Event Summary: USAID Frontiers for Development Conference The Future of Development Assistance

June 13, 2012 Georgetown University, Washington, D.C.

Moderator: Nina Easton, Fortune Magazine Panelists: Gene Sperling, National Economic Council Chris Policinski, Land OLakes Paul Collier, Centre for the Study of African Economies, Oxford University; author of The Bottom Billion Steve Radelet, chief economist, USAID; former senior advisor to Hillary Clinton on development issues Opening videos Solving poverty is harder than putting a man on the moon. Second video on USAIDs initiative to open an AIDS clinic in Kampala, a partnership wherein U.S. government shared risk with a local bank. USAID also partners with the local bank to give loans to individuals with small businesses like bakeries via the Development Credit Authority. Gene Sperling How to create public awareness to help people in other countries? With a three-part formula: 1) Find a way of creating awareness that a problem exists. 2) Show that successes can happen within that problem. 3) Show that more can be done. People also need self-interest to get involved in international development moral, political, a sense of injustice. On awareness: data will go so far in informing people about a problem, but pictures, movies, etc., of people suffering is more powerful. People respond to success; to overwhelm them with depressing stories is not productive. Awareness + data + a tangible plan for success motivates people to get involved and stay involved. Without a plan for success, people lose motivation and enthusiasm for problem-solving. Nina Easton A recent change in development is that the types of donors are different. China, Brazil, and India play a role now, as do big private donors like the Gates Foundation. Question to the panel: Is aid effective? When is it effective and how? Paul Collier If move beyond polarized theatrics, then the reality is that aid agencies are focused on the poorest and most difficult environments, like Liberia, Sierra Leone, Malawi. Those countries lack infrastructure, which makes them risky. Working within those high-risk environments is just the reality of aid work now.

Chris Policinski Failure is part of the process failure isnt actually failure, its learning. With development, is every dollar effective? o No, but thats part of the learning process. Easton Can that message failure is part of the process be given to donors? Sperling Donors are not monolithic. Operators in the field should not get defensive about their failures they must acknowledge when things are not working and be willing to work through that obstacle. Pouring money into a system that isnt working decreases public support in the long run. Easton How to answer critics like William Easterly who say that aid is not effective at all? Steve Radelet Easterly and Sachs camps are sparsely populated and ultimately just distracting. Most development agencies are in neither camp. Aid is trying to achieve many types of objectives. Monitoring and evaluation, results, and the structure of aid programs must be clear for measuring effectiveness. Aid has an overall, modest impact. The actions of partner countries / governments are of utmost importance. Variance around aid means that sometimes it works, sometimes it doesnt. Sometimes it makes sense to make investments even in risky environments like venture capital. Want to be driven by results, but still take risks. Easton Give an example. Radelet In post-war Liberia, there was no guarantee that aid would work. But with JohnsonSirleaf in office, there was some hope. Same with South Sudan right now. Cant invest only in countries that are sure bets, because those countries dont need foreign aid as urgently. Easton How does bad governance undermine aid? Collier Agree with Radelet on taking risks. Rwanda is a success story. There are so many negatives in 1994 post-genocide Rwanda, but aid there over past 18 years is part of the story of Rwandas success. o Very fast rate of poverty reduction, on par with China in reducing poverty. o Notably, Rwandan government was good at establishing basic infrastructure, especially in rural environments.

They were short of money the country had no tax base so it was aid money or nothing for Rwanda. Donors in post-conflict environments have a lot of leverage to demand good governance because some countries really depend on aid money. Aid may be part of the problem, but it doesnt have to be. o

