.

Many American and other foreign companies come to this country both to help develop its abundant natural resources and to tap into its growing consumer market. These companies, however, face a tough choice: import skilled workers or train unskilled locals. Either choice brings a lot of expense and a lot of challenges. It also forms part of the “middle income trap” that has stalled the growth of many other developing countries when they reach this same stage of development.

The country director for an international aid agency[3] operating in the country showed great insight when s/he went directly to the country’s government and asked them what they thought their own country needed most to break out of the trap. While in hindsight this may seem like an obvious thing to do, stunningly few development professionals or philanthropists take this step. Most come to the table lecturing their local counterparts on what they think they need. The government said they needed help creating opportunities for people to enter the formal economy – especially for the poor and vulnerable at the “bottom of the pyramid”.

Recognizing this as somewhat uncharted territory, the aid organization’s leadership tapped into the relatively new and emerging field of “co-creation”, making use of a process that would allow the aid organization to issue a call for ideas on a new or emerging problem like this one. The aid organization received dozens of innovative ideas from local, regional, and international organizations, employers, educators, and more. Sifting through these ideas, the aid organization selected the best and invited the submitters to a two-day co-creation and co-design workshop. Over 100 leaders showed up, representing academia, civil society, the national and provincial governments, large and small employers, the American Chamber of Commerce, industry associations, and other bilateral and multilateral donor agencies. During the workshop, the participants brought fresh eyes to the problem, formed new teams and coalitions, and came up with actionable ideas, several of which the international donor community chose to fund.

                   
The CollaborateUp Formula, a proven process for co-creation that adapts successful rapid development tools and Lean Startup methodology to focus creativity and jump-start collaboration. 

Opportunities for Replication

This case offers five principles that USAID and other aid agencies could replicate to accelerate impact, reduce cost, and increase long term sustainability while reducing long-term reliance on foreign aid:

  • Align with American security interests while responding to local needs. The world’s youth will use their pent up kinetic energy. The question is whether they will use it for good or evil. The widening youth-skills gap is a global challenge and a large challenge specifically for the host country. The wider this gap, the more likely youth will get lured into danger and violence. This effort represented a very targeted down payment on securing a more stable and less violent future for the host country and the region. The aid organization’s decision to ask the local government what they needed most may seem stunningly obvious in retrospect, but is a little used concept in this field. Especially for critical allies and trading partners well along the development curve, asking the government, employers, and civil society what they need most represented a distinct break from the past.
  • Focus on solvable problems. The youth-skills gap is a well-known problem with well-known potential solutions. These solutions are trapped due to structural issues within the host country and within the labor market. Unleashing the potential of these solutions is less about coming up with innovative technical solutions and more about convening the right stakeholders and gaining their collective buy-in and political will to implement them.
  • Create solutions that address a market/structural failure. Although the youth-skills gap is not unique to the developing world it is compounded by structural issues within many of these societies. When curriculum is set centrally (e.g., in the national capital), it can take years to change it, often resulting in students graduating with out-of-date skills, ill-prepared for the high demand careers of the future.
  • Encourage greater co-creation and involvement of the private sector as problem-solvers. The co-creation process in this case created “connective tissue” in civil society and the private sector that can help to fill the structural gaps in between the official education institutions at the local, regional, and national levels. Many countries – including the United States – could benefit from replicating this approach to closing the youth-skills gap. While the international donor community ultimately funded several of the ideas that came out of the co-creation process, many of the participants said they got a lot out of the simple act of getting so many people together from across the public, private, and civil sectors. They don’t have the opportunity to do that very often or at all and very few organizations have the convening power to draw in that much broad interest and participation. In many developing countries, the American “brand” of entrepreneurialism, transparency, and fairness uniquely positions America as a country and USAID as an agency to host these types of gatherings. While some participants have criticized this and other co-creation processes as “not producing anything truly innovative” that couldn’t have been produced with a traditional RFP process, that criticism misses the point. The co-creation didn’t begin with the co-design workshop. It began when the aid organization first met with the country’s government.
  • Have clear exit strategies that quickly bridge from philanthropy to markets or local ownership. America can no longer afford to write indefinite checks. When we decide to take on a development challenge, we need to set clear “trip wires” for how we will get in and how we will get out. Because the aid organization and the country leadership agreed on this program from the beginning, the government shares ownership and responsibility. While it’s still too soon to tell the ultimate outcomes of this project, if the aid organization follows through on its engagement with the government, it should take ultimate responsibility and eventually take over these programs itself.

