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Understanding the African Continental Free Trade Area and how the US can promote its success

17. Mai 2022 - 20:25

By Landry Signé

Thank you very much, Chair Karen Bass, Ranking Member Christopher Smith, and distinguished members of the subcommittee, for your extraordinary leadership on U.S.-Africa relations. I am incredibly honored by and grateful for the opportunity offered to me by the members of this committee to testify on “Understanding the African Continental Free Trade Area and How the U.S. Can Promote its Success.” I am Landry Signé, Managing Director and Professor at the Thunderbird School of Global Management, Senior Fellow at the Brookings Institution’s Africa Growth Initiative, Distinguished Fellow at Stanford University’s Center for African Studies, and a member of the World Economic Forum’s Regional Action Group on Africa, and the World Economic Forum’s Global Future Council on Agile Governance.

The African Continental Free Trade Area (AfCFTA) was signed in March 2018, ratified by the required number of countries by May 2019, and came into force in January 2021.

The significance of the AfCFTA cannot be overstated. It is the world’s largest new free trade area since the establishment of the World Trade Organization (WTO) in 1994. It promises to increase intra-African trade through deeper levels of trade liberalization and enhanced regulatory harmonization and coordination. Moreover, it is expected to improve the competitiveness of African industry and enterprises through increased market access, the exploitation of economies of scale, and more effective resource allocation.

My research has shown that the AfCFTA—and its accompanying increased market access—can significantly grow manufacturing and industrial development, tourism, intra-African cooperation, economic transformation, and the relationship between Africa and the rest of the world. In fact, under a successfully implemented AfCFTA, Africa will have a combined consumer and business spending of $6.7 trillion by 2030 and $16.12 trillion by 2050, creating a unique opportunity for people and businesses —and meaning the region can be the next big market for American goods and services.

UNECA has predicted that by 2040 implementation of the AfCFTA will raise intra-African trade by 15 to 25 percent, or $50 billion to $70 billion. The World Bank estimates that the AfCFTA will lift 30 million people out of extreme poverty and substantially increase the income of 68 million people who are just slightly above the poverty line. The International Monetary Fund (IMF) similarly projects that, under the AfCFTA, Africa’s expanded and more efficient goods and labor markets will significantly increase the continent’s overall ranking on the Global Competitiveness Index.

Although there is a great momentum behind the agreement, its successful implementation is dependent on smart choices and thoughtful policy options. The United States can and should play an extraordinary role in promoting the AfCFTA’s success to increase intracontinental and global trade, as well as achieve mutual African and U.S. prosperity.

In this testimony, I will first briefly examine a few challenges to trade in Africa and their consequences for the continent’s development. Second, I will explain why the AfCFTA can constitute a solution to these challenges. Finally, I will discuss how smart U.S. foreign policy and assistance (both financial and technical) can promote its success in increasing intracontinental and global trade.

Continue reading the full testimony here. 

      
Kategorien: english

The new global tax deal is bad for development

16. Mai 2022 - 22:31

By Julie McCarthy

In October 2021, G-20 leaders finalized a new global tax deal aimed at curbing tax avoidance by large multinational enterprises (MNEs). The deal—brokered by the Organization for Economic Cooperation and Development (OECD) and endorsed by 137 countries and jurisdictions (collectively this group is referred to as the Inclusive Framework or IF)—represents the most significant global tax reform in decades. Among other features, the “IF deal” introduces new taxing rights irrespective of an MNE’s physical location and a new global minimum corporate income tax of 15 percent on the largest MNEs.

The IF deal has two key pillars (Table 1): Pillar one establishes new taxing rights over a subset of large multinational companies (including ubiquitous digital giants like Amazon, Google, and Facebook), and pillar two establishes the base, rate, and approach for a new global minimum corporate tax (GloBE).

Table 1. The new IF global tax deal at a glanceOECD/G20 Base Erosion and Profit Shifting Project’s “Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy,” October 21, 2021 and BEPS 2.0: What You Need To Know, KPMG.

A missed opportunity to boost development finance

Nearly all stakeholders seem to agree that the IF deal represents a real step forward in trying to reduce a “race to the bottom” in global tax competition and refashion MNE taxation to better reflect the places where enterprises have real operations, sales, and personnel. By moving closer to a formulaic method of allocating corporate taxes globally—rather than pretending that subsidiaries and affiliates are fully independent businesses—both critics and fans seem to support the IF deal’s direction of travel away from traditional residence rules in an increasingly complex and digitized global economy.

Unfortunately, when it comes to generating meaningful revenue benefits for the Global South, low- and middle-income countries (LMICs) rightly diverge from the G-7 consensus that the IF deal represents an “equitable solution” for reallocating global taxing rights. While G-7 countries have celebrated the IF deal as a breakthrough in “ending the race to the bottom in corporate taxation” worldwide, LMICs have expressed frustration and concern about various inequities embedded in this deal—with Kenya, Nigeria, Pakistan, and Sri Lanka refusing to sign on. At present, only 23 African countries are among the 137 countries and jurisdictions set to implement this global deal—less than half of all the countries and jurisdictions on the continent—and many LMICs are being cautioned to reconsider implementing the deal.

Concerns include high-income countries having first choice at collecting additional “top up” taxes on MNEs, the low rate of minimum taxes creating a “race to the bottom” on corporate income tax rates, and LMICs having to forgo existing and future digital service taxes in exchange for a new formula-based approach to MNE profit reallocation that could undermine their revenue base (Table 2). For the new GLoBE, the current formula would provide G-7 countries—home to only 10 percent of the world’s population—with 60 percent of the estimated $150 billion in new tax revenue generated. In effect, LMICs are being asked to take a blind leap of faith by signing a legally binding agreement to give up certain taxing rights in return for a completely uncertain, and potentially harmful, revenue outcome.

Table 2. Summary of core LMIC concerns with the IF deal

faces opposition from Republicans and may require approval from two-thirds of the Senate to pass. EU tax laws require unanimous support from all 27 member countries, and there are several smaller low-tax countries like Estonia, Poland, and Hungary that are reluctant to move forward on the global minimum tax (pillar two and the U.S. priority) unless the EU places equal priority on advancing digital taxation reforms (pillar one and on a slower track). Last month Poland vetoed the EU’s most recent attempt to approve the new global minimum tax on this basis. These ongoing deadlocks have thrown the IF deal’s overall fate into question.

What next for LMICs on global tax governance?

As the IF deal runs up against potentially fatal political challenges to implementation, LMICs would do well to keep their distance and refrain from taking steps to implement it themselves in the near term. This is especially true when it comes to eliminating existing or planned digital services taxes, as the U.S. and Europe have been pressuring them to do, including through the threat of potential sanctions.

In a best-case scenario, the IF deal will help to create a more permissive environment and momentum for LMICs to introduce their own more aggressive anti-avoidance measures, including revising their tax regimes to remove incentives and introducing minimum taxes with less threat of legal action from MNEs or their home countries. Likewise, frustrations with the IF deal’s substance and process seem to have galvanized momentum behind broader global tax reform, including a potential U.N. Convention and more equitable approaches to involving LMICs as equal stakeholders in tax governance debates. There may also be room within the G-20 to reframe the IF deal as an initial “draft” and commit to working with IF partners to revamp key sections and address LMIC concerns over the next few years.

Remarkably, recent discussions at the IMF/World Bank Spring Meetings about additional aid, loans, debt relief, and innovative financing to address economic crisis in LMICs took place with barely a reference to the importance of domestic resource mobilization, and specifically, global tax governance reform. It’s as if G-20 donors, international financial institutions, and the private sector have all implicitly agreed that the IF deal and the (seriously underfunded) Addis Tax Initiative have checked that box and there is nothing more that needs to be done here for LMICs. This could not be further from the truth.

Going forward, continued political debates about the merits and evolution of the IF deal cannot continue to take place in a vacuum—they must be deeply integrated into broader multilateral conversations about economic recovery, poverty reduction, and fiscal support measures for the Global South.

      
Kategorien: english

A bad deal for development: Assessing the impacts of the new inclusive framework tax deal on low- and middle-income countries

16. Mai 2022 - 22:29

By Julie McCarthy

Overview

In October 2021, G-20 leaders finalized a new global tax deal aimed at curbing tax avoidance by large multinational enterprises (MNEs). The deal, brokered by the Organization for Economic Cooperation and Development (OECD) and endorsed by 137 countries and jurisdictions (collectively this group is referred to as the Inclusive Framework or IF), represents the most significant global tax reform in decades.1 Among other features, the “IF deal” introduces new taxing rights irrespective of an MNE’s physical location, and a new global minimum corporate income tax of 15 percent on the largest MNEs.

The IF deal’s primary goal is to prevent MNEs from taking advantage of gaps in international tax regimes that have enabled them to shift profits away from jurisdictions where they actually generate economic value to low or no tax jurisdictions. Multinational tax avoidance costs countries an estimated $500 billion per year, with the greatest relative intensity of losses occurring in low- and middle-income countries (LMICs).2 Recent research suggests that approximately 40 percent of multinational profits are shifted to tax havens each year, which results in a net loss of around 10 percent of global corporate income tax revenue worldwide.3 MNE tax avoidance may cost as much as 5-8 percent of GDP annually for LMICs like Guyana, Chad, Guinea, Zambia, and Pakistan, compared to 0.61-1.06 percent of GDP in annual losses for higher income countries like Germany and France.4

Negotiations over the IF deal took place in the context of a pandemic-driven global recession, which has dramatically reduced economic growth, increased poverty, strained public resources and reduced the tax base, particularly in LMICs. For LMICs, the burden of pursuing COVID-19 economic recovery comes in addition to navigating the fiscal challenges of climate crisis, a spiraling debt burden, faltering foreign aid, and more recently, inflation. In this context, the IF deal represented a critical opportunity to help LMICs generate significant new resources to confront urgent development challenges by addressing the serious revenue drain of MNE tax avoidance.5

Unfortunately, that is not how the negotiations unfolded. While G-7 countries have celebrated the IF deal as a breakthrough in “ending the race to the bottom in corporate taxation” worldwide, LMICs have expressed frustration and concern about various inequities embedded in this deal, with Kenya, Nigeria, Pakistan, and Sri Lanka refusing to sign on. Despite LMICs suffering disproportionately from multinational corporate tax avoidance, the net result of this largely G-7 driven tax reform appears to be that it will overwhelmingly benefit only this handful of wealthy countries. Indeed, by approaching the IF deal as primarily a domestic policy opportunity, the G-7 missed one of its most powerful near-term foreign policy tools to support the economic recovery and development in the Global South in the coming years.6

The failure of the IF deal to benefit domestic resource mobilization in LMICs is particularly egregious not only given the dire economic situation in these countries, but also in light of high income country promises at the Addis Ababa Action Summit in 2015 to “combat tax evasion as well as tax avoidance” as a means to help LMICs finance the Sustainable Development Goals (SDGs).7 That 2015 summit gave rise to the Addis Tax Initiative, a multistakeholder effort to help LMICs get the financing, technical assistance, and global cooperation they need to strengthen domestic resource mobilization (DRM) and fund social and economic development. The result of that effort to date has been the failure of high-income countries to live up to their collective promises to double DRM funding, while at the same time refusing to use the IF deal to close global loopholes in ways that meaningfully benefit DRM in the Global South.

This paper looks at the substance of the recent IF tax deal in terms of its likely impacts on LMICs and finds that the deal is nothing to celebrate outside a handful of wealthy countries. It explores what LMICs had initially hoped to gain from the tax deal and where their asks and expectations ultimately failed to find resonance in the final IF deal. It places the tax deal in the broader context of financing for development trends in LMICs before and during COVID-19, with particular attention to specific commitments made by high-income countries to scale up support for DRM in recent years. Finally, it considers what opportunities exist for LMICs to address their unresolved global tax governance concerns going forward, both within and outside of the IF deal.

Download the full working paper»

      
Kategorien: english

Dawn of a second Cold War and the ‘scramble for Africa’

13. Mai 2022 - 15:32

By Hippolyte Fofack

Abstract

Ample empirical evidence shows that the African Continental Free Trade Area (AfCFTA) will boost the competitiveness of African economies and accelerate the diversification of sources of growth and trade to deepen economic integration in Africa and enhance the region’s assimilation into the world economy. However, realizing these potentials hinges on reversing the current trend of rising insecurity heightened by proxy wars in the new age of great power rivalries. This paper outlines policy options that draw on the political and trade economies of scale to optimize the allocation of scarce resources and strengthen the security and development nexus to implement the AfCFTA successfully for lasting peace and prosperity in Africa.

Download the full report

 

      
Kategorien: english

Repurposing agricultural support: Creating food systems incentives to address climate change

12. Mai 2022 - 17:09

By Danielle Resnick

      
Kategorien: english

Financing for sustainable development is clogged

11. Mai 2022 - 19:30

By Homi Kharas, Charlotte Rivard

The IMF/World Bank Spring Meetings are a time when financing for sustainable development gets attention. This year, it was apparent that the main channels are clogged.

To see why, it is useful to start with an understanding of the core elements of sustainable development financing. There are many channels, each with its own drivers.

As Table 1 below shows, external financing in support of sustainable development objectives is in the range of $500 billion to $600 billion. These figures include a number of different sources of financing for sustainable investment, including aid, loans, and private flows. We adjust net official development assistance (ODA) for sums that cannot be used for sustainable development investments: donor administrative costs, in-country refugee charges, and humanitarian assistance. What’s left—approximating what is called country programmable aid—can be used for investments to achieve the Sustainable Development Goals (SDGs).

If developing countries can develop sound project pipelines and improve their policy and institutional structures and if advanced economies give political and financial backing to unclogging finance channels, it is possible to move the agenda forward.

The nature of official flows is reasonably well understood. Private flows are less easy to categorize, which we can divide into five categories: (i) lending to sovereigns and their enterprises through bond markets and syndicated bank credits; (ii) private philanthropy, which is now of significant proportions; (iii) private finance mobilized into investment projects in co-financing with multilateral agencies (the International Finance Corporation is the major mobilizer); (iv) private provision of infrastructure (mostly in electric power generation, but also toll roads and hospitals); and (v) impact investing into a variety of sectors.

The smaller channels of development finance are closing or showing little prospects for improvement in the short to medium term. For example, even though there is much excitement about environmental, social, and governance investments and sustainable bonds, very little of this money flows to developing countries, and there is an increasing backlash against “greenwashing.” Private philanthropy is large but not organized in a systematic way and responds to the preferences of individual donors rather than being directed to the SDGs. Much is in the form of in-kind donations. And the flows from large emerging economies like China and India have slowed dramatically, starting—in the case of China—well before the pandemic, and now becoming increasingly small as recipient countries shelve investment projects. From a policy perspective, other than the engagement of these creditors in debt relief (see below), there is little that can be done by policymakers in the short run to provide more resources.

For this reason, the real policy debate is over the three main channels that account for around two-thirds of the flows: aid, official nonconcessional lending, and private lending to sovereigns or to entities with a sovereign guarantee. Policymakers need to find a way to unclog these channels.

Table 1: Broadly-defined net international development financing contributions (current USD, billions)aid grew by 0.6 percent in 2021 in real terms, excluding vaccines for COVID-19. At one level, it is commendable that aid continued to grow despite real budget difficulties in every donor country. At another level, however, aid increases appear modest. The ODA increase in 2020 was modest—less than 0.1 percent of the $12 trillion that governments of donor countries spent on their domestic fiscal stimulus packages in 2020.

During the Spring Meetings, the pressures on aid were evident. Officials, especially from Europe, talked about needing to accommodate in-donor costs for housing Ukrainian refugees from aid budgets. Afghanistan, which prior to February 24 was expected to figure prominently in the discussions, was hardly brought up, and a U.N. appeal for humanitarian funding in March came up $2 billion short—the pledged amounts were 45 percent less than the estimated need. Afghanistan now has the highest infant and child mortality in the world.

Given the pressures on aid to respond to humanitarian crises, the Ukraine war, spillover impacts on food and fuel crises, potential debt crises, and the ongoing need for vaccinations and pandemic-related spending, prospects for increases in aid for sustainable development appear bleak.

Official nonconcessional lending

Official financial institutions provided $60 billion during 2020, almost entirely from multilateral institutions that stepped up countercyclical financing in response to the COVID-19 pandemic. Even this, however, was unable to prevent a bifurcated global recovery: Rich countries have mostly regained their pre-pandemic output levels, while developing countries still fall far short. A further concern is that the pandemic forced many developing country governments to slash investment spending and close schools, compromising the potential for future growth.

Against this backdrop, a major announcement at the Spring Meetings was the approval of the IMF’s Resilience and Sustainability Trust (RST) facility, funded in part through a reallocation of special drawing rights (SDRs) that had been issued to rich countries in the initial response to the pandemic. The RST is aiming to raise SDR 33 billion (roughly $45 billion equivalent). Its big breakthrough, however, is not the volume of funding but the terms: The loans will have a 20-year maturity, a 10 ½ year grace period, and an interest rate slightly above the SDR interest rate that is currently 0.5 percent.

Another major announcement was a second surge financing package by the World Bank Group, which aims to provide $170 billion in sustainable development finance over the 15 months between April 2022 and June 2023. However, the World Bank warns that this program will substantially erode the available capital of the International Bank for Reconstruction and Development (IBRD), the main lending arm of the World Bank to middle-income countries. IBRD will be forced to cut its lending by one-third in fiscal year 2024 and beyond under current assumptions.

Other multilateral development banks face the same problem as IBRD. They have lent considerable amounts to respond to the pandemic, leaving them undercapitalized as they look to the future. For this reason, the channel of providing more official nonconcessional lending is clogged.

Private capital

The Spring Meetings had their fair share of warnings about impending debt crises in developing countries and, indeed, credit ratings from the major agencies show that risk is rising. During 2020 and 2021, 42 developing countries had their credit rating downgraded by at least one of the three major ratings agencies, and an additional 33 had their outlook downgraded. The Common Framework for debt treatment beyond the debt service suspension initiative seems stuck. Only three countries are participating (Chad, Ethiopia, and Zambia) and negotiations in each case have been ongoing for too long, with progress measured more by process change than by actual results.

As a sharp reminder of why credit ratings are important, consider that developing countries with an investment grade rating pay an average real interest of 3.6 percent on borrowing from capital markets; those with less than investment grade ratings pay an additional 10 percentage points in interest. At those interest rates, it becomes very difficult to maintain creditworthiness. The only option for a finance minister is to avoid new borrowing and to try to limit fiscal deficits. This is why developing countries were complaining during the Spring Meetings about their lack of fiscal space. Given these conditions in financial markets, there is considerable pessimism that developing countries will be able to profitably return to capital markets on a broad scale.

The way forward

This assessment of what is blocking long-term finance for development suggests three main areas for policy action:

  1. Aid remains the cornerstone of sustainable development finance, but it is in such short supply relative to demand that it must be leveraged—through guarantees, funding institutional innovation, or providing fresh capital to development institutions.
  2. International financial institutions are an efficient way of leveraging capital but are rapidly running out of headroom. They will need fresh capital soon, or else middle-income developing countries will be left with few options. Small improvements may be possible on the margin through balance sheet optimization, but these are a distraction from the core need for additional funding.
  3. Private finance can only restart if new flows are protected from the legacy of existing debt. This means either accelerating debt workout or use of guarantees and other forms of risk pooling and risk shifting, preferential treatment for funds used for core SDG and climate investments, and/or lending to off-sovereign balance sheet public wealth funds or development banks.

If developing countries can develop sound project pipelines and improve their policy and institutional structures and if advanced economies give political and financial backing to unclogging finance channels, it is possible to move the agenda forward. Big asks—no wonder the mood at the Spring Meetings was somber.

      
Kategorien: english

Obstacles and recommendations for moving US development policies onto a locally led path

10. Mai 2022 - 0:59

By George Ingram

On April 18, the Brookings Center for Sustainable Development hosted a roundtable to explore the obstacles facing U.S. government agencies—specifically the U.S. Agency for International Development (USAID)—in the implementation of locally led development. Today we published the background essay that informed the discussion and commentary from 15 of the roundtable participants—representing a diversity of organizations and experiences in global development—as well as a proposed narrative with principles and values.

The title, “Locally driven development: Overcoming the obstacles,” accurately describes the subject of the essay. It briefly presents the ways in which each of the past four U.S. administrations have moved development policies and programs onto a more locally led path so that stakeholders in developing countries have greater agency. It then details six major impediments to the U.S. implementing locally led development. In brief:

  1. Capacity: Many organizations in developing countries lack the technical capacity to fulfill USAID accountability requirements and manage sizeable projects. USAID lacks sufficient staff quantity and with the relevant training to oversee large numbers of small grants and contracts and base programming on local priorities.
  2. Risks: Accompanying the benefits of engaging with local organizations steeped in the local culture and connections are possible heightened financial, programmatic, and fiduciary risks of working with small, technically less experienced organizations.
  3. Rigidity: USAID’s ability to be responsive and adaptive to local priorities and needs is constrained by rigidities flowing from: the lengthy, complex U.S. budgetary process; presidential initiatives and earmarks/directives in appropriations bills; USAID management best practices such as strategies and accountability measures; and insufficient delegation of authority to USAID country missions.
  4. Organizational culture: Localization asks USAID’s highly skilled and committed development experts to take a less assertive role in deference to local priorities, experience, and knowledge.
  5. Values: The U.S. will not forgo fundamental American and international values (e.g., rule of law, individual and human rights, inclusion, and gender equality).
  6. Power dynamics: It is a challenge to shift decisionmaking power from donor to beneficiary.

The essay makes a series of recommendations on how to address these obstacles. They range from building up and training USAID staff, to helping U.S. stakeholders understand that localization involves accepting greater risk, to providing USAID with greater authority to manage budgets and programs.

It also highlights several overarching challenges in advancing localization and the flexibility it requires. One challenge is that—to cede power—stakeholders would have to recognize that what is in the ultimate interest of the United States is not control of specific development activities but developing country partners having long-term stability and prosperity; this follows the model of placing decisionmaking in the hands of those closest to the action and of “leader as servant.”

A second challenge is that in pursuing a medium-/long-term strategy of transitioning programs to local ownership, USAID would need to adopt a short-/medium-term strategy of challenging its traditional implementers to operate in that mode.

Commentary

Accompanying the essay are 15 commentaries by participants at the roundtable. The objective of the commentaries is to build on and share the richness of the discussion at the roundtable and present the range of issues and perspectives on a topic as complex as locally led development—something a single author is unable to do. The commentaries range from providing a different perspective or nuance on aspects of the essay, drilling down on a topic, and introducing a new issue.

Several of the commentaries note the need for greater clarity on what is meant by locally led development and the need for metrics to measure progress. I likely subconsciously avoided the matter of metrics from a concern that metrics often do not accurately reflect reality and become the driver of a project in place of the development objective—as several of the commentaries note—but I concur that relevant metrics are important to track and assess progress.