Policinski Good infrastructure the rule of law, say prepares a country for further investment. Land OLakes is $13 billion farmer cooperative, and infrastructure is key. Sperling Too easy to go to the poorest countries and say, Were going to ignore the lack of resources here and just write a check. Linking resources to infrastructure is essential, otherwise funds go into a black hole. Do you ignore the lack of governance and just give money so that people can see immediate improvements in their lives? Aid serves an appropriate role at an appropriate time. A functioning, transparent government is key. Thats the ultimate goal, and development agencies need an on-ramp strategy before a country gets to that point. Easton What has been learned about using limited resources? Radelet Theres a tension between long term goals and short term progress, which donors want to see. Old models of aid are not going to work in the future. Even if been doing it right in the past, have to change in the future because of private sector growth. More democracies in the world, more responsible governments to partner with but not all governments are democracies. Need different models for working with various governments. Also new partners who didnt exist 10 years ago, both governmental China, Saudi Arabia and private foundations. Easton Tell more about the countries just mentioned and how they deliver aid. Radelet China and Saudi Arabia are not transparent with aid, but China is commercially motivated when investing in agriculture. China is less likely to be involved in health and education. They have fewer conditions for giving aid, unlike the U.S., which is too restrictive sometimes. Collier Tim Bergen said, However many objectives you have, you need an equal number of policy instruments to implement those objectives. Development industry has infinite objectives but only one policy instrument: money.

If aiming for addressing need, that requires one instrument. If trying to prove effectiveness, thats a different instrument. Future is the Sierra Leones of the world, but one unhappy country is different from another unhappy country. Need a portfolio of instruments, not just a single one, and havent done that yet. Millennium Challenge Corporation, for instance, said forget need, lets go where they can be effective.

Easton Technology how does it change the nature of foreign aid? Policinski Agriculture depends on technology because of the increasing global population. Innovative technology is essential, but we have to be crisp about roles and responsibilities. Countries that arent the most desperate are probably going to get investment because theyre trustworthy. Easton Do recipients of aid have problems accepting new technology? Policinski Also have to be advocates of technology. Because of technological advances in farming, now one farmer feeds 150 people on fewer acres, whereas half a century ago, one farmer fed 10 people. Radelet Donors can help develop the technologies themselves (new seed varieties, say, or oral rehydration therapy), or they can support others developing technology and also help disseminate that technology. Easton What mistakes have been made in leveraging private capital? Collier Like to note a success in this pursuit: Haiti, post-earthquake, was a total nightmare governance failure, destruction, death. o USAID, through the State Department, used private capital to create jobs. We knew that garment manufacturing would generate much-needed jobs in Haiti o Earthquake persuaded Congress to relax trade restrictions on Haiti; then donors helped establish a garment factory, creating 20,000 jobs, in a new city in northern, earthquake-free, Haiti. o Private South Korean firm came in to help set-up the factory, with guidance from the U.S. government and other donors. Radelet Donors can be helpful in encouraging the private sectors involvement by: 1) Covering the cost of due diligence and risk assessments. 2) Linking supply chains; donors can work with agricultural co-ops and buy from them, though might not work directly with them.

3) Easing collective action problems a bank wont commit without some existing infrastructure, but infrastructures might not exist without bank help. 4) Encouraging co-investments between public and private investors (like OPIC). Sperling Shaping private sector flows is helpful its harder to start investing in a vague plan, especially if that plan is prone to change course along the way. U.S. government can tell the private sector how and where to invest, set some standards, and think through a plan that will benefit both donors and recipients. U.S. government can be catalyst for private investment. Easton So does the private sector need government guidance? Policinski Money does not naturally flow to the most needy areas, so yes, government can guide where aid money goes. Money will naturally flow to low-risk areas, which are not always the neediest. Easton How can NGOs increase the publics trust in development projects? Collier Given the flow of money into and out of fragile states, NGOs can be helpful in making issues more transparent. This happened in the extraction industry to great effect. Easton Last question for the panel: 10 or 20 years out, what will be the smart ways to think about development? Policinski By then, the development world should have clear roles and responsibilities and accountability for those roles. Sperling Must help people shape the flow of money. Create an ethic to inspire the U.S. public to care, create a caring environment in companies. Should prove the mutual interest in development for both donors and recipients. Radelet Three words: transparency, accountability, partnerships - especially with emerging countries and emerging donors. Collier Fewer fragile states is our overarching goal. Should increase the capacity and build institutions in those states to spend money well. There need not be tension between compassion and self-interest.