The Global Development Alliance: Public-Private

THE GLOBAL DEVELOPMENT ALLIANCE PUBLIC-PRIVATE ALLIANCES FOR TRANSFORMATIONAL DEVELOPMENT U.S. Agency for International Development Office of Global Development Alliances www.usaid.gov/gda General Information: 202-712-0600

Published January 2006

Prepared by Management Systems International, Inc., www.msiworldwide.com Design and production by Meadows Design Office Inc., www.mdomedia.com CONTENTS

A word on partnership from the President of the United States 7

Preface 7

Foreword 8

Welcome 11

PART 1: THE GLOBAL DEVELOPMENT ALLIANCE BUSINESS MODEL

CHAPTER ONE THE PRIVATE REVOLUTION IN GLOBAL DEVELOPMENT 14

The tightening web of economic exchange between the developing and industrialized worlds 14 International development concerns us all 15 New players, new money 17 More aid, for countries that use it well 18 A new mindset for new challenges 19 Origins of the Global Development Alliance 20

CHAPTER TWO BUILDING DEVELOPMENT ALLIANCES THE GDA MODEL AT WORK 25

Who participates in alliances, and why? 25 Conceiving, developing, and implementing an alliance 28 U.S. Agency for International Development funding mechanisms 30 How have alliance partners had to adapt to make alliances work? 30 Evaluating alliances for effectiveness 32 Reading the cases that follow 34 PART I1: ALLIANCE STORIES

CHAPTER THREE SUSTAINABLE SUPPLY CHAINS RAISING STANDARDS, BUILDING TRADE 36

Sustainable Tree Crops Program Alliance: helping the smallholder farmer in Africa 38 Sustainable Forest Products Global Alliance: making markets work for forests and people 43 Conservation Coffee Alliance: ﬁeld-to-cup stewardship of the world’s largest reserve of biological diversity under intensive human management 48 The Alliance for Continuous Improvement in Labor Standards in Central America: growing global competitiveness through higher labor standards 54

CHAPTER FOUR WORKING WITH EXTRACTIVE INDUSTRY INVESTING IN COMMUNITIES 58

Angola Enterprise Development Alliance: a better society is everybody’s business 60 Sierra Leone Peace Diamonds Alliance: rebuilding after war 67 The Urban Development Alliance: improving service delivery through partnership 71

CHAPTER FIVE WORKING WITH FOUNDATIONS MARRYING RESOURCES, SCALING INNOVATION 76

Balkan Trust for Democracy: homegrown efforts build peace 78 Earthquake Zone Recovery Program: expatriate Armenians return to rebuild 84 Global Alliance for Vaccines and Immunization: preventing preventable disease 87

CHAPTER SIX BUILDING HUMAN CAPITAL DEVELOPING STRATEGIC SKILLS AND CAPACITY 90

Cisco Networking Academy Alliance: building information technology capacity worldwide 92 entra 21: job, life, and skills training for youth 98 The Certiﬁed International Professional Accountant Alliance: accounting for change in the former Soviet republics 104 CHAPTER SEVEN PARTNERSHIPS FROM THE BOTTOM UP ENGAGING GRASSROOTS NETWORKS FOR SUSTAINABILITY 111

Alliance for Restorative Justice, Coexistence, and Peace: reconciling the past, preparing for the future 112 The International Small Group and Tree Planting Program: “As the trees grow, the money ﬂows” 118 GlobalGiving: development at the speed of light 123

CHAPTER EIGHT REDUCING POVERTY SOLUTIONS AT THE BOTTOM OF THE ECONOMIC PYRAMID 128

NetMark Alliance: pairing communications and markets to fight malaria 130 Next Generation Microfinance Alliance: bringing efficiency and security to microfinance and remittances 137 Business Creation Alliance: new technologies for profit 142 Markala Sugar Project Alliance: “We will do great things together” 147

CHAPTER NINE WATER FOR LIFE IMPROVING THE FLOW OF HEALTH 151

West Africa Water Initiative Alliance: safe water, healthier lives 152 Community-Watersheds Partnership Program: safeguarding water resources 156

PART III: THE WAY FORWARD

CHAPTER TEN TOMORROW’S PUBLIC– PRIVATE ALLIANCES 162

Concerted interventions, just in time 162 The capacity to form and manage alliances 163 Inside USAID: managing relationships and mainstreaming the alliance model 163 Outside USAID: new partners, new frontiers 164 Governing growing alliances 165 The challenges of the second generation of alliances 166

Acknowledgments 168

A WORD ON PARTNERSHIP FROM THE PRESIDENT OF THE UNITED STATES

We agree on the need for partnerships across borders and among both the public and private sectors. We must call upon the compassion, energy, and generosity of people everywhere. This means that not only governments can help, but also private corporations, foundations, faith-based groups, and nongovernmental organizations as well.

—President George W. Bush

PREFACE

In May 2001, my predecessor Secretary Powell launched the Global Development Alliance as a new business model for the U.S. Agency for International Development. Public-private alliances multiply the impact of ofﬁcial U.S. development assistance abroad. USAID made signiﬁcant progress in this area and we must build on the established foundation.

The alliance stories in this document are a small but representative sample demonstrating the actions of committed individuals and organizations across all spheres of action—reducing poverty and encouraging democratization, economic reform, civil society, and opportunity for all through education.

I hope that potential partners will read this report with great interest. It should be seen as a cele- bration of those individuals and groups that have already come together to form alliances furthering international development, as well as an invitation to others to join in future partnerships.

—Secretary of State Condoleezza Rice

7 FOREWORD

Since 2001, the U.S. Agency for International Development (USAID) has multiplied the impact of foreign aid by welcoming businesses, foundations, nonproﬁt organizations, and others as partners in the vital project of improving the lives of the world’s poor. The ongoing transformation— under the banner of the Global Development Alliance (GDA), one of USAID’s principal business models—already has shown impressive results.

In recent years the composition of flows of financial resources into the developing countries has changed in a fundamental way. In 1970, the U.S. government was the largest source of funds for developing countries. Two decades later, most international resource flows to developing countries still came from governments. Today, about 80 percent of U.S. funds moving into the developing world come from the private sector: businesses, nongovernmental organizations (NGOs), universities, foundations, churches, private charities, and migrant and diaspora communities.

I established the Office of Global Development Alliances to respond to that change. It has allowed USAID to work more closely with new development alliance partners both in the NGO sector and more broadly with companies, foundations, and others. Among the improvements that US- AID has made to promote alliance formation are procurement reform, which creates the flexibility to build alliances; new policies to provide clarification on competition, conflict of interest, and other legal concerns; and organizational change. In December 2005, I made the decision to con- vert the GDA Secretariat into a permanent office within USAID, now called the Office of Global Development Alliances.

GDA draws on some of our country’s greatest strengths—among them ﬂexibility and generosity. Acting through membership organizations, employers, and on their own behalf, Americans give of their time, money, and expertise at rates unmatched anywhere in the world, placing our country at the vanguard of the international trend in voluntary, nongovernmental action for development.

“I have often admired the extreme skill [Americans] show in proposing a common object for the exertions of very many and in inducing them voluntarily to pursue it,” observed Alexis de Toc- queville in Democracy in America. “If they want to proclaim a truth or propagate some feeling by the encouragement of a great example, they form an association.” Or, in this case, an alliance.

The GDA business model builds on these strengths by connecting the development expertise of USAID with the humanitarian instincts of American communities, the vitality of the voluntary organizations they form to put their beliefs into action, and the development potential of the global supply chains that connect consumers and producers all over the globe.

Through the GDA model, we believe USAID is blazing a new trail in foreign aid. In this USAID is not alone. In their use of the partnership model, other bilateral and multilateral donors have chosen a course parallel to USAID’s—among them Britain’s Department for International Development, Germany’s GTZ, and the Inter-American Development Bank, through its Multi-

8 lateral Investment Fund. The Swedish, French, Spanish, and Japanese development agencies, too, have expressed interest in GDA’s work in publicprivate alliance building.

Thanks to GDA, the number and diversity of the agency’s alliance partners have expanded significantly in recent years, fulfilling one of the goals in creating GDA. Many new partners in the for-profit sector have been pleasantly surprised at the tangible and intangible benefits that alliance with USAID brings to their business. I recall a GDA workshop in which a representative of Procter and Gamble remarked that 15 years ago she would have asked herself, “Why work with USAID?” With alliance activities spanning coffee, water filtration, and nutrition-fortified drinks, all designed to advance public health and individual livelihoods while serving vast new markets in the developing world, she now wonders how Procter and Gamble could not work with USAID.

If your organization operates in the developing world or has identiﬁed it as an area of potential interest, you probably have ideas about how your activities could contribute to, and beneﬁt from, complementary activities by other organizations. We want to hear those ideas.

We have learned much in the years since we introduced GDA—from our partners and from within the agency. We still have much to learn, and much to share. In the years to come, we will report in greater detail the outcomes of the alliance approach. In the meantime, we are, in the words of former Secretary of State Dean Acheson, present at the creation of a new era of global development.

I believe that 10 years from now a strong alliance-building component will remain a central part of USAID and of the development community at large. I will consider that a success.

—USAID Administrator Andrew S. Natsios

WELCOME

One of four key pillars for the U.S. Agency for International Development (USAID), the Global Development Alliance (GDA) links U.S. foreign assistance with the resources, expertise, and cre- ativity of the private ﬁrms and nongovernmental organizations (NGOs) that provide a growing share of ﬁnance, human capital, and other resources for global development.

The GDA approach enables alliance partners—corporations, foundations, and NGOs—to bring their strongest assets to bear to address jointly deﬁned development challenges, thereby achieving together a solution that would not be possible for any individual partner. This multi-stakeholder approach represents a shift in the way USAID executes its foreign assistance mandate. For its entire history, USAID has acted either as a direct donor or through a client-vendor relationship with organizations that carry out projects deﬁned by USAID. With the advent of GDA, however, US- AID welcomes companies and NGOs as equals in the development project.

Thanks to the GDA, USAID is able to form alliances quickly as needs emerge. Since the devastating tsunami of December 2004, for example, the agency has formed 18 alliances with the private sector in affected countries, leveraging more than $17 million in private sector funds from partners including Mars, Inc., Chevron Corporation, Microsoft, The Coca-Cola Company, Pru- dential, Deutsche Bank, IBM, 3M, and ConocoPhillips.

This report has two purposes. The ﬁrst is to introduce GDA to businesses and nonproﬁts interested in improving the lives of people in the developing world by coordinating their activities with other actors pursuing complementary goals. The second is to present some of the bold and innovative publicprivate alliances formed under the GDA standard.

It is too soon to say whether GDA or the alliance approach will fully realize its promise. The initiative is young. But each of the 22 alliances profiled here, a small sample of the nearly 300 alliances active today, represents a creative way of harnessing the fundamental forces now shaping the development landscape—the spread of globalization, the rise of private giving, and the need for cooperative solutions to the most significant development problems. The GDA has already exceeded expectations, had an important impact on development thinking, and generated promising early results through the application of nearly $5 billion in combined publicprivate funds. Moreover, the commitment of USAID professionals in the field attests to the fact that the agency sees alliance-building as a valuable approach to accomplishing our goals.

In December 2005, after close consultation with senior staff in Washington and mission directors overseas, Administrator Natsios converted the GDA Secretariat into an independent office, reflecting significant advances in mainstreaming the GDA business model within the agency. The former secretariat is now known as the Office of Global Development Alliances. It will assist missions and offices in Washington in their efforts to reach out to the private sector, to mainstream the publicprivate alliance model, and to manage relationships with private sector partners. The GDA team is honored to serve USAID and our alliance partners, present and future.

—Daniel F. Runde, Director, Ofﬁce of Global Development Alliances, U.S. Agency for International Development 11

PART 1

THE GLOBAL DEVELOPMENT ALLIANCE BUSINESS MODEL CHAPTER ONE

THE PRIVATE REVOLUTION IN GLOBAL DEVELOPMENT

The U.S. Agency for International Development’s (USAID) Global Development Alliance (GDA) is at the forefront of an unprecedented change in the global system of development assistance. The facets of that change, characterized by the growing importance of private resources as instruments of development, are the tightening web of economic exchange between the developing and industrial worlds with the expansion and integration of the global market; the rising importance of foundations, nongovernmental organizations, companies, and individuals in conceiving, ﬁnancing, and implementing solutions to development problems; and the renewed commitment by the industrial economies to increase ofﬁcial aid to countries that use aid well, especially poor countries that lack access to private sources of capital.

THE TIGHTENING WEB OF ECONOMIC EXCHANGE BETWEEN THE DEVELOPING AND INDUSTRIALIZED WORLDS Foreign aid as traditionally conceived is just one part of an increasingly dense web of economic relations between the developed and developing worlds. In fact, the growth rate of flows of goods, capital, labor, and remittances over the last three decades has far outstripped increases in aid, or official development assistance (ODA). Today, foreign aid is only the third-largest source of financial flows from the developed to the developing world (and from the United States), but it remains important for the poorest countries, which have trouble attracting private finance and mobilizing capital to address specific development challenges. Elsewhere, the most important forms of economic engagement between developed and developing countries are private flows of capital (foreign direct investment, portfolio investment, and bank lending) and private transfers (remittances) from migrants working outside their home country.1

14 INTERNATIONAL DEVELOPMENT Africa. Running shoes made in China or fleece CONCERNS US ALL vests sewn in Lesotho may be no more than a Throughout its history USAID has worked few weeks old before they are bought in with foundations and NGOs to carry out its Toronto or Baltimore. The proportion of in- assistance mandate. The Rockefeller and Ford ternationally traded goods in our market bas- foundations, for example, joined hands with ket is at least three times what it was in 1970. USAID and U.S. land-grant universities to This means, in effect, that international devel- bring about the “Green Revolution” of the opment is everybody’s business. Consumers 1960s and 1970s. In 2000, the agency spent know that they can hold companies and gov- more than half of its $7.2 billion in assistance ernments accountable through their collective funds through contracts, grants, and coopera- buying decisions. And the many companies that tive agreements with NGOs (at least a quarter rely on global supply chains for competitive ad- of which were faith-based2), favoring mecha- vantage know the value of a positive environ- nisms that delegated to implementing partment wherever they source and produce traded ners a large degree of operating control over goods. With incomes, education, and longevity carefully chosen programs. rising faster in much of the developing world But in the last two decades independent foun- than in the industrialized countries, more com- dations have grown rapidly in number and in panies are discovering that the people at the ori- wealth. Those headquartered in the United gin of their supply chains may soon become States alone now possess assets of close to half significant consumers of their products. a trillion dollars. The exemplar of the new Companies are no longer concerned solely with generation of private foundations is the Bill managing the effects of their operations, and and Melinda Gates Foundation, which made $1.2 billion in grants in 2003 from a $29 billion endowment. With USAID as a “minority U.S. RESOURCE FLOWS TO THE DEVELOPING shareholder,” the Gates Foundation is leading WORLD IN 2003 — $112.6 BILLION one of the world’s largest immunization campaigns aimed at children in poor countries † PUB LIC S ECT (chapter 5). Other philanthropic foundations OR F U.S. LO W are partnering with USAID to provide disas- government S 1 official 5 ter relief, fund projects to build democracy % development and civil society, and restore peace and justice assistance † to conflict-torn regions (chapters 5 and 7). (parts I & II) U.S. private 15% capital flows to The “global reach” of multinational corpora- the developing U.S. civil tions is nothing new. What is new, however, is world society giving (FDI and net and grants the extent to which producers and consumers capital markets) 15% in the developed and developing worlds have 45%

P become closely connected through the growth R Personal I V A remittance from of international supply chains in nearly every T E U.S. to S sector of business activity, as the rate of E developing world C T 25% O growth in international trade over the last sev- R F LO eral decades has far outpaced growth in GDP W S as a whole. Today, raspberries grown in Chile 85% may be harvested and packed on Tuesday and consumed in Illinois on Thursday. Packaged Source: Bureau of Economic Analysis; Conference Board; Foun- salads are consumed in London a day after be- dation Center; faith-based groups; USAID internal estimates. ing picked, packed, and shipped in East

INTERNATIONAL DEVELOPMENT IS EVERYBODY’S BUSINESS 15 PUBLIC–PRIVATE ALLIANCES mid-1990s, suggesting that coordi- nies have responded to stiffer foreign CAN ATTRACT FOREIGN DIRECT nated efforts to combine increased competition by seeking new markets INVESTMENT TO DEVELOPING investment with improvements in in- elsewhere in the developing world. COUNTRIES BY IMPROVING THE vestment climate would find a recep- BUSINESS CLIMATE tive audience among multinational Presently, FDI is still concentrated in firms. That expectation lies behind a handful of middle-income coun- ike other types of private capi- the efforts of USAID and its partners tries—Brazil, China, India, Mexico, tal flows, foreign direct invest- to foster world-class accounting prac- and Russia absorb more than half of L ment (FDI) is strongly influ- tices in the former Soviet Union and all FDI worldwide—but it has gener- enced by a country’s investment to build information-technology ca- ated important gains in some poor climate. Political and regulatory pacity through workforce develop- countries with good economic poli- risks—conflict, confiscation, expro- ment (chapter 6). cies, among them Lesotho, Maurita- priation, nationalization, nonconvert- nia, Moldova, and Mozambique. In ibility of currency, and lax or inconsis- Economic conditions in recent years Mali, with help from USAID and al- tent enforcement of regulations—are have encouraged FDI in developing liance partners, the nascent sugar in- higher in poor countries than else- countries. Net FDI inflows to devel- dustry is poised to reap the largest where. Most poor countries score oping countries increased by $14 bil- single foreign investment in the coun- much lower than middle-income lion (9 percent) in 2004, partly re- try’s history (chapter 8). countries on measures of corruption, versing a steep decline in the two efficiency of administration, law and years following the global slowdown Sources include: Foreign Aid in the National order, quality of infrastructure, and of 2001 and sluggish performance Interest—Promoting Freedom, Security, and other factors important to investors. during the successive regional finan- Opportunity (Washington, DC: USAID, 2002) cial crises that occurred between and Global Development Finance 2005— Despite these constraints, the share 1994 and 2002. The net increase Mobilizing Finance and Managing Vulnerabil- of FDI going to the least developed masks significant outflows of FDI ity (Washington, DC: World Bank, 2005). countries has grown steadily since the from several countries, where compa-

the public perception of those effects; increas- The attainment of strategic goals usually in- ingly they have become willing to deploy their volves partners—governments, NGOs, or capabilities—their business assets and their other ﬁrms in the same region or sector— people—to contribute to the communities whose interests parallel the company’s in es- and countries in which they operate. Although sential respects, even as their goals remain dis- still keen to avoid contributing to environ- tinct. Using ideas developed by thinkers such mental and social problems, trend-setting as James Austin, Michael Porter, David ﬁrms such as GE (with its “ecomagination” Grayson, and Adrian Hodges, leading corpora- initiative to help GE customers improve oper- tions have learned how to get more bang from ating performance while simultaneously im- their buck by linking core business activities to proving environmental performance) now projects that improve local conditions where think much farther ahead. Forward-thinking they operate, enhancing their competitive po- companies seek out opportunities to link their sition in the process.3 business investments to complementary efforts Cisco Systems, Inc., for example, has demon- toward the achievement of a greater good— strated the potential of fusing social and eco- such as the sustainability of resources on nomic goals. Through its successful program which the company depends, the vitality of its of Cisco Networking Academies in some 150 present and future customer base, the quality countries (chapter 6), the world’s leading proof the economic and political institutions that ducer of computer networking equipment affect its operations, or the development of trains skilled network administrators and so quality standards that build markets (for ex- has removed a constraint to the company’s ample, by enabling buyers to make judgments growth while providing jobs to tens of thou- about products). sands of secondary-school graduates.

16 CHAPTER ONE: THE PRIVATE REVOLUTION IN GLOBAL DEVELOPMENT When companies join with aid donors, nonprofit organizations, and host governments to raise quality and productivity, introduce better handling and transport practices, and improve the health and skills of the workforce, they reinforce domestic demand for the rule of law, transparent regulation, and more effective protection of property rights. In so doing, they make the country more attractive to other investors. Once it takes root, foreign direct investment (FDI) can reduce poverty and LEVERAGING PERSONAL REMITTANCES FOR propel a country to sustained growth by creat- ECONOMIC GROWTH WHILE BROADENING ACCESS TO ing jobs and building wealth and capital re- FINANCIAL SERVICES sources through export earnings, domestic supply responses, and other effects. he portion of their income that immigrants send back to their home countries is the second-largest and fastest-growing Today USAID’s partners in sustainable devel- Tsource of financial flows to developing countries. Expected to opment include global firms in agriculture exceed $160 billion in 2005, personal remittances amount to more than double the official aid provided by industrial countries. Remit- (Mars, Inc., chapter 3), natural resources (The tance volumes have quintupled since 1990 with the rising tide of mi- Home Depot, chapter 3), energy (Chevron gration and growth in migrants’ incomes. Corporation, chapter 4), and technology (Cisco Systems, Inc., chapter 6). But the transaction costs of remittances remain unnecessarily high for the small transfers typically made by poor migrants, depriving migrants and their families of much-needed income. The cost of such NEW PLAYERS, NEW MONEY transactions is often well below the fees paid by customers. As the volume and speed of international Remittances reduce poverty in the developing countries from which flows of goods and capital have grown, so too immigrants come by directly increasing the incomes of the recipients have movements of persons. Immigrants, and helping them deal with crop failure, health crises, or children’s ed- both temporary and permanent, recent and ucation. They also provide a source of savings and capital for invest- not so recent, have become a powerful poten- ment, usually in education, microenterprise, and better health—all of which have a high social return. In Guatemala, the World Bank esti- tial force for development, remitting billions mates that remittances have reduced the severity of poverty by 20 of dollars annually to their countries of ori- percent. gin. By placing more money in the hands of the poor, remittances directly reduce poverty The developmental impact of remittances can be increased by policies that help poor migrants and their families gain access to reliable, and vulnerability. Because a large share of re- low-cost financial services for sending and receiving remittances. mitted funds is spent on health and educa- With its alliance partners, USAID is encouraging expansion of bank- tion, remittances also constitute an important ing networks, building competition in the remittance transfer market form of social investment.4 Well-educated, through the introduction of new technologies and new competitors, long-term immigrants contribute more than and facilitating the participation of microfinance institutions and money; they improve access to capital, tech- credit unions in providing low-cost remittance services. nology, information, foreign exchange, and Sources include: Global Economic Prospects 2006—International Remittances and business contacts for firms in the country of Migration (Washington, DC: World Bank, 2005). origin and help smooth the way for FDI. Di- asporas have played an important role in the transfer of knowledge and finance to countries such as Armenia, where the diaspora helped rebuild after a devastating earthquake in 1988 (chapter 5). Recognizing this, USAID is working to increase the development effectiveness of personal remittances through

NEW PLAYERS, NEW MONEY 17 diaspora groups in the United States and non- proﬁt organizations serving migrants’ interests.

MORE AID, FOR COUNTRIES THAT USE IT WELL Since 2002, the industrial countries have publicly recognized the need to increase foreign aid for countries that cannot yet gain access to private ﬂows of capital but that have adopted policies that enable them to make good use of THE U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT’S increased aid. Substantial increases in ODA NINE PRINCIPLES OF DEVELOPMENT ASSISTANCE are expected in 200506 to meet commitments the developed countries made at and oday, USAID’s principles of development assistance reflect a global consensus about development that includes all of the after the 2002 Monterrey Conference on Fi- 5 T factors discussed above. The agency’s nine principles are: nance for Development. African countries are likely to be the largest recipients of future in- 1. OWNERSHIP Build on the leadership, participation, and commit- creases in ODA. The Africa Action Plan an- ment of a country and its people. nounced at the G-8 Leaders’ Summit in 2. CAPACITY BUILDING Strengthen local institutions, transfer tech- Kananaskis, Canada, in June 2002 suggested nical skills, and promote appropriate policies. that “in aggregate half or more of our new de- 3. SUSTAINABILITY Design programs to ensure their impact en- velopment assistance could be directed to dures. African nations that govern justly, invest in their own people, and promote economic 4. SELECTIVITY Allocate resources based on need, local commitment, and foreign policy interests. freedom.”

5. ASSESSMENT Conduct careful research, adapt best practices, and In March 2002, in the ﬁrst major presidential design for local conditions. address on foreign assistance in decades, Presi- dent George W. Bush announced a New Com- 6. RESULTS Focus resources to achieve clearly defined, measurable, strategically focused objectives. pact for Development centered on the Millen- nium Challenge Account (MCA). By vowing 7. PARTNERSHIP Collaborate closely with governments, communi- to boost U.S. development assistance by 50 ties, donors, NGOs, the private sector, international organizations, percent over three years (a $5 billion annual in- and universities. crease over current levels), the President pro- 8. FLEXIBILITY Adjust to changing conditions, take advantage of posed the largest increase in U.S. aid since the opportunities, and maximize efficiency. Tr uman administration. The United States has 9. ACCOUNTABILITY Design accountability and transparency into increased ODA even beyond President Bush’s systems and build effective checks and balances to guard against pledge. U.S. assistance increased from $10 bil- corruption. lion in 2000 to $19 billion in 2004—a quarter of the total from the countries of the Organisa- tion for Economic Co-operation and Develop- ment and the largest increase in any ﬁve-year period in postwar history.

MCA provides development assistance to countries that rule justly, invest in their people, and encourage economic freedom.6 A year later, the President announced his Emergency Plan for AIDS Relief, a ﬁve-year, $15 billion, multifaceted approach to combating HIV/AIDS; it is the largest commitment ever

18 CHAPTER ONE: THE PRIVATE REVOLUTION IN GLOBAL DEVELOPMENT by a single nation to an international health Competitive, well-regulated private markets initiative. In his second term, President Bush are indispensable because they are the most ef- supported the debt-relief plan approved by fective institution ever devised for allocating the G-8 leaders at their July 2005 summit in resources efficiently, for fostering innovation, Scotland (involving immediate cancellation of and for communicating information that helps $40 billion in debt owed by 18 countries to in- consumers and producers make decisions. ternational financial institutions) and un- Regulatory frameworks should aim to build veiled a $1.7 billion aid plan for Africa, the the public’s confidence in private markets to centerpiece of which is a plan to fight malaria, protect property, enforce contracts, and gener- a leading killer of children there. ally respect the rule of law.

Using aid well requires political will, functioning institutions, and a coherent, homegrown A NEW MINDSET FOR NEW strategy to reduce poverty and promote equi- CHALLENGES table, sustainable economic growth. To have Guiding the new global consensus about de- maximum development impact, projects must velopment are goals established by the inter- be consistent with the development priorities national community. In September 2000, 189 of the host country, as expressed in its national heads of state ratified the Millennium Decla- development strategy or in a poverty reduction ration, one of the most significant United Na- strategy devised in cooperation with the World tions documents of recent times. The declara- Bank and the International Monetary Fund tion articulated a set of Millennium (IMF). Projects that fit within the strategy are Development Goals (MDGs) focused on re- more likely to be “owned” by the ultimate ducing poverty, improving the quality of peo- beneficiary, and more likely to benefit from ac- ple’s lives, ensuring environmental sustainabil- tive participation of the host-country govern- ity, and building alliances to make ment and local NGOs, citizens, and other globalization a positive force for all the stakeholders. Properly planned, they do not world’s people. Specific targets and indicators duplicate or compete with other efforts by the have been set for each of the goals, to be beneficiary or other donors, and do not im- achieved by 2015. pose onerous conditions or reporting require- The MDGs are ambitious and not likely to be ments on the recipient. met through conventional top-down ap- Owned projects are more likely than those im- proaches to development, no matter how well posed by outside actors to complement other funded. Instead, the combined efforts of many development efforts and to contribute to and stakeholders, working in cooperation, will be benefit from synergies and spin-offs. They are required in a push-pull approach that offers less likely than projects that are not integrated more and better targeted aid while simultane- or consistent with the host country’s develop- ously stimulating domestic demand for honest, ment priorities to be undermined, intention- transparent governance. But coordinating mul- ally or unintentionally, by conflicting govern- tiple partners with diverse interests to achieve ment policies or to see their support eroded by shared goals requires specific skills from all claims from competing projects and priorities. partners, including firms and governments. Firms must learn to accommodate stakeholders There is ample evidence that aid usually is not other than shareholders and regulators in their the limiting factor on national development. planning and operations. Governments, for Development progress depends, first and fore- their part, have to learn to “govern by net- most, on governments having the political work.”8 In this new model of governance, with will to rule justly, promote economic free- implications for business as well as govern- dom, invest in people, and create an environment, officials do more than manage people 7 ment in which competition can flourish. and programs in hierarchical structures—they

A NEW MINDSET FOR NEW CHALLENGES 19 manage relationships among a shifting range drew Natsios, incoming USAID administrator, of partners and marshal the resources of those and Colin S. Powell, then secretary of state, partners to produce public value. who featured it in testimony to Congress in May 2001 as a new approach to implementing USAID’s emphasis on working in partnership, foreign assistance. rather than in isolation, is an expression of the Bush administration’s recognition of the A team of leading thinkers in USAID, supple- sources of national strength and security in the mented by several key political appointees, modern world. It also reflects a broad change fleshed out the concept and began implemen- in the role of donors in development. Tradi- tation.10 Career foreign service officer Holly tional donors, including foreign governments, Wise was appointed as founding director of the World Bank, and the United Nations, the newly created GDA Secretariat in Novem- know that they are no longer the sole sources ber 2001. The team built on and expanded of development resources, ideas, or efforts. “To USAID’s long history of working in partner- effect change and improve the living condi- ship with NGOs, foundations, and interna- tions of billions of people in a sustainable tional organizations. In addition, USAID’s ties manner,” reads a recent report from the to private companies, previously limited, were United Nations, “partnering with civil society rapidly expanded. In keeping with the new re- and business is more than just an option... it alities of development assistance, in which the has turned into a necessity.”9 private sector and civil society were playing larger roles, USAID would welcome its partners as equals, to participate not only in the ORIGINS OF THE GLOBAL implementation of development projects, but DEVELOPMENT ALLIANCE now also in their identification, design, and Conceived by USAID career staff during the funding. transition to the Bush administration, the GDA concept was heartily endorsed by An-

USAID AND THE POSTWAR the spread of ideological threats such untary agencies, international and local EVOLUTION OF DEVELOPMENT as communism and the threat of in- NGOs, and, in recent years, private ASSISTANCE stability arising from poverty. companies whose goals and practices complement those of USAID and the lthough USAID’s predeces- Alongside USAID’s four regional countries in which they operate. sors date back to the Mar- bureaus, three functional bureaus and A shall Plan, the Truman admin- one office manage the agency’s With an annual budget of almost $14 istration’s Point Four Program, and transnational themes or “pillars”: billion (less than one-half of 1 percent Eisenhower’s International Coopera- ∫ Global health of the federal budget) and a staff of tion Administration, among others, about 7,500, the agency manages pro- ∫ USAID in its present form was cre- Economic growth, agriculture, and grams in more than 100 countries, in ated by President Kennedy in 1961, trade close partnership with NGOs, indige- following passage of the Foreign As- ∫ Democracy, conflict, and humani- nous groups, universities, American sistance Act. tarian assistance businesses, international organizations, other governments, trade and The new directions stressed in the ∫ And a cross-cutting pillar, the Global Development Alliance professional associations, faith-based 1961 act were a dedication to devel- organizations, consulting firms, and opment as a long-term effort requir- Historically, USAID has moved away other U.S. government agencies. ing country-by-country planning and a from providing so-called budget sup- commitment of resources on a multi- port to foreign governments (the di- USAID is led by an administrator ap- year, programmed basis. The new fo- rect funding often used by European pointed by the President and con- cus was to achieve economic growth aid agencies), preferring to target its firmed by the Senate. and democratic, political stability in efforts on specific development goals the developing world to combat both through cooperation with private vol-

20 CHAPTER ONE: THE PRIVATE REVOLUTION IN GLOBAL DEVELOPMENT No longer would the agency necessarily be the THE OFFICE OF GLOBAL “majority shareholder” in the alliances it DEVELOPMENT ALLIANCES: forged. The key would be to unite the skills CHANGE AGENT and resources of several partners, including he Office of Global Development private companies, each with its own special Alliances (GDA) reports to the ad- strengths, and to apply them to a problem T ministrator of the U.S. Agency for that no one actor could solve alone. The International Development (USAID). In pur- GDA initiative thus represented a shift in the suit of its goal of institutionalizing role of USAID, from being primarily a funder public–private alliances within USAID, it of development projects to being an equal provides support and services to agency staff and partners as they conceive and de- partner and manager of collaborative pub- velop alliances. It also provides guidance for licprivate relationships. prospective alliance partners. GDA has a core staff of six people: five program spe- The new plan required changes at USAID— cialists and the director. from the manner in which assistance projects were conceived to the specific modalities used to pay for them. But it drew on significant strengths within the agency and decades of But GDA represents a significant evolution in agency experience in promoting sustainable partnership thinking at USAID, particularly in development in countries around the globe. the role accorded to private firms and philan- Notable among those strengths were USAID’s thropic foundations in the definition as well as extensive overseas presence, its credibility with in the execution of international development developing-country policymakers, a dense activities. Partners in publicprivate alliances network of NGO partners, and its history of include organizations that have never before alliances and partnerships. partnered with the U.S. government. Other GDA forerunners at USAID were the FORERUNNERS OF THE ALLIANCE New Partnership Initiative (NPI), which ran APPROACH WITHIN THE U.S. AGENCY from 1995 to 2000. NPI focused on engaging FOR INTERNATIONAL DEVELOPMENT local NGO partners and stakeholders overseas. The concept of publicprivate alliances has It encouraged an alliance approach, but with strong precedents in USAID. The Matching limited staff and financial resources. The Grant Program in the Office of Private and Global Trade and Technology Network Voluntary Cooperation, established in 1980, (19942004) used an Internet platform to fa- enabled USAID to support international, in- cilitate linkages for trade among small and digenous, and U.S.-based NGOs that culti- medium-sized businesses in the United States vated relationships with for-profit firms, foun- and overseas. dations, and other partners previously outside the USAID orbit. When NGOs secured Non-USAID initiatives also influenced the funds from such partners, USAID could GDA business model. The World Bank’s Busi- match the investment and so expand budding ness Partners for Development, a pilot project NGOprivate sector relationships and build from 1998 to 2001, convened and seed-funded the capacity of NGOs by challenging them to four publicprivate alliances. Still other initia- bring dollar-for-dollar resources to the table. tives sprang up simultaneously with GDA— By the mid-1990s, the agency was encourag- among them the U.N. Global Compact. A di- ing NGOs to develop relationships with com- rect initiative of Secretary-General Kofi Annan, panies. Conservation International’s program launched in July 2000, the U.N. Global Com- with Starbucks Coffee Company, which be- pact encourages companies to abide by 10 social gan in 1997, was a product of that new em- and environmental principles to promote re- phasis (chapter 3). sponsible corporate citizenship.

ORIGINS OF THE GLOBAL DEVELOPMENT ALLIANCE 21 A CLEAR VISION The patterns of adoption of the alliance ap- With the creation of the GDA Secretariat, proach by the agency’s bureaus and missions USAID Admininstrator Andrew S. Natsios reflected their priorities and the differing con- also authorized the creation of a modest in- texts in which they operate. In some cases al- centive fund to support demonstration pro- liance opportunities were already obvious; in jects as well as training and other activities re- others, they had to be sought out through the quired for transition to the GDA model. diligence of staff. Several bureaus formed alliances at the bureau level; others delegated re- With intellectual and financial resources from sponsibility for alliance building to their coun- the GDA Secretariat, reforms in hiring and try missions. Some concentrated procurement policies, and a small number of alliance-building in a specific sector, such as successful projects that demonstrated the dy- health or education; others did not. Some pre- namism of the new approach, public-private ferred to begin with a few large alliances; oth- alliances were progressively adopted by US- ers looked for small demonstration projects to AID’s field staff, who began to explore al- test the concept. All have supported the alliances with partners in their geographic and liance approach with funds, outreach, and sectoral spheres. Staff in the agency’s bureaus good ideas. It is now ingrained, and thriving, and regions have been a steady source of al- in all bureaus. liance initiatives, complementing the many good ideas submitted in response to GDA’s In GDA’s first years, four dozen alliances, of- annual program statement.11 ten global or multiregional in scope, were managed by the functional bureaus organized

SOME LESSONS LEARNED ON 4. Respect the organization’s 7. Establish honest metrics, and ORGANIZATION CHANGE existing strengths and culture. use them. GDA has simple metrics USAID is a decentralized organization to measure success. One is the num- 1. Nothing succeeds like success. that empowers those closest to prob- ber of new alliances built over time. A few early successes demonstrated lems in the field. Accordingly, selec- Another is the amount of money the potential of the GDA model to tion and management of alliances now leveraged by the agency. GDA keeps internal and external audiences. US- takes place at the mission level so “alliance-like” activities off of the list AID’s alliances with Chevron Corpo- that partnerships closely match the and has excluded some of the very ration (chapter 4) and Cisco Systems objectives of USAID field staff. large global health alliances that (chapter 6) played this role. would have skewed leverage num- 5. Tell your story to all who will bers. 2. Invest in staff. GDA developed listen. GDA delivers its message a two-day workshop on alliance about public–private alliances around 8. Reward and recognize. GDA building for USAID staff in Washing- the world and down the hall. recognizes the “Alliance of the Year” ton and in the field. GDA’s Tools for and the USAID professional who Alliance Builders guides staff (and ex- 6. Make it easy to say yes. The does the most to support alliance ternal partners) seeking to build al- administrator ensured that GDA had building each year. In 2005, the Al- liances. a small incentive fund to encourage liance of the Year was the Balkan innovative alliances built by USAID Trust for Democracy (chapter 5). 3. Adapt and change. Once it be- missions. GDA asks people inside and came clear that changes were needed outside the agency to accept a new in USAID’s traditional processes to way of doing business. Setting up facilitate alliance building, the agency meetings, writing the first draft, pay- responded with a new solicitation ing for the conference call — all help tool (the annual program statement) make it easier to begin the discus- and a new funding instrument (the sion. collaboration agreement).

22 CHAPTER ONE: THE PRIVATE REVOLUTION IN GLOBAL DEVELOPMENT USAID’S INNOVATIVE APPROACH IS ATTRACTING ATTENTION . . . AND WINNING PRIZES

ovember 2005. For its ground- sharing of discretion between parties whose breaking use of public–private part- interests overlap but are far from identical,” Nnerships to achieve significant noted John D. Donahue, director of the Weil development results, USAID’s Global Devel- Program, in announcing the award. opment Alliance (GDA) has been named the inaugural winner of the Lewis and Clark April 2005. GDA was selected from among Award for Innovation in Collaborative Gov- 1,000 applicants as one of 18 finalists for the ernance. The award is a joint effort of the Innovations in American Government Weil Program on Collaborative Governance Awards. Often referred to as the “Oscars of and the Ash Institute for Democratic Gover- government,” the Innovations Award is a pro- nance and Innovation, both located in Har- gram of the Ash Institute, administered in vard’s Kennedy School of Government. The partnership with the Council for Excellence award celebrates real-world success in in Government. GDA was a semi-finalist for collaborative governance across government, the award in 2004. business, and civil society. “GDA represents the evolution of a loose bundle of partnership models into a more disciplined and deliberate rubric for the

around USAID’s other three pillars—eco- But GDA also cultivated relationships with nomic growth, agriculture, and trade; global smaller foundations that were taking an active health; and democracy, conflict, and humani- interest in development issues. Executives of tarian assistance. the Case Foundation, for example, joined US- AID in planning support for initiatives such as By 2003, GDA had initiated hundreds of con- a network of computer stations in Jordan and tacts with corporate partners and played an a social enterprise venture to provide revenue- active role in either facilitating the creation of generating products to rural producers in publicprivate alliances through the appropri- Kenya and Tanzania (chapter 8). ate USAID bureaus and missions, or directly initiating alliances through GDA incentive Several bilateral donors are adapting the al- funds. liance approach to their own agencies. For example, GDA has met with senior officials in In addition to corporate contacts, GDA built Japan, Spain, and other countries to discuss relationships with foundations, surveying the how they can use publicprivate alliances in landscape of foundation donors in an effort to their own operations. The United Nations De- coordinate USAID efforts with the interests velopment Programme (UNDP) and the Ger- and priorities of public, private, and corporate man foreign aid agency (GTZ) have developed foundations in the United States. The un- alliance initiatives and policies on a parallel precedented philanthropy of Bill and Melinda track with GDA. In reference to UNDP’s Gates and other wealthy individuals had re- work with USAID and Chevron Corporation cently emerged, and part of GDA’s role was to in Angola, former UNDP administrator Mark prepare USAID to accommodate itself to the Malloch Brown declared that the Angola En- sudden “supply shock” of increased funding terprise Fund created by the alliance could “set for vaccines and HIV/AIDS. an example for how publicprivate alliances can benefit the poorest in a very tangible way.”

ORIGINS OF THE GLOBAL DEVELOPMENT ALLIANCE 23 1. Other categories of growing assistance are international 8. Stephen Goldsmith and William D. Eggers, Governing by giving by independent and corporate foundations, other Network: The New Shape of the Public Sector (Washington, corporate giving, and transfers (including in-kind trans- DC: Brookings, 2004). fers, such as know-how and scholarships) by NGOs and educational institutions. 9. See, for example, Jan Martin Witte and Wolfgang Reinicke, Business UNusual — Facilitating United Nations 2. U.S. General Accounting Office, “USAID Relies Heavily Reform through Partnerships (New York: United Nations, on Nongovernmental Organizations” (Washington, DC, 2005). April 2002). 10. The members of the USAID task force that gave life to 3. See, for example, Michael E. Porter and Mark R. GDA were (in alphabetical order): Colleen Allen, Kramer, “The Competitive Advantage of Corporate Thomas Anklewich, Joan Atherton, Chris Brown, Philanthropy,” Harvard Business Review, December 2002, Lawrence Brown, Letitia Butler, Rebecca Cohn, Pamela pp .5–6, and David Grayson and Adrian Hodges, Corpo- Cullen, Judith Gilmore, Carol Grigsby, Martin Hewitt, rate Social Opportunity: Seven Steps to Make Corporate So- Scott Kleinberg, Kenneth Lanza, Bob Lester, Adele cial Responsibility Work for Your Business (Sheffield, Eng- Liskov, Drew Luten, Delbert McCluskey, Linda Morse land: Greenleaf, 2004). Grayson and Hodges define (chair), Kathleen O’Hara, Dana Peterson, Patricia Ram- corporate social opportunities as “commercially viable sey, Curt Reintsma, Wade Warren, John Wilkinson, and activities which also advance environmental and social Holly Wise. For “outstanding teamwork in the conceptu- sustainability.” alization and articulation of the GDA business model,” the team received USAID’s Meritorious Unit Award in 4. See Global Economic Prospects 2006—Economic Implica- 2001. tions of Remittances and Migration (Washington, DC: World Bank, 2005). The members of GDA’s interim secretariat were (in alphabetical order) Joseph Fredericks, Robert Goodwin, 5. ODA increased to $78.6 billion in 2004, the highest Martin Hewitt, Yumiko Ikuta, Jillian Inmon, Kurt Low, level ever. The United States is the largest aid donor in Linda Morse, Suzanne Nolte, Curt Reintsma, Reyna Rice, volume terms, followed by Japan, France, the United Lane Smith, and Holly Wise (interim director). The team Kingdom, and Germany. Net ODA from the United received USAID’s Meritorious Unit Award in 2001 for States in 2004 was $19 billion, about a quarter of the “outstanding teamwork, critical thinking, and innovation world total, and a 14.1 percent increase in real terms in the development of operational details and an imple- from 2003. Source: OECD Development Assistance mentation plan to support the GDA business model.” Committee and World Bank. 11. GDA’s annual program statement for fiscal year 2006 6. The Millennium Challenge Account began with nearly $1 was issued on November 10, 2005. The annual program billion in funding in 2004, and President Bush has asked statement specifies the type and scope of projects that that the 2006 amount be tripled, followed by annual may be considered for funding. It is available at www.us- funding of $5 billion. The administration requested $4.1 aid.gov/gda and on www.fedgrants.gov. billion for USAID programs for the fiscal year that begins in October and runs through September 2006. The agency also would help manage and disburse some of the funding for other U.S. aid programs, including a requested $2 billion for the Global HIV/AIDS Initiative and $3 billion for the MCA. USAID proposes allocating more money to countries that have demonstrated a commitment to reform but do not meet strict MCA criteria. 7. The Report of the United Nations Commission on the Private Sector and Development estimates that developing countries have $9.4 trillion dollars in private financial assets that cannot be fully mobilized for development, largely because of corruption and inadequate legal protections for property and contracts. In one developing country, according to the World Bank’s Doing Business in 2004—Understanding Regulation (New York: Oxford University Press, 2004), it takes 203 days to register a business; in another enforcing a contract takes 1,459 days. Such barriers to business formation and entrepreneurship keep businesses small and informal.

24 CHAPTER ONE: THE PRIVATE REVOLUTION IN GLOBAL DEVELOPMENT CHAPTER TWO

BUILDING DEVELOPMENT ALLIANCES THE GDA MODEL AT WORK

A publicprivate alliance in the mold of the Global Development Alliance (GDA) is a formal agreement between two or more parties to deﬁne and address a development problem. Alliance partners combine resources and share risks in pursuit of common objectives, while recognizing that each partner will have other objectives not shared by other members of the alliance. There is no predeﬁned maximum number of partners; each alliance is different.

Alliances bring together the resources of the U.S. Agency for International Development (USAID) and partners to solve problems that exceed the capabilities of individual actors. Those resources are as diverse as the alliances themselves. In addition to cash, they include human capital, technology and intellectual property, market access, cutting-edge business practices, policy inﬂuence, in-country networks, and expertise in development programs ranging from international trade to biodiversity protection. Because local ownership, leadership, and participation are important keys to success in development projects, alliance activities that involve local leaders and beneﬁciaries in design and implementation are most likely to be sustainable.

As of the end of fiscal year 2004, 339 corporate and 89 foundation partners were participants with USAID in a growing network of approximately 290 publicprivate alliances for development—in areas such as education, health, safe water, youth vocational training, information technology, forest certification, and small-enterprise development. The American people contributed $1.1 billion to those alliances through the USAID budget during the three fiscal years from 2002 to 2004. That contribution was more than tripled by GDA’s for-profit and nonprofit alliance partners, yielding a grand total of almost $5 billion in development assistance.1

WHO PARTICIPATES IN ALLIANCES, AND WHY? Effective publicprivate alliances draw on the comparative advantages of varied alliance partners, each of which brings unique strengths to the solution of a pressing development problem.

25 THE ROLE OF BUSINESS Firms exploring alliances may be motivated by direct or indirect business interests, or by their policy of corporate social responsibility. Al- though alliances formed under GDA are not designed to promote a particular company’s position or entry to a particular market, many alliances advance direct business interests by improving the quality and reliability of raw materials and other inputs, the health and skills of the workforce, the quality of infrastructure THE GLOBAL DEVELOPMENT ALLIANCE BUSINESS and trade facilities, the predictability of regula- MODEL IN BRIEF tion, and the security of property rights. Many ublic–private alliances may be initiated from within USAID, but USAID-sponsored programs address issues of most come from outside. They typically involve at least three vital importance to businesses operating in the P alliance partners (at least one private firm and at least one developing world—among them the rule of nongovernmental organization in addition to USAID). USAID may provide no more than half of an alliance’s resources; a ratio of at law, control of corruption, efﬁcient courts, ef- least 3 to 1 is sought. The private contribution to the alliance must fective contract enforcement, and eased restric- be at least 25 percent of its value, but it need not all be in cash. Con- tions on investment, all of which enhance the tributions of goods, intellectual property, and volunteer time may environment for business activity for alliance also be counted. partners and society at large.

The chief characteristics of the Global Development Alliance busi- Other alliances are motivated by corporate so- ness model are: cial responsibility (CSR), a subject that has ∫ Joint definition of a development problem not likely to be solved evolved greatly in the last decade, as discussed by a single actor in chapter 1. CSR makes good business sense ∫ Sharing of resources, risks, and results in pursuit of the agreed in countries where companies operate. Socially objective by a single actor, and of the solution to that problem responsible corporate performance can im- ∫ Use of innovative approaches that exploit the comparative advan- prove their ﬁnancial performance, reduce op- tage of each alliance partner erating costs, enhance brand image and reputation, and increase sales and customer loyalty, ∫ Leveraging of resources, both financial and in-kind. among other beneﬁts. CSR also meets investor For more on the GDA business model, visit www.usaid.gov/gda. expectations and creates shareholder value.