Another action I failed to note in the essay but that I have referenced in the past is several authors’ suggestion that a way to act on localization is for USAID to return to the past practice of issuing more grants, which, unlike cooperative agreements and contracts, require less USAID staff involvement.

Several other commentaries bring in other issues not covered by the essay—the need for mutual accountability, the importance of domestic resource mobilization, and the role of the Grand Bargain in bringing localization to humanitarian assistance.

Various commentaries focus on the role of local partners. One points out that local entities must be treated as true partners—not just delivery mechanisms; another notes the importance of building local capacity; and yet another asserts that directing funding to local partners is a step toward local empowerment. Several authors emphasize the importance of feedback loops in shifting the balance of power. Another makes a strong argument that the focus should be on building and supporting community leadership. Several people drilled down on the importance of giving greater voice to local actors, and one notes that, with the increase in recent years in earmarks and directives, the local voice in U.S. development activities has weakened.

The importance of success stories is noted by two authors—one suggesting that USAID issue a “case study challenge” to implementers to benefit from both past successes and failures. Several commentaries emphasize that procurement is at the heart of implementing localization, noting the impediments created by the Federal Acquisition Regulations, that compliance can undermine effectiveness, and that other U.S. government agencies have found simpler ways to comply with federal regulations.

One commentary gives an interesting explanation of how the core issue in localization is not “effectiveness,” but rather “sustainability.” On the one hand, I agree with the point—sustainability is the goal; on the other, maybe sustainability is part of one’s definition of effectiveness. This demonstrates the value of the commentaries in providing more than one person’s perspective and experience.

Narrative

The essay concludes by proposing a brief narrative to convince U.S. stakeholders of the central importance of localization and the flexibility required to implement it:

  • Economic, social, and political progress in low-income and lower-middle income countries is in the U.S. national interest.
  • Economic assistance can contribute to this objective only if used effectively.
  • Seventy-five years of development experience corroborates that effectiveness is grounded in local partners setting priorities and implementing programs.
  • This locally led development requires that assistance be managed flexibly so as to adapt to country priorities and changing circumstances.
  • The most effective role for the U.S. is to (1) lead on values and basic principles and (2) support partner country priorities in how they adapt those values and principles to fit their own circumstances

It is this leading with values and supporting local priorities approach that will inspire other development actors, earn the U.S. respect as a valued development partner, and distinguish the U.S. from more autocratic approaches.

I invite readers to submit comments and reactions to this proposed narrative.

      
Kategorien: english

Locally driven development: Overcoming the obstacles

10. Mai 2022 - 0:44

By George Ingram

Locally driven development: Overcoming the obstacles LOCALLY DRIVEN DEVELOPMENT Overcoming the obstacles George Ingram May 2022

Locally led development is a complex process that the development community, in the United States and around the world, has spent several decades trying to get right. Yet, despite all the experience and lessons learned, it feels like we are barely beyond the starting line. This publication aims to contribute to the ongoing dialogue on locally led development, especially as to how the United States can address the obstacles posed by U.S. law, regulation, policy, and practice. It consists of two parts:

  • An essay by George Ingram that notes the path that has taken us to this point, identifies key obstacles, and invites a discussion of how to overcome impediments and move forward.
  • A set of 15 commentaries written by development experts that add a range of perspectives and nuances to the discussion.
Download the full reportIntroduction

The U.S. government, led by the U.S. Agency for International Development (USAID) and the U.S. development community, are working through what is meant by and required for locally led development. This essay notes the path that has taken us to this point, identifies key obstacles, and invites a discussion of how to overcome impediments and move forward.

U.S. development policy is on a multidecade journey shifting its North Star from priorities set and programs designed by Americans in Washington and at USAID country missions and embassies to priorities and programs defined by partner governments and other local stakeholders. The endeavor to put greater agency in the hands of developing country stakeholders is variously referred to as country ownership, localization, local ownership, locally led development, and decolonization. There are no clear definitions of any of these terms. They are used interchangeably to refer to simply funneling foreign assistance to local organizations, to the partner government being in charge, to local civil society setting the agenda, and to community-led development.

In this essay the terms are used in a holistic manner to refer to the broad range of local stakeholders—national and local government, civil society, academia, business and business associations, formal and informal communities, and citizen groups—individually and collectively, setting the agenda, designing programs, managing activities, and conducting evaluations. When the terms are used by other actors, it cannot be assumed that is their definition.

The major conundrum for development agencies is how to move from policy and symbolic actions such as giving small grants to local organizations to authentic country ownership where priorities, program directions, and financial decisions are determined by local actors. As USAID is responsible for 60 percent of U.S. economic assistance and the principal U.S. government agency seeking to address how to operationalize local ownership, it is the focus of this essay.

History of locally led development

The idea of local direction of programs aimed at social, economic, and political change is as old as foreign assistance as we know it—the Marshall Plan required European countries to unite to map out how to deploy U.S. assistance. Throughout its existence, USAID in specific areas and programs has utilized country-led approaches. Agencies such as the Peace Corps and the Inter-American Foundation were founded on responding to the needs and priorities of local stakeholders and communities. U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) has reached a level of 62 percent of funding through local organizations.

In recent times, a significant foray into local ownership at an institutional level was the establishment of the Millennium Challenge Corporation (MCC) in 2004. Drawing on 60 years of development experience, the MCC transfers responsibility for identifying investment priorities from the donor, in this case the U.S. government, to the partner government, with input required from civil society. While the MCC sets the parameters for funding activities to overcome binding constraints to economic growth and influences program design, it shifts substantial power by requiring the partner country to initiate the assistance package and empowering implementation through a locally incorporated and managed entity (Millennium Challenge Account).

Beyond the Bush administration’s desire for a significant U.S. initiative at the upcoming Monterrey Financing for Development Conference and advocacy by Irish rock singer Bono, what enabled such a dramatic shift in the entrenched power dynamics of the donor-recipient relationship?

The reasons are multiple. With the Bush administration viewing USAID as underperforming, constrained by bureaucracy, and resistant to change, there was a willingness to try something new. The creation of a new entitty had strong, active presidential backing. This created the conditions for legislating a new statutory agency that would be free of the constraints of the Foreign Assistance Act. When created, the MCC received “new” money, so sidestepped a turf fight over resources in not taking funds away from existing programs and implementers. Originally conceived as a $5 billion per year program, the MCC manages a relatively small portion of U.S. foreign assistance—less than $1 billion of the $51 billion in total foreign aid (economic and military) in fiscal year 2020. Finally, the new approach fit with best practices (local ownership, transparency, accountability, rigorous use of data and evidence, independent evaluation) animating the development community, anchored in the concept of locally led development and soon to be adopted in the Paris Declaration on Aid Effectiveness.

Subsequently, the gravity for change shifted to USAID. In the Obama administration, USAID Administrator Rajiv Shah, responding to mission directors and other senior USAID staff, launched a major reform program emphasizing direct funding of local organizations. With USAID Forward and Local Solutions, Shah established an ambitious target of directing 30 percent of all USAID funding to local organizations, including partner governments. In practice, the target proved too ambitious, and USAID staff subsequently questioned the utility of this type of target to measure progress on locally led development. Nonetheless, the idea of “localizing” foreign assistance continued to gain strong support, as illustrated by Congress creating the Local Works program that incentivizes missions to follow locally led programming.

In the Trump administration, the USAID administrator—former Republican congressman and Ambassador Mark Green—established the drive for greater localization as the central organizing principle of his Journey to Self-Reliance and sought to revise the procurement system to be more amenable to local organizations.

More recently, President Biden’s USAID administrator, Ambassador Samantha Power, set forth her vision for USAID in 2021, stating simply “we must listen to what our partners in the countries where we work are asking of us.” Returning to the metrics-driven approach of the Obama administration, she set a target of 25 percent of assistance going directly to local partners by 2024 and pledged that by the end of the decade, 50 percent of programming would place “local communities in the lead to either co-design a project, set priorities, drive implementation or evaluate the impact of our programs.” Initial actions include a five-year, $300 million Centroamerica Local initiative to work with local entities in the Northern Triangle countries of El Salvador, Honduras, and Guatemala to address the root cause of irregular migration.

Many in USAID and the development community have come to realize that just channeling assistance to local organizations is not real localization. As much as local entities need improved capacity and as well-intended are USAID’s efforts to provide that support, USAID’s efforts have been heavily focused on building their capacity to win and manage USAID projects—to make them implementers of USAID-designed projects. The change to a new approach is reflected in the draft USAID Local Capacity Development Policy that was released for public comment in December 2021. It seeks to move the agency’s support beyond just building the capacity of local organizations to their executing the design, implementation, and evaluation in pursuit of their own priorities. The policy makes the starting point an understanding of the local system, how local organizations fit into the local system, and the priorities, strengths, and goals of local actors. It focuses on strengthening their existing capabilities and identifying drivers and barriers to change rather than just giving them the ability to comply with U.S. government requirements.

The validity and broad acceptance at the policy level of locally led development is not in question. Although in many different forms, it features prominently in development theory. It has been a major pillar of the development policies of four successive administrations. The FY 2022 and FY 2023 foreign operations appropriations bills include provisions supporting localization. It is endorsed by civil society development organizations such as the Modernizing Foreign Assistance Network, InterAction, and the Council of International Development Companies. It reflects a broad consensus in the international development community.

Impediments

The question is how to operationalize this basic principle of good development. The answer requires a clear understanding of the impediments. A number of operational challenges are well known and have received a fair amount of attention; others have not.

Capacity

While many local organizations in low-income countries may be fit to respond to local needs and dynamics, only a limited number have the working capital and specialized management and technical expertise required to successfully implement contracts at scale and comply with U.S. government requirements.

A significant portion of USAID funds are awarded in large contracts and grants, ranging from $10 million to $500 million or more. Working with smaller, less experienced organizations would require USAID to retool its systems to design, award, and track numerous, mostly small awards ranging from a few hundred thousand to several million dollars. This would require a significant increase in USAID staff to oversee the activities and manage relations with a much larger number of organizations, many just learning how to do business with USAID. After several years of effort, USAID has finally achieved the congressional mandate of 1,850 foreign service officers and 1,600 civil service officers. Yet, even at this level USAID struggles to administer the current portfolio, much less shift to a more staff-intensive business model. The Congress recognizes the staff shortage in a reference in the joint explanatory statement accompanying the FY 2022 Department of State, Foreign Operations, and Related Programs Appropriations Act (state/foreign operations bill) and by increasing funding for operating expenses (which cover personnel and other expenses) by $258 million (19 percent)[And $108 million (7 percent) above the president’s request.] above the FY 2021 level[The president’s budget for FY 2023 calls for a further increase in operating expenses of $107 million (7 percent) compared to the enacted level in FY 22. This increase will allow USAID to grow its workforce to a total of 3,720 foreign service and civil service personnel.].

Even if USAID were able to significantly increase its workforce complement, there would be numerous practical problems to confront. The most obvious is securing State Department approval to create new positions at posts overseas. The 1982 National Security Decision Directive 38 puts the chief of mission (ambassador) in charge of determining the size and composition of overseas staffing of U.S. agencies within the embassy complement. Ambassadors and the Department of State are typically reluctant to expand the number due to constraints of budget and embassy services, lack of office space, and security concerns. This highlights the importance of interagency buy-in and cooperation in the move to localization[It will be interesting to see if the recent experience with virtual work modifies the USAID model of work and reduces the hurdle factor of NSD 38.].

Risk

Development programs by their very nature face multiple risks—financial, fiduciary, programmatic, and reputational. Outsourcing risk management to experienced implementing partners (IPs) is one way USAID reduces its risk exposure.

Localization changes the risk calculation. Modest grants to local organizations with a laser focus on their mission and embedded in local culture and practices can reduce the magnitude and likelihood of some risks. At the same time, grants to inexperienced local organizations with poorly trained, inexperienced staff can lead to accountability and program difficulties. Most local organizations are equipped to deliver technical services, not to manage the risks inherent in large grants with complex management compliance and reporting requirements, including safety and environmental standards, terrorist and money laundering reporting requirements, reimbursement for rejected or questioned costs, and other U.S. and local rules and regulations.

In contrast, established international nongovernmental organizations (INGOs) and for-profit contractors have well-honed manuals and processes that guide compliance with USAID rules and regulations and provide safety checks against fraud and security breaches. USAID’s ability to react to shifting policy priorities in Washington and to changing political and economic dynamics on the ground, or weathering a natural or manmade disaster, is easier with funding concentrated in a limited number of large grants to experienced international implementers with a range of competencies that give them the ability to shift to managing new challenges. At the same time, large grants/contracts to Western organizations run the risk of funding activities that have high overhead, are not attuned to local customs and priorities, and end without sustainable impact.

USAID’s local national staff—known as foreign service nationals or FSNs—and local implementers often operate in a small community with overlapping relationships that can prove invaluable to achieving goals, but they can also present the risk that USAID may be engaged with a circle of urban elites or those most connected to the Western community. Reputation-wise, USAID and local organizations can benefit from mutual association, but along with that advantage comes potential risks: USAID’s association with a bad actor and reputational risk for a local organization if it is seen as too closely aligned to U.S. interests, especially when there is policy disagreement between the two governments.

Rigidity

The ability to adapt and adjust U.S. assistance programs and projects to local priorities and frequently changing local dynamics is hindered by:

  • The rigidity of a budget driven by (i) prescribed sector funding categories, (ii) presidential initiatives, (iii) congressional earmarks, directives, and the 15-day congressional notification process, and (iv) abrupt cut-off of funds due to the unpredictability of the U.S. budget and appropriations cycle and priorities.
  • USAID following good management practices such as programs guided by strategies and rigorous accountability measures.
  • Insufficient decisionmaking authority at the country and program levels.
Budget

The annual U.S. foreign assistance budget proceeds along a complicated two- to three-year process that starts with USAID missions and USAID and State Department headquarters operating units submitting budget proposals that are typically based on current funding levels. This is followed by back-and-forth negotiations between the agencies and the agencies with the Office of Management and Budget (OMB), which makes the final call on numbers in the president’s budget submitted to the Congress. The Congress works its will on the president’s budget request in the annual state/foreign operations bill that locks funding into funding categories, accompanied by innumerable more specific funding directives in the act and committee reports that direct how agencies use the funds. The final allocation of funds to USAID country missions and other operating units is then determined through monthslong section 653(a) (Foreign Assistance Act) negotiations between the appropriations committees, USAID, and the Department of State Office of Foreign Assistance (known as F). Thereafter, if altered circumstances in the country or experience with a project would indicate need for a change in the use of funding, all but minimal changes must go through the 15-day congressional notification process, which in and of itself discourages USAID staff from proposing changes and, when utilized, runs the risk of delaying proposed activities by weeks or months.

USAID implementation is impeded by major and even minor decisions and changes requiring the concurrence of F. Originally intended to ensure coherence among U.S. assistance agencies, F’s main interagency function is as the venue for coordination between the Department of State and USAID on assistance issues. F’s role too often is that of a bureaucratic gatekeeper far removed from the substance and activities it oversees. The result is a roadblock delaying or obstructing U.S. assistance program responsiveness to country stakeholder priorities and impeding the ability to adjust to changing country and program circumstances.

Programmatic best practices

USAID follows good programmatic practices, in some instances setting the standard for what becomes best practice in global development cooperation. These practices include: setting strategies with clear rationales, objectives, and measurable results; open competition for awarding grants and contracts to implementing organizations; monitoring technical, administrative, and financial performance; and conducting rigorous independent program/project evaluation, both during and after the program/project life cycle. These processes are important for ensuring that funds are used well for the intended purpose. However, they are time-consuming and require experienced, trained staff; they can be onerous and even impossible for small, less experienced organizations that typically function in the local language and follow simpler practices; and they are expensive. Training organizations to U.S. standards can deplete their energy and divert their limited resources and attention from their core mission. What if these Western processes are alien to or stymie the dynamics of local organizations and community groups and their way of operating and so fail to produce sustainable results?

For example, strategies establish a well-thought-out rationale and process for reaching a specific objective, provide USAID a guide for required staff expertise and processes, and set standards against which to assess programs and progress. But what if the partner country or community has different priorities or wants to achieve a similar result in a different way? Inflexibility born of strategies can close the agency off from creative ideas not invented in-house. Further, financial accountability requires sophisticated financial and accounting systems. Monitoring and reporting can be complex and time-consuming and beyond the capacity of inexperienced, resource-limited indigenous organizations. These practices are governed by statute and regulation, giving USAID little discretion in adjusting the requirements to local conditions, especially for awards greater than $250,000.

Along with these programmatic best practices come layers of rules and regulations that overwhelm those of other U.S. government agencies involved in managing development programs. The USAID Acquisition Regulation (AIDAR) runs 272 pages. Responsibility for the largest pot of U.S. assistance funds brings to USAID greater stakeholder scrutiny and, consequently, a self-imposed dynamic of trying to ensure that no mistakes are made, which can stymie programmatic innovation and risk taking that development success requires.

Delegation of authority

A comparative advantage of USAID is its country presence. Country missions staffed by committed and experienced American and local experts are best positioned to identify local priorities, build relations with local stakeholders, and understand the nuances and dynamics of the local context. However, USAID mission authority operates within all the constraints noted above, plus delegation of authority from headquarters to country missions has been eroded over time, shifting significant decisions to USAID headquarters and State F.

Organizational culture

USAID is comprised of highly skilled and committed development professionals, many with a lifetime of experience in what works in development, knowledgeable of best development practices, and accustomed to taking charge. While many agency employees are attuned to supporting local actors, their ability to do so is constrained by priorities set by U.S. policymakers and the rigidity of agency procedures and operating environment.

Asking them to step back to a supporting role with local organizations—which may have less technical experience in development practice but deeper roots in the local culture and experience—is a big ask that will take years of reskilling and recruiting the right staff. What should USAID staff do when local partners seek to pursue a development path/solution that is inconsistent with what they consider best development practice—especially given that issuing a larger number of awards will further tax an already overburdened staff and exacerbate the always lingering fear that a project gone wrong can result in one being hauled before the inspector general or a congressional committee and sidetrack one’s career?

Values

Unspoken in most conversations about localization is the need to come to terms with the reality that not all country ownership is good, at least in terms of American and international values. Countries can “own” bad things. Adhering to local national, cultural, and religious practices and priorities is a great concept until it runs up against basic principles—rule of law, individual and human rights, gender equality and empowerment of women, inclusion of minorities and underserved communities, and political and economic liberalism. These are fundamental values that undergird the moral imperative of our foreign assistance. Though the U.S. does at times compromise those values in the interest of foreign policy and national security, they will always permeate the U.S. approach to the world. The U.S. will promote them despite contrary attitudes of governing elites and local stakeholders.

Power dynamics

At its core, country ownership is about rebalancing the power differential between donor and recipient—with donors ceding power over decisionmaking to local actors. The question is what legitimate equities does the donor have and how should they be exercised? How far are the American public and Congress willing to go to shift decisionmaking over public funds to recipient country partners?

Path forward

The path to overcoming and managing these obstacles involves known but often difficult actions.

Building capacityLocal capacity

Along the lines of the draft USAID Local Capacity Development Policy, USAID efforts
should focus on strengthening the existing capabilities of local entities to achieve their
own stated missions rather than just becoming USAID grantees and contractors. USAID
should spend less time trying to train local NGOs how to work with USAID and more time
training its own staff to work with local entities.

USAID capacity

USAID acquiring the ability to support locally led development requires:

  • A significant increase in direct hire staff, likely at least doubling the current cadre.
  • Rewriting USAID’s operating handbooks to incorporate new concepts, practices, and processes to support local programming, along with associated training for current and incoming staff.
  • Empowering local staff (foreign service nationals and third country nationals) with greater authority.
  • Building on the strategic workforce plan called for in the explanatory statement accompanying the FY 22 state/foreign operations bill, to make this a serious exercise pulling in broad and independent experience and thinking, Congress and USAID should collaborate on engaging the National Academy of Public Administration to produce a comprehensive workforce plan that fits the needs of USAID with the dynamics of the 21st century workplace
Managing risk

Development is a risky business. It often involves working in unfamiliar and unstable environments, challenging existing systems and customs, and experimenting with new solutions and unproven counterparts in rapidly changing circumstances. USAID is experienced in managing the contextual, financial, programmatic, and reputational risks, as articulated in the 2014 policy paper Local Systems: A Framework for Supporting Sustained Development. But U.S. stakeholders tend to focus principally on financial risks rather than programmatic opportunities and fail to accept that important lessons can be learned from programmatic failure—in contrast to the way Silicon Valley values failure as a step toward achieving a goal[For more on this, see “Lean Impact” by Ann Mei Chang.]. Moreover, there is the fundamental risk of ineffectiveness and unsustainability—and therefore waste of U.S. taxpayer resources and failure to achieve our objectives—of programs not grounded in local priorities and ownership.

USAID will be caught in an untenable position until the various oversight stakeholders (USAID inspector general, Congress, National Security Council, State Department, Government Accountability Office (GAO), the foreign policy and development communities, media) acknowledge the programmatic risk in not pursuing the priorities of local stakeholders. These risks include:

  • Not investing in local ownership and capacity risks delaying the ability of partner countries and communities to take charge of their own development.
  • Implementation by U.S. INGOs and contractors to achieve quick results risks missing the slower but more sustainable results that can be achieved by working with local partners.
  • Seeking quick results tied to short-term political goals risks allowing local organizations the time needed to learn and develop at their own sustainable pace.

Being serious about localization requires accepting new and different risks with a degree of forbearance.

Decreasing rigidity

Introducing greater flexibility/adaptability into the budget process requires U.S. stakeholder behavior change and constraint.

Congress and the president should keep budget accounts (earmarks), directives, and initiatives at a high level of aggregation and avoid micromanagement of the budget and programs. The Congress and the president have the responsibility to set basic policies and priorities for the expenditure of U.S. government funds and prescribe the basic direction of programs. But their comparative advantage is at the broad policy level, setting and balancing national priorities, not at the granular technical level of designing programs and directing their implementation.

To its credit, the Congress at times acknowledges the constraints of earmarks and directives. As far back as the FREEDOM Support Act of 1992, the Congress authorized an illustrative rather than definitive list of activities to help with the transition of the former Soviet Union. More recently, the Global Fragility Act of 2019 established the Prevention and Stabilization Fund with a broad mandate with no specific activities designated and the Complex Crisis Fund with a proviso “notwithstanding any other provision of law.” The recently enacted FY 2022 state/foreign operations bill has several provisions that acknowledge the need for greater flexibility in pursuit of U.S. development objectives. Specifically, the act allows 10 percent of funds to be shifted among accounts; restates “notwithstanding any other provision of law” for the Complex Crisis Fund; provides a 10 percent deviation below the minimal levels set for programs in basic education, environment, and gender and women’s empowerment; and exempts activities authorized under laws governing the Peace Corps, Inter-American Foundation, and the African Development Foundation from prohibitions otherwise set in the act or other laws. Further, the joint explanatory statement exempts from directives the $100 million for locally led development under Centroamerica Local.