Profitably Ending Micronutrient Deficiency in Rwandan Youth

When Hugh Welsh, President and General Counsel of DSM North America, reviewed the agreement that finally established Africa Improved Foods Rwanda, he counted up the weeks and months it took to negotiate. Hugh had a long track record of doing multiple, complex, multi-national deals with other companies. A deal like this should have taken two and half months. This one took two and half years.

Over a hundred years ago Royal DSM started extracting coal from the Southern Province of Limburg in the Netherlands. Through the decades, DSM transformed itself, changing the meaning of those three letters from Dutch State Mines to Do Something Meaningful. DSM’s CEO Feike Sijbesma says, “We are intent on ‘future-proofing’ DSM, delivering higher value to all our stakeholders.” In the century since its inception, DSM has made an incredible journey from taking coal out of the ground to moving into material sciences, and now tackling micronutrient deficiency. Thanks to work with initiatives like Sight and Life to Partners in Food Solutions, DSM has become a global leader in ending malnutrition.

So when the World Food Programme (WFP) and the Republic of Rwanda invited DSM to tackle the issue of youth physical and developmental stunting – a startling 44% incidence rate in Rwanda – Hugh saw an opportunity. He and his team understood that the explosive, double-digit growth DSM’s shareholders want won’t come from the United States, China, or the European Union – but it might come from Africa. Getting a foothold in Africa had become paramount to “future-proofing” the company, and a new food product to address Rwanda’s youth stunting crisis would generate goodwill and a potential new market. But DSM makes its money producing micronutrients, not food. Hugh would need partners.

As a mergers and acquisitions attorney, Hugh knew a lot about structuring deals. He turned to the International Finance Corporation (IFC) of the World Bank; the Dutch development bank (FMO); and the CDC Group plc, the UK’s development finance institution, pitching them on creating Africa Improved Foods (AIF) – a Dutch joint venture that would address the nutritional needs in Rwanda with a new set of food products: Nootri Mama and Nootri Toto, enriched porridge flours for expectant and lactating mothers and newborns. But these strange bedfellows didn’t have a lot of experience taking on the kinds of innovative investments AIF would require. They wanted a low risk deal with guaranteed return on capital and tough audit and reporting requirements beyond what a private sector partner would require. Negotiating these deal terms would take months. The audit and reporting provisions proved particularly difficult. While the IFC considered them as standard practice to avoid corruption and the paying of bribes, they never really explained them to DSM, who perceived them as punitive and unnecessary. Once DSM understood why the IFC wanted these terms, the parties could come to agreement.

Beyond innovative investors, for the deal to succeed, AIF would also need an innovative customer. With the help of the Clinton Health Action Initiative (CHAI), AIF secured a commitment from the WFP to purchase 50% of its outputs for the next five years and an agreement from the Rwandan government to purchase products for use in its school nutrition programs. Making the Rwandan government a shareholder in AIF Rwanda in return for in-kind contributions of land and a storage silo ensured buy-in at the national level. Whatever is not sold to these committed partners and customers is then sold on the commercial market and in neighboring countries. This is the true key to AIF’s success, and enables it to exist beyond philanthropy as a sustainable business model – replicable almost anywhere.

Hugh and DSM fought for AIF and demonstrated that a sustainable business case can be made even if it is not the most profitable business case – if it serves a strategic purpose. Leveraging the expertise of DSM to create Nootri Mama and Nootri Toto AIF Rwanda contributes to the Rwandan economy by sourcing from 9,000 smallholder farmers, and employing 260 Rwandans in its Kigali plant. In January 2017 AIF made its first delivery to the Rwandan government. Today, Kigali residents see commercials for Nootri products, and recognize them on their store shelves. Nootri Mama and Nootri Toto porridge flours, reinforced with the vitamins and minerals required for children to grow and thrive, exceed global standards for quality and nutrition and will hopefully soon contribute to ending stunting in Rwanda.