In return, business activity reinforces development work. Success in business turns on the ability to set and achieve targets efﬁciently. When targets include a social component to be achieved in partnership with government and NGOs, corporate skill at analyzing problems, marshaling resources, and eliminating bottlenecks can energize all partners. With their eye for productivity, efﬁciency, and results, corporate philanthropists can identify and mentor effective NGOs, transferring to their partners, by example or more formal means, technical skill, advanced technology, and good management practice. Alert to the value of technical and managerial break- throughs in radically enhancing productivity

26 CHAPTER TWO: BUILDING DEVELOPMENT ALLIANCES and thus competitiveness, corporations spread a taste for innovation among alliance part- THE U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT’S PARTNERS ARE A VARIED GROUP ners. At a more mundane level, corporate skill at managing inputs in complex supply chains ∫ Businesses and business trade associations and production processes applies directly to ∫ Foundations and philanthropies the resolution of development problems, pro- ∫ Faith-based groups vided firms are well advised by partners on ∫ Diaspora communities the social, cultural, and sovereign aspects of ∫ Nongovernmental organizations and civic groups those problems. Moreover, the credibility and ∫ Institutions of higher learning cachet of leading companies can pique the interest of other firms and organizations in the ∫ International organizations, such as the United Nations and the World Bank work of the partnership, a phenomenon that Michael Porter calls “signaling other funders.” ∫ Development consulting firms Corporations are also adept at advertising the ∫ U.S. cities and states, and other U.S. government agencies value of their results, which can sustain al- ∫ Governments of other industrial nations liances and help them grow. ∫ Host-country governments and state-owned enterprises Private companies also provide access to markets and capital and are well positioned to address other global challenges, such as protect- support with implementation. USAID has ing the environment and fostering equitable worked with such “traditional” partners since labor practices, often through the adoption of its founding—for example, with the Rocke- international industry-wide standards negoti- feller Foundation in developing and dissemi- ated with governments and multilateral or- nating the seed strains that boosted agricul- ganizations. tural yields in the developing world in the 1960s during the Green Revolution. The com- THE ROLE OF FOUNDATIONS AND munity also includes growing numbers of fam- NONGOVERNMENTAL ORGANIZATIONS ily foundations in the United States and the Foundations are an increasingly important developing world such as the Aga Khan Foun- source of funds, ideas, and operating expertise dation, AlvarAlice Foundation, Case Founda- for publicprivate alliances in development. tion, Conrad N. Hilton Foundation, and American foundations large and small, old Lincy Foundation. and new, spent $3 billion in developing countries in 2004 supporting civil society groups With their ability to move quickly and target and democracy building, ensuring the sus- resources precisely, foundations are often the tainable management and exploitation of nat- first to demonstrate what can be done to tackle ural resources, funding health campaigns of a given development problem efficiently. In so global reach, helping people acquire technical doing, they catalyze other resources and hold skills to lift them from poverty, and healing governments accountable. the wounds of civil strife and natural disaster NGOs—not-for-profit entities characterized (chapters 57). Foundations are making par- by a commitment to furthering humanitarian ticularly important contributions to global aims—play an essential role in the formation health; in 2002, the last year for which com- and implementation of publicprivate al- prehensive data are available, U.S. founda- liances.3 International NGOs often broker al- tions gave more than $707 million for inter- liances between the public and private sectors, 2 national health programs. as in the case of the International Youth Foun- The foundation community includes large dation, which has brought USAID together entities such as the Ford, Kellogg, and Rocke- with a dozen major companies to provide jobs feller foundations, which combine research for young people in Latin America (chapter 6).

WHO PARTICIPATES IN ALLIANCES, AND WHY? 27 Local NGOs arrange for the participation of contributions to alliances. GDA may tap other beneﬁciary communities in development pro- sectors of USAID to link alliance activities with jects. In so doing, they build their local capac- ongoing activities and so access additional ity for advocacy and social action. sources of funding and technical expertise.

NGOs naturally serve to bridge government USAID’s staff assesses needs for assistance and commercial sectors in the development of through field visits, surveys, and interviews; a publicprivate alliance. Their involvement prioritizes programs for support by analyzing provides an important sense of legitimacy for policy, legislation, country needs, and funding such alliances, as it ensures that humanitarian, availability; negotiates with host-country au- community-based interests will be represented thorities policy changes that will increase the in the relationship. NGOs may offer the ad- development impact of the alliance’s work; vantages of being able to operate in politically and monitors progress by visiting program sensitive situations, to deploy assistance more sites, reviewing implementers’ reports, and quickly than official donors, and to work meeting frequently with counterparts. USAID smoothly with governments and communities also gathers data on alliances and reports to with which they have established relationships. Congress and the American people on the NGOs also foster pluralism, voluntarism, and progress leveraged with public funds. compassion—values that have characterized the United States throughout its history. CONCEIVING, DEVELOPING, AND IMPLEMENTING AN ALLIANCE THE U.S. AGENCY FOR INTERNATIONAL From the preliminary idea to written agree- DEVELOPMENT’S ROLE ment on roles and responsibilities, the devel- USAID provides leadership by bringing to- opment of an alliance takes time. Prospective gether potential alliance partners around a partners may come together at a forum or con- specific development problem in a specific ference to develop the idea of the alliance and country or region. This convening power has examine the potential risks and benefits of proved to be a powerful tool to inform poten- working together on a development problem. tial partners about the possibilities of the new Before the first formal meeting, prospective model, and to generate ideas for new al- partners should become familiar with the aims liances. and experience of others.

USAID also contributes ﬁnancially to alliance Among the key questions: development, through the GDA Incentive Fund, and to implementation, through direct ∫ What are the results to be achieved, and how will performance be measured?

∫ How will activities be financed and how WHAT DOES THE U.S. AGENCY FOR INTERNATIONAL will the funding be managed? Most al- DEVELOPMENT BRING TO ALLIANCES? liances are financed in parallel, with each ∫ Long-term country presence with commitment to economic partner retaining control of its funds. growth Pooled financing, where the partners de- ∫ Financial resources posit contributions into a single fund, is an alternative used primarily in large health- ∫ Working relationships with developing country governments, and with U.S. and local firms and nongovernmental organizations related alliances. ∫ Knowledge of language, culture, customs, and political context The initial stages require support from senior ∫ Expertise in project management, including monitoring and evalu- managers and staff time and resources to settle ation, and in technical matters related to development the details. For high-profile alliances, the time ∫ Ability to undertake policy, social, and investment research required of senior management may be significant. Staffing or a reconfiguration of

28 CHAPTER TWO: BUILDING DEVELOPMENT ALLIANCES PRECONDITIONS FOR SUCCESS: AN ALLIANCE CHECKLIST

∫ Common cause. The issue to be addressed by the alliance is important to prospective alliance members. It is clear why forming an alliance is a good solution. ∫ Belief in alliances as a strategy. Prospective alliance members believe that cooperation can achieve more than going it alone. Alliance members are willing to treat each other as equal partners. ∫ Presence of a convener. At least one prospective alliance member has the standing to call the other alliance members to the table. ∫ Principled behavior. The U.S. Agency for International Development aligns itself with entities whose interests are compatible with USAID’s and whose practices do not pose reputational risks for the alliance or for the agency. ∫ Resources. Financial and human resources to support the alliance are available. ∫ Willingness to explore opportunities. Alliance members are willing to take risks together that individually they might be unwilling to take; they are willing to work together creatively in doing so.

staffing may be required to implement an al- Setting an alliance in motion requires agree- liance effectively. ment on the approach the alliance will take to address the problem around which the part- Alliance partners must commit to certain pre- ners have coalesced, including the develop- cepts—among them joint definition of the ment of an action plan that addresses key problem and joint pursuit of its solution; points requiring clarification. The points of sharing of resources (financial, technical, in- the action plan should include the develop- tellectual, proprietary, in-kind) in pursuit of ment of implementation plans, resource allo- the common objective; openness to flexibility cation decisions, and attention to adjustments and innovation in getting the job done, in- in the alliance to the different interests of the cluding the possibility of adding new part- alliance members in the development of de- ners; and leveraging significant resources. For tailed plans. The many points to be considered that reason, alliances should be formalized are detailed in GDA’s reference manual, Tools through instruments that establish the pur- for Alliance Builders, available in PDF form at pose of the alliance, define objectives and www.usaid.gov/gda. managing principles and procedures, and specify funding mechanisms and arrange- GDA can assist in the formation process by ments for the alliance. These instruments are connecting prospective strategic partners; pro- not mutually exclusive; several instruments viding support during different phases of al- may be used in the process of creating any liance building; and clarifying USAID policies particular alliance. Possible instruments that and standards. Tools for Alliance Builders, pre- may be used to formalize an alliance include: pared by GDA, covers the phases of the alliance development process, from determining ∫ A memorandum of understanding or whether an alliance is appropriate, to getting equivalent alliances underway, to outlining the steps in- ∫ A funding award (contract, grant, coopera- volved in formalizing and managing the relative agreement, or collaboration agree- tionship. ment) from USAID following a competi- USAID performs a “due diligence” inves- tive selection process tigation of prospective partners before engaging in negotiations to establish an alliance.

CONCEIVING, DEVELOPING, AND IMPLEMENTING AN ALLIANCE 29 USAID uses a variety of tools to assess corpo- ∫ The proposed alliance must be within the rate behavior and looks at: GDA precepts and consistent with the terms of GDA’s annual program statement. ∫ Economic performance ∫ A compelling reason must exist to com- ∫ Environmental record mingle USAID and partners’ funding re- ∫ Social responsibility (respect for human sources for joint programming. rights, support for labor and environmen- ∫ Other implementing mechanisms must tal standards, and an interest in sustainable have been considered and rejected as unfea- development). sible or inappropriate. USAID missions work with the U.S. embassy ∫ A partner, notably a nontraditional partner,4 and others to make local determinations of will receive USAID funds directly under the suitability of prospective alliance partners. the alliance.

The collaboration agreement is an innovation U.S. AGENCY FOR that will prove instrumental in streamlining INTERNATIONAL DEVELOPMENT funding for alliances. Nevertheless, the agency FUNDING MECHANISMS foresees that most alliance funding will con- The USAID contribution to alliances may take tinue to be provided through cooperative one of several forms. The agency uses three agreements. main instruments to obligate public funds under traditional vendor-client arrangements between USAID and implementing partners: ac- HOW HAVE ALLIANCE quisition contracts for the purchase of goods PARTNERS HAD TO ADAPT TO and services, and assistance agreements to MAKE ALLIANCES WORK? award grants and cooperative agreements. When different organizations, each imbued Grants are made primarily to nonprofit organi- with a distinct culture, find themselves in a zations to carry out programs in support of a partnership, they must adapt to one another public purpose. Cooperative agreements are sim- and learn to speak each other’s language. ilar to grants, but USAID maintains substan- Despite a long history of working with foun- tial involvement in the activity covered by the dations and NGOs, the agency understood award. To date, most alliances have been that the business model represented by GDA funded through cooperative agreements and would require significant changes in the grants. agency’s institutional culture. Redirecting a USAID has recently developed a new funding large organization is never easy. mechanism—the collaboration agreement—to GDA’s status as a pillar ensured that facilitate the formation of publicprivate al- publicprivate alliances would be incorpo- liances. Neither contract nor grant, the collab- rated, at least formally, in the strategies of US- oration agreement is a procurement innovation AID’s bureaus and missions. GDA promoted that allows USAID to engage with a resource that process by championing the partnership partner (such as a corporation or foundation) idea and providing model language. To con- at a strategic level. It also allows USAID to vert formal adoption into live alliances, the program and fund alliances more quickly than agency identified the specific skills needed to before. The four criteria for its use are: build and broker alliances, and then ensured that personnel in the bureaus and missions possessed those skills. A program of alliance- building workshops presented by GDA and newly recruited alliance participants gave agency staff in Washington and overseas a taste

30 CHAPTER TWO: BUILDING DEVELOPMENT ALLIANCES of the challenges and the potential of their facility is based or where they source publicprivate alliances. Those workshops their crops. A foundation may have a history have trained more than 1,000 USAID profes- of grant-making in a certain region. Failure to sionals, who have responded by bringing new understand such limits at the outset may pre- partners to the table—among them corpora- vent a successful alliance from scaling up later. tions, foundations, universities, and faith- Alliance partners also have to come to general based organizations. agreement about sectors. For example, alliance Finally, as already noted, the agency adapted partners may agree in a memorandum of units funding mechanisms to accommodate new derstanding that they will work in the “educa- types of partners. To invite good ideas from tion, enterprise development, and other sec- prospective partners, it began to issue an an- tors.” In other cases, alliance partners come nual program statement (APS) that sets forth with very fixed ideas about what an appropri- in clear and simple terms the parameters of ate project might be. fundable alliances. The APS for fiscal year Financial. Partners usually have an idea of how 2006 was published on www.fedgrants.gov on much they are willing to spend (in cash and November 10, 2005. other assets) on a given activity, and for how USAID’s traditional implementing partners long. Such limits must be acknowledged and have had to make changes as well. The most made explicit. Sometimes prospective alliance obvious adjustments for NGOs accustomed to partners do not know or are unwilling to di- using agency money to accomplish tasks vulge what they are willing to contribute. spelled out by the agency are the GDA re- They may be flexible (susceptible to adjust- quirement for leveraged funds, the enlargement as results are achieved) or they may have ment of the scope of the typical alliance to in- “hard budget constraints.” clude business firms and philanthropic Temporal. Are partners in it for the long haul? foundations, and the concomitant sharing of There is no right or wrong answer, except with responsibilities for designing and planning (in reference to the development challenge and addition to implementing) development oper- the other partners’ expectations. Corporate ations. partners that join alliances that affect their Each alliance partner tends to bring to the core business interests tend to be long-term bargaining table certain “implicit interests”— players, offering their NGO partners (local limitations or assumptions that must be made and international) significant opportunities to explicit and reconciled with other partners’ benefit from transfers of technical and man- practices if fissures are to be avoided later. agerial skill. Partners’ implicit constraints can be found Relational. Prospective alliance partners often along several distinct dimensions: have preferred implementing partners. Some- Geographic and sectoral. Partnerships only times alliance partners come with implement- work when the parties’ geographic and sec- ing partners. Often implementing partners toral interests overlap. Prospective alliance come with funding partners in tow. It is im- partners may be willing to work in one area of portant to understand the relationships and a country but not in another. For instance, whether they make sense in light of the stated USAID often selects one or two regions of a purpose of the alliance. developing country in which to work. Such Some private firms may be reluctant to join al- geographic decisions are a result of consulta- liances with direct competitors. On the other tions with developing country governments hand, some of the most productive alliances and the U.S. government’s interagency are centered on groups of firms working to- process. Sometimes, companies and donors gether to resolve collective industry supply have reasons to focus on a particular part of chain issues, improve the business climate for a the country—for example, the one in which

HOW HAVE ALLIANCE PARTNERS HAD TO ADAPT TO MAKE ALLIANCES WORK? 31 sector, or otherwise improve the context (eco- build trust and to learn each other’s culture nomic, social, political, or environmental) in and language, goals, and methods. which they all must operate.

Interests can change. Time tables can change. EVALUATING ALLIANCES FOR Facts on the ground can change. These reali- EFFECTIVENESS ties affect the alliance calculus. Understanding Alliance partners approach the challenge of and negotiating through these interests takes monitoring and evaluation from their particu- time and discussion to make the implicit ex- lar perspectives: USAID, NGOs, other aid or- plicit and to devise compromises and working ganizations, institutions, foundations, and arrangements that suit all partners. As al- firms each have their own set of criteria and liances unfold and partners learn to trust each procedures for monitoring and evaluating pro- other, constraints can become more flexible, jects. In an alliance, they must agree on shared but they must be accommodated initially or criteria and procedures. But all alliance part- trust may be crowded out by conflict. Lasting ners have an interest in measuring the effec- alliances are living, changing entities. Many tiveness of their efforts, learning from experi- start small and expand over time as the al- ence, and building a body of knowledge that liance matures and succeeds, trust is built, can be exploited by future alliances. and the benefits to the partners become Different partners define success in different clearer. ways and hence may be interested in tracking Organizations accustomed to acting quickly different outcomes. In the Sustainable Forest on an idea, especially when they bring sub- Products Global Alliance, for example (chapter stantial money or resources to the table can 3), IKEA and The Home Depot are most con- learn from the example of the German Mar- cerned about the levels of green timber pro- shall Fund and the Charles Stewart Mott duction that can be achieved for a given input Foundation as they advanced the idea of the cost. The World Wildlife Foundation and The Balkan Trust for Democracy over three years Nature Conservancy are more concerned with beginning in 2000—navigating government measuring the decline in illegal logging. US- regulations, competing to actualize their own AID and other development agencies want to idea, and eventually finding support within see the impact on farmers’ income and, in USAID that culminated in a 10-year partner- turn, on the health and education achievement ship that won USAID’s “Alliance of the Year” of rural families. award for excellence in 2005. The two foun- All are legitimate measures of alliance “success” dations took a long view to developing the al- that need to be assessed to determine whether liance. Their patience paid dividends: the an alliance is meeting the objectives of each al- Balkan Trust has attracted new partners, new liance partner. The challenge is to knit these funding, and additional development exper- differing measures of success into an analytical tise to guide the Trust’s local and regional pro- framework that integrates each into the strate- jects. USAID learned that it had to pay more gic logic of the alliance as a whole. attention to partners’ differing priorities and constraints. In designing any system for monitoring and evaluation (M&E), it is necessary to strike a With several years of alliance experience un- balance between the value of the information der its belt (and a new procurement process collected and the costs in time and dollars to and mechanism to obligate funds in its tool- collect it. The key consideration is what infor- box), USAID can implement an alliance mation is needed to: much more quickly now than when the Balkan Trust was first proposed—generally ∫ Effectively manage alliance resources, en- about six months from idea to funding. To- suring that alliance managers can get infor- day, the binding factor is the time it takes to

32 CHAPTER TWO: BUILDING DEVELOPMENT ALLIANCES mation they need to make mid-course cor- EVALUATING EFFECTIVENESS IN ENTRA 21 rections as appropriate entra 21—a $27 million initiative that provides youth in Latin Amer- ∫ Properly account to taxpayers, sharehold- ica and the Caribbean access to training, internships, mentoring, and ers, and donors for funds expended placement services—has been implementing an evaluation process ∫ Meet the information needs of other stake- to help verify the effectiveness of its many projects. In 2005 it com- holder groups—among them host govern- pleted external reviews of eight projects: El Salvador (Agape), Do- minican Republic (ISA), Peru (Alternativa), Panama (Cospae), ments, other donors engaged in related de- Paraguay (CIRD), Colombia (Comfenalco), Brazil (CEPRO), Mexico velopment programs, and additional (CIPEC), and Argentina (SES). partners who may be sought in the future Evaluators are thoroughly oriented on entra 21, and become fluent in to sustain or expand the alliance. project terms, procedures, and other essential features. Data is col- Determining what information is needed by lected about the sample group of participants and compared with whom and with what frequency and degree of baseline data in use by the program; focus groups are facilitated with different categories of graduates: youth in salaried employment, the rigor drives the design of the M&E system for self-employed and, unemployed youth looking for work. Supplemen- the alliance. Once the scope of the desired tal data is gathered from a sample of employers and individuals who system is deﬁned, alliance managers must provide technical assistance to young entrepreneurs. agree on how M&E activities will be funded, Results are disseminated in stakeholder dialogues and publications to who will manage them, and how widely the maintain continuous improvement throughout the program. data and analyses will be shared.

Participation by the private sector partner in the design of an alliance M&E plan may introduce new approaches and create learning liance specifically to perform M&E. The In- opportunities for all parties. Performance donesia Timber Alliance provides an example management practices are well known to cor- of this approach. Following a suggestion by porate and NGO managers but may be Britain’s Department for International Devel- widely different from those applied in US- opment, to construct a bigger M&E compo- AID, creating an opportunity for cross-fertil- nent from the beginning, USAID increased ization. Corporate and business sector part- the budget for that purpose. The implement- ners may offer special expertise on ing partners then contracted a research insti- cost-effective data collection on pricing and tute to handle the task for the alliance. The marketing, while USAID and its traditional system is set up so that each alliance activity is partners can contribute expertise on measur- tracked separately and each partner’s resource ing development impact. contribution linked to the activity it is funding. Each partner can learn, for example, how Some firms measure the impact of their pub- much of its contribution is going toward tim- licprivate alliances in terms of their CSR ob- ber tracking and the specific amount of wood jectives, which typically turn on the firm’s saved. Giving each partner a clear idea of what reputation and employee satisfaction. Others their resources are accomplishing is a matter of assess impact in terms of the results achieved accountability—and a good way to build by the programs they support. In alliances commitment and sustainability into an al- where corporate participation is linked to core liance. business interests, the bottom line will figure in the evaluation of program results. Other alliances have plans to carry out both process and impact-level evaluations at various USAID’s 2004 assessment of the GDA model points in alliance implementation. found that many alliances had not yet developed effective alliance-wide M&E systems. Where such systems were in place, they were typically carried out by an independent contractor or other third party funded by the al-

EVALUATING ALLIANCES FOR EFFECTIVENESS 33 READING THE CASES THAT work in all sectors—community development, FOLLOW education, health, environmental sustainabil- The chapters that follow represent some of ity, enterprise development, better governance, the best work in development today. Orga- and post-conﬂict recovery—to name just a nized into categories that illustrate common few. And their motivations differ. Community features of USAID’s Global Development Al- groups want to educate their children and pro- liances, the case examples are just a fraction of tect their environment; businesses want a reli- those underway in countries and communi- able supply of high-quality products. USAID ties all over the world. There is no standard has designed GDA so that they all can suc- approach or model to follow; each alliance de- ceed. Through careful planning and mutual velops in a unique way. Participating organi- respect, partners with distinct but complemen- zations come in all sizes and types—from tary goals can come together to produce as- governments and major corporations to foun- tounding results. To learn how, read on. dations, small businesses, and NGOs. They

1. Reported funding amounts for USAID and alliance part- 2. International Grantmaking III, Foundation Center, New ners include expended funds and projected commit- York, 2004. The nation’s independent foundations made ments for future years. GDA maintains a limited data- 1,266 international health grants in 2002 totaling base of alliances for the entire U.S. Agency for $693,797,861; U.S. corporate foundations made 227 International Development. Gathered through the grants totaling $13,538,457 in the same year. agency’s annual reporting process, the data cover funding both from USAID and partners, resource leverage 3. For USAID, an NGO is a registered nonprofit organiza- ratios, countries and regions where alliances are active, tion that receives part of its annual revenue from the pri- and minimal information on activities and programs. vate sector; receives voluntary contributions of money, Health alliances are a special case, since the funding for time, or in-kind support from the general public; is finan- some of the largest ones, such as the Global Alliance for cially viable; has a board of directors; fits USAID priori- Vaccines Initiative, which is highlighted in this report, ties; and does not have terrorist ties. USAID-registered runs in the hundreds of millions of dollars. Only contri- NGOs work in 159 countries in nearly every area of de- butions made after 2001 are counted in the database. In velopment. Most are involved in health, nutrition, or mi- the name of conservative measurement, USAID ex- croenterprise. cludes the very significant private investment resources 4. According to guidelines issued by USAID’s Office of Ac- leveraged from USAID’s Development Credit Authority quisitions and Assistance, a “non-traditional partner is a program. The highly successfu DCA is a credit guaran- private organization offering resources at a leveraged ra- tee that attracts hundreds of millions of dollars in loan tio in excess of one to one, whose principal business pur- capital for investment projects that support interna- pose is other than foreign development assistance or tional development. USAID also does not include data whose development assistance purpose was recently es- from a large universe of “alliance like” activities with tablished, and who has not routinely received federal companies that do not meet certain GDA criteria (such funding under traditional grants and cooperative agree- as 1:1 leverage ratio). Missions do not include these ments.” partnership relationships in their annual reports and, therefore, are not captured in GDA data.

34 CHAPTER TWO: BUILDING DEVELOPMENT ALLIANCES PART 1I

ALLIANCE STORIES CHAPTER THREE

SUSTAINABLE SUPPLY CHAINS RAISING STANDARDS, BUILDING TRADE

With help from the U.S. Agency for International Development (USAID), multinational corporations are working with local producers to raise agricultural productivity and improve quality standards for commodities such as cocoa, coffee, and forest products. In so doing they are assuring stable supplies of high-quality products and predictable returns for growers. This chapter looks at four examples of how such alliances have paid off by emphasizing higher productivity, sound agricultural marketing, sustainable environmental practices, and certiﬁcation programs that deliver better value for buyers.

Each alliance is built on the strong interests and commitments of the partners and the communities in which they work. All show that globalization works by linking smallholder farmers to markets and that tropical products like cocoa, coffee, nuts, and lumber can be grown and harvested in ways that improve livelihoods and protect the environment.

∫ In the Sustainable Tree Crops Program Alliance, a consortium of chocolate companies including The Hershey Company and Mars, Inc. are securing long-term supplies of cacao by enhancing the well-being of the farmers who harvest it.

∫ In the Sustainable Forest Products Global Alliance, The Home Depot and the World Wildlife Fund have teamed up to promote market demand for certiﬁed forest products.

∫ In the Conservation Coffee Alliance, Starbucks and Conservation International are improving biodiversity through shade-grown coffee and paying price premiums to producers of high-quality beans.

36 ECOLOGIC

∫ In the Continuous Improvement Alliance for Labor Standards in Central America, Gap, Inc., and other partners are raising the competitiveness of clothing manufacturers by improving the standards under which factories operate.

In each of these cases, USAID is a supportive alliance partner — a funder, convener, and broker of solutions that improve lives. As developing countries participate in world markets, US- AID is ensuring that farmers and workers have greater opportunities to improve their livelihoods by participating in global trade.

37 SUSTAINABLE TREE CROPS PROGRAM ALLIANCE HELPING THE SMALLHOLDER FARMER IN AFRICA

PURPOSE ALLIANCE MEMBERS To improve the economic and social well be- U.S. Agency for International Development ing of smallholder farmers and the environ- “As a specialty U.S. Department of Agriculture mental sustainability of tree crop farms in chocolate com- West Africa, Latin America, and Asia. World Cocoa Foundation (WCF), with more pany, we see the than 45 chocolate industry members, among importance of CONTEXT them Mars, Inc., The Hershey Company, building regional The most important tree-based commodity in Nestlé Products, Kraft Foods, ADM Cocoa, West Africa, cocoa also provides a livelihood Ferrero, Guittard Chocolate Company, Barry cocoa programs for rural producers in Latin America and Asia. Callebaut, and Blommer Chocolate that increase In all three regions, millions of small-scale Smithsonian Institution farmer produc- family farmers cultivate the crops. Fungal dis- tivity and the eases and insect pests destroy a third of the International Institute of Tropical Agriculture crop annually, while weak extension and in- quality of cocoa formation systems, inefficient market systems, ACCOMPLISHMENTS AND OUTCOMES grown in the and shortcomings in national policy pose a STCP promotes shade-crop biodiversity tropics.” threat to chocolate industry buyers as well as methods that improve the quality and avail- rural producers. ability of cocoa beans for the international — ED SEGUINE, chocolate industry. The healthier trade cli- GUITTARD mate fostered by the alliance is also raising the standard of living of participating farmers and CHOCOLATE improving the labor climate for cocoa work- COMPANY ers. Globally, more than 60,000 smallholders have graduated from farmer field schools and realized productivity gains of 30 to 50 percent. More than 2,000 farmers in Africa have been sensitized to child labor issues.

FUNDING ARRANGEMENT U.S. Agency for International Development— $5 million

World Cocoa Federation and chocolate industry—$5 million

38 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS he Sustainable Tree Crops Program 10 leading producing countries account for Alliance (STCP) improves the eco- more than 95 percent of exports. Similarly, the Tnomic and social well being of small 10 leading consuming countries account for 75 farmers and the environmental sustainability percent of imports. of tree crop farms in Africa (with expansion But as the chocolate industry became less ver- projects in Asia and Latin America), by bring- tically integrated over time, its connection ing industry expertise and resources to bear with and understanding of cocoa producers on the cultivation and marketing of cocoa. grew increasingly distant. “The whole notion The industry is represented by the World that they needed to be thinking about di- Cocoa Foundation (WCF), whose 45 mem- versified systems or stability to rural commu- bers include Mars, Inc., The Hershey Com- nities was not yet part of their rationale,” company, Nestlé, Kraft Foods, ADM, Ferrero, mented Jeff Hill, senior agricultural advisor for Barry Callebaut, Blommer and other choco- USAID. “They didn’t see that it was in their late companies and trade associations. enlightened self-interest to directly invest in About 70 percent of the world’s cocoa comes smallholder producers.” from West Africa, where it is the most impor- The problems of cocoa supplies did not receive tant tree-based commodity. There, and in serious attention until the 1990s, when issues Latin America and Asia, millions of small- of biodiversity conservation, rural livelihoods, scale family farmers cultivate the crops ac- and poverty were finally recognized as inextri- cording to time-honored tradition. But that cably linked. Today, the same concentrations tradition is challenged by deforestation, fun- have facilitated the development of a con- gal diseases, and insects, which destroy a third certed approach to cultivation and marketing of the cocoa crop annually. Weak extension of cacao. and information systems, inefficient market systems, and shortcomings in national policy In 1998, a critical mass of stakeholders began pose additional threats to the multinational to form around the problems of the cocoa sup- chocolate industry as well as rural producers. ply chain. An industry-supported conference The disappearance of tropical forests and de- organized by the Smithsonian Tropical Re- clining yields on remaining acreage imperil search Institution in Panama convened some the supply of cocoa to the industry and the 200 government and industry leaders to dis- livelihoods of producers. cuss ways to strengthen cocoa production and cocoa producers. A research paper presented at In the 1980s a fungal plague called witches’ the conference profoundly changed the views broom turned Brazil — at the time the of industry and the donor community. world’s second-largest cocoa producer — into a net importer. Brazil’s rural producers were The paper described cultivation systems devel- devastated by the plague, and industry buyers oped by farmers in Cameroon, who grew food resolved to work together to help producers crops on the ground under cocoa trees, taller prevent the recurrence of preventable diseases fruit trees over the cocoa trees, and even taller that had proved so destructive. shade trees that supplied local lumber. The farms using these practices were the most eco- COCOA AND BIODIVERSITY: AN nomically productive in West Africa and sec- AWAKENING ond only to rain forest producers in their The $40 billion chocolate industry is most preservation of biodiversity. visible in the form of companies in developed The Smithsonian conference concluded that countries that grind cacao into cocoa and cocoa farms could function simultaneously process it into finished chocolate products. as economic engines and conservation tools. Because cacao can be grown only in very USAID representatives at the conference specific climates (at 20 degrees latitude), the found it immensely significant that revenue

SUSTAINABLE TREE CROPS PROGRAM ALLIANCE 39 production, food security, and poverty reduc- ∫ Better policy, and tion efforts could be combined with conserva- ∫ More robust marketing and information tion and biodiversity strategies. systems. Following the conference, USAID invited a Later the focus would expand to social and la- high-level industry delegation to visit West bor issues tied to cocoa production. Africa. The delegation visited research institutions, extension programs, and ministries of The plan called for the four focus areas to be agriculture and finance to gain a better under- implemented in West Africa, where standing of the systems supporting cocoa Cameroon, Côte d’Ivoire, Ghana, Guinea, and farmers. The reality that confronted the dele- Nigeria recognized their common interests. As gation contrasted sharply with the hopeful the initiative matured, independent national message of the conference. Existing support cocoa networks began to collaborate on a re- structures were extremely limited, and most gional basis. farmers received no support at all. Less than 15 percent of farmers were organized in farmer In the pilot phase of STCP, innovations in organizations or co-ops — mechanisms productivity, marketing and trade, and farm through which extension services could be de- diversification were tested and validated. Suc- livered and innovations disseminated. cessful practices were then integrated into national and regional development efforts. Farm- The delegation presented its findings at a se- ers were linked to markets through producer ries of global stakeholder meetings in Paris in organizations; farm field schools expanded 1999. The resulting “Paris Declaration” by the farmers’ knowledge and use of proven technol- chocolate industry, USAID, trade organiza- ogy and techniques. Together these actions tions, producer groups, and major interna- now protect rural producers from dangers, tional research institutions expressed the com- such as crop pestilence and market instabilities mitment of all parties to sustainable cocoa and help ensure a more secure and sustainable production. STCP evolved from that declara- supply of cocoa for industry buyers. “Sustain- tion. able cocoa farming in West Africa not only se- cures the supply chain for the long term,” says USAID played a critical role in brokering the John Lunde of Mars, Inc., but also protects Paris agreement. “The chocolate companies the livelihood of more than 1.5 million cocoa have an interest in building up cocoa produc- farmers in the region.” tion,” says GDA director Dan Runde. “Through our collaboration with neutral entities such as the World Cocoa Foundation and ADVANCING COCOA CULTURE AT 20 the International Institute of Tropical Agricul- DEGREES LATITUDE ture, USAID is helping to bring alliance part- Operating in all of West Africa’s major cocoa- ners together.” producing countries, STCP is administered by the International Institute of Tropical Agricul- ture (IITA), a U.K.-based member of the UN- A REGIONAL ALLIANCE IS BORN affiliated Consultative Group for International Late in 1999, USAID invited 250 participants Agricultural Research that works to enhance to Washington, D.C., to review a rudimen- incomes and food security in Sub-Saharan tary outline of what is today known as STCP. Africa. A spin-off alliance, SUCCESS, oper- Through a series of facilitated working meet- ates in Indonesia, Vietnam, and the Philip- ings, stakeholder teams hammered out the pines. Another spin-off, ACCESSO, was re- four primary components of STCP: cently launched in Peru, Bolivia, and ∫ Stronger community groups Colombia. With the new alliances in Asia and Latin America, USAID and industry stake- ∫ Dissemination of technology and research holders — joined later by the U.S. Depart-

40 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS ment of Agriculture (through USDA’s Food Farmer field schools also teach farmers about for Progress program) — are now engaged in shade management, tree husbandry, and a global alliance spanning the entire band at postharvest handling. The teaching has been 20 degrees latitude north and south of the effective. A recent random sampling demon- equator. strated a 42 percent reduction in hazardous practices among field school participants com- All three regional initiatives provide farmers pared to nonparticipants. The curriculum will with organizational support, marketing infor- soon include crop diversification, natural fer- mation, policy reform, research services, and tilization, and other best practices. The result technical training through dedicated farmer has been dramatic; incomes have increased be- field schools. The schools teach farmers how tween 20 and 50 percent. In some cases pro- to boost their incomes by increasing yields ducers doubled their income. and quality, while protecting cocoa’s natural resource base. As with coffee, cocoa is often To date, more than 80,000 farmers have grad- cultivated with other plant and animal life. uated from schools supported by the alliance. That practice offers the benefit of diversifying Each trainer works with about 20 facilitators, farmers’ overall production, but it also re- who then conduct workshops and training on quires special care to avoid disrupting the cocoa farms — an extension function. In ecosystem. many cases, new facilitators are recruited from among the most avid field school participants.

ELIMINATING THE WORST The overarching goal of the effort is The industry is supporting other pro- FORMS OF CHILD LABOR IN to ensure that children are not grams to improve conditions in West COCOA FARMING AND harmed in cocoa farming. Achieving Africa’s cocoa farming communities PRODUCTION IN WEST AFRICA that requires improving the lives of through the World Cocoa Founda- children and the incomes and eco- tion. Newly established “farmer field n September 2001, global choco- nomic opportunities of cocoa farming schools” educate communities on late and cocoa industry represen- communities. Social conditions are farming topics and issues—among I tatives signed the “Harkin-Engel also very important—children must them the role of children on the fam- Protocol” to eliminate the worst have access to schools and families to ily farm—while providing secondary forms of child labor in growing cocoa health services. messaging to reduce the worst forms beans and cocoa bean products in As a result of the protocol, the of child labor, encourage education, West Africa. The agreement marks an and prevent HIV/AIDS. The CLASSE important first—as an entire indus- chocolate and cocoa industry are creating something virtually unprece- program (Child Labor Alternatives try has made a commitment to work through Sustainable Systems in Educa- with host governments and other dented—a voluntary certification system to monitor and curtail the tion) aims at improving access to edu- partners in developing voluntary cer- cation at the village level. STCP con- tification standards for cocoa farm worst forms of child labor. The system will analyze data from monitoring tributes by helping farm families earn workers, particularly children. The more, thereby reducing the incentive protocol was developed by Senator efforts, report on child labor practices, and implement measures to ad- to send children to work instead of Tom Harkin (D-IA) and Representa- to school. tive Eliot Engel (D-NY), in response dress the worst forms of child labor. to evidence of harmful child labor Each country’s cocoa farming sector practices in cocoa production. The will be certified on the basis of re- agreement serves as a framework for ports from independent local NGOs, progress that brings together the co- community and youth leaders, and coa industry, West African govern- other groups not tied to the cocoa ments, organized labor, nongovern- industry. Once certification has been mental organizations (NGOs), and verified, reports will become publicly farmer groups. available.

SUSTAINABLE TREE CROPS PROGRAM ALLIANCE 41 In February 2004, representatives from public found. Children who work are less likely to at- and private organizations came together at the tend school. In Côte d’Ivoire, for example, National Academy of Sciences in Washington, about one-third of school-age children living DC, to review cocoa’s role as a model crop in cocoa-producing households have never at- that enhances the economy, environment, and tended school. The study also found that chil- health of countries that grow it. Carol dren were applying pesticides, using machetes Brookins, U.S. executive director to the to clear lands, and bearing heavy loads. World Bank, gave credit to STCP: “Through The alliance approach was critical to the estab- this unique public/private partnership, we lishment of the certification program, because have made incredible advances in cacao re- no single chocolate company would have search and economic development for farmers risked the competitive disadvantages of acting in tropical regions that would not have been alone to certify good labor practices. possible without the willingness of industry, academia, government and international organizations to come together for the greater BEANS OF PLENTY good.” The combined impact of STCP, SUCCESS, and ACCESSO is paying off for all partners. As USAID’s Jeff Hill puts it, “An important SOCIAL PROGRAMS AND CHILD LABOR achievement of STCP is its success in building The networks formed under STCP have en- an industry coalition committed to improving abled the alliance to address social develop- the circumstances of cocoa producers. Clearly, ment issues with farmers and communities. a consensus exists that the future of the choco- Child labor has become a focus of social im- late business depends on the future of rural provement efforts, particularly aimed at help- families growing the cocoa.” ing “at-risk” children while simultaneously addressing the underlying community issues More than 15,000 farmers have graduated from that lead to abusive labor practices. The result STCP’s field schools in Cameroon, Côte is an industry commitment to develop volun- d’Ivoire, Ghana, Guinea, and Nigeria, resulting tary certification standards to protect cocoa in significant improvements in yield and in- farm workers, particularly children. In addi- come. In Indonesia, the Philippines, and Viet- tion, farmer education programs include ses- nam more than 50,000 farmers have graduated sions on issues such as HIV/AIDS, child la- from farmer field schools run by the SUC- bor, the importance of children’s education, CESS alliance, leading to quality improve- and the role of children on the family farm ments, lower pesticide use, and improved yields (see box on page 41). and incomes. In Latin America, the ACCESSO alliance is helping to coordinate and promote With support from USAID, the U.S. Depart- the adoption of best practices among the vari- ment of Labor, the WCF, the International ous cocoa initiatives in the Andean Region. Labour Organization (ILO), and West African governments, IITA surveyed child la- On this global scale, USAID and the chocolate bor practices in the cocoa sector of West industry have invested millions of dollars to Africa, comparing those practices to ILO con- improve the lives of rural producers, while also ventions. boosting trade and production. In so doing, the alliance rebuts the conventional wisdom of The study found that although most of the the 1980s and 1990s, that traditional export children working on cocoa farms did so as sectors offered little to stimulate sustained eco- part of a family unit (a traditional pattern in nomic growth. West Africa), some child laborers had no family ties to farmers. Those with no family ties and those recruited through intermediaries are more likely to be exploited, the study

42 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS SUSTAINABLE FOREST PRODUCTS GLOBAL ALLIANCE MAKING MARKETS WORK FOR FORESTS AND PEOPLE

PURPOSE ACCOMPLISHMENTS AND OUTCOMES To advance a new model for forest conserva- More than 13 million hectares of forest are now tion and community development in which committed to a credible system of A groundbreak- sustainable forest management is rewarded in certification, so that buyers can be sure that ing alliance of the global marketplace. the wood products they buy come from well- business, govern- managed forests. Trade in responsibly sourced ment, forest CONTEXT forest products among participants in the More than 1.6 billion people around the Global Forest and Trade Network (GFTN) communities, and world depend on forests for their livelihood, now exceeds $37 million. Metafore has trained civil society es- thousands of producers in responsible forest but many forested ecosystems are being de- tablishes a frame- stroyed at unprecedented rates by destructive management. In some high-profile cases, and illegal logging, conversion to other land GFTN partners have exerted their purchasing work for uses, and poor forest management. power to find solutions to illegal logging. responsible forest management and FUNDING ARRANGEMENT ALLIANCE MEMBERS global trade in U.S. Agency for International Development U.S. Agency for International Development: $9.5 million forest products. World Wildlife Fund United States Department of Agriculture For- Metafore est Service: in-kind technical assistance and expertise United States Department of Agriculture (USDA) Forest Service The Home Depot: $1 million

The Home Depot Other corporate donors, including Andersen Corporation, Lowe’s, IKEA: $27 million

SUSTAINABLE FOREST PRODUCTS GLOBAL ALLIANCE 43 he loss of millions of acres of tropical of Samartex-managed lands, and laid out a forest to illegal logging, clearing by in- work plan for credible certification by 2007. digenous people for new farmland, or T In Indonesia, meanwhile, the giant Asia Pulp government development and resettlement and Paper (APP) was doing business in a man- programs results in short-term gains but long- ner that threatened Sumatran forests. WWF term economic and environmental conse- first sought constructive engagement with APP quences. The Sustainable Forest Products directly. Negotiations proceeded, only to col- Global Alliance facilitates partnerships and lapse when the company went ahead with fur- business practices that help reverse the clear- ther purchases of illegally harvested wood. cutting and illegal logging that threaten the WWF next turned to GFTN members and long-term productivity of the world’s great other stakeholders in the forest products trade. forest areas. By reducing trade in illegally har- Japanese paper companies signaled that im- vested and unsustainably managed forest proved environmental performance would products, the alliance is improving conditions help APP maintain a business relationship for resource-dependent communities and low- with them. In Europe, WWF engaged APP income producers. Together, the alliance’s customers and managed to insert environmen- partners are working to advance a new model tal safeguards into APP debt restructuring for forest conservation and community devel- agreements. In the United States, Staples, Inc., opment in countries assisted by the U.S. and Office Depot, Inc., both demanded re- Agency for International Development (US- forms; Office Depot later suspended its deal- AID). ings with APP pending resolution. The World Wildlife Fund (WWF), an al- The job is far from done—with Samartex, liance partner, has helped build national and APP, or any other of the many companies regional forest and trade networks (FTNs) whose products originate from endangered with companies committed to practicing or forests. But through constructive engagement, supporting responsible forestry. These FTNs the GFTN global network is changing the fu- have come together as the Global Forest and ture, one forest products company at a time. Trade Network (GFTN). By facilitating trade links between member companies committed to achieving and supporting responsible VOLUNTARY COMMITMENT forestry, the GFTN creates market conditions In 1991, a small group of companies in the that help conserve the world’s forests while United Kingdom committed to purchasing providing economic and social benefits for the wood products from well-managed forests. businesses and people that depend on them. These companies became the first forest and trade network. By the end of the decade, simi- For example, Samartex Timber and Plywood lar groups had sprung up in Europe, Brazil, Company is the leading producer of forest Japan, and the United States. They included products in West Africa, with $20 million in some of the most prestigious names in the annual sales through the 159,000 hectares global forest products industry. The GFTN (392,889 acres) of forest the company man- member companies generated more than half ages. With the encouragement of two of its of all demand for certified forest products in major buyers (members of the U.K. Forest the 1990s, according to the United Nations. and Trade Network), the company committed to certify all its products as not coming from In 2001, USAID began to engage the private endangered or illegally harvested forests when sector in preserving biodiversity. Several of the it joined the Ghana Forest and Trade Net- agency’s bureaus came together under the lead- work in May 2005. Samartex declared a mora- ership of USAID’s Forestry Team to find mar- torium on logging in primary forests, devel- ket-based solutions to critical forest-manage- oped benefit-sharing plans with communities ment issues. Through intensive consultations

44 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS within USAID and with potential partners, the Forestry Team assembled strong support ROLES OF THE MEMBERS OF THE SUSTAINABLE FOREST PRODUCTS GLOBAL ALLIANCE for engaging business as stakeholders in the development agenda. ∫ U.S. Agency for International Development (USAID) provides funds and manages the alliance. The alliance concept was taken to an international Forest Leadership Forum organized in ∫ The World Wildlife Fund manages the Global Forest and Trade Network, an affiliation of national and regional buyer and pro- April 2002 by WWF and Metafore, an NGO ducer groups in nearly 30 nations, with more than 400 member based in Portland, Oregon, that works with companies committed to responsible forestry. business to identify market-based practices that support thriving forests. A landmark ∫ Metafore works with North American businesses to promote the responsible purchasing and use of wood and paper. event that bridged the interests of environmental groups, retailers, forest communities, ∫ The United States Department of Agriculture (USDA) Forest and the forest products industry, the forum Service provides technical support and guidance. made allies of parties previously thought to be ∫ The Home Depot, a charter private sector partner, contributes adversaries. More than 1,300 participants funding, its global reputation, and its purchasing model in support from 45 countries developed a framework to of responsible forest management. address issues of common concern — chief among them illegal logging, preserving forest biodiversity, and the role of certification schemes in improving forest management. A HOW THE GLOBAL FOREST AND TRADE key outcome of the conference was the under- NETWORK WORKS standing that business markets and purchas- Through the voluntary GFTN framework ing behavior can be important drivers of so- supported by the alliance, corporations, cial and environmental change. NGOs, forest communities, and governments cooperate to design and implement market- In light of the feedback and interchange based schemes (such as certification) that pro- from the Forest Leadership Forum, USAID mote responsible forest management. refined its alliance concept and issued a solicitation for groundbreaking approaches in “Forest” members of FTNs are forest owners natural resource management that would and managers that have achieved or are com- bring government, industry, and NGOs to- mitted to achieving credible certification using gether as partners. one of two certification systems. “Trade” members are primarily retailers, distributors, USAID awarded $3.5 million to an alliance and manufacturers of forest products, includ- proposed by WWF and Metafore, based in ing community and private enterprises of all part on the two organizations’ groundbreak- sizes from cooperative sawmills to industrial- ing work with The Home Depot and other scale pulp mills that have committed to sup- leading buyers, marketers, and producers of porting credible certification. forest and paper products to track the origin of wood products and certify that those prod- Participating in FTNs brings many benefits to ucts come from well-managed forests. buyers and producers. Forest owners and managers receive information and technical assis- USAID administrator Andrew S. Natsios, tance to improve forest management, achieve WWF president Kathryn Fuller, Metafore certification, and find customers for their president and CEO David Ford, and a repre- products. They join a powerful advocacy sentative of The Home Depot formally an- group supporting changes in forest-sector pol- nounced the Sustainable Forest Products icy and law. They may become eligible for Global Alliance (SFPGA) on May 6, 2003. financing to invest in their operations. Retail- ers and distributors in FTNs receive assistance with the development and implementation of

SUSTAINABLE FOREST PRODUCTS GLOBAL ALLIANCE 45 procurement policies, are briefed on nontradi- ity and supply of environmentally responsible tional or lesser-known wood species and paper. In line with the SFPGA mission to fos- sources, and get help in their efforts to enter collaboration in addressing broad environ- courage their suppliers to pursue certification. mental and social challenges through action in the global marketplace, the Paper Working Perhaps most important, both classes of mem- Group promotes stakeholder involvement bers derive mutual benefit from each other — across the forest products supply chain, with producers know they have a reliable market of Metafore as both a collaborator and project buyers, and buyers know they have depend- manager responsible for communicating group able long-term suppliers. As of September efforts. 2005, GFTN consisted of 35 forest members, 373 trade members, and 13 million hectares “The power of the Paper Working Group is (32 million acres) of forests committed to that it brings together influential North Amer- credible certification throughout Europe, ican–based companies that not only buy paper Asia, Africa, and the Americas. GFTN mem- and paperboard products from developing bers’ annual trade in forest products exceeds countries, but, in many cases, actually have $15 billion. operations in these regions,” said David Ford, Metafore president and CEO. He adds, “We’re The partners intend that GFTN will become working with leaders in the industry to help a permanent commercial fixture — a self-sup- them source and use products in ways that porting global clearinghouse of responsible benefit the forests in these areas and the com- trade in forest products largely independent munities that depend on these natural re- of WWF management and oversight. The sources.” Jagwood+ FTN in Central America is a model example. The group has incorporated as its The Paper Working Group began operations own professional membership organization. in 2003, when representatives from two large- Corporations ask members of their senior volume corporate paper buyers consulted staff to govern the group on a rotating basis, Metafore about implementing forest-product while SFPGA funds pay for a regional coordi- purchasing policies. Those businesses found it nator to facilitate market links. Other FTNs difficult to integrate global forest-management are seeking a similar level of sustainability. standards and manufacturing practices into their operations. As it turned out, several com- THE POWER OF EFFECTIVE ADVOCACY panies were experiencing similar challenges; While WWF advances market incentives for from this discovery, Metafore’s Paper Working responsible forest management on a global Group was formed. Its principal source of scale, Metafore pursues action in the board- value to participating businesses is a common rooms of North American businesses that definition of environmentally preferable paper have global reach and major purchasing and and consistent measurements for global buyers production power — such as Bank of Amer- and suppliers of paper on the components of ica, Nike, McDonald’s, and Staples. environmentally sound paper. Metafore’s goal is to provide the knowledge, Mark Buckley, vice president of environmental tools, and connections to help companies affairs for Staples, remarks that Metafore’s con- align their business objectives with responsi- vening authority proved to be of great value in ble wood and paper production, purchasing, bringing partners together that might not have and use. collaborated otherwise. The working group Metafore applies a marketplace leadership provides an opportunity to “not just focus on concept through its Paper Working Group, a sustainable forestry or recycled content, but to collaboration between Metafore and 11 large- take a broader view of paper and its whole life volume paper users to increase the affordabil- cycle.”

