This is part of our FrontLines Year in Review series. This originally appeared in FrontLines March/April 2012 issue.
In the five decades since President John F. Kennedy asked Congress to create the U.S. Agency for International Development, the development landscape has changed tremendously. One of the most powerful changes is the growing role of the private sector.
The statistics speak for themselves: official development assistance has gone from being 70 percent of resource flows to the developing world in the 1960s to less than 13 percent today. Private sources of capital—from remittances and foreign direct investment to foundation grant-making—have outpaced official development assistance. This shift is transforming not only how development is funded, but how it is being done.
To be effective, development agencies must adapt to this trend and take steps to make private-sector partnerships a key part of their work. Crafting effective public-private partnerships is no longer a luxury, but a necessity.
As USAID Administrator Rajiv Shah has said, “If we are going to encourage truly sustainable, broad-based economic growth in developing countries, we have to do a far better job of working with private firms—be they domestic or foreign, established or entrepreneurial.”
USAID recognized this need early on. In 2001, the Agency established the Global Development Alliance program and pioneered a structured approach to public-private development partnerships. With over 1,000 partnerships under its belt, USAID is recognized as a global leader by its peers in the development donor community as well as by private sector organizations. We are proud of this legacy but we know there is still work that needs to be done if we are going to seize the full potential impact these partnerships can have in international development.
Strategy not Philanthropy
How the business community thinks about development is evolving. As experts like Jane Nelson at Harvard’s Kennedy School of Government and Michael Porter at the Harvard Business School point out, successful businesses increasingly consider development as a core strategy issue rather a matter of corporate philanthropy.
At a forum USAID hosted in December 2011, three Fortune 500 business leaders—Cargill CEO Greg Page, Walter Bell of Swiss Re, and former Merck Chairman and CEO Richard Clark—agreed that development was a core business issue for them. Companies and business leaders like these have a stake in development for a range of reasons such as broadening their access to markets and creating secure, stable, and sustainable supply chains. And what the development community provides is a combination of deep technical expertise, ground knowledge, access, and credibility.
For example, in one recent partnership, USAID is partnering with PepsiCo to help smallholder chickpea farmers increase their yield, which PepsiCo will turn into a high-energy paste that will be used by the World Food Program as well as sold commercially by Pepsi. This partnership is about addressing overlapping interests and leveraging expertise that are core to each of our organizations.
As the business world changes how it thinks about integrating development into its strategies, those of us in the development community also need to adapt how we think about integrating the business world into our strategies.
As Administrator Shah has said, “We must partner with the private sector much more deeply from the start, instead of treating companies as just another funding source for our development work.” [continued]
Read the rest of the article in FrontLines.
- More information on USAID’s Global Partnerships
- Harvard’s Corporate Social Responsibility Initiative