GLOBAL ECONOMY & DEVELOPMENT WORKING PAPER 75 | JULY 2014 Global Economy and Development at BROOKINGS ADJUSTING ASSISTANCE TO THE 21ST CENTURY A REVISED AGENDA FOR FOREIGN ASSISTANCE REFORM George Ingram Global Economy and Development at BROOKINGS George Ingram is a senior fellow in the Global Economy and Development program at the Brookings Institution. Acknowledgements: While I alone am responsible for the assessment and views presented in this paper, I am grateful to the many friends and colleagues who reviewed and commented on drafts of the paper. It is important to recognize that the work on aid reform over the past decade has been a collective effort, for which I thank and acknowledge col- leagues at Brookings, other Washington policy institutions, the Modernizing Foreign Assistance Network, the U.S. Global Leadership Coalition, the executive branch, and Congress. I think I can speak for this community in saying that we are grateful to the dedicated developmentalists—in the U.S. government, civil society, and private sec- tor—for their dedication to reducing poverty and advancing economic and political development. CONTENTS Introduction . 1 Overview of Administration Aid Initiatives . 2 Assistance Initiatives of George W . Bush . 2 Assistance Initiatives of Barack Obama . 3 The Reform Agenda . 8 Historic and Current American Interests in Aid . 8 The Rationale for Aid Reform . 8 Eight Elements of Reform . 13 The State of Aid Reform: Significant Progress and Notable Gaps . 16 Development Voice at the Table – Progress . 16 Coherence – Progress . 16 Strategy – Progress at the Sector and Policy Level, but a Comprehensive Strategy Still Missing . 17 Accountability – Notable Progress . 18 Rebuilding USAID – Commendable Progress . 20 Local Solutions – Mixed Progress . 21 Collaboration/Partnership – Serious Implementation . 22 Congress – Not Recently . 23 A Focused Agenda to Institutionize Reforms . 25 Coherence – Rebuilding USAID – Development Voice at the Table . 25 Strategy . 25 Evaluation . 25 Transparency . 26 Local Solutions . .. 27 Collaboration/Partnership . 28 Congress . 28 Development Finance . 29 Post-2015 Agenda . 30 References . 31 Endnotes . 35 LIST OF FIGURES Figure 1: U .S . Foreign Assistance Objectives and Organizations . 10 Figure 2: Main Resource Flows to Developing Countries, 1990 to 2011 . 12 Figure 3: Total Foreign Aid, 2000 to 2015 . 13 ADJUSTING ASSISTANCE TO THE 21ST CENTURY A REVISED AGENDA FOR FOREIGN ASSISTANCE REFORM George Ingram INTRODUCTION A decade of reform of U.S. development assistance cipal aid initiatives of the administrations of George W. programs has brought significant and important Bush and Barack Obama (anyone well versed in Bush improvement in the nature and delivery of U.S. as- and Obama initiatives might bypass or skim this sec- sistance. But the 21st century world is witnessing tion), presents the rationale for aid reform, identifies constant change in development. More developing eight key elements of aid reform, assesses the Bush countries are ascending to middle income status and and Obama initiatives according to those eight ele- gaining the capability, resources, and desire to finance ments, and proposes a focused reform agenda for the and direct their own development. The rapid expan- next several years. sion of private capital flows, remittances, and domes- tic resources has significantly reduced the relative This paper reports on and evaluates Bush and Obama role of donor assistance in financing development. administration aid initiatives only as to their impact Donors are becoming more numerous and varied. on the aid reform agenda, not as to their broader There is growing recognition that the private sector, impact. This paper deals only with development as- both nationally and internationally, is an indispens- sistance as that has been the principal target of aid able component of sustainable development. reform efforts. It does not cover humanitarian assis- tance, military assistance, or development-type assis- With donor assistance serving as an ever smaller tance that is provided by the Department of Defense. share of the development equation but remaining im- It also does not address the large assistance programs portant for some countries and sectors and an impor- to front-line states like Afghanistan and Iraq, where tant tool of U.S. international engagement, the U.S. aid has been driven principally by political and secu- government must fully implement suggested and al- rity objectives rather than development objectives. ready begun reforms. This paper catalogues the prin- ADJUSTING ASSISTANCE TO THE 21ST CENTURY: A REVISED AGENDA FOR FOREIGN ASSISTANCE REFORM 1 OVERVIEW OF ADMINISTRATION AID INITIATIVES Both the Bush and Obama administrations advanced tries with a record of good performance. The funding aid reform. Bush’s initiatives occurred while the level, never reaching the original aspirational target agenda was still being formulated. They were fewer, of $5 billion a year, has ranged between $1.77 billion not as broad reaching, and restricted to a single issue and $898.2 