46 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS The Paper Working Group defines environ- liance. Joint work plans and quarterly reports mentally preferable paper based on seven re- have since been the norm. lated outcomes: But the alliance has scored clear victories as ∫ Efficient use and conservation of raw ma- well. From at least as far back as the 2002 For- terials est Leadership Forum, corporations such as The Home Depot and Andersen Corporation, ∫ Minimization of waste makers of windows and doors, have found ∫ Conservation of natural systems value in partnering with USAID on global trade in responsible forest products. ∫ Clean production The alliance is poised for continued success ∫ Community and human well-being through its relationships with businesses, poli- ∫ Economic viability cymakers, and civil society organizations. For example, several high-profile cases of illegal ∫ Credible reporting and verification logging have been resolved through a new class of partners in the finance sector, many of Through the web-based Environmental Paper which have adopted the Equator Principles, Assessment Tool, participating companies es- under which participating companies agree tablish consistent language and metrics for not to lend money for a project until the bor- environmentally preferable paper that enable rower explains how it will meet criteria for sus- efficient communication between the buyers tainable development and other social goals. and suppliers of these products. By tracking trends in the forest products sector, WWF and Metafore have influenced some CHALLENGES OVERCOME, of the world’s largest banks to adopt responsi- OPPORTUNITIES EMERGING ble purchasing and corporate procurement Now in its fourth year of implementation, policies that are fully aligned with alliance val- SFPGA has encountered obstacles and learned ues and goals. lessons. A retreat held to evaluate the first year of the alliance revealed that having two lead In four years of operation, SFPGA has shown implementers with discrete organizational pri- that when alliance partners act on shared goals orities and protocols had sometimes created a in a manner best suited to each and align oper- barrier to working together. Retreat partici- ations to promote responsible harvesting, pur- pants decided that some unwieldy processes chasing, and use of forest products, the end re- needed to be changed to better coordinate sult is greater than what any one partner could implementation and reporting efforts — and achieve alone: trade in responsible forest prod- to better illustrate the achievements of the al- ucts on a global scale.

SUSTAINABLE FOREST PRODUCTS GLOBAL ALLIANCE 47 CONSERVATION COFFEE ALLIANCE FIELD-TO-CUP STEWARDSHIP OF THE WORLD’S LARGEST RESERVE OF BIOLOGICAL DIVERSITY UNDER INTENSIVE HUMAN MANAGEMENT

A major coffee company builds an alliance ALLIANCE MEMBERS with an international conservation organiza- Conservation International “Instead of tion and USAID to promote sustainable cof- Starbucks Coffee Company destroying pro- fee-farming practices that fairly compensate ductive land, growers, restore and protect rain forests, and U.S. Agency for International Development supply a growing market for quality coffee coffee cultivation beans. ACCOMPLISHMENTS AND OUTCOMES is now an engine The alliance has succeeded in improving the of conservation. PURPOSE supply of premium coffees that meet the mar- Instead of slash- To expand the cultivation and sale of high- ket demands for high-quality, shade-grown and-burn, we quality, shade-grown coffee. coffee. In Mexico, the initial group of 300 farmers has grown to 1,000 growers in six pro- are conserving CONTEXT ducer organizations. biodiversity” The El Triunfo reserve in Chiapas, Mexico is among the world’s largest reserves of biologi- FUNDING ARRANGEMENT — AMBASSADOR cal diversity under intensive human manage- U.S. Agency for International Development: TONY GARZA ment. The small-scale farmers from such re- $1,200,000 gions typically grow their crop under a Starbucks Coffee Company: $1,500,000 canopy of shade trees, often alongside other crops for domestic consumption or local mar- Conservation International: $500,000 kets. Because this system provides native ﬂora and fauna critical to conserving the diverse ecosystems in which coffee is produced, coffee farmers are also stewards of biodiversity. The Conservation Coffee Alliance has taken up the challenge to make sustainable livelihoods and sustainable ecosystems possible through a “ﬁeld to cup” intervention in which stewardship is practiced throughout the supply chain, from grower to consumer.

48 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS CONSERVATION INTERNATIONAL CONSERVATION

or Rogelio Vazquez and other growers unfo nature reserve grow coffee of higher qual- in the Chiapas region of Mexico, sup- ity and to sell that coffee directly to Starbucks F porting a family on income from coffee Coffee Company. Starbucks agreed to buy cof- was never easy. Wild price ﬂuctuation was a fee the farmers produced—if it met certain major reason. Vazquez earned $200 for a 132- criteria for quality and growing methods. pound bag of coffee in 1997; two years later With USAID and Starbucks’s support, Con- he could barely get $40. He and other farmers servation International showed farmers such as were sometimes told that their coffee was sub- Rogelio Vazquez how to meet those standards. standard and that they had to adopt growing Thanks in large part to Starbucks’s willingness techniques nobody understood. to pay more for higher quality, Vazquez’s income recovered to $100 a bag. USAID and its In 2001, the U.S. Agency for International partners are now expanding this longstanding Development (USAID) enlisted Conservation and successful alliance in Mexico, Costa Rica, International, experts in protecting biodiver- and Panama. sity, to help farmers in and around the El Tri-

CONSERVATION COFFEE ALLIANCE 49 Through a comprehensive “field to cup” inter- ther struggle with inadequate health care dur- vention, the Conservation Coffee Alliance is ing periods of unemployment, resolved never building capacity among smallholder farmers to allow a similar hardship to befall his col- through training and access to credit services leagues. Today, Starbucks provides health-care promoting quality and transparency in the benefits to all employees working 20 or more supply chain through sourcing guidelines that hours per week. include social and environmental performance But in the transformation from a string of criteria, and stimulating demand at the end of Seattle coffeehouses to global purveyor of the the supply chain. Together, alliance partners $3 caffeine shot, Starbucks recognized in the are enhancing the livelihoods of smallholder plight of smallholder coffee producers a set of farmers by adapting to and benefiting from challenges that neither savvy marketing nor market forces that favor specialty coffees. superior customer service could solve.

BUILDING THE ALLIANCE: “While we take great pride in our business and LIVE YOUR VALUES THROUGHOUT THE our broader role as a good corporate citizen, SUPPLY CHAIN we also recognize that we are not a social de- Sue Mecklenburg, vice president for Business velopment business,” says Mecklenburg. Practices, ascribes Starbucks Coffee Com- “We’re good at opening four stores a day, but pany’s astounding transformation of the U.S. that is different from ensuring transparency in coffee industry in the 1990s to a strong corpo- coffee farms in the Latin American highlands. rate culture that links business performance We needed help to do that.” with employees’ skills, morale, and good health. She summarizes that culture as “hit- Conservation International ﬁrst approached ting our numbers and living our values.” Starbucks in 1997, hoping to establish a relationship based on a shared commitment to re- Case in point: Howard Schultz, Starbucks’s quire at-origin conservation measures on all founder and chairman, after witnessing his fa- coffee purchased. At the time, it was a bold

WEAVING CORPORATE SOCIAL depended? business model itself.” RESPONSIBILITY INTO Accordingly, the Business Practices STARBUCKS’S BUSINESS MODEL In his presentation of the Starbucks 2004 corporate social responsibility division of Starbucks exists within a s Starbucks considered coop- report, Orin Smith provided the an- CSR department headed by a senior eration with nongovernmen- swer, laying out a straightforward re- vice president who reports directly A tal organizations in safeguard- lation between the company’s core to the chief executive. Starbucks’s ing its supply chain, it faced the business functions and the health of work with USAID is tied to its direct question of where to house the new ecosystems and the livelihoods of business interests. functions within its organizational farmers: At the same time, “Starbucks is mak- structure. Was the livelihood of farm- “Our CSR program is not a philan- ing a real difference in the quality of ers really a core business function? thropic effort. We do have philan- the natural environment while helping Or should it be dealt with through thropic initiatives, but these may or farmers who live in sensitive ecosys- the company’s philanthropic division, may not be part of a social responsi- tems,” says Peter Seligman, Conserva- or perhaps even a dedicated corpo- bility program. We recognized long tion International chairman and CEO. rate foundation? Was cultivating and ago that while philanthropy is impor- “Our project in Chiapas has resulted harvesting coffee in a manner that re- tant, these initiatives can never go in a 40 percent average increase in stored biodiversity a matter of corpo- far enough to fulfill the responsibili- coffee farmers’ earnings, a 100 per- rate compliance with environmental ties that we have socially. We under- cent growth in the cooperative’s in- regulations, or was it a question of stood that in order to fulfill our ternational coffee sales, and $200,000 safeguarding the long-term supply of obligations, we must build our social in non-Starbucks harvest loans to the commodity on which its business responsibility programs into the farmers’ cooperatives.”

50 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS proposition for a company just beginning to product resulting from the Conservation In- consider the prospect of adapting its purchas- ternationalStarbucks alliance. It was one of a ing practices to meet concerns about environ- small selection of products marketed and sold mental sustainability and the livelihoods of under Starbucks’s Commitment to Origins cof- coffee farmers. fee category, which also included Fair Trade Certified and certified organic coffees. An initial meeting included Glenn Prickett of Conservation International and Dave Olsen, the Starbucks senior vice president who had GOING TO THE SOURCE: put together the company's first nonprofit U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT SCALES UP TESTED strategic alliance with CARE. After reviewing RELATIONSHIPS the results of the due diligence he requested Fresh off the successful launch of its co- on Conservation International and several branded, shade-grown coffee label, Starbucks other conservation organizations, Olsen in- and Conservation International looked to ex- vited Conservation International to Seattle to pand the relationship. Conservation Interna- explore the two organizations' mutual inter- tional identified the Matching Grant Program ests in conservation and coffee. Sue Mecklen- in the USAID Office of Private and Voluntary burg, then director for environment and com- Cooperation (PVC) as a good opportunity to munity affairs, was among those involved in leverage additional funding support. the relationship building. For two decades, USAID’s Matching Grant In 1998, after mutual trust had been devel- Program had helped U.S. NGOs develop their oped through frank dialogue, Starbucks com- community-based programs overseas. By mitted $150,000 over three years to allow matching dollar-for-dollar a NGO’s own re- Conservation International to work to protect sources, the Matching Grant Program (a fore- biodiversity and empower smallholder pro- runner to GDA) supported NGO projects ducers in the El Triunfo reserve. Starbucks that were consistent with USAID’s evolving promised to evaluate the coffee produced un- sectoral and geographic priorities. der the initiative according to its stringent standards for specialty coffee. The company For Martin Hewitt, director of the Matching was willing (but did not guarantee) to pur- Grants program at the time of Conservation chase some or all of that production. The par- International’s proposal, the intriguing ties codified this agreement in a memoran- prospect was directly involving communities dum of understanding (MOU).1 within and surrounding the El Triunfo. “We used to wonder what stake local people have in Working with 300 farmers, each tilling fields buffer zones in a conservation strategy,” He- of two hectares or less, Conservation Interna- witt said. “The Conservation International tional’s local cooperative partners produced, in proposal had the potential to realistically ad- their first year, two containers of organic spe- dress the livelihoods of local people and pro- cialty coffee suitable for purchase. Matthew vide a powerful market incentive for coffee Quinlan was a member of the Conservation producers to advance conservation and biodi- International team working with the coopera- versity.”2 tives. “From the 1998 MOU, we had three years to meet standards,” he recalls. “But we Through a matching grant, USAID provided met our first production goals on the very day Conservation International approximately $1 a Starbucks newsletter announced the three- million over three years (200003) for its work year target. It was a great success for us and a with Starbucks in the El Triunfo reserve. real shot in the arm for the partnership.” With the success of Shade Grown Mexico and In 1999, the product was branded as Shade additional support from USAID, Conservation Grown Mexico and marketed as a special International and Starbucks turned their atten-

CONSERVATION COFFEE ALLIANCE 51 servation International to expand its work ROLES OF THE MEMBERS OF THE CONSERVATION with farmers to promote water and soil conser- COFFEE ALLIANCE vation, crop diversiﬁcation, and reductions in ∫ Conservation International provides technical assistance and agri- the use of chemical fertilizers and pesticides— cultural knowledge to small farmers and cooperatives participat- all designed to protect the surrounding forest, ing in the program. streams, and wildlife. In addition to its exper- ∫ Starbucks Coffee Company, the world’s leading roaster and re- tise, Conservation International pledged tailer of specialty coffees, assesses and purchases coffee pro- $500,000 to the alliance. duced by Conservation International’s local partners. Purchases over several years have provided a reliable and expanding market The MOU cementing the alliance of USAID, for shade-grown coffee and the CAFÉ initiative. Starbucks, and Conservation International— ∫ The U.S. Agency for International Development provides funds and the ﬁrst for USAID but the third for Starbucks country mission support. It has helped the alliance scale up from the and Conservation International—was signed Chiapas region to elsewhere in Mexico, Costa Rica, and Panama. in September 2004 in Mexico City at a cere- mony hosted by Tony Garza, U.S. ambassador to Mexico.

tion to the section of their agreement that “Instead of destroying productive land, coffee called for systemic changes in Starbucks’s sup- cultivation is now an engine of conservation. In- ply-chain management: sourcing guidelines. stead of slash-and-burn, we are conserving biodiversity,” said Ambassador Garza, addressing businessmen and coffee growers at a Starbucks FROM QUALITY TO SUSTAINABILITY In November 2001 the parties announced that store. “The partnership model we are honoring they would award premiums to growers who today is the business model of the future.” met certain environmental, social, and economic criteria. The goal was to ensure sus- SOARING PAST ORIGINAL TARGETS: tainability in growing practices, as well as STABLE PRICES, SUSTAINABLE GROWING high quality. PRACTICES, BETTER COFFEE Starbucks’s CAFE Practices initiative has far Starbucks’s sustainable buying guidelines outstripped its targets: came to be called the CAFE (Coffee and ∫ Farmer Equity) Practices initiative. By 2004, In ﬁscal year 2004, Starbucks paid an aver- under the initiative, Starbucks was paying age price of $1.20 per pound for green (un- participating producers more than twice the roasted) coffee. The average price on the market rate for commodity grade coffee. New York “C” Market was $0.69 per pound. CAFE Practices also demonstrated to millions ∫ The company purchased 43.5 million of discerning consumers Starbucks’s social and pounds of coffee from preferred suppliers environmental responsibility. The message who had implemented sustainable mea- was not lost on other industry players. sures through CAFE Practices, far exceed- By 2004, Conservation International and ing the goal of 30 million pounds. Starbucks had also expanded their alliance to ∫ Starbucks has set ambitious targets to pur- Peru, Colombia, Panama, and Costa Rica. chase 75 million pounds of CAFE coffee in Through a proposal submitted to GDA, Con- 2005, 150 million pounds in 2006, and 225 servation International again invited USAID million pounds in 2007. to participate. USAID joined the alliance in Panama and Costa Rica. In the El Triunfo Biosphere Reserve in Chia- pas, results have been lasting: USAID’s $1.2 million contribution matched an earlier pledge by Starbucks of $1.5 million ∫ The Chiapas program increased its client over three years. The funds would allow Con- base from two to six cooperatives in two

52 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS years, while the number of participating ∫ Since late 2000, Verde Ventures has ad- farmers rose from 300 to more than 1,000. vanced over $2.2 million to eight cooperatives in Chiapas, with a 99 percent repay- ∫ Approximately 3,000 hectares of coffee ment rate. ﬁelds are now managed using the best practices for conservation coffee. 1. MOUs between USAID and its resource partners are ∫ Starbucks Coffee Company has bought not binding legal documents. Those executed by Star- bucks and Conversation International were explicit in coffee directly from the project’s coopera- setting out funding arrangements, partner roles and responsibilities, lines of communication, and criteria for tives for four consecutive years, beginning dissolution of partnership. with purchases of 75,000 pounds in 1999 2. “The Matching Grants program was a fabulous pro- and increasing to 1.7 million pounds (45 gram,” said Quinlan. “We had a relationship with Star- bucks, but it was USAID who gave us the resources containers) in 2002 and 2003, and 42 con- needed to build it. Without USAID’s support of NGO- tainers in 2004. business relationships back in 2000, the present relationship would not exist.”

USAID, VERDE VENTURES, AND eratives commit to purchasing agree- message to potential investors,” ar- ECOLOGIC FINANCE HELP ments with final buyers such as Star- gues William Foote, founder and COFFEE FARMERS BRIDGE THE bucks and Green Mountain Coffee president of EcoLogic Finance. “The CREDIT GAP Roasters, Inc., according to stringent message is that there is strong sup- standards of conservation and quality, port—both public and private—for sk coffee farmers anywhere Verde Ventures and EcoLogic Finance socially responsible investing.” in the world what they need advance farmers the funds they need With the recent rebound in coffee A most to help their family, and to operate in the coming production prices, the need for purchasing agree- the answer will be the same: credit to cycle or to make investments in capi- tide them over between the harvest ments is no longer so acute. But tal equipment and sustainable farming credit based on the agreements is still and the time they are paid. Farm-gate techniques. prices often leave producers with needed to enable growers to make barely enough to provide for their To date, Verde Ventures has ad- capital improvements and enhance families, let alone to invest in the up- vanced more than $2.2 million to farming techniques. Building a credit coming production cycle. But the eight cooperatives in Chiapas. Only history also helps farmers access local small- and medium-sized rural credit one has defaulted—a repayment rate sources of credit. Finally, as farmers market is too big for microfinance of 99 percent. After a modest start in know, the true value of such an loans, and farmers are typically not el- 1999, with loans of around $25,000, arrangement is when prices are low, igible for loans from local financial in- EcoLogic Finance now disburses loans not at their peak. stitutions. as large as $500,000. USAID’s relationship with EcoLogic Recognizing the value of the EcoLogic has been successful: Since 2000, in an initiative that grew business model, the U.S. Agency for ∫ 4,000 small farmers in Latin Amer- from the experience of the Conser- International Development (USAID) vation Coffee Alliance, Conservation ica benefited from $3 million in loans strengthened the nongovernmental in 2002. International’s Verde Ventures pro- organizations’ operational capacity in ∫ gram and EcoLogic Finance, a non- Latin America (and its relationships A $5.7 million trade credit in 2003 profit offering affordable financial ser- with buyers such as Starbucks and assisted 18 coffee farmer organiza- vices to community-based businesses Green Mountain) by providing a $4 tions in Latin America. operating in environmentally sensitive million credit guarantee. USAID’s ∫ 55 producer organizations in Latin areas of Latin America and select technical assistance and credit guar- America and East Africa benefited countries of Africa and Asia, have antee—but also the mere participa- from $10 million in loans in 2004. filled the rural credit gap by providing tion of USAID in the alliance—has loans to low-income communities ∫ Lending doubled in 2003–04, with lowered perceived risks and transac- a 99 percent loan repayment rate. whose business activities respect en- tion costs for other partners, making ∫ vironmental conservation and pro- it easier for final buyers to provide 6,300 farmers will benefit from a mote grassroots economic develop- loan capital. $2 million loan guarantee for East ment. Africa. “Working directly with partners such The approach is simple. Once coop- as USAID and Starbucks sends a clear

CONSERVATION COFFEE ALLIANCE 53 THE ALLIANCE FOR CONTINUOUS IMPROVEMENT IN LABOR STANDARDS IN CENTRAL AMERICA GROWING GLOBAL COMPETITIVENESS THROUGH HIGHER LABOR STANDARDS

PURPOSE ACCOMPLISHMENTS AND OUTCOMES A strategic publicprivate alliance, the Con- An impressive effort to engage labor, manage- Clothing compa- tinuous Improvement Alliance gives Central ment, corporate customers, and associated par- American apparel manufacturers tools to ties in activities leading to better working con- nies unite with sharpen their competitive edge. ditions, workplace cooperation, and long-term representatives competitiveness in the world marketplace. of labor and CONTEXT manufacturers to Fair labor standards have become a critical el- FUNDING ARRANGEMENT ement of competitive advantage for two big U.S. Agency for International Development: increase Central reasons. First, multinational brands increas- $2,000,000 America’s com- ingly demand compliance with such stan- Gap, Inc. and The Timberland Company: petitive edge dards. Second, trade agreements such as the $500,000 cash and $1,000,000 in in-kind con- Central America Free Trade Agreement through fairness tributions (CAFTA) make compliance a requirement for and productivity. receiving trade beneﬁts. Improving labor standards has become an important way for countries to improve competitiveness, gain market access, and attract foreign investment.

ALLIANCE MEMBERS U.S. Agency for International Development

Development Alternatives, Inc.

Gap, Inc.

The Timberland Company

Social Accountability International

Commission for the Veriﬁcation of Codes of Conduct USAID International Textile, Garment and Leather Workers’ Federation

54 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS he international context surrounding taps private sector mechanisms to improve Central America’s maquila sector is working conditions, putting pressure on cor- Tvastly different from what it was a porations to remain accountable for responsi- year ago. The end of three decades of clothing ble sourcing. This approach allows for local in- and textile quotas under the Multi-Fibre put, thereby fostering the sense of ownership Arrangement has made many producers more critical to sustainable outcomes. vulnerable to competition from low-cost pro- Managed for USAID by Development Alter- ducers. At the same time, debate over labor natives, Inc. (DAI), it draws on the technical standards surrounding the Central American expertise of Social Accountability International Free Trade Agreement (CAFTA) has put the (SAI), global trainers in workplace labor stan- apparel sector in the spotlight. In this new dards. DAI asked SAI to reach out to global global context, improved labor standards have corporations, such as Gap and Timberland, become a critical element of competitive ad- both members of SAI’s corporate board, and vantage as multinational brands increasingly encourage them to forge an alliance with US- demand compliance standards, and as AID to improve labor standards in Central CAFTA and other trade agreements make America. The alliance also draws on the local compliance a requirement for receiving trade union linkages of the International Textile, benefits. Improving labor standards has be- Garment, and Leather Workers’ Federation, come an important way for countries to im- whose 217 affiliated trade unions represent 10 prove competitiveness, gain market access, million workers. Additional on-the-ground and attract foreign investment. knowledge comes from respected local groups The Continuous Improvement Alliance offers that monitor labor standards, government the maquila sector in Central America a way ministries, civil industry associations, gender- to overcome both challenges—to increase focused NGOs, and other labor initiatives global competitiveness through continuous supported by the U.S. Department of Labor, improvement in labor standards. The alliance the U.S. State Department, and the Interna- leverages $2 million in funding from USAID’s tional Labour Organization. Given the highly Global Development Alliance along with cash sensitive nature of labor standards, DAI’s per- and in-kind contributions from brand part- ceived neutrality is viewed by all parties in- ners, Gap, Inc., and The Timberland Com- volved as key to gaining the trust of local pany. groups and governments and expanding the alliance to include other major brands. NO ONE CAN DO THIS ALONE The Continuous Improvement Alliance is a TWO PROJECTS, ONE GOAL multistakeholder initiative that brings to- The alliance has funded two projects: Contin- gether U.S. apparel retailers and a dynamic uous Improvement in the Guatemalan Work- mix of leading international and local labor, place (CIMGUAW), a pilot effort, and Con- training, and development organizations. This tinuous Improvement in the Central American partnership was born of the partners’ under- Workplace (CIMCAW). standing that sustainable improvements in With a $530,000 seed grant from GDA, working conditions in the maquilas of Central CIMGUAW serves global businesses and fac- America would require an intensive multi- tories in Guatemala’s textile and apparel sector stakeholder effort. According to Gap chief ex- by training some 20 managers in garment fac- ecutive Paul Pressler, writing in the company’s tories in and around Guatemala City on labor 2004 report on corporate social responsibility, standards and workers’ rights embedded in na- “our goal is to help improve conditions across tional labor legislation and ILO conventions the apparel industry as a whole. And we know ratified by Guatemala. The alliance is helping that’s not something we can do alone.” By us- supplier factories develop systems to foster ing a multistakeholder approach, the alliance

THE ALLIANCE FOR CONTINUOUS IMPROVEMENT IN LABOR STANDARDS IN CENTRAL AMERICA 55 continuous improvement in labor standards tems. CIMCAW also trains auditors and labor and enhance their ability to achieve compli- inspectors, notably in national ministries of la- ance with applicable standards. The alliance bor, to increase institutional capacity to moni- has found that better management and com- tor labor conditions in manufacturing. Finally, munication of labor standards can enhance CIMCAW supports social dialogue on the link productivity and economic opportunity. between labor standards and national and regional competitiveness. With the success of the pilot program in Guatemala in September 2003, CIMGUAW Since its launch in October 2004, CIMCAW expanded to ﬁve other Central American has made remarkable progress. An initial countries: Honduras, El Salvador, Nicaragua, country diagnostic, in which a local consultant the Dominican Republic, and Costa Rica. provided information on the status of the gar- The expanded project is CIMCAW, a strategic ment sector in each target country, was com- publicprivate initiative involving USAID pleted in Phase I countries: Honduras, and Gap, Inc. Nicaragua, and the Dominican Republic. A multistakeholder workshop will revisit the di- CIMCAW’s primary objective is to help gar- agnostic with the aim of reﬁning each coun- ment factories meet growing global demands try’s work plan. Auditors and inspectors are for better working conditions and, in so do- now being trained in the Phase 1 countries. As ing, enhance their competitiveness by boost- with CIMGUAW, the next step will be to hold ing quality and productivity. To this end, a curriculum development workshop, in which CIMCAW provides joint workermanager all key stakeholders will be invited to partici- training aimed at increasing the understand- pate in the development of the training pro- ing by both groups of their rights and obliga- gram. tions while equipping managers with tools that can be integrated into management sys-

OUTCOMES OF THE CIMCAW ALLIANCE IN SIX COUNTRIES, 2004–05

∫ Staged six multistakeholder workshops in Phase I countries: Honduras, Nicaragua, and the Dominican Republic ∫ Held three sectoral workshops with key unions involved in the maquila sector in Honduras, Nicaragua and the Do- minican Republic and obtained their support for the project ∫ Completed diagnostic in Phase I countries ∫ Through a diagnostic validation workshop, engaged key stakeholders—private sector, unions, civil society and government—in dialogue on labor standards and helped the alliance build a relationship with key stakeholders ∫ Obtained support from the Corporación de Zonas Francas in Nicaragua, ADOZONA in the Dominican Republic, and the Association of Honduran Maquilas in Honduras ∫ Trained 30 private auditors and inspectors from Nicaraguan ministry of labor ∫ Selected local partners in Nicaragua and the Dominican Republic ∫ Cooperated with Central America Labor Assurance project, funded by the U.S. Department of State, and Greater Access to Trade Expansion/WID, funded by USAID ∫ Recruited Limited, Inc., as new corporate partner and hosted representatives of other multinational brands at ex- ploratory sessions and as observers at factory training sessions

56 CHAPTER THREE: SUSTAINABLE SUPPLY CHAINS HIGHER LABOR STANDARDS, tiatives in areas not covered by alliance part- SUSTAINABLE SALES, AND A ners. The alliance has demonstrated the value REPLICABLE MODEL of engaging the private sector as sources of con- The experience of the alliance partners has tacts and expertise as well as funds. Global shown that approaching the issue of labor companies possess a vast network of important standards from a multistakeholder perspective local contacts, command a huge pool of hu- is critical to ensure sustainability and impact. man resources, and offer a strong, on-the- The CIMGUAW partners have invested con- ground presence in many developing countries. siderable resources in Guatemala to support an intensive multistakeholder dialogue that DAI realizes that its traditional service offer- seeks common ground. Through that effort, ings, such as stakeholder engagement and sup- CIMGUAW has put labor standards and cor- ply chain development, are very attractive to porate social responsibility on the agenda of the private sector. Through the Continuous key stakeholders and clearly deﬁned compli- Improvement Alliance, DAI has learned some ance with labor standards as a determinant of valuable general principles for alliance build- competitiveness. ing:

CIMCAW has taken this a step further and ∫ Pick a strategic NGO partner with a dy- successfully incorporated labor standards into namic corporate board. the regional agenda by highlighting the link ∫ In seeking a partner, target multinational between labor standards and national and re- corporations, that are willing to engage be- gional competitiveness. The transition from yond philanthropy. CIMGUAW to CIMCAW shows that protecting workers’ rights—helping to alleviate ∫ Unite diverse organizations that share a poverty, reduce income inequality, increase common, overarching objective. competitiveness, and enhance market access for developing countries, while ensuring that ∫ Strike a balance between process and results. employment conditions are not undercut by a Given the traditional tension between labor race to the bottom—is a win-win regional and management in the region, this change in strategy. relationships, driven by the marketplace and Recognizing that labor standards are a critical by the brand-name corporations that make up development issue that affects trade, market the maquilas’ client base, shows how important access, gender concerns, social and economic cooperation is for all sides. To successfully development, and basic human rights, the al- compete, they need each other; CIMCAW’s liance is forging links with other regional ini- ability to reach all parties has been impressive.

THE ALLIANCE FOR CONTINUOUS IMPROVEMENT IN LABOR STANDARDS IN CENTRAL AMERICA 57 CHAPTER FOUR

WORKING WITH EXTRACTIVE INDUSTRY INVESTING IN COMMUNITIES

The role of extractive industries has changed over the last few decades. As governments in developing countries continue to improve their resource management goals, shareholders and business planners are critically examining the long-term effects and implications of their companies’ operations. Leading companies are trying to balance their core business requirements with social investments in the countries and communities where they operate.

Companies with a long-term investment in extraction of natural resources have a clear interest in the quality of the host country’s institutions and infrastructure; in the health, education, and training of the local workforce; and, often, in the development of local suppliers. In Angola, the U.S. Agency for International Development (USAID) is working with Chevron Corporation to support the growth of local business, rebuild infrastructure, and return ex-combatants to productive agricultural employment. Chevron understands that productivity rises when employees are educated, healthy, well housed, and hopeful about the future. They also appreciate the economic beneﬁts of being able to turn to capable local suppliers of goods and services (including research and consulting).

While many companies traditionally have focused on building community schools or clinics, now they are also developing alliances with partner organizations, such as USAID, to ensure that their investments not only generate proﬁtable returns, but also create conditions for sustainable long-term growth.

Extractive industry companies share common interests in making social investments that:

∫ Develop in-country capacity to supply operational needs

∫ Meet government requirements to build human capacity and employ host nationals

∫ Protect their “license to operate” in the eyes of the host government and local communities

∫ Cement production sharing or concession agreements with host governments in a transparent and constructive way.

58 CHEVRON CORPORATION

The alliances profiled in this chapter illustrate that extractive operations can offer significant opportunities for all participants. Chevron in Angola, the international diamond trade in Sierra Leone, and the Siberian-Urals Aluminum Company in Russia all have developed alliances with USAID and other organizations to enhance the economic health and social stability of the regions where they operate and to better ensure that investments will deliver profitable returns— for all stakeholders.

59 ANGOLA ENTERPRISE DEVELOPMENT ALLIANCE A BETTER SOCIETY IS EVERYBODY’S BUSINESS

PURPOSE FUNDING ARRANGEMENT To advance local business development, Chevron Corporation: $10 million Chevron initiate recovery of the agricultural sector, U.S. Agency for International Development: Corporation and promote peace and security, and resettle ex- $10 million USAID help combatants and displaced Angolans. rebuild Angola’s shattered econ- CONTEXT Angola’s 27-year civil war left the country omy and agri- with an agricultural system in disarray and a cultural sector shattered economy. Chevron Corporation, after prolonged present in Angola since the 1930s, is the coun- CHEVRON CORPORATION try’s largest investor and top exporter of oil. and devastating In 2002, the company’s chairman resolved to civil war. help Angola recover from war.

ALLIANCE MEMBERS Chevron Corporation

U.S. Agency for International Development

ACCOMPLISHMENTS AND OUTCOMES A balanced development program helped return 300,000 people to productive lives and restore the country’s agriculture and economy. The alliance contributed to a 45 percent improvement in food security among the vulnerable population. By September 2005, NovoBanco, a private microenterprise and ﬁnancial services bank created by the alliance, had disbursed more than $3 million in loans averaging $5,000 to more than 800 borrowers (half of them women), with a 98 percent repayment rate. CHEVRON CORPORATION

60 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY olomay Epouca is no stranger to oil producer and investor. For its contribu- poverty, having raised eight children in tion, Chevron Corporation won USAID’s Sthe former rebel stronghold of Global Development Alliance Excellence Huambo, Angola, while the 27-year civil war Award for 2004. raged about her. Looking back, she counts herself blessed to be among the few who did BUILDING THE ALLIANCE—IDENTIFYING not lose a family member to the devastation. COMPLEMENTARY GOALS But she and her children were among millions In 2002, the war at an end, the government of of Angolans at risk of starvation and malnu- Angola turned its attention to rebuilding the trition because of war. country. A generation of Angolans would be able to restart their lives. After the 2002 peace accord, most of Angola lay in ruins. A net exporter of food before the Chevron also found itself in a position of self- conflict, the country could not provide food reflection. Its local and wholly owned sub- for its own people following years of violent sidiary, Cabinda Gulf Oil Company (CAB- fighting. A hundred thousand combatants GOC), had been active in social and (with a total of 350,000 dependents) lost their economic investments for decades, but had jobs and could not return to destroyed farms. not broadened its impact beyond the regions Of more than four million internally dis- where it operated.1 The end of the civil war placed, many had collected in cities and were offered new opportunities to pursue long- dependent on food aid, too fearful to return term development in its offshore oil conces- to their home villages. sions and consider how its presence in the country might contribute to reconstruction Epouca’s was one of more than 58,000 fami- and development. lies in Huambo that benefited from a U.S. Agency for International Development (US- It was in this context that Angolan president AID) program to encourage the displaced to José Eduardo dos Santos, in a public forum, move back to their home villages, where ad- asked Chevron chairman and CEO Dave ditional assistance was available to reduce O’Reilly to help the country rebuild. O’Reilly food insecurity and build self-reliance. She re- responded by creating the Angola Partnership ceived more than 300 pounds of food, 30 Initiative, a five-year commitment to work in pounds of seeds, and basic tools such as wa- alliance with major donors and nongovern- tering buckets. mental organizations (NGOs).

Sitting on a pile of bean husks, her three-year- In June 2002, Chevron officials, including old daughter on her lap, Epouca says, “Things Vice Chairman Peter Robertson, met with are better now. If we can have two successful representatives from several USAID operating harvests, I will be able to sell some food and units, including the Global Development Al- buy some clothes. All we need is a little extra liance (GDA), Africa Bureau/Southern Africa, food and seeds so we can become strong and USAID/Angola, Office of Foreign Disaster self-sufficient.” When asked about the differ- Assistance, and Food for Peace. Chevron ex- ence humanitarian assistance makes in her plained that its chairman was ready to com- life, and how it has provided hope for the fu- mit $25 million over five years to build a ture, she says, “I don’t have to think about legacy of lasting development in Angola. The what I will feed my children. Instead, I can company was interested in building on US- think about my children going to school and AID’s projects in the country to extend its learning things I don’t know.” own social investments to additional regions. Chevron officials also expressed an interest in USAID’s efforts to speed Angola’s return to building human capacity and developing normalcy are significantly aided by Chevron small, micro, and medium enterprises in sup- Corporation—for decades Angola’s biggest port of the company’s internal mandate to

ANGOLA ENTERPRISE DEVELOPMENT ALLIANCE 61 hire more Angolans and increase local procurement of supplies. ROLES OF THE MEMBERS OF THE ANGOLA ENTERPRISE USAID welcomed the opportunity to engage DEVELOPMENT ALLIANCE Chevron Corporation as a joint participant in ∫ Chevron Corporation initiated the al- the agency’s development agenda for the liance, provided half the funding, and country. USAID staff briefed Chevron on the participates in oversight and program agency’s country programs and development design. capabilities and offered preliminary ideas for ∫ The U.S. Agency for International De- engagement by the company, such as resettle- velopment provides in-country exper- ment activities and support for rebuilding tise, development planning, implemen- rural infrastructure. tation, and management; USAID matched the funding offered by The next meeting, in September 2002, in- Chevron Corporation. cluded other donors—among them the United Nations Development Programme and the United Nations Foundation. Chevron’s representatives summarized the art Brooks, a retired official of Britain’s De- company’s corporate presence in Angola and partment for International Development who offered initial thoughts on a potential al- joined Chevron to help the company assess liance. To institute a framework from which a geopolitical risk associated with its global pres- full alliance could develop, Chevron proposed ence, it was also the most compelling course of a working group of representatives from all action: “When you see thousands of people parties to forge an arrangement “where indi- around you at risk of starvation, it establishes vidual strengths can be leveraged to make a priorities very quickly, and those priorities sustainable contribution to social and eco- were also USAID’s priorities.” nomic growth.” The resulting memorandum of understanding At this meeting, Chevron raised the possibil- (MOU) was negotiated between USAID- ity of establishing a joint foundation to en- Washington and Chevron corporate headquar- dow mutually designed and implemented ters. It outlined several activities: programs. The firm had done something similar in Papua New Guinea. But the agency’s ∫ Expansion of finance and business develop- experience with pooled funding mechanisms ment services to small and medium enter- had shown them to be time-consuming and prises in the target provinces labor-intensive. If the process of establishing ∫ Support to NGOs providing savings and the requisite governance structures were not credit products sufficiently daunting, congressional restric- tions on USAID’s ability to create endowed ∫ Technical assistance to commercial banks funding mechanisms added an unacceptable providing wholesale lending to rural finan- level of risk to the enterprise. Furthermore, cial institutions such an arrangement might prove in some ∫ Support for private sectorbased agricul- ways duplicative of the Southern Africa En- tural initiatives terprise Development Fund, a $100 million capitalization fund for small and medium- ∫ Support for professional training and edu- sized businesses in the region. cation in finance, business planning, product development, and marketing to im- Instead, the mission presented its framework prove commercial viability of small and for humanitarian relief and agribusiness devel- medium enterprises in the agricultural opment as a ready-made menu of options that sector could be activated quickly. According to Stu-

62 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY ∫ Support for short-term educational pro- program helps returned combatants develop grams for small and medium enterprises in small and medium-sized agricultural busi- the design and development of agriculture nesses through the formation of more than 150 infrastructure projects. farming cooperatives. It includes land preparation, rural infrastructure development, seed Because the alliance did not use an endow- production and multiplication, harvest protec- ment and Chevron Corporation did not have tion, crop diversification, technology transfer, the capacity at the time to program and man- establishment of farmer associations, creation age development activities, the company de- of credit programs for seeds and tools, and decided to invest $10 million directly with US- velopment of market linkages. Implementing AID, using the agency’s gift authority.2 This partners are Africare, Catholic Relief Services, move allowed Chevron to jointly plan activi- CARE, Save the Children, and World Vision. ties through the advisory committee estab- They have committed significant resources to lished under the MOU, while freeing itself of the initiative. programming and management functions. Microfinance (Chevron $1 million; USAID $1 It was not the first time USAID had received million). This component of the alliance has money from a corporate partner, but the $10 established a private bank, NovoBanco, to million commitment was unprecedented in support the creation and expansion of micro, scope and dollar value relative to the Angola small, and medium-sized enterprises. In its mission’s usual programming budget.3 Robert first year, NovoBanco disbursed $2.5 million in Hellyer, mission director at the time, reported micro- and small-business loans and opened the experience at the next mission directors’ 5,000 savings accounts worth $1 million. conference, informing a roomful of surprised and suddenly curious colleagues that the mis- Enterprise Development Center (Chevron sion had just engaged a major corporate part- $100,000; USAID $100,000). The new Enter- ner and significantly expanded its budget. prise Development Center is an independent economic policy and business development At USAID headquarters, the GDA program, hub at an Angolan university. It will provide which was just getting started, faced the chal- access to continuing education and profes- lenge of shepherding a significant new al- sional training. The implementing partner is liance. GDA staff wondered whether the fed- the Angola Educational Assistance Fund. eral Office of Management and Budget would score the Chevron contribution to the alliance Seed multiplication (Chevron $2 million; US- as on offset against the overall USAID bud- AID $2 million). The seed-multiplication get. The answer was negative: the U.S. gov- component of the alliance supplies agricultural ernment could accept the help of its con- extension services and technical assistance in stituent citizens, organizations, and businesses modern agricultural practices. The implement- in executing its mission. ing agency is World Vision.

As USAID and Chevron evaluated and agreed Agricultural extension and research (Chevron upon projects, the agency accepted gifts of $4 $1.2 million; USAID $1.2 million). This com- million, $1.8 million, and $1.4 million in ﬁscal ponent is designed to strengthen an agricul- years 2003 to 2005. tural research center and conduct ﬁeld trials with farmers. The implementing agency is FIRST-GENERATION PARTNERSHIP World Vision. The collaboration points outlined in the MOU became these discrete mission activities: A CONFLICT OF INTEREST? The U.S. Agency for International Develop- Development relief (Chevron $4.8 million; ment (USAID) was working with several non- USAID $4 million). The development relief governmental organizations to rebuild Angola

ANGOLA ENTERPRISE DEVELOPMENT ALLIANCE 63 when it engaged Chevron Corporation as a liance, Chevron Corporation, the largest pri- new resource partner and formed an alliance vate sector presence in Angola, has effectively with the company. While most of the agency’s challenged USAID to accelerate its assistance partners were not affected by the move, it did and to address issues such as developing local present a problem for Catholic Relief Ser- private sector capacity sooner than might oth- vices, which chose to substitute Chevron’s in- erwise have been the case given severely lim- tended contribution with its own fundraising ited USAID funding for economic growth (totaling $700,000). programs.”

The example demonstrates that alliance The action memorandum laid out the terms builders must not overlook issues such as due for extending the mission’s effort to promote diligence and conflict of interest. micro, small, and medium-sized business in Angola for two years to coincide with Dennis Flemming, director of the Angola Chevron’s planned investments through 2007. Partnership Initiative for Chevron, sees the Success would be measured in terms of regis- positives. “Some of the best discussions I’ve trations of new enterprises, increases in local had about the transparency issue have been business subcontracts, and loans to firms in with the country director of CRS,” he said. different business sectors. It was under this “They have their position and we have ours, special objective that the mission moved for- and we get lots of chances to talk about it. If ward with a planned enterprise bank, we weren’t involved in the resettlement pro- NovoBanco, in 2004. gram, we probably wouldn’t have had as many opportunities to do so in a neutral forum.” USAID had presented its plans to Chevron and started the alliance with a speed that CREATING A PARTNERSHIP THAT Chevron chairman Dave O’Reilly later noted WORKS was faster than the performance of some of his If Chevron, through association with USAID, own business units. Chevron, in turn, com- saw the need to move resources into immedi- pelled USAID to accelerate its plans for eco- ate humanitarian relief and resettlement, nomic development. Although the partners’ Chevron’s focus on enterprise development alacrity in developing the alliance caused some also influenced the USAID mission. The sud- bumps, the alliance has brought clear benefits den presence of a for-profit partner brought for both partners and improved assistance for challenges, however, as Chevron’s interests Angola. and the mission’s priorities were not in perfect synchronization. MANAGING THE ALLIANCE The USAIDChevron MOU called for an ad- USAID/Angola’s strategic plan for 2001 to visory committee to jointly plan activities and 2005 established four objectives to distribute serve as a governance structure to assist in about $11 million per year in development as- shared functions such as knowledge dissemina- sistance: food security, democracy and gover- tion, alliance monitoring, communications nance, health, and a special objective covering outreach, and conflict resolution. In fact, pro- economic policy analysis.4 (The last objective ject planning was more informal, usually oc- pertained mostly to negotiations over a pend- curring in meetings convened by the mission ing International Monetary Fund macroeco- to respond to sudden opportunities in the de- nomic stabilization agreement.) velopment landscape. Collaboration with Chevron changed the sit- USAID had developed a strategic framework uation. In an action memorandum to US- establishing a formal framework and plan for AID’s Africa Bureau in Washington, mission collaboration, but that framework was never director Robert Hellyer reported that taken up, for several reasons. One was “through the Enterprise Development Al-

64 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY Chevron’s decision, in mid-2003, to transfer USAID and Chevron have since had several ownership of the alliance from the company’s stakeholder consultations to continue building headquarters to its southern Africa and coun- the relationship as it enters its second genera- try business units. The transfer entailed a tion. The clear lesson for alliance partners is to waiting period, while Chevron reviewed its remain patient and ﬂexible in relationship strategic direction and revised its plans before management, and take time to take stock. advancing the alliance beyond the original funding commitments. On the USAID side, SECOND-GENERATION PARTNERSHIP the mission’s preparations for a new strategic Dennis Flemming arrived in Angola in 2004, framework after 2005, along with other insti- after overseeing Chevron’s social investments tutional demands, caused USAID to step in Papua New Guinea for several years. He left back from the alliance at times to concentrate behind in Papua New Guinea a record of trust on other activities. and a corporate foundation that exists today, It was not until June 2004 that Chevron and with several funders. What he inherited when USAID began collaborating more substan- he moved to Angola to work on the alliance tively. Chevron took the lead, convening a was a massive partnership nearing the end of stakeholder workshop. Presentations from its ﬁrst stage that needed to be retooled if it both sides laid out the partners’ respective op- was to enjoy a healthy second stage. Most of erational culture and organizational values in Chevron’s $10 million had been spent, but the order to identify commonalities and mitigate question of how to continue with collabora- any possible misunderstandings; at the same tion remained. The initial alliance experience time, there was great interest in identifying had generated a number of lessons that could the comparative advantages of each partner. inform the development of its second stage.

Flemming, who took ownership of the rela- Chevron raised several issues with USAID that tionship at Chevron as it shifted to the field, reflected an understanding of the development explains that much of the value of partnership challenges in Angola. For one, the programs is relational. “For a company, a big part of the funded by the alliance were not needed. The business value in supporting development ini- USAID mission’s geographic focus on war-torn tiatives is in the engagement itself. Getting to regions constrained Chevron’s intention to know donors and NGOs and understanding achieve social investments with national im- what challenges and issues they’re facing . . . pact. The overhead charged by USAID’s tradi- serves everyone’s interests.” He adds: tional implementing partners was high, and many local NGOs and non-U.S. consultants We’re engaging [through the alliance] with gov- that had not previously worked for USAID ernment ministries that we don’t normally have had difficulty qualifying for funding. This last anything to do with. We’ve got a very strong rela- constraint was especially relevant to Chevron, tionship now with the ministers of agriculture which had hoped the alliance might build local and health. This may not have anything to do capacity in the NGO and small business sec- with our operations in the field, but it has a big tor. But Chevron also recognized that there impact on our workforce, which is increasingly was nothing structurally wrong with the col- Angolan. It has a big impact on the commercial laboration. The alliance simply needed to be environment we’re operating in. There is a lot of more fully aligned with the stated intentions value in these partnerships, and it’s important to and values of each partner. Reports Flemming: capture those benefits. That’s why these workshops and meetings [which allow us] to take a We knew we wanted to go to a second phase, but step back and look at the partnership are so recognized that we wanted to do it a bit differ- valuable. ently. Partly because of my own background in development and experience in Papua New Guinea, I wanted us to be a more active partner.

ANGOLA ENTERPRISE DEVELOPMENT ALLIANCE 65 I didn’t want to just sit back and respond to pro- O’Reilly reﬂects that “partnerships can also ject proposals. I wanted us to work jointly on go- break down barriers that are caused when gov- ing out for RFAs [requests for applications] and ernment, businesses, and communities simply jointly selecting the implementing organizations, do not speak each other’s language or, at worst, and being partners all the way. distrust one another.”

USAID and Chevron are currently developing Chevron’s increased focus on good governance a joint vision for shared programs that will and proper stewardship of oil revenues is al- become a second-generation partnership. One ready evident. In 2004, Angola awarded possibility may be an approach to develop- Chevron a 20-year extension of its Block 0 ment through a different strategic lens: a concession—2,000 square miles of ocean that community development and capacity-build- anchor Angola’s oil production. At Chevron’s ing initiative focusing on development at all urging, Sonangol, Angola’s national oil com- levels of government—local, regional, and pany, published the amount of its signing federal. Such a framework still concentrates bonus: $210 million. A social bonus of $80 on enterprise and agricultural development, million was earmarked for development pro- but it also embraces municipal and regional jects, and a portion of that reserved for the governments as potentially more active part- Cabinda region. In announcing the extension, ners. Such an approach meshes well with US- a Sonangol official stated: “The government of AID’s increased emphasis on good governance Angola understands that good governance is a and the rule of law as prerequisites for sus- cornerstone of good business, and that it is in tainable development. our own interest to make progress in this important area.” The mechanics of a new partnership may also shift: whereas in the first-generation partner- The alliance also demonstrates that corporate ship Chevron left programming and manage- partners can make long-term commitments ment duties to USAID, the company now has with timelines that often exceed those of the organizational capacity to manage and im- donors. plement initiatives on its own, thus increasing options available to the next partnership. 1. Investments totaling more than $22 million in the last five years alone include annual support for the Cabinda CONCLUSION General Hospital Blood Bank, funding local health programs for HIV/AIDS and malaria prevention, constructing Whatever the future holds for one of US- primary and secondary schools and health centers, and AID’s most visible partnerships, it remains in sponsoring Angolan students and employees to universities on scholarship. several ways the standard for business, govern- 2. ADS 628(d). See Tools for Alliance Builders, appendix 13, ment, and NGO engagement. By enlisting available in PDF format at http://www.usaid.gov/our_work/global_partnerships/gda/ USAID’s development expertise, Chevron tab.html. added new capabilities to its social investment 3. In addition to the usual programming budget, USAID was efforts. Chevron also strengthened its brand authorizing large grants for food security and famine prevention through the Food For Peace account: more than reputation and stakeholder relations. Speak- $100 million in 2003 and $70 million in 2004. ing from his experience with the Enterprise 4. As noted, this does not include the Food For Peace ac- Development Alliance, Chevron chairman count.

