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How to ensure foreign aid dollars are invested wisely

Jan. 6, 2013 - 02:54PM   |  

For those of us who partner with the U.S. Agency for International Development (USAID) and others to support and advance America’s efforts and goals abroad, 2013 is shaping up to be a pivotal year.

Regardless of how Congress ultimately addresses the fiscal cliff, the debt ceiling, tax and entitlement reform and other pressing fiscal challenges, it is clear we all must do more with less. New leadership atop key congressional committees — and before long, the State Department — and ever more constrained federal spending together mean we need to be more accountable, transparent and effective than ever.

International development companies bring highly skilled, entrepreneurial assistance to developing countries, so they in turn can overcome complex challenges. We stand for maximizing competition in the execution of work performed using U.S. tax dollars, building free markets and multi-stakeholder societies, and representing and sharing American values.

The national and economic security benefits of our work are clear. But that doesn’t mean we can ever stop advocating for what we do, how we do it, and why policymakers and the public should care.

On behalf of the Coalition of International Development Companies, we offer the following suggestions to the incoming Congress and the Obama administration, with the goal of helping ensure that the transformative power of development assistance and the unique role USAID plays in the world are always clear:

• We support the fundamental principles of the reform agenda of USAID Forward and its focus on sustainable development. But in achieving that goal, there is no “one size fits all” approach. Often, giving dollars to governments is not the same as providing assistance to the people those governments claim to represent. Where countries and national public and private institutions are proving themselves, and have the right capacity and systems in place, it may make sense for them to be primary implementers. They know their own countries best, and can be cost-effective agents of U.S. assistance.

But not all countries — and not all sectors within a country — are there yet. Lack of transparency, different standards of how business is done, and varying practices of public financial accountability continue to hold back many of the countries that would benefit most from American assistance. Often, cash isn’t the key problem; capacity is. Ultimately, we must transition to empowering those organizations and governments in their efforts to own their own destinies; this is what engenders sustainability.

Therefore, we believe the U.S. government should capitalize on its greatest strength — knowledge transfer — rather than its greatest liability and least proven approach — cash transfer.

• We believe U.S.-led development assistance will only meet the highest standards of quality, value for money, and accountability that U.S. taxpayers rightly demand if complemented by full and open competition. Smart development policy should leverage the best that America and the world have to offer. The proven mechanism for finding the “best” is open competition — a truly “open source” approach, on a level playing field, in which all competitors are judged by the same standards of quality, value and accountability.

Competition lowers costs, assures greater responsiveness, and offers better value to the U.S. government, American taxpayers, and ultimately the countries and communities in the developing world. From the government’s perspective, it makes sense to nurture the highest possible level of competition in its ecosystem of providers, and we believe it is harmful to distort the natural equilibrium of the marketplace by picking winners and losers outside the competitive process — for example, by erecting quotas for local over U.S. organizations. It is patronizing to suggest that developing countries want anything less than the best technical assistance available, whether that’s local or international; nonprofit or for-profit; small, medium or large.

We agree with USAID and Congress that we need to improve development effectiveness and efficiency, while ensuring that every dollar delivers benefits to the people we serve in developing countries — and the United States. We believe that following the two suggestions above will go a long way toward providing the necessary and proper safeguards against the risks of waste, fraud and abuse — and against any further erosion in congressional or public support for the assistance the U.S. provides others around the world, which in turn advances America’s security, values and prosperity. Ë


Betsy Bassan is the president and CEO of Panagora Group. James Boomgard is CEO of DAI. Both are board members of the Coalition of International Development Companies, which promotes a strong private-sector role in overseas development.

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