The congressional practice of earmarks and directives is not going away, but it could be better executed to support effective localization, for example: (1) limit earmarks and directives to three-year periods during which their value could be demonstrated or not; (2) make them discretionary, rather than mandatory, with the agency having to explain to congress why a directive was not followed; (3) expand the 10 percent transfer authority in the FY 22 appropriations act to 20 percent; and (4) do not apply earmarks to countries falling under the U.S. Strategy to Prevent Conflict and Promote Peace.

USAID should ensure that its country strategies—Country Development Cooperation Strategy (CDCS)—are structured around the intersection of partner country development priorities and U.S. development interests, designed to be implemented through localization, and developed through robust local consultation. More broadly, the agency should fully incorporate the localization agenda into its foundational planning documents, regulations, and structures, specifically the Acquisition and Assistance Strategy, Partnership Principles, Local Capacity Development Policy, Policy Framework, and Risk Appetite Statement, all of which are in various stages of review.

Further, a CDCS is required to present two budgets: (1) one that is based principally on the current program and funding likely to be available, and (2) an aspirational budget based on the USAID mission’s assessment of what would be needed to achieve agreed-upon partner development priorities. The Congress should charge USAID, the GAO, and/or invite civil society organizations, to roll up the aspirational budget allocations in the 60-plus country CDCSs into overall sector/program allocations that can serve as a guide to inform both the executive branch and the Congress on sector allocation of foreign aid funds.

State F should remove itself from the activity approval process and otherwise eliminate micromanagement of USAID programs, including eliminating the requirement for the unproductive operational plans and approving USAID congressional notifications.

USAID should create templates for delegation of authority, tailored to a variety of operating contexts, to allow for greater operating flexibility in country missions and headquarter operating units.

Congress and the administration should support the continuation of USAID’s efforts to simplify procedures to make them relevant to local realities in partner countries, while not sacrificing basic accountability functions.

Shifting organizational culture

Organizational change involves recruitment, training, incentives, and revised processes and practices that can take years to bring to fruition. Accordingly, retooling USAID for localization must be a bipartisan effort as it will extend across administrations.

Staying true to values

The United States is not going to change the fundamental, universal values, derived from its history and self-identification, and the core principles of Paris, Busan, and the Sustainable Development Goals (SDGs) that inform its development policies. The U.S. can exercise some degree of forbearance in some areas, especially where we do not measure up to our own ideals, such as in the dysfunction of our own budget processes and the corruption that is built into financing our politics. This approach is probably encompassed in USAID Administrator Samantha Power’s call for greater “humility” and involves greater understanding and appreciation of local culture and practices and less pushing the “American way.” But the U.S. will not intentionally allow our assistance and policies to facilitate elite capture, be used for illegal or unethical activities, or support inequitable development. The U.S. will use its development tools to advance the role of women and other minorities, the rule of law, fundamental human rights, and inclusive development, no matter the attitude of local stakeholders.

Rebalancing power relations

American policymakers and other stakeholders will support a rebalancing of power only if they believe in the narrative of the central importance of sustainable development to the U.S. national interest. (See the proposed narrative in Box 1.)

Addressing 3 fundamental challenges

Woven through this essay are three fundamental questions:

  1. How do we change the power dynamic between donor and partner?
  2. How in the near term do we execute the complex, difficult, lengthy process of localization?
  3. How do we bring U.S. policymakers and stakeholders onboard to this shift in how U.S. foreign assistance is managed?
Power dynamics

Changing the power relationship is at the core of adopting a local ownership approach to development. If the essence of successful development is local stakeholders being in charge, that means granting them the authority to make decisions and do things their own way. This implies the U.S. ceding decisionmaking. The U.S. will not cede ultimate power—the power to decide which countries with whom to partner and to set country and sector budgets. But the U.S. could empower local partners on priority uses and design and management of the assistance within agreed parameters, while maintaining a role in oversight and accountability. As suggested in the proposed narrative in Box 1, U.S. policymakers need to recognize that the primary interest is not in a particular programmatic sector or type of project, but in the U.S. national interest in countries achieving sustainable development (stability, poverty eradication, prosperity, anti-terrorism and anti-corruption, democracy, rule of law). This interest can be achieved in many ways and with the greatest efficacy if based on local ground truthing and ownership that make implementation equitable, effective, and sustainable.

There are two guides that can inform the U.S. government’s move to authentic locally led development. One is from the business and the military communities, which have learned to put tactical decisionmaking in the hands of those closest to the customer and action. The second is the servant-leader model, where the goal of the leader is to serve, to empower those in his/her community/organization to perform their functions and develop their own skills and capabilities. These are approaches that fit with American values and contrast with more authoritarian approaches to politics and economics.  

Execution: Realizing localization

There are two elements to implementing locally led development:

Part one: Part one is the ambitious agenda laid out in this essay that USAID and the administration are working diligently to get right. It is centered on USAID transforming its business model and culture by placing local partners in the driver’s seat through processes and practices that empower them to identify priorities, design activities, manage projects, monitor and evaluate, and ultimately take responsibility for financing the activity.

Part two: A pragmatic assessment is that the full transition to authentic localization is not feasible in the near term. The difficulties are clear. No matter the support Congress has given to increasing USAID staffing, is it realistic that the Congress and OMB will agree to expand the agency’s workforce by double or more over the next few years? Will the Congress and senior government officials forgo micromanaging how foreign aid is to be spent? Will the Congress, inspector general, GAO, and the media resist punishing USAID when a program goes awry? How far can USAID really go in aligning good development practices and accountability procedures with localization? How long will it take USAID to change its culture? The U.S. is not going to forgo its values.

This assessment suggests that U.S. progress along the path of locally led development will be long and gradual. This calls for focusing on more immediate solutions that will maximize local development. The place to look is where existing capabilities exist.

One place is the U.S.-sponsored regional foundations—Inter-American Foundation, African Development Foundation, and Asia Foundation—which have localization in their DNA. The Eurasia Foundation has the experience of spinning off and building its local offices into indigenous foundations. INGOs such as the International Youth Foundation, Restless Development, and a number of others have been doing locally led development for decades. More funding could be channeled through these entities, but not large amounts, as that might turn them into more cumbersome bureaucracies.

A second place to turn is the “development industrial complex”—the INGOs and contractors that implement U.S. development programs. These are organizations that have deep development capacity and extensive relations in-country. In making awards, USAID can challenge these organizations to show how to implement locally led development. To be clear, this is not the traditional approach of just funneling funds to local organizations through U.S. INGOs and contractors to implement U.S.-determined priorities and project designs. The role of the INGOs and contractors would be to empower local organizations and communities and build the capability for local organizations to carry out their own mandates and priorities. There is a solid base from which to work as some implementers have experience with executing localization and increasingly are trying to better understand what localization requires and their role in this approach to development. USAID is probably better positioned to hold implementers accountable for localization than itself.

This means being clear on the types of assistance that qualify as locally led, which would include most U.S. economic assistance to local communities and organizations where they set the agenda and to governmental entities (government-to-government) in support of their priorities and strengthening their capabilities.

Narrative

The final issue is communicating a compelling narrative for why locally led development serves the U.S. national interest. This involves convincing the Congress, senior administration policymakers, and the broad foreign policy and development communities on the efficacy of a fundamentally different approach to development. This is an approach based on the flexibility/adaptability essential to relying on institutions in partner countries. That narrative is attempted in the box below.

Box 1. Effective development requires localization—which requires flexibility


Economic, social, and political progress in low-income and lower-middle income countries is in the U.S. national interest.

Economic assistance can contribute to that objective only if it is used effectively.

75 years of development experience confirms that effectiveness is grounded in partner stakeholders being in control of setting priorities and implementing programs.

Which requires that assistance be managed in a flexible way so it can be adapted to country priorities and changing circumstances.

The most effective role for the United States is to lead on values and basic principles and to support partner country priorities and how they adapt those values and principles to fit their own circumstances.

It is this “values leading/local supporting” approach that will inspire development actors, earn the U.S. respect as a valued development partner, and distinguish the U.S. from more autocratic approaches.Commentary

The following commentaries were written following the April 18, 2022 roundtable for which the former part of this paper served to set the agenda and inform the discussion. Some of the commentaries address specific issues in the essay, others address related aspects, and all bring in important nuances and perspectives.

Two additional pieces that are important to understanding the breadth of the conversation and how USAID is approaching locally led development are the article by Don Steinberg, senior advisor at USAID, that was published April 13 by Global Development Forum, “Global Embrace of Localization: Changing the Power Dynamics in Development and Humanitarian Aid Systems” and the March 8 congressional testimony of Michele Sumilas, assistant to the administrator of the Bureau for Policy, Planning, and Learning.

1

Time for ambition: USAID needs to inspire change through radical reformsTariq Sayed Ahmad
Senior Policy Manager, Aid and Development Finance; Oxfam America

This paper provides a great snapshot of some of the challenges and opportunities with the localization agenda. But there are some areas where I think it misses important dimensions about USAID’s localization push and how the agency will achieve success.

Distinguishing between locally led development and financing local organizations

The paper rightly states that there is a myriad of terms currently being used by those in the community to refer to the localization agenda. However, those terms are slowly being better defined. And those definitions have an impact on how USAID develops policies and approaches to align with their broader development objectives through localization. Direct financing through localization and “locally led development” are becoming increasingly confused and entangled terms. Importantly, direct financing between USAID and local organizations and institutions is not the same as “locally led development.” In current USAID parlance, “locally led development” refers to ways local organizations can exercise influence over a USAID project without necessarily receiving direct support. USAID needs to achieve both. And USAID will have to adopt different policies and manage risk approaches to achieve each. Yet the paper, and many in the community, don’t think direct financing relationships are as important as supporting “locally led development.” In fact, the paper refers to the direct financing relationship as a “symbolic action.”

Time and time again, local organizations have called on USAID to provide more direct financing to their organizations. A common critique against establishing a direct financing relationship is that local organizations will lose their local identity and, instead, simply become USAID implementers. Yet we often hear from local organizations that they see the benefit of creating a direct dialogue with the donor through direct partnerships and are better able to capture revenues to reinvest in their own capacity and priorities. Additionally, as our analysis in the Oxfam and Save the Children’s report, “The Power of Ownership,” demonstrates, those projects which had direct financing were much more successful at allowing more stakeholder influence over all parts of a project of program.

Understanding the bureaucratic and risk averse nature of USAID

The paper does a great job of highlighting the litany of rules and regulations that keep USAID programming inflexible and prone to over-reporting. It also points out the need to shift USAID personnel towards embracing and managing risk to foster localization. But there are a few dimensions that are missing.

First, there’s little discussion about the risk of failing to achieve sustainable and efficient results by avoiding local direct partnerships. USAID’s current ways of operating promotes U.S.-based contractors and INGOs, without recognizing the value towards sustainability and institution strengthening that comes from direct partnerships.

Second, the paper does not address how USAID staff and development experts may hold bias when it comes to working with local organizations. While USAID staff are highly capable and knowledgeable about global development, they, like many of us, are prone to perceive their knowledge and western orientation above the knowledge and capability of local partners. This bias, which has been a major point of concern for local organizations, helps reinforce perceptions of risk and lack of capacity. These biases must be challenged as part of addressing USAID’s institutional change.

Finally, in order to reorient a large institution like USAID, you need mechanisms that will stimulate organizational change processes. This is the value of targets and publicly shared commitments. For example, during USAID Forward, USAID was able to reach a direct partnership target of roughly 18.6 percent by 2015. But during the years where they stopped measuring the direct partnership target and renegotiated the definition of localization internally, that amount reduced to roughly 6 percent before Administrator Power’s November announcement.

Pushing change and allowing the systems to adapt is important. And because of this, I encourage those reading this article to reject the idea that the road to locally development will be long and gradual – and to look for opportunities for maximizing local development where they currently exist. Rather, USAID should push harder, embrace the ambitious agenda, and begin to see direct local partnerships as a default funding mechanism while only using U.S.-based intermediaries where there’s a demonstrable added value.

What would local stakeholders say about localization or even this paper?

One important aspect to the localization agenda that is missing from this paper is the perspective of local leaders. But this goes for USAID’s policy development, too. This paper helps call on USAID to build better policy development feedback loops with local stakeholders. If we continue to rely on feedback from D.C.-based implementers and experts, we’ll continue to focus on the challenges and priorities of D.C. stakeholders without acknowledging the value of localization efforts to local partners or allowing their experiences to feed into the reform efforts. Without hearing from local partners, we’ll be focused on the risk of working with local partners, and not the risk of maintaining the status quo. Building formal feedback loops should happen in both Washington and with USAID missions—since each mission will likely lead their own localization efforts against nationally determined localization targets.

I’m often struck by how southern views on USAID can immediately reorient my understanding about localization. For example, there continues to be a worrying notion among D.C. stakeholders that localization efforts might reinforce local power dynamics by unintentionally supporting local elites or those who are networked in a way to better capture USAID funds. But if we turn that same argument on its head—isn’t that what happens in D.C.? How is it that that in 2017 60 percent of USAID funds were awarded to 25? The path forward is not to stall progress on localization because of a fear that we might reinforce local power dynamics—we’re already reinforcing power dynamics globally with the current way USAID conducts business. Rather, USAID should embrace localization while becoming smarter about how localization affects local power dynamics and orienting those dynamics towards sustainable impact.

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Subsidiarity works: Locally led development and humanitarian response is possible, and is a better, more sustainable approach to effective foreign assistanceMeghan Armistead
Senior Research and Policy Advisor, Catholic Relief Services (CRS)

In addition to growing calls by local organizations themselves for more opportunities to lead their own development, from the Grand Bargain to the USAID Journey to Self-Reliance to Administrator Power’s bold goal of increased local funding and engagement, it is clear that donors and policymakers are increasingly recognizing the need for local leadership across the humanitarian and development spectrum. In response, governments, INGOs, and multilaterals are grappling with the task of transforming their institutions in ways that recognize the importance of local leadership at all levels of decision-making and implementation.

This paper provides a comprehensive and helpful overview that effectively pulls together and reflects upon the long history of movement towards locally led development within the U.S. government, and describes how daunting a task it is to affect this level of transformation. It also carefully boils down and effectively identifies core impediments to advancing localization at scale, and provides expert insight into the workings of foreign assistance and the complex interactions between funding streams and implementation on the ground.

Reflecting on the paper and its themes from a practitioner perspective, a few areas emerge that may warrant additional consideration:

  1. Assumptions about local partners’ capacity and links with donor procurement practices: The paper seems to assume that all local actors are low capacity, and/or are only capable of managing small or sub awards. This may be the case in some places, but there is growing recognition that it is certainly not universally the case. Even at the broadest level, a country with a vibrant civil society and robust professional population may have many actors very capable of managing middle and even larger social service grants – and is certainly a very different scenario from fragile states, or states with weaker civil society. It is important to make room for wide differences in capacity around the world. In addition, local actor capacity to implement is also intrinsically linked with procurement conditions. This is touched on indirectly in the USAID capacity section, but it would be helpful to make clear that the bar for ‘capacity’ is significantly higher when considering multi-million-dollar contracts versus medium-size cooperative agreements. Capacity and funding mechanisms should be considered two sides of the same coin.
  2. Absence of localization of humanitarian funding and programming: Though the paper is specifically about locally led development, its argument would be significantly strengthened if it also included cognizance and discussion of the parallel movement for localization of humanitarian aid – particularly as humanitarian assistance is such a large part of USG assistance. The history is a little different, and interestingly, much of the rationale for humanitarian localization is rooted in calls for efficiency, but it is also rich and recent years have seen a significant increase in the movement’s momentum. At a minimum it is important to at least recognize the movement and core agreements, in particular, the Grand Bargain, and the ongoing opportunities and challenges it presents. As a signatory, the U.S. government has committed, for example, to having 25 percent of its humanitarian funds go ‘as local as possible,’ though it seems they have barely made it to one percent in five years. The agreement was renewed last year, and localization has been elevated as one of two primary priorities.
  3. Potential false dichotomy between increasing direct funding to local actors or percentage of local actors implementing USAID projects and ‘true’ local ownership: The current discourse around local leadership seems to include an emerging “either/or” dynamic that makes localization about either putting more actors in a position to directly implement programs or increasing ‘true ownership and voice.’ In CRS’ experience with local partners, these two things are directly connected – as money and power are always intertwined. While we agree that simply having local partners implement existing USAID programming is not the endgame, progress in increasing direct funding for local partners would be a big step in that direction. When local actors become prime recipients of funding, they: 1) receive institutional support (either via NICRA or overhead) and therefore have critical resources to increase their organizational capacity; 2) gain experience implementing at a bigger scale and taking on more leadership roles; and, as they succeed, 3) grow more influential (both with their own government and with donors) as they become experts and key development partners. Stronger local implementers receiving direct donor funding can help increase local leadership of development in key ways and should be considered an intrinsic part of, not an alternative to, increasing country ownership and voice.
  4. Meaningful metrics as key to success: Though the paper is very strong in identifying institutional challenges across USAID, it might have also included additional attention on the role of establishing meaningful metrics and clear definitions for ensuring success. Currently USAID has developed a range of definitions of local civil society and other entities, but significant differences among them has caused confusion and raises a number of concerns. For both the integrity of the efforts to support locally led development, and for effective transparency in funding, USAID must clearly define the goal and what “local” means in a way that reflects their intent to support autonomous local institutions who are accountable to their nations and communities they serve. In addition, while some data is currently available on how much funding goes to local and national entities, holistic data across U.S. government is not available. To advance locally led development and humanitarian response, USAID will need meaningful metrics: ways to get a clear and accurate baseline of how much funding is currently going to truly local organizations, and a clear and capable system for measuring and transparently reporting progress towards the 25 percent funding goal.

Supporting local leadership is core to CRS’ foundation in Catholic Social Teaching, and in particular, its principle of subsidiarity: The idea that communities who are closest to challenges are best placed to address them. Supporting locally led development reflects this subsidiarity ideal and our commitment to respecting the dignity and agency of each person and community we serve. Working with thousands of local organizations has taught us that partners embrace opportunities to lead, and CRS is committed to supporting their growth because it is the right thing to do and because it is the most effective, efficient, and sustainable way to do development. Our work with partners has shown us that a new way is possible. Listening, investing, and partnering with smart, capable leaders committed to advancing their communities and their institutions can make foreign assistance smarter, more cost effective, and more impactful.

3

Sustainability: The rationale for localizationAnnette N. Brown
Principal Economist and Acting Head of Strategy, FHI 360

In this commentary, I will examine the statement Ingram makes at the end of his paper titled, “Effective development requires localization.” It includes a sequential list of statements that are intended to convince U.S. policymakers to adopt a localization approach. The statement in question is, “75 years of development experience confirms that effectiveness is grounded in partner stakeholders being in control of setting priorities and implementing programs.” This statement purports to be supported by evidence about effectiveness coming from 75 years of experience, but no evidence is given in the paper or in other policy documents making similar claims. I argue here, first, that there is not an evidence base that supports this broad claim, and second, that we do not need to make the claim in this way to provide a compelling narrative in support of locally led development and localization.

I will begin by clarifying that by questioning the effectiveness evidence for locally led development, I am not questioning the importance of locally led development. Rather, I want to make sure we are making the strongest case for locally led development.

What is the evidence base?

Effectiveness claims like Ingram’s statement imply a counterfactual comparison, that is, if effectiveness is “grounded” in partner stakeholders setting priorities and implementing programs, then without these features, there must be no effectiveness or less effectiveness. The evidence for such a claim should come from research or evaluations that compare two otherwise similar programs where one has local priority setting and implementation and the other does not. I have not seen any studies that truly make this comparison. At the same time, there has been a dramatic increase in effectiveness research in international development over the last two decades. So, what does that evidence show?

There are a few studies that compare the effectiveness of an intervention piloted by an international group when scaled up by local implementers. Unfortunately, these studies often find a lower effect at scale. A naïve interpretation would be that local implementation is less effective. There are many reasons for these findings, though none of which imply that interventions should not be scaled up by local implementers. Rather they point out flaws in the way we pilot test interventions and challenges in taking interventions to scale. There are also many evaluations of interventions that do not work, for which discussants offer the possible explanation that local context was not considered carefully in the design. Unfortunately, these ex-post hypotheses to explain non-effectiveness do not prove that the interventions would be effective if designed with greater attention to local context.

Some observers suggest that the successful performance of local implementing organizations under PEPFAR’s localization initiative provides evidence of the superiority of localization. The PEPFAR experience does demonstrate that local implementers, often with support from international implementers at the outset, can achieve the outcomes demanded by PEPFAR. This experience does not show that local implementation is more effective, however, just that it can be equally effective. The PEPFAR localization experience is also limited to local implementation, not local priority setting. The priorities are still very much set by PEPFAR.

There are certainly evaluations of successful community driven (or community led) development programs. Community driven development programs are a specific type of program, which can be effective for delivering some services and improving infrastructure (but not building social cohesion) at the municipal level. In these programs, the community groups do set priorities and carry out the activities. The formation of the community groups is not always community led, however. For these studies, international researchers or implementers often determine group composition (sometimes with inclusion requirements such as for female participation) and design the processes the groups must follow. There are many good examples and lessons from effective community driven development, but these should not be extrapolated as evidence that locally led and localized development is more effective.

By pointing out the “gap” in evidence supporting a broad claim about locally led and implemented development being more effective, I am not advocating for a research program of counterfactual-based studies of localization. Programs designed with different priorities are not comparable in any case, and comparing a locally implemented pilot program to an internationally implemented version of the same does not tell us much about what works at scale.

What is the compelling argument?

The compelling reason for locally led and locally implemented development is sustainability. All countries can benefit from foreign advice and assistance at different points in time, but the outcome of development assistance ultimately should be policies and programs that are still in place after development assistance ends, and that means implemented locally. We do not need effectiveness evidence to understand that local implementation is a necessary condition for sustainable country-level development.

This assertion begs the question, if localization is a necessary condition, why has there not been more progress on localization? One answer among several is that the demand for measurable outcomes means that sustainability, which by definition cannot be measured during the life of a project, is not the de facto objective of much development assistance. Effectiveness is. And effectiveness outcomes are typically easier to produce in internationally run programs, often involving local partners under sub-agreements. We need to make the case for locally led development and localization in terms of sustainability, not in terms of effectiveness.

What about effectiveness?

That is not to say that we shouldn’t continue to examine the effectiveness of interventions. We want sustainable programs to be effective and effective programs to be sustainable. Effectiveness evidence should continue to inform program design such that locally designed programs integrate local knowledge with the best and most relevant available evidence. New programs should be rigorously evaluated for their effectiveness and continue to be evaluated at scale to ensure maintained effectiveness. Improved localization is also important for this process. Evaluations of pilot programs that closely mimic implementation at scale provide better predictions of effectiveness at scale. Thus, locally led and implemented pilot programs provide the best evidence about effectiveness and can also answer questions about sustainability.

4

Untangling localization objectives and minimizing unintended consequencesLarry Cooley
President Emeritus, MSI and Non-resident Senior Fellow, The Brookings Institution

The three issues discussed below are intended as extensions to points raised in this thoughtful and constructive paper.