66 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY SIERRA LEONE PEACE DIAMONDS ALLIANCE REBUILDING AFTER WAR

PURPOSE ACCOMPLISHMENTS AND OUTCOMES To create a transparent, fair, and safe alluvial Since its founding, the alliance has expanded A long-term diamond market that delivers equitable and from the Kono to Tongo diamond fields and sustainable benefits to local miners, diggers, trained more than 200 diggers and miners in USAID partner and the extended local community in Sierra small-stone identification and valuation. engages a major Leone. Stakeholder workshops address issues of local diamond buyer concern; persistent issues are resolved through to support the CONTEXT arbitration. Government funds have been suc- The illicit diamond trade in Sierra Leone has cessfully leveraged to rehabilitate mined-out Kimberley fueled civil war, money laundering, and possi- land in Koidu, Kono District. Process through bly terrorist activities. It also limits legitimate fair-trade foreign investment in the diamond sector that FUNDING ARRANGEMENT diamond certi- might raise the living standards of the hun- U.S. Agency for International Development: dreds of thousands of Sierra Leone’s small- $4.2 million fication. scale diamond miners. Department for International Development: $40,000 for partnership housing facility ALLIANCE MEMBERS Government of Sierra Leone Rapaport and Kono’s Hope: $75,000 to support five pilot cooperatives for one mining U.S. Agency for International Development season

U.K. Department for International Develop- World Bank Communities and Small-Scale ment Mining Project: $47,500 to sponsor ﬁeld visits World Bank Communities and Small Scale and stakeholder consultations in Canada, Sri Mining Project Lanka, Ghana, and Brazil

Global Witness Government of Sierra Leone: $50,000 for Kaisambo Rehabilitation Project Koidu Holdings

The Rapaport Group

The DeBeers Group

Kono’s Hope

Management Systems International

SIERRA LEONE PEACE DIAMONDS ALLIANCE 67 he Peace Diamonds Alliance is a col- that could return to volatility and war at any lection of stakeholders abiding by a moment. USAID and its partners worked Tcode of conduct for sustainable com- from the ground up with participants at every munity and economic development, environ- level of the diamond supply chain: from the mental stewardship of existing mines, and laborers who spent their days digging in pits, reclamation of mined-out landscapes. A cata- through the miners who typically managed a lyst for change, the alliance began as a foray group of laborers through a usufruct over a into uncertain terrain in the immediate after- given site, to holders of land titles and licenses math of war. In 1999, near the end of the to mine diamonds, who sold to licensed ex- country’s brutal civil war, Sierra Leone’s dia- porters—the final tier of the in-country sup- mond resources were worth an estimated $300 ply chain. million a year—of that, legal diamond ex- USAID soon identified an ideal focus for sta- ports made up only $1.5 million. The rest was bilization efforts: the diamond-rich Kono Dis- smuggled out of the country through illegal trict, where, during the civil war, the Revolu- channels. None of the benefits of the illegal tionary United Front had used illegally mined trade reached the government of Sierra Leone diamonds to fund its rebellion through the or its people. global sale of what came to be known as Revenues from diamond sales now flow “conflict” or “blood” diamonds. Kono could through more formal channels within Sierra become a source of legitimate jobs and income Leone, helping one of the world’s poorest for citizens and tax receipts for the govern- countries rebuild from war. Legal exports of ment, rather than a haven for illegal mining. diamonds climbed to $42 million in 2002, Partners also met with representatives of inter- $70 million in 2003, and $127 million in national diamond buyers, such as DeBeers and 2004. They are projected to reach $150 mil- Rapaport. The challenges of developing a part- lion for 2005. Even better, local mining com- nership immediately became evident. In a first munities benefit by receiving a portion of meeting in June 2002, a DeBeers representa- the tax revenues from the increase in dia- tive made it clear that the company would not mond exports, with funds specifically allo- commit to buying diamonds from specific cated through the Diamond Areas Commu- suppliers; they would market only their own nity Development Fund (DACDF) to build production. This was a completely rational public structures, markets, and schools. Pro- business decision for DeBeers, but it high- ceeds to mining communities exceeded lighted the difficulties inherent in the forma- $300,000 in 2002, $500,000 in 2003, and tion of an alliance. DeBeers exercised control $900,000 in 2004. over a significant portion of global diamond supply and had little incentive to support what WINNING THE PEACE it could only see as a competing producer. In January 2000, following the Lomé Peace Martin Rapaport of the Rapaport Group Accord signed the previous year, a technical showed guarded interest in the prospect of advisor for Management Systems Interna- working more closely with USAID. tional (MSI), a longtime implementing partner of the U.S. Agency for International De- At the same time, DeBeers affirmed its sup- velopment (USAID), entered Sierra Leone on port of efforts to legalize Sierra Leone’s dia- behalf of the USAID Office of Transition Ini- mond sourcing and to see that the supply tiatives. MSI had received an order to identify chain delivered more value to laborers and immediate opportunities to set the country’s miners. One sign of that support was an offer mineral wealth to productive use through the to provide technical assistance on diamond national-level Strategic Minerals Commission. valuation to the Sierra Leone Department of The purpose of the task was to support a frag- Mineral Resources. At the same time DeBeers’s ile peace in a highly uncertain environment support of USAID’s efforts to legalize the dia-

68 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY mond trade added credibility to MSI’s work be addressed. But the process does not reach in the eyes of industry players, and gave US- below the level of international tender. In AID access to DeBeers’s industry expertise in Sierra Leone, as in Angola and the Democratic developing the skills of diggers and miners. Republic of Congo, a million or more artisanal miners exist outside the formal sector and still Efforts in Sierra Leone were supported by a see little of the income generated by the dia- series of international consultations address- monds they find. ing the issue of the illicit diamond trade, organized by members of the diamond industry, The Peace Diamonds Alliance seeks to change governments, and civil society organizations. that through an integrated approach to dia- The first gathering was held in Kimberley, mond management: developing competitive South Africa—where diamonds were discov- buying schemes, training miners to recognize ered 140 years ago. This “Kimberley Process,” the value of their products, tracking diamonds formally launched in January 2003, articu- from earth to export, providing credit to min- lated a system for managing and certifying in- ers, and ensuring that communities benefit ternational trade in rough diamonds. The from the mining that takes place in their local- Kimberley Process Certification Scheme was a ities. voluntary initiative that brought together The alliance’s voluntary code of conduct for more than 40 governments and the European Sierra Leone connects the principles of the Commission to reform diamond laws and Kimberly safeguards at international tender regulations in order to track diamonds sold with the more involved process of getting dia- internationally. monds to market. This “Earth to Export” By this time, the funding from the USAID chain of the artisanal diamond market delivers Office of Transition Initiatives for diamond- higher income for producers and introduces sector management under the peace accords environmental, health, and safety protections had expired, but new diamond-sector man- for laborers. It is hoped that the code of con- agement funds supporting the Kimberley duct will one day evolve into a formal Process were committed in 2002. With fresh certification scheme for the country. resources, USAID took its first major step to- At the national level, the alliance tackles policy ward realizing a vision of the Kimberley and regulatory bottlenecks to encourage the Process principles to support sustainable liv- government to continue reforms in the dia- ing conditions for the first links in the supply mond sector. In partnership with government, chain: the diggers and miners who labored, other donors, and the international commu- often under poor conditions, in hopes of nity, a high-level steering committee chaired making a big find. by the Ministry of Finance studies policy ini- USAID’s efforts came to fruition in Decem- tiatives that affect the diamond sector. USAID ber 2002, when producers, buyers, advocates, provides secretarial services for the steering officials of the Sierra Leone government, and committee. heavyweight industry players, such as DeBeers and Rapaport, gathered to form the Peace Di- OUTCOMES amonds Alliance. Sierra Leone President Ah- The alliance has leveraged funds on favorable mad Tejan Kabbah formally launched the al- credit terms from Kono’s Hope, a small invest- liance in 2003. ment firm based in South Carolina, and from the Rapaport Group. These investors sponsor FROM KIMBERLEY PROCESS TO PEACE five mining cooperatives—for one mining sea- DIAMONDS son—in the hope of developing a brand of The Kimberley Process is recognized for fair-trade diamonds that will carve out a mar- greatly increasing legal exports of diamonds, ket niche beneficial both to the investors and although issues of implementation remain to

SIERRA LEONE PEACE DIAMONDS ALLIANCE 69 to the mining cooperatives of Kono. In accor- The alliance periodically holds stakeholder dance with the alliance’s code of conduct, the workshops on issues of local concern. Typical cooperatives apply environmentally friendly agenda items include the cost of obtaining mining methods and reclaim the land at the mining licenses and problems with local min- end of each mining season. ing firms. These meetings are also used to publish licensing fees, diamond revenues, and re- The alliance has trained 209 individuals on turns to various communities, as well as to basic small-stone identification and valuation convey community concerns to the govern- and has made valuation equipment and the ment. The alliance, in collaboration with the services of the government valuation officer local office of the Ministry of Mineral Re- available to small-scale miners without sources, has mediated some potentially violent charge. Joseph Sembo Kabia, a mines moni- conflicts between affected property owners and toring officer from the Ministry of Mines for a mining company that is also an alliance Kono District, remarked at his first small-dia- member. The alliance is also party to the man- mond training session, “The valuation of dia- agement and use of the DACDF to maximize monds was always viewed as a secret skill community benefit. Advocacy and awareness owned by non-Sierra Leoneans. The veil of efforts, for example, succeeded in leveraging mystery is only now being lifted.” Efforts are funds to rehabilitate a perennially mined-out underway to build a cadre of trainers and an land in the Kono District. association of master trainers.

70 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY THE URBAN DEVELOPMENT ALLIANCE IMPROVING SERVICE DELIVERY THROUGH PARTNERSHIP

PURPOSE ALLIANCE MEMBERS To adapt the Soviet-era practice of corporate U.S. Agency for International Development The Siberian- investment in communities to post-Soviet re- Siberian-Urals Aluminum Company Urals Aluminum alities. The Siberian-Urals Aluminum Com- Company builds pany (SUAL), one of Russia’s largest compa- The Barents Secretariat nies, has traditionally supported civic needs in an alliance with the communities where it has factories, from Local implementing partners the U.S. Agency towns of ten thousand people to cities of a for International quarter million. Its alliance with USAID extends that tradition. Development, FUNDING ARRANGEMENT foundations, and The goal of the Urban Development Alliance U.S. Agency for International Development: is the sustainability of numerous civic pro- $1,000,000 local organiza- jects. A pilot program in three locations fo- tions to expand Siberian-Urals Aluminum Company: cuses on improving municipal planning and $1,250,000 and sustain com- governance, supporting enterprise develop- munity-based ment, modernizing healthcare, and strengthening civil society. programs to improve health, CONTEXT education, Since the demise of the Soviet Union in 1989, enterprise devel- the quality of life in most of Russia’s industrial towns has suffered. Under the Soviet sys- opment, and tem, large state-owned companies were the government key providers of many social services. Priva- services. tized and downsized, companies are seeking new ways to support their communities. With little support from the central government, local governments have few resources and capabilities to provide citizens with adequate social infrastructure.

THE URBAN DEVELOPMENT ALLIANCE 71 fter the Soviet Union dissolved in SUAL approached USAID with an idea to 1989, the Soviet system of subsidized help rebuild the local economy in those com- A state-owned enterprises began to fall munities in a sustainable way. A precedent had apart. Those enterprises had been a key already been established: SUAL and the Eura- source of housing, education, healthcare, and sia Foundation, a frequent partner of USAID, other social services for employees and their had worked together on a project to develop families. As they were closed or privatized, small and medium enterprise. What started the quality of life in industrial towns with a $13,000 contract eventually brought in throughout Russia declined. With little sup- $1,000,000 for three locales in the Ural region port from the central government, local gov- of Siberia. SUAL’s vice-president for regional ernments have struggled to provide citizens government affairs wanted to build on that ex- with social services. perience in a comprehensive way.

After years of adjustment, however, the Russ- For USAID’s mission in Russia, SUAL’s idea ian economy is growing, creating new sources was an opportunity to leverage the corporate of support for municipal services. Companies expertise and extensive geographic reach of still provide some of that support; additional SUAL’s holdings. By programming its re- support comes from a variety of new sources. sources in coordination with SUAL’s social in- Still, local capacity for using the money and vestments, USAID could accelerate the ac- running social programs is lacking. complishment of the mission’s country objectives. The Siberian-Urals Aluminum Company (SUAL) and the U.S. Agency for Interna- Ensuing discussions established that both par- tional Development (USAID) are taking a ties were interested in improving the quality of creative approach to building local capacity. life in cities. The partners studied opportuni- Their Urban Development Alliance is a pub- ties to promote growth, expand credit, im- lic–private alliance aimed at encouraging civic prove government services, and develop local activism in small towns where SUAL is the capacity. They also reviewed the basic impedi- main industry. An example: In April 2005 the ments to business and came up with some alliance sponsored a “Week of Good Deeds” straightforward solutions. The most promising in the town of Shelekhov in the territory of sites would participate in an economic devel- Irkutsk. The events, organized by local ac- opment program that included: tivists, included a town clean-up project, an ∫ Improving the environment for enterprise anti-drug campaign, free legal and psycholog- development ical consultations, and fundraising activities for local charities. Initially, the local adminis- ∫ Working with local banks and investors to tration did not support the week’s events, but fund a microcredit facility ofﬁcials were so impressed with the results that they have now contributed funds for fu- ∫ Providing technical assistance and training ture community development project grants. for local government to bring transparency The organizers of the “Week of Good Deeds” and integrity to business licensing, permit- have raised money from local businesses and ting, and tax collection other donors to continue civic activities in ∫ Streamlining the permit process Shelekhov. ∫ Establishing local capacity to sustain improvements. GENESIS OF THE ALLIANCE With 62,000 employees and operations in The ultimate goal of the program was to in- nine regions of Russia, SUAL is one of Rus- crease local revenues and resources for educa- sia’s largest companies; many cities and towns tion, health, and other social sector programs. depend on the company for jobs. In 2003,

72 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY After three months of talks, the idea evolved, in 2004, into the Urban Development Al- liance. It began with $300,000 from USAID- Russia, $700,000 from the Global Develop- ment Alliance (GDA), and $1.25 million from SUAL. SUAL’s contribution was linked with

USAID work in areas where SUAL had a SIBERIAN-URALS ALUMINUM COMPANY workforce. The soundness of the idea attracted interest and additional participation.

AN AMBITIOUS PILOT CHARTS A COURSE The partners decided to pilot a joint approach to local development in three cities — one large, one small, one in between — where SUAL had a presence and would continue to invest in the community. The alliance also looked for sites that would generate results adaptable to other locations. Because SUAL had purchased many preexisting industrial facilities and inherited some unfortunate environmental and public health problems, these factors were considered in the selection of the pilot sites.1 The pilot sites are:

Kamensk-Uralsky. Lying in the Ural mountain range southeast of Yekaterinburg, this city of 180,000 is the largest in central Russia. The Kamensk-Uralsky Metallurgical Plant is

SUAL’s largest (and Russia’s second-largest) SIBERIAN-URALS ALUMINUM COMPANY producer of products for the automobile, aviation, and aerospace industries. The plant was built in 1943, with American assistance, to produce high-strength aluminum alloys for naval and aviation purposes. Through 1990, it depended on military contracts. The subsequent reduction in military spending resulted in lower production. The plant has now adapted to meet new demand by producing state-of-the-art automotive, aviation, and pre- fabricated building products.

Shelekhov is a relatively new city in southern Irkutsk, about ﬁve time zones from Moscow. Originally settled in 1956 by 13,000 people who came to work in aluminum production, the city currently has a population of about 53,000. It now has some additional industries as well, such as building materials, clothing, woodworking, and mechanical repair.

THE URBAN DEVELOPMENT ALLIANCE 73 Nadvoitsy is a factory town of 11,000 in the local officials monitor and support implemen- Republic of Karelia, between St. Petersburg tation of all activities, ensure buy-in from local and Murmansk near the border with Finland. institutions, remove potential obstacles to The Nadvoitsy Aluminum Smelter began pro- proper management, and provide logistical ducing aluminum and aluminum powder in support when feasible. 1954. Today the plant is refitting with cleaner production technologies, such as a gas scrub- IMPACT bing system that will cut emissions by as In the area of local governance, a needs assess- much as 50 percent and begin repairing the ment has been completed for each of the city significant environmental damage typical of implementation plans that the alliance devel- Soviet-era industry. oped in consultation with stakeholders. The In all three sites, the pilot project is: alliance is also evaluating the pilot projects and their programs in health, economic growth, ∫ Strengthening municipal governance, fiscal enterprise development, governance, civil soci- systems, and budget planning with provin- ety, and environmental protection. The results cial and national counterparts of the evaluation will shape the expansion of the alliance to other locations in Russia. SUAL ∫ Improving the business climate for small has indicated that it will invest about $2 mil- and medium sized enterprises by simplify- lion next year to implement alliance activities ing the issuance of business licenses, in the other cities where the company oper- adding courses in economics and business ates. to school curricula, and other measures USAID planned for sustainability from the ∫ Establishing community foundations very beginning of the relationship, including ∫ Supporting civic initiatives that promote SUAL’s expected adaptation, at its own ex- citizen participation in local decision-mak- pense, of program successes to 20 other cities ing, environmental stewardship, healthier where it had a major presence. USAID, for its lifestyles, and community and individual part, intends to apply the lessons of the collab- ownership of their own development oration to future partnerships with other Russ- ian corporations. ∫ Improving maternal and child health by creating systems that protect child welfare Additional corporations and organizations and prevent undue institutionalization. have already expressed interest in either joining or replicating the USAID–SUAL model: This far-flung alliance is managed in a couple of ways. Within SUAL, a dedicated task force ∫ Russia’s biggest producer of mineral fertiliz- is headed by the company’s vice-president for ers intends to replicate the Urban Develop- government affairs. At the implementation ment Alliance in their cities. It has sug- level, SUAL’s aluminum production units in gested a first pilot in the North Caucasus the pilot cities work directly with USAID and region. partners. USAID’s task force is coordinated ∫ A major auditing company is negotiating from the program office, while members of with USAID to use the alliance model to the teams responsible for each of the alliance’s develop client reporting standards and sys- strategic objectives — health, democracy and tems related to environmental and social governance, environment, and economic investments. Through better reporting, growth — gather regularly to discuss companies can improve their chances of at- progress. In each pilot city, mayors lead tracting foreign investment. “working groups for change” to coordinate alliance-funded efforts and contribute to their ∫ Russia’s biggest milk and juice producer sustainability. Through mayoral leadership, will provide resources to support environ-

74 CHAPTER FOUR: WORKING WITH THE EXTRACTIVE INDUSTRY mental and health components of the Ur- For SUAL, the alliance leverages additional ex- ban Development Alliance, while other pertise and cash resources for its own social in- businesses in the pilot cities are negotiat- vestments in the communities where its working with SUAL about coinvesting in their force resides. For USAID, the alliance efforts. leverages the unique Russian brand of corporate social responsibility and provides a mecha- ∫ The Center for Fiscal Policy, a Russian nism by which the mission can transfer some nongovernmental organization that fo- of its functions to in-country partners—both cuses on budget reform, has begun work- public and private. ing with the alliance to strengthen the capacity of local governments to address Overall, the Urban Development Alliance rep- social issues and to increase the quality of resents best practice in establishing strategic budget services by facilitating the estab- relationships with in-country resource partners lishment of public–private partnerships, that help advance USAID strategic objectives. assisting municipalities to implement the The alliance is also a model of public–private recently adopted law on local self-gover- cooperation that develops the capacity of US- nance, and enhancing the professional AID’s partners to carry on the USAID legacy qualiﬁcations of ﬁnancial department once Russia no longer requires development staffers working in regional and municipal assistance. administrations.

The Urban Development Alliance, originally 1. The Siberian-Urals Aluminum company (SUAL) was es- planned as a $300,000 investment from each tablished in 1996 as a result of a merger of the Urals and Irkutsk Aluminum Plants. SUAL controls the South Urals partner, has quickly grown with resources Bauxite Mine, the Bauxite Timana company, and the from the GDA incentive fund, a planned $4 SUAL-Silicon-Urals and Kremny facilities in Irkutsk. million commitment by USAID’s Russia mission, $2 million from SUAL, and investments expected from other companies in 2006.

THE URBAN DEVELOPMENT ALLIANCE 75 CHAPTER FIVE

WORKING WITH FOUNDATIONS MARRYING RESOURCES, SCALING INNOVATION

Foundations and other institutions, such as think tanks and international organizations, offer the U.S. Agency for International Development (USAID) a powerful mechanism for leveraging private sector funds in support of the agency’s development strategies and objectives. Strong coordination between USAID and these partners enables alliances to advance a shared agenda with resources greater than any single member could provide.

Foundations have a long history of involvement in development — and as traditional partners of USAID. In the 1960s, the Rockefeller Foundation was USAID’s partner in the Green Revo- lution. The Ford Foundation teamed with USAID to form the International Rice Research In- stitute. The Aga Khan Foundation has been USAID’s partner in a broad range of activities in education, health, and other social sectors. In recent years the role of foundations in development has expanded with the inﬂux of many new family, corporate, and community foundations; think tanks; and other socially committed institutions in the United States and abroad.

In addition to providing funds, knowledge, experience, ﬁeld presence, and ideas, foundations have proved durable partners in project implementation. By investing resources in tandem with a shared mission and long-term outlook, USAID alliances with foundations are better able to sustain the development impact of projects beyond the lifetime of any single grant. Locally run foundations place responsibility in the hands of local partners and increase the capacity of local organizations to plan and achieve results. By encouraging local involvement and encouraging local project implementers, foundations strengthen civil society and can set the stage for major international initiatives.

76 URBAN INSTITUTE

This chapter illustrates several of USAID’s current alliances with foundations. The emphasis is on innovation, creative thinking, and grassroots solutions to development challenges.

∫ The Balkan Trust for Democracy realizes the German Marshall Fund’s vision for an international trust to address regional development, cooperation, and governance goals in the Balkans.

∫ In the Armenia Earthquake Zone Recovery Alliance, the Urban Institute, the U.S.-based Lincy Foundation, and USAID anchored a coalition to help Armenians recover from a devastating earthquake.

∫ The Global Alliance for Vaccines and Immunization shows how a gift of $750 million from the Bill and Melinda Gates Foundation inaugurated a second era of big philanthropy. That gift has leveraged billions of dollars from governments and other organizations to combat preventable diseases in the developing world.

77 BALKAN TRUST FOR DEMOCRACY HOMEGROWN EFFORTS BUILD PEACE

Governments and foundations come together ACCOMPLISHMENTS AND OUTCOMES to fund local and regional initiatives to build Since its inception, the Balkan Trust has “ The activists peace, democracy, and regional cooperation in awarded more than 240 grants totaling some danced, drank, the Balkans. $6.2 million to civic groups, indigenous non- and then got up governmental organizations, governments, think tanks, and educational institutions in the morning PURPOSE throughout the Balkans to promote democra- To support local and regional organizations for earnest argu- tic consolidation and cross-border cooperation committed to peace, citizen empowerment, ments about and reconciliation. Projects address issues such better government, democratic reform, and as citizen advocacy and political participation, knowledge prolif- cross-border cooperation in Southeastern Eu- youth development, policy analysis, participa- eration, flash rope. tory decision-making, and media develop- mobs, Foucault, ment. CONTEXT the value of lo- Following the collapse of communism, Yu- gos and corpo- goslavia, Bulgaria, Romania, and Albania had FUNDING ARRANGEMENT (AMOUNTS ARE APPROXIMATE) rate branding, to create self-governing societies after nearly German Marshall Fund of the United States: 50 years of stagnation. Their aspirations were political market- $10 million (plus $2 million in administrative disrupted as Yugoslavia exploded into ethnic support) ing, the meaning violence that shocked the world. Peace was re- of politics…” stored in 1995, but the region is still recover- U.S. Agency for International Development: ing—economically, politically, and culturally. EUR — THE GUARDIAN $11,230,000 ( 10 million) (JUNE 6, 2005) Charles Stewart Mott Foundation: $5 million Observing the “Civic ALLIANCE MEMBERS Activism and Be- U.S. Agency for International Development Other resource partners: yond” festival hosted by the Albanian youth German Marshall Fund of the United States Government of Greece: $970,000 movement MJAFT! (ENOUGH!), a Charles Stewart Mott Foundation Kingdom of the Netherlands: $650,000 Balkan Trust grantee. Swedish Agency for International Develop- ment Cooperation (Sida): $900,000

Rockefeller Brothers Fund: $150,000

78 CHAPTER FIVE: WORKING WITH FOUNDATIONS ith the collapse of communism, sources; its innovation lies in establishing a the Balkan region descended platform for collaboration that other public Winto ethnic and sectarian and private donors can join. conflict. It soon was in acute need of assis- Due to its programmatic success and inventive tance. In 1996, the Bosnia-Hercegovina coun- approach, the Balkan Trust for Democracy, try mission of the U.S. Agency for Interna- from a pool of nearly 300 publicprivate al- tional Development (USAID) established an liances, received the 2005 Global Development emergency lending program to promote eco- Alliance (GDA) Excellence Award in recogni- nomic growth by helping enterprises expand tion of its innovative partnership model and production and create employment opportu- exemplary dedication to cross-border coopera- nities for the general population—including tionand broad-based democratic engagement 1.2 million refugees and 200,000 demobilized in Southeastern Europe. soldiers—while generating income for families and communities. The program targeted large and medium-sized private enterprises; HARNESSING INTERNATIONAL INTEREST loans covering forestry, manufacturing, In April 2001, USAID, in consultation with agribusiness, and construction. the U.S. State Department and based on the 2001 Foreign Operations Appropriations Act, A miniMarshall Plan, the assistance restarted authorized the use of the Bosnia reflows production and fueled economic growth in throughout the surrounding region. By Au- the country at rates higher than Germany ex- gust, USAID’s Europe and Eurasia Bureau is- perienced during its postwar years. USAID sued a solicitation for the establishment of a loan recipients accounted for 50 percent of 10-year sinking endowment to benefit South- Bosnia’s postwar exports during this time. By eastern Europe, supplemented by no less than the end of the initiative in 2003, USAID-sup- a one-to-one funding match from the winning ported banks had disbursed $162 million in bidder. 600 loans to Bosnian enterprises eager to expand business activity but lacking working Concurrently, the German Marshall Fund of capital and medium-term financing. Nearly the United States was putting together its own 15,000 jobs were created and 30,000 sus- resources to establish a foundation to execute tained. the fund’s mission in the Balkans: to bolster democracy wherever it is found and facilitate The program was so successful in jumpstart- transatlantic cooperation and expansion of ing the Bosnian economy that it generated multilateral structures such as the European substantial profits, or “reflows,” of which $40 Union and NATO. The German Marshall million was set aside for legacies such as the Fund had set aside $10 million for the purpose, American University of Bulgaria and the and soon after obtained a commitment of $5 Southeastern Europe University in Macedo- million from the Charles Stewart Mott Foun- nia. Another set-aside was to establish a legacy dation, with which it had a long and produc- in democratic reform, community and cross- tive history of collaboration. border reconciliation, and civil society development not just in Bosnia, but throughout In the USAID solicitation, the German Mar- the Balkan region. The Balkan Trust for shall Fund recognized an opportunity to fur- Democracy, a 10-year, $30 million grant-mak- ther its own objectives and leverage its re- ing initiative, is one of the most successful of sources. With $15 million between them, the USAID’s publicprivate alliances. German Marshall Fund and the Charles Stew- art Mott Foundation had assembled sufficient USAID’s investment of $11,230,000 (EUR 10 resources to act without USAID, but they million) in the Balkan Trust was matched by chose to be patient and submit a proposal in an additional $17 million from partners. But answer to the solicitation. Both saw the value the trust does more than leverage public re-

BALKAN TRUST FOR DEMOCRACY 79 of a long-term alliance with USAID, which and stability among political and ethnic fac- was worth the time and effort to comply with tions, and broader geopolitical concerns. The agency protocols.1 Balkan Trust shares responsibility with its collection of donor partners and the individual The Balkan Trust for Democracy succeeded and institutional grantees that do the difficult because all parties were committed to staying on-the-ground work of facilitating democratic the course from idea to implementation. The outcomes, influencing policies and practices, planning processes occurred in parallel engaging and empowering local stakeholders, (within USAID to program the reflows; be- and leveraging additional public and private tween the German Marshall Fund and the resources. Charles Stewart Mott Foundation to establish a foundation for the Balkans), but both sides Funds are managed by a small staff at the Ger- concurred on the goal and knew that they man Marshall Fund’s headquarters in Wash- could achieve greater impact by combining ington, D.C. Thanks to the strong relationship forces than by going it alone. between the German Marshall Fund and the Mott Foundation, the two parties’ contribu- In their proposal to the USAID Europe and tions are pooled. USAID’s investments, Eurasia Bureau, the German Marshall Fund though also pooled with those of other con- and Mott offered $17 million to complement tributors, are tracked separately across grant USAID’s $11.23 million.2 When the solicita- activities. tion was subsequently revised, they adjusted their proposal accordingly. Their patience An informal advisory board of experts from with USAID as a funding partner paid off: Southeastern Europe and key international or- their successful response to the solicitation re- ganizations oversees the Balkan Trust’s strate- sulted in an exceptional partnership that now gic development. The partners commit them- includes the Swedish International Develop- selves to letting the Balkan Trust work, but ment Agency, the Dutch and Greek govern- they all play a role in planning and setting ments, and the Rockefeller Brothers Fund. strategy, defining problems and possible solutions, and leveraging their strengths to reach LEAN, RESPONSIVE OPERATIONS optimal solutions. This close relationship The Balkan Trust for Democracy creates sus- demonstrates the principles and goals of GDA: tained, simultaneous change along the parallel to maximize the potential of established rela- tracks of indigenous development, security tionships among donors, to deepen those rela-

INVENTING A NEW ALLIANCE MODEL

he Balkan Trust for Democracy took some time to get started. A conventional “request for applications” (RFA) was issued, and proposals were received. A final decision Twas delayed by a month or two as the RFA was revised to take into account the previously unanticipated decision to close several Balkan country programs. Once a final decision was made to proceed, however, the Balkan Trust was established quite rapidly as a fund within the German Marshall Fund of the United States, an experienced implementing organization with low overhead costs. The German Marshall Fund also contributed $2 million in administrative services. Since the founding of the Balkan Trust, USAID has developed new procurement instruments and policies, such as the collaboration agreement, that enable the agency to respond even faster to partnering opportunities. The Balkan Trust, from decision to obligation, required about two years to create. A similar transaction today might take as little as six months.

80 CHAPTER FIVE: WORKING WITH FOUNDATIONS tionships, and to facilitate new ones through association and shared action. ROLES OF MEMBERS OF THE BALKAN TRUST FOR DEMOCRACY

USAID’s alliance coordinator joins semi-an- ∫ The U.S. Agency for International Development developed the nually in policy discussions regarding the en- conceptual framework for programming EUR 10 million in “re- dowment and monitors activities to ensure flow” funding for the Balkans that the goals of the endowment are ∫ The German Marshall Fund developed Balkan foundation con- met.Grant proposals are reviewed by a com- cept; executes and manages grants mittee composed of German Marshall Fund staff and officials from partner institutions. ∫ The Charles Stewart Mott Foundation joined GMF’s efforts as resource and cooperating partner Representatives from USAID and the Mott Foundation sit as nonvoting participants,3 together with a panel of reviewers from the region. Proposals are accepted on a rolling basis, and decisions are made monthly. Both the advisory and grant-making committees REGIONAL REFORM AND RECONCILIATION must ensure that programs funded by the en- The Balkan Trust awards more than $3 million dowment are effective, responsive to local annually in pursuit of its mission to link citi- needs, and complementary to other initia- zens with government and promote cross-bor- tives supported by the international commu- der cooperation and collaboration, as the nity. The German Marshall Fund submits an countries and territories of the Balkans move annual report listing all grants as well as the toward integration into Euro-Atlantic struc- specific USAID contributions. tures such as NATO and the European Union. In its first two years of operation, it disbursed SINKING FUNDS VS. PERPETUAL more than $6.2 million to some 240 grantees ENDOWMENT in the region. Grants are made to civic groups, The Balkan Trust is a so-called diminishing indigenous NGOs, local and regional govern- endowment, or sinking fund. Like perpetual ments, think tanks, educational institutions, endowments, diminishing endowments en- and the media. able donors to sequester funds over a relatively long period in support of specified ob- The overall goal for the trust is to increase de- jectives, freeing them of the need to recommit mocratic practices and reforms in nine Balkan funds or to hedge against later shifts in atten- countries and territories as they move toward tion or priority. For grant-makers, an endow- eventual integration the European Union. ment provides a secure, long-term funding That goal is achieved through two objectives: source that lessens the burden of annual fund ∫ To link citizens with government by deep- seeking from donors. ening dialogue between citizens and local USAID’s Europe and Eurasia Bureau has ex- elected leaders, improve public access to intensive experience with endowments due to formation about the performance and ac- the series of enterprise funds established by tions of government, and strengthen citizen Congress in 1989, many of which were trans- participation in the democratic process. formed into legacy mechanisms as a part of ∫ To promote regional cooperation and col- their liquidation. Based in part on the lessons laboration by creating linkages among gained in this process, USAID’s 10-year fund- grantees through which best practices can ing horizon in the Balkan Trust is recognized be communicated, by funding groups in by some as the proper balance of longer-term neighboring countries to work together on development planning while still allowing for shared concerns, and by facilitating a net- shifts in donor need, priority, or approach.4 work of civic activists, government officials, public policy analysts, journalists,

BALKAN TRUST FOR DEMOCRACY 81 business leaders and others to advance po- gage young people in civic affairs. The Coun- litical, economic, and social development cil recognized that GONG had organized in the region. some 3,700 workshops for 100,000 high school seniors in Croatia. Dialogue is the first step toward reconciliation. To promote it, the Balkan Trust made a Transparency receives 14 percent of the Balkan grant to the Center for Regionalism, one of Tr ust’s grant funds. Transparency issues in- 140 local NGOs belonging to the Igman Ini- clude citizens’ access to information, corrup- tiative, a consortium of groups dedicated to tion and conflict of interest, and the rule of peace and reconciliation. The Center’s pro- law. Despite efforts by civic groups to improve ject, “Truth about the Past—The Foundation citizens’ access to information about decision- for the Future,” builds on multistate struc- making, governments have had difficulty im- tures to strengthen reconciliation through plementing institutional reforms. Creative documentation and dialogue among high- civic groups are working with local communi- level officials of Dayton Triangle countries— ties and individual citizens to press the govern- Bosnia and Herzegovina, Croatia, and Serbia ment to practice and enforce its own legisla- and Montenegro. Through the efforts of Cen- tion and provide access to critical information ter for Regionalism and the Igman Initiative, that should be, but too often is not, available the presidents of the three countries agreed to to the public. The Balkan Trust also funds pro- meet—for the first time in the region—to jects to monitor the progress of legislation af- sign a trilateral agreement on relations among fecting the treatment of women and minori- their countries, a widely publicized initiative ties. Finally, grants to the media play an that is building public confidence in reconcil- important role in uncovering government cor- iation efforts. ruption and holding public servants accountable for their actions. Information and participation are the subjects of nearly 40 percent of Balkan Trust grants. The MJAFT! (Enough!) Movement is a youth Voter apathy is rife in Southeastern Europe, campaign to build civic pressure for govern- reflecting poor understanding of the democra- ment accountability in Albania. MJAFT! has tic process, disaffection with politics in gen- successfully pressed for more public funding eral, and lack of confidence that voters can for education. When a public official assaulted make a difference. To counter these self-de- a journalist, MJAFT!’s efforts to raise public feating beliefs, grants are made to NGOs and awareness of the incident led to the official’s other entities that promote citizen participa- resignation. Grants from the Balkan Trust have tion in the political process and improve citi- helped MJAFT! expand its well-organized, zens’ understanding of democracy. homegrown, political youth movement to at least 10 cities in the country. One grant sup- One grantee is GONG, an organization based ports a regional exchange program that has in Croatia. GONG initiated a campaign spawned a wide network of youth activists in known as “I’m voting for the first time” to ed- the Balkans, Ukraine, Belarus, Uzbekistan, ucate young people on the rights and respon- Georgia, and Lebanon. sibilities of a democratic electorate and to encourage them to play a more active role in the political processes of their country. By enlist- FROM DARK MOMENTS TO A BRIGHT ing the support of Croatia’s high schools, FUTURE The Balkan Trust’s efforts to nurture a vibrant GONG also helped first-time voters make in- and spirited political culture among tomor- formed decisions. In December 2005, the row’s generation complement the yearnings of Council of Europe recognized GONG, now Balkan citizens for a better life, peace through in its sixth year, as one of five winners of the reconciliation and democratic institutions, and Council’s “Young Active Citizens” competi- integration with the rest of Europe. tion, aimed at highlighting programs that en-

82 CHAPTER FIVE: WORKING WITH FOUNDATIONS The Balkan Trust exemplifies the essential cross-border reconciliation and cooperation in qualities of the GDA business model, which the region. calls for public and private stakeholders to The experience has borne many lessons. jointly define a development problem, jointly USAID assistance to democratic reform is not plan measures to address the problem, and to an obvious candidate for a publicprivate al- share resource, risks, and rewards in imple- liance.5 But through the valued intercession of menting those measures and assessing out- the German Marshall Fund, a strong partner- comes. The next steps for the Balkan Trust ship developed in furtherance of the Euro-At- for Democracy include expanding the circle lantic partnership. of bilateral and foundation donors to include prominent for-profit partners active in the region. 1. Previous collaborations had not ended as successfully. In the case of the Trust for Civil Society in Central and This successful partnership has proven robust Eastern Europe, USAID was heavily involved in project enough to address tough regional issues and design with other potential funding partners and expected to contribute to the endowment. Unfortunately, attract a variety of respected donors. A similar USAID found itself slowed by its own bureaucratic safeguards and congressional scrutiny of the transaction, and model has been applied in the West Africa could not participate. Water Initiative (chapter 9) and may be ap- 2. Resource leverage is both a cost and technical criterion propriate for other sectors, such as health. By in awarding a solicitation, but secondary to the technical building regional platforms for donor collabo- review. 3. To prevent conflicts of interest, U.S. government em- ration at the front end, with beneficiary-led ployees may not exercise fiduciary responsibility in out- initiatives as outputs, united donors can have side organizations. greater development impact than the same 4. In a diminishing endowment, a 10-year planning horizon can be achieved by investing $7–8 for every $1 disbursed donors acting in isolation. in grants. For a perpetual endowment, the necessary investment is $20. And it is more difficult to change tack Even as USAID phases out its assistance in with perpetual endowments: parties must seek a change in charter or bylaws, or withdraw funds. In the Balkan East Europe in concert with the integration Trust for Democracy, the contributions of the German and enlargement processes of the European Marshall Fund and the Mott Foundation are expected to be drawn down at a slower rate than those of USAID, al- Union, significant work remains to consoli- lowing the organizations to retain an equity position at date democracy in the Balkans. The Balkan the end of 10 years and to shift directions if indicated. Tr ust for Democracy provides USAID a 5. In its four years, the GDA model has proved a good fit with enterprise and agribusiness development and health long-term mechanism to unite dwindling re- activities, while democracy building alliances remain largely uncharted terrain. Should the Balkan Trust enlist sources with like-minded partners that are long-term support from for-profit entities, the alliance equally committed to good governance and will be truly groundbreaking.

BALKAN TRUST FOR DEMOCRACY 83 EARTHQUAKE ZONE RECOVERY PROGRAM EXPATRIATE ARMENIANS RETURN TO REBUILD

PURPOSE ACCOMPLISHMENTS AND OUTCOMES To accelerate the construction of permanent Approximately 6,500 families have found per- Diaspora founda- housing for Armenians in temporary shelters manent housing, either through certificates to tions join USAID since the 1988 earthquake, and to promote purchase new housing or grants to complete or efforts to help sustained recovery by encouraging private in- repair unfinished or damaged homes. In align- vestment, democratic reform, and good gov- ment with alliance strategy, the government of Armenia recover ernance. Armenia has now taken over the U.S. Agency from a devastat- for International Development’s housing pro- ing earthquake. CONTEXT gram, investing $6.2 million for housing The December 1988 earthquake in Armenia certificates and $2.6 million for rural housing. claimed more than 25,000 lives and left 500,000 homeless. Reconstruction efforts FUNDING ARRANGEMENT were largely abandoned upon dissolution of U.S. Agency for International Development: the Soviet Union three years later, and an en- $35 million suing war with Azerbaijan over the Nagorno- World Bank: $140,000 Karabakh region further delayed action. In 2000, 12,000 families still lived in temporary United Nations High Commissioner for shelter. Refugees: $80,000

Norwegian Refugee Council: $500,000 ALLIANCE MEMBERS World Bank Lincy Foundation: $45 million

U.S. Agency for International Development All Armenia Fund: $750,000

Urban Institute

Norwegian Refugee Council

All Armenia Fund

Lincy Foundation

United Nations High Commissioner for Refugees

84 CHAPTER FIVE: WORKING WITH FOUNDATIONS or most of the nations that suddenly be- stock), but on issuing “housing purchase came independent when the Soviet certificates” to potential buyers stuck in tem- FUnion dissolved in 1991, conditions got porary housing, enabling those buyers to begin much worse before they got better. Armenia sending market signals to builders. was hit particularly hard. Efforts to repair the USAID quickly embraced the strategy through damage from the devastating 1988 earthquake a proof-of-concept voucher program in were suspended, leaving a collection of “car- Giumri. Using housing certificates worth casses”—row upon row of empty shells of $3,000 to $7,000 issued through the banking housing blocks that were never completed.1 An system, the pilot program realized a 97 percent ensuing conflict with Azerbaijan over Nagorno- redemption rate. Sellers wishing to leave Karabakh, a disputed region with deep histori- Giumri suddenly found buyers where, before, cal resonance, compounded the problems. there had only been poor families with no cash. It was in the course of the conflict with Azer- Eighty-nine percent of those who redeemed baijan that groups of Armenian emigrants be- certificates chose to remain in Giumri. In the gan to mobilize resources to rebuild their spaces previously occupied by the metal con- country. Seven Armenian diaspora groups— tainers that so many Armenians had called the Armenian Assembly of America, the Ar- home for the past 10 years, an Armenian public menian General Benevolent Union, the Ar- works program created a playground, park, and menian Missionary Association of America, recreation fields, with support from USAID. the Armenian Relief Society, the Diocese of the As the architect of the World Bank housing Armenian Church of America, the Prelacy of strategy and USAID’s partner in implementing the Armenian Apostolic Church of America, the pilot project, the Urban Institute was ex- and the Lincy Foundation—came together as pected to maximize collaboration with other the United Armenian Fund to raise $20 mil- organizations. Steve Anlian, the institute’s lion to transport some $400 million in donated country director for Armenia, had already em- goods and supplies to their country of origin. braced that mandate when he met Harut Sas- Beginning in 1998, the Lincy Foundation, cre- sunian, Lincy Foundation vice chairman and ated by the billionaire Kirk Kerkorian, in- United Armenian Fund president, during one vested $170 million of its own funds to help of Sassunian’s trips to Armenia to manage the Armenia recover from the earthquake. The Lincy Foundation’s grants. Anlian suggested Lincy funds were directed to critical infra- that the Lincy Foundation might coordinate its structure: roads, schools, and new housing to building program with other donors such as move families out of domiks, temporary metal USAID. Sassunian readily agreed, and joined shelters that lacked running water and sewage the collaboration of public donors to maximize lines. The foundation’s $45 million investment resources for earthquake recovery. in housing stock, centered on the hard-hit One clear result of the new alliance was a refo- district of Giumri, attracted the attention of cusing of Lincy-funded renovations on town USAID, which had been present in Armenia and city centers, as opposed to scattered sites, since 1992, and had participated with Arme- based on the theory that concentrated invest- nia on restoration through public works pro- ments would heighten the psychological impact grams and other government initiatives. on citizens who, upon seeing the most visible and important sections of their cities or towns MAXIMIZING DONOR COLLABORATION rebuilt, would take new pride and responsibil- In 1998, the Urban Institute, a nonprofit, ity in spurring reconstruction and revival nonpartisan research institute, developed a throughout the community. In Giumri, for ex- housing strategy for Armenia at the request of ample, the Lincy Foundation renovated the en- the World Bank. The strategy focused not on tire city center and connecting avenues in coop- the supply side (building more housing eration with the Armenian government.

EARTHQUAKE ZONE RECOVERY PROGRAM 85 NEW PARTNERS COME ON BOARD USAID monitors formal and informal agree- The Urban Institute and USAID sought addi- ments between alliance partners. For instance, tional partners in the earthquake zone and both the United Nations High Commissioner among diaspora groups, bilateral donors, and for Refugees (UNHCR) and Norwegian international organizations working in hous- Refugee Council worked with the Armenia ing and urban development. The resulting government and USAID to manage the process broad alliance of donors, governments, and of moving families out of the domiks, clearing foundations came to be known as the Earth- the domiks, and then reclaiming the land. UN- quake Zone Recovery Program. The alliance HCR and USAID signed a formal agreement took on the coordination of the partners’ var- on coordinating their investments. In the case ied roles: The Urban Institute convenes peri- of the Norwegian Refugee Council, a verbal odic stakeholder meetings to welcome new understanding sufficed. Such interactions partners, update partners on progress, and re- reaffirm that alliances are predicated on trust solve issues in collaboration or implementa- and regular communication among the donors tion. The Norwegian Refugee Council and and private sector partners—exactly what the United Nations High Commission for GDA business model seeks to engender. Refugees concentrate on the provision of refugee housing, often in areas recently cleared For this alliance, a parallel funding approach, of domiks. The Armenian government, which in which partner resources are held and tracked contributed $210,000 to the alliance, assumed separately, serves as the most appropriate way ownership in 2005 of the successful program to fund activities. Each member maintains and of issuing housing certificates to provide de- manages its own funds, allowing each partner, mand-pull to housing suppliers and stimulate large or small, to focus on what it does best. a self-governing housing market that would not need donor support or intervention. The LESSONS LEARNED government plans to expand the program to ∫ An effective implementer already operating include homeless populations in addition to in the field—in this case, the Urban Insti- the families remaining in temporary shelter. tute—can be a key partner and convener when opportunities for alliances arise.

∫ Be realistic in expectations, frank and clear ROLES OF MEMBERS OF THE EARTHQUAKE ZONE with partners and stay focused—building RECOVERY PROGRAM alliances takes time.

∫ The World Bank commissioned a “New Strategy for Armenia’s ∫ Be prepared for an alliance to hit stumbling Earthquake Zone” to complete earthquake recovery efforts. blocks. Alliances are often slowed and ∫ The U.S. Agency for International Development developed a sometimes fail to materialize. housing certificate scheme in execution of World Bank strategy. ∫ Focus on the unique attributes of partners— ∫ The Norwegian Refugee Council supported the housing certifi- it is often the differences, rather than com- cate scheme. monalities, that make for effective collabora- ∫ The Urban Institute has been the alliance’s implementing partner. tion. ∫ The All Armenia Fund invested in housing stock in tandem with ∫ Capitalize on diaspora resources wherever USAID. possible. ∫ The Lincy Foundation supported Armenia’s building renovation ∫ Be ﬂexible. Do not overly structure an al- and reinforcement efforts, and coordinated new housing and building construction with USAID. liance, or try to prevent it from evolving in what may be unexpected directions. ∫ The United Nations High Commissioner for Refugees supported housing vouchers. 1. Jonathan Steele, “What Happened Next?” The Guardian, October 19, 2005.

