---

On Tuesday, June 13, the Economic Policy Program hosted a luncheon discussion with Dan Runde, Director of the Office of Global Development Alliances (GDA) at USAID. This event was initiated and moderated by GMF’s Senior Transatlantic Fellow Paul Applegarth and was part of our ongoing series on aid effectiveness. Runde talked about USAID’s public-private alliance initiative and about GDA’s experiences in combining resources and sharing risks with businesses and NGOs in pursuit of common development objectives. He argued that development alliances are a necessary addition to traditional development assistance and an effective means of channeling private money into sustainable development projects.

Key points made at the event were:
Aid agencies have become a minority shareholder in the business of development. Foreign aid assistance is still important, but other capital flows like private capital flows (foreign direct investment + net capital markets), personal remittances and private philanthropy have become much more important. Today, ODA makes up for only 15 percent of capital inflows to the developing world while private capital inflows (45%) and personal remittances (25 percent) account for 70 percent of total flows. Thirty years ago, these numbers were exactly reversed. Runde: ”We are becoming a minority shareholders in the business of development.”

Many companies have stakes in developing countries: Runde mentioned Cisco, Coke, P&G and General Electric - the company forecasts that 70 percent of its future profits will come from developing countries – as well as huge European FDI inflows to Latin America; Spain’s largest part of overall FDI flows into the Americas. Runde: “The future of companies lies in some countries that they have not traditionally been working with.”

For example, the food company Mars imports 70 percent of its cocoa from West Africa and has substantially invested in this area. They established powerful supply chains in the area that enable small farmers to participate in the global economy. Mars’ message to USAID could be summarized as ‘If you keep standards we will keep on buying.'

Paul Applegarth mentioned the so-called Oxfam/Unilever Report that offers a joint study of the complex reality of some key aspects of Unilever’s operations in Indonesia, and the many opportunities that these present to support the development process.

Establishing USAID’s public-private partnership initiative was an attempt to strategically broaden and organize these partnerships. Runde emphasized how the private sector makes development projects more efficient and how networks help to make commitment on both sides more sustainable. He contrasted this to conventional USAID projects that often only run two to three years. What USAID contributes to these partnerships are their knowledge (program management), their contacts in the NGO world and local administrations, and their resources. USAID’s GDA has been involved in 400 initiatives in 80 countries and has leveraged $4.6 billion.

Other public-private partnership initiatives are run by the German GTZ, British DFID, French AFD, UN System/World Bank and the Spanish and Italian governments. Paul emphasized the successful work of DFID's Emerging Africa Infrastructure Fund (EAIF).

John Lunde, a representative from Mars Inc., added that agencies like USAID or GTZ help to synchronize different project teams working in developing countries, they can provide training to the local population and establish social or health projects. The positive outcomes for companies like Mars are immense, often raising productivity and income by 30-50 percent. This is despite the fact that most projects demand that fewer chemicals are being used. Lunde emphasized that early public-private partnership efforts focused on increasing yield, while nowadays they tend to focus on environmental and social impact.