What counts?

As this paper notes, and as Jean Gilson, Indira Ahluwalia, and I commented in our paper to USAID[Perspectives on Localization, August 2021.], the localization agenda embraces at least three overlapping, but quite different, objectives—putting local voices in the lead, enhancing support for and use of accountable local institutions, and expanding the use of local implementing partners.

The objective related to “local voice” is the most fundamental and most challenging of these three objectives. It implies major shifts in how priorities and budgets are established, programs are designed, activities are implemented, and results are assessed. As such, it speaks directly to the power dynamics involved in foreign aid and has its biggest implications upstream from activity implementation. Despite various efforts to expand and enrich participation by, and consultation with, local civil society groups, in my view the scope for local voice in shaping the substance of USAID programming is arguably worse today than it was two decades ago—a result of budgets increasingly centralized and circumscribed by successive layers of Congressional earmarks and Administration initiatives, exacerbated by compliance requirements, and blows to the delegations of authority to USAID Missions. This trajectory can be reversed, but not easily and not without enhanced deference to country-based programming. As with the other two localization objectives, solid metrics and a clear strategy are needed, but receive relatively little attention in this paper or in the actions so far announced by USAID.

In the absence of clarity and metrics related to the other two objectives, the current focus on use of local implementing partners threatens to suck all the oxygen out of the room.

Avoiding the curse of the ‘mini-me’

In contrast to directed grants, contracts, and cooperative agreements are normally competitively awarded and paid for on what is essentially a fee-for-service basis. USAID’s policy statements and this paper both sound cautionary notes regarding the dangers of inadvertently re-creating indigenous carbon copies of U.S. implementing partners by incentivizing organizations that are build-to-purpose as USAID implementing partners but ill-equipped to compete and perform within the institutional landscapes and cost structures of their respective countries. But absent significant safeguards or significant shifts towards the use of directed grants, I continue to fear that this mimicry will emerge as the default option. Compounding what some have called a “compliance conundrum” are the pressures to recreate a local version of a competitive environment where only local organizations with substantial reserves and high overhead rates can successfully compete for USAID contract awards. Every solution to these challenges has corresponding costs and risks and as USAID continues to explore solutions to these challenges, it will be important to debate openly the trade-offs involved.

The role of host governments and the special case of fragile states

There is no simple or uniform channel for local voice. In the best case, democratic, and accountable governments—national, state, and local—can and should occupy a dominant position. In the worst case, autocratic and polarized governments serve as barriers to voice and as flashpoints for large, marginalized segments of the population. Particularly in these settings, the ways donors like USAID privilege and support various local voices have implications far beyond their effects in shaping USAID priorities and programming. Implicit in this reality is the potential to leverage the role of U.S. foreign aid in ways that promote stability, and the corresponding risk of inadvertently exacerbating tensions. This is not just a detail given recent drifts towards authoritarianism in many countries and the fact that fragile and conflict-prone countries receive the bulk of U.S. foreign assistance.

These considerations are well known to USAID and reflected in its embrace in recent years of political economy analysis, but they receive relatively little attention in this paper or in the public statements to date from USAID about implementation of the localization policy. High priority should be given to mining the insights and experience from earlier work on these issues in shaping the continued evolution of the localization discussion.[Ali Poyac-Clarkin, Christy Martins, Lynn Carter and I are writing a paper on the topic of localization in conflict settings, to be published in May.]

5

Is USAID finally offering a workable strategy for localization?Patrick Fine
Non-resident Senior Fellow, Institution Center for Sustainable Development

Since the 1980s there has been a strong consensus among development professionals that local participation and buy-in are essential elements of development effectiveness. This was enshrined in development doctrine in the 2005 Paris Declaration on Aid Effectiveness under the rubric of Country Ownership—the principle that those most impacted by development activities should have a decisive say in setting priorities and designing and implementing programs.[Center For Global Development Working Papers: What Is “Country Ownership”? A Formal Exploration of the Aid Relationship. William Savedoff. October 2019]

Three USAID approaches to localization

It turns out, even with genuine commitment, this is easier said than done. USAID, as well as other major bilateral and multilateral donors, have struggled to put the principal of country ownership into practice. Since 2010, USAID has launched three major initiatives aimed at shifting power towards local actors: The Obama administration’s “Local Solutions” set a target of awarding at least 30 percent of all funding directly to indigenous organizations, including partner governments. This target was never fully achieved and by the end of the administration, USAID, although still committed to local solutions, had grown skeptical that procurement targets were the best way to advance country ownership.

The Trump administration rebranded Local Solutions to appeal to conservative sensibilities by calling it “The Journey to Self-Reliance.” In this iteration, USAID assessed countries’ capacity to manage and co-fund development in order to increasingly rely on local organizations and wean countries away from foreign assistance.

USAID’s newest iteration is called “Localization.” While still under development, it has replaced conservative calls for self-reliance with a more liberal appeal to decolonize aid and returned to a metrics driven approach—this time pledging 25 percent of all USAID funding will be awarded directly to local organizations by 2024 and 50 percent of all funding will put local partners in the lead over the next decade.[A New Vision for Global Development https://www.usaid.gov/news-information/speeches/nov-4-2021- administrator-samantha-power-new-vision-global-development]

Achieving clarity

What each of these efforts has in common is a genuine desire to see U.S. assistance enable local participation and control. Unfortunately, each attempt has suffered from confusion and false starts arising from the lack of a common vocabulary and clear objectives, as well as the very real operational constraints that go along with major institutional reforms involving the management of public funds.

Fortunately, this may be changing with USAID’s latest initiative. In a recent article published by the Global Governance Forum, Ambassador Don Steinburg, a senior advisor to USAID Administrator Samantha Power, lays out a simple and workable approach that resolves some of the central concerns that have stymied past efforts by answering two critical questions: What does locally led mean? And who is local?

Local implementation

USAID’s new Localization initiative has two broad objectives. The first, which has received the most attention, is to award 25 percent of the development assistance (DA) directly managed by USAID[This target excludes other types of U.S. Official Development Assistance (ODA) such as financing to International Public Organizations, PEPFAR funds, and humanitarian assistance.] to local community, faith-based, and nongovernmental organizations (CBOs/FBOs/NGOs). While there is a reflexive apprehension among some USAID staff and many of USAID’s traditional international partners about the risks inherent in financing smaller local organizations, this target is entirely doable. Nor is a program focused on community-based action without precedent. In the 1980s, for example, USAID had a large program in apartheid-era South Africa that worked exclusively with South African CBOs/FBOs/NGOs.

What is particularly appealing here is that targeting CBOs resolves much of the confusion around who counts as local since there are few foreign owned or controlled CBOs and FBOs. It will be essential, however, for USAID to negotiate clear agreements with its bilateral counterparts (usually the national government) that distinguish this new approach for community-based programs from its traditional assistance programs where most U.S. aid will continue to flow.

USAID has already noted that community programs will tend to be smaller in size and scope. To address legitimate concerns about the capacity of local organizations to comply with the USG’s burdensome rules and regulations, USAID should use its simplified assistance and acquisition authorities which have far lower transaction costs and fewer compliance requirements. Also, USAID should treat these programs as pure grants. In essence, the localization program would operate more like a foundation model that supports local organizations doing work that aligns with the donors’ strategic objectives, rather than treating them as implementing partners tasked with achieving those objectives. This may seem like a subtle distinction but changing the way USAID thinks about and relates to local organizations— in this case seeing them as partner grantees and not subordinate implementing partners, requires a critical shift in organizational culture.

USAID has requested additional staff to manage the expected larger volume of awards. However, by increasing the threshold for simplified assistance awards and by giving Mission Directors higher delegations of authority—two measures within USAID’s control and consistent with a community-based grants model, USAID could do much of what it envisions within its current budget envelope. Additionally, USAID should make clear that it will follow PEPFAR’s example of measuring the targets at an organizational level so that Missions can determine the appropriate proportion of funding for community programs based on each country’s conditions.

Local decisionmaking

The second, less talked about objective is arguably the more important, certainly in the long run. It sets a somewhat ambiguous target of shifting decisionmaking power to local actors for 50 percent of development assistance over the next decade. Given USAID’s long-standing commitment to local solutions and the many practical methods and tools it has developed over the years to engage local leaders and institutions, the only question here is why the target is not much higher.

While attention has focused on operational constraints, a bigger challenge will be changing the ingrained outlook and behavior of staff who have been brought up to look to the partner government as their primary counterpart, and who see the role of bilateral assistance as addressing large-scale national priorities such as health, education, energy, or financial sector reform. USAID will need a change-management effort that differentiates between two funding approaches, one for the bulk of U.S. assistance programmed in conjunction with partner governments, and a new “window” to finance community-based development through local organizations. This will require upskilling USAID staff to recognize and deal with the difficulties of going local, such as national officials who act as gatekeepers, confronting corrupt systems that upend local work, and navigating entrenched interests at the community level.

The longer the development community struggles to find a way to translate its commitment to locally led development into action, the more those who care about this topic—government officials and community leaders in developing countries, international and local NGOs, and donors—will keep talking past each other. USAID’s latest localization drive may finally provide a workable plan to diversify its partners and respond to a fuller spectrum of needs, including those of local organizations working at the community level—a step that is long overdue and likely to be welcomed by both U.S. direct hire and foreign service national staff.

6

CIDC comments on ‘Locally driven development: Overcoming the obstacles’Paul Foldi
Vice President for International Development Affairs, Professional Services Council

On behalf of the Professional Services Council (PSC) and our Council of International Development Companies (CIDC), we welcome the opportunity to engage further in the discussion surrounding greater Localization efforts as outlined in Administrator Power’s November 4 speech at Georgetown University. Many of the themes raised in this paper are consistent with CIDC’s support of greater engagement with local partners as the key to ensuring successful, long-term development outcomes. These themes form the core tenets of two recently published CIDC papers Perspectives on Localization and Grants Under Contract Help Meet USAID’s Local Spending Goals. We believe the current paper provides an exceptional analytical assessment of USAID’s ongoing Localization efforts that is necessary to enact the many policies outlined. In order to enhance the discussion, CIDC provides the following comments for consideration:

  • Absent a formal definition of Localization, establishing relevant and realistic metrics and goals to document success will be challenging, if not impossible. Prominently highlighting this absence, and the concomitant difficulties, would strengthen the paper.
  • While the paper refers to the 272pp of the AIDAR, not enough recognition is given to the current regulatory and legal requirements that implementing partners are held to, and how these create Barriers to Entry that inhibit new local partners from entering the development ecosystem. These Barriers play a significant role in the important and ongoing New Partners and DEIA (diversity, equity, inclusion, accessibility) conversations and policy analyses.
  • Ever-cognizant of the need to guard the American taxpayers’ funding of U.S. development, CIDC welcomes the paper’s repeated emphasis on risk.
  • In addition to CIDC’s paper, which discusses the role grants under contracts and local subcontracts already play in localization, documenting the significant changes in U.S. development practices over the last twenty years—including increased local partner engagement, hiring, and capacity—is warranted for additional context.
  • In order to assist policymakers and congressional supporters of international development, the paper would benefit from a formal Recommendations section.

7

The obstacles to localization are the same obstacles holding back USAID as an agencyJustin Fugle
Head of Policy, Plan International USA

At the heart of this debate about whether USAID can successfully advance locally led development (LLD) are two questions about the Agency itself. Does USAID now have the autonomy to follow the evidence to a more successful development approach? Does USAID now have the vision and capacity to return to its role as the world’s leading bilateral development agency? The questions are this fundamental because locally led development has always been central to USAID’s objectives since its founding in 1961. Through mission distortion for national security imperatives and through the devastating 30 percent staff cuts of the 1990s, that worthy objective has been weakened and delayed, but it remains essential, which is why it keeps re-emerging from USAID’s career staff, alumni, and administrators.

USAID’s current efforts to expand LLD build on twenty years of international agreements beginning with the UN Millennium Development Goals, as well as twenty years of bi-partisan efforts to increase the impact and sustainability of U.S foreign aid. It also echoes President Kennedy’s speech that founded the agency.

“Our job, in its largest sense, is to create a new partnership between the northern and southern halves of the world….At the center of the new effort must be national development programs. It is essential that the developing nations set for themselves sensible targets; targets based on balanced programs for their own economic, educational and social growth, which use their own resources to the maximum.” It was President Kennedy speaking in March of 1961 who first said that USAID would work, “toward the ultimate day when all nations can be self-reliant and when foreign aid will no longer be needed.”

Contrasted with this vision is the overburdened and diminished agency that John Norris wrote about in a 2014 Devex history of USAID, and which he expanded upon in a recent book, The Enduring Struggle. Norris’ book was praised by several USAID Administrators and the USAID Alumni Association.

Norris concluded his pieces with one issue that he felt all the modern USAID Administrators and every single member of the development community would agree on. Namely, that USAID is, ‘excessively bogged down by rules, regulations, reporting, and earmarks imposed by Congress and its own bureaucracy. Requirement after requirement has been layered onto the agency over the years as process has often crowded out substance.’ The consequences for USAID’s influence and impact have been severe. Norris concludes, ‘Navigating that thicket is onerous for USAID staff and draining for the agency’s leadership…This also explains why many of the important assistance initiatives, like the President’s Emergency Plan for AIDS Relief [PEPFAR] and the Millennium Challenge Corporation [MCC], have been placed outside of USAID in recent years.’

Remember that Norris was not writing about obstacles to locally led development, but instead writing a history of USAID. Yet, in doing so, he has listed the same litany of barriers frequently cited to question the agency’s ability to advance LLD. Are local organizations capable of complying with USAID’s onerous and multi-layered rules and regulations? Will local organizations be able to complete ‘complex management compliance and reporting requirements, including safety and environment standards, terrorist and money laundering reporting requirements, reimbursement for rejected or questioned costs, and other U.S. and local rules and regulations.’ Will Congress ever really waive its directives so USAID Missions can respond to local priorities or will the ‘development industrial complex,’ continue to hold sway over USAID’s budget?

Thus, USAID’s own history shows that if it is unable to pull down the walls that prevent it from advancing LLD, it also will not pull down the walls that prevent it from truly acting like America’s leading development agency. This is also a fundamental question for its future role because other US foreign aid entities have already successfully advanced LLD.

For example, the Inter-American Foundation (IAF) has safely and successfully invested hundreds of millions of U.S. taxpayer dollars in local NGOs since 1969. The IAF fully complies with the same Federal Acquisition Regulations (FAR) that USAID must comply with, but without the additional burdens that Congress and USAID have imposed on its funds over the years. The IAF also has a library of ex-post evaluations proving the lasting impact of its investments. IAF programs are structured so they nearly always reflect local priorities and build from on-going locally rooted efforts. Perhaps USAID can tap into some of these methods under its newly approved and more flexible Centroamerica Local initiative.

The MCC has safely and successfully invested billions of U.S. taxpayer dollars in programs that reflected the priorities of partner country governments and NGOs. The MCC also has a large set of rigorous evaluations demonstrating the impact of its approach.

Perhaps the most powerful example of all is PEPFAR. PEPFAR is run from the State Department, but its programs are implemented by the CDC and USAID. Abundant evidence demonstrates that PEPFAR is one of the most effective foreign aid initiatives ever run by the U.S. government, having saved an estimated 17 million lives since 2004; however, it had made few strides towards sustainable locally-led programs. That began to change in July 2018 when PEPFAR directed CDC and USAID to reach a benchmark of 40 percent of their PEPFAR funding to ‘organizations based in the developing countries where the programs are operating’ — in the next 18 months, and to reach 70 percent local funding in the next 30 months!

At that time, PEPFAR’s data showed that CDC was well ahead of USAID in terms of localization. Despite USAID’s many bureaucratic burdens, under intense pressure from PEPFAR, it made huge strides in local funding in a short period of time and PEPFAR’s studies found that its local implementers generally delivered services as well as the U.S.-based implementers they replaced. While PEPFAR’s journey beyond localization to truly locally led development remains a work in progress, this experience shows that USAID can overcome its many internal obstacles when leadership is heavily committed to that objective.

The current high-profile commitment of Administrator Power and her excellent team combined with support for locally led development in the White House, Congress, implementing community, and within the agency – all building on the procurement and process reforms developed under Administrator Mark Green – provide USAID with the best chance in decades to overcome its internal and external obstacles to not only achieve locally led development, but to reclaim its role as the premier U.S. development agency.

8

Four Approaches reportLarry Garber and Gretchen King
Independent

Thanks for inviting us to participate in the roundtable and to offer comments on this paper. The paper does an excellent job of providing historical context and a nuanced understanding of the challenges and opportunities USAID faces on localization.

Our comments are divided into two parts. The first focuses on specific questions/issues relating to this paper, while the second highlights several recommendations emerging from the Four Approaches report[Larry Garber and Gretchen King are co-authors of the USAID-funded Four Approaches Final Report.].

three countries (i.e., $20 million per year in each country). Rather, the more relevant question is whether CentroAmerica Local can be implemented in a manner that applies localization principles to the remaining 80 percent of U.S. government assistance that is flowing to these three countries on an annual basis.

  1. Localization at USAID v. other USG agencies: The paper starts with a description of other agencies that have more successfully utilized localization than USAID, including MCC. This begs the question of why the U.S. government should not simply shift more resources to agencies that have successfully demonstrated their ability to operate in accord with the narrative presented at the end of the paper. In other words, what is the value proposition for continuing to have USAID as the lead provider of U.S. government assistance? We should acknowledge that the answers traditionally offered cut against increased emphasis on localization: a) USAID’s ability to implement programs that reflect U.S. government national security priorities as defined by both the Executive and Congress (e.g., support to key allies, countering malign actors, reducing illegal migration) regardless of whether the country is localization friendly; b) USAID’s ability to manage large sums of money even in countries with weak/fragile systems, albeit applying all the mandated “rules” associated with using appropriated funds; and c) USAID’s ability to work with problematic host country actors and to achieve specific results (e.g., PEPFAR, humanitarian assistance). We suggest a sentence or two explaining USAID’s critical role in the USG assistance ecosphere.
  2. Giving voice to which local actors: The paper does not provide guidance regarding who USAID should engage in moving toward more locally-led development: a) how should USAID distinguish between partnering with host country governments, which was the original intent of the country ownership principle in the Paris Declaration, and partnering more generally with local actors, which emerged more clearly as a principle during the Accra and Busan follow-on meetings? and b) how should USAID staff decide which voices to prioritize given the inevitable cacophony that will result from the inclusive consultations that are being encouraged?
  3. CentroAmerica Local: The paper does not examine the CentroAmerica Local initiative. While applying the initiative in this challenging context should be lauded, the real test of localization is not whether the Administration can spend $300 million over five years in three countries (i.e., $20 million per year in each country). Rather, the more relevant question is whether CentroAmerica Local can be implemented in a manner that applies localization principles to the remaining 80 percent of U.S. government assistance that is flowing to these three countries on an annual basis.
  4. Expanding USAID Foreign Service Staff: The paper is properly skeptical about the practicality of dramatically expanding the U.S. government work force because of the NSDD-38 issue. Moreover, unless USAID culture changes, placement of more USAID Foreign Service Officers (FSOs) on the ground may have the unintended consequence of resulting in more direct control of U.S. government assistance program by FSOs.
  5. Development Industry Role in Localization: The paper appropriately emphasizes the importance of encouraging traditional implementing partners, both for-profit contractors and international nongovernmental organizations, to internalize the principals of localization. In an ideal world, USAID field staff should be responsible for developing, together with local actors, broad strategies, while implementing partners would partner with local actors, who would be responsible for the design, implementation, monitoring and evaluation of programs.
  6. Empowering Foreign Service Nationals (FSNs): We totally support further empowering USAID FSNs. However, the paper makes an important point by noting that many USAID’s FSNs reflect a particular segment of their societies and arrive with their own biases about what their societies need.
  7. Incentivizing USAID staff: Under the “USAID Capacity” section, we think that it is important to review the incentives associated with USAID staff promotion. Our understanding is that USAID culture emphasizes “getting money out the door” as the most important factor signifying success. Further, staff must believe that the Agency truly will have their back when things do not go well (loss of funds, reputational risks, etc.) with concrete examples reinforcing the message.
  8. Referencing New Partnerships Initiative (NPI) Action Plans: The paper (Page 14) discusses CDCS development and several other strategy and policy documents. Missing from this list is the NPI Action Plans that all Missions are required to develop. New guidance for these plans was issued by the Biden Administration last fall. These action plans should not be viewed in a vacuum and should connect to the strategies/policies listed.
  9. Enhancing donor coordination: Administrator Power has promoted USAID as a thought leader in the international community regarding localization/locally led development. That leadership should include reiteration of many of the themes that were originally presented in the Paris Declaration (i.e., enhanced coordination among donors on such issues as sector funding approaches, reporting, M&E, and compliance requirements), so that local actors don’t have to respond to 30 different processes from 30 different donors.

Specific lessons from Four Approaches research:

  1. Localization is one of many approaches that USAID field staff are directed to utilize. Field staff require guidance on how to prioritize among these approaches and how to integrate them with substantive priorities (e.g., HIV/AIDS, climate, anti-corruption, private sector engagement, etc.).
  2. Even as we advocate for increased use of localization as good development practice, we should appreciate that prioritizing localization, with all the accompanying multiple bells and whistles, represents an example in Dan Honig’s terms of “navigation by direction” and reduces the field staff ability to “navigate by judgement.”
  3. Guidance on localization should recognize the multiple USAID operating contexts and avoid prescribing a one-size-fits-all approach, which is counter to the very idea of localization.
  4. In support of locally led development any future USAID guidance should take into account the realities of local actors’ language capabilities – emphasis should be on translating documents into local languages and reliance on FSNs to serve as the principal counterpart with local actors.
  5. USAID should facilitate the sharing of localization success stories through easy to access publications and through staff interactions across missions.
  6. USAID staff lack incentives to work with local actors: Large budgets, real, or perceived risks that could be pinned on A&A staff, and lengthy processes required to ensure local actors meet USAID standards all provide disincentives to work with local actors.

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Effectiveness is in the details: Realizing the promise of localization requires rethinking USAID’s administrative processDan Honig
Associate Professor of Public Policy, University College London

Administrative process rarely quickens the reader’s pulse. This is a shame, for the procedural underbelly of U.S. development assistance will determine whether localization achieves its promise of (as Ingram notes) shifting power from American to local actors.

Localization can accomplish multiple objectives

Discussions of localization often skip over the question of why: What localization is meant to accomplish? Perhaps as a result, what localization in fact means varies across organizations. It seems to me localization is primarily seen as accomplishing two distinct objectives:

  • Decolonizing Development: Central to decolonization is the notion of structural power inequality – of the Global North (e.g. the U.S.) holding power over the affairs of those in the Global South. The current structural power imbalance is morally wrong, and should be rectified.
  • Improved Effectiveness: Local actors have greater information and understanding of local context. Localization will lead to more effective and sustainable development programs.