86 CHAPTER FIVE: WORKING WITH FOUNDATIONS GLOBAL ALLIANCE FOR VACCINES AND IMMUNIZATION PREVENTING PREVENTABLE DISEASE

PURPOSE New Funding Initiative through International To ensure that every child in the world is vac- Finance Facility for Immunization: cinated against preventable diseases, with a fo- A concerted United Kingdom cus on improving access to vaccines in the effort to save the France world’s poorest countries. world’s poor Italy children from CONTEXT Spain preventable In the last century, medical research yielded Sweden vaccines to prevent several crippling, and of- disease has galva- ten fatal, childhood diseases. However, as a ACCOMPLISHMENTS AND OUTCOMES nized partners in new century begins, the world is falling short As of December 2004: many countries. of realizing the full benefit of childhood immunization. At present, worldwide immu- ∫ 8.7 million children immunized with three USAID acts both nization programs save up to three million doses of diphtheria-tetanus-pertussis vaccine as a donor and lives annually, but three million more still die ∫ 71.9 million children immunized with He- program coordi- from diseases that could be prevented. The patitis B; 9.3 million with Hib; and 10.5 nator. The agency partners in the Global Alliance for Vaccines million with yellow fever vaccines and Immunization know that preventing in- also has facili- ∫ 1 million deaths prevented in children born fectious diseases is not only the most efficient between 2001 and 2004 tated the partici- and cost-effective form of health intervention; pation of other it also reduces poverty, lowers birth rates, and ∫ 5 million further child deaths will be pre- promotes economic growth. vented in 70 countries over the next 10 years. organizations in this significant FUNDING ARRANGEMENT world health ALLIANCE MEMBERS Financing for the Vaccine Fund, the initial Vaccine Fund: financing arm of the Global Alliance for Vaccines alliance. Bill and Melinda Gates Foundation and Immunization: Canada Gates Foundation: $750 million France U.S. Agency for International Development: Norway $283 million through FY05 The Netherlands Other governments: $1.7 billion from 2000 to 2003 U.S. Agency for International Development International Finance Facility for Immu- World Bank nization: World Health Organization United Kingdom: $130 million per year United Nations Children’s Fund France: $100 million per year United Kingdom Italy and Spain: $15 million per year And other countries Sweden: $27 million one-time gift

GLOBAL ALLIANCE FOR VACCINES AND IMMUNIZATION 87 he Global Alliance for Vaccines and the agency had to obtain waivers of standard Immunization (GAVI) was formed in USAID procedures and budgetary require- T1999 to ensure that every child in the ments, because USAID was not managing world—particularly those in the poorest coun- GAVI. That step was difficult for the agency, tries of the world—would be protected against but it proved dramatically important in shap- vaccine-preventable diseases. GAVI’s global ing USAID’s approach to future alliances. partners include the Bill and Melinda Gates USAID has contributed increasingly larger an- Foundation (which provided seed funding of nual amounts to GAVI through the Vaccine $750 million over five years), the World Health Fund. Through fiscal year 2005, USAID has Organization (WHO), the United Nations contributed $283 million and has been active in Children’s Fund (UNICEF), the World Bank, the governance and technical oversight of the the U.S. Agency for International Develop- alliance. Since 1999, the agency has either held ment (USAID), and a broad spectrum of par- a seat on the rotating board of directors or has ticipants from developed and developing coun- served as a member of the GAVI Working tries, including governments, development Group, the alliance’s primary technical arm. agencies, technical institutions, NGOs, vaccine Phase 1 of GAVI—the first five years of coun- manufacturers, and health organizations. try-level investments—is coming to a close, and Phase 2 is about to begin. BUILDING THE ALLIANCE: A NEW ROLE FOR USAID OPENS AVENUES FOR PARTICIPATION AN INNOVATIVE FINANCING MECHANISM The Gates Foundation’s $750 million grant In August 2005, the International Finance Fa- formed the core of what was then known as cility for Immunization (IFFIm), the brain- the Vaccine Fund. Four governments—those child of Gordon Brown, Britain’s chancellor of of the Netherlands, Norway, the United States, the exchequer, was formally constituted. Four and the United Kingdom—contributed an ad- countries have made 10-year commitments. ditional $250 million, pushing the Fund’s re- Annual spending of approximately $272 mil- sources over $1 billion. Additional govern- lion dollars will be maintained over the com- ments have joined since 1999. mitment period through the issuance of bonds. The IFFIm approach, at current funding levels, By making its grant to the Vaccine Fund, should bring to GAVI-eligible countries an ad- rather than directly to the UNICEF Trust Ac- ditional $3.2 billion dollars of funding through count from which much of GAVI’s money 2015. The countries that have committed to the flows, USAID helped the Vaccine Fund IFFIm are the United Kingdom ($130 million achieve permanent status as “a publicly sup- per year), France ($100 million per year), and ported organization” under U.S. Internal Rev- Italy and Spain (with a combined total of ap- enue Service regulations. That status allows proximately $15 million per year). Sweden will U.S. citizens and corporations to support make a one-time gift of $27 million. The United GAVI through tax-deductible contributions to States, via USAID, continues to contribute to the Vaccine Fund and greatly facilitates the GAVI through the traditional Vaccine Fund. making of contributions by private foundations. From its inception, GAVI has made support available to the 75 poorest countries of the But in joining GAVI the agency demonstrated world. Governments may apply at three “win- flexibility in another way. Accustomed to be- dows”: ing “majority shareholder” in projects, and often manager as well, USAID chose in the case New and underutilized vaccines. Most GAVI- of GAVI to enter into a cooperative eligible countries now use only traditional vac- publicprivate alliance with a wide array of cines, which are relatively inexpensive. When a partners. Before executing the initial contract, country reaches 50 percent coverage with diph-

88 CHAPTER FIVE: WORKING WITH FOUNDATIONS theria-tetanus-pertussis (DTP3), GAVI offers Applications for support are reviewed by an in- access to three vaccines that are not used in the dependent review committee that makes rec- developing world because of their high cost. ommendations to GAVI’s board of directors, These vaccines, which GAVI offers free for five which then forwards applications to a technical years, come bundled with auto-disposable sy- oversight panel (the GAVI Working Group) ringes for safe administration. made up of experts from alliance member organizations, which may request further detail. Safe injection equipment. Most immunization Once GAVI’s board approves an application, programs in poor countries use syringes that the Vaccine Fund authorizes a disbursement are not protected against reuse. GAVI provides from a UNICEF trust account. auto-disposable syringes free of charge for three years. Auto-disposable syringes are GAVI has begun two programs to accelerate outfitted with a safety feature so they cannot development of new vaccines for global use—a be reused and come with safety boxes to cap- rotavirus vaccine and a pneumococcal conju- ture used syringes. All GAVI-eligible countries gate vaccine. are eligible for this window of support for all vaccines administered through their public im- WHY GAVI WORKS munization program. GAVI is a monumental undertaking that brings Immunization services support. Governments together many players. All share a belief in the in poor countries often have difficulty sup- viability of the enterprise and its critical mis- porting the immunization services that deliver sion. They know that immunization is the most life-saving, cost-effective vaccines, in part be- cost-effective health intervention, that effective cause immunization programs are usually un- use of existing vaccines would significantly im- derfunded. GAVI’s funding for immunization prove the health status of the world’s children, services is innovative in that it is performance- and that delivery systems exist to some extent based. Countries may apply for a grant of $20 in even the very poorest countries. They also per unimmunized child. The country receives know that although immunization programs a percentage of the grant annually for two have been scaled up in many parts of the world, consecutive years. But the balance of the grant the gap in coverage rates between the richest is paid only if the country can demonstrate in- and poorest countries is still substantial. creased numbers of children immunized. Some GAVI functions because of that clear consensus, countries have risen to the challenge and deliv- and because the partners understand that no one ered tremendous results, others have not. To institution can direct or finance the effort re- date, this window of funding has been avail- quired. The alliance’s partners have created a able only to countries with DTP3 coverage clear governance structure and a reasonably ef- rates under 80 percent. fective division of labor and responsibilities. With commitment at the highest level of partner institutions and a high level of political interest in its success, GAVI also has a well-established arrangement for the administration of funds that is acceptable to all partner institutions.

GLOBAL ALLIANCE FOR VACCINES AND IMMUNIZATION 89 CHAPTER SIX

BUILDING HUMAN CAPITAL DEVELOPING STRATEGIC SKILLS AND CAPACITY

Skills in information and communications technology and internationally accepted accounting practices are vital components of the enabling environment for business activity. Without them (and other core skills), economies cannot grow. The alliances that have formed to provide such skills are characterized by cooperation among business, government, and education.

Businesses see the obvious advantages of programs that provide them with the workers they need. As the numbers of such workers grow, they enhance the economy’s capacity to thrive in global competition. The same skills allow governments to expand their use of technology to improve administration and governance. Alliance partners play diverse roles in imparting those skills: providing trainers and teachers, supplying equipment and facilities, lining up internships and business opportunities, mentoring young entrepreneurs, and certifying the integrity of the program.

With USAID’s help, computer and software ﬁrms, such as Cisco Systems, Inc., Sun Microsys- tems, Microsoft, and Hewlett-Packard, donate products and provide training to enhance information technology capacity and improve workforce skills in developing countries, thereby improving the investment climate and introducing advanced technologies in the delivery of health, education, and government services. The International Accounting Standards Board is working with USAID and professional associations in 22 countries to improve accounting practices — and thus the investment climate — across the former Soviet Union.

The alliances proﬁled here show a range of possibilities:

∫ The Cisco Networking Academy Alliance adapted a proven U.S.-based community program to venues in Africa and Asia, bringing sophisticated IT and network management skills to 200 locations in 41 countries. Each academy builds an alliance with local partners, expanding its potential to create jobs and promote business development.

90 CISCO SYSTEMS

∫ entra 21 established an IT training program for disadvantaged youth in Latin America and the Caribbean that also established a local network of partners for job creation and mentoring.

∫ The Certiﬁed International Professional Accountant (CIPA) Alliance in Russia, Ukraine, Kyrgyzstan, and Kazakhstan is helping those countries ensure the business integrity needed for international investment, economic growth, and government budget management. CIPA brings together respected accounting institutions and homegrown national organizations to build capacity for modern business practices.

91 CISCO NETWORKING ACADEMY ALLIANCE BUILDING INFORMATION TECHNOLOGY CAPACITY WORLDWIDE

PURPOSE ACCOMPLISHMENTS AND OUTCOMES To develop skills in information and commu- The alliance is developing an IT workforce at Two major nication technologies (ICT) in countries and more than 200 Cisco Academies in 41 coun- public–private regions trying to take advantage of the oppor- tries that enroll 10,000 students, 30 percent of efforts—the tunities presented by electronic business and them women. management tools. U.S. Agency for FUNDING ARRANGEMENT International CONTEXT Cisco: more than $150 million invested in Development’s An estimated two million skilled computer academies around the world and at least $15 Leland Initiative network operations and management profes- million in academies in least developed coun- in Africa and sionals are needed to meet worldwide demand tries. For donor partners, this represents a level for the growing use of information technol- of service delivery that might cost 12 times Cisco’s Network- ogy in the global marketplace, as well as by more if pursued through a formal vendor rela- ing Academy governments and the public. Cisco’s Network- tionship. Program in the ing Academy Alliance originated as a U.S.- U.S. Agency for International Development: based training initiative that has become a United States— approximately $5 million since 1999. global alliance and a central U.S. Agency for unite to build an International Development partner in ICT IT workforce and development. advance women’s technical educa- ALLIANCE MEMBERS AND ROLE Cisco Systems, Inc. tion in the world’s least developed U.S. Agency for International Development countries. United Nations Development Programme

International Telecommunications Union

Japanese International Cooperation Agency

Institute of International Education

92 CHAPTER SIX: BUILDING HUMAN CAPITAL or Ekwoge Hudson Mbong, the Cisco BRIDGING THE DIGITAL DIVIDE Networking Academy was the path to In 1993, Cisco Systems began developing a Fhis aspirations. In August 2004, he ob- community-based ICT training platform to ad- tained an associate’s certificate (the first of dress several concerns. Cisco leaders had four levels in the Cisco professional hierarchy) identified that a shortage of qualified adminis- in computer networking from the local Cisco trators to operate the company’s products was a academy at the University of Buea in key restraint to growth. The company also Cameroon. Degree in hand, he began search- wished to practice good corporate citizenship.1 ing for a way to earn the more demanding At that time, Cisco was designing practical, professional certificate. cost-effective networks for schools as a part of But there were no such programs in his native its regular business. While developing materi- Cameroon. Only two existed in all of Sub-Sa- als to enable teachers and staff to maintain haran Africa, in fact; the closest was 1,500 their school’s network, Cisco engineers discov- miles away at the Cisco Regional Academy at ered that many of the students they met were the Makerere University in Kampala, Uganda. eager to learn about networking. The company Three months later, after being admitted, wondered if it could capitalize on that interest Hudson set out for Uganda to become a to encourage technology programs in sec- Cisco Certified Network Professional. ondary schools, especially in underserved districts. Such an initiative could narrow the gap “It’s quite a tough program, but the tough between education and employment by link- take it by force,” he reported. “I believe I have ing the program with local employers who a bright future here.” Hudson graduated with would provide on-the-job training, such as in- 41 other classmates in July 2005; he now internships and apprenticeships. Students with tends to earn a degree in network engineering an interest in information technology would and begin his career. have access to a ready-made curriculum, while Cisco Systems, Inc., aims to produce thou- local businesses would have a pool of candi- sands like Ekwoge Hudson Mbong. A lack of dates from which to recruit. skilled IT professionals is a key factor limiting The business logic was simple. Education based future growth in emerging and underdevel- on skill in using Cisco products tied directly oped economies for Cisco and other compa- into Cisco’s strategic needs. A Cisco-initiated nies that use information technology. The and-implemented initiative would serve the U.S. Agency for International Development dual roles of promoting education and the so- (USAID), United Nations Development Pro- cial good while improving the labor pool and gramme (UNDP), and other donor partners market for Cisco’s core business functions.2 see their support of Cisco Academies, in the least developed countries and elsewhere, as an The Cisco Networking Academy Program was excellent way to produce IT professionals and launched in October 1997 at 64 schools in help make African countries more hospitable seven states in the United States. The web- to foreign investment. Also, academies have based curriculum was developed to prepare proved surprisingly effective in training students for industry certifications such as women. Cisco Certified Network Associate (CCNAª) and Cisco Certified Network Professional It is in the melding of complementary inter- (CCNPª), as well as Network+ certifications. ests to achieve shared goals that the value of The CCNA curriculum, offered mainly at the partnership is most evident. Dating from secondary and university levels, requires 280 2000, the Cisco-USAID relationship is hours of instruction; CCNA graduates can ad- among the most durable of public and private vance to CCNP with another 280 hours in- alliances—a success by any measure. struction. At that level they are certified to administer complex network configurations and

CISCO NETWORKING ACADEMY ALLIANCE 93 ALLIANCE HIGHLIGHTS: New programs. The success of the gram is under discussion. On the 2003 TO 2005 multilateral LDC Initiative launched in agenda are a gender initiative, job 2000 leads several USAID country placement activities, and the de- Gender. The PLAN-IT Model—a se- missions to fund further programs ployment of project coordinators ries of toolkits in sustainability, work- specific to country needs and priori- in different districts to support ex- force development, and gender main- ties, such as: pansion of the program. To date, streaming—is deployed in every eight academies have been estab- academy. ∫ Afghanistan joined the LDC Initia- tive in September 2003. Within lished in Bangladesh. Uganda. The launch of the Work- two years, it had expanded to ∫ Jordan’s academy program is force Development Program at Mak- three academy sites graduating “Achieving E-Quality in the IT Sec- erere University’s Institute of Com- more than 100 students, including tor” by combining gender training puter Science in Uganda, a 30 percent women. Now in its and job placement. In 2005, 476 department dedicated to linking stu- second generation, the program students (42 percent women) en- dents with the private sector. operates in six secondary cities rolled in the academies supported Asia. The U.S. Agency for Interna- and provinces. Cisco-Afghanistan by the United Nations Develop- tional Development’s (USAID) Asia will be the focus of the second ment Fund for Women (UNIFEM). and Near East Bureau creates the phase of the PLAN-IT sustainabil- More than 600 students have be- Cisco Networking Academy Scholar- ity model. Private sector interest come Cisco-certified network as- ship Program, providing $350,000 in in academy graduates has opened sociates. scholarships for women in Algeria, the possibility of replicating the ∫ In Morocco, USAID has partnered Bangladesh, Mongolia, Morocco, Uganda Workforce Development with Cisco Systems and UNIFEM Nepal, Sri Lanka, and Tunisia. Program in Afghanistan. to establish 11 new academies. ∫ In Bangladesh, a four-year acad- Nine have met the alliance’s re- emy-expansion plan administered quirement for female enrollment. by the USAID-funded JOBS pro-

diagnose and troubleshoot network problems. the last country in Africa without Internet ac- The CCNP curriculum is offered primarily at cess. The connectivity program continued to the university level. evolve, engaging USAID around the world. USAID considered ICT as a cross-sectoral is- USAID’S PARALLEL TRACK: THE LELAND sue fundamental to all USAID interventions. INITIATIVE Today, ICT is integrated into 351 development After decades of promoting ICT development activities, or 95 percent of all mission efforts. in telecommunications and other fields, US- USAID’s strategic approach to ICT involves AID first took action to bridge the global reforming ICT policies that hamper or over- “digital divide” in 1996. The late Mickey Le- regulate the sector; facilitating greater access land was a Texas Congressman and an advo- for those not connected because of economic cate for the world’s poor, particularly in and geographic factors; enabling individuals Africa. Leland died in a plane crash while on and institutions to practice broader, more tar- a relief mission to Ethiopia during its 1984 geted use of ICT applications; fostering inno- famine. USAID’s efforts to bring the benefits vation and new applications; and engaging in of the information revolution to the people of alliances to implement development initia- Africa were later dubbed the Leland Initiative tives. in his memory. By 1999, when the first phase of the Leland In 1995, as the Leland Initiative began to Initiative was winding down, USAID looked bring the Internet to Africa, almost no one ahead to a new phase that would intensify its had access. But by November 2000, when Le- efforts through partnership. Cisco, whose Net- land Initiative engineers activated the Eritrea working Academy Program was already a national Internet backbone, they connected

94 CHAPTER SIX: BUILDING HUMAN CAPITAL prominent example of web-based IT educa- and Peace Corps pledged skilled volunteers to tion, was ready to take the curriculum global help support new academies. once it found the right mix of partners. “The Cisco Networking Academy Program However obvious the potential for partner- enables the Internet to bring digital opportu- ship between Cisco and USAID, the partners nity to every corner of the earth,” said John had yet to meet in person. At the G-8 summit Chambers, Cisco president and chief executive in 2000, the digital divide was high on the ofﬁcer. “By including these countries in our agenda. Cisco was there to meet with devel- program, we will show that the Internet and opment partners: USAID, UNDP, United education are truly the two great equalizers in Nations Volunteers (UNV), the World Bank, life for countries, companies, and individuals.” and other bi- and multilateral donors. The With a global consensus on the importance of event was the launch of the Least Developed information technology matched by the par- Countries (LDC) Initiative, a multistake- ticipation of donors, Cisco’s Networking holder effort to train students of the develop- Academy concept expanded quickly. By the ing world for jobs in the Internet economy. end of 2001 Cisco was present in 20 countries, At the summit, Cisco pledged to invest a having established 58 academies enrolling minimum of $3.5 million to take its learning 1,000 students. Cisco Systems trained trainers platform to 24 of the world’s least developed at Cisco Academy training centers, which in countries. UNDP and USAID also pledged turn trained staff at regional academies. Re- support, while the United Nations Volunteers gional academies then trained local academy

LANE SMITH, USAID/AFGHANISTAN pacity. Because of the 30 percent gender target, ROLES OF MEMBERS OF THE CISCO NETWORKING Cisco academies in Africa now boast a higher ACADEMY ALLIANCE female participation rate than those in the ∫ Cisco Systems, Inc., provides funding, curriculum, and technical as- United States and other advanced economies sistance from Cisco engineers, equipment, and brand recognition. of the world. ∫ U.S. Agency for International Development offers funding, schol- In 2004 the Japanese International Coopera- arships for women, and guidance from USAID country missions and the agency’s IT team. tion Agency joined the initiative, and the In- stitute for International Education was en- ∫ United Nations Development Programme provides funding and listed to strengthen the gender-education guidance from country offices and the UNDP technical team. component. The year 2004 also saw an up- ∫ The International Telecommunications Union supports the al- grade in the Cisco curriculum, as well as new liance with funds, in-kind and technical assistance, policy advocacy. operational challenges: Cisco managers had to ∫ The Japanese International Cooperation Agency provides technical cope with staggering numbers of new acade- assistance through the Japanese professional volunteer program. mies and the associated operational issues, such as staff turnover and facility management.

Today, 200 academies in 41 of the world’s least instructors to educate eager students, such as developed countries and 11 middle-income Ekwoge Hudson Mbong. The same system is countries enroll almost 10,000 students. in place today. Thirty percent of enrolled students are women, and more than 5,800 students have By the end of 2002, Cisco had established 83 earned an associate’s certificate. academies in 39 countries with a total enrollment of 3,400 students. After two years of operation, Cisco convened its first Africa Fo- ADJUSTMENTS rum, where partners and the best academies The alliance has faced difficulties stemming came together to share experiences, successes, from its own success—among them sustaining and lessons learned with colleagues Cisco en- high placement rates for graduates, reducing gineers. the brain drain of academy staff into the private sector, and helping academy operators achieve financial stability. THRIVING ACADEMIES HELP THE ALLIANCE GROW One obstacle has been the sustainability of In 2003, alliance partners committed to a sec- academies. Financial sustainability toolkits are ond phase—known as Africa 100—under standard issue at all academies, as are manuals which USAID sponsored 75 new academies for gender and workforce development. How- and UNDP 25. Sponsorship includes equip- ever, not all of the academies are viable in a ment, training, and sponsored courses. strictly business sense. User fees charged at some academies help recover costs and reduce Africa 100 also represented a shift in focus— the donor burden, but only a few academies from universities in larger cities to secondary have a shot at full cost recovery. schools in smaller cities. Standards were also revitalized through the 50/30 campaign: in or- One long-term strategy for sustainability is to der to participate in the initiative, an academy make sure that academies are agile in perceiv- had to enroll at least 50 students, 30 percent ing and responding to customer and workforce of whom are women. The minimum enroll- needs. Though Cisco is a longstanding and ment requirement was designed to permit valued partner with USAID, both sides recog- academies to wield a professional presence ca- nized early on that the academies should offer pable of advancing national policy change more than the Cisco curriculum. For one and building the country’s technological ca- thing, the Cisco training suite did not bridge

96 CHAPTER SIX: BUILDING HUMAN CAPITAL CISCO WINS DEPARTMENT OF STATE’S 2005 AWARD FOR CORPORATE EXCELLENCE FOR JORDANIAN EDUCATIONAL INITIATIVE

he futures of countries are determined by their education system, their infrastructure, and the environment they create for innovation and supportive government,” said TCisco CEO John Chambers upon receiving the 2005 Award for Corporate Excellence. “Cisco’s commitment to the future of Jordan is an inspiration for businesses everywhere,” observed Secretary of State Condoleezza Rice in presenting the award. The Jordanian Educational Initiative is building the backbone for an Internet network linked to 100 schools, partnering to create a multimedia e-mathematics curriculum and 12 Cisco Acade- mies that train young men and women in information technology to prepare them for high- tech careers. The academies have produced 600 graduates so far. “If you’ve seen how the jobs are being created in Jordan,” Chambers continued, “… at the number of companies that are now moving into Jordan and locating their businesses there, and the number of Jordanian companies that have flourished, you now understand what the power of working together can do.” Cisco and its partners are extending the model developed in Jordan to Palestine, Egypt, Israel, India, and the United States, in the form of the “21S” initiative, a long-term effort to rebuild schools in the hurricane-ravaged Gulf Coast region of United States and to develop student- centric, world-class education that will bridge the digital divide. The Secretary of State’s Award for Corporate Excellence, established by the State Depart- ment in 1999, recognizes the important role U.S. businesses play abroad as good corporate citizens.

the gap between the advanced networking regulators were generally pleased with the skills taught in the academies and basic com- Cisco e-learning platform, they were unani- puter literacy. mous in saying that content imported directly from the United States needed to be adapted Recognizing this, Cisco Systems created the to the African context. From that feedback, “sponsored curriculum” and enlisted other USAID developed a second IT alliance, Net- technology partners to participate. Hewlett- Tel@Africa. The web-based curriculum was Packard, Sun, and Panduit were among the designed by and for African regulators, draw- companies that developed speciﬁc training ing expertise from leading African and Ameri- modules to add to the Cisco curriculum. In can telecommunications experts, universities, coordination with Africa 100, these modules and regulatory associations. Successful comple- have been added to curricula throughout tion of the 10 courses leads to a postgraduate Africa. USAID has begun to reach out to diploma and master’s levels degrees in telecom- other vendors, as well, including Unigraphics, munications policy and regulation at 20 whose software for managing the product life African universities. NetTel@Africa ultimately cycle is used by major corporations, and improves the operating environment for acad- ESRI, a leading provider of software for geo- emies and the USAID-Cisco alliance. graphic information systems.

Finally, the IT and telecommunications regu- 1. The Cisco Networking Academy Program is discussed in latory environment in most countries in Michael Porter and Mark Kramer, The Competitive Advan- which academies operate has proved in dire tage of Corporate Philanthropy, Harvard Business Review, need of modernization. USAID and Cisco December 2002. 2. A history of the academies is available at teamed up in 2001 to introduce regulatory www.cisco.com/edu/emea/academy/academy_history_ho training through the Cisco platform. While me.shtml.

CISCO NETWORKING ACADEMY ALLIANCE 97 ENTRA 21 JOB, LIFE, AND SKILLS TRAINING FOR YOUTH

With that as a guiding principle, the entra 21 Corporate donors include: “ The ‘hope gap’ alliance is helping disadvantaged youth in Microsoft Corporation Latin America and the Caribbean enter the separates the Lucent Technologies Foundation workforce through training in information world’s people, and communications technologies and job Merrill Lynch from the earliest networking. Gap age, into those Nike who have a fu- PURPOSE Nokia entra 21 is a $27 million initiative that pro- ture and those vides youth in Latin America and the Shell who cannot even Caribbean access to training, internships, Unocal Foundation imagine one. It is mentoring, and placement services. The pro- our collective re- gram teaches life skills as well as skills in in- ACCOMPLISHMENTS AND OUTCOMES formation and communications technology sponsibility to By assembling a consortium of bilateral and (ICT), both keys to the job market. multilateral institutions and corporate donors, bridge that gap.” the entra 21 alliance has implemented 35 local CONTEXT partnerships involving nonproﬁts, private sec- — HER MAJESTY More than half the population of Latin Amer- tor stakeholders, and government ministries in QUEEN RANIA ica and the Caribbean is under age 25. As 18 countries. Between 2002 and 2005 more AL-ABDULLAH OF many as two-thirds of those young people are than 12,000 young men and women were se-

JORDAN, INTER- not enrolled in school and unable to ﬁnd lected for training. By the end of 2007 the jobs. Even those who are able to afford an ed- program will have trained more than 17,000 NATIONAL YOUTH ucation are unprepared to compete for skilled youth, and will have placed more than half of FOUNDATION jobs. In contrast, the demand for a workforce them in jobs and paid internships. BOARD MEMBER skilled in ICT is strong in the region. FUNDING ARRANGEMENT ALLIANCE MEMBERS International Youth Foundation (IYF): $15 International Youth Foundation million ($10 million to match the MIF invest- Multilateral Investment Fund of the Inter- ment and an additional $5 million at the pro- American Development Bank (IDB) ject level) U.S. Agency for International Development Multilateral Investment Fund: $10 million

U.S. Agency for International Development: $3 million as a part of IYF’s match. Country missions have contributed an additional $1.1 million toward IYF’s $5 million commitment at the project level.

Corporate donors: various amounts

98 CHAPTER SIX: BUILDING HUMAN CAPITAL edellin, Colombia’s second-largest preneur: her business plan to open up a craft city, is the center of a region known store showcasing local arts and culture was Mfor its flower production. Yet it also chosen for further development and is eligible suffers from drug trafficking, gang violence, for seed funding. and soaring unemployment. One intersection Medellin is one of five sites in Colombia on a hillside above the city is referred to as where entra 21 is in action. Projects harness “the Wolves’ Mouth” for its particularly vio- the dreams and energy of youth and turn lent drug trade—and perhaps for the dreams them to productive uses—building national devoured over the years by bloodshed and un- economies and giving young people a stake in employment. When entra 21 came to the future. It began with the International Medellin, 1,900 young people applied for the Youth Foundation. 500 spots offered. entra 21 provides access to low- or no-cost employment training for poor youth. For many of these young people, ac- LEVERAGING FUNDS AND KNOW-HOW cess to computers and other information The International Youth Foundation (IYF) is a technology is limited or unavailable, putting global nonprofit organization committed to them at a disadvantage in finding a first job. providing young people with opportunities to use their talents productively. IYF engages Not every applicant could join, but those youth—especially disadvantaged youth— given the opportunity made the most of it. through job and life-skills training, and active Jenny Acosta, 18, worked at a candle-making participation in society, education, and em- factory and could not afford to enroll at the powerment. Through its work with donors local university. Now she has a full-time in- and at the grassroots level, IYF has developed ternship at a more prestigious institution and an approach based on two main tenets: even turned down a full-time job offer so she ∫ Youth issues are universal but tend to have could continue to develop, through an entra regional particularities; a multicountry ap- 21 entrepreneurship circle, her plans to start proach is therefore a good way to capture an office-supplies distribution network. both the general and the specific aspects of Catherine Garcia Montoya, 21, works at the the issues. reception desk at Teledatos, a call center for ∫ Innovative pilot approaches to youth skills businesses, where she’s a paid intern through training should be identified and scaled up entra 21. She had wanted to attend the univer- to multicountry initiatives. sity after high school but was too busy caring for her child. Now, with the money she’s “In pursuing its mission to bring worldwide earned, she can pay to continue her educa- resources to young people in need, IYF tion. Even better, her business plan to open identifies programs that work,” says William an ice cream shop with a friend has become Reese, IYF’s president and CEO. “Rather than eligible for seed funding. She and others in building new programs from scratch, we take the entrepreneurship group meet in the center successful approaches and scale up their im- of Medellin every Saturday for additional pact and reach so that many more young peo- training in planning and marketing strategies. ple can benefit.”

Paula Ramirez, 20, felt she had few options entra 21 evolved out of lessons learned from after graduating from high school. She earned prior youth employment training programs in some money from odd jobs—including bak- the region, especially national initiatives in Ar- ing cakes in a family business—but was often gentina, Brazil, Chile, Peru, and Uruguay. without work or income. Today she’s an IT Evaluations of those programs showed a need systems assistant at a leading nongovernmen- to assess the existing and projected labor mar- tal organization (NGO) and a budding entre- kets in each project location, and to adapt lo-

ENTRA 21 99 cal partnerships to ensure the greatest poten- U.S. Chamber of Commerce. The deal offered tial for job placement. the newly created GDA an opportunity to hit the ground running with a proven partner and To take this lesson to an appropriate scale, an array of cofunders, both public and private. IYF engaged the Inter-American Develop- ment Bank through its Multilateral Invest- ment Fund (MIF), a $1.2 billion source of ATTRACTING DONORS seed capital that extends IDB’s activity be- IYF’s fund-raising strategy counted heavily on yond existing bilateral and international assis- tech-sector funding that was severely curtailed tance instruments. after the stock market crash of 2001. That some corporate donors stuck to their commit- “What IYF could offer was greater leveraging ments despite the downturn suggested that success than they were accustomed to,” Reese they viewed their alliance with IYF as both im- says. “MIF normally leverages locally 30 to 50 portant and a good long-term investment. IYF cents on the dollar, and some of that is in- had successfully presented itself as an effective kind contribution. IYF offered full one-to- partner to which corporations could turn to one leveraging, plus an additional $5 million implement all or part of their social responsi- at the country or project level, with an agree- bility initiatives. Thus IYF was winning and ment to bundle grants and shift implement- building relationships and alliances rather than ing oversight to a partner organization.” catching a series of one-time philanthropic gifts, which allowed the alliance to attract re- ENTER THE GLOBAL DEVELOPMENT sources despite the contraction in philan- ALLIANCE thropy following the crash. As IYF was courting public and private In addition to lending corporate partners the donors, GDA was just emerging. Holly Wise, positive reputation of IYF’s mission and orga- GDA’s director at the time, was interested in nizational performance, IYF gives partners what IYF was doing. “Both USAID and IYF global reach, a core set of defining issues stood to benefit from working together in this (youth, job and life skills training, ICT skills alliance,” she says. “IYF had done prior work development), reduced transaction costs (com- in cultivating an alliance with significant pared to a corporation executing its own pro- leveraging from the private sector. USAID, in gram), and the capacity to directly manage addition to contributing project funds, of- and implement programs. fered a well-established field presence, an extensive network of local partners, and the Also important to firms is that through an al- technical expertise of its staff.” liance with NGOs, other corporate partners, and donors such as IDB and USAID, a corpo- This was new territory for IDB. MIF was in- ration can leverage its investment and achieve tended for single-country, single-program a much greater impact than it would on its grants; Reese was pitching a multicountry own. It is the mark of a durable alliance, in umbrella with IYF as manager of up to 35 fact, that all partners can claim to have lever- projects throughout the region. But because aged each other’s resources! the program promised to generate new lessons and best practices to train youth, place them In the case of entra 21, the resources leveraged in productive jobs and engage the business and the outcomes achieved have matched or sector, IYF’s efforts were successful. IDB exceeded original projections. IYF’s obligation pledged $10 million through the MIF, while was $10 million; it has raised more than $11 IYF promised to match that pledge and add million. For its local cost-share match, IYF has $5 million more at the project level. USAID’s secured more resources for 24 projects than it $3 million contribution was announced in thought were needed for 35. (In addition to May 2002 at a three-sector conference at the the $3 million from GDA to help meet the

100 CHAPTER SIX: BUILDING HUMAN CAPITAL INTERNATIONAL YOUTH FOUNDATION

ENTRA 21 101 SUSTAINED, STRATEGIC ∫ The Netherlands, where it estab- Nokia adds funding, staff volunteers, COLLABORATION lished a network of press agencies and community relations support. to train disadvantaged youth as Martin Sandelin, Nokia’s vice presi- ne of the International journalists Youth Foundation’s most dent for corporate social responsibil- Odurable relationships is with ∫ Poland, where it trained and en- ity and community involvement, ex- Nokia. Since April 2000, the “Make a gaged more than 3,500 youth in plains some of the “must haves” Connection” initiative has benefited volunteer service exhibited by the alliance: “In order more than 180,000 young people ∫ Canada, where it strengthened the for a global collaboration of this mag- worldwide. The initiative emphasizes personal and social skills of more nitude to work effectively, there has development of life skills such as self- than 15,000 aboriginal youth to be open, frank dialogue, clear strategic intent, strong political will, confidence, responsibility, and team- ∫ Brazil, where it organized 1,000 and a willingness to take risks.” work to induce young people to con- dedicated young people as reading tribute to their communities and help mentors to at-risk children In 2005, Nokia and IYF extended the them become competent and caring Make a Connection program to sup- adults. Nokia’s investment exceeds IYF chief William Reese views the port an entra 21 project operating in $20 million. program as a classic division of labor Chile, Colombia, and Venezuela. that exploits the comparative advan- Make a Connection is active in 21 tage of each partner: IYF focuses on countries, including: program design, implementation, monitoring, and assessment, while

MIF match, individual country missions have Each local project supported by entra 21 devel- provided funds to meet the local-cost-sharing ops and executes its own strategy and holds it- component.) self accountable for the results achieved. But though IYF takes care to see that local projects MANAGING FOR RESULTS exercise broad autonomy rather than depen- IYF’s grant review committee has funded 25 dence, all share key traits: a clear labor-market of a planned 35 projects to train 12,000 young need, an explicit job placement strategy, par- people and place at least 4,800 in jobs. IDB’s ticipation by youth ages 16 to 29 (with special two-year program extension to January 2008 consideration for disadvantaged youth), activi- will permit 10 to 12 additional projects (using ties combining technical training with busi- an additional $8 million in project funds) and ness life-skills, and local-partner engagement greater opportunity to measure programmatic to strengthen service delivery and project sus- impact and disseminate successes and lessons. tainability. More than 5,000 youth will beneﬁt from the Discovering, strengthening, and uniformly latest series of grants, enabling entra 21 to ex- evaluating 30 to 35 locally conceived projects tend its impact to a total of 17,000 disadvan- gives IYF and its co-investors the opportunity taged youth in 18 countries. to identify best practices in connecting with Don Terry, the managing director of MIF, is youth, training them, and engaging businesses proud of his decision to explore new waters that can employ them. The alliance’s monitor- with the IYF grant. “This is the most impor- ing and evaluation data reveal that 87 percent tant grant program that we have ever done,” of youth are completing the training programs he said at IYF’s 2002 annual partners’ meet- (young women have an even higher success ing. “We wanted to do something different, rate). Having planned for a 40 percent place- and we needed new partners. In other grant ment rate at the outset, IYF now believes it projects, MIF was the donor which gave a will place 50 to 55 percent of graduates. grant to an executing agency. This program with IYF is a true partnership.”

102 CHAPTER SIX: BUILDING HUMAN CAPITAL Complications have occurred. Programs in corporations. entra 21 has become more than Argentina, Bolivia, and Panama saw some at- job training for youth—it is a massive under- trition among participants, due variously to taking in capacity building for local NGOs. students being ready for more advanced training, difficulties in balancing formal schooling BRIDGING THE “HOPE GAP” with entra 21 training programs, or finding For the partners that make up entra 21—IDB, employment. In Ecuador, a simultaneous roll- IYF, USAID, and corporate partners such as out in four cities, with training segmented by Nokia—documenting and sharing lessons has age groups, proved difficult to manage. brought a deeper understanding of youth em- Program successes include a training course in ployment issues. They know that although the Dominican Republic that placed 89 of 91 there are many challenges surrounding youth graduates in internships. A program in Bolivia employment, the right programs can have real is training 600 young people to help non- impact. profits expand their IT capabilities through a Today’s young people—and their children— nationwide telecommunications system. A will define the quality of life in the 21st cen- major local partner in Brazil, the Instituto de tury. Their success is tied to the state of the Hospitalidade, helped secure a major commit- world’s economy, stability, and progress toward ment from the ministry of tourism to take a a more democratic society. To achieve positive local project to scale at the national level— outcomes on these fronts requires instilling in going from benefiting 480 youth in one city youth the skills to maneuver through everyday to more than 4,000 in 11 cities. life, raise a family, contribute to their commu- IYF is documenting and disseminating the nities, and find a productive job. Without lessons from these experiences in order to those skills, a young person’s first job—if he or strengthen existing youth-employment train- she finds one—can too often be a dead end, ing projects. Results will be made available to with little or no hope of earning a decent liv- local, national, and international policymak- ing or finding a better future. ers—and used to engage business associa- Bill Reese likes to cite Queen Rania Al-Abdul- tions, donor agencies, and foundations. So lah of Jordan, an IYF board member, who of- far, the results point to several key lessons and ten speaks of the need to narrow the “hope best practices: gap” between those who have confidence in ∫ Life and employability skills must be com- their future and those who do not. Queen Ra- bined with technical IT skills to succeed. nia and Reese agree that that gap is one of the greatest challenges facing the global commu- ∫ Market studies must precede local initia- nity; entra 21 is helping to close it. tives to determine private sector employment needs. Local implementers must be adequately prepared.

∫ Internships are often a key step toward job placement. The role of local private sector stakeholders in training and job placement cannot be understated.

Not to be overlooked are the immense institutional gains for local implementing partners. Through their interaction with IYF, local partners learn how to build multisector alliances that in some cases include relationship management with local and multinational

ENTRA 21 103 THE CERTIFIED INTERNATIONAL PROFESSIONAL ACCOUNTANT ALLIANCE ACCOUNTING FOR CHANGE IN THE FORMER SOVIET REPUBLICS

PURPOSE Eurasia Council of Certified Auditors and Ac- To establish international accounting stan- The global countants dards in the former Soviet republics to im- Certified General Accountants’ Association of marketplace for prove governance, conduct business, and at- Canada business and in- tract investment. Thunderbird, The Garvin School of Interna- vestment—like tional Management good governance CONTEXT The Soviet Union had a command economy, a United Nations Conference on Trade and De- and budget man- centrally controlled system based on govern- velopmentIntergovernmental Working agement— ment orders to produce and distribute goods Group of Experts on International Standards of Accounting and Reporting requires trans- and resources. Bookkeepers and formal accountants tracked quantities of goods and parent, standard- materials, not costs or income. Selling goods ACCOMPLISHMENTS AND OUTCOMES ized accounting for more than the cost of production was a The Certified International Professional Al- practices. The crime. liance alliance began by implementing internationally certified accounting programs in CIPA Alliance is When the region began its transition to a Kazakhstan, Kyrgyzstan, and Ukraine, creating market system, basic concepts such as track- laying a solid curricula in the languages of the countries. ing finances and budgets, depreciation, and foundation for The program has scaled up and expanded to other international accounting practices were Russia and Eastern and Central Europe. investment and virtually unknown. Continued use of Soviet- business develop- era accounting principles and a lack of ac- Sustainability is assured by the formation of a ment in Central countants skilled in international accounting regional accounting association and national principles has crippled the growth of success- associations, conceived and built by the partic- Asia through a ful enterprises and regional employment, dis- ipating republics and supported by alliance comprehensive couraged foreign investment, and slowed the partners. program of region’s integration into the global economic professional community. FUNDING ARRANGEMENT training, capacity U.S. Agency for International Development: ALLIANCE MEMBERS $3,500,000 from GDA and missions building, and net- U.S. Agency for International Development, International Accounting Standards Commit- working through Accounting Reform Project tee Foundation: $9,200,000 (in-kind equiva- local and regional CIPA Examination Network, Inc. lent) associations. International Accounting Standards Commit- Certified General Accountants’ Association of tee Foundation Canada: $805,000 (in-kind equivalent) International Accounting Standards Board International Federation of Accountants

104 CHAPTER SIX: BUILDING HUMAN CAPITAL hen the Soviet Union disinte- can Institute of Certified Public Accountants grated in 1991, its newly inde- (AICPA), the Association of Chartered Wpendent republics needed to Certified Accountants of Great Britain make the switch from controlled economies (ACCA), and the Certified General Accoun- dominated by government-run industries to tants of Canada (CGA). But CPA programs market economies based on privately owned are not available in the Russian language. Ac- enterprises. Governments had to begin grap- countants of the former Soviet Union could pling with real budgets. The technical exper- not be expected to learn a new language along tise of an army of command-economy book- with a new set of accounting standards. keepers and accounting clerks was rendered For Linden, the opportunity for USAID was obsolete; new skills were needed. clear—adapt international accounting stan- Mass privatizations and economic reforms in dards into other languages to retrain an entire the former Soviet republics spawned thou- generation of accountants. sands of private enterprises in 16 newly independent countries with a total population of PARTNERS IN COURSE DEVELOPMENT more than 280 million. If these enterprises Initial contacts with AICPA, ACCA, and were to become the engines of resurgent na- CGA were not promising. AICPA’s charter did tional growth, professionals versed in market not allow services to be extended outside the economy accounting and financial manage- United States, while ACCA and CGA were re- ment would be needed. luctant to provide industry expertise and tools outside the universe of their dues-paying AN OPPORTUNITY TO MAKE A members—especially when retrained accoun- FUNDAMENTAL DIFFERENCE tants might then compete with those members Gary Linden, director of the Office of Market for jobs. If the leading accounting associations Transition in the Central Asia mission of the would not swoop in with a top-down ap- U.S. Agency for International Development proach, USAID resolved to build professional (USAID), recognized the fundamental nature accounting standards from the ground up for of the problem and its breathtaking scale. But the former Soviet bloc. he was optimistic. Research revealed that Soviet-era bookkeepers, most of whom were The agency’s accounting reform team started women, were generally willing and able to from scratch by developing a basic financial learn a new set of concepts, skills, standards, accounting course in Russian. A former CGA and rules. Many were eager to become profes- member working for the USAID accounting sionals. reform project in Kyrgyzstan began offering a course and exam on financial accounting in Linden envisioned a solution with three parts: that country that proved to be a competent introduction to internationally recognized ac- ∫ Train the new class of accountants using counting standards. It was also rigorous and appropriate materials and curricula comprehensive enough that only 50 percent of ∫ Certify the completion of training to sig- test takers passed. Those who did received a nal competence to potential employers. certificate of merit with the seals of USAID and the Kyrgyz ministry of finance, which ∫ Institutionalize international standards of quickly gained currency among accountants. quality and competence. “We knew we were on to something when we Many forms of certification are available to found forged certificates circulating,” recalls signify training in internationally recognized Rick Gurley, USAID’s accounting reform pro- accounting standards. Among the most wide- ject officer. “The new certificates were widely spread are the certified public accountant respected by accountants and prospective em- (CPA) designation established by the Ameri-

THE CERTIFIED INTERNATIONAL PROFESSIONAL ACCOUNTANT ALLIANCE 105 ployers, and even had real value on the CGA representatives in Vancouver to extract street.” from the course the most relevant proficiencies for use by USAID in Central Asia. The result Recognition of the new credential among ac- was a blueprint for a two-tiered certification countants and employers was a significant system involving three courses leading to the measure of success, though only a first step. credential of Certified Accounting Practitioner USAID’s accounting reform team immedi- (CAP) and seven courses (the three CAP ately set about developing a managerial ac- courses plus four more) for full recognition as counting course to complement the financial an international accounting professional—a accounting offering. A third course in tax and Certified International Professional Accoun- law was added to train accountants in Kyrgyz tant (CIPA). regulations. This three-course module was soon expanded to Kazakhstan. At this time, Gurley tried to persuade CGA to establish a program in the Commonwealth of To gain the confidence of investors, the Independent States (Belarus, Kazakhstan, Kyr- courses needed to be developed into a full gyzstan, Russia, and Tajikistan) to write and suite of courses to enable candidates to meet score exams for the CAP and CIPA program. the basic requirements for accounting The association agreed, on the condition that certification recognized by bodies such as CGA’s training materials would be used, at a AICPA, ACCA, CGA, and the International price of $125,000 per course and $25 per copy Federation of Accountants (IFAC), the global for royalties. CGA has excellent training mate- governing body for accountancy. rials, but with seven courses planned and as The United Nations Council on Trade and many as 5,000 copies of each course needed Development (UNCTAD) and CGA had de- each year, the price of the CGA materials was veloped accounting education guidelines and too high. It far exceeded the resources of the a global model curriculum based on the accounting reform team. equivalent of an undergraduate accounting USAID looked elsewhere for a partner willing degree. In the spring of 2001, members of the to invest its own sense of mission in the effort, USAID accounting reform team met with not a vendor offering a set of services at full price. Eventually, the accounting reform team

TA engaged several U.S. publishing houses to de- TIANA SERDUK, CIPA EXAMINATION INC. NETWORK, rive basic accounting courses from university textbooks. It called on Pragma, a long-time USAID partner, to further reﬁne and administer the three-course module.

But to consolidate the success achieved so far—and to expand the three-course module to Russia, Ukraine, and elsewhere—the agency needed a strategic alliance with a major accounting certiﬁcation body.

PARTNER BUY-IN The accounting reform team soon realized that they were not working alone. The London- based International Accounting Standards Committee Foundation (IASCF) promotes international ﬁnancial reporting standards (IFRS) issued by the International Accounting

106 CHAPTER SIX: BUILDING HUMAN CAPITAL THE VARIED MEMBERS OF THE porting standards issued by the In- ∫ Certified General Accountants’ CERTIFIED INTERNATIONAL ternational Accounting Standards Association of Canada (CGA) is a PROFESSIONAL ACCOUNTANT Board (IASB). professional membership associa- ALLIANCE tion. ∫ International Accounting Standards ∫ The staff of the U.S. Agency for In- Board (IASB), an independent ∫ Thunderbird, The Garvin School of ternational Development’s Ac- NGO, serves the public interest by International Management, is a U.S. counting Reform Project, based in developing enforceable global ac- business school specializing in in- USAID’s Central Asia mission, counting standards in the public international business. conceived the alliance. terest. ∫ United Nations Conference on ∫ CIPA Examination Network, Inc. ∫ International Federation of Ac- Trade and Development–Intergov- (CIPAEN) is a nongovernmental countants (IFAC), the global governmental Working Group of Ex- organization (NGO) created to erning body for accountancy, com- perts on International Standards of produce accounting exams for use prises 168 member organizations Accounting and Reporting (UNC- in the former Soviet Union and in 119 countries. TAD/ISAR) has developed model other regions of the world. global accounting curricula to as- ∫ Eurasia Council of Certified Audi- sist transition economies. ∫ International Accounting Standards tors and Accountants (ECCAA) is Committee Foundation (IASCF) the IFAC-recognized regional asso- promotes international financial re- ciation of accounting associations in the former Soviet Union.