million annually. The MCC has signed com- or agency, but they were important in laying down a pacts with 24 countries, four of which have received strong marker and piloting key reforms. The Obama second compacts.1 Built into the MCC structure are reforms have been more holistic and encompass the aid reform elements of ownership, transparency, multiple programs. Both administrations have made and rigorous use of data, analysis, and evaluation. notable contributions to modernizing U.S. assistance programs and policies. PEPFAR, announced in the 2003 State of the Union address, was an unprecedented commitment by the United States to tackle the HIV/AIDS pandemic that Assistance Initiatives of George W. was at the time viewed as not just stymieing but Bush setting back development, particularly in the poor In some ways several of the aid initiatives of George countries of Africa, with no relief in sight. It was de- W. Bush, embedded with best practices developed signed to focus on results and be driven by data. over several decades of experience and learning, PEPFAR is led by the U.S. Global AIDS Coordinator at jump-started the aid reform process. Bush’s adminis- the Department of State and is carried out through tration undertook five initiatives that are relevant to seven U.S. government agencies, but principally three: this analysis—the Millennium Challenge Corporation the Department of State, USAID, and the Centers for (MCC), President’s Emergency Plan for AIDS Relief Disease Control and Prevention (CDC). A decade later, (PEPFAR), President’s Malaria Initiative (PMI), the the U.S. contribution of money, technology, and meth- Office of U.S. Foreign Assistance Resources (F odology is leading the world in the global effort that Bureau) in the Department of State, and USAID’s (US has finally stopped the growth of the disease, saved Agency for International Development) Development millions of lives, and given hope to many more. From Leadership Initiative (DLI). 2003-2012 the U.S. directed $46 billion to PEPFAR programs. The outcomes, as of September 2013, The MCC was the Bush administration’s response include antiretroviral treatment for more than 6.7 to the global movement to increase funding for de- million people and in 2013, through drugs to prevent velopment. It was the principal US announcement mother-to-child transmission, an estimated 240,000 at the 2002 Monterrey Conference on Financing for infants born HIV-free who otherwise would have been Development and established by legislation in 2004. It infected.2 was created as an independent agency in order to cir- cumvent what was viewed by the administration as an The President’s Malaria Initiative (PMI), launched in ineffectual USAID and the constraints of the Foreign 2005, similarly targets a single disease with specific Assistance Act. It was an innovative endeavor to start interventions (insecticide-treated bed-nets, insec- afresh with robust funding for supporting poor coun- ticidal sprays, and diagnostic tests), but in a single 2 GLOBAL ECONOMY AND DEVELOPMENT PROGRAM region: Africa. USAID is the lead agency and works known to delve so broadly and deeply into develop- closely with the CDC and other U.S. government agen- ment issues, and his administration brought several cies. While not solely the result of PMI, it is estimated leading proponents of aid reform into key positions. that deaths from malaria fell from 985,000 in 2000 to about 660,000 in 2010.3 The Obama administration undertook a series of significant foreign assistance initiatives. Three in- The creation in 2006 of the position of director of volved broad policy and operational reviews. The foreign assistance to head the new F Bureau in the White House commenced a National Security Council Department of State was an effort to bring coher- (NSC)-led eight-month review of U.S. development ence to the multi-tentacled foreign assistance pro- policies and programs that produced a Presidential gram. The catalyst reportedly was Secretary of State Policy Directive (PPD) on Development, signed by Condoleezza Rice’s frustration at the inability of the the president on September 22, 2010. The White bureaucracy to inform her how much assistance was House standard practice is to not make public presi- being spent on democracy programs. The intent was dential determinations, but in this case a detailed to consolidate foreign assistance planning and re- summary was released.5 In December 2013 a court source management throughout the U.S. government ruling6 required the release of the full PPD.7 The PPD and was implemented largely by moving those staff is designed to elevate development in U.S. policy and competencies from USAID to the new office in the serve as guidance to all U.S. government agencies on Department of State. the administration’s development priorities. The PPD centers U.S. development efforts on promoting broad- The fifth initiative stemmed from the appointment in based economic growth, democratic governance, in- 2007 of Henrietta Fore to the dual positions of admin- novation, and public sector sustainable capacity.