While these objectives certainly imply differences in how localization should proceed (e.g., improved effectiveness suggests starting where local information is most critical to success; decolonization implies broad rollout of changes), amongst other points of commonality is that accomplishing either objective requires an actual shift in power and control to local actors (however “local actors” is defined, and particular actors and organizations are identified).

Local actor autonomy and navigation by judgment are necessary conditions for BOTH decolonization and improved development effectiveness, because without it there will be no shift in power

Twenty years ago Mark Schuller examined the performance of two local NGOs in Haiti implementing similar programs in “Killing With Kindness.” One of the local NGOs received USAID funding; the other did not. Schuller found that the local organization reliant on USAID saw its autonomy undermined as it worked to fulfil USAID administrative requirement in a process he calls “trickle-down imperialism.” The NGO became less and less effective in fulfilling the development objectives of USAID programs as the NGO increasingly focused on “easily measurable things that can be explained to the taxpayer”; this often involved engaging in actions to meet targets that were not in the interests of beneficiaries and prevented the incorporation of beneficiary perspectives. USAID’s famously onerous compliance regime was not just bad for the local organization; it did not merely preclude decolonization and a genuine shift in power to local actors. The compliance regime also undermined effectiveness.

My research finds that the Haitian NGO story is part of a general pattern. In econometric analysis of a large (14,000+) project sample and comparative case studies (including four from

USAID), I find that greater central control and reporting requirements undermine performance. This is because tight controls restrict what I call “Navigation by Judgment” – the ability of actors closer to the ground (e.g., donor representatives in field offices) to design, implement, and revise/adapt programs as circumstances inevitably change. These reporting constraints preclude empowering local actors and leaders.

USAID needs a different approach to accountability to realize localization’s promise

Ingram notes that “Only a limited number [of local organizations in low-income countries] have the working capital and specialized management and technical expertise required to successfully implement contracts at scale and comply with U.S. government requirements.” I agree – and believe that the way forward must separately consider 1) expertise to actually implement projects and 2) expertise to comply with U.S. government rules and procedures.

To the first, where local organizations are judged promising through whatever mechanism, localization must involve a process of helping them thrive – helping build implementation capacity where it is lacking. This means treating these organizations not as delivery mechanisms but as true partners who USAID is accompanying – investing in local organizations through core funding (e.g., through indirect cost mechanisms). Partnership requires putting real power and trust in the hands of these organizations and sticking with them even if what is delivered in initial stages is not what USAID evaluators would have expected from an experienced INGO with decades of experience implementing USAID programs.

The binding constraint will, I suspect, often be the second – with many local organizations capable of achieving development impact but unable to comply with U.S. government monitoring and reporting procedures. Moreover, compliance with current procedures risks precluding the very core of localization’s value proposition as a tool of decolonization or development effectiveness. Effectively empowering – that is, shifting real power to – local actors means changing USAID’s reporting requirements and rethinking accountability. USAID must move beyond accountability that is primarily accounting-based, focused on quantifiable metrics and procedural compliance. Absent altering USAID’s approach to reporting and accountability I suspect we will find, after a decade and many hundreds of millions have been spent, that the current push of localisation had no discernible impact because there was no real shift of power.

Localisation offers the promise of a more equitable and just sector, which will also be one where development assistance is more effectively translated into development impact. If localization simply shifts formal responsibility to local implementers, the constraints which currently undermine field offices’ effectiveness will simply undermine local organizations’ effectiveness. As the aid sector more broadly considers localization, actors must grapple with the simple truth that shifting power and addressing structural inequality require changing donor HR, management, and reporting practices. Absent reform localization efforts will, I predict, meet portfolio allocation metrics (e.g., USAID’s current 25 percent and 50 percent targets) but have no greater impact on the sector’s structural inequalities or development effectiveness. U.S. taxpayers, citizens of the developing world, and the sector’s many mission-driven actors – international and local alike – deserve better.

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Thoughts on overcoming obstacles to locally driven developmentJames Michel
Senior Advisor, Center for Strategic and International Studies (CSIS)

George Ingram, in his analysis of locally driven development, has made an important contribution to current deliberations on how the United States and other international actors can best help developing societies to become more stable, just, and prosperous. His paper thoughtfully identifies impediments to the ability of local leaders and institutions and engaged civil societies to fulfill their essential roles and offers constructive ideas on how development cooperation can effectively address those impediments. This brief commentary offers selective thoughts on these issues.

Capacity and Commitment

Neither local actors nor U.S. agencies have the internal capacity to implement large, complex, multi-year projects with predetermined objectives and expected results. Nor should they.
Several measures will be needed to overcome the impediment of all too frequent reliance on such projects.

1. The U.S. Country Development Cooperation Strategy (CDCS) should begin with:

a. Understanding of local plans and priorities for addressing locally defined development problems and local development strategies at national, subnational, and, as appropriate, community levels; and
b. Awareness of what is being done by local and international actors to advance those plans and priorities.

The CDCS should build on that base with informed judgments about how the U.S. can be most supportive of locally led development efforts.

2. The CDCS should be more than a USAID strategy. And it should not be confined to the necessarily limited donor-recipient paradigm. Rather, it should be developed under USAID leadership on an interagency basis that includes consideration of the relevant range of U.S. policy instruments, relationships, and interests that can help to broaden the framework for effective partnerships and foster local capacity and commitment. A key element of the CDCS should be responsiveness to local strategies, plans, and implementation approaches.

3. USAID should have the capacity to lead an ongoing dialogue with local partners to reinforce the development objectives the U.S. is able to support and to foster shared values. That dialogue should identify implementing mechanisms for U.S. support of locally led efforts and should prioritize reliance on local institutions and strengthening sustained local capacity, commitment, and coordination. This does not preclude drawing on available international expertise where necessary (e.g., providing technical information to inform local decision makers).

Among other things, USAID will need greater in-house capacity for policy dialogue and program management (largely field based) and be less dependent on U.S.-based contractors and grantees as implementing agents. In addition to engaging local actors, USAID will need to be better able to coordinate with other U.S. agencies and public and private and institutions and with the international community.

Rigidity

Development cooperation that emphasizes coordinated support for strengthening local capacity and commitment to shared development objectives will facilitate clarity about basic values. It will require flexibility to be able to respond to evolving local conditions and the inherent complexity and iterative long-term nature of the development process. This means there is need for intensive and continuous dialogue with Congress on use of the recently enacted liberalization of how appropriated funds can be used in selected fragile countries and regions and in Central America. If USAID and the other concerned U.S. agencies can satisfy Congressional needs for full and current reporting on how funds are used and how U.S. support is contributing to development progress it may be possible to obtain additional relief from the overly rigid and counterproductive constraints of the current budgeting system.

The long history of international support for locally led development is one of broad recognition that development comes from within a society and that international support should be collaborative, helping developing countries, their institutions, and their people to increase their capacities and take the lead in doing things for themselves. And yet, studies and evaluations over the years have shown that international practice has not lived up to declared policies.

The Need for Persistence and Continuity

The compelling vision expressed by USAID Administrator Samantha Power, the positive response from USAID’s U.S.-based implementing partners and from the international community, and the recent flexibility shown by Congress in enabling the use of appropriated funds in ways that can be more responsive to local circumstances all suggest that this is a propitious moment. There is a new opportunity for overcoming what one study referred to as the “big gap between donor rhetoric and actual behavior” that caused development practice to remain “donor-driven and aid-centric”; what another study observed to be a continued reliance by donors on “adherence to static, linear theories of change” and their emphasis on “the strict delivery of outputs for the purpose of making funding recipients accountable”; and a third study that characterized as a donor preference “paying for inputs over paying for results.”[The quotations are from: Sue Unsworth, An Upside-down View of Governance (Brighton: Institute for Development Studies, 2010 )https://www.agora-parl.org/sites/default/files/agora- documents/An_Upside-down_View_of_Governance.original.pdf; Michael Moses, Learning to Make All Voices Count: Lessons and reflection on localizing the Open Government Partnership (Brighton: Institute for Development Studies, 2017), https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/13351; and William Savedoff, What is “Country Ownership”? A Formal Exploration of the Aid Relationship (Washington, DC: Center for Global Development, 2019), https://www.cgdev.org/sites/default/files/what-country- ownership-formal-exploration-aid-relationship.pdf.] Current trends in global inequality and declining respect for democratic values threaten recent progress toward sustainable economic, social, and political development. Those trends are making the world less safe, less just, and more impoverished. They underline the importance of ensuring that we not lose this opportunity to bring the practice of international support for sustainable development into line with what decades of experience and analysis have shown is the most effective approach.

For the United States, proponents of locally led development have multiple responsibilities:

  • Persuade others in our own government and in civil society that development is important, in our national interest, merits the wise investment of our national resources, and deserves changes in our own behavior to enable locally led approaches keyed to local circumstances;
  • Engage the international community in developed and in developing countries as well as in multilateral organizations to make locally led development the global standard in practice as well as in theory; and
  • Act wisely, monitor carefully, and report fully and widely in order to sustain a coherent, long-term effort to demonstrate the value of effective development cooperation.

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Collective leadership as a path for sustainable development: Putting people, agency, and leadership firstAnna Molero
Chief Government Officer, Teach For All

This commentary is submitted on behalf of the People First Community and based on its Working Paper available here.

The Community is a cross-sectoral and globally diverse group of practitioners, academics, and public and private sector actors with a shared belief in the importance of prioritizing investing in collective leadership development as a path for sustainable development.

We welcome this paper and its analysis about the path that has taken us to this point and some of the key obstacles. We primarily value the emphasis on the critical role of local actors and their ability to drive and own development efforts in their own contexts, jointly with USAID’s ambition to establish a new cooperation for development ecosystem through a revamped Agency’s policy on capacity development.

Whilst valuing this analysis, we would like to offer two recommendations:

  • The first portion of this paper (before the commentaries) overlooks what we believe is a key action around prioritizing not only local capacity building, but collective leadership development as a path to achieve locally led development and ultimately sustainable development.
  • The “Execution: realizing localization” section could emphasize the importance of global networks in the role evolution that INGOs need to undertake.
Local capacity building will not be enough: The critical role of collective leadership development

The approach of the international development community, including USAID, has contributed to massive progress over the last decades. We have achieved immense wins by making vaccines broadly available, enabling all children access to schooling, building roads, and investing in easily scalable technical solutions that could be driven top down with the promise of delivering short-term outputs. Now, as the problems we are addressing become all the more complex, and the COVID-19 pandemic threatens to disrupt years of progress, we will need to evolve our approach. Tackling the adaptive challenges ahead — like managing chronic diseases and delivering high-quality primary care, fostering learning in schools, and building resilient infrastructure — will require shifting the power to drive development to local stakeholders, enabling them to be globally informed and continuously improve over time.

Locally led development and local ownership can be achieved through different means. Among many others, some of these include Community-driven development[Community-Driven Development: https://www.worldbank.org/en/topic/communitydrivendevelopment#1], Localization agendas like The Grand Bargain[Grand Bargain Commitment: https://interagencystandingcommittee.org/grand-bargain], and Decolonizing aid[Aid reimagined https://medium.com/@aidreimagined].

This Community acknowledges all these efforts as critical ones. At the same time, we believe that growing support and investment of efforts to develop collective leadership is one of the dimensions that could have a significant impact on fostering locally led development and decolonizing aid, but one that has been mostly overlooked by the international development ecosystem.

Although all major aid agencies have included “capacity building” as a key program element since the mid-1990s, in practice, capacity building efforts to date have primarily focused on targeted technical skills for the purpose of implementing specific projects and interventions, rather than a more comprehensive approach that includes the mindsets and skills needed for leading long-term change. These include decision-making skills, relationship management, self- awareness, adaptability, and a growth mindset among others.

A keyword analysis of Official Development Assistance (ODA) grant descriptions found that only
$15.2M went to projects related to local “leadership development” across sectors in 2018— approximately 0.01 percent of total development assistance. And even this small fraction was not directed towards developing the collective leadership of local communities.

In the ‘80s and ‘90s, several foundations and aid agencies invested quite significantly in leadership development as a critical ingredient for sustainable transformation. However, the funders of these efforts have reflected that the leadership development focus was often on providing local leaders with an elite, Western education rather than on developing leadership deeply rooted in local context, culture, and values, and focused on their own communities’ sustainable development.[Conversations with Joyce Moock and Gary Toenniessen, March-April 2021] As a result, while these efforts contributed to the diaspora and to an elite, they did not have the desired result of generating what we refer to as “collective leadership.”

By collective leadership we mean people who themselves have experienced the inequities being addressed and their allies, working together across lines of difference and across whole ecosystems, exerting leadership and learning constantly towards the purpose of sustainable development.

Our commitment to developing collective leadership references developing the ability of everyone to exert leadership including, but not limited to, those who by nature of their positions have significant influence over the welfare of others. We believe that leadership is an action and something that anyone can practice, starting with the inner-self work of growing consciousness. It is not something that any particular person is born to do, but rather can be cultivated and nurtured. We believe we need to move beyond individualistic leadership models towards leadership that is inherently a collective pursuit that involves diverse stakeholders building relationships, listening to each other, and collaborating.

Through our Community’s collective experience, and the evidence generated through initiatives and organizations in which we’ve been involved, we’ve seen first-hand the impact of developing collective leadership on increasing the likelihood of improved outcomes and systems change. We see a clear gap and an untapped opportunity resulting from the lack of a concerted effort to invest in collective leadership development as a path to driving sustained outcomes.

Evolving the role of INGOs: The importance of global networks

This Community also believes that global organizations and networks need to evolve their roles to contribute to locally led development. Global networks can play a significant role in enabling local leaders to be globally informed and able to respond to development challenges by exposing them directly to knowledge and insights from other local leaders and communities.

Network approaches can spread and share knowledge across geographies through fostering peer-learning and can help reach significant scale. They can support building the mindsets, processes, and capabilities among leaders in communities of learning and adapting, rather than simply transposing a technical set of best practices.

12

Learning and leadership: The case study challengeSusan Reichle
President and CEO, International Youth Foundation (IYF)

This paper clearly lays out the history and challenges of achieving “real localization” and provides strong recommendations for how USAID and other organizations can make meaningful progress. This commentary focuses on recommendation two, which addresses a fundamental question: In the near term, how should USAID begin executing the complex, difficult, lengthy process of localization? (Page 16)

Ingram emphasizes the need for “immediate solutions that will maximize local development” (Page 17) and highlights that USAID could learn from and build on the experiences of organizations like the International Youth Foundation (IYF), Restless Development, and others that have practiced locally led development for decades. Tapping into the experiences of organizations that have created and/or worked through local organizations for decades would provide a detailed, inside look at what’s worked, what’s failed, and why. Organizations could share their approaches to locally led development—and their outcomes—via case studies commissioned by USAID as part of the Agency’s evidence-driven approach to development

Although “locally-led” is the phrase of the day in development spheres, the idea of tilting the balance of power away from U.S.-based funding organizations and towards the individuals, communities, and local organizations who receive funding is not new. Frankly, many young leaders have been calling for this change for years. Maryam Mohiuddin Ahmed, a young social entrepreneur and founder of the Social Innovation Lab, put it this way in an interview on the World Economic Forum blog: “The shift in the balance of power is both utterly necessary and long overdue. And it is also not enough. An actual systems shift will see the communities that usually receive funds…be in a position of influence that enables them to be the decision-makers when it comes to allocating the said funds.” And she’s right.

There is a myriad of approaches to locally led development. Below are just four examples from IYF’s 32- year journey which could be expanded upon in the case study format:

Invest in local, indigenous organizations for locally led, sustainable impact

IYF was born with the collapse of the Soviet Union, and its approach to “localization” was creating and growing local foundations in Eastern and Central Europe that serve children and youth. IYF invested for years in developing the capacity of these indigenous foundations and created a network of local partner organizations to share learning and best practices. Over time, they grew and spun off to be fully independent of IYF. When done right, capacity building does more than prepare local partners to effectively implement programs; importantly, it also equips them to grow and flourish after the initial partnership ends. In 1994, for example, only five years after the Berlin Wall crumbled, IYF provided seed funding for the creation of the German Children and Youth Foundation (DKJS). In addition, we helped build their capacity to best deliver on their mission of improving the educational outcomes and societal engagement for young people in Germany. Today, almost thirty years later, DKJS is thriving and playing a critical role as

Ukrainian refugees make their way to Germany. Not all efforts succeed, of course, and we need to learn as much from those that failed as from those that succeeded.

Support and learn from youth-led, locally led, grassroots organizations

Another approach to locally led development is ensuring funds go directly into the hands of grassroots organizations working at the community level and providing them with support to grow. For example, at the onset of the pandemic, IYF reached out to more than 2,000 social entrepreneurs and asked them what they needed most. We listened and heard clearly that a flexible rapid response fund was essential to help them address local needs brought on by the COVID-19 pandemic. As a result of generous funding provided quickly from the Conrad N. Hilton Foundation and Burberry, IYF started the Global Youth Resiliency Fund (GYRF) to help support youth-led organizations around the world. As a new report from Restless Development highlights, it’s critical to work with on-the-ground youth-led organizations to meet local needs.
Two years on, we’re hearing from GYRF fellows about the difference the award made in their community and in some cases, how they leveraged it to pull in other funds to grow their initiatives. To be clear, it was a small grant, but it had an enormous impact at the community level. There’s much to learn about supporting local initiatives, and there are partners in the development ecosystem with expertise to share.

Forge multi-stakeholder alliances including corporate and foundation partners

Multi-stakeholder alliances are a critical part of achieving local and sustainable development. Corporate and foundation partners are often more flexible and can move quickly to respond to local organizations, but they often need large institutions such as bilateral and multilateral institutions who will engage deeply over years along with host country governments, local actors, and communities. Examples of multi-stakeholder alliances from IYF’s history include our entra21 and New Employment Opportunities (NEO) programs which were under the leadership of the InterAmerican Development Bank. In this case, IYF connected more than 20 corporations and foundations to local organizations and institutions seeking to increase employment opportunities for young people. Not only did this 15-year alliance impact more than half a million young people, but it also created training institutions, platforms, and models that continue today long after this multi-year alliance ended. What can we learn from a multi-stakeholder alliance? Case studies could dive into questions such as: Are there ways to structure an alliance to ensure its best localization practices can be shared easily across the network? What is the role of private sector funding? How could USAID’s Private Sector fund, announced by Administrator Power, be structured to advance locally led development?

Reimagine traditionally U.S.-based positions with localization in mind

Case studies could also focus on how organizations approach localization under their own roof. IYF has been on this journey for many years with the guiding principle that all programs and offices are locally led unless the donor requires an expatriate. Although the majority of IYF staff are local like other INGOs, we reimagined IYF during the pandemic to go even further. With COVID-19 travel restrictions, we were dependent on our local teams like never before to implement IYF programs with support from the U.S. team. It was IYF’s locally led offices and teams around the world who understood the local context and ensured we still delivered on our mission of connecting young people to opportunities. Leaning into our legacy of localization, we reimagined traditionally U.S.-based IYF positions—including two senior regional director positions—and moved them closer to where the work was happening in Latin America and Africa. We are currently hiring our first Executive Vice President for Programs from the Global South. Today, our U.S. team is almost half the size it was two years ago. This was not an easy, quick decision of course—it was, frankly, tough. And it’s certainly not a place to rest on our laurels. But we are proud of the outcome, proud to be walking the talk of locally led development.

These are just a few examples of how IYF approaches locally led development, and we are certainly still learning. If USAID is serious about localization, and I believe they are, the Agency should learn from the experiences of organizations across the ecosystem. A USAID-led initiative to challenge partner organizations to share case studies of locally led development, both the successes and the failures, could provide invaluable recommendations for how to advance localization, as well as broaden our understanding of the many forms of locally led development.

At the end of the article, Ingram writes, “In making awards, USAID can challenge these organizations to show how to implement locally led development.”

Building on this idea, I recommend that USAID frame the “Case Study Challenge” as a competition that highlights localization successes and failures. There could be a prize— monetary or otherwise—to incentivize participation and a social media component promoting the competition, sharing the results, elevating the participant organizations, and stimulating further conversation about how best to localize global development.

As USAID and others in the development community lead the charge towards achieving real localization, let’s remember John F Kennedy’s words: “Learning and leadership are indispensable of each other.”

13

Mutual accountability in locally led developmentLori Groves Rowley
Managing Member, LGR Strategies

In this paper, George Ingram illustrates the timing is right for USAID to lead a transformation of
U.S. foreign assistance policy so that it is locally driven by the global partners who receive it. He also points out the numerous ways the effort could stumble or at least fall short again, as it has in the past.

Despite the significant hurdles Ingram identifies in his paper, the locally led development (LLD) vision of USAID Administrator Power and her leadership team is well on its way to leading U.S. policy in this direction. It also seems to be headed for real implementation and, hopefully, success, because the necessary changes are taking place across the agency and throughout its policies and practices, rather than in small, demonstration programs.

As a member of the Modernizing Foreign Assistance Network (MFAN), I focus on foreign aid effectiveness policy through the coalition’s two reform pillars: Local ownership and accountability. The two are directly related, but I am concerned that not enough attention is being paid to how critical the accountability pillar is to the success of LLD. At MFAN we describe this pillar as encompassing (1) transparency, (2) monitoring and evaluation, and (3) learning. Yes – USAID should be commended for the progress it has made to date in this pillar – its Foreign Assistance Data and Reporting Team (FA-DART) in partnership with the Office of Foreign Assistance at the State Department has brought tremendous transparency to U.S. foreign assistance through FA.gov. It has an agency evaluation policy and an agency-wide learning agenda, and its learning experts are important team members designing new locally led policies. However, in discussions about reducing risk and ensuring accountability, little has yet to be discussed about mutual accountability with our partners. Rather we hear about the need to work with Congress – which provides the funding for U.S. foreign assistance – to alter risk tolerance or being alert to not setting off an IG investigation. The component of accountability cannot be so one-sided, despite the fact that the U.S. partner will likely provide some or all of the funds for programs and projects.

In working with partners to set their own goals and priorities for development, these early conversations must also include both what they seek and how they will measure their accomplishments in the programs they carry out. And they need to include how each partner will hold themselves to account for successes and shortcomings. Sure, Congress will still hold USAID to account for the funding it allocates to the agency for carrying out these programs, but I believe even more effective and sustainable investments in food security, education, democracy, and rule of law, as well as economic development, can be achieved when true partners with mutual accountability act together.

I hope USAID will spend more time investing in this component of accountability as it builds out its locally led development approach to U.S. foreign assistance. With this additional focus, the reform pillar can realize its full potential for supporting the success of locally led development.

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Game changers for USAID’s localization agendaJenny Russell
Lead Advisor, Democracy, Rights and Governance, Save the Children U.S.Local financing

The recently announced USAID “Vision for Inclusive Development” includes a strong push for localization and shifting power to communities, with targets aiming to elevate local voices in agency policies and programs and increase direct financing and a plan for capacity support to local actors. Although direct implementing grants can confer a degree of autonomy, local control over the pot of financial resources for development will truly allow local priorities to take center stage, noted in Save the Children and Oxfam’s Power of Ownership Report and Local Engagement Assessment Framework. As one former U.S. government official put it, “U.S. grants to local organizations is still [aid] dependency.” Without the ability of local institutions to finance development interventions, aid dynamics will not fundamentally change.

While local financing can take many forms and include private sector resources, the key component must be sustainable public investment, or Domestic Resource Mobilization (DRM). As USAID defines it, DRM is “the process through which countries raise and spend their own funds to provide for their people – [and] the long-term path to sustainable development finance.”

Why is Save the Children, an organization known for providing services to children, advocating for government financing for development? Because we know that working with governments to confront these financing, governance, accountability, and participation challenges are at the heart of development effectiveness and the foundation upon which our child-centered development programs – such as health, food security, education, and protection – are built.

The U.S. is one of the largest contributors of DRM aid to countries in the world. It is reported that the U.S. committed $44 million and disbursed $36 million in aid for DRM in 2019 with the majority of spending attributed to USAID and a smaller contribution by U.S. Treasury. Through its technical assistance and capacity strengthening for public financial management (PFM), the U.S. government helps partner governments increase the efficiency of their tax systems to collect more resources. With more revenue, many governments are able to expand budgets for health, education, and other needed services to children and families – and do so in accordance with local needs.

Despite the power of local financing for localization and USAID’s ongoing work on DRM, there is scant mention of this in USAID’s current localization agenda; yet, sustainable local finance should be a core element of localization.

In this respect, there may be some lessons from previous administrations that could be applied to USAID’s current plans. This includes elements of the “Journey to Self-Reliance” (J2SR) and earlier/ongoing USG engagement on DRM. In 2015, USAID made a commitment to DRM as part of its financing framework to end preventable child and maternal deaths. Also in 2015, the U.S. government co-founded the Addis Tax Initiative at the Financing for Development Conference to increase DRM in aid-recipient countries around the world. Moreover, USAID’s Local Works program supported case studies on DRM, such as from USAID/Serbia in 2021.

The goal of the Journey to Self-Reliance was to enhance a “country’s ability to plan, finance, and implement solutions to its own development challenges.” A work stream within J2SR called “Financing self-reliance (FSR)” provided a holistic approach to “help countries overcome systemic constraints to mobilizing and managing financial resources, and transforming those investments into sustainable development outcomes.” FSR included a focus on DRM, PFM, domestic accountability, and fiscal transparency, and empowered USAID’s operating units to integrate domestic financing into sector programs.

USAID has demonstrated a political commitment to DRM but there is more the agency can do to connect its past and present DRM work to its localization priorities. Save the Children just completed a new report on the importance of local financing for transitions to locally-led development: Shifting From Global to Domestically Owned Health Finance: Case Studies of USAID and PEPFAR In Uganda, which includes a recommendation to the U.S. government on increasing government revenue generating capacity at the national and subnational levels in Uganda, particularly on progressive tax collection and enhanced budgeting and public financial management (PFM).

The Modernizing Foreign Assistance Network (MFAN) wrote in its Principles for DRM, “Greater public revenue, when managed well, reduces the need for aid, strengthens fiscal sustainability, enhances countries’ stability, and increases citizen capacity to hold governments accountable.” DRM is important to sustain the results of Save the Children’s projects. Likewise, for true localization and to shift power dynamics in foreign assistance, USAID’s approach must integrate support for local financing.

Local partner consultations

One aspect of the organizational culture to be addressed is the way in which USAID policies are created and circulated for public input. Localization aims to elevate local voices on the issues that will affect their communities – for enhanced policy development, and to demonstrate the value and respect that USAID has for its local partners. For this reason, all new policies and policy updates should include a broad and intentional public comment period that brings in local partners’ feedback.

In its efforts to shift power and resources, the agency has established more relationships with Global South organizations such as NEAR, the Global Alliance for Communities, and the Local Accelerator Coalition. This is an important step forward. An additional step would be to establish a systematic process to consult with USAID’s own local partners organizations – prime and sub-prime – on all new and updated policies, just as USAID does with trusted U.S.- based thought leaders like MFAN and InterAction.

USAID has demonstrated interest in more consultations with local communities in policy development, but this must be institutionalized. For example, during the drafting of USAID’s Local Capacity Development (LCD) Policy, the USAID team in charge of the policy took the bold step to carry out local consultations on the policy. The USAID team asked Save the Children, Catholic Relief Services, and Oxfam to invite local partners to Focus Group Discussions on the policy prior to the official feedback period. The INGOs and USAID together facilitated 11 focus groups with 70 local organizations from 34 countries. The local partners answered questions on what constitutes good capacity development, capacity trends they find problematic, and what trends they would like to see in the future. Local partners particularly emphasized that “capacity development should contribute to an organization’s long-term ability to adapt and address emerging local needs.” USAID integrated feedback from the focus groups into the policy, and included the local input in an annex of the draft LCD Policy that was released for feedback.

Thanks to USAID’s efforts to garner this local feedback, the agency’s LCD policy has changed for the better. Local actors should be consulted systematically and regularly on USAID’s policies and programs to improve them based on partner needs and to live up to the values of shifting power.

15

Operationalizing the localization agendaConor M. Savoy
Senior Fellow, Center for Strategic and International Studies (CSIS)

I share this as not a dissent from the localization agenda but simply as an effort to lay out the significant barriers that exist. I know that these are well known, but I feel to be successful we need to have a clear-eyed view of what they are and how to overcome them.

The goals and objectives of localization are well understood by most in global development. It is seen as an important vector to shift greater control of policy, projects, and resources to local control, pulling it away from Northern-based governments and institutions. In the U.S. context, the primary outcome would be reducing the amount of money in grants and contracts that flow to for-profit and non-profit implementing partners. This is a laudable goal, and the evidence does suggest that such a shift would have the intended effect of increasing local control over development. Yet, moving from rhetorical support to operationalizing this agenda is extremely difficult and will require significant investments of people, time, and money on behalf of USAID.

In the 11 years since USAID launched its first big push for localization, the agency has managed to shift only 6 percent of all funds spent to locally based organizations. Administrator Power has set a target of 25 percent of USAID’s annual spending directed toward local partners. This is ambitious and faces the same barriers that have limited USAID from moving beyond six percent. There are two clear barriers that need to be addressed to get USAID to 25 percent of its funds to local partners: Personnel and rules and regulations. On the personnel front, USAID needs to significantly increase the size of its acquisition workforce to manage the localization push. Because many locally based organizations are smaller than U.S.-based implementing partners, they cannot manage large-dollar grants or contracts. USAID will need to hire more agreement officers and contract officers to support this effort. This must be part of any localization effort.

As with other federal agencies, recipients of USAID funding must comply with the Federal Acquisition Regulations (FAR) and meet other requirements under USAID’s ADS 300. These are time-consuming for any organization to meet, and many local partners lack the capacity to be in compliance with them. USAID has already tried to create new procurement mechanisms to attract non-traditional partners; finding additional ways to streamline the FAR and ADS 300 requirements will be necessary to engage local partners. This is not an easy process, especially because the existing system of procurement rules is meant to provide a measure of accountability for USAID and other stakeholders (e.g., Congress). Finding ways to continue to provide accountability for spending will be necessary.

Finally, I would also strike a note of caution at simply looking to local civil society, NGOs, and other locally based non-governmental institutions. A common critique of the use of implementing partners is that it bypasses local government undermining citizen’s faith in its own government’s ability to deliver basic human needs. There is a risk that pushing too much toward locally based non-governmental partners would further erode trust in local governments. This of course makes sense in countries where the government lacks legitimacy, but in other

instances the state should be strengthened. Government-to-government funding remains unpopular within the U.S. system, except in certain countries of strategic importance. As part of the new localization effort, USAID should reexamine the use of government-to-government funding mechanisms in an effort to strengthen capacity of governments to deliver basic human needs. Over time, this would help to build the citizen-state bond necessary to bring greater stability to our partners in the developing world. This would be true local ownership.

Annex 1April 18, 2022 Roundtable Participants

Tariq Ahmad, Oxfam USA
Sandra Amis, MSI-Tetra Tech
Meghan Armistead, CRS
Tahalia Barrett, USAID
Annette Brown, FHI360
Ruth Buckley, USAID
Larry Cooley, MSI-Tetra Tech
Patrick Fine, Former USAID, MCC, FHI-360
Paul Foldi, Council of International Development Companies
Justin Fugle, Plan International USA
Larry Garber, Independent consultant
Dan Honig, University College London
George Ingram, Brookings
Gretchen King, Independent consultant
Jim Michael, CSIS
Anna Molero, Teach For All
Larry Nowels, Modernizing Foreign Assistance Network
Danielle Pearl, USAID
Adam Phillips, USAID
Tony Pipa, Brookings
Sid Ravishankar, House Foreign Affairs Committee
Susan Reichle, IYF
Sarah Rose, CGD
Jenny Russell, Save the Children U.S.
Lori Rowley, LGD Strategies
Conor Savoy, CSIS
Don Steinberg, USAID
Michele Sumilas, USAID
Zoe Swarzenski, Brookings

Annex 2April 18, 2022 Roundtable Agenda

1. What is the problem localization addresses? How does localization compliment or compete with other U.S. purposes (e.g., national interests, values) that drive U.S. foreign assistance?

  • Is the push for localization different from prior attempts and is the priority to achieve sustainable development results or to shift power to local actors – or is this a false dichotomy?
  • Does a policy of localization weaken or strengthen the ability to build and maintain long term international partnerships?

2. What counts for localization? How does USAID define localization?

  • Does country ownership require a primary role for the partner government?
  • Multistakeholder – national and local government, civil society, academia, business, formal and informal community groups, and associations.
  • Community-led – organizations proximate or indigenous to communities being served who are not registered NGOs
  • Local subsidiaries/affiliates of U.S. or multinational for-profit/nonprofit organizations
  • Does the focus on a percentage and counting distract from the goal of localization which is locally led development?

3. Is localization the most effective strategy for a large government organization like USAID, constrained by a myriad of rules and regulations and the demands of political masters in the Congress, administration, and civil society?

  • Can USAID operate with the required flexibility and adaptability under existing authorities or are new authorities required?
  • Are the authorities from CentroAmerica Local enough to foster locally led development? How do we learn both the successes and failures to build bipartisan support for greater flexibility in funding?
  • What new business practices will be required to manage a portfolio of “localized” activities? Can management be outsourced or will it have to be done directly by USAID?

4. What role does USAID envision for implementing partners? How does USAID expect the development industry to change/evolve as its localization initiatives take off?

  • How can USAID learn from decades of experience in the partner community that works with a variety of donors, some who provide much greater flexibility than the U.S. government? Ideas?
    • Case studies presented by partners in a competition to highlight localization successes and failures.
    • Community organizations, such as youth organizations, provide recommendations to both implementing partners and USAID (see Restless development report which makes recommendations for the development community: https://restlessdevelopment.org/2022/03/youth-civil-society-under-threat-says-new-report/)
Endnotes
  1. 1. And $108 million (7 percent) above the president’s request.
  2. 2. The president’s budget for FY 2023 calls for a further increase in operating expenses of $107 million (7 percent) compared to the enacted level in FY 22. This increase will allow USAID to grow its workforce to a total of 3,720 foreign service and civil service personnel.
  3. 3. It will be interesting to see if the recent experience with virtual work modifies the USAID model of work and reduces the hurdle factor of NSD 38.
  4. 4. For more on this, see “Lean Impact” by Ann Mei Chang.
  5. 5. Perspectives on Localization, August 2021.
  6. 6. Ali Poyac-Clarkin, Christy Martins, Lynn Carter and I are writing a paper on the topic of localization in conflict settings, to be published in May.
  7. 7. Center For Global Development Working Papers: What Is “Country Ownership”? A Formal Exploration of the Aid Relationship. William Savedoff. October 2019
  8. 8. A New Vision for Global Development https://www.usaid.gov/news-information/speeches/nov-4-2021- administrator-samantha-power-new-vision-global-development
  9. 9. This target excludes other types of U.S. Official Development Assistance (ODA) such as financing to International Public Organizations, PEPFAR funds, and humanitarian assistance.
  10. 10. Larry Garber and Gretchen King are co-authors of the USAID-funded Four Approaches Final Report.
  11. 11. Community-Driven Development: https://www.worldbank.org/en/topic/communitydrivendevelopment#1
  12. 12. Grand Bargain Commitment: https://interagencystandingcommittee.org/grand-bargain
  13. 13. Aid reimagined https://medium.com/@aidreimagined
  14. 14. Conversations with Joyce Moock and Gary Toenniessen, March-April 2021
About the Author George Ingram Senior Fellow – Global Economy and Development, Center for Sustainable Development Acknowledgments This report addresses the obstacles to U.S. government, specifically U.S. Agency for International Development (USAID), implementation of the imperative to transition development programs to being locally led. The author is especially appreciative of the comments on an early draft of the paper by Patrick Fine, Justin Fugle, Tony Pipa, Susan Reichle, Jenny Russell, and Don Steinberg, and to the participants in an April 18, 2022 roundtable, 15 of whom have written commentaries on localization that comprise the second part of this publication.

About Global Economy & Development

Founded in 2006, the Global Economy and Development program at the Brookings Institution aims to play its part to ensure that the future of globalization is one of inclusive growth and shared prosperity. With an interdisciplinary team of experts, Global provides thought-leadership, cutting edge research, and innovative policy solutions to achieve a more equitable global economic system for sustainable prosperity, drawing on the core strengths of Brookings—authoritativeness, independence, depth of practical expertise, and unparalleled convening power. For more, visit www.brookings.edu/global.

About the Center for Sustainable Development

Launched in 2020, the Center for Sustainable Development at Brookings generates leading research and insights to advance global sustainable development and implement the Sustainable Development Goals within and across all countries. To learn more visit: www.brookings.edu/SustainableDevelopment.

      
Kategorien: english

Coping with high inflation and borrowing costs in emerging market and developing economies

5. Mai 2022 - 21:16

By Jongrim Ha, M. Ayhan Kose, Franziska Ohnsorge

As the old adage goes, all good things come to an end. Gone are the days of low inflation and easy global financial conditions. Many emerging market and developing economies (EMDEs) have recently been experiencing an unpleasant combination of elevated inflation and rising borrowing costs. At 8.5 percent in March 2022, inflation in EMDEs has reached its highest level since 2008 (Figure 1). In advanced economies, inflation is now at its highest level since 1991. Global financing conditions are tightening, as major advanced economy central banks are expected to raise policy interest rates at a faster pace than previously anticipated to contain inflationary pressures.

Figure 1. Consumer price index inflation, 1990 – 2022 

Sources: Ha, Kose, and Ohnsorge (2021); World Bank.
Note: Last observation is March 2022 and includes year-on-year group median inflation for 81 countries, of which 31 are advanced economies and 50 are EMDEs.

Amid deteriorating growth prospects, EMDEs will likely continue grappling with elevated inflation and more expensive borrowing terms. To cope with high inflation and borrowing costs, policies in these economies will require careful calibration, credible frameworks, and clear communication. This is easier said than done, especially when fiscal space is limited and financial vulnerabilities are prominent. However, sticking to certain principles of policymaking can pay large dividends in making these economies more resilient as they navigate uncharted waters.  

Monetary policy: Tighten with care

For monetary policy, calibrating policy levers within a clear and predictable framework to get ahead of inflation without stifling the recovery will be key. Many EMDEs had already started tightening monetary policy well before the war in Ukraine to stem inflation pressures. The average policy rate in EMDEs is now higher than the average during the 2010s (Figure 2).

Figure 2. Monetary policy rates in EMDEs, 2019 – 2022

Sources: Bloomberg, Haver Analytics, World Bank.
Note: Sample includes 22 EMDEs and nominal policy rates using real GDP as weights. Last observation is March 2022.

Going forward, communicating monetary policy decisions clearly, leveraging credible monetary frameworks, and safeguarding central bank independence will be critical to manage the cycle in these economies. To reinforce the anchor of low inflation expectations, policymakers need to communicate efficiently—not only with financial markets but also with households and firms. 

Financial policy: Contain risks

On the financial side, policymakers need to rebuild reserve buffers and realign prudential policy to prepare for possible financial stress. During the pandemic, at least three-fourths of EMDEs implemented regulatory forbearance measures to prevent a credit crunch. Many governments supported lending to firms to address liquidity constraints through loan guarantees and payment moratoria.  

In light of these earlier interventions, banking system exposures to exchange rate and rollover risks need to be monitored carefully and, if necessary, mitigated through macro- and micro-prudential policies. Credit quality and nonperforming loans need to be reported transparently such that prompt corrective action can be taken. Banks’ capital and liquidity buffers need to be sufficiently sound to be able to absorb shocks. If deployed appropriately, reserve buffers can help stem temporary exchange rate pressures. 

Fiscal policy: Commit to credible plans

Fiscal policy challenges have been building in many EMDEs. Fiscal positions deteriorated sharply in the pandemic, and these deteriorations have not been fully unwound by 2022. Despite a strong initial rebound in growth last year, EMDE fiscal deficits are still 1.1 percentage points of GDP wider than in 2019, and government debt is 10 percentage points of GDP higher (Figure 3). In part to contain the fiscal deteriorations, EMDEs already tightened fiscal policy in 2021, unwinding about one-half of the 2020 fiscal impulse.

Figure 3. Government debt and fiscal deficits in EMDEs, 2019 and 2022 

Sources: International Monetary Fund, Kose et al. (2021), World Bank.
Note: Aggregates weighted with GDP in U.S. dollars for 152 EMDEs (government debt) and 155 EMDEs (deficit). LHS stands for left scale and RHS stands for right scale.

The pace and magnitude of further withdrawal of fiscal support must be finely calibrated and closely aligned with credible medium-term fiscal plans. Moreover, policymakers need to address investor concerns about long-run debt sustainability by strengthening fiscal frameworks, enhancing debt transparency, upgrading debt management functions, and improving the revenue and expenditure sides of the government balance sheet. Inflation expectations are unlikely to be well anchored if there are concerns about fiscal sustainability due to fears that monetary policy is constrained, especially in cases where high interest rates imply unstable public debt dynamics

If the recent surge in energy and food prices persists, EMDE commodity exporters and importers will face diverging policy challenges. Commodity importers may need to contain inflation pressures, which could weigh on growth, while controlling challenges associated with fiscal and external imbalances resulting from high commodity prices. Commodity exporters may need to keep inflation in check amid strong growth on the back of rapidly expanding resource sectors. Some of the windfalls from higher commodity prices need to be invested to enhance long-term growth—including human capital—instead of being used for distortive energy subsidies. 

Other interventions: Avoiding distortive measures

Export restrictions and disrupted global food markets due to the war are expected to contribute to rising global food inflation. The use of trade policy interventions and price controls to insulate domestic markets from food price shocks could compound the volatility of international prices and lead to even higher domestic prices. To address the volatility in food prices, EMDE policymakers need to strengthen social safety nets and enhance the resilience of food systems, while refraining from counterproductive price control measures. Price controls were pervasive in EMDEs even before the recent surge in commodity prices. These controls tend to distort markets and have adverse consequences for growth and poverty reduction, which often prove difficult to roll back after a crisis. If political considerations make price controls or untargeted subsidies unavoidable, their longer-term damage can be contained if they are introduced with automatic sunset clauses.

      
Kategorien: english

Jacob Taylor

4. Mai 2022 - 22:58

By Jeannine Ajello

Jacob Taylor is a fellow in the Center for Sustainable Development. He is a core secretariat member of the 17 Rooms initiative, a new approach to catalyzing action for the Sustainable Development Goals. His research focuses on mechanisms for advancing collaboration and collective intelligence for global-scale sustainable development challenges across disciplines, sectors, and geographies. 

Jacob is a cognitive anthropologist by training with a research background in collective intelligence and social cohesion in human systems and high-performing teams.  Within the 17 Rooms initiative, he is responsible for codification of insights and innovations across both the global flagship process and the bottom-up 17 Rooms-X community of practice. Before joining Brookings, he conducted applied research in several contexts, including most recently as a research fellow at the Asian Bureau of Economic Research at the Australian National University, and as a consulting scientist to a DARPA research program for developing technology for team intelligence and performance.  

Jacob has a regional research focus on China, having spent several years studying, working, and conducting ethnographic research in Beijing with the local Chinese sports community. He himself has a background in professional team sport, representing his native country of Australia in Rugby 7s, 2009-2013. He received a B.A. (Honors) from the University of Sydney and an M.Sc. in cognitive and evolutionary anthropology and D.Phil. (Ph.D.) in anthropology from the University of Oxford, where he studied as a Rhodes Scholar. 

Affiliations 

Asian Bureau of Economic Research, Crawford School of Public Policy at the Australian National University, visiting research fellow 

      
Kategorien: english

How can better climate data empower people to act?

28. April 2022 - 22:25

By Wolfgang Fengler, Lukas Vashold

Addressing climate change is quintessentially a collective action problem. My individual actions will not make a difference if everyone else maintains their current lifestyles and behaviors; but if each of us waits for others to change, nobody ever will, and we will not make any progress. Climate change is such an overwhelming problem—arguably the greatest of our time affecting all areas of life—that it’s easy to get discouraged given the magnitude of the challenge.  

This is why we need to personalize climate change in a way that makes it clear that we all have a part to play and quantify our actions, so that we are empowered to act. In this blog, we attempt to outline the quantitative parameters to break down the problem.  

The starting question: How much are we emitting?

The question appears simple, but the answer is not straightforward. Where and how we live makes a huge difference in the size of our climate footprint.

In 2022, the global population is projected to release an estimated 58 gigatons (GT) of greenhouse gas emissions (including all forms of emissions—CO2 as well as non-CO2 gases such as methane). One GT is 1 billion tons. If we divide 58 GT by 7.85 billion people, we get 7.4 tons per person per year, which is the climate footprint of the average world citizen.

In a Western economy, it is currently hardly possible to be climate neutral, i.e., to have zero net emissions. Even with someone who drives an electric car (or no car at all), doesn’t travel by plane, and eats no meat, there will still be significant emissions. If that person lives and works in a building, showers several times a week, and uses public transportation, emissions occur in ways we typically don’t think about: the cement industry (for the material used to construct a building), the chemical industry (that produces soap and shampoo), or the steel industry (that supplied the material for the public buses and trains). 

Broadly speaking there are five main drivers of our emissions. Here is how they add up to the average 7.4 tons a typical world citizen emits: 

  • Electricity (2.7 tons). More than a third of overall emissions are caused by the production of energy, mostly in the form of electricity. Coal is responsible for more than half of all electricity-related emissions.
  • Industry (1.8 tons). This includes the fabrication of everyday products such as toiletries and newspapers, durables made of cement, or the metals used in buildings. 
  • Transport (1.1 tons). Road transportation—cars, buses, and trucks—causes the largest share of emissions in this sector, around 0.8 tons per person. The remainder comes from ships, planes, and railways.
  • Agriculture (1.5 tons). The production of food causes around 10 percent of global emissions, with meat production contributing the highest share, at 0.46 tons per person. Land conversion currently adds 0.7 tons per person, but it could be an important driver of emissions reductions in the future through afforestation and reforestation, for example.
  • Buildings (0.4 tons). Outside of construction alone, buildings also need to be heated and cooled, causing additional and continuous emissions. 

People in rich countries emit more than residents of poor countries. However, there are also significant differences between countries of similar incomes. For instance, an average French person emits four times less than an average Australian (see Figure 1 below). Among the G-20 economies, the largest emitters on a per capita basis are Australia (26 tons), Saudi Arabia (25 tons), Canada (24 tons), the U.S. (19 tons), and Russia (16 tons). China, Germany, and South Africa are emitting substantially more than the world average, while a number of European economies, as well as Mexico and India, are emitting slightly less than the global average.

Figure 1. The average Australian emits around 8 times more than her Indian counterpart

Source: World Data Lab projections based on data from Minx et al 2021.

The next question is:

Can we create a world with net zero emissions while maintaining strong economic growth so that everyone can thrive and prosper?

As highlighted by numerous Intergovernmental Panel on Climate Change (IPCC) reports and leading climate researchers, it will be extremely challenging to bring the world to a net-zero emissions path because it would require deep changes in our economic system and our individual behavior. Even under conservative projections, the global population is likely to reach about 9 billion people by 2050. On average, living standards will be higher in the future than today. This is good news for the fight against poverty, but potentially bad news for the climate—unless we make fundamental changes in how economies are organized.  

So, coming back to our initial conundrum: How do we begin to make change?

An important starting point is to generate better and more actionable data that allows each and every one of us to link individual and collective actions and choices to tangible results. You may be wondering how data alone can help, so let us illustrate. 

First, to prioritize action, we need to get on top of the main drivers of global emissions to understand the significance of key sectors and specific countries. We also need a better understanding of where emissions are still going up and where they are going down (some 40 countries have already started to reduce their climate footprint, albeit mostly from a too high level).  

Second, new technologies and better data can be leveraged to tackle specific emission sources. For example, the World Resource Institute’s Global Forest Watch developed a sophisticated data model to monitor and react to forest fires in Indonesia in real time, showcasing the ability for actionable mitigation scenarios and response. 

Third, better data can help us manage logistics better. Today, many resources are wasted because we produce, transport, and store products very inefficiently (to places where they won’t be needed or way in advance). Imagine the resources that could be saved if we could produce, transport, cool, or heat consumer products exactly where and when they are needed. This “just-in time” production—spearheaded initially by Toyota—makes sense for business and protects our climate. 

Providing better climate data that can be leveraged concretely to change our vision and our action is the fundamental ambition driving the development of the World Emissions Clock. We look forward to presenting it in a subsequent installment of our blog.

Acknowledgements: Many thanks to the German Federal Ministry for Economic Cooperation and Development (BMZ) for the financial support to develop the World Emissions Clock, alongside IIASA and other scientific partners. Thanks also to Cécile Schneider (GIZ) for valuable inputs. Any questions on the data model should be directed to lukas.vashold@worlddata.io.

      
Kategorien: english

Resolving gender gaps in ICT is critical for a more sustainable future

27. April 2022 - 15:51

By Khadim Hussain, Nasrin Siddiqa

“Empowering girls to choose a career in ICT is not just good for girls and their families, it can be a major accelerator of socio-economic development at the national level.”

– Brahima Sanou, Director, ITU Telecommunication Development Bureau

As we approach the annual “Girls in ICT Day,” the United Nations International Telecommunication Union (ITU) is highlighting the need to promote career opportunities for girls and women in the world’s fastest-growing sector. As the world faces an estimated skills shortfall of over two million jobs in the information and communication technology (ICT) sector within the next five years, ITU hopes to inspire both government and the private sector to find ways to equip girls and young women with the skills they need to become ICT professionals. 

Though ICT is a key catalyst for women’s employment and socioeconomic empowerment, most girls in Bangladesh and Pakistan are still excluded from advances in digitalization. If Bangladesh had provided the mostly female ready-made garments sector workforce with an ICT education, this nation could now be a developed one. Now, with the next wave of technological revolution upon us, it is critical that we learn from this lesson and build a skilled ICT female workforce. However, there are significant challenges, as ICT access and education remains urban-centric, gender exclusive, and expensive.  

ICT in Pakistan and Bangladesh  

In Pakistan, girls and youth with disabilities suffer from unequal access to the internet and smartphones. In fact, Pakistan reports some of the widest mobile gender gaps in the world. According to a 2021 report, women are 38 percent less likely than men to own a mobile phone, 49 percent less likely to use mobile internet, and 94 percent less likely to own a mobile money account. Similarly, in Bangladesh, 96 percent of women in villages and 87 percent in cities have never used a computer and 87 percent of rural and 77 percent of urban women have never used the internet; while 57 percent of the urban female population have their own mobile phone, this percentage is merely 42 among rural females. 

Sixty-five percent of children entering primary school today will have jobs that do not yet exist; the jobs of the future will be driven by technology and innovation. Continuing to exclude millions of young women in Bangladesh and Pakistan from developing their technological skills will make it impossible to meet the challenge of the fourth industrial revolution.  

Learning ICT skills at a young age sets girls up for economic empowerment. Girls and young women who learn coding, app development, and computer science will not only be well placed for a successful career in the ICT sector but will also possess the ICT skills that are rapidly becoming a strong advantage in just about any field they might choose to pursue.  

Fortunately, initiatives to support girls and young women’s participation in ICT have multiplied in recent years. Collaborations such as UNESCO’s partnership with the Pakistan Telecommunication Authority on digital inclusion, gender mainstreaming, and e-government for women’s empowerment or the U.N.’s work with organizations a2i and Plan Bangladesh are providing support to enhance accessibility, affordability, and digital skill development for women and girls in ICT. 

The Echidna Global Scholars at Brookings are also leading the way, thinking globally and contributing locally. Education & Cultural Society—a Bangladeshi nongovernmental organization founded by 2019 Echidna Scholar Nasrin Siddiqa—is working to build community-based STEM hubs, STEM villages, and robotics clubs in rural areas to inspire girls and young women to pursue STEM careers. To date, over 50,000 girls from the secondary-school level and 10,000 from the tertiary level, as well as 2,000 female STEM teachers have participated in these STEM-based endeavors and career counseling. Moreover, in a new program started in 2021, hundreds of underserved women are getting ICT training to support their small and medium enterprises.  

In Pakistan, the nonprofit GRACE Association Pakistan—founded by 2012 Echidna Scholar Khadim Hussain—is providing opportunities to girls and young women ages 13-25 to become proficient in English and enhance their ICT skills through virtual programs and enrichment activities via Zoom, WhatsApp, Canvas, and GoogleMeet, among others. To promote more inclusive participation, GRACE provides tablets with SIM cards and 4G LTE (long-term evolution) service and ensures equal gender participation in its programs. Around 300 girls ages 17-25 have graduated from a series of six-month intensive courses from 2019 to date. They now serve as community volunteers or are self-employed, bringing their skills and knowledge to youth in their respective village communities in the northern parts of Pakistan. One remarkable aspect of GRACE’s endeavors is that the trained girls are using their ICT skills and knowledge to solve domestic challenges and improve well-being and prosperity for their families and communities. 

In line with 2022’s Girls in ICT Day theme of “Access & Safety,” these initiatives in Pakistan and Bangladesh demonstrate how local organizations can promote safe and reliable access to the internet, digital tools, and ICT skill development and thus enable girls and women to thrive in STEM education and careers.  

The world needs to come together to resolve gender gaps in the use of technology and the digital divide in low- and middle-income countries to achieve a more equitable and sustainable future. If nations as a whole are to benefit from the fourth wave of technological revolution, then interest, accessibility, and skills must increase among the entire population. The United Nations and stakeholders in Bangladesh and Pakistan must bolster investments and engage with local nongovernmental and civil society organizations well situated to address the interconnected issues of poverty, place, and gendered social norms that limit access and use of ICT among girls and young women.

      
Kategorien: english

Mainstream economic policy must factor climate change into its growth calculus

26. April 2022 - 20:04

By Vinod Thomas

The scientific community is at the forefront in raising the alarm over climate change and providing incontrovertible evidence on the link to human activity. Yet economic policies to decarbonize economies continue to lag behind the urgency of the warnings. Indeed, the lukewarm response of the economic policy community is part of the disconnect between knowledge and action in addressing the climate crisis. Some excellent research notwithstanding, mainstream economics has not factored climate change into its growth calculus. Part of the reason is the fear that strong climate action will sap short-term economic growth.  

Climate action is not costless. By one estimate, investments of an additional $3.5 trillion annually will be required to reach net zero carbon emissions by 2050 by limiting global warming to 1.5 degrees Celsius to reduce the chances of catastrophic climate events. The message from the economics of externalities or spillover harm is that the cost of action is far lower than the carbon and climate cost in the case of inaction

To move the needle on climate action, mainstream economics needs to get into step with the climate science.

In finding solutions to daunting problems, be it HIV-AIDS or terrorism, a key is evidence linking cause and effect. Scientists have been clear in connecting the dots in the climate change ecosystem—greenhouse gas emissions, rising temperatures, sea level rise worsening floods and storms, and heatwaves aggravating fires (see Figure 1)—but cautious in attributing individual events to global warming. But new studies are doing just that—concluding that the extreme heatwaves in Siberia and the Pacific Northwest in 2021 would not have occurred without climate change. Or that climate change made the 2021 extreme rains and floods in Belgium and Germany more likely and more intense. 

Figure 1. Connecting the dots in the climate change ecosystem

Source: Author’s illustration. 

The economics of negative externalities call for taxing carbon emissions. While around 40 countries have initiated carbon pricing, powerful lobbies continue to block climate action. Big oil has been misleading the public about the damage from greenhouse gases since the 1970s. Fossil fuels enjoy large subsidies, which—inclusive of their estimated damage to health—add up to $5 trillion a year. China, Japan, and the United States are the largest financiers of new fossil fuel plants. Multilateral development banks (MDBs) have also invested in fossil fuel projects. 

There are also downward spirals, rather than self-correcting forces, inherent in the climate crisis. For instance, energy shortages related to global warming can ironically lead to more reliance on fossil fuels. Texas’ electricity failure in 2021 was partly caused by unseasonably cold weather freezing natural gas pipelines. War-triggered petroleum price rises exacerbate energy concerns and motivate policy reversals.  

The relative absence of economics at the policy table is an opportunity lost. At the last count, the top economic journals still barely publish articles on climate change. The widely cited Quarterly Journal of Economics had not published any and the quantitative Econometrica—only two. A Nobel Prize in economics went to Nordhaus for “integrating climate change into long-run macroeconomic analysis,” but the cited work and its follow up did not recognize exponential damages, tipping points, and irreversibility.  

Underlying this error of omission is valuation centered on GDP, a gross measure of production that does not net out environmental and biodiversity damages. Making no allowance for carbon intensity is a signal to maximize GDP growth regardless of the damages. The “East Asia miracle” implicitly celebrated fast GDP growth at the expense of ecological destruction. Rapid growth in China and India, as in advanced economies earlier, has worsened the environment. Southeast Asia has the highest rate of increases in emissions, despite being the most climate vulnerable. 

Once conventional economic growth is adjusted for CO2 emissions per capita, a truer picture emerges that can help guide policy. One such measure is the planetary pressures-adjusted human development index (PHDI) proposed by the United Nations Development Program to qualify its own human development index (HDI). Country rankings change notably in going from HDI to PHDI—for example, top-ranked Norway falls 15 places, and the U.S.—ranked 17th—drops 45 places. 

The World Bank has estimated national wealth as the sum not only of produced capital and human capital but also natural capital for 146 nations from 1995 to 2008. The United Nations Environment Program (UNEP) also estimates inclusive wealth as the “social value of natural capital, human capital and produced capital” of 135 countries’ during 1990-2014. UNEP shows a larger adjustment for environmental loss, presumably since the World Bank’s measure, according to the report, does not subtract the social cost of carbon from fossil fuels, nor include the value of carbon sequestration from conserving ecosystems. 

The crucial question is whether economic measures like the World Bank’s Country Policy and Institutional Assessment adjust for environmental losses. And whether measures like the Doing Business index rank performance on the wrong premise that the less regulation, including in environmental and social protection, the better.  

Growth analysis rightly emphasizes productivity in addition to physical and human capital accumulation as well as worker participation, but ignores environmental sustainability. The World Bank and the International Monetary Fund, which have produced reports on climate change, must integrate climate impacts in growth projections. A big role for the MDBs could be in helping to address global public goods, like the environmental health across countries.  In this case, they could ramp up lending for climate mitigation and adaptation, as some promise to do. The World Bank has a new Climate Change Action Plan that, among other things, aims to align operations of the International Finance Corporation to the Paris Climate goals by 2025.  

To move the needle on climate action, mainstream economics needs to get into step with the climate science. Growth economics—influential in country policy—could integrate climate change and the environment. It is time to complement, if not replace, gross domestic product with a measure of quality growth that is net of climate cost damages.  

 

      
Kategorien: english

COVID-19’s impact on learning losses and learning inequality in Colombia

21. April 2022 - 19:21

By Emiliana Vegas

1. Introduction

The COVID-19 pandemic’s toll on humanity worldwide cannot be overstated. To date, over 6 million deaths across the globe have been documented. Economic growth globally slowed down, and many more individuals fell into poverty. The World Bank estimates that, due to the pandemic, about 97 million more people are living in poverty, and the global poverty rate will increase from 7.8 to 9.1 percent. Even as the global economy is beginning to bounce back, the pandemic will lead to rising poverty and widening inequality across the world.

Meanwhile, leading global institutions as well as governments have been primarily focused on mitigating the spread of COVID-19 through vaccines, tests and treatments, and fiscal and monetary policies to set the conditions needed for private investment, job creation, and economic growth. The urgent need to implement policies and programs to mitigate the lasting impacts of the COVID-19 school closures on learning has received much less attention globally.1

In this brief, I focus on Colombia, which, like most countries globally, closed its schools in March of 2020. As throughout most of Latin America, Colombian schools remained closed for over a year, and they only began to gradually reopen in July 2021. I explore the pandemic’s impact on student learning by analyzing trends in student achievement in national assessments from 2015 to 2019 and comparing them with student achievement in the same national assessments carried out in 2020 and 2021. I also explore the extent to which students in subnational territories (ETCs)—the equivalent to U.S. states, except some are certified by the national government to have more autonomy in spending than others—with different lengths of school closure periods experienced varying levels of learning losses.

My findings indicate that COVID-19 had a significant impact on student learning in Colombia. The effects were greatest for female students and students from wealthier backgrounds, a surprising finding given that studies from other countries have found that students from socioeconomically disadvantaged households suffered larger learning losses than their peers from wealthier households. A plausible explanation is that in Colombia students from wealthier backgrounds tend to attend better schools. I also find that learning losses due to COVID-19 were lower in ETCs that provided access to in-person schooling sooner.    

 2. Data

I use student achievement data from Colombia’s National Institute for Education Evaluation (ICFES). Since 2000, Colombian students in 11th grade (the last year of mandatory education) are required to sit for the Saber 11 assessment. The one exception was 2020, when due to COVID-19, the assessments did not take place.

Saber 11 evaluates students in reading, math, civic competencies, natural sciences, and English language, and it also collects background information on students’ socio-demographic variables. The subject assessments are scored on a scale of 0-100 points, and thus the maximum global score for all subjects is 500 points. I constructed a panel that includes a total of 2,754,862 observations of Colombian students’ test scores in all Saber 11 subjects for the years 2015-2021 (except 2020). In estimating the impact of COVID-19 on student learning, I included variables to account for differences by student socioeconomic background, gender, and the ETC of his or her school.  

3. Findings Impact of COVID-19 on student learning

I analyzed the pandemic’s impact on student learning by comparing student learning outcomes as measured by the Saber 11 national assessments during five years prior to the pandemic (2015-19) and two years after the onset of COVID-19 (2020-2021). Overall, the pandemic led to a 0.2 standard deviation decrease in average Saber 11 scores from previous years (see Table 1). While learning losses occurred in most of the subjects, the greatest losses were in English, social sciences, and critical reading (see Appendix Table A1). 

Table 1. Impact of COVID-19 on standardized Saber 11 test scores, by subject

Source: Author’s analysis using Saber 11 national assessments.

Female students suffered greater learning losses (on average, equivalent to 0.2 standard deviations less in Saber 11) than their male counterparts across all assessed subjects. Interestingly, students from socioeconomically advantaged households experienced greater learning losses than their peers from poorer backgrounds, ranging from 0.4 to over 0.6 standard deviations less in the Saber 11 assessments (see Appendix Table A1). A plausible explanation is that in Colombia, wealthier students are more likely to attend higher quality schools, and thus the nationwide school closures affected them more. This finding is consistent with recent research by Barrera, Quintero, Cañizares, and Arango (2022).

Impact of COVID-19 on student learning by differences in the length of school closures across subnational entities 

Due to the federal nature of Colombia’s education system, subnational entities had decisionmaking authority over the timing of school reopenings. The resulting variation in length of school closures makes it possible to estimate the extent to which in-person schooling contributes to higher student achievement.

Figure 1. Relationship between share of students in school due to COVID-19 and change in learning, by ETC (2020-2021)

Source: Author’s analysis using Saber 11 national assessments.

As shown in Figure 1, the data suggest that students in ETCs that reopened schools sooner suffered lower levels of learning loss. An increase of 10 percentage points in the share of students who had access to in-person schooling is associated with an increase of one-half point in Saber 11 average scores (see Appendix Table A2).

4. Discussion 

The impact of the COVID-19 school closures on student learning in Colombia and the rest of the world is deeply troubling. Ample research has shown that student learning is associated with higher earnings, lower unemployment, and increased economic growth for entire nations.2 Prior to COVID-19, Colombia ranked 61st among 77 participating countries in the Organization for Economic Cooperation and Development’s 2018 Program for International Student Assessment (PISA), and the COVID-19 school closures threaten to dial back years of progress in expanding access to quality education in Colombia and in much of the globe.

Across most subjects assessed among students in the last year, I found COVID-19 had significant impacts on student learning in Colombia. However, female students suffered greater learning losses than their male peers. Notably, students from higher-income backgrounds suffered greater learning losses than their peers from lower-income households. This finding suggests a reduction in learning gaps in Colombia across socioeconomic status.   

My findings shed light on the role of in-person schooling on student learning. First, I found that subnational governments that made in-person schooling accessible to more students had better student learning outcomes in 2021. Importantly, the findings suggest that the quality of in-person schooling matters, as Colombian students from higher-income households—who tend to attend higher quality (often private) schools then do students from poor households—suffered greater learning.

A clear policy implication is that keeping schools open should be a priority for Colombia. Additionally, improving the quality of schools, especially of those serving disadvantaged populations, is critical for Colombia to ensure that all students achieve the skills they need to thrive.

Download the full brief»

      
Kategorien: english

A conversation on Africa’s debt

21. April 2022 - 18:26

On Friday, January 28, the Brookings Africa Growth Initiative, in partnership with the Centre for the Study of the Economies of Africa (CSEA), convened a conversation with leading experts from foundations, multilateral institutions, nongovernmental organizations, and the private sector to discuss the issue of Africa’s debt.

Major themes of the discussion included the viability of debt swaps for development and carbon pricing as financing instruments to undo the pernicious effects of the pandemic as well as discussions around the gendered impacts of the pandemic-related macroeconomic policies.

Participants made three presentations. The first explored the wide-ranging effects of the pandemic on debt sustainability. Debt levels and debt servicing have increased while revenues and exports have decreased, leading to pressure on balance of payments. Importantly, over the last 15 years, the composition of Africa’s debt has changed noticeably, with emerging market economies borrowing predominantly from private creditors and nontraditional bilateral creditors such as China.

In the second presentation, speakers proposed an outline for a paper exploring the potential for debt swaps for development in Nigeria. In the third presentation, contributors explored five case study countries (Ethiopia, Ghana, Kenya, Nigeria, and South Africa) and their particular financial vulnerabilities, including reliance on external borrowing, tax burden, recent growth in public debt, fiscal risks, monetary policy, credit ratings, and more.

The presenters argued that Africa’s heavyweights, Nigeria and South Africa, were better positioned to weather their debt crises than the other three countries (who for various reasons rely on external financing), but nonetheless had financial vulnerabilities that required attention. Nigeria has exceptionally low tax revenue mobilization and South Africa’s debt service-to-revenue ratio poses risks for a liquidity crisis.

Following each presentation, participants reflected on the findings reported, shared their thoughts on the particular challenges facing these and similar African economies, and debated policy mechanisms and steps forward to manage debt—both domestic and foreign.

Agreement was over the need to develop a concept note and expand the number of case study countries. These case studies would form the basis for a compendium on the state of play of Africa’s debt in the aftermath of the COVID-19 pandemic. 

      
Kategorien: english

Yemen in the shadow of Russia’s war on Ukraine

18. April 2022 - 22:22

By Omer Karasapan

On April 1, 2022, the warring parties in Yemen agreed to a U.N. brokered two-month truce. By April 7, under Saudi and UAE tutelage, Yemeni President Hadi had transferred power to a presidential council uniting forces opposed to the Iran-supported Houthi rebels with a view to facilitate negotiations between the two warring sides. The Saudi blockade on fuel imports was called off and Houthi-controlled Sanaa will be allowed limited commercial flights. The two Gulf countries also deposited $3 billion in the Central Bank of Yemen.  

This is a welcome respite for Yemen, which the U.N. terms the world’s worst humanitarian crisis. The war, now in its eighth year, recently escalated. Since January 2022, the Saudi coalition had pushed back Houthi advances in Marib and Shabwa provinces even as mostly civilian infrastructure and facilities in the Emirates and Saudi Arabia came under attack from missiles and drones linked to Iranian assistance. Air strikes by the coalition have hit Sanaa—the main port of Hodeida—and other areas causing significant civilian casualties, a recurring tragedy since 2015.  

The toll on the country and its people has been horrendous. In January 2022 alone there were 650 civilian casualties, the highest toll in three years, including a Saudi coalition air strike on a prison in Saada that killed and wounded over 300 people. The punishing Saudi air and sea blockade on Yemen was in its seventh year, with Saudi Arabia’s further restrictions on fuel imports since January 2021 worsening humanitarian conditions. Hardest hit were health and education facilities, which were already in dire condition. Half of Yemen’s hospitals are out of commission and over 2 million children are out of school. The devastated health system and damages to water and sanitation facilities have led to the rapid spread of diseases such as cholera, diphtheria, measles, polio, and dengue. The United Nations Development Program says the war has killed 377,000, with 150,000 directly tied to the war and the rest to hunger and diseases. Most of the dead are children.

Of Yemen’s 30 million people, 24 million are under Houthi rule. The rest are under government control and smaller numbers are under various groups, including UAE-backed groups, which oppose both the Houthis and the government. Some 17.3 million Yemenis need food aid—a number that will likely increase to 19 million in the coming months. Some 7.3 million could be at emergency levels of hunger by December 2022. The World Food Program (WFP) says 5 million risk slipping into famine-like conditions. Around 2.2 million children face malnutrition, including over 500,000 with life-threatening severe acute malnutrition. Some 1.3 million pregnant or nursing mothers are acutely malnourished. Nearly 70 percent of Yemenis—20.7 million—rely on humanitarian assistance to survive. It is estimated that 80 percent of the population lives below the poverty line, with some two-thirds in extreme poverty.

This tragedy is likely to worsen as a result of the war Russia unleashed against Ukraine. Both countries together account for 30-40 percent of Yemen’s wheat imports. For Yemen which imports 95 percent of its overall needs, this will mean higher prices for grains, especially wheat, but also fuel and fertilizers. Food prices in Yemen had already doubled in 2021 and according to the International Commission of the Red Cross (ICRC), they increased by 150 percent since the onset of the war in Ukraine. With the Black Sea effectively choked off and most Black Sea wheat going to the Middle East, the hike in wheat prices will also have an impact on regional stability. Internationally, wheat prices have gone up 25-30 percent since the start of the war and continue at historical highs, with bigger spikes in local markets as in Yemen. Worryingly, Ukraine is unlikely to come back soon as a major agricultural exporter. Planting season is already here, and as a good portion of Ukraine remains too dangerous to engage in farming, many farmers are either fighting or displaced.   

The war in Ukraine also means that donor funds will become scarcer even as donor focus on Yemen was already weakening. Germany, for example, will be spending more on defense and Ukrainian refugees and less on aid elsewhere. Just a few months after WFP had to cut food rations for 8 million Yemenis, a March 16 Yemen donors conference pledged only $1.3 billion versus the $4.2 billion requested. Although 36 countries pledged funds, including the U.S. ($585 million), EU countries ($407 million), and the U.K. ($115 million)—this was the sixth year that Yemen’s Humanitarian Response Plan failed to be fully funded.  

Saudi Arabia and the UAE, which respectively provided $350 million and $230 million in 2021, did not pledge this year, but the recent truce means that aside from the $3 billion deposited in the now presidential council-controlled Central Bank, only an additional $300 million in humanitarian assistance has been provided.  

There are available funds in the global financial system to support needy populations and incentivize peaceful solutions. In 2021, the International Monetary Fund (IMF) approved a new allocation of special drawing rights (SDRs) to deal with the COVID-19 crisis. The extra $650 billion of reserve assets to be injected into central banks is an important boost, especially for poorer countries. However, the vast majority of funds, allocated on the basis of each country’s IMF shares, will go to rich countries that don’t really need them. 

There have been calls to deploy these funds to offset food and fuel price hikes in vulnerable countries. One model might be for richer countries to lend their SDR allocations to vulnerable countries via the IMF’s concessional arm, the Poverty Reduction and Growth Trust, at zero interest rates. Other modalities, such as routing these funds to the World Bank’s concessional arm—the International Development Agency—are also possible. While nothing has happened as yet, there are commitments from the G-20 and G-7 to channel $100 billion of SDRs to developing countries. The funding is there, as are millions of vulnerable people—it’s a matter of bringing the two together and lessening the potentially catastrophic impact of Russia’s war on Ukraine on Yemen and elsewhere.   

      
Kategorien: english

Raising the standard: Time for a higher poverty line in India

14. April 2022 - 20:53

By Surjit S. Bhalla, Karan Bhasin, Arvind Virmani

The time has come for India to raise its poverty line from the existing extreme poverty line of $1.90 per person per day to the lower-middle income (LMI) poverty line of $3.20, a level some 68 percent higher. This may seem odd to aspire to in what is not even the first post-pandemic year, but that is the main message coming out of our recent IMF working paper “Pandemic, Poverty and Inequality: Evidence from India.”  

No one should be surprised at this need for a higher poverty line. Per capita GDP growth in India averaged 3.5 percent per annum for twenty years from 1983 to 2003. In 2004, the official poverty line was raised by 18 percent, when the head count ratio (HCR) was 27.5 percent. Rapid growth (5.3 percent per annum) and an improved method of measurement of consumption (the modified mixed recall period (MMRP) rather than the Uniform Recall Period (URP)), resulted in the HCR reaching the low teens in 2011-12. The poverty line should have been raised then, as Bhalla (2010) argued. Most countries change from the concept of absolute poverty to relative poverty as they get richer, and India should too. Relative poverty—subject to minor debate—is mostly chosen to mean an HCR level of around a quarter or a third of the population. Hence, the$1.90 poverty line was already too low in 2011-12 and is extremely low today.

The HCR of the $1.90 poverty line (Figure 1) has shown a steep decline since 2004—from approximately a third of the population in 2004 to less than 1.5 percent in 2019. These numbers are lower than those shown in the World Bank’s Povcal database, the most commonly used source, because Povcal does not correct for the misleading uniform recall period used or for the provision of food subsidies.

Figure 1. The poverty rate in India steeply declined starting in 2004

Source: NSS 2011-12 MMRP data; Private Final Consumption Expenditure (PFCE)  growth rates for estimates of monthly per capita consumption; authors’ calculations.

By our estimates, in the pre-pandemic year 2019, extreme poverty was already below 1 percent and despite the significant economic recession in India in 2020, we believe that the impact on poverty was small. This is because we estimate poverty (HCR) after incorporating the benefits of in-kind food (wheat and rice) subsidies for approximately 800 million individuals (75 percent of rural and 50 percent of urban residents). This food subsidy was not small and rose to close to 14 percent of the poverty line for the average subsidy recipient (Figure 2) in 2020. This was enough to contain any rise in poverty even in the pandemic year 2020.

Figure 2. Food subsidies contained any increases in poverty

Source: NSS 2011-12 MMRP data; Private Final Consumption Expenditure (PFCE)  growth rates for estimates of monthly per capita consumption; Indian poverty line very close to PPP $1.9 per capita per month; authors’ calculations.

A notable feature of the pandemic response was the provision of a free extra 5 kilograms of wheat or rice per person per month via the Pradhan Mantri Garib Kalyan Yojana (PMGKY) program plus 1 kg of pulses. This was in addition to the existing food transfers of 5 kg per capita per month of wheat or rice at subsidized prices. Total subsidized food grain in 2020 therefore amounted to 10 kg, which is the average per capita level of food (wheat and rice) consumption by Indian citizens for the last three decades.  

The additional food subsidy was a pandemic-centric response. We would conjecture that a cross-country comparative study could show that this policy response was possibly the most effective in the world. Hence, the Indian experience can provide lessons for individual countries, and multilateral agencies concerned with effective redistribution of income.

The last official consumption survey (the basis for poverty measurement) in India was in 2011-12. The following survey conducted in 2017-18 generated results that have not been officially released, on the grounds that the data were not of acceptable quality. Our paper has an extensive discussion on the validity of the evidence regarding this controversial decision where we conclude that the data is indeed unreliable and of extremely questionable quality and hence should not be released. A very recent World Bank April 2022 study by Edochie et. al. suggests support for our conclusion and inference.  

Our paper presents a consistent time series of poverty and (real) inequality in India for each of the years 2004-2020. Our estimate of real inequality (Figure 3) shows that consumption inequality has also declined, and in 2020 is very close to the lowest historical level of 0.28. Poverty and inequality trends can be emotive, controversial, and confusing. Consumption inequality is lower than income inequality, which itself is lower than wealth inequality. And each can show different trends. The levels and trends are different, and intermingled use should carry a warning about this when discussing “inequality.” 

Figure 3. Consumption inequality in India has declined  

Source: NSS 2011-12 MMRP data; Private Final Consumption Expenditure (PFCE)  growth rates for estimates of monthly per capita consumption; authors’ calculations.

Our results are different than most of the commentary and analysis of poverty in India. All the estimates are made in the absence of an official survey post-2011-12. A large part of the explanation for the difference in results is because of differences in definition. Our paper makes a strong case for the acceptance of the official consumption definition (accepted by most countries and also recommended by the World Bank); it should be measured according to the classification of consumption according to the nature of the good or service consumed. This is the MMRP method for obtaining consumption expenditures. The Indian government has officially adopted this method, and the above mentioned “ill-fated” 2017-18 survey was the first time when the National Statistical Organization exclusively measured consumption (and poverty) according to the MMRP definition.

However, many studies continue to rely on the now obsolete uniform reference period (URP or 30-day recall for all items) method. For example, a very recent World Bank study estimated the HCR to be around 10 percent in 2019; it uses the outdated (URP) definition of consumption and does not adjust for food subsidies. Incidentally, both in 2009-10 and 2011-12, the URP and MMRP poverty estimates diverged by approximately 10 percentage points, as did their respective estimates of mean consumption. Thus, given the approximate magnitude of definition differences observed both in 2009-10 and 2011-12 and making the necessary adjustment for food subsidies, the World Bank poverty estimate for 2019 is likely to be very close to our estimate.

Inclusive growth is a very relevant policy goal for all economies. With the pandemic ebbing and the IMF’s expected growth for India rebounding very strongly for three successive years from 2021-23, Indian policymakers will soon be confronted with a policy choice—how long should they keep the extra PMGKY subsidy? This query is part of a huge success story of poverty decline. Additionally, another query pertains to whether policies should move toward targeted cash transfers instead of subsidized food grains.  

In the past, the key argument in support of a policy shift to cash transfers was to reduce leakages, but our results indicate that leakages have substantially been reduced over the last decade even in the in-kind food transfer scheme. In fact, the recent food transfer program was a very successful intervention, especially during the pandemic when supply chains were breaking down and there was heightened uncertainty. Under normal circumstances, cash transfers are likely to be more efficient, and they retain broadly the same allocative outcomes as food transfers. The debate therefore now should be on the efficiency trade-offs associated with use of either in-kind or cash transfers as the key instrument of poverty alleviation. 

These debates are significant given the improvement in targeting of transfers and are consistent with the objective of building a modern social security architecture in developing countries.  

Accumulating all the evidence, the strong conclusion from our work is that Indian policy has effectively delivered both growth and inclusion, and in a fundamental sense has faithfully followed the Rawlsian maximin principle—maximizing the welfare of the poorest.

      
Kategorien: english

From fragility to resilience: Recommendations for implementing the US global fragility strategy

13. April 2022 - 23:18

By George Ingram, Jonathan Papoulidis

The U.S. Global Fragility Act (GFA) is groundbreaking legislation that elevates the challenges of fragility. It calls for the U.S. government to adopt new ways of working to better assist fragile states. The White House recently announced the long awaited list of countries and regions where the GFA will be piloted over a 10-year period, guided by a U.S. global fragility strategy.

The strategy lays out a critical, but also wide-ranging and ambitious framework to help fragile states exit their predicament. The concern is how to implement such an ambitious framework—which includes promoting human rights and the rule of law, as well as strengthening service delivery, governance, and security institutions, and improving early warning mechanisms and natural resource management—while also fostering a more vibrant civil society, private sector, and free media.

To effectively guide these efforts, the U.S. government must focus on three core elements of the strategy that collectively provide for the strategy’s organizing framework, method of planning and operations, and venue for strategic partnerships, dialogue, and collective action.   

These core elements align with an emerging “fragility to resilience” paradigm within the development community, which is focused on achieving more effective foreign assistance and development cooperation.   

We highlight the three major elements below and recommend next steps.  

1. A fragility to resilience approach

The U.S. global fragility strategy is focused on four goals—prevention, stabilization, partnership, and management. While not apparent from these goals, the strategy’s implicit framework for attaining them is rooted in resilience. Resilience is the identification of potential complex risks of crises and the building of absorptive, adaptive, and transformative capacities to address these risks, their root causes, and ensuing crises.

The strategy affirms that the “United States will adopt a multi-pronged, multi-sectoral approach to strengthen the resilience of partner nations.” To do this, it outlines a framework using resilience language: “Fragile countries face an array of often compounding shocks and stresses that can include civil unrest, complex humanitarian emergencies, natural disasters, and economic volatility. The United States will align diplomacy (including public engagement), assistance, investment, defense engagement, and other tools to help partners end protracted or recurrent crises and absorb, adapt to, and recover from such shocks and stresses.”

The U.S. global fragility strategy’s use of resilience as a guiding framework is vital for the GFA’s successful implementation and aligns to new approaches to apply resilience for prevention and stabilization efforts. The “Pathways for Peace” report highlights the need to shift from an early warning to a risk and resilience perspective for more upstream prevention efforts, since early warning signals can often appear too late when options for redress are limited.

Moreover, if prevention fails, a resilience framework will have guided U.S. government efforts to strengthen local capacities to absorb and adapt to emerging shocks so they do not turn into full blown catastrophes, and to transform systems, institutions, and social contracts in the face of crises. While prevention has always been part of resilience thinking, it has for too long been placed in a programmatic silo. The Pathways report helps overcome this by observing that resilience is the best means of prevention.

 

A potential barrier to the strategy’s approach is that for many within the U.S. policy community, resilience is still synonymous with food security. To address this misconception, champions for a broader U.S. government approach to resilience must emphasize how other major donors (like the European Union and the Foreign, Commonwealth and Development Office) and multilateral institutions (like the Organization for Economic Cooperation and Development (OECD), World Bank, and United Nations) are embracing this shift. Likewise, they can highlight how the State Department and USAID programs for health and education have applied a wider notion of resilience for addressing fragility.

As the Bureau for Humanitarian Assistance finalizes its own framework to address complex crises, it could use resilience as an umbrella framework for relief and recovery efforts. Relief and recovery approaches are still too concentrated on meeting human needs and not on building resilient capacities to risks and crises.

To make best use of a resilience framework, the U.S. global fragility strategy must use political settlements analysis to identify patterns of clientelism and elite capture that create the root causes of exclusion and make marginalized groups more vulnerable to crises. The strategy refers to the need for political will, but this reference tends to oversimplify complex patterns of patronage that can block the best intentions—political will—of national reformers. There is a widening research agenda linked to elite bargains, governance reform, and service delivery in violent contexts, and anti-corruption that can contribute to politically informed approaches to strengthen partner countries’ resilience.

2. Adaptive management

Just as the adage goes that planning is essential but plans are useless, so too would be the U.S. global fragility strategy without an adaptive management approach.

All too often, aid is delivered through preconceived solutions and rigid approaches for implementation that fix the resources, partners, and timelines without the ability to change in the face of risks, crises, or new learnings into complex political economies.

Adaptive methods allow for more dynamic collaboration with local stakeholders, intentional learning, and course correction in the face of fragility. The GFA requires a 10-year approach to various fragile states and recognizes the need to institutionalize adaptive management, potentially its greatest achievement.

The U.S. government—and particularly USAID—have made significant strides to make assistance more adaptive. This includes efforts for adaptive procurement processes and more rigorous learning approaches to fragile contexts.

Adaptive management must increasingly shift from the preserve of small projects to portfolio approaches within the U.S. government to share contextual insights, determine what is working and shift resources accordingly, and provide leadership signals and “psychological safety” for teams to experiment with riskier approaches based on evidence, but more often on well-reasoned hypotheses, as data is often notoriously hard to come by in fragile settings.

Beyond portfolio approaches, the U.S. government and broader development community must promote the use of adaptive management at the partnerships level to garner richer contextual and operational insights and pool greater resources from diverse stakeholders, as recently argued by the World Bank’s independent evaluation group.

3. Country platforms

Where they are possible, country platforms are the best venues for the U.S. government to promote adaptive management and partner with governments, civil society, business, and international partners.  These are government-led bodies, typically designed to promote political and policy dialogue, mutual accountability, and collective action at high levels and through sector groups with support from a secretariat. Country platforms are not theoretical. They have been used by governments and donors for over two decades, but without the benefit of a guiding doctrine or learning agenda. The G-20, World Bank, United Nations Development Program, and OECD have all affirmed the value of supporting country platforms.

The U.S. global fragility strategy commits that “United States embassies and missions will establish coordination mechanisms for engaging regularly with national government counterparts, local civil society, and other stakeholders. They will review, align, and adapt plans and programs based on ongoing partner engagement and iterative conflict analysis, keeping other United States Government stakeholders periodically informed.”

The strategy’s emphasis on establishing coordination mechanisms that will work adaptively based on partner engagements and conflict analysis aligns well with the growing international consensus to support country platforms and adaptive approaches for greater impact. Country platforms can help discipline U.S. government efforts by anchoring them to country priorities and dynamics.

Among the newly announced GFA pilot countries, Haiti has experimented (with limited success) for over a decade with country platforms and Libya is preparing to establish a platform with multilateral support. Getting these mechanisms right across GFA pilot countries and regions will be critical for success.

Next steps

The U.S. global fragility strategy recommends widespread, ambitious, multisector reforms that could easily default to traditionally projectized, disjointed, and rigid attempts to deal with systemic breakdowns in institutions, markets, and social contracts in fragile states.

However, the strategy’s emphasis on resilience, adaptive management, and country coordination mechanisms has the potential to be a major change driver for realizing the GFA and should guide implementation. As U.S. interagency efforts pick up speed within the GFA senior-level steering committee and GFA working group to implement the strategy, this is the time to identify the critical path forward to promote more coordinated, adaptive, and resilient solutions to help those fragile states in the hardest places.  

      
Kategorien: english

Give credit where credit’s due: Development assistance in loans should reflect donor effort

13. April 2022 - 21:36

By Steve Cutts

Despite COVID-19 and the pressure of donor finances, official development assistance (ODA) from members of the Organization for Economic Cooperation and Development’s (OECD) Development Assistance Committee (DAC) rose to an all-time high of $161.2 billion in 2020, according to the most recent DAC statistics.

Most bilateral ODA is provided as grants, but ODA provided through loans is growing. In 2020, when total ODA grew by 3.5 percent, the ODA in bilateral sovereign loans surged by 38.7 percent.

Giving loans rather than grants stretches aid further because donors can recycle repayments into other projects and countries. Lending also gives recipients an incentive to scrutinize a proposed project’s costs and benefits more closely, and to take greater ownership to ensure it delivers economic benefits.

This is why we are campaigning for systemic change: to ensure the ODA counted in loans truly reflects donors’ budgetary costs.

However, donors must always consider carefully whether a loan or a grant is more appropriate, taking into account both the recipients’ capacity to make repayments and the characteristics of the project being supported.

Especially now that global interest rates are rising, donors should avoid lending to any countries already showing signs of “debt stress.” The Jubilee Debt Campaign reports that 54 countries across the world are currently suffering from a debt crisis. And the latest World Bank/IMF debt sustainability analysis shows that, of 69 low-income countries listed, 38 are either “in distress” or at “high risk,” with 20 more at “moderate risk.”

Donors should also consider restricting loans to projects that clearly offer additional financial flows (or savings) to the recipient country government. Only projects of this kind will avoid adding to debt stress.

It would be reassuring to think that these factors were always at the front of donors’ minds.  However, the recent disproportionate surge in ODA lending almost certainly owes more to changes the DAC has made in ODA accounting rules than to such considerations.

 

From 2018 onward, the DAC’s “grant equivalence” system has been used to calculate ODA in loans. Grant equivalents calculate a loan’s cost to the lender (the “donor effort”), which can only sensibly be done by comparing the loan’s interest rate with what the borrower would have had to pay on the open market. But instead, the DAC selected a “base rate” of 5 percent—far higher than the near-zero rate at which its governments can raise funds—and then added (somewhat arbitrary) margins of 1-4 percent to cover the risk of nonrepayment of the loan.

Including risk margins should have ruled out reporting any eventual debt relief, and the DAC originally promised to change the rules in this regard. However, in 2020 it went back on this promise and decided to continue to count debt relief as a new aid effort. In effect, ODA is now double counting loan risk.

The resulting exaggeration of ODA in loans is massive. In 2019 (the most recent year for which disaggregated data is available), France and Germany combined scored $2.72 billion in ODA from the bilateral loans they extended, when estimates of their actual budgetary cost have ranged from $240 million to $340 million. In other words, they received an unearned uplift of between 800 and 1,000 percent!

By changing the rules to exaggerate their own largesse, the DAC “donors’ club” has given its members an enormous budgetary incentive to provide loans over grants, since by doing so they can claim significant progress toward their 0.7 percent ODA/gross national income target without incurring commensurate budgetary costs. It is clearly this incentive that is driving some donors’ increased lending, rather than whether the recipient country’s circumstances or the project’s financial benefits justify a loan rather than a grant.

Nowhere is this more pernicious than in climate financing. In 2019, public loans comprised $44.5 billion out of the $79.6 billion reported (the target is $100 billion). Many of these loans were to the poorest countries least able to service the resulting debts. And the loans were not just for mitigation—many were for adaptation projects that will not generate revenue or savings from which to fund repayments.

Thanks to the flaws in the DAC’s system, rich OECD countries are making profits by lending at or near commercial rates of interest, while claiming large ODA credits. In effect, developing countries are paying for the costs of climate change they haven’t caused, while OECD countries claim credit for aid that they haven’t given. This is the antithesis of climate justice.

This is why we are campaigning for systemic change: to ensure the ODA counted in loans truly reflects donors’ budgetary costs. Given the DAC’s clear conflict of interest, this may require divesting it of the future governance of ODA in favor of an independent body with the required statistical expertise and that is free of political influence. The aim is not to stop loans, but to remove the current perverse incentives for donors to provide them where grants would be the better option. 

      
Kategorien: english

Ghulam Omar Qargha

12. April 2022 - 22:18

By Jeannine Ajello

Ghulam Omar Qargha is a fellow in the Center for Universal Education at Brookings and an education, research, and program evaluation expert with 20 years of overseas experience designing, managing, implementing, and evaluating international education programs. Qargha’s expertise is in policy analysis, program design, education transfer, and research on teacher education, curriculum development, educational delivery, and monitoring and evaluation in the developing world, with a particular focus on fragile, conflict-affected, and emergency contexts. Qargha brings this expertise to enrich and continue Brookings work on scaling educational innovations for systemic improvement in low- and middle-income countries around the world.

Qargha’s work experience includes developing national standards for teacher education programs; developing science- and math-training programs; developing national teacher competency and credentialing systems; working with grassroots organizations to manage school construction; developing teacher training, peace, and environmental training curricula; and conducting research, monitoring, and evaluation of education and development efforts.

In his last position, Qargha served as the chief technical advisor for Afghanistan’s minister of education. He led the national reform of Afghanistan’s educational system, led the development of the Afghanistan National Education Policy (1400), and provided technical advice and direction for the structural reform of the Ministry of Education based on the new policy.

Before his international development work, Qargha taught chemistry in Jacksonville, Florida.

Qargha holds a Bachelor of Science degree in chemistry from the University of North Florida, a Master of Education degree in curriculum and instruction from George Mason University, a Master of Arts degree in international comparative education from Stanford University, and a doctoral degree in international education policy from the University of Maryland, College Park.

      
Kategorien: english

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