           
A Rwandan rice farmer with his crop. Despite having a 44% incidence rate of youth stunting, Rwanda has all the natural resources it needs to feed itself. Source: International Rice Research Institute (IRRI) on Flickr. 

Opportunities for Replication

This experience offers several principles that USAID and other development organizations could replicate to accelerate impact, reduce cost, and increase long term sustainability:

  • Align with America’s security interests while responding to local needs. Post-conflict areas like Rwanda have a tenuous grasp on stability. While small, Rwanda can play a big role in regional security and stability. Rwanda also has all the natural resources it needs to feed itself, making its youth stunting problem all the more tragic. Africa Improved Foods Rwanda also provides needed jobs for Rwandans and generates income for farmers.
  • Focus on solvable problems. The causes and cures for youth stunting are well known and widely available in other countries. All that’s needed is the political will, investment capital, and purchase guarantees necessary to overcome the financial and public policy barriers.
  • Create solutions that address a market/structural failure. Building a plant like the one in Kigali obviously costs money. Beyond that initial investment, though, to make the solution truly market sustaining required the vision to create a commercially-viable product and structure a deal that would allow it to come to life.
  • Encourage greater co-creation and involvement of the private sector as problem-solvers. Structuring this deal took patience and a willingness to change standard practices and entrenched bias on all sides. DSM had to accept a lower initial return on capital,, remain patient, and endure greater audit and reporting requirements. The IFC, FMO, CDC, and the Rwandan government had to learn what it means to invest in a for-profit business, get over their collective allergy to AIF and DSM making a profit on the deal, and accept higher levels of risk.
  • Have clear exit strategies, quickly bridging from philanthropy to market creation or local ownership. Hugh put it best: depending on indefinite philanthropy would be irresponsible. Opening the plant only to shut it down a few years later would leave a bigger hole in the already fragile Rwandan economy than simply doing nothing. Building a commercial product intended to compete on the open market will earn Rwandans and the investors a long-term return on their collective investment.

Collective Impact for Nurturing Families, Thriving Children, Secure Futures

As many as 250 million children worldwide will fail to meet their development potential[4]. Millions of these children fail to thrive because they grow up deprived of essentials during their early years. Millions more lack the care of a nurturing parent. In many developing countries, and especially in post-conflict areas, institutionalization has become the default method for dealing with these children. America, Europe, and much of the developed world have all but ended orphanages and instead use foster care as a way-station for children in need of out-of-home care. Yet, citizens of these same countries often prop up these institutions in developing countries through well-meaning but misplaced “voluntourism” building and staffing orphanages when these children really need family-based care.  In fact, studies have shown that in many of these countries parents and families put their children in orphanages in order to access health care, food assistance, and a Western-style education. In Cambodia as an example, nearly 80% of the children in institutions have at least one living parent.

Data show that children raised by nurturing families have healthier, safer, and more productive futures. Deprived of a nurturing relationship with an adult, a child suffers long-term emotional, cognitive, and physical setbacks. Children raised by nurturing families not only thrive, they get a buffer from the adverse effects of war, violence, and disease, allowing them to grow up healthier, safer, and better educated. When families are strong and can care for children at home, the impact radiates to their society. Strong families build strong communities and strong communities build strong countries. Later in life, these children enter the workforce better prepared to contribute to their country’s human capital and competitiveness in the global economy.

Enter the Global Alliance for Children and Family Care First Cambodia. Formed from the beginning as a joint venture uniting many of the greatest minds and organizations working on early childhood development, the Alliance creates platforms through which leading organizations including the Bill and Melinda Gates Foundation, Global Affairs Canada, GHR, J.K. Rowling’s Lumos Foundation, Save the Children, UBS, USAID, the World Bank, and World Childhood can all work together to solve problems. Under a cooperative agreement with USAID, the Alliance launched Family Care First Cambodia. Using a collective impact model, the Alliance brought together over 30 local Cambodian organizations and three main international resource partners to collaboratively contribute to an increase the number of Cambodian children with access to safe, nurturing, family-based care.

        
In Cambodia, nearly 80% of the children in institutions have at least one living parent. Family Care First Cambodia accelerates funding for local organizations that strengthen family-based care. Source: Global Alliance for Children. 

While all children count, not all children are counted. So, in addition to its on-the-ground work in Cambodia, the Alliance works to address this basic fact: official data and statistics rely on household surveys. The poorest of the poor don’t live in houses and therefore fall out of the data. Over 220 million children – more than the entire population of Brazil – simply don’t get counted in official data. When millions of children outside of families go uncounted, left invisible in the data, they fall between the cracks, they fall behind, and they stay behind. The Alliance has taken the lead in a global effort to ensure all the world’s children get counted so they can go on to have lives that count.

Opportunities for Replication

The Alliance and Family Care First Cambodia stand out from similar programs for several reasons:

  • Align with American security interests while responding to local needs. Displaced, under-skilled, and un- or under-employed youth have become one of the greatest sources of instability and economic distress in post-conflict areas. The Alliance addresses these problems directly and provides many follow-on benefits by strengthening families as one of the pillars of these still fragile societies.  
  • Focus on solvable problems. The myriad of issues facing institutionalized children are well-known and many other countries have already solved them. These solutions are trapped due to structural issues within developing countries like Cambodia and an existing system of international donors and organizations who unwittingly prop up an ecosystem of childcare that doesn’t actually serve children or their families. Breaking this cycle requires convening the right stakeholders and gaining their collective buy-in and political will to implement new approaches.
  • Create solutions that address a market/structural failure. The Alliance and Family Care First Cambodia respond to both a structural failure in Cambodian society and the international response to the needs of vulnerable children. Well-meaning Western governments, churches, and so-called “voluntourists” subsidize these programs, allowing them to continue functioning despite proof that family-based care is better for children. Recognizing that programs aimed at early childhood development must start at birth and actively engage parents, the Alliance works to empower families and communities as opposed to building or supporting orphanages. 
  • Encourage greater co-creation and involvement of the private sector as problem-solvers. The Alliance embraced a multi-sector approach from the beginning and carried it through from the way it organized its global platform to the way it implements programs on the ground. In contrast to other early childhood development programs, this means a large percentage of the funds invested actually make it into the community and don’t get siphoned off along the way. With a relatively modest initial USAID investment of $6.5million over three years, the Alliance has been able to attract an additional $4 million in funding and in-kind contributions from diverse organizations across the public, private, and civil sectors. With the rise of “shared value” programs, where corporate philanthropists want to combine financial contributions with in-kind contributions of skills, technologies, products, and services, the Alliance’s Family Care First program allows a flexible model that can accommodate multiple different types of donation from multiple sources.
  • Have clear exit strategies that quickly bridge from philanthropy to markets or local ownership. The Royal Government of Cambodia is a principle partner in the program. Moreover, the local Cambodian organizations, community leaders, and the families themselves have had a direct voice and hand in the formation and operation of Family Care First. This means they have accountability now for its success and will be better prepared to take over once it’s time for USAID to exit.

Making Sanitation Markets Work

In India, more than 564 million people still openly defecate[5] due to long standing social norms as well as limited opportunity for households to build their own latrines. Market failures in sanitation have led to immense social burdens for the country, including significant deaths in children under the age of five from preventable health issues like diarrhea, and an increase in gender-based violence when women have no safe place to go to the toilet. These social burdens reduce economic opportunity and prosperity.

Work carried out over the last few years by a number of international NGOs and foundations including PSI and the Bill and Melinda Gates Foundation have sought to understand the market dynamics of sanitation across the entire ecosystem, from individuals through communities to entrepreneurs and factory owners, and even to local governments and trade councils. Their work revealed that a sustainable and healthy market creates an environment in which consumers, including those living below the poverty line, can conveniently select and purchase sanitation goods and services from a variety of choices.

Sustaining and growing from basic sanitation towards safely managed sanitation[6] requires fostering systemic changes in the market such that consumers begin to prefer and use better sanitation, an efficient and adaptable supply chain evolves as populations shift and grow, and governments more effectively use their influence and resources. With a healthy market under development, the opportunities for global companies to access these markets as manufacturers and suppliers increases as evidenced by the involvement of companies including Kimberly Clark, Unilever, and LIXIL/American Standard.

Opportunities for Replication

While USAID was not involved in the creation of this market in India, it has invested in similar sanitation programs in West Africa, leveraging many of the lessons learned in India. Some of these lessons include:

  • Align with American security interests while responding to local needs. Ultimately, slowing the pace of migration will need to focus on making it easier and safer for people to stay where they are. Making markets work to solve problems like sanitation can help ensure stronger borders and national security thanks to well-fed and well-educated populations. Stronger markets can reduce the need for international handouts due to vibrant local economies. And stronger markets can ultimately become strong trading partners for the US and its allies, bringing resources back home in the form of  both manufacturing jobs and overseas profits.
  • Focus on solvable problems. Over the millennia that humans have lived in increasingly concentrated groups, the value and importance of good sanitation has been demonstrated over and over again. The barrier to advancement lay not in a radical new toilet but overcoming longstanding cultural norms and beliefs. And while sanitation itself is not new, the specific context in India – the different organizations and parts of society that needed to be engaged – are new. Technology exists to solve this problem, it just needs to be made available and aspirational.
  • Create solutions that address a market/structural failure.  Giving consumers choices they like and use is the key to almost every entrepreneur’s success. Unlike in other markets replete with focus groups and satisfaction surveys, in these kinds of markets providers rarely engage consumers in determining what they offer to them and how much they charge for it. These approaches in India not only did that, they also created a responsive supply chain that could adjust to changes in demographics, migration, behavior, and other emerging needs. 
  • Have clear exit strategies that quickly bridge from philanthropy to markets or local ownership. Because these solutions relied on local engagement from the beginning and have broad-based support, they don’t rely on ongoing philanthropy or development funds. They’ve become part of the fabric of society and a profitable market replicable across each state in India and beyond.

Conclusions & Recommendations

These three examples provide insight into how the Administration could radically rethink international development and America’s role as a leading economic development partner. Without abandoning its allies or leaving a vacuum that other rising powers might seek to fill, this approach would play to America’s core strengths and comparative advantages, strengthen and stabilize key allies by addressing solvable problems, and earn the American taxpayer a distinct return on investment. To spread the benefits of these examples, the Administration should undertake the following recommendations.

Recommendations

1.     Focus on solvable problems.

Pick a set of development priorities. Analyze them and find the solvable problems among them. As an example, the UN’s Sustainable Development Goals (SDGs) offer a set of development priorities. Some of them, like “No Poverty” or “Climate Action”, may seem like an unending obligation. Others, like “Decent Work & Economic Growth” or “Clean Water and Sanitation”, have clearly defined outcomes and known solutions. Making a more inclusive workforce, keeping children with safe and nurturing families, and making sanitation markets work all tackle well-defined problems with existing solutions. The Administration should focus development resources on these kinds of solvable problems.

2.     Address market or structural failures

Again, when looking at solvable problems within a given set of development priorities (e.g., the SDGs), market or structural failures lie at the heart of most development issues. In the country described in our first example, the market and structural failure lies in a centrally-set curriculum that can’t keep pace with rapidly changing demand for technical skills. In Cambodia, the structural failure lies in an entrenched system that cuts families out and props up the “International School of the Orphan”. In India, the market failure stemmed from long-held customs and beliefs and the inability to create an adequately dynamic supply of choices that consumers actually wanted to use. The Administration should look for similar market or structural failures and use its resources – and perhaps more importantly its convening power – to call others to help address them.

3.     Plan for replication and scale from the beginning.

For the past decade, many in the development community paid lip service to the idea of scaling and replicating, without much attention to the how of scaling and replicating. Each of the examples above presumed they would need to scale from the beginning and that they would need to share lessons across their own programs and with others. To put this into action, when planning the launch of a new program, require tests in multiple communities, not just one. Instead of single-location pilots, test the new approach in at least three different communities to test variances and assumptions that might come from differences in geographic, demographic, or psychographic factors. In addition, have a dedicated function devoted to identifying and sharing appropriate practices across the program itself and among other development programs.

4.     Tie funding to collaboration and coordination.

International development is a highly competitive field. Lots of NGOs fiercely compete for funds. At the same time, many of these NGOs lack the kind of dynamism and willingness to embrace the creative destruction of the private sector. Part of that behavior is driven by the donor community itself. In business, entrepreneurs can constantly reinvent themselves and markets regularly grant second chances. Failure is a widely accepted part of the process to success.  In development, the perceived price of failure is quite high. Between these two dynamics, high levels of competition for the same funding and a high price of failure, many NGOs actively resist collaborating with others.

Collaboration is sometimes called, “an unnatural act among non-consenting adults.” In each example above, the donors and project leaders displayed remarkable acts of bravery and willingness to take personal and professional risk by collaborating with others. Recognizing the difficulty of collaboration, the UK’s Department for International Development (DFID) has already undertaken this recommendation as part of its Multilateral Development Review and Bilateral Development Review. USAID should follow suit.

            
CollaborateUp's Collaboration Canvas supports partners in social innovation by quickly bringing stakeholders up to speed on the major challenges and provides a simple but effective structure for co-creating programs.

5.     Insist on impact measures that are tied to clear exit strategies – but be patient.

Macarthur Genius Fellow Amos Tversky once said, “It is sometimes easier to make the world a better place than to prove you have made the world a better place.” Monitoring and evaluation have reached near fetish levels of obsession in some parts of international development with reporting on the outcomes requiring more time than the work itself. At the same time, effective impact measurement often remains elusive. The timeframes for many development projects to show results can run from years to decades to generations. This has led to many development professionals turning measurement into a pro forma exercise or (worse yet) only doing what they can measure.

The Administration should continue to invest in programs like the Global Development Lab and Measuring Impact to build up the muscle and brain power for effective measurement. These programs should, though, go on the road and spend more time imbuing this kind of talent and culture into the missions, not just headquarters. At the same time, Congress and the Administration should be patient and take input from the field on appropriate measurement timeframes. Ultimately, impact assessments should evaluate the ability of a project to be truly sustainable – to quickly bridge from philanthropy to markets or local ownership.

6.     Keep USAID outside of the State Department bureaucracy.

While collapsing agencies may seem, on the surface, to enhance efficiently, more often than not it actually reduces it. USAID has built up a significant and relatively agile capability to work across multiple sectors, especially when compared to the more Byzantine nature of the State Department.

The private sector already complains about the long timelines in working with all government agencies, including USAID. Consolidating USAID into the State Department would result in more, not less, difficulty in decision-making, less ability to think creatively, and decreased ability to craft effective deals.

7.     Have impact measurement report outside of USAID.

Picking up on the point above, someone outside of USAID should take responsibility for reviewing and assessing impact. DFID took the extraordinary step of having impact measurement report directly to Parliament. Congress and/or the Administration should consider something similar.

8.     Reform the software and hardware of development.

Every incoming administration is tempted to move boxes around on the organization chart. Reorganization alone will do very little. Changing the hardware of development – the boxes on the organization chart – will do nothing if the internal software remains the same. Really changing the course of development requires a reboot to the software of development: the culture, traditions, and beliefs that imbue the whole development community both inside and outside of government.

This begins with changing the ethos around collaborating across agencies, across organizations, and across sectors to drive collective impact. As noted earlier, effective collaboration and collective action are extremely hard to pull off. Part of this is natural human behavior. Specialization drives productivity, so we want people to focus. The downside, however, comes in “stove-piping” as people focus and segment themselves into smaller and smaller groups. People grow up in and begin to identify with an “us” of their team, organization, field, and sector separate from a “them” of the other team, organization, field, or sector. This can manifest as distrust, suspicion, and an unwillingness to cooperate with “them”, which in the case of development often means the private and civil sectors.

Even now, in a time when we seem to talk a lot about public-private partnerships, at the mission and office level, distrust remains ingrained, and very few practitioners – especially in the acquisition workforce – really believe in cross-sector collaboration or know how to make collective action work within the bureaucratic constraints of the FAR and the USAID Acquisition Regulations (AIDAR). In fact, even though many development practitioners talk about “sustainability”, no one agrees on what that means and very few people understand how to bridge to markets and actively fear or discourage profit-making as part of the solution. Helping them better understand how to make use of the tools they have in the FAR and AIDAR and how to use them specifically to engage the private sector should form a top priority in remaking the culture of development.

9.     Reform development procurement policies and regulations to make it easier to co-create with civil society and engage the private sector as problem solvers.

If and when the Administration succeeds in changing the mindsets, beliefs, and behaviors within the development community, it should institutionalize those changes in procurement policies and regulations. In the end, most government agencies do one thing: they buy things. Whether through grants, contracts, or cooperative agreements, agencies accomplish their missions by procuring products and services. Therefore, the surest way to ultimately shape an agency’s ability to accomplish its mission is by changing its buying practices, policies, and regulations.

This requires a two-pronged strategy. First, as noted earlier, groups like the Global Development Lab and Measuring Impact have built up a strong knowledge and skill base for innovation. Those knowledge, skills, and mindsets need to spread beyond them and get directly infused into the acquisition workforce. The willingness to take intelligent risks and collaborate across sectors is very spotty once you get beyond a few dozen people within the agency overall and a small handful of contracting officers. These innovators need to fan out across the agency and across the development community to spread their knowledge and experience and fundamentally change the culture and procurement of development.

Second, these efforts at culture change need to be backed with real reforms to the procurement policies themselves. USAID should think of itself as more than a buyer of things but as a buyer of ideas and opportunities. And with that should come a different way of buying and selling. Rather than applying the same procurement processes for buying desks and buildings, USAID should have a more flexible set of procurement policies for buying ideas. The kinds of co-creation and co-design allowed under the BAA process needs to be intelligently encouraged and expanded into other forms of procurement yet directed and controlled to ensure adequate transparency, competition, and value for money.

Some BAA participants complain that the process takes too long, requires a lot of upfront investment on the part of the NGO community, and doesn’t adequately involve local civil society. The first and third are legitimate criticisms. USAID should look to make it easier to co-create with more agile forms of procurement besides the BAA and should reduce the cost for small and/or local NGOs to participate. The second is a largely spurious criticism, especially when made by large international NGOs. It’s far better for everyone involved to spend time up front getting it right rather than rushing to award.

Conclusions

By undertaking these recommendations, the Administration will improve the value of international development as an instrument in its dealmaking toolkit. The Administration will be able to use its development resources to shape near and long term conditions in a country or region in favor of American interests. In particular, as the Administration pursues its objective to craft more favorable trade and economic deals it will have a more dynamic set of tools for advancing economic development and prosperity aligned with our interests and the interests of the host country. This will allow the Administration to gain more favorable, win-win-win deal terms benefiting us, our allies, and the countries we help.


[1] “Creative destruction” refers to the incessant product and process innovation by which new production units replace outdated ones. Originally coined by Joseph Schumpeter (1942), who considered it “the essential fact about [market] capitalism.” Source: MIT Economics.

[2] Full disclosure: CollaborateUp played a role in the first and third case studies. PSI, a key partner in the fourth, has been a client in the past, but not for this work.

[3] Note: The names and some of the facts of this case have been changed as the participants did not have permission to discuss it on the record.

[4] Source: The Lancet, 2016

[6] The Sustainable Development Goal define “safely managed” as: a private improved facility where fecal wastes are safely disposed on site or transported and treated off-site; plus a hand-washing facility with soap and water.

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