Standards Board (IASB), which IASCF cre- ian language, USAID supported the creation ated and supports. In 2002, the accounting of regional and national accounting associa- reform team learned that IASB had been tions, followed by a certification network. working on a certification scheme based on In the summer of 2001, Sapar Koshkimbaev, the IFRS and was planning to launch it on a president of the chamber of auditors of Kaza- pilot basis within one or two years. khstan, invited his counterparts from through- Gurley presented the concept of a partnership out Central Asia to Almaty to propose the for- with USAID to Kurt Ramin, commercial di- mation of a Central Asia Council of Certified rector at IASB. USAID’s team suggested that Auditors and Accountants. The purpose of the IASB join its ongoing work with USAID’s ef- regional federation would be to establish and forts in Central Asia on a trial basis, with po- promote a regional, Russia-language education, tential expansion to Russia and Ukraine. examination, and certification program based IASB was potentially the mission-based part- on international standards, practices, and ner with the international credibility that US- ethics. In October 2001, a group of 13 represen- AID sought. For IASB, USAID’s proposal was tatives of the four Central Asian republics and an opportunity to pilot its certification con- one representative from Russia met again in Al- cept through established channels. Ramin ac- maty to sign a formal protocol outlining the cepted. USAID had successfully brokered a new body’s education, examination, and publicprivate alliance based on shared goals, certification criteria, thus formally establishing resources, risks, and rewards. the CIPA certification program. The leaders of the accounting profession determined that the PROACTIVE INSTITUTION BUILDING proposed federation, together with the local An outgrowth of the accounting reform pro- member association in each country, would is- gram was acceptance within the CIS countries sue the certificates. They also decided that an of the importance of the training and independent, regional examination center certification. To introduce an internationally should be established that would write and recognized, regional certification in the Russ- score exams and maintain a database of candi-

THE CERTIFIED INTERNATIONAL PROFESSIONAL ACCOUNTANT ALLIANCE 107 dates and results. The exam center, the second come commercially viable, it would have to be institute that USAID helped to create, became introduced into Russia. USAID did not have the CIPA Examination Network (CIPAEN). an accounting reform project in Russia, but it would devise one. Funds committed by US- On December 5, 2001, the 13 members of the AID’s Ukraine mission and the agency’s Eu- federation were joined by colleagues from two rope and Eurasia bureau now support a coop- Russian accounting associations and a erative agreement with ECCAA to open a Ukrainian association to establish the Interna- branch office in Moscow, publish training ma- tional Council of Certified Auditors and Ac- terials, and market the CIPA program countants, now known as the Eurasia Council throughout Russia. of Certified Auditors and Accountants (EC- CAA). They elected Sapar Koshkimbaev as their president. Kurt Ramin, IASB’s market- AN ALLIANCE EMERGES AND GROWS ing director, joined the meeting in Tashkent Over a period of several months in the summer to pledge his support for the new organiza- of 2004, USAID, ECCAA, and IASCF negoti- tion and for the CIPA certification. ated a memorandum of understanding to formalize the CIPA Alliance, which was signed in August by IASCF chairman Paul Volker, US- BUILDING A CERTIfiCATION NETWORK AID administrator Andrew S. Natsios, and USAID then turned its attention to the exam- ECCAA president Sapar Koshkimbaev. The ination challenge. Pragma, the contractor agreement allows ECCAA to use the logo of tasked with supporting the development of IASCF’s International Financial Reporting the CIPA program, hired the former director Standards on the CAP and CIPA certificates, of ACCA in Ireland, Liam Coughlin, to come marketing, and educational materials. CAP and to Central Asia to establish CIPAEN. Cough- CIPA are currently the only professional ac- lin quickly assembled a fine local team, and counting certificates in the world that bear the the first CIPAEN exams were given in 2002. prestigious IFRS logo. An independent ap- In the same year, CIPA was introduced into praiser of intangible assets valued the IASCF Moldova and Ukraine. contribution to the alliance at $9.2 million. The program had compiled a record of suc- Separately, AICPA had become very interested cess in Central Asia and was off to a good in the CIPA program. The association sent out start in Ukraine and Moldova. But USAID assessment teams to determine if CIPA had and ECCAA realized that for CIPA to be- the credibility, quality, and viability to offer

THE ALLIANCE HELPS y 2003, the International Ac- tee Foundation, the legal entity under SPREAD THE USE OF counting Standards Board which the IASB operates. He had an INTERNATIONAL FINANCIAL B(IASB) had decided that its hour to persuade Volcker that CIPA REPORTING STANDARDS business should focus on the develop- was not only beneficial to the ac- ment and promulgation of accounting counting profession of the former So- standards and that it would cease its viet Union, but also was an excellent work with CIPA. Because the interna- mechanism for spreading the use of tional credibility of the Certified In- the IASB’s international financial re- ternational Professional Accountants porting standards (IFRS). Since the in- program depended on affiliation with troduction of CIPA into the Central an international standards body, Rick Asian republics, three had adopted Gurley of the U.S. Agency for Inter- IFRS as their national accounting national Development, arranged a standards. Volcker was convinced. He meeting with Paul Volcker, chairman obtained his board’s approval to con- of board of trustees of the Interna- tinue supporting the CIPA program. tional Accounting Standards Commit-

108 CHAPTER SIX: BUILDING HUMAN CAPITAL AICPA’s global accounting certification. Gurley gave his presentation in Geneva. Pleas- Knowing that AICPA lacked experience in antly surprised that the program CGA had Russia and the CIS, USAID approached the helped create had become so successful, they Center for Business Skills Development expressed their renewed interest in joining the (CBSD) at the Moscow branch campus of alliance. Gurley asked them to consider waiv- Thunderbird’s Garvin School of International ing its licensing and royalty fees for the seven Management as a potential partner for courses as a contribution to the CIPA program. AICPA in CIPAEN. Together, AICPA and After months of discussion, CGA agreed to CBSD could provide long-term financial sus- waive its licensing fee (a total of $875,000) and tainability and expert management for to charge a nominal royalty of $2 per copy, for CIPAEN. CBSD agreed, and with CBSD as a an in-kind contribution equivalent to local partner, AICPA felt the confidence to $805,000. join the CIPA program in July 2004.

In March 2003, UNCTAD invited Gurley to INTERNATIONAL ACCEPTANCE make a presentation on the CIPA program at ECCAA has achieved its goal of becoming an a special meeting in Geneva of the Intergov- official IFAC regional grouping. In September ernmental Working Group of Experts on In- 2005, IFAC accepted ICCAA with one stipula- ternational Standards of Accounting and Re- tion—that it adopt its present name to reflect porting (ISAR). The topic of the conference its geographic region. IFAC has selected EC- was the need for a global accounting CAA for its first ever outreach program, certification. Among many academic and the- through which IFAC will build ECCAA’s ca- oretical presentations, Gurley’s talk on CIPA pacity as a regional group. stood out as the only example of an interna- Since its inception in 2001, the CIPA program tionally recognized, professional certification has attracted the support of the global leaders based on the IFRS and offered in the local of the accounting profession. ECCAA has language. UNCTAD/ISAR was impressed grown from 11 founding members to 25 associ- with CIPA’s potential as a global certification ations in nine countries. The CIPAEN/EC- program and pleased to see its global curricu- CAA partnership has administered, or recog- lum being put into action as the basis for the nized from earlier USAID accounting reform CIPA certification. projects, 64,821 exams—including 14,618 dur- Before the conference ended, UNCTAD/ ing the latest USAID project year in Central ISAR’s chairperson, Lorraine Ruffing, made a Asia (September 2004August 2005)— commitment to partner with USAID and throughout Belarus, Moldova, Russia, ECCAA to upgrade the education content in Ukraine, and the five Central Asian republics. the CIPA program to full compliance with To date, more than 4,000 accountants have the UNCTAD/ISAR global curriculum and earned the CAP credential. This program: to improve the training material used in the ∫ Improves the abilities of small and medium CIPA education program. Ruffing assigned enterprises to manage their businesses more her deputy, Tatiana Krylova, a Russian citizen profitably seconded to UNCTAD/ISAR from KPMG, to work with USAID, ECCAA, and ∫ Reduces corruption and money laundering CIPAEN. Krylova now chairs an international opportunities, and increases foreign direct committee established to review CIPA train- investment ing materials and to make recommendations ∫ Provides an excellent vehicle for raising the for upgrading the materials to meet interna- level of professionalism and increasing the tional standards. education, qualification, and earning power CGA’s chairman and the head of its interna- of accountants in the former Soviet re- tional division were in the audience when publics.

THE CERTIFIED INTERNATIONAL PROFESSIONAL ACCOUNTANT ALLIANCE 109 USAID has had numerous inquiries about of- khstan is also the leader in raising exam fees to fering the CIPA program in Arabic, Chinese, cover the cost of examinations. In two USAID Dari, and Spanish. In November 2005, US- project years it has gone from collecting no AID ofﬁcials traveled to the Middle East to fees to collecting more than $140,000. meet with accounting professionals in that re- So far 1,975 candidates in Kazakhstan have gion to discuss the potential for an Arabic passed the three CAP exams and eight candi- language program similar to CIPA. Soon, the dates have passed the eight CIPA exams. The CIPA program may become a truly global de- CIPA program is delivered by 34 independent velopment alliance. training providers, by far the largest number in any country, only ﬁve of whom, located in re- ACCOUNTING FOR SUCCESS IN mote territories, receive any subsides from the KAZAKHSTAN USAID Enterprise Development Project in Kazakhstan has led the former Soviet coun- Kazakhstan. tries in participating in the CIPA program, although Ukraine is quickly gaining ground. Finally, Kazakhstan’s Qualifying Commission, With only about 7 percent of the total popu- which has statutory authority for certifying lation of the former Soviet Union (FSU), auditors, has adopted the CIPA-level exams Kazakhstan has accounted for 23,361 exams for this purpose, meaning that Kazakhstan’s (37 percent of the total). The country’s gov- auditors have the most rigorous technical re- ernment has established a relatively support- quirements in the FSU. The auditor-qualify- ive legal and regulatory environment for the ing bodies in Kyrgyzstan and Uzbekistan have creation of a market economy and the inter- expressed interest in following the Kazakh national accounting and audit standards on example. which the CIPA program is based. Kaza-

110 CHAPTER SIX: BUILDING HUMAN CAPITAL CHAPTER SEVEN

PARTNERSHIPS FROM THE BOTTOM UP ENGAGING GRASSROOTS NETWORKS FOR SUSTAINABILITY

All development is local. The alliance model of the U.S. Agency for International Development (USAID) was devised to recognize and take advantage of opportunities that arise locally through formal and informal networks. Locally, USAID mission staff are always on the lookout for new initiatives to mobilize the energy and talents of poor people who lack only opportunity to improve their lives.

With a variety of partners, USAID is encouraging grassroots initiatives to bring peace to Colombia, plant millions of trees on deforested land, and make it easier for concerned citizens in the developed world to support disaster relief and other worthy causes in developing countries.

∫ The Alliance for Restorative Justice, Coexistence, and Peace in Colombia brings a visionary foundation together with USAID and a philanthropic think tank to promote a vision of peace amid the civil chaos that bedevils Colombia.

∫ Thanks to the International Small Group and Tree Planting Program, thousands of small groups of poor villagers in poverty-stricken and marginalized areas of Tanzania, Kenya, Uganda, and India are breaking the cycle of unsustainable subsistence farming and deforestation by planting millions of trees. Trees prevent erosion and improve the soil, while providing fruit, nuts, shade, and wood. As the trees grow, so do the incomes of the small groups.

∫ The GlobalGiving Alliance expands an innovative use of the Internet to fund and support local community development projects around the world.

111 ALLIANCE FOR RESTORATIVE JUSTICE, COEXISTENCE, AND PEACE RECONCILING THE PAST, PREPARING FOR THE FUTURE

A scion of a well-known Colombian family ALLIANCE MEMBERS U.S. Agency for International Development “ If peace is partners with USAID to help the country move toward peace and reconciliation after AlvarAlice Foundation possible in decades of violence. Synergos South Africa,

it can happen PURPOSE Local resource and implementing partners: in Colombia.” To help Colombia achieve civil peace and Corporación Valle en Paz, a membership or- provide alternative means of healing conﬂicts ganization of some 600 businesses, farmers or- — ARCHBISHOP involving juvenile offenders. By applying the ganizations, churches, universities, and other DESMOND TUTU restorative justice model pioneered in South partners Africa, Northern Ireland, other postconﬂict Fundación Corona situations, and traditional societies, the alliance provides a way for Colombia to heal Fundación Paz y Bien the wounds of its past and embrace the fu- Javeriana University Cali ture.

ACCOMPLISHMENTS AND OUTCOMES CONTEXT Five restorative justice centers established in Colombia must absorb large numbers of for- three slums in the city of Cali serve hundreds mer combatants back into society, but there is of marginalized urban households by allowing little public awareness about restorative jus- juvenile offenders and at-risk youth to take re- tice. Meanwhile, high levels of crime and do- sponsibility for their actions as a basis for rec- mestic violence in some urban areas, particu- onciliation. Similar rural centers help former larly involving youth, tax the ability of the combatants to reenter society. Some 650 rural traditional justice system to restore relations households have received conﬂict management between offenders and victims. training and agricultural extension and marketing services to improve livelihoods and lessen recruitment of rural youth by illegal armed groups. More than 3,000 individuals will be reached over the life of the project.

FUNDING ARRANGEMENT U.S. Agency for International Development: $1.7 million

AlvarAlice Foundation: $500,000 in fundraising from public and private donors

Sugar industry: $1,000,000

112 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP ith one of South America’s richest The alliance has three parts. In the urban com- endowments of natural resources ponent, in the city of Cali, young people in W(including petroleum, coal, cof- poor, violent neighborhoods are learning to fee, flowers, fruits, gold, and emeralds) and apologize for their crimes and become produc- Latin America’s oldest democracy, Colombia tive members of their communities. In the has suffered decades of political-criminal in- rural component, farmers in the nearby Cauca surrection that have thwarted development. Valley are learning how to solve conflicts using For almost half a century, armed groups have restorative justice. Simultaneously, agrono- taken advantage of a lack of state presence in mists specializing in ecoagriculture are teach- outlying rural areas to wage violent campaigns ing farmers new techniques to grow and mar- for control of parts of the country. An esti- ket organic vegetables and coffee as mated 3,000 to 4,000 civilians are killed each premium-priced substitutes for coca. In the al- year as a result of the conflict, and hundreds liance’s curricular component, Colombian uni- more are kidnapped. Coca and poppy cultiva- versities are creating courses focused on inter- tion is spreading to new regions; democratic national humanitarian law and restorative institutions (especially in rural areas) remain justice. fragile; and thousands of rural Colombians All three components are an extension of pri- have been forced to abandon their homes to vate philanthropic work dating back several escape the violence. Criminality from the drug decades, recently invigorated by new partners trade and the common crime found in many to face new challenges. Serendipity played a of the urban centers of Latin America add to role in the formation of the alliance. the country’s difficulties, overwhelming the judicial and penal systems. BUILDING THE ALLIANCE: With the potential demobilization and reinte- PHILANTHROPISTS AND VISIONARIES gration of tens of thousands of guerrilla and Maria Eugenia Garcés, a founding member of paramilitary fighters, Colombia faces a tough the AlvarAlice Foundation, comes from a fam- road. But it is also a time of fragile hope and ily with a long tradition of private philan- opportunity. An alliance among the U.S. thropy. Her parents, Álvaro Garcés and Alice Agency for International Development (US- Echavarría, engaged in philanthropic work in AID), a Colombian family foundation, and the city of Cali, capital of the rich state of the grassroots organizations is doing its part to re- Cauca Valley. With others, they established the alize the country’s promise by applying the Corona Foundation to provide social services concepts of restorative justice, an idea whose for the 6,000 employees of the family busi- roots can be traced to antiquity, but that is ness. In 1988, the foundation, one of Colom- relatively new in modern judicial systems. bia’s most respected for 40 years, began to make grants in the areas of education, health, Restorative justice, pioneered in South Africa and community and enterprise development. after the downfall of the apartheid system, Maria Eugenia Garcés became a member of emphasizes healing the wounds of victims and the Corona Foundation’s board in 2000 and perpetrators of criminal behavior, as well as later joined the board of the Brain Trauma those of communities affected by that behav- Foundation in the United States. She would ior. Its principles have been applied in many build on that experience to found FUND- countries beset by conflict. A common ele- COMA, the Colombian Foundation for the ment of restorative justice programs is that Treatment of Brain Injuries. victims, perpetrators, and community members are brought together to forge solutions Upon the death of her parents, Garcés and her based not on retribution but on forgiveness, siblings set out to create a new private founda- repair of harm, and reintegration of victims tion, the AlvarAlice Foundation, to commem- and offenders into society. orate and continue the Garcés Echavarría

ALLIANCE FOR RESTORATIVE JUSTICE, COEXISTENCE, AND PEACE 113 ALVARALICE FOUNDATION

legacy of social philanthropy in Colombia. In capacity of local foundations in countries recognition of the broad-based and participa- where a strong tradition of philanthropy did tory style of Álvaro Garcés and Alice Echavar- not yet exist. ría’s social activism, the foundation’s charter The Garcés Echavarría family recognized the and mission called for strategic relationships value of the services that Synergos and the with other local, national, and international Global Philanthropists Circle could provide— partners to further Colombia’s development strategic planning and operational blueprints, from the grass roots up. stakeholder maps, and action plans to start a private foundation from scratch. But Maria THE GLOBAL PHILANTHROPISTS CIRCLE Eugenia Garcés also valued the intangible In the process of setting up AlvarAlice, Garcés beneﬁts of accessing the ideas and experience and her family were introduced to the Syner- of people who were in a similar position as her gos Institute’s Global Philanthropists Circle, a family and could offer guidance and personal network of individuals and families active in support. private and community philanthropy. Com- posed of 50 member families in 15 countries, Andrew Sillen, a relationship manager at Syn- the Global Philanthropists Circle is one of ergos, helped formulate a strategy to support several essential services provided by the Syn- the AlvarAlice vision. Sillen suggested an inter- ergos Institute, an international organization national symposium in Colombia as a way of formed in 1986 to expand private philan- introducing the new foundation and launch- thropy in developed countries and build the ing its ﬁrst initiative in restorative justice.

114 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP At the 2003 annual meeting of the Global University for a Night is an annual keynote Philanthropists Circle, Garcés found herself event designed to bring together the members seated at a table with fellow member Tokyo of the Global Philanthropists Circle and a Sexwale, a charismatic figure who was at one broader array of stakeholders from founda- time imprisoned alongside Nelson Mandela tions, bilateral and multilateral donors, and for activities “subversive” to South Africa’s other international organizations. It is de- apartheid regime. After serving a reduced sen- signed to facilitate informal connections and tence at the Robben Island maximum-security support of the sort that have made the Global prison (and earning an undergraduate degree Philanthropists Circle so effective in advancing in the process) Sexwale went on to be elected private philanthropy. a regional governor in post-apartheid South That evening, Runde was seated with Maria Africa. He then retired from politics to found Eugenia Garcés and Oscar Rojas, executive di- a holding company and subsidiaries with ma- rector of the AlvarAlice Foundation. He lis- jor stakes in oil and diamonds. tened as they detailed the foundation’s plans to When Garcés related her plans to focus on focus on restorative justice. For Runde, the restorative justice in Colombia, Sexwale re- connection between the GDA mission and the sponded unequivocally. “You don’t know combination of grassroots effort and private what it takes to do restorative justice,” Sillen philanthropic activism by a prominent recalls Sexwale saying, “but we do, and we Colombian business family was immediate. will help you.” A second serendipitous con- He invited Garcés to submit a proposal for nection would be made soon after—this time collaboration through the 2004 GDA solicita- with the Global Development Alliance tion. (GDA). With assistance from Synergos, Garcés proposed to GDA a major restorative justice ini- IT HAPPENED ONE NIGHT tiative in Cali and its surrounding regions. Af- GDA had only recently cultivated the Syner- ter classifying the proposal as technically gos Institute as a strategic partner, after a sound and the partners competent to carry out stocktaking exercise identified a gap among the work, GDA put in $300,000 from its in- GDA’s resource partners—individuals of high centive fund and enlisted support from US- net worth who gave significantly, either di- AID’s Colombia mission, which provided $1.4 rectly or through foundations. GDA realized million in cash resources. that by reaching this population it could build robust links between public and private foreign aid and add new points of leverage for THE INTERNATIONAL SYMPOSIUM ON RESTORATIVE JUSTICE AND PEACE USAID programs. After months of event preparations and out- To reach the newly identified population, reach to sponsors, the International Sympo- GDA staff member Dan Runde (now GDA sium on Restorative Justice and Peace was held director) identified the Synergos Institute as a in Cali, Colombia, in February 2005. With potential new partner that not only had insti- more than 1,000 participants, the conference tutional expertise in poverty reduction efforts, brought to Colombia veterans of conflict from but also was a point of entry to many private Guatemala, Northern Ireland, Peru, the philanthropists. A series of consultations led Philippines, Sierra Leone, South Africa, Spain, Andrew Sillen and Synergos president Bruce and Timor Leste. The keynote speaker, Arch- Schearer to invite Runde to participate in one bishop Desmond Tutu, had led South Africa’s of the activities surrounding the 2003 Univer- Tr uth and Reconciliation Commission and sity for a Night event hosted by the Global won the Nobel Peace Prize for his role in the Philanthropists Circle. struggle against apartheid. “If peace was possible in South Africa,” Tutu told his listeners, “it

ALLIANCE FOR RESTORATIVE JUSTICE, COEXISTENCE, AND PEACE 115 can happen in Colombia. It can happen bility for their actions as a basis for reconcilia- everywhere.” tion. Paz y Bien, which operates a range of programs in urban community development, was The culminating event of the conference was started by Sister Alba Stella, a Catholic nun a nationally televised roundtable between who studied restorative justice as practiced in Colombian president Álvaro Uribe and a Northern Ireland. panel of six symposium participants. In a dramatic, unscripted moment, panelist Arch- A notable feature of Sister Stella’s work is a bishop Tutu brought audience members— women’s network of consejeras, or advisors. A and the Colombian president—to their feet dozen or so women lead and mentor a network with an offer to approach South African presi- of about 125 consejeras who act as neighbor- dent Thabo Mbeki about inviting representa- hood mediators and peace-builders who can tives of Colombia’s rebel forces to South safely cross the jurisdictions of Aguablanca’s Africa to learn about that country’s path to many gangs. Though Sister Stella’s work is peace and reconciliation. Discussions are be- faith-based, the women’s network does not ing held in both countries to follow up on proselytize—in part to protect its neutral sta- Tutu’s offer.1 tus in the community. Rather, the consejeras apply generic but universal principles such as As a result of the symposium, the restorative restorative justice to mitigate harm when it is justice component of Colombia’s Peace and done and help prevent the use of violence as Justice Law—enacted in 2005—gained the first recourse.2 broader national recognition and support, thanks to extensive media coverage. In applying restorative justice and other community mediation services, the women’s net- THE ALLIANCE’S URBAN COMPONENT: work has evolved into an informal neighbor- RESTORATIVE JUSTICE CENTERS AND hood governance structure in a country where CONSEJERAS DE FAMILIA municipalities govern weakly, if at all, and are Restorative justice has the potential to help partly to blame for the persistence of violence Colombia recover from decades of civil war at the local level.3 and insurrection. It is also important as a means of addressing juvenile crime, including THE RURAL AND CURRICULAR gang violence. COMPONENTS: CORPORACIÓN VALLENPAZ AND JAVERIANA UNIVERSITY Cali’s Aguablanca district is a largely informal In the countryside, meanwhile, farmers are assembly of people displaced by Colombia’s caught in a crossfire as illegal armed groups bat- conflicts. It is notorious for its troubles. Left- tle with each other and government forces. The ist insurgent groups trawl the neighborhoods two sides often vie with one another for for new recruits, while right-wing paramili- influence in rural communities, and this usually tary troops make periodic sweeps, killing results in violence. Young people growing up in youths suspected of guerrilla involvement. such communities often see membership in one Gang violence, petty and violent juvenile of the rival groups as a ticket to a better life. crime, and spousal and familial abuse are all common. The alliance’s main partner in mitigating harm in rural communities is Corporación VallenPaz, With help from the alliance, including a membership organization of some 600 busi- $600,000 in funding from the AlvarAlice nesses, farmers organizations, churches, univer- Foundation, the Fundación Paz y Bien (Peace sities, and other partners committed to peace and Well-Being Foundation) is helping Cali’s through the social and economic development marginalized urban households through five of rural communities. As in the urban compo- restorative justice centers that teach juvenile nent of AlvarAlice’s work, centers have been es- offenders and at-risk youth to take responsi- tablished to teach program beneficiaries about

116 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP ALVARALICE FOUNDATION restorative justice, thereby mitigating conflict HIGH STAKES FOR A BOLD NEW MODEL and promoting community coexistence. Cor- As Colombia struggles to reintegrate thou- poración VallenPaz also provides income and sands of former guerrilla and paramilitary employment opportunities, for youth espe- fighters into a civic culture damaged by cially, to counter the recruitment appeals of il- decades of conflict, the Alliance for Restora- legal armed groups. Through Corporación tive Justice, Coexistence, and Peace, offers VallenPaz, agronomists and agricultural exten- reason for hope in its melding of community- sion specialists are teaching local farmers to based reconciliation and new income oppor- grow and market organic lettce, tomatoes, tunities. The alliance is attracting attention maize, cassava, and coffee beans as substitutes not only for its ambitious scope, but also for for coca cultivation. its composition. The world is watching to see if USAID’s experiment with a local family The sugar industry is especially committed to foundation and a network of local NGOs will this component of the alliance’s work, as it prove successful. If it does, and the signs are has an interest in improving the livelihoods of good, the model offers immense promise. its workforce. The industry association and other stakeholders have invested about $1 mil- 1. Synergos Global Philanthropists Circle,, www.syner- lion in the rural livelihoods and justice com- gos.org/05/colombiajustice.htm. ponents of Corporación VallenPaz’s work. 2. Declan Roche, “Governing Ungoverned Spaces: The Role of One Women’s Group in Cali, Colombia,” unpublished paper, Javeriana University is a Jesuit institution London School of Economics. Available at http://www.justicia- restaurativa-colombia.org. working with Fundación Corona to introduce 3. Some might say the consejeras are reviving past prac- restorative justice concepts into the political tices. Until the Spanish conquest, a few of Colombia’s indigenous groups practiced both matrilineal descent science and law curricula and to develop an and restorative justice. online course on restorative justice and conflict resolution for 3,000 undergraduate and graduate students.

ALLIANCE FOR RESTORATIVE JUSTICE, COEXISTENCE, AND PEACE 117 THE INTERNATIONAL SMALL GROUP AND TREE PLANTING PROGRAM “AS THE TREES GROW, THE MONEY FLOWS”

A community-based program that grew out of ACCOMPLISHMENTS AND OUTCOMES a faith-based mission to Africa restores com- More than 2,500 groups of 6 to 12 committed “One thousand munities and biodiversity by planting trees. In individuals are breaking the cycle of unsustain- trees at the the process, it mitigates environmental degra- able subsistence farming in Tanzania, Kenya, hospital in one dation, famine, drought, disease, and poverty. Uganda, and India. In Kenya alone, 800 small groups have planted 170,000 trees and one month. We million seedlings. Of several million trees PURPOSE meet every planted under the program, more than 1.5 mil- To empower subsistence farmers to develop Tuesday and lion are under successful cultivation. community-based reforestation and sustain- Thursday after- able agricultural techniques. noon after the FUNDING ARRANGEMENT U.S. Agency for International Development: heat of the day CONTEXT $1.5 million Millions of acres of tropical forest in Africa and dig holes, and Asia have been destroyed by decades of Clean Air Action Corporation: $3.9 million then plant the logging and slash-and-burn farming. This un- trees to improve sustainable human activity has exposed the Dow Chemical Company Foundation: $1.2 million the area around ground to harsh, drying winds and brief, heavy rains that erode the thin topsoil. Poor the hospital [and] farmers then work the degraded land until the have more shade ecosystem or crops fail, exposing rural com- for patients and munities to drought, famine, and disease. visitors.” ALLIANCE MEMBERS — FROM THE U.S. Agency for International Development

ACTION PLAN OF Clean Air Action Corporation A SMALL GROUP Dow Chemical Company Foundation IN KENYA The World Bank

Institute for Environmental Innovation

Berkeley Reforestation Trust CLEAN AIR ACTION CORPORATION

118 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP ohn Gichuki, of Jacaranda Group, Kenya, four countries. Small group members have was a very active farmer interested in tree planted more than 10 million trees, and more Jplanting. Although he had never taken than 1.5 million trees are alive today. Active part in group action before, he decided in TIST participants have recruited and trained 2004 to join six fellow villagers to start a small others, have more than doubled crop yields, group under the International Small Group and have reduced their health risks substan- and Tree Planting Program (TIST). Gichuki’s tially. group planted 5,000 trees in the first nine months of 2005, receiving roughly $76 for its FROM FAITH TO ACTION work. The group decided to reinvest 20 per- In 1998, Ben Henneke, president of Clean Air cent of their earnings in care for the trees they Action Corporation (CAAC), and his wife planted. The remainder went to purchase Vannesa, answered a call to service from the food for their families. minister of their congregation in Virginia. TIST creates incentives for rural communities They soon found themselves “surprised mis- in such areas to form small groups that restore sionaries” on a trip to help the Anglican dio- barren landscapes. “As the trees grow, the cese of Mpwapwa in central Tanzania. The money flows,” goes the program’s slogan. diocese, about the size of Rhode Island, con- Money flows to the planting groups in the sists of 500 congregations shepherded by 62 form of payments for each tree planted and priests. also from sales of fruit, nuts, timber, fire- “We thought other people did things like wood, and other forest products. Benefits that,” commented Vannesa Henneke. “And we grow as the trees mature, improving local would support them and say prayers for them. farming conditions. Simultaneously, better But all of a sudden we were in central Tanza- agricultural techniques taught by program nia.” They were there to lead a seminar in personnel increase the supply of food to the “small group servant leadership.” Bishop Si- small groups and their communities. Wher- mon Chiwanga had decided to organize the ever TIST small groups exist, local auditors, members of his diocese into self-supporting, or “quantifiers,” verify the number of trees cooperative small groups to reduce the load on planted (and still living) and upload the data his thinly stretched clergy. The groups also to the program’s website, www.tist.org. would become vehicles for collective problem Planting millions of trees recovers environ- solving. ments and changes lives. Trees provide shade It was the Hennekes’ first exposure to Africa, and windbreaks for people, animals, and and they remember being shocked at the deso- crops. They prevent erosion, preserving agri- late landscapes and at the lack of opportunity cultural land. Some types of trees improve soil for the intelligent, hard-working villagers. quality. Others provide fruits, nuts, animal Their group returned a year later and con- food, timber, medicines, bee habitats, and ducted a follow-up seminar, a “visioning even insecticides. Trees mark borders around process,” to determine exactly what problems homes, farms, roads, and paths. Groves can villagers faced and what they might imagine as become a village woodlot. Native grasses grow a hopeful future. During that seminar partici- again under the shelter of trees, providing pants developed the goals of sustainable agri- food for farm animals. culture and tree planting, an idea that soon As the trees grow, so does the hope of poor flourished into the TIST program under the villagers in poverty-stricken and marginalized continued supervision of the diocese. areas that lack good roads, bus service, phone The problems identified in the visioning coverage, internet access, and banks. Since process were clear. Declining soil fertility; lack 1999 TIST has grown from 40 small groups in of shade and firewood; and recurrent famine, Tanzania, to more than 2,500 small groups in

THE INTERNATIONAL SMALL GROUP AND TREE PLANTING PROGRAM 119 disease, drought, food insecurity—all were Dow’s policy is that to succeed in the twenty- among the villagers’ top concerns. And they first century, a company must simultaneously all seemed to result from decades of unsus- excel in all three elements of sustainable devel- tainable use and destruction of local re- opment: economic viability, social responsibil- sources. But hope for the future came out ity, and environmental integrity. clearly, too. Local participants in the Hen- Dow AgroSciences (DAS) has also become in- nekes’ seminar voiced their commitment to volved with TIST. DAS provides technical as- change and agreed on the need for reforesta- sistance for TIST program participants to fur- tion, sustainable agricultural practices, and ther develop agricultural practices, crop micro lending to build livelihoods. protection, and agricultural marketing skills. The participants had vision; that was clear. In so doing, DAS aims to gain insights into They also had begun to form groups to im- the needs of undeveloped markets and the plement their vision. What they lacked was kind of new products that will be needed in access to funds to create the system they knew the future in areas like Mpwapwa. they needed. That was where the Hennekes In 2000, the TIST Board voted to create a for- and CAAC came in. profit organization—TIST, Ltd.—with an arms-length business relationship with the An- EXPANSION glican Church. TIST, Ltd. is designed to man- When the Hennekes returned a third time to age the business operations of the Mpwapwa implement the plans that had emerged from TIST program. In 2002, TIST expanded to the visioning process, Ben Henneke brought the state of Tamil Nadu in southern India. In along his own business, CAAC, which in- 2003, it was replicated in Uganda by farmers vested $500,000 for planting 500,000 trees. who had participated in a TIST seminar in CAAC also provided mentoring and guidance Tanzania and saw that TIST could make a dif- for the small groups; assistance in manage- ference to their own lives. ment techniques and democratic procedures; and the technological infrastructure needed to In 2003, the U.S. Agency for International monitor the progress of the planting program. Development (USAID), recognizing TIST as CAAC also would work with the small groups an innovative mixture of private sector in- to share best practices for replication and ex- volvement and faith-based outreach, invested pansion. $500,000 to enable TIST to reach out to another 1,500 small groups in Tanzania. The plan As the Hennekes developed the TIST con- was to plant 1.8 million new trees, benefiting cept, they reached out to other partners. Jerry some 75,000 people. Martin, a vice president of Dow Chemical Company, had been among the facilitators of In 2005, USAID’s mission in Kenya commit- the visioning process during the second semi- ted $1 million for TIST to expand to the Meru nar. Inspired by that experience, he led an ef- and Nanyuki regions of that country. In addi- fort within Dow to support TIST. In 2001, tion to the demonstrated benefits, USAID the Dow Chemical Company Foundation thought TIST’s small group structure might awarded TIST $1.2 million to create a non- serve as an effective vehicle for educating rural profit implementing organization, the Insti- people about HIV/AIDS and malaria, topics tute for Environmental Innovation, and to that the small groups in Kenya had identified plant an additional 1.5 million trees involving as important. some 7,000 farmers working in more than 650 small groups. Dow wanted to ensure that the TIST program would embody the same approach to sustainability that Dow was developing for its own operations. The heart of

120 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP TIST BY THE NUMBERS, OCTOBER 2005

Tanzania Kenya Uganda India Trees planted 408,073 170,369 324,589 447,856 Seedlings 67,416 1,062,160 31,975 561,377 Top species Luciner, Mijohoro, Eucalyptus, Eucalyptus, Enshaarri, Casuarina, Eucalyptus, Mjlonge Gravellia Misaipras Indian Tree Active small groups 348 1,032 735 275

Source: www.tist.org.

HOW TIST WORKS Neem tree, a species native to India and At the heart of TIST are small groups of 6–12 Myanmar, has proven extremely beneficial. It subsistence farmers. Participation in the thrives in semi-arid climates and demonstrates groups is voluntary, but a minimum commit- positive effects on pest management, environment of five years is encouraged. The group mental protection, and even health and medi- structure is based on equal participation; lead- cine. ership rotates among members. TIST empowers these voluntary associations to meet The small groups own the trees and receive all group-defined goals by planting trees, im- benefits of their presence, including a sustain- proving agricultural practices and fuel able fuel supply, fruits, nuts, fodder, shade, efficiency, spreading health-related informa- and local environmental benefits. TIST pro- tion, and sharing best practices with other vides quarterly payments to small groups ac- groups. cording to the number of trees planted and maintained according to specified practices. In Using principles of conservation farming de- Tanzania, a typical group with 1,500 trees veloped in Zambia under the aegis of the could earn the equivalent of a month's wages U.N. Food and Agricultural Organization, from their trees over the course of a year. The TIST trains small groups to prepare nurseries trees are both a cash crop and a visible repre- and raise seedlings. Trees are planted in small sentation of the choice that each small group local plots around group members’ homes, has made—to do what they can to improve farms, and communities—wherever they can their community. be useful—rather than in large monocultural tracts. Plantings increase shade, reduce ero- TIST uses a low-cost, high-tech approach to sion, restore important natural resources, and monitor and collect data about plantings. Lo- control flooding, all of which help fight cal quantifiers collect field data using palm famine and poverty. As the TIST alliance ex- computers and a global positioning system. pands through these areas, farmers and other From internet cafés, they upload their data— participants build skills in agricultural man- on the location, size, and species of trees being agement, conservation farming, community planted—to TIST’s database. The TIST web- building, and computer technology (related site offers real-time data on tree populations to data gathering and information sharing), and the GPS coordinates of the groves planted that will serve them in the future. and tended by the program’s many small groups. Groups design their own approach to planting, making decisions on which trees to plant TIST also provides training and supplies for and where to place them. The small groups tree planting and conservation farming, fuel- are encouraged to plant indigenous trees. The efficient and healthier stoves, and education

THE INTERNATIONAL SMALL GROUP AND TREE PLANTING PROGRAM 121 on malaria and HIV/AIDS prevention. A the small groups are receiving the proper train- two-way communications network includes ing, putting it into practice, and achieving newsletters and monthly reports, plus weekly broader environmental goals. Connecting local meetings, monthly district-level meet- these worlds has been a challenge, and many ings, and biannual national seminars. The lessons have been learned along the way: communications network allows for training, ∫ TIST is most effective in the poorest areas: the addition of new TIST components, and among people with the least resources and expansion to new small groups in other areas, infrastructure, and the fewest alternatives. regions and countries. ∫ Daily operations in such locations can be EMPOWERMENT OF 20,000 SUBSISTENCE grueling, with a phenomenal toll on peo- FARMERS, ONE GROUP AT A TIME ple, organizations, and machines. For TIST, reforestation is the means to the ∫ TIST is easy to join; adding another group larger goal of building communities and or location does not require much initial spreading hope through self-help and empow- work in the villages. But as the popularity erment. “We ask people what they care of the small groups grows and new groups about,” says Ben Henneke, reviewing the spread over larger areas, the logistics re- method of community mobilization and em- quired for continued service to and moni- powerment he and his wife developed for toring of the groups become daunting. their seminars in 1998. “Then we ask them to talk to each other about what works really ∫ Keeping costs low is a constant challenge well. And then we ask them to ﬁgure out how for participants and sponsors alike. to use the things that work well to achieve the things they care about.” ∫ Good equipment and training can allow the collection and transfer of data with rea- From its humble beginnings in Tanzania, sonable and declining cost. But it takes in- TIST has now been replicated (with adapta- dividual integrity and lots of hard physical tions) in Kenya, Uganda, and India. It has and intellectual labor by the people collect- mobilized more than 20,000 men and women ing the information to provide accurate in 2,500 small groups to develop and share and useful information. best practices in reforestation, agriculture, and health. The growing popularity and awareness ∫ Grassroots organizations and large organi- of the reforestation program has encouraged zations like USAID and the World Bank more villages to become involved. require “interpreters.” TIST participants may be in complete alignment with a As TIST develops, it becomes clear that it donor’s goals—but a major effort often is straddles multiple worlds. The farmers are necessary to aggregate and organize infor- most concerned about whether, how much, mation from so many local sources into a and how quickly they are paid for the trees form useful to donors. they plant. Donors wants to be assured that

122 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP GLOBALGIVING DEVELOPMENT AT THE SPEED OF LIGHT

PURPOSE ACCOMPLISHMENTS AND OUTCOMES To build the leading online marketplace for Development organizations have posted more international philanthropy, channeling contri- than 1,300 high-impact projects in 60 coun- Two former butions from individuals, community-based tries on the GlobalGiving website. To date, World Bank organizations, corporations, and foundations 3,800 individual and institutional donors have executives to projects in the developing world. contributed $2.4 million to 470 projects. engage USAID

CONTEXT FUNDING ARRANGEMENT to advance a Integrated markets, communications technol- U.S. Agency for International Development: next-generation ogy, network-oriented thinking, and decen- $1.5 million platform to tralized decision-making are changing the Other resource partners include Omidyar Net- facilitate giving theory and practice of development, creating work and the Hewlett, Kellogg, Mott, Sall, new coalitions of stakeholders focused on for international and Skoll foundations, which together have speciﬁc development problems and issues. development contributed more than $4 million. GlobalGiving is a fresh approach to delivering causes and foreign aid and is competing to become a eBay, Google, PayPal, Yahoo!, and Visa Inter- projects. household name in international philan- national provide in-kind technical assistance thropy. and expertise.

ALLIANCE MEMBERS AND ROLES GlobalGiving

U.S. Agency for International Development

Partners through employee and customer giving campaigns include:

Hewlett-Packard

The North Face

Development Alternatives, Inc.

Gap, Inc.

Applied Materials TER PARTNERS INTERNATIONAL TER PARTNERS WA

GLOBALGIVING 123 nable to make ends meet, many fam- A NEW DEVELOPMENT MARKETPLACE ilies in rural western Nepal send As leaders of the Corporate Strategy and Inno- Utheir daughters to work in faraway vation groups at the World Bank from 1998 to cities as bonded servants in private homes or 2001, Dennis Whittle and Mari Kuraishi were as dishwashers in teahouses. The conditions responsible for Development Marketplace, an under which these “indentured daughters” open competition designed to unearth new live and work are entirely at the discretion of ways of stimulating and channeling small do- their employers. Abuse is rampant. nations to development causes. The initiative brought together individuals, nongovernmen- But help is coming from GlobalGiving.com. tal organizations (NGOs), and other groups For every $100 donation made through the proposing innovative “bottom up” solutions to web-based philanthropic portal, the Nepalese pressing social and economic concerns—solu- Youth Opportunity Foundation is able to pay tions that delivered results and could be ex- for a girl’s primary education and offer fami- panded or replicated. Development Market- lies compensation for the wages they would place was the World Bank’s first explicit have received if their daughter had gone to attempt to apply a venture capital approach to work. Sumitra Chaudhari, one of an esti- international development. Since the first mated 40,000 Nepalese girls sold into bonded event in 1998, marketplace events have been servitude, is now in school, with help from staged at both the global level (with 171 win- the foundation. She wrote of her experience ning proposals receiving $23 million in fund- in a poem to her family: “Father, and my ing), and in several countries (with 650 win- mother, I join my 10 fingers. Don’t send us to ners in 42 countries receiving $11 million). work for the landlords.” The innovations that surfaced in the competi- A continent away in rural Kenya, a network tions had a powerful common thread. of independent health clinics offers preven- Whether it was Bosnian war widows placing tion and treatment services for malaria, respi- their hand-knit apparel in Parisian boutiques ratory infections, worms, amoebas, and diar- or a new approach to developing an AIDS vac- rhea. Donations to the clinics make possible cine, each innovation seemed to suggest that training for health workers and deliveries of an incredible wealth of available resources for medicines and other supplies. A clinic aver- development lay untapped. And though the ages 5,000 patients a year, and economies of Development Marketplace events succeeded in scale are allowing them to offer services to generating millions of dollars for partners and more people at lower cost. “The [clinics] will projects, the sums were a drop in the bucket of go a long way to narrow the gaps currently ex- World Bank assistance. Competitive market- isting in delivery of health services,” reports places did not blend well with the sprawling Dr. E. Maree of the ministry of health for the operations of the World Bank. Kirinyaga District. But buoyed by the potential of the marketplace These small but effective projects, although approach, Whittle and Kuraishi elected to spin very different in scope, share space in an on- off the concept. They resigned from their posi- line catalog of development projects at tions at the World Bank in 2000 with opti- www.globalgiving.com. The site enables any- mistic but unproven ideas that online giving one to support a development project—a could help transform the development industry concerned individual, a Brownie Scout and capture the imagination (and dollars) of a troop, or an employee of a Fortune 500 cor- new generation of unofficial donors. Like the poration whose contribution is matched by bright-eyed business school grads that try their her employer. It began with the idea that fortunes in start-up ventures each year, they web technology had opened new ways to tap reached out not only to potential investors, but new sources of philanthropy for develop- also to friends and family. ment projects.

124 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP “The start-up phase was quite a challenge,” Whittle remembers. “But once we launched GLOBALGIVING… programs with the initial users, the whole “...represents the application of eBay to international aid... Like eBay thing started to gather momentum. And now, it is meant to let the “market”—in this case for development aid— we have an extraordinary, growing network of clear at a minimum cost without any bureaucratic interference.” — James Fallows, Atlantic Monthly partners from all sectors.” “. . . is a kind of turbo-charged global want-ads section where project Initial successes included partnerships in the leaders can advertise their needs and funders can find them.” technology, nonproﬁt, and foundation sec- — Bruce Jacobs, Philanthropy Magazine tors; an endorsement from the United Na- “… may be the first of many market endeavors that compete with tions Information and Communications aid agencies...” — William Easterly, Foreign Policy Technology taskforce; and support from corporate partners (such as Hewlett-Packard) and “. . . will focus on the underserved segments of the market and ex- international NGOs (such as Ashoka and pand funding for entrepreneurs and communities in emerging markets. [It] will help increase transparency, encourage innovation, and IDEX). With the help of its new partners, reduce transaction costs in the development industry.” GlobalGiving was able, in late 2002, to — International Finance Corporation, World Bank Group launch its web-based portal—the new development marketplace. “. . . the foreign aid equivalent of the speed of light.” — The Washington Post In 2003, GlobalGiving approached the Global Development Alliance (GDA) in hopes of connecting with like minds and leveraging additional resources. The concept was well NGO partners to vet projects and to handle suited to GDA’s focus on new approaches to and disburse donations. development and on leveraging new and addi- GlobalGiving.com is a public website that of- tional resources in the service of international fers a simple, measurable way for individuals, development. community-based groups, and institutions to “GlobalGiving brought two valuable services invest in projects that improve the quality of to the table,” said GDA director Dan Runde. life of local communities. Through its pro- “First, it promoted and supported personal jectdonor matching service, GlobalGiving giving by the American people—through in- brings the buyers and sellers of the interna- dividual donations and the collective, volun- tional development world together, with mini- tary action of community-based groups and mal transaction costs, to build an efﬁcient employers. Second, each donation indirectly market for philanthropic contributions di- helped build the capacity of the local NGOs rectly to development activities. that implemented the projects. Both of these The new development marketplace is a 24/7 actions advanced important USAID objec- one-stop shop for advancing causes: poverty tives.” reduction, good governance, maternal and GDA granted GlobalGiving $500,000 in 2003 child health, education, livelihood skills devel- and an additional $1 million in 2004, both for opment and other missions pursued by social general operating support. entrepreneurs in developing countries.

CLICK HERE THE COMPONENTS OF GLOBALGIVING GlobalGiving encompasses two separate or- A programmatic focus of GlobalGiving’s out- ganizations. A for-proﬁt ﬁrm, Many Futures, reach has been to partner with corporations in reaches out to potential funders and provides employee-, member-, or customer-giving cam- technical support, while the GlobalGiving paigns focused on one or several projects, Foundation works directly with in-country some of which are featured on the public website. Hewlett-Packard, The North Face, Ap-

GLOBALGIVING 125 FREEPLAY FOUNDATION

plied Materials, Yahoo!, Gap, Inc., Participant DUE DILIGENCE Productions, and Sister Cities International GlobalGiving sources projects through a net- are some of the organizations now working work of project sponsors that vet projects to with GlobalGiving. ensure they are legitimate, well-run, and satisfy IRS guidelines for international grant-mak- For employee-giving initiatives GlobalGiving ing—including new voluntary guidelines set offers to develop a customized website for its forth in the USA Patriot Act to prevent access partner. The partner may then select projects by terrorists to sources of financing. that are strategically relevant to its business, thereby making the connection between em- Project sponsors use a variety of mechanisms ployees and international issues of special con- to accomplish this task, including visiting pro- cern. Gap, Inc., and Hewlett-Packard, both ject leaders, conducting financial audits, meet- among the first to participate in employee-giving with stakeholders, and collecting refer- ing campaigns, have provided corporate ences from local, national, and international matching funds. The North Face also matched experts. GlobalGiving evaluates all project gifts from its employees and customers to sponsors’ methodologies and procedures, and tsunami relief. Such direct-giving opportuni- reviews the due diligence done. After projects ties often engage a younger segment of em- are submitted, GlobalGiving conducts sec- ployees who might not otherwise donate. ondary due diligence and random audits to ensure that the organization meets GlobalGiv- USAID’s relationship with GlobalGiving al- ing’s standards for trustworthiness, quality, lows the agency to bring the advantages of the and impact. GlobalGiving platform to individual country missions. Powered by and cobranded with The end result contributes to an important GlobalGiving, country mission websites mar- aim for USAID: building local capacity. Glob- ket the mission’s investments as candidates for alGiving, through its affiliated project spon- further support, connect donors to the local sors, demonstrates the power of proper grants partners with which the missions work, and management and governance. The simple act connect diaspora populations in the United of a citizen in the United States investing $200 States and elsewhere with development pro- in a developing country project provides a jects in the emigrants’ home towns or market signal to NGOs that certain standards provinces.

126 CHAPTER SEVEN: PARTNERSHIPS FROM THE BOTTOM UP of transparency and good governance must be There is no formula for reaching new market seg- met if they are to compete for that funding. ments. GlobalGiving believes that there is an untapped market segment of younger donors GlobalGiving hopes that reporting on the sta- who are keenly aware of issues of global con- tus of projects will improve donors’ under- cern, as well as local issues in remote places. standing of the efficiency and impact of the There is no standard method to successfully projects they support. As projects promoted engage a nontraditional market segment that through GlobalGiving become fully funded may not otherwise contribute, though em- and achieve their objectives, both donors and ployee-giving campaigns have shown some project leaders should get a better understand- promise. Similarly, diaspora populations repre- ing of what works and what does not, in a va- sent a large, untapped market. While most re- riety of contexts. mittances are used for necessary household items, some are spent on durables such as CHALLENGE AND SUCCESS FACTORS home construction. A much smaller portion is GlobalGiving has surmounted some chal- enlisted to support local infrastructure projects lenges in its quest to become the preferred in tandem with public funds. GlobalGiving is means to donate online. Among the lessons ideally positioned to make the connection be- learned so far: tween emigrants and development projects in their country of origin—or in the home Titles matter. GlobalGiving was originally province or municipality of community-based named DevelopmentSpace, but it was quickly groups bound by this commonality. evident that this name reflected past associations with official donor bodies that elicited Country projects do not market themselves. At its little recognition outside that community. most basic, GlobalGiving is nothing more Upon assessment, Whittle and Kuraishi real- than a neutral space where buyers and sellers ized that they needed a name that kept an of development projects can meet. If Global- outsider’s perspective, was short and easy to Giving is to become a development cyber-fair remember, and clearly communicated the ap- with the same name recognition as eBay, the propriate message. The new name correctly “sellers” of development projects must assume and effectively explains what the organization the functions of marketing and outreach to is promoting. differentiate their scope, effectiveness, and impact. GlobalGiving offers opportunities to do Building brand trust and visibility is difficult. A this through reporting on status and other “flight to recognized brands” is not unusual forms of communication between donor, im- during humanitarian crises. GlobalGiving’s plementer, and beneficiary, but many local response to the tsunami that struck South partners have yet to learn that differentiating Asia on December 26, 2004, was to cede the their product is a factor that helps determine usual 10 percent overhead capture on the first why some projects get fully funded, while oth- $100,000 of donations raised for relief and re- ers languish. construction, work with partners to increase its visibility on partner websites and other Innovation is key. GlobalGiving’s experience media, and establish new partners on the has shown that rapid-cycle experimentation— ground in affected countries to enable general the ability to quickly test and implement new relief as well as specific project support. How- features and enhancements—has been key to ever, the public response to tragic events that continuing its growth, and remains a critical capture widespread attention moves toward factor in achieving long-term success. The established, well-known organizations like the GlobalGiving cycle of innovation quickly rec- American Red Cross, neutralizing efforts to ognizes and addresses the challenges that con- increase visibility during such times, no mat- front a new enterprise, and reduces the lag ter how well planned. from idea to operation.

GLOBALGIVING 127 CHAPTER EIGHT

REDUCING POVERTY SOLUTIONS AT THE BOTTOM OF THE ECONOMIC PYRAMID

“Four billion poor can be the engine of the next round of global trade and prosperity,” writes C.K. Prahalad of the University of Michigan’s business school in The Fortune at the Bottom of the Pyra- mid (Wharton School Publishing, 2005). In responding to a development challenge, alliance partners can discover or create previously unimagined business opportunities; others take proven technologies and apply them in innovative ways. Under the right circumstances, the bottom of the pyramid is the human equivalent of an oil deposit: it can raise an economy from below.

In partnership with the U.S. Agency for International Development (USAID) and nongovernmental organizations, leading companies are ﬁnding ways to provide vital goods and services to millions of underserved people at the bottom of the economic pyramid. The alliances in this section cover health, microﬁnance, enterprise development, and agriculture. They represent diverse business models, some intricate (with many participants across a continent), others compact and focused.

∫ The NetMark Alliance brings together the world’s leading manufacturers of mosquito netting with local retailers, marketing communications ﬁrms, and the ExxonMobil sales network in Africa to build a sustainable program to prevent mosquito-borne diseases. The program offers product choices for all levels of consumers, including the poor.

∫ Visa International, FINCA, and local banks in Guatemala and Nicaragua are pioneering the use of electronic ﬁnancial tools such as ATMs and electronic money transfers for the microenterprise and remittance sectors. The alliance widens access to ﬁnancial services for poor entrepreneurs who are often outside the traditional banking community and minimizes electronic transfer fees for workers who send money home from abroad.

128 KICKSTART

∫ The Business Creation Alliance unites foundations and other partners to bring pumps and other appropriate technologies and tools to farmers and entrepreneurs in Tanzania. Busi- nesses kick-started by the technologies have a major ripple effect on the local economy. One corporate partner provides a steady market for crops grown with the tools the alliance provides.

∫ The Markala Sugar Project Alliance grew out of an initiative by the government of Mali to build a sugar industry to supply the domestic market and provide export revenue. Schaffer and Associates, USAID, and Mali’s government veriﬁed that the concept would work before opening the alliance to additional partners and investors to join in implementation.

129 NETMARK ALLIANCE PAIRING COMMUNICATIONS AND MARKETS TO FIGHT MALARIA

PURPOSE ALLIANCE MEMBERS AND ROLE Protect millions in Sub-Saharan Africa from U.S. Agency for International Development USAID convenes death or chronic illness from malaria by pro- Academy for Educational Development a longstanding moting the use of insecticide-treated bed nets ExxonMobil Corporation international while building African commercial carrying capacity for a sustainable insecticide-treated health education Commercial and production partners: bed net market. partner, a multi- A to Z Textile Mills tude of large and CONTEXT BASF small manufac- There is no consensus on how best to fight Bayer Environmental Science turers of mos- malaria, an affliction that kills more than 2 SiamDutch Mosquito Netting Co. million people in sub-Saharan Africa each Vestergaard Frandsen quito netting, a year—mainly children and pregnant women. consortium of But the U.S. Agency for International Devel- Syngenta health communi- opment, through the NetMark Alliance, Mossnet Industries makes the case for the long-term sustainabil- cators, and a Harvestfield Industries ity and effectiveness of African and interna- major fuel com- tional commercial partnerships in the manu- Reckitt Benckiser pany to help facture, distribution, retail, and promotion of Sunflag Nigeria long lasting insecticide treated mosquito nets. protect millions Communications and social marketing partners: from malaria. ACCOMPLISHMENTS AND OUTCOMES Exp. Momentum Nine million treated nets sold. A successful Foote, Cone and Belding Advertising demand creation campaign informs potential consumers that Mosquitoes Kill, Kill Mosqui- FUNDING ARRANGEMENT toes with long-lasting insecticide treated nets. U.S. Agency for International Development: ExxonMobil Corporation provides demand $65 million ceiling over eight years ($30 mil- creation support, discount voucher funding, lion to date) and an expanded voucher distribution network. ExxonMobil Corporation: $900,000 (to date)

Commercial partners: $20 million (to date, and not including unofﬁcial partners)

130 CHAPTER EIGHT: REDUCING POVERTY tudies suggest that decreased productiv- mercial sector professionals as a kick-off for the ity and higher health costs related to agency’s Infectious Diseases Initiative. The pur- Smalaria negate economic growth in sub- pose was to examine the latest ﬁeld trials for Saharan Africa by 1.3 percent each year. Many malaria drugs and formulate fresh approaches more studies conducted over the past 15 years to treatment and prevention. This was a prob- show that insecticide-treated bed nets (ITNs) lem-solving conference, and Carroll was among reduce all-cause mortality rates among young those who hoped to build a consensus around children by at least 20 percent, severe malaria ITNs as tools that met both immediate public by an average of 45 percent, and premature health needs and the challenge of sustainability. births by 40 percent. One of the attendees, David McGuire, was al- But large donor investments in purchase and ready convinced of the potential for partner- distribution of nets are required to achieve ships with the private sector to build market these results across a continent. As demand momentum around ITNs. “Using donor grows for free or partially subsidized ITNs, money has its place and is very effective in so, too, does the donor and public ﬁscal bur- some ways,” he said. “But in terms of creating den. Research has shown that many people something that would last whether donor are willing and able to pay for nets, while funding is available or not—I came to realize some cannot. Unfortunately, donor resources that you needed to engage the commercial sec- are often wasted by supplying subsidized tor in a much different way.” products to those already willing and able to USAID issued the solicitation that became pay, while the neediest go unreached. NetMark soon after the 1998 kick-off meeting. The NetMark Alliance helps international At that time, there were still questions about and African manufacturers and distributors of whether the commercial sector could carry ITNs develop sustainable markets that do not ITNs as a valued good or that the commercial depend on donor funding. In addition to en- sector could viably complement, or even re- listing local commercial investment through a place, direct donor subsidies. generic marketing campaign communicating Consequently, when the Academy for Educa- the need to sleep under insecticide-treated tional Development (AED) won the solicita- mosquito nets, the alliance provides targeted, tion in September 1999, the organization faced time-limited subsidies to prime new potential markets and distributes discount vouchers through public antenatal clinics and other ROLES OF THE MEMBERS OF THE outlets to reach vulnerable populations unable NETMARK ALLIANCE to pay full market prices. Finally, the alliance ∫ works in the national and international policy U.S. Agency for International Develop- ment developed the NetMark concept arena to reduce or eliminate taxes, tariffs, and as part of its Infectious Diseases Initia- other impediments to the proper functioning tive. of the ITN market. ∫ Academy for Educational Development is the alliance’s implementing partner. BUILDING THE ALLIANCE: ∫ ENGAGING THE COMMERCIAL SECTOR ExxonMobil Corporation funds vouch- What evolved into the NetMark Alliance be- ers for net purchases, honors vouchers at Mobil Marts, and creates demand for gan in 1998 when Dennis Carroll, an infec- treated bed nets through the Help Us tious disease specialist from the Centers for Help campaign. Disease Control but attached to the U.S. ∫ Agency for International Development (US- Leading manufacturers of netting and insecticides offer a reliable supply of AID), convened a quorum of leading epidemi- products at reasonable prices. ologists, public health specialists, and com-

NETMARK ALLIANCE 131 an immediate challenge in pursuing this ex- AN INTRIGUING VALUE PROPOSITION perimental new strategy. But McGuire, as di- The linchpin of AED’s winning proposal was a rector of the NetMark team, was determined sole-source partnership with SC Johnson, a to show that commercial sector partnerships global leader in the marketing of insect control could achieve public health goals. products. AED felt it necessary to work with a company that had the distribution and mar- The need for action could not have been keting capacity to take on a new product un- starker. A NetMark study showed that in der a well established brand. Such a relation- 2000, the year before NetMark began selling ship would increase the likelihood of creating nets, retail prices for conventional untreated a viable ITN market within the original five- nets ranged from $3 in Nigeria to $27 in Zim- year timeframe of the project, as stipulated in babwe, a significant amount of money for the agreement between USAID and AED. poor Africans. Wide-reaching studies estimated that malaria cost Sub-Saharan Africa at SC Johnson had understandable concerns least one percentage point in annual eco- about the viability of a commercial ITN mar- nomic growth each year from 1965 to 1990. ket in an environment of low demand, highly The NetMark concept had to vie with major subsidized competition, and uncertain tax and international initiatives from the traditional tariff policies. In addition, its timeframe was development organizations as well. NetMark’s not consistent with NetMark’s commitment to launch in 2000 coincided with the 1998 USAID to launch in at least four countries on launch of the Roll Back Malaria Global Part- a national scale. When initial market research nership by the World Health Organization, indicated uncertain prospects for success, SC the United Nations Children’s Fund Johnson ultimately decided to withdraw from (UNICEF), the United Nations Development the partnership. Programme, and the World Bank as a global It was a heavy blow to AED, which had to de- coordinating and information sharing mecha- cide whether NetMark should continue or be nism, and the Global Fund to fight AIDS, dismantled. AED’s initial assumption hit an Tuberculosis, and Malaria with its global unexpected challenge. For McGuire there was financial support for local implementing no time to lose; quick action was needed to groups responding to country action plans. salvage the entire concept of engaging the private sector for commercial expansion of the ITN market.

The NetMark team made a case to senior staff at USAID and AED for presenting the same market data to all major net and insecticide manufacturers to determine if they would reach the same conclusion as SC Johnson, since companies already producing ITNs or treatment kits for the donor market might be in a better position to expand into the com- ACADEMY FOR EDUCATIONAL DEVELOPMENT ACADEMY FOR EDUCATIONAL mercial market. Once USAID had accepted this proposal, the NetMark team presented to the six major suppliers of nets and insecticides—Aventis, Bayer, BASF, Siam Dutch Mosquito Netting, A-Z Textiles, and Vester- gaard Frandsen—an intriguing value proposition: they could double their marketing budget through joint investment with NetMark, and gain the support of key policy makers and

132 CHAPTER EIGHT: REDUCING POVERTY CONSUMER BEHAVIOR AT THE BOTTOM OF THE ECONOMIC PYRAMID

mplementing a discount voucher program was an opportunity to observe consumer behavior in a population that normally enjoys a severely prescribed range of purchase options. IEvidence indicates that, as would be predicted by Bottom of Pyramid scholars C.K. Prahalad and Stu Hart, individuals given the opportunity to become new consumers act like any other consumer by demonstrating a willingness to “upgrade” regardless of where they lie on the spectrum of purchasing power. For example, rather than use a $3 discount for a low-end $6 net of the sort that mass donor procurement would provide, 80 percent of consumers re- deeming NetMark vouchers purchase higher-end nets that are bigger, longer-lasting, and even serve as something of a household fashion accessory through variation in color and style.

community groups by entering a new market natal clinics, the vouchers were likely to go to with few competitors, and help save lives in indigent families. Because the vouchers were the process. redeemable at local retail outlets rather than donor distribution points, the subsidy was still By “doubling the marketing budget,” Net- channeled through local commercial distribu- Mark was referring to its pledge to match tion channels. Also, the vouchers were not commodity procurements for initial orders, necessarily worth the full price of a typical bed and provide support for product distribution. net, as NetMark wanted to retain the basic fea- Their efforts would also be supported by ture of a market economy: that consumers broad-based generic campaigns NetMark should see the inherent value of the goods and would conduct to communicate the need to chose the models they like and can afford. use mosquito nets.

AN UNEXPECTED PARTNER, AN INSTANT BALANCING EQUITY AND SALES NETWORK SUSTAINABILITY By 2002, NetMark was battle-tested. Having While the initial NetMark alliance was con- weathered the shock of losing an important ceived as a way to channel commercial invest- partner, NetMark had successfully ment into a functioning market for insecti- reconfigured itself as a valued member of a cide-treated mosquito nets, there was also the consortium of manufacturers representing need to deliver ITNs to populations unable to more than 80 percent of global supply of in- afford the market price. Accordingly, the Net- secticide-treated bed nets. It had also intro- Mark agreement between AED and USAID duced a voucher program targeting popula- was modified to include action to achieve the tions that were most at risk or beyond the proper balance between achieving sustainabil- reach of the market. This hard-won success ity through local commercial participation was beginning to attract attention as a proven and equity through delivery of mosquito nets model of sustainability and equity. to the poorest populations. McGuire was flying home from Tanzania in The challenge was how to achieve equity in a 2002 when he encountered a former colleague manner consistent with the NetMark philoso- on the flight and struck up a conversation. phy of strengthening the local commercial When he talked with her about the success sector, and not disrupt sustainable market po- NetMark had achieved so far, she promised to tential with poorly targeted donor interven- refer the discussion to her husband, who tion. The NetMark solution stresses a seg- worked at ExxonMobil’s Global Issues Busi- mented market approach: a broad-based ness Unit. discount voucher scheme for those outside the reach of the market. Issued at public ante-

NETMARK ALLIANCE 133 It was a serendipitous connection. ExxonMo- The ExxonMobil Foundation made a small bil has been in Africa for a century as a pro- grant to test the approach in Zambia. When ducer and retailer. The company maintains the pilot realized an 80 percent redemption 2,000 service stations in 30 countries while rate and enabled approximately 8,000 preg- producing a million barrels of oil each day— nant women in the Kabwe and Lusaka districts activity that involves more than 5,000 direct to receive discounted ITNs, ExxonMobil and employees and 50,000 through in-country NetMark committed to expanding and repli- supply chains. cating the partnership in Nigeria. The partnership was also subsequently expanded to In 2000, ExxonMobil made a strategic deci- Ghana, and Cameroon. The ExxonMobil sion to reduce the malarial burden in Africa as Foundation has committed more than the centerpiece of its corporate social respon- $900,000 to support the use of vouchers in sibility program. Since that time, the Exxon- these expansions. Mobil Foundation has invested more than $10 million in its Africa Health Initiative, sup- The beauty of the partnership is that NetMark porting various anti-malaria programs. In Jan- engaged ExxonMobil at every level of its oper- uary 2005, ExxonMobil announced that it in- ations in Africa. First, it was a natural ﬁt with tended to ratchet up its commitment to $10 the company’s focus on malaria through the million per year and maintain that commit- Africa Health Initiative. From this shared sec- ment in subsequent years. The potential value toral focus came a partnership that yielded for in developing a partnership between NetMark NetMark a distribution network of hundreds and ExxonMobil was enormous. of service stations and Mobil Marts. The network advanced both the local carrying capacity After a series of “get to know you” discussions as points of sale for bed nets and a place where to identify shared priorities and build trust, co-branded ITN vouchers were honored. With NetMark and ExxonMobil developed the the proceeds generated by the Help Us Help “Help Us Help” campaign. Help Us Help re- campaign, ExxonMobil procured nets and dis- inforces the basic message of NetMark’s be- tributed them at orphanages. havior-change marketing by teaching preven- tive actions against malaria. Capitalizing on NetMark’s collaboration with ExxonMobil has the ExxonMobil network of Mobil Marts and been recognized as a durable best practice for service stations as a way of reaching beneﬁcia- publicprivate alliances. UNICEF joined as a ries, the campaign used a variety of materials NetMark partner in Zambia and Senegal, to transmit the NetMark message: point of while Britain’s Department for International purchase education posters, banners, and T- Development implemented the model in a shirts all communicating the need to “Help us large-scale initiative in Ghana. roll back malaria.”

The ExxonMobil service stations also served A NET SUCCESS, EVEN BY DIFFERENT as a place where customers could purchase MEASURES NetMark’s loss of SC Johnson but gain of ITNs with the NetMark seal of quality, and ExxonMobil as partners has proved rich in where ExxonMobil/NetMark-branded lessons and irony. NetMark initially bet every- coupons were honored. Finally, the campaign thing on a single player and lost its first round, generated additional funds from ExxonMobil but then won the greater benefits of the con- in the form of a percentage donation for every sortium approach: a diverse and more sustain- liter of gasoline sold. Donations went toward able supply chain, lower prices through invest- purchases of ITNs for children in orphanages. ment and competition, expanded consumer choice, and flexibility in responding to production or supply problems.

134 CHAPTER EIGHT: REDUCING POVERTY ARE VOUCHERS TOO SLOW? AN ONGOING DEBATE

he need to reach the poorest of the poor with mosquito nets is a source of ongoing tension due to differences among donors, governments, nongovernmental organiza- Ttions, and individual activists over the best way to combat malaria. Many argue that the only response to endangered lives is mass procurement and distribution of free nets. The governments of Uganda and Kenya have both withdrawn from planned voucher schemes as an inadequate response to the malaria threat; other African nations are expected to apply for funding from the Global Fund for AIDS, Tuberculosis, and Malaria to enable them to purchase bed nets for free distribution. However, mass distribution of free nets will almost certainly frus- trate the development of local commercial and administrative capacity and ultimately may prove unsustainable. Local capacity is needed for the management of future health crises.

However, the consortium approach also has manner not directly tied to business strategies challenges. A commercial partner that sees a 4 for future growth. It is more an exercise in to 5 percent increase in sales due to the part- good corporate citizenship. For ExxonMobil, nership with NetMark would consider it an the fight against malaria responds to the hu- astounding success; but for public health ad- man case for action, interest in the health of vocates who need to reach 50 to 80 percent of its consumer base, and concern for its 5,000 the target population, such “success” is unac- direct and 50,000 extended employees. Exxon- ceptable (of course, a 5 percent increase for Mobil’s Africa Health Initiative demonstrates each of 10 suppliers may get to the public the corporation’s acknowledgement of and health goal). McGuire puts this in perspec- commitment to these self-evident mandates. tive: “These public versus commercial agendas can lead to success when [partners are] bound LESSONS by a shared commitment around mutually Perhaps the greatest impact of NetMark is its beneficial goals, but also create interesting dy- demonstration that enlisting private sector in- namics and tensions.” volvement in malaria prevention works. The mechanics of success and failure in part- Rather than using Global Fund resources ex- nerships can also be linked to where the col- clusively to procure a volume of nets, African laboration is within the private sector’s orga- governments can invest in homegrown com- nizational structure. The partnership with SC mercial capacity that will outlast donor sup- Johnson originated as a proposal from its port. The NetMark approach is not a magic R&D department and was to be implemented bullet solution, but seeks to maximize com- by the marketing unit in sub-Saharan Africa. mercial sector involvement within the context When the marketing team could not foresee a of the Roll Back Malaria Campaign by using a profitable outcome in assessing the market re- mixed model that includes commercial, subsi- search, the partnership could not continue. dized and free products through market seg- Had SC Johnson’s Corporate Social Responsi- mentation. The exact extent of the private sec- bility unit been able to underwrite some of tor’s ability to deliver ITNs throughout the business risk, the original partnership Sub-Saharan Africa has yet to be fully demon- might still exist. strated, but if the NetMark alliance has demonstrated anything it is that a lasting solu- The successful partnership with ExxonMobil, tion will not be found without it. on the other hand, leverages its existing brand image and network of service stations in a

NETMARK ALLIANCE 135 As it is, with more than nine million ITNs tional partnerships that build commercial sold, NetMark’s new goal is 20 million, or carrying capacity. about $60 million in commercial investment. ∫ A clear and focused response to a major The alliance developed a successful social public health problem through a well-bal- marketing campaign to educate people about anced publicprivate alliance can have a ITNs as an effective way to avoid disease. An significant impact. exceptional supply chain produced a range of popular ITN products and choices and a sales ∫ There are benefits to having diverse part- network through Exxon that could reach the ners with well-defined roles. intended market. ∫ Investment and competition can result in In terms of a scaleable model for other similar lower prices, expanded consumer choice, challenges, NetMark shows that: and improved supply. The program provided equal access to ITNs to the poor ∫ Donor resources for malaria can be through a voucher system. efficiently applied to local and interna-

136 CHAPTER EIGHT: REDUCING POVERTY NEXT GENERATION MICROFINANCE ALLIANCE BRINGING EFFICIENCY AND SECURITY TO MICROFINANCE AND REMITTANCES

PURPOSE ALLIANCE MEMBERS The U.S. Agency for International Develop- U.S. Agency for International Development A leader in global ment and FINCA, pioneer of the village FINCA finance teams banking model, have partnered with Visa In- Visa International with a preeminent ternational’s financial services network to modernize banking and money transfers for Bancafe microfinance in- poor people in Guatemala and Nicaragua. Bancentro stitution to ex- Co-branded debit cards provide security and pand the reach, convenience for micro-entrepreneurs, ACCOMPLISHMENTS AND OUTCOMES efficiency for commercial banks and efficiency, and The VisaFINCABancafe debit and remit- microfinance institutions, and cross-border affordability of tance card made available to FINCA’s 12,000 funds transfer capability to facilitate remit- clients—all of them women—in Guatemala. banking and re- tances at reduced or no cost. mittance services FUNDING ARRANGEMENT for the aspiring CONTEXT U.S. Agency for International Development: Small loans, often $200 or less, reduce poverty poor. The out- $610,000 in a big way by allowing aspiring entrepre- come will provide neurs in low-income countries to start or ex- Visa International: $641,800 in technical ex- millions of extra pand small businesses. A broader array of pertise financial services—savings and checking ac- dollars in direct FINCA and other partners: $168,420 counts, funds transfer, flexible credit, and in- investment surance—can sustain the successful entry of for small business low-income actors into the broader economy development. in which they live and operate. FINCA

137 lanca Jimenez could provide for her If the Visa brand is an unexpected sight in re- family on her husband’s income, but lation to a microfinance loan, that’s because Bthere was seldom any left over to save the organization has just begun to develop the or for the children’s education. Her home- business models and financial services prod- made bread was famous in her neighborhood ucts that enable their member banks and mer- and she wanted to open a small bakery as a chants to cater to low-income market seg- way of bringing in more income. Her hus- ments. Through their microfinance alliance, band used a part of his income to purchase USAID, FINCA, and Visa help draw together raw materials from a family friend with a the realms of commerce, finance, and effective, wholesale business. With help from Jimenez’s sustainable poverty reduction. father and brothers, they built a clay oven. She began baking her bread and selling door BUILDING THE ALLIANCE to door. In its 30-year history, Visa has been at the fore- Then Jimenez took out her first FINCA front in the explosion of electronic financial loan—about $100—and over the next five services. Today, 1.3 billion Visa cards circulate years received 13 more to purchase specialized in 150 countries, with transactions generating supplies, such as molds, bread trays, and a more than $3 trillion in annual sales volume— kneading machine, as well as greater quanti- more than 10 percent of all personal consump- ties of ingredients. Her business activity has tion in many developed markets. had important spillover effects—the family In following its mission to expand the benefits friend’s wholesale business expanded to proof electronic payments to all the world, Visa vide more supplies for Blanca and other bak- has been aware of the macroeconomic benefits eries in Guatemala City. Today, Jimenez over- to developing economies of electronic pay- sees a bakery and four outlets, employing nine ments—increased transparency, greater bakers. She earns enough to send her younger efficiencies, higher security, and the migration children to school, while her older ones now from informal, un-banked economies to the have a family business to help maintain and formal financial sector. In terms of positive so- grow. cial impact, the tangible improvements to the With her next loan from FINCA, Blanca in- life of poor and low-income individuals are di- tends to open another bakery. But this time, minished reliance on predatory lenders and instead of receiving the entire proceeds of her government aid; enabling the aspiring poor to loan at FINCA’s country office, she’ll be given build businesses, create personal wealth, and the opportunity to have her loan deposited achieve dignity through self-sufficiency; and electronically into a savings account at Ban- the investment potential from streamlining cafe—a local commercial bank. What’s more, and improving transfer of remittances from she’ll be given a debit card to access her ac- family members working in other countries. count at the bank, use its ATMs, or make The company quickly identified microfinance purchases at participating merchants. as a way to use electronic payment solutions to The card, branded with the name and logos help local economies obtain greater access to of FINCA, Bancafe, and Visa International, capital, thereby advancing its broad business reduces her exposure to theft. And her ac- objectives while building positive working re- count at the bank gives her access to a range lationships with a broad range of stakeholders. of financial services she needs as her business It seemed a win-win situation: Visa could expands. For any of Blanca’s family who work benefit local economies through greater access abroad, the card can access funds transferred to capital while it developed and refined new internationally from agencies or bank ac- financial services products that catered to low- counts. income market segments.

138 CHAPTER EIGHT: REDUCING POVERTY But Visa is a service executed through member banks and very few banks have ROLES OF THE MEMBERS OF THE NEXT GENERATION MICROFINANCE ALLIANCE reconfigured themselves to provide banking services for microcredit clients. For Visa to ∫ U.S. Agency for International Development provides funding re- contribute, it needed a member bank willing source and local support. to deploy a business model that had a high ∫ FINCA, as the alliance’s implementing partner, works directly number of customers with low account bal- with banks to transform FINCA clients into commercial bank cus- ances. Such services were almost entirely pro- tomers. vided by microfinance institutions—usually ∫ Visa International provides staff time and expertise, access to local or international nonprofit organizations member banks, brand strength. that could not legally provide the full services ∫ Bancafe and Bancentro provide commercial banking services in of a bank. Visa needed to learn more about Guatemala and Nicaragua. the field.

FINCA was identified as a potential partner due to its preeminence in microfinance; also, an attorney sitting on a committee examining and the GDA mandate to orient USAID mis- Visa’s potential role in international develop- sions and bureaus toward partnerships. ment was acquainted with a member of FINCA proposed to hire a project leader to FINCA’s senior staff. The Visa attorney sug- identify and establish working relationships gested that FINCA, a pioneer in the village with Visa member banks in Latin America to banking model, could educate Visa about mi- pilot the use of Visa payment solutions among crofinance and perhaps serve as a potential micro-entrepreneurs. partner. Holly Wise, then director of the GDA Secre- Conference calls and personal presentations tariat, took an interest in the proposal. “It was- about the microfinance field and FINCA’s n’t so much that additional support for corporate capabilities laid the groundwork for FINCA represented a unique opportunity,” a stronger relationship. One area of potential she recalled. “But their strategic relationship collaboration was to improve FINCA’s with Visa certainly merited attention. In addi- efficiency through the use of Visa electronic tion to engaging Visa as a partner, we thought payment solutions: Visa had the technical ca- the potential impacts of the relationship would pability to contribute to such a project while be increased efficiencies among our FINCA brought to its long history as innova- microfinance development partners, and possi- tors and service providers in microfinance. bly even a reduction in remittance transfer The alliance would be based in Latin America costs further down the road.” because FINCA was well established there With endorsement from GDA and a favorable and Visa’s regional director was interested in technical review from the economic growth developing new financial services products to team at USAID, the alliance was announced at serve the bottom of the economic pyramid. the World Economic Forum in Davos, Switzerland, in January 2004. USAID admin- TRADITIONAL PARTNERS, NOVEL IDEAS istrator Andrew S. Natsios joined Malcolm FINCA has a long history with the U.S. Williamson, then Visa International’s presi- Agency for International Development (US- dent and CEO, and FINCA executive director AID) as a traditional implementing partner. Rupert Scofield in presenting the alliance as a In 2003, when the Global Development Al- concrete example of one of the meeting’s core liance (GDA) solicited innovative projects themes: partnerships among governments, that brought additional resources and new businesses, social entrepreneurs, and non- partners to the table, FINCA recognized a governmental organizations (NGOs) as drivers good fit between its relationship with Visa of economic opportunity.

NEXT GENERATION MICROFINANCE ALLIANCE 139 BANKING THE UNBANKED pected to become Bancafe customers and re- Commercial banks do not typically consider ceive co-branded FINCAVisaBancafe debit it profitable to engage microfinance clients. and remittance cards. Card services include The cost of paperwork to register new ac- savings accounts, ATM access, electronic pur- counts, for instance, exceeds the profits from chases at Visa-participating stores, and a con- their small deposits. For the aspiring poor, venient, cost-effective money transfer mecha- minimum balance requirements are a formi- nism. dable obstacle to entering the banking system. In Nicaragua, partners are exploring the possi- While banks are not organized to work with bility of delivering a flexible business credit poor and illiterate clients, FINCA’s mission line through the FINCA-Visa card, in addi- supports precisely this clientele. However, like tion to the remittance and loan disbursement most other microfinance institutions, it can- innovations under way in Guatemala. not accept deposits from its clients without first becoming a regulated financial institu- REMITTANCES—LOWERING tion. The cost to do this in Guatemala, TRANSACTION COSTS... AND RISKS Nicaragua, and many other countries has In a significant alliance innovation, holders of been prohibitive. Instead, as part of its al- FINCAVisa cards and Bancafe savings ac- liance role, FINCA connects its clients with counts may receive funds transfers from family commercial, Visa member banks. members in the United States. Clients visit or In Guatemala, the partner bank is Bancafe. call the bank to transfer funds directly to their FINCA’s client database supplies documenta- Bancafe accounts in Guatemala. Bancafe cus- tion that allows Bancafe to process new ac- tomers may then access the transferred funds counts efficiently. Because it is a conduit for a at ATMs or merchants that accept Visa. large number of clients, FINCA has been able The potential impact of this innovation is vast. to negotiate favorable terms with Bancafe, for Worldwide, migrants’ remittances are the sec- example, a relaxation of minimum-balance re- ond-largest source of financial transfers to the quirements. developing world (after foreign direct invest- FINCA clients gain access to formal savings ment and well ahead of official development accounts, providing them with a secure means assistance). In 2003, remittances from the to accumulate wealth and a platform to access United States (the largest source country) formal money transfer services and insurance. topped $28 billion, providing capital for many It is here that Visa adds value to FINCA’s ef- microentrepreneurs. Through the debit card, forts. Under the Next Generation as many as 12,000 microbusinesses in Microfinance Alliance, up to 12,000 are ex- Guatemala—all owned by women—can in-

ON MICROFINANCE governmental organization such as FINCA has transformed 3 of its 22 INSTITUTIONS BECOMING FINCA to risk its own capital, but the country operations into such regu- BANKS savings of commercial bank cus- lated entities and plans to transform tomers receive much stiffer pruden- more, but the process is arduous. hereas FINCA has been tial regulation. Visa’s involvement in the Next Gen- extremely successful in eration Microfinance Alliance speeds Wextending credit to the Before accepting deposits an institu- the process for FINCA by helping se- poorest of the poor, offering savings tion must build information systems lect the most suitable member bank and remittance services that FINCA’s that can close its books under dead- to approach and interceding on microbusiness clients need has line and generate statements that FINCA’s behalf when the partnering proven much more difficult. Authori- conform to specific national formats process stalls. ties may allow an international non- established for commercial banks.

140 CHAPTER EIGHT: REDUCING POVERTY vest remittances, loan proceeds, and their own “The value of partnership is strongly demon- savings directly into their businesses, avoiding strated by this alliance,” remarks Tim Huson, costly money transfer operators and risky in- director of electronic products at FINCA. formal operators. “When USAID’s support enables FINCA to partner with a commercial bank and offer If extended to the millions of people who Visa’s electronic payment services, it’s a success send remittances from the United States and for everybody—but most of all the poor, who elsewhere to Latin America, funds transferred require only the right opportunities to suc- by debit card could save, annually, hundreds ceed.” of millions of dollars otherwise lost in transaction costs, and redirect it to the investment Ultimately, the success of the alliance depends WHY 12,000 WOMEN? and consumption needs of poor families. on the ability of a commercial bank and FINCA to devise a mutually beneficial busi- FINCA loans to men As elsewhere, carrying cash in Latin America and women but tar- ness approach that expands the range of ser- can be dangerous. For clients who purchase gets women clients vices to low-income clients. One key success directly from merchants in the Visa network, because they have factor in this respect is leveraging the ability of the least access to the VisaFINCA card reduces risks for client a microfinance institution to gather and verify credit and because and merchant alike. Instead of cashing a client information at a relatively low cost. women with children check and then leaving the bank carrying Many poor clients cannot readily provide doc- are typically the cash, clients can use their VisaFINCA card poorest segment of umentation, and because many are illiterate to withdraw only the amount they need for the poor. Evidence they need help to complete the required pa- immediate purchases. By accessing the net- also suggests that perwork. FINCA solves these problems for women channel loan work of ATMs and Visa member banks, they banks, vastly simplifying the task of processing proceeds toward can also withdraw cash closer to where they new-account applications and meeting the nutrition, health and make their business purchases, reducing the tough “know your customer” regulations that education for them- risk of traveling with cash. selves, their husbands, have been adopted in most countries to curb and their children, Using cards, Bancafe customers also save time money laundering and prevent terrorist while male heads of waiting in bank branch lines, while Bancafe is financing. households do not able to move clients from costly teller win- always utilize re- In addition to cross-fertilizing the fields of mi- dows to more efficient ATMs, thereby lower- sources as produc- crofinance, electronic payments, and remit- tively. ing the costs of serving poor customers. tance services, the Next Generation Microfinance Alliance should allow Visa to OUTCOMES AND LESSONS share success strategies and best practices with The aim of the alliance is to bring more peo- member banks around the world to bring the ple into the formal banking system by helping benefits of formal financial services, in cost commercial banks, and Visa itself, develop and security, to more of the world’s poor. profitable business approaches and products suitable for low-income customers. For banks, According to Sandy Thaw of Visa’s product the solution is a high number of low-balance group, the Next Generation Microfinance Al- accounts. For Visa, it is adapting existing so- liance has generated just such a discussion lutions for a new segment and developing among Visa’s executive leadership. With help new tools, some of which meet the needs of from USAID and FINCA, Visa has the oppor- this segment for cross-border financial ser- tunity not only to improve the capabilities of vices. Someday, both Visa and the commercial its members to serve the unbanked, but also banking system will know how to do this. It is apply the lessons of its new partnership and in the allying of partners with shared re- become, in effect, a permanent partner in fur- sources and complementary interests that thering a development agenda. brings that day closer.

NEXT GENERATION MICROFINANCE ALLIANCE 141 BUSINESS CREATION ALLIANCE NEW TECHNOLOGIES FOR PROFIT

PURPOSE ACCOMPLISHMENTS AND OUTCOMES A Stanford To develop and market low-cost tools that Nearly 3,000 pumps sold under a USAID poor farmers can use in proﬁtable businesses. grant have generated $2.4 million in proﬁts engineer enlists The U.S. Agency for International Develop- and wages. Thirty-three wholesalers have been the U.S. Agency ment supports KickStart’s efforts to build established, and 126 retailers recruited and for International markets and raise demand to a level where trained. Each $1 invested by donors generates donor subsidies can be replaced by a fully sus- an estimated $20 in new income for farmers. Development in tainable supply chain. a social enter- FUNDING ARRANGEMENT prise in Africa CONTEXT U.S. Agency for International Development: based on simple In Tanzania, 80 percent of the populace works $650,000 in agriculture. However, falling household in- designs, durable KickStart co-investors: $810,000 come, limited access to water, and lack of af- profits, and fordable technology constrain production ca- sustainable local pabilities. To stimulate growth through supply chains. agriculture, development initiatives must address these issues.

ALLIANCE MEMBERS AND ROLES KickStart U.S. Agency for International Development KickStart co-investors, including: Mulago Foundation SC Johnson Corporation Case Foundation Lemelson Foundation Nike Foundation John Deere Foundation KICKSTART

142 CHAPTER EIGHT: REDUCING POVERTY bedinego Lession and his wife Monica ple, manual tools that people could use to cre- started a business cultivating orna- ate an income for their families. mental plants and flowers at their A The technologies born from his efforts were home in Tanzania about seven years ago. For designed to create entrepreneurship opportu- the first five, they watered plants by toting nities. KickStart’s manually operated oilseed buckets of water from the only source avail- press helped stabilize and lower the cost of that able: a communal irrigation stream that sup- commodity after the removal of price controls. plied each household two hours a week. The Its housing-block presses and carpentry tools work was tedious, and they were not able to ir- are sold at half the price of competitors’ tools. rigate all their flowers within the allotted time. And the company’s design for a latrine pit But with six months’ savings, the couple in- cover has been applied in refugee camps all vested $75 in a KickStart Super MoneyMaker over central and eastern Africa. irrigation pump. The contraption, which re- But the technology with the greatest economic sembles a stripped down Stairmaster, com- impact has been the MoneyMaker line of mi- bined the pumping action of a normal walk- cro-irrigation pumps. For about $60 ($90 for ing gait with the pressure created by a vacuum the deluxe Super MoneyMaker), farmers can to lift water 23 feet and irrigate up to two move from seasonal subsistence farming into acres of land. high-value crop production by farming year Today the Lessions earn about $130 a month, round in several crop cycles. twice what they earned before. “We are now The U.S. Agency for International Develop- able to cover all our domestic needs, our chil- ment’s (USAID) first partnership with the dren’s school fees, and maintenance of our company that became KickStart began in buildings,” reports Abedinego Lession. 1997 in Kenya. ApproTEC, as the company The Lession family is only one of nearly was then known, approached USAID again 40,000 businesses begun or expanded in Tan- in 2004 through the Global Development Al- zania, Kenya, and Mali thanks to water pumps liance (GDA) solicitation for innovative de- and other simple, appropriate technologies velopment solutions and new partners willing created by KickStart. Their added profits are a to bring resources to the table. The organiza- tiny part of $38 million in new wages and tion had recently opened a domestic office profits generated by KickStart products. In and launched an outreach campaign to take Tanzania, farmers using KickStart pumps gen- its proven concepts to scale. ApproTEC erate profits and wages equivalent to 0.2 per- asked USAID to support the important first cent of Tanzania’s reported GDP. step of expanding sales of irrigation pumps in Tanzania.

BUILDING THE ALLIANCE Thomas McAndrews, a private sector develop- KickStart was founded by Nick Moon and ment officer in USAID’s Tanzania mission at Martin Fisher, two veterans of African devel- the time, recognized the company’s value, opment efforts. Frustrated by the lack of last- commenting that the pumps “could have a ing progress against poverty, and inspired by profound impact on the income streams of the tremendous entrepreneurial spirit of poor small farmers and their families.” While nei- Africans, they set out to create a new model ther the mission nor GDA could support the for fighting poverty. Because 80 percent of the company enough to confidently foresee the world’s poor live on small farms, Moon and end of marketing subsidies, they could partici- Fisher knew that helping farmers improve pate with its private sector funders to help their productivity would have the greatest im- reach that goal and help thousands of subsis- pact on global poverty. Fisher, a Stanford- tence farmers create a middle class. trained engineer, designed a number of sim-

BUSINESS CREATION ALLIANCE 143 USAID/Tanzania offered $200,000, while formance, and to measure the economic im- GDA committed $450,000 from its 2004 in- pact of the pumps on the households that pur- centive fund. These funds were matched by chase them. cash resources totaling more than $700,000 The greater goal is to help KickStart achieve from the Mulago Foundation, the Case Foun- the critical mass of sales needed to pay for its dation, SC Johnson Corporation, and the Nike marketing budget. Once a stable demand for Foundation. Jill Rademacher, senior vice presi- the technology exists, the company intends to dent of the Case Foundation, spoke for many make it the anchor of a complete supply chain, foundation partners when she explained her first transferring the technology to manufac- organization’s support: “We look for NGOs turers and building their capacity to mass-pro- with the ability to scale innovative and proven duce it, then getting the product to distribu- approaches. Being able to leverage the contri- tion hubs that can deliver the products for sale butions of many was also an important factor at retail outlets. In time, as demand and sales in our decision to partner with USAID.” increase, the cost per sale will drop to point As a part of its expansion campaign, Appro- where a profit is made on each sale. KickStart TEC took on a new name that better reflected will use these profits to develop new technolo- its mission and impact—to kick-start busi- gies and to build markets in new countries. nesses, lives, and economies. While proud of its Ending marketing subsidies and developing roots in the appropriate technology movement, integrated supply chains are just two facets of the organization had carved out a special niche the KickStart intervention, which cycles con- by focusing not on devices that saved time or tinuously through: money, but on those that made money. ∫ Market research to identify small-scale busi- AMBITIOUS TARGETS ness opportunities with high potential. KickStart’s target is to sell 7,000 irrigation Market and subsector studies examine the pumps to farmers and an additional 3,000 to raw materials available to an economy, the local nonprofits and relief agencies. USAID’s products that compete with a proposed support is used to refine the company’s mar- technology, and market demands and con- keting techniques and effectiveness, to im- straints for small enterprises. prove product design, to assess product per- ∫ Design and production of new technologies. In addition to the tools, equipment, manuals, and business plans required to create and roll out a new product, KickStart pro- KICKSTART vides tooling, quality-control specifications, and training for manufacturers.

∫ Marketing to entrepreneurs. KickStart recruits and trains existing local retailers. It then purchases products from its circle of manufacturers and sells them to the retailers.

∫ Demand creation campaigns, perhaps the toughest step in the cycle. Despite the time and effort invested in new and appropriate technologies and the innovative results achieved, KickStart’s products are big-ticket items for local farmers. But with time, effort, and excellent product performance, marketing begins to generate awareness and

144 CHAPTER EIGHT: REDUCING POVERTY KICKSTART

sales to the point that full cost recovery is are the Case Foundation, and SC Johnson possible. Marketing techniques include Company. promotional sales and discounts, radio and The Case Foundation is an example of what newspaper advertisements, live demonstra- Business Week has called the new breed of tions, and the legwork of a commissioned philanthropic foundations, often founded by sales staff. investors and entrepreneurs, who then bring ∫ Monitoring of impact. KickStart’s monitor- their business acumen and entrepreneurial ing staff interview a random selection of approach to the practice of development. The purchasers when they ﬁrst buy the tech- KickStart story and method meshed well with nology and again one and two years later. Steve and Jean Case’s own success stories as KickStart staff administer detailed ques- founders of America Online, and they have tionnaires and gather data to determine personally visited KickStart’s Kenyan opera- the impact of the new businesses and the tions to share their business perspective. The performance of KickStart products. Prod- Case Foundation also provided a communi- ucts that fall short of the desired increase cations expert as KickStart debated its name in the owners’ income are discontinued. change in May 2005, advised KickStart on its The data help KickStart gauge how fast it expansion campaign, and committed is approaching full cost recovery. $100,000 in operating support for its program in Kenya. Says Martin Fisher: “Steve PUMPING PROFITS and Jean Case really understand what we do, KickStart’s private sector investors, like US- and it is especially gratifying when supporters AID, are committed to poverty reduction for are engaged on so many levels.” its own sake. But they have chosen to spend SC Johnson provides ﬁnancing for KickStart’s their development dollars on KickStart, in efforts to reach farmers in the Kenyan high- particular, because of the resonance between lands, one of the most remote areas of the the organization’s mission, approach, and im- country. There, some 200,000 subsistence pact and the issues and conditions donors farmers harvest the chrysanthemum plant for identify as important to them. Two examples its active ingredient, pyrethrum, whose natural insect-killing properties is the action agent in

BUSINESS CREATION ALLIANCE 145 SC Johnson’s Raid and Baygon products. puts and may lead to a new market niche at Kenya produces two-thirds of the world’s sup- the bottom of the economic pyramid. ply of this natural insecticide, and SC John- son is the world’s largest buyer. But only 12 NEXT STEPS percent of farmers irrigate their lands, de- The Business Creation Alliance is a part of pressing crop yields, while the lack of exten- KickStart’s $16 million plan to create 80,000 sion services has degraded crop quality. De- new enterprises by increasing market penetra- spite its comparative advantage, Kenya is not tion in Kenya, Tanzania, and Mali, and ex- maintaining its share of the global market in panding to three new countries in the region. active ingredients for insecticides. A low-cost hip pump and deep-water pump Since Kenya’s pyrethrum farmers do not often are two new technologies under development. visit the city and town centers where Kick- Priced at about $30, the hip pump is designed Start’s regular marketing activities take place, as an entry-level product, while the design of SC Johnson enables KickStart to take its mar- the deep-water pump will allow it to reach 70 keting outreach directly to the highlands. feet below the surface through well shafts and Through promotions and event marketing— boreholes. Marketing efforts also include prod- such as contests to determine who can fill a uct placements in a radio soap opera and men- water tank faster using one of the pumps— tions in a song by a popular Tanzanian per- pyrethrum farmers see what the pumps can former. KickStart hopes to test a rural do for their lives. In the first year of SC John- micro-credit project by the end of 2006. son’s involvement, more than 10,000 farmers These efforts are progressing while the organi- have had an opportunity to learn about the zation overcomes obstacles—among them in- pumps through radio and newspaper adver- creases in the cost of steel that threaten to tisements, newsletters, posters, contests, and price the pumps out of the market, a copycat other marketing. manufacturer that is threatening the reputa- Tied marketing is also an element of the part- tion of the KickStart brand, and continued nership. SC Johnson supplies a can of Raid or difficulties in reaching rural consumers. De- Baygon insecticide with every pump sold, es- spite these challenges, KickStart is well posi- tablishing the SC Johnson brand in the minds tioned, with a wide mix of public and private of new consumers who, thanks to the pump, funders. will soon enter the middle class and have For-profit and foundation donors provide the more disposable income for public health majority of KickStart’s funding. Official bi- products, such as insecticides. The Pyrethrum and multilateral donors provide just 14 percent Board of Kenya supplies a pack of high-qual- of KickStart’s revenues, an amount that is ex- ity pyrethrum seeds with every pump sold, ceeded by KickStart’s earned income. Kick- providing further value to the farmers and Start’s goals is to increase earned income, re- restoring seed quality for future generations. duce the need for marketing subsidies, Pyrethrum production per acre has increased cultivate a wide array of private sector funding substantially, allowing SC Johnson to con- sources, and enlist official donors for help only tinue to use natural pyrethrum rather than in navigating the intricacies of a given devel- switching to a synthetic replacement. At the opment milieu. The company’s plan is well same time, pyrethrum farmers boost house- aligned with USAID’s approach to partner- hold incomes that will improve nutrition, ships, in which the agency gradually reduces health, and education for their families. For public funding but continues to play a con- SC Johnson, it is an opportunity to invest in vening and facilitating role among diverse the well-being of communities in a manner stakeholders. that improves the conditions of its factor in-

146 CHAPTER EIGHT: REDUCING POVERTY MARKALA SUGAR PROJECT ALLIANCE “WE WILL DO GREAT THINGS TOGETHER”

PURPOSE ACCOMPLISHMENTS AND OUTCOMES The Markala Sugar Project Alliance, part of a After a preliminary feasibility study and initial long-term plan to build a sugar industry in testing showed that sugarcane could be grown A visionary but Mali, mobilized funds to prove the feasibility in Mali, the alliance has expanded its program businesslike of a program to grow and process 8,000 tons of field-testing and attracted private sector in- public–private of sugarcane per day, about five times the terest. Two enterprises have been created: approach to country’s current capacity. The expected out- Caneco, to grow and harvest the cane; and So- come—to produce 164,000 tons of sugar per ciété Sucri∑re de Markala, SA, to build a fac- building a sugar year—will have a major impact on Mali’s in- tory to process the cane and market sugar do- enterprise is ternal economic development by creating mestically and regionally. The alliance’s $1.785 proving a tremen- jobs, raising indigenous managerial capacity, million investment is expected to attract $270 stimulating investment in infrastructure, and million in capital, the largest amount of for- dous growth generating export income. eign direct investment that Mali has ever at- opportunity for tracted. Mali, one of the CONTEXT poorest countries With per capita income of $860, Mali is a FUNDING ARRANGEMENT of Sub-Saharan poor country on the southern edge of the Sa- U.S. Agency for International Development: hara. But the Niger River holds out the $892,000 Africa. The enter- promise of economic growth and jobs through prise is expected Schaffer and Associates International, LLC: expansion of agriculture. Only 6 percent of $626,000 to generate 5,000 Mali’s one million hectares of arable land are jobs, build the do- presently cultivated, leaving ample room to Government of Mali: $177,000 grow and process sugarcane to satisfy strong mestic economy, Office du Niger: $90,000 domestic demand and earn export revenue. and generate export revenue. ALLIANCE MEMBERS U.S. Agency for International Development Schaffer and Associates International, LLC Ministry of Industry, Government of Mali Office du Niger

MARKALA SUGAR PROJECT ALLIANCE 147 ali’s 11 million people consume RECOGNIZING AN OPPORTUNITY— about 140,000 metric tons of sugar BUILDING THE ALLIANCE Mannually, of which less than 30,000 Pamela White, USAID’s mission director for metric tons are produced domestically. The Mali at the time, ﬁrst heard about the plan Markala Sugar Project is designed to make from SAIL president Francis C. Schaffer. Hav- Mali self-sufﬁcient in sugar and allow export ing been briefed on the alliance approach by of up to 60,000 tons of sugar each year, while staff of the Global Development Alliance opening investment opportunities and creat- (GDA), and with her thorough knowledge of ing thousands of jobs to lift Malians out of conditions in Mali, White quickly tagged the poverty. This home-grown concept was a nat- Markala Sugar Project as alliance material. ural candidate for a publicprivate alliance. Now the USAID director in Tanzania, White recalls the moment:

THE IDEA: TO CREATE JOBS ALONG “Sometime in the fall of 2001, I went to a meet- THE NIGER RIVER ing that Francis Schaffer was chairing on the The idea that became the Markala Sugar Pro- merits of building a sugar factory in Mali. I re- ject sprang from Mali’s plan to develop a ally was there by happenstance. Holly Wise [then poverty-stricken region along the Niger River. GDA director] had finally convinced me that the Agribusiness, and particularly sugar, had al- GDA concept was truly viable and worth pursu- ready been identified as a primary sector for ing. I was looking for a chance to build an al- development and investment. With funds liance when someone mentioned to me that the from the U.S. Trade and Development Schaffer Company was holding a briefing at the Agency, the Malian ministry of industry, national convention center. Schaffer gave such a commerce, and transport hired Schaffer and technically detailed yet passionate speech that I Associates International, LLC (SAIL), to con- was immediately convinced. duct a feasibility study for proposed sugar development in the region of Ségou. SAIL “Later that night I met Schaffer again at the am- matched the funds provided by the U.S. gov- bassador’s residence and asked him if he would ernment.1 The study, approved by Mali’s gov- like to work together. Before I could even outline ernment in 2001, concluded that the region my ideas, he responded, “We will do great things appeared well suited to the further develop- together.” After that there was no turning back. I ment of sugarcane, based on the quality and knew that no investors would come to Mali (a bit quantity of available land, the ready availabil- off the beaten path) unless we could prove to ity of water from the Niger River, the avail- them that Mali was a good place to invest, so Mr. ability of workers needing employment, and Schaffer and I agreed that we would, together attractive financial projections. with the government of Mali, start sugarcane trials to prove that land in Mali was indeed suit- The plan called for sugarcane to be grown on able for development of sugarcane and could pro- 15,000 hectares of irrigated land, with 2,500 duce enough cane to support a factory with a hectares dedicated to small farmers. A future daily capacity of 8,000 tons. sugar factory would have the capacity to process 8,000 tons of cane per day. Total an- “At first the road was rocky—what would be the nual production was projected at 1.53 million government’s share? Who would implement the tons of cane, or 170,000 tons of sugar, exceed- project? How could we move the money quickly? ing domestic demand and providing export What about environmental concerns? We took opportunities. Further expansion was to be the challenges on one by one, never getting dis- divided equally between the estate and small couraged by bureaucracy or lack of vision. Many, farmers. even in USAID Mali, could not see where we were going. Many said it was illegal to give US- AID money to a private company. I knew that it wasn’t. Environmentalists said that it would take

148 CHAPTER EIGHT: REDUCING POVERTY a year to get the clearances—it took about four months thanks to a very dedicated USAID envi- ROLES OF THE MEMBERS OF THE MARKALA SUGAR PROJECT ALLIANCE ronmentalist. Some said that the land that the government had given us wouldn’t really pro- ∫ U.S. Agency for International Development provides funding and duce anything—it did. We had problems get- project support. ting the land graded correctly; we had problems ∫ Schaffer and Associates International, LLC, provides program getting the sugarcane samples into the country; management, implementation, and design. we had problems with the government’s customs ∫ Ministry of Industry, Government of Mali provides research and ofﬁcials but we took on each task, overcame, land preparation. and carried on. ∫ Office du Niger provides water and power from the Niger River. “Today this is a fabulously successful project even without the factory, which will be built next year”[2006].

