Possible Future Effects of Existing Events and Conditions
Today, USAID is witnessing the most significant shift in awareness and understanding of international development since the end of World War II. The demise of the Soviet Union, the integration of global communications and markets, the growing menace of global terrorism, weapons of mass destruction and transnational crime, the surge of HIV/AIDS and other infectious diseases—all these are hallmarks of an altered 21st century landscape for development. Failed states and complex emergencies now occupy center screen among the nation's foreign policy and national security officials. Americans now understand that security in their homeland greatly depends on security, freedom, and opportunity beyond the country's borders. USAID's development mission is now as essential to U.S. national security as are diplomacy and defense.
To prepare the Agency for these new challenges and opportunities, USAID is addressing them head-on:
Technical Leadership
USAID is revitalizing its cutting-edge technical leadership and reforming critