Return on investment in the new global development landscape

June 26, 2013 By John Glenn

The landscape of global development is changing, and partnerships engaging the private sector and NGOs are at the center of these trends.  In 1961, 71% of all U.S. financial flows to the developing world were from official development assistance, whereas it was only 9% in 2010, with now over half of the total coming from the private sector.  President Obama heads to Africa today, where he will likely reinforce the consensus that promoting economic growth by creating the enabling environment for investment is the driving force for reducing poverty, but challenges remain to ensure development and diplomacy have the resources needed to be effective and accountable in dealing with today’s global challenges.

Senior Administration officials, including U.S. Trade Representative Mike Froman and Treasury Secretary Jacob J. Lew previewed the President’s trip to Africa, while World Bank President Jim Young Kim, business executives, and military leaders highlighted trends in global development as the USGLC launched its new campaign, “Innovations in Smart Power,” yesterday before an audience of 800 from around the country.

Ambassador Froman, who told those gathered he had been sworn in as U.S. Trade Representative only a half hour before by the Vice President, said he wanted to make his first speech on the President’s trip to Africa because of the Obama Administration’s focus on trade and investment as a critical part of development. The Administration’s plans in the next week to engage Africans on rule of law, democracy, and food security are “not philanthropy or corporate social responsibility,” he said, but “hard-headed risk adjusted investments” that identify strategic investments where U.S. resources can be force multipliers.  He laid out a vision where countries in Africa would become “the next generation of BRICS,” referring to emerging economies in Brazil, India, China, and South Africa that could become new markets for American businesses.

World Bank President Kim called on the audience to embrace a historic opportunity in global development to reduce global poverty below 3%. Economic growth is critical, he said, but if growth doesn’t include the bottom 40% of the population, women, and young people, it can build instability in countries that can result in the kinds of street protests recently seen in Brazil, despite its recent economic growth. He suggested the hardest part in working with the private sector is “convincing them that we understand the nature of risk and reward.” The World Bank has increased its investment in Africa tenfold in recent years, he noted, with significant returns on investment, and developed new strategies for dealing with corruption that make it easier for the local population to report abuse while trying to protect those in vulnerable situations.

Creating “shared value” was raised by World Bank President Kim and business executives to capture the shift of seeking to “do good” while “doing well.”  Microsoft’s Oliver Bell described its 4Afrika partnership with USAID to distribute cell phones as an initiative where Corporate Social Responsibility and the for-profit sides of business are coming together.  Geralyn Ritter discussed Merck’s over 20-year partnership in distributing treatment for river blindness that has given rise to talk of a global elimination of the disease.  “We don’t do philanthropy, this is our business,” said Hugo Welsh about Royal DSM’s Partners in Food Solutions, which works to build new markets in the developing world.  Karl Hoffman from PSI referred to “the last mile” when explaining the role of NGOs in working with the private sector to improve the delivery of new technologies, expertise, and resources in the developing world.

Innovators of new technologies in development also highlighted the engagement of the private sector in development.  Innovations presented at the symposium included a portable backpack to carry water inspired by the needs after the earthquake in Haiti and created by the Ohio-based company Greif; new sources of healthier nutrition developed in partnership between MANA and Georgia peanut farmers ; and cook stoves developed by GE and BURN that have changed the health and lives of women in the developing world.  (Many others, including the VOTO , which can charge a cell phone with an open fire, were also featured at the “Smart Power Expo”)  The key to these businesses reaching those who could benefit from these new technologies has been partnering with U.S. development agencies like USAID and OPIC and with NGOs, which bring a local presence and country knowledge critical to ensuring access and delivery on the ground.

Military leaders reinforced their need for strong civilian partners in a session with senior leaders from one of the six “combatant commands” that map the military’s authority across the globe.  Retired Lt. General Kip Ward, the first commander for U.S. Africa Command, stressed the military’s role as “a force to assist and support” the efforts of diplomats and development experts to promote stability in Africa.
Retired General John Craddock, who led U.S. Southern and European Commands,  also noted the military’s efforts to “bring in capability for others,” NGOs and the private sector, in humanitarian disaster response, which he described as the “greatest return on investment in assistance” in Latin America.  Vice Admiral Robert Harward, Deputy Commander of U.S. Central Command, praised the “Veterans for Smart Power” video shown at the beginning of the session, saying that he is encouraged when he sees younger officers “who have worked from the bottom up with all the elements of power” in Iraq and Afghanistan.  This experience will be critical, he suggested, for the prevention of conflict in the future.

Treasury Secretary Jack Lew laid out the Administration’s vision for global leadership in a final session, saying “the U.S. is the indispensable country, but we can’t operate alone everywhere in the world.”   He laid out the case for support for the International Affairs Budget in an era of austerity, saying diplomacy and development are in our national and economic security interests, embracing the reform agenda to ensure the United States spends wisely and with purpose, and reminding the audience how small a part of the budget it represents at just one percent.  “The United States can’t entertain the option of withdrawing from the world,” he concluded and added, “the real challenge is to go in and build a system so that you can leave.”

Please visit the USGLC’s website in the coming days for video and photos of the Symposium, as well as from the morning’s sessions with our state-based business, faith-based, and retired military leaders.