∫ The third goal is to test the best cultivars ALLIANCE PARTNERS SOW THE SEEDS and agronomic practices in actual farm tri- OF FUTURE INVESTMENT als on the Caneco estate and with small From their initial meeting in 2001 through farmers. the completion of the GDA proposal in March 2002, SAIL worked closely with US- ∫ The last stage is to dedicate a plot of 30 AID and the government of Mali to design a hectares to produce seed cane to be used on sound alliance of private and public organiza- the commercial estate and by participating tions. The initial three-year alliance, approved farmers. in July 2002, has committed nearly $2 million already, with a further $1 million planned for Several social benefits are built into the 2006. The government of Mali provided land Markala Sugar Project Alliance. Employment and water resources and owns the majority opportunities are aimed at both men and stake in Caneco, the cane growing enterprise women. The program will engage young farm- for the project. With support and direction ers and provide training and technology trans- from key ministries, the Office du Niger fer. Small farmers and rural communities in (which manages the river), and USAID, SAIL the Segou region will be able to participate in hopes to complete the total funding package sugar cultivation, share access to improved infor the Markala Sugar Factory in 2006, lever- frastructure, and enjoy new opportunities to aging alliance funds to attract other invest- earn income, among other health and welfare ments and funding totaling about $270 mil- resources. lion. In the process the project will create some 5,000 jobs for the people of Mali. CANE AND ABILITIES The probability that the enterprise will prove The alliance-funded testing plan included sustainable is high, thanks to careful planning four stages, the first two of which had been and conservative business projections and as- completed by 2005: sumptions about yields, prices, and other mat- ∫ The first goal was to establish the viability ters. The partners clearly apportioned their re- of large-scale cultivation of sugarcane. Set- sponsibilities and the uses to which their ting up a methodical testing protocol, the financial contributions would be put during alliance determined the most suitable vari- the first four phases of the Markala project. eties of cane for Mali’s climate and soil. Once field-testing and seed production are ∫ The second goal was to test fertilization complete and the full investment has been and irrigation methods and requirements. raised, factory construction, infrastructure development, land preparation, and cane plant-

MARKALA SUGAR PROJECT ALLIANCE 149 ing will begin. The first harvest is expected to pact in the region is represented by approxi- coincide with commissioning and testing of mately 2,000 direct full-time and more than the completed factory. Sugar production and 3,000 seasonal jobs in the SoSuMar factory factory throughput is projected at 29,000 tons and on the Caneco estate. Some 300 small during commissioning (Year 0), rising to farms covering 2,600 hectares of the Caneco 162,000 in Year 6. The Société Sucrière de estate will provide further job opportunities Markala, SA (SoSuMar) expects an internal and growth, and encourage an economy of rate of return of 57.95 percent. SoSuMar private commercial farms within Caneco. shareholders include the Chamber of Com- When full investment capital is achieved, the merce of Mali, Schaffer and Associates Inter- Markala Sugar Project will provide the largest national LLC, and Illovo Sugar. return on investment of any publicprivate alliance to date. The major economic benefit of the project comes through substitution of domestic sugar 1. The chief innovation in this alliance was that, after careful review by contract officers, the U.S. Agency for Interna- for imports presently valued at about $45 mil- tional Development (USAID) made a grant to a for-profit lion, which will stimulate the local economy company to conduct research on sugarcane varieties appropriate for Mali. USAID funding for the project did not instead of being sent abroad. The social im- violate the Downey amendment.

150 CHAPTER EIGHT: REDUCING POVERTY CHAPTER NINE

WATER FOR LIFE IMPROVING THE FLOW OF HEALTH

Sustainable freshwater is a critical underpinning of all development. By the year 2025, 2.8 billion people in 48 countries (one-third of the world’s population) are expected to face severe and chronic water shortages. Worldwide, more than 1.2 billion people are at risk of illness because they lack access to clean water services. With the Conrad N. Hilton Foundation, The Coca- Cola Company, and other partners USAID is working to reduce the incidence of diarrheal diseases and other dangers of unsafe water, and to improve the management of water resources.

∫ WAWI unites 13 international organizations in partnership with local governments and communities to provide water supply and sanitation service delivery, hygiene promotion, and water resources management in rural and peri-urban Ghana, Mali, and Niger. WAWI is developing a coherent partnership model that promotes a community-driven, sustainable, integrated approach to service delivery and water resources management, over a period of six years, with a total of $44 million in funding.

∫ Recognizing the complexity of the challenge of global water access, both to its business and to the communities where it operates, Coca-Cola launched a Global Water Initiative in 2004 to understand and tackle risk issues in collaboration with other partners and stakeholders. The Community-Watersheds Partnership Program was the result of a strategic alignment of Coca-Cola’s social and business objectives with USAID’s strong development focus in the water sector. Both organizations seek to demonstrate that community development and business objectives are in many cases naturally allied in the water sector and can together create a much greater positive impact in developing countries.

151 WEST AFRICA WATER INITIATIVE ALLIANCE SAFE WATER, HEALTHIER LIVES

“Where there is no clean water and sanitation, United Nations Foundation Twelve interna- millions of children die each year, and millions United Nations Children’s Fund of people become blind unnecessarily and suffer U.S. Agency for International Development tional institu- debilitating diseases. Our board chose water and tions — including sanitation as a priority, as we felt it was where WaterAid a major family we could have maximum impact on the most Winrock International lives.” foundation — World Chlorine Council —Steven Hilton, chairman, president, and partner with US- CEO, Conrad N. Hilton Foundation World Vision AID to expand access to clean PURPOSE ACCOMPLISHMENTS AND OUTCOMES By 2008, as many as 450,000 people will water and sani- To provide water supply, sanitation, and hygiene services and to support sustainable wa- beneﬁt from: tation, reduce ter resources management in rural and peri- ∫ 825 new borehole wells and 9,000 new la- water-borne dis- urban Ghana, Mali, and Niger. trines ease, and ensure ∫ 100 alternative water sources the sustain- CONTEXT Access to clean drinking water and sanitation ∫ ability of water Training in water resources management, is a serious problem in developing countries. hygiene, and sanitation resources. Some 430 million people, almost two thirds of the population of Sub-Saharan Africa, lack ∫ More efﬁcient and productive use of water access to adequate sanitation services. About by farms 280 million lack easy access to a supply of safe water. The incidence of water-related disease FUNDING ARRANGEMENT such as guinea worm, trachoma, and diarrhea Conrad N. Hilton Foundation: $19.1 million presents a critical health challenge for chil- U.S. Agency for International Development: dren and vulnerable populations. $6 million

ALLIANCE MEMBERS World Vision: $16.7 million Conrad N. Hilton Foundation World Chlorine Council: $300,000 Cornell International Institute for Food, Agri- Other partners: $2.7 million (in-kind) culture, and Development Desert Research Institute Helen Keller International International Trachoma Initiative Lions Clubs International

152 CHAPTER NINE: WATER FOR LIFE hana, Mali, and Niger are among U.S. Department of State. The alliance also the 10 poorest countries of the advanced the water supply and sanitation Gworld. There are very large gaps in component of the U.S. government’s $970 coverage of water and sanitation services—in million Water for the Poor Initiative. some areas, more than half of the population WAWI unites 13 international organizations in lacks access to a safe water supply, and an partnership with local governments and com- even higher percentage lack access to sanita- munities to provide water supply and sanitation. As a consequence, the poor and vulnera- tion service delivery, hygiene promotion, and ble rural and peri-urban populations suffer a water resources management in rural and peri- high rate of preventable water-related diseases, urban Ghana, Mali, and Niger. WAWI is de- including guinea worm, trachoma, and diar- veloping a coherent partnership model that rheal disease. Food production, livelihoods, promotes a community-driven, sustainable, in- and conservation of the natural resource base tegrated approach to service delivery and water also are threatened by the lack of clean water. resources management, over a period of six In 1986, the U.S. Agency for International years, with a total of $44 million in funding. Development (USAID) issued a $5 million USAID has committed $6 million to WAWI grant to World Vision, a faith-based non- through the agency’s economic growth and governmental organization (NGO) with a global health bureaus, and through GDA. long record of humanitarian assistance around the world, to launch the Ghana Rural Water SAFER WATER, LESS DISEASE, GREATER Project. The success of that project attracted DEVELOPMENT the attention of the Conrad N. Hilton Foun- WAWI’s objectives reﬂect the internationally dation, which was interested in providing safe recognized principle that improved water re- water in developing countries. In 1990, the sources management and increased access to foundation contributed funds to enable water supply and sanitation services are World Vision to expand its activities. As a re- strongly linked to other development goals. sult, by the end of 2001, more than 500,000 Improving health and preventing water-borne villagers in Ghana enjoyed better access to ailments require clean water and sanitation fa- safe water and sanitation. That same year, the cilities. Access to water frees families to earn Hilton Foundation assessed the Ghana Rural income or engage in other pursuits that create Water Project. Finding it a success, the foun- possibilities for additional economic develop- dation decided to fund further expansion of ment. Because women and girls are predomi- safe water services around the world, commit- nantly responsible for collecting water for do- ting an initial $17.5 million (later increased to mestic use, improving water supply is $19 million) to expand work into Niger and especially beneﬁcial to them. Mali, where World Vision already had a strong presence. But the foundation also The goal of the alliance is to improve the sought an opportunity to tap into the health and well being of rural and peri-urban strength, expertise, and resources of addi- families and communities in Ghana, Mali, and tional partners. It soon found the Global De- Niger by meeting four core objectives: velopment Alliance (GDA). ∫ Increase access to sustainable, safe water USAID and the Hilton Foundation, along and environmental sanitation for poor and with several other groups, jointly announced vulnerable communities in rural and peri- the West Africa Water Initiative (WAWI) al- urban settings liance at the 2002 World Summit on Sustain- ∫ Reduce the prevalence of water-borne and able Development, citing it as a good example sanitation-related diseases, particularly tra- of the new public-private partnership ap- choma, guinea worm, and diarrheal dis- proach being promoted by USAID and the eases, through the promotion of personal

WEST AFRICA WATER INITIATIVE ALLIANCE 153 hygiene and environmental sanitation Winrock International works with other part- practices ners to develop sustainable smallholder irrigation, micro-irrigation, and associated market- ∫ Ensure ecologically, financially, and so- ing activities. cially sustainable management of water quantity and quality Lions Clubs International Foundation provides funding and in-country volunteers to ∫ Foster a replicable partnership model and carry out a trachoma-prevention campaign in institutional synergy to ensure technical Mali and Niger. excellence, programmatic innovation, and long-term financial, social and environ- UNICEF provides technical assistance and mental sustainability training on rural school-based sanitation and hygiene education. It also drills wells, rehabili- The alliance began field implementation in tates water points, and develops alternative 2002 in Mali, and in 2003 in Ghana and water sources. Niger. The alliance is well on its way to meeting its target of providing benefits to at least WaterAid builds the capacity of communities 450,000 people in the first six-year phase of to manage rural sanitation and change hy- the initiative. It is working closely with na- giene-related behaviors. It is the principal im- tional governments to replicate and scale up plementer of the alliance’s peri-urban program efforts to make a significant impact on meet- in water supply, sanitation, and hygiene service ing the Millennium Development Goals in delivery. water supply and sanitation in all three World Chlorine Council utilizes its network of WAWI countries. There is also interest in ex- industry trade associations to donate PVC panding the program by incorporating new pipe and education materials to communities. resources and gradually extending the areas of geographic focus. USAID supports partner grants in focus areas including integrated water resources manage- PARTNER ROLES AND ACTIVITIES ment, income generation, gender mainstream- In addition to the founding roles played by ing, and environmental strengthening. In ad- the Hilton Foundation and World Vision, the dition, the agency provides significant support current members of the alliance represent a through cross-cutting activities of interest to broad spectrum of institutions, including a the alliance, including strategic planning, private foundation, a bilateral donor, interna- communications and outreach, monitoring tional NGOs, universities, a public interna- and evaluation, hygiene behavior change, and tional organization, and a for-profit industry knowledge management. association. Together, partners exercise broad international reach and bring rich and diverse PARTNERSHIP GOVERNANCE expertise to the program through their com- WAWI’s governance structure has evolved con- plementary roles. siderably since the partnership was created. Presently, a headquarters-level steering com- Cornell International Institute for Food, Agri- mittee holds semi-annual meetings to ensure culture and Development conducts practical continued attention by all partners to overall research and pilot activities to promote com- policy and funding issues. The Conrad N. munity mobilization and raise attention to gen- Hilton Foundation is an active participant at der issues and natural resource management. this level. The USAID Water Team provides Desert Research Institute assists program im- coordination and technical support to the plementation through hydrologic analysis and steering committee. modeling for well siting and water-source sustainability.

154 CHAPTER NINE: WATER FOR LIFE At the regional level, World Vision’s Ghana WAWI is a complex alliance with many part- office hosts the WAWI secretariat, which co- ners, wide geographic reach, and an ambitious ordinates field implementation. USAID pro- mission. Partnership development can be a vides a regional coordinator for WAWI activi- challenge under such conditions, requiring ties based in Bamako, Mali, who supports and considerable time and effort to ensure that the works in close coordination with the WAWI alliance becomes greater than the sum of its secretariat. parts. Sharon Murray of the USAID Water Team, who manages USAID’s participation in For each WAWI country, national steering the alliance, has witnessed first-hand WAWI’s committees for each WAWI country are maturation through many stages of formation, hosted by World Vision and chaired by a rep- reconstitution, and development. resentative of the host government. WAWI partners active in the country are represented For Murray, an effective alliance is one that on the steering committees, which coordinate maintains effective communication, navigates partner efforts and carry out joint program diverse institutional cultures, and overcomes planning at the country level. the logistical and practical problems of coordinating multiple activities on the ground. “The Some 450,000 people are expected to benefit intense commitment and perseverance of part- from WAWI interventions by 2008. Those in- ners at both headquarters and field level,” terventions include: notes Murray, “has allowed WAWI to move ∫ Drilling 825 new borehole wells closer to a practical, effective, operational model of collaboration. Refining and sharing ∫ Developing 100 alternative water sources that model with others,” she concludes, “will ∫ Building 9,000 latrines ultimately help realize the promise of partnership that WAWI offers.” ∫ Training thousands of people in water management, hygiene, and sanitation

∫ Teaching community associations, women’s groups, and households how to maintain clean and safe water supplies in WORLD VISION the home

∫ Making hundreds of farm households more efﬁcient and productive users of water

LESSONS LEARNED WAWI is approaching the mid-point in its ﬁrst six-year phase of activity. It will conduct a formal evaluation in 2006 to measure progress and adjust course where needed. “This program is still in its infancy relative to the demanding and important results that are expected of each of the partners and in terms of stated goals and activities,” reports Richard Stearns, president of World Vision. WAWI partners have just completed a ﬁve-year strategic planning process focused on scaling up current efforts and becoming even more effective in national and international water-sector reform.

WEST AFRICA WATER INITIATIVE ALLIANCE 155 COMMUNITY-WATERSHEDS PARTNERSHIP PROGRAM SAFEGUARDING WATER RESOURCES

PURPOSE ALLIANCE MEMBERS AND ROLES Match the business objectives of a major in- U.S. Agency for International Development The U.S. Agency ternational corporation with the needs for wa- (USAID) for International ter resources management and service delivery The Coca-Cola Company (TCCC) Development in countries where both partners operate. US- AID and the Coca-Cola system work together and The Coca- Global Environment & Technology Founda- to provide incentive grants to local business tion (GETF) Cola Company units and bottlers and USAID missions to join forces to carry out water-related projects in target com- ACCOMPLISHMENTS AND OUTCOMES munities of the developing world. address water In Mali, the program will support community resources issues water supply and sanitation as well as small- CONTEXT scale agriculture activities using recycled waste- in developing Sustainable freshwater is a critical underpin- water from a local Coca-Cola bottling plant. countries where ning of all development. By the year 2025, 2.8 In Bolivia, activities will improve governance both operate. billion people in 48 countries (one-third of and management of the watershed near a the world’s population) are expected to face Coca-Cola facility. Two more projects will be severe and chronic water shortages. World- initiated during 2006, and USAID and TCCC wide, more than 1.2 billion people are at risk hope to extend the program into 2007. of illness because they lack access to clean water services. At the same time, a dependable FUNDING ARRANGEMENT and clean water supply is essential for eco- U.S. Agency for International Development: nomic and industrial development. Increas- $1 million ingly, different human activities are competing for limited water supplies that are critical The Coca-Cola Company: $1.5 million to sustaining human health, ecosystem sustainability, livelihoods and economic productivity.

156 CHAPTER NINE: WATER FOR LIFE ater is the key ingredient in The sion and global offices in over 200 countries. Coca-Cola Company’s (TCCC) An overwhelming 92 percent of The Coca- Wapproximately 400 beverage Cola system bottlers responded, demonstrat- brands and its reliable supply is fundamental ing a keen desire to both understand and ad- to the company’s business success. TCCC has dress the water-related risks faced by the recognized that issues of water supply sustain- company worldwide. ability (quality and quantity), watershed man- Among the environmental concerns identified agement, and wastewater treatment compli- were issues related to availability and manage- ance are key environmental business risk ment of shared water resources, as well as liq- issues for the corporation. Access to adequate, uid and solid waste management risks associ- dependable, clean water is also basic for qual- ated with local bottling facilities. Community ity human life. As a responsible global corpo- relations and the company’s social license to rate citizen, TCCC desires to act positively operate were also examined in light of past ex- and, working through local and international periences in communities where water scarcity partners, help to ensure access to clean drink- is a real issue and the responsibility of the ing water and sanitation in the communities Company towards helping to resolve these where they operate. Water stewardship, for challenges extends beyond the walls of the fa- the business, the communities and the envi- cilities. ronment, is central to TCCC’s corporate social responsibility goals. The risk model provided strong empirical support of the business case for addressing water For the past decade, The Coca-Cola Com- issues that affect local bottlers and the sur- pany and its bottling partners have imple- rounding communities, in their environmen- mented efficiency measures to lower the water tal, economic, political and social dimensions. use ratios in its approximately 900 bottling Based on the analysis, customized mitigation facilities around the world. Recognizing the plans are being developed by TCCC operating complexity of the challenge of global water units and bottlers, focusing on concrete ac- access, both to its business and to the com- tions to improve company operations and en- munities where it operates, Coca-Cola gage with communities and development or- launched a Global Water Initiative in 2004 to ganizations to address social concerns. understand and tackle risk issues in collaboration with other partners and stakeholders. In March 2005, TCCC married its local risk The Community-Watersheds Partnership assessment work with top-level strategic plan- Program was the result of a strategic align- ning to map the company’s aspirations for the ment of TCCC social and business objectives future. The company developed a 10-year vi- with USAID’s strong development focus in sion statement recognizing water stewardship the water sector. as a critical element of the overall Coca-Cola corporate strategy, and resolving to translate TAKING ACTION TO REDUCE RISK the vision into action. Strategic thinking and action on water within TCCC has been advanced by a dedicated En- MEETING MULTIPLE OBJECTIVES vironment and Water Resources department THROUGH PARTNERSHIP within the company, led by Jeff Seabright, a In charting a way forward on water issues, former USAID senior officer in natural re- TCCC engaged a nongovernmental organiza- sources management. As a key building block tion, the Global Environment and Technology of its strategic approach, the office undertook Foundation (GETF), to assist in outreach, a comprehensive assessment of diverse physi- facilitation and implementation of the Global cal, social, economic, and political risks facing Water Initiative with a variety of development the company through a 300-question survey partners. Representatives from both TCCC sent to all its bottling facilities as well as divi- and GETF approached individual USAID

COMMUNITY-WATERSHEDS PARTNERSHIP PROGRAM 157 COCA-COLA’S BUSINESS CASE FOR ACTION

he Coca-Cola Company has communicated the relationship between water and its core business functions in its forward-looking statements to shareholders. In what is called a T10-K filing with the U.S. Securities and Exchange Commission (SEC) covering Coca- Cola’s fiscal year 2004, the company reported that “Water is a limited resource facing unprecedented challenges from overexploitation, increasing pollution and poor management. As demand for water continues to increase around the world and as the quality of the available water deteriorates, our system may incur increasing production costs, which may materially adversely affect our Company's profitability in the long run.” “What Coke is now reporting to its shareholders,” explains Dan Vermeer, Director of Coca- Cola’s Global Water Partnerships within the Environment and Water Resources department, “is that water quality and water quantity are enterprise risks that are globally significant in scale. Essentially, it’s a message that this is an important business challenge that Coke faces.”

missions as well as the Water Team located at ted over $200,000 of solar pump equipment USAID headquarters in Washington about a for the local initiative, while the Bolivia mis- broad range of partnership possibilities during sion is contributing management, technical ad- 2004 and 2005. vice, and partnership facilitation support.

As a result of these interactions, TCCC and GETF worked to develop a request for ALLIANCE PROfiLE USAID Global Development Alliance (GDA) The Community-Watersheds Partnership Pro- funding to support a global program that gram supports an incentive grants program for would address specific local water resources water-related projects in countries where there needs, while also advancing Coca-Cola’s cor- is a Coca-Cola corporate presence as well as a porate objectives in social responsibility, USAID mission. USAID missions and Coca- cleaner production, local community support, Cola divisions or bottling facilities are asked to and risk management. This proposal incorpo- jointly develop proposals for activities of mu- rated ongoing projects under development tual interest. Final project selection is based on with the USAID/Mali and USAID/Bolivia evaluation criteria jointly developed by US- missions. The alliance would be managed on AID and TCCC. the USAID side by the agency’s Water Team, One or two additional projects will be initi- which welcomed the opportunity to engage a ated under the program during 2006 (with major corporate partner to jointly address USAID’s 2005 fiscal year funding), including global water issues. at least one activity in Asia. Projects developed GDA and other offices within the agency sig- under the alliance can address any important naled a willingness to support the partnership water resources management or water service in the amount of $1 million, matched by $1.5 delivery problem facing the local communi- million of TCCC funding. A memorandum of ties, and must follow internationally estab- understanding outlining the objectives of the lished principles of the sector including good Community-Watersheds Partnership Program governance and public participation, financial was signed by USAID, Coca-Cola, and GETF and ecological sustainability, and social and in August 2005. The two projects already de- gender equity. Projects must also directly sup- veloped in Mali and Bolivia were approved as port both the strategic development priorities the first activities to be supported under the of the local USAID mission (as demonstrated global alliance. To supplement the core fund- by a matching funding requirement), as well as ing, the USAID mission in Mali has commit- the corporate interests of TCCC locally.

158 CHAPTER NINE: WATER FOR LIFE MALI ners, the alliance has reinforced local water In Mali, TCCC faces water resources oppor- partnership arrangements, provided direct and tunities and challenges, among them a desire tangible services and economic benefits to to bring the local bottling facility BRAMALI Malian citizens, and strengthened community into compliance with global corporate stan- decision-making. For the Malian Ministry of dards for plant wastewater treatment. TCCC Environment, an example has been set for committed to a local investment in plant other industry leaders in the country to follow wastewater management, coupled with sup- in the area of environmental compliance. And port to community interventions in water for the local communities, significant benefits supply, sanitation, and hygiene. are forthcoming both in improved environmental quality, as well as increased access to Under the initiative, USAID’s local NGO basic services for the poor. partners are developing and rehabilitating water points and promoting sanitation and hygiene in peri-urban Bamako (near the local BOLIVIA bottling plant), as well as rural communities In Bolivia, the local Coca-Cola bottler EM- in the Ségou, Mopti and Timbuktu regions. BOL is located in the Tarija municipal water- In addition, once the BRAMALI wastewater shed which experiences chronic surface and treatment plant is operational in 2006, NGO groundwater shortages due to a number of fac- partners will explore both use of the treated tors including inadequate water supply service wastewater for small-scale irrigation near the development, wasteful water use practices by a plant, as well as the potential application of number of actors, and lack of sustainable wa- waste biosolids as a soil conditioner, with the tershed management. As a leading industrial goal of increasing food security and generat- user of water in the area, EMBOL was moti- ing revenues for local families. These activities vated both to improve its own internal man- build on three years of investment by USAID agement to reduce water use and prevent water working with a consortium of local partners contamination, and to become a more active to deliver an integrated package of water re- participant in governing area water resources sources management services and technical as- with other local stakeholders. The USAID sistance to vulnerable communities through- mission in Bolivia became interested in the out Mali. The program also provides critical partnership as a way to build on its past in- added value to existing USAID programs that vestments in biodiversity, upper watershed increase local government capability to deliver management, and cleaner production in Tar- and manage basic services for their communi- ija, by engaging an important industrial actor ties. and strengthening local participatory governance models for water resources manage- The entire package of interventions success- ment. fully meets the objectives of the multiple partners involved: For the local bottler, the lever- The Community Watersheds Partnership Pro- aged investment in wastewater treatment as gram is supporting a local alliance of stake- well as community water supply and sanita- holders in the water sector to promote im- tion projects has garnered support at both the proved watershed management in the Tarija national and local government levels in Mali, area, including public awareness and behavior and mitigated local social and economic risk change, local industry engagement in partici- for the company. For TCCC corporate head- patory decision-making processes, commu- quarters and divisions, one more local bot- nity-based water resources management activi- tling facility will be brought into compliance ties, and improved industry water and with TCCC internal environmental stan- wastewater practices. These activities will be dards, serving as a model to others in the re- implemented by USAID’s local development gion. For USAID and local development part- partner NGOs together with local governments and communities. In addition, the local

COMMUNITY-WATERSHEDS PARTNERSHIP PROGRAM 159 EMBOL bottling facility will be supported by to build productive synergies between the TCCC division and headquarter representa- agency’s existing development priorities and tives to carry out complementary activities in- private sector interests. Both organizations cluding those related to local hydrogeological seek to successfully demonstrate that commu- analysis, public outreach and information dis- nity development and business objectives are semination, as well as improved water man- in many cases naturally allied in the water sec- agement activities of the plant operation it- tor, and can together create a much greater self. As its contribution to the alliance, the positive impact in developing countries. USAID/Bolivia mission will serve a key coor- The first two projects supported by the pro- dinating and facilitating role among the part- gram, as well as additional activities under de- ners, and provide ongoing technical oversight velopment, reflect the diversity of water-re- for local NGO activity implementation. lated challenges that face both the business The project is still in the final stages of de- and development sectors, and highlight the sign, and all the partners’ roles and activities numerous opportunities for intersection of the have not been fully identified. However, the two. The great enthusiasm already demon- project holds great promise to improve both strated throughout the TCCC system as well the long-term sustainability of the water re- as USAID missions for this alliance is a clear sources upon which both local industry and demonstration that “water” is an issue around communities depend, while also improving which diverse partners can find a meeting of EMBOL’s corporate citizenship and collabora- the minds. tive interactions with other actors in the wa- Once the Community-Watersheds Partnership tershed. Program activities are fully up and running, the partners will work to document overall THINK GLOBALLY, ACT LOCALLY progress in addressing both business risk and The Community-Watersheds Partnership development objectives against jointly devel- Program is still quite new and faces many oped indicators. Demonstrated impacts of the challenges in its efforts to spread a forward- alliance will serve to advance both TCCC’s looking vision throughout two highly decen- and USAID’s overall visions in the water sec- tralized organizational structures. TCCC is tor. Eventually, TCCC and USAID envision working hard to communicate the general that the Community-Watersheds Partnerships business case for water resources management model will be fully internalized within each of to its divisions, bottling facilities, and other their organizational structures, fostering the operating units, while permitting a cus- formation of many additional locally-devel- tomized approach that responds to a diversity oped alliances in the water sector that go well of contexts in the field. USAID is working beyond the boundaries of the existing global with its missions to ensure that they under- program, and embrace other actors beyond the stand the local TCCC needs and priorities re- two founding partners. lated to water resources management, in order

160 CHAPTER NINE: WATER FOR LIFE PART 1II

THE WAY FORWARD CHAPTER TEN

TOMORROW’S PUBLIC– PRIVATE ALLIANCES

The national security strategy of the United States rests on the triad of defense, diplomacy, and development—the “three Ds.” President Bush and Secretary of State Rice have made it abun- dantly clear that all three legs of that strategy are essential. As evidence of development’s place in the administration’s thinking, one has only to note that the budget of the U.S. Agency for International Development (USAID) has nearly doubled since 2001—the largest increase in percentage terms since the Truman Administration. But effective promotion of development depends on far more than appropriations of public funds, important as these are. The fact is that today’s toughest development challenges will be met not by a single set of actors—not by governments, international organizations, corporations, foundations, faith-based groups, or civil society acting in isolation. They will be met—they are being met—by cross-sectoral alliances of several or many actors, each lending its own capacity to the coordinated and se- quenced pursuit of shared goals.

Globalization has highlighted the power of private sector-led growth, as well as the enduring re- alities of poverty, disease, and poor governance. Where governance is poor and institutions weak, economic life is stiﬂed or driven underground. Most foreign investors stay away, and what investment there is has little beneﬁt for poor people.

CONCERTED INTERVENTIONS, JUST IN TIME Multinational corporations have a unique perspective on how differences in the quality of institutions from one country to another can affect investment decisions. It is no surprise, therefore, that they have led the way in forming public–private alliances, which they view as the best means of achieving just-in-time improvements to the investment climate. Such companies were the ﬁrst to turn to other actors—to governments and international institutions, bilateral and multilateral aid agencies, civil society and nongovernmental organizations (NGOs)—to com-

162 CHAPTER TEN: TOMORROW’S PUBLIC–PRIVATE ALLIANCES plement their limited capacity to meet the USAID does not have a monopoly on good governance challenges that affect their ability partnership ideas, but it is well positioned to to operate. partner with others to achieve their social, environmental, and economic goals in developing The partnerships thus formed have become countries. With more than 40 years of experi- an established approach for delivering devel- ence managing a wide range of projects in de- opment assistance, as both established and veloping countries, the agency has a unique un- new actors now recognize that neither govern- derstanding of social, economic, and political ments, nor international organizations, nor challenges and long-term working relationships companies, nor NGOs can succeed alone. with governments, the private sector, and civil They know that lasting change, change that society organizations in developing countries. leads to sustainable, equitable, and environmentally sound growth, depends on mobiliz- The GDA business model has passed some ing complementary roles and skills. significant milestones. Approximately 290 alliances have been formed in less than four In 2001, USAID embraced this new paradigm years, leveraging more than three dollars in by creating the Global Development Alliance partner funds and in-kind contributions for (GDA). The GDA approach hinges on the every dollar contributed by the U.S. taxpayer. idea that business has a critical contribution to As a result of the record of concrete results make to sustainable development but cannot that the GDA has built, alliances will continue do so on its own. It galvanizes that contribu- to gain salience as a new business model for tion by combining companies’ resources, delivering development assistance. skills, and presence in particular countries with USAID’s global platforms, capabilities, To extend alliance work into new sectors and and experience—and, as necessary, with the to deepen alliance activity in sectors where talents of other organizations. they have already made a mark, the agency will, in the years to come, continue to adjust its policies, programs, and procedures to pro- THE CAPACITY TO FORM AND mote alliance formation. In making those ad- MANAGE ALLIANCES justments, several internal and external issues Because successful development requires will need to be addressed. private actors, companies, foundations, philanthropists, and faith-based groups with partnership capacity, USAID has supported or- INSIDE USAID: MANAGING ganizations, such as the International Business RELATIONSHIPS AND Leaders Forum, the U.S. Chamber of Com- MAINSTREAMING THE ALLIANCE merce’s Center for Corporate Citizenship, the MODEL Synergos Institute, and Partners for Christian Changing the mindset and behavior of any Development, that are dedicated to raising large organization, especially a decentralized the capacity of companies, foundations, vol- organization spread over the globe, is a major unteers, and faith-based groups to work in undertaking. While much progress has been partnerships similar to those profiled in this made, the agency will seek to further embed report. alliance building in strategy development and human resource management. USAID’s tradi- USAID has had to raise its own partnership tional approach to strategy development has capacity as well. The agency has had to learn been to gather input from a wide variety of to play various roles in alliances, depending sources, while developing a strategy that on circumstances and needs. In some cases, reflects the U.S. government’s priorities and USAID has been a convener of a small set of fits within USAID’s budget. This often leaves partners. In others, it has been a builder of little latitude for new direction, new resources, new institutional arrangements. and others’ ideas. What needs to be done?

INSIDE USAID: MANAGING RELATIONSHIPS AND MAINSTREAMING THE ALLIANCE MODEL 163 ∫ Collaborative models of planning need to within USAID and among partners, in mak- be developed to support the alliance busi- ing alliances work for development. ness model. Several trends may prove particularly impor- ∫ Simultaneously, there needs to be a major tant in alliance formation in the coming years. operational shift from managing money and instruments to managing relation- DIASPORAS ships. The development community has only just be- The people who drive the alliance-building gun to sense the development potential of di- process are critical. USAID will need to focus asporas, both for their specialized knowledge on valuing, recruiting, and retaining people and as a source of finance. Diasporas are often with an entrepreneurial spirit to match their rich in skills needed in their countries of ori- technical development skills. USAID will gin, and the money they remit to relatives at need to provide incentives to develop new home already exceeds the official aid provided management structures and reward people for by governments in the developed world. US- managing partners’ money as well as they AID, and the development community at manage that of their own program. large, are considering ways to facilitate the transfer of both skills and funds, and to multi- To assist with the change process at the tacti- ply the development effect of those transfers. cal level, in the field, the agency is extending Tasks include making it easier for people to the use of regional alliance builders, whose send money home, possibly by encouraging job it is to mainstream the theory and prac- them to participate in the local banking sys- tice of alliance building in USAID field mis- tem or by devising collective (and more cost sions and to provide partners with a point of effective, or lower transaction costs) remit- contact when building alliances across regions tance instruments that could serve, for exam- and sectors. Regional alliance builders will ple, as a source of capital for housing and busi- draw upon the resources of USAID and the ness loans or for insurance. resources of private actors to build country and regional alliances. By the end of fiscal Future alliances will exploit other ways for di- year 2006, USAID will have deployed six re- aspora groups to use their skills and capital to gional alliance builders. Several field missions help their homelands. Diasporas can serve as a with substantial and intense alliance activities force for democratization, as symbolized by have hired their own alliance builder to foster the return of expatriates to assume leadership and manage partner relationships. positions in Georgia, Latvia, and elsewhere. In 2005, GDA helped USAID’s Pakistan mission to bring together a group of influential mem- OUTSIDE USAID: NEW PARTNERS, bers of that country’s diaspora community to NEW FRONTIERS consider how they could advance development USAID spends around $15 billion dollars a in their country of origin. At first skeptical year on foreign assistance—the bulk of it still about what could be done, the participants outside partnership arrangements. Similarly, soon achieved a convergence of energy and most of our alliance partners (foundations, ideas. When the earthquake hit Pakistan in firms, NGOs) spend most of their resources October 2005, USAID was able to reach out outside alliances. Therefore, significant “mar- to the Pakistani diaspora in important ways. ket share” of development dollars remains to Similar groundwork has been laid with the be “captured” by alliances that command the Vietnamese diaspora on several occasions as sort of synergy evident in the 22 cases profiled well. Other field missions hope to replicate the in this report. With the right leadership and model. management processes, more alliances should mean more innovation and growing skill,

164 CHAPTER TEN: TOMORROW’S PUBLIC–PRIVATE ALLIANCES THE NEW PHILANTHROPISTS cause economic activity depends on them. Be- Since the 1980s, the open economies of the cause good governance is an indispensable developed world—characterized by rapid condition for doing business in the twenty- technological change, accelerated flows of first century, its attainment will be a growing financial and human capital, and market ex- source of competitive advantage among devel- pansion through trade and globalization— oping countries. And many countries have have created unparalleled opportunities for made progress. That is the good news. The the accumulation of private wealth. The new bad news is that just as many countries, in- philanthropists who seized those opportuni- cluding failed states that fall into anarchy and ties take a hands-on approach to charitable become breeding grounds for terrorists, have endeavors, often international in scope. Some slipped backwards. Many others have a long have built the infrastructure of large, tradi- way to go before they can hope to attract for- tional foundations. eign investment or foster the growth of a competitive, innovative private sector of their own. New philanthropists interested in international causes quickly encounter two major Because of the importance for development of obstacles: (1) the difficulty of finding a rep- good governance and the private sector, aid utable implementing partner in developing donors are keen to create new opportunities to countries and (2) the expense of overseeing leverage private resources to address gover- large-scale grant-making in large amounts of nance and democracy building. Developing overseas. To overcome them, the new private successful models will be a particularly tough philanthropists often seek to share infrastruc- challenge, but one we cannot shirk. ture through donor advisory services that offer foundation-like services to hands-on The private sector has much to gain from se- philanthropists. Those services include procure property rights, predictable and transpar- fessional program officers, monitoring and ent regulation, and the rule of law, all of which evaluation of grants, fund administration, create market opportunities and permit firms and collection of donations. Directly or to invest with confidence. The companies with through their advisors, the new philan- the most to gain, and thus those that are the thropists also seek to leverage their dollars by most logical partners in alliances to improve partnering with other actors whose capacities the business climate, are those that have long- complement theirs. In some cases, USAID term business interests in developing coun- works with such donors directly; in other tries. Such firms have shown interest in US- cases, it works with their advisors. AID’s experience in democracy and governance work—the rule of law, labor standards, capacity building for governance, and DEMOCRACY AND GOVERNANCE other issues—and a willingness to invest in In their traditional philanthropy as in their these activities, which, although lying outside newer, “strategic” giving, companies often the usual boundaries of corporate social re- gravitate toward sectors such as education, sponsibility and involving sensitive topics, health, and economic development. In such complement their interests. areas, it is easy to measure and observe results: students taking computer courses, water being purified, cashews being harvested. GOVERNING GROWING ALLIANCES Laying the groundwork for political and eco- Alliances are built on institutional and per- nomic freedom, by contrast, offers no such sonal relationships that require a strong dose easy benchmarks or visible results to the of trust among partners. As the alliance con- donor or alliance member. Yet development is cept spreads, and alliances grow in depth and impossible without good (or at least improv- number, building and managing those rela- ing) governance and the rule of law, partly be- tionships becomes simultaneously more

GOVERNING GROWING ALLIANCES 165 difficult and more essential, particularly when THE CHALLENGES OF THE some of the partners are networks. (Several of SECOND GENERATION OF USAID’s alliances include networks of organi- ALLIANCES zations that have coalesced around a particu- In remarks before Congress in 2000, Colin lar issue, such as cocoa in West Africa or Powell, then secretary of state, introduced youth employment in the Americas.) GDA as “a fundamental reorientation in how USAID sees itself in the context of interna- Some alliances are more than five years old, tional development assistance, in how it re- others soon will reach that mark. As time goes lates to its traditional partners and in how it on, it becomes apparent that adjustments to seeks out and develops alliances with new approaches, planning, and funding will occur. partners.” The institutionalization of alliance structures (governance, levels of support) and the deci- One of Secretary Powell’s illustrious predeces- sion to expand or disband a partnership are sors, General George C. Marshall, set the stage just a few of the important challenges that the for GDA’s alliance-based approach to develop- agency will soon face. There are bound to be ment. The Marshall Plan worked as it did be- situations where some alliance partners will cause it built partnerships within and between want to keep an activity going, even when the countries, economic sectors, public and corpo- original goals have been met or some of the rate entities, and communities. The impor- partners’ interests have shifted. tance of individuals and institutions was balanced, establishing a personal sense of Successful governance of evolving partner- responsibility and initiative that permeated the ships is essential for the simple reason that Plan’s many projects and initiatives. No single public–private alliances are not a develop- country or organization could have accom- ment fad or a temporary solution to develop- plished any of the goals of the Marshall Plan. ment problems. The United Nations and Together, they accomplished them all— other international organizations know that through collaborative problem solving, an en- they cannot solve development problems trepreneurial attitude, and the willingness of themselves. Businesses alone cannot create the all partners to adapt to new circumstances and optimal climate for their operations. Philan- newly gained experience. thropists want to take their pilots to scale. Bi- lateral donors outside the United States are GDA has adapted the alliance process to our reaching the same conclusion —and respond- era. But much remains to be done to realize ing with models similar to the GDA. the promise of public–private alliances. Chief among USAID’s challenges, as it embarks on Because public–private alliances are not going the second generation of alliance building, are away, our challenge is to make them work as the following: well as they possibly can. Leading academics are conducting valuable research on the build- ∫ Recruiting professionals with the ability to ing, managing, and governing of broad part- build and manage partnerships, and devel- nerships. Application of that research to ma- oping the alliance-building skills of the turing alliances is a sort of real-life laboratory agency’s staff and partners process with immense implications for the ∫ Ensuring that the agency has the resources, growth of the alliance-centered, collaborative human and financial, to be a reliable al- development model—and for the societies in liance partner which that model is applied. ∫ Taking the lessons learned from the first generation of alliances and bringing them to bear on the next

166 CHAPTER TEN: TOMORROW’S PUBLIC–PRIVATE ALLIANCES ∫ Demonstrating, in facts and ﬁgures, the Public–private alliances are not a panacea, and salutary outcomes of ﬁrst-generation al- they may not be appropriate in all circum- liances stances. However, the cases presented in this report provide ample evidence that alliances, ∫ Laying out priorities (geographic, sectoral, in their many possible forms, offer creative so- compositional) for the formation of new lutions, bring more resources, and deepen alliances commitment to resolving seemingly in- ∫ Discovering new ways to realize the devel- tractable development challenges. opment potential of diaspora groups, new The portfolio of alliances already formed of- philanthropists, and other emerging classes fers much learning that needs to be mined of alliance partners and shared. Most reports call for “more re- ∫ Working with academia to meld theory search,” and one of the tasks resulting from and practice in the governance of complex this report will be to continue to mine and alliances share the learning of our existing portfolio of alliances. The report you have just read is part ∫ Harnessing the energy of public–private of our commitment to sharing what we have alliances to the essential goal of fostering learned. GDA will be leading the charge to political and economic freedom in coun- deepen USAID’s institutional understanding tries where these are lacking. of alliances as development tools and making the results available to the broader development community.

THE CHALLENGES OF THE SECOND GENERATION OF ALLIANCES 167 ACKNOWLEDGMENTS

In the space of ﬁve years the Ofﬁce of Global Development Alliances (GDA) at the U.S. Agency for International Development has grown from an idea to a thriving enterprise that is pushing back the frontiers of development practice. Behind that growth lie uncounted numbers of individuals and groups. Likewise, this report on GDA’s origins and present activities is the work of many, many people—among them the hundreds of development professionals at USAID who have adopted GDA as part of their approach to development.

Within USAID, special thanks go to Barbara Addy, Roopa Karia, Todd Lofgren, Curt Reintsma, Jim Thompson, and Holly Wise for their institutional memory and gracious willingness to help tell GDA’s story.

Several friends of GDA reviewed drafts and provided invaluable advice. Chief among them are Larry Cooley, Bennett Freeman, Adrian Hodges, and Shona Sabnis. We thank you.

Representatives of the many fine groups that make up the alliances profiled in this report provided up-to-date details and data on their activities in the field, as well as reviewing drafts of the report. The fact that they are too numerous to mention is one measure of GDA’s success in alliance building. Some representatives sat for long interviews that have taught us much about the process of alliance formation. You know who you are.

Our team of writers and editors was made up of Daniel Harter, Steven Kennedy, Dan Killian, and Stephen Spector, with writing contributions from Margaret Saunders and editorial help from Julie Brooks Noble and Katie Raymond—all under the kind but firm direction of Mary Liakos.

Finally, on a personal note, I would like to thank Andrew S. Natsios for the confidence he placed in the alliance concept from the moment President Bush named him as the agency’s administrator in 2001. That confidence, and the unflagging support for GDA that accompanied it, have made the world a better place. On behalf of all my GDA colleagues, past and present, I extend my gratitude for your leadership.

—Daniel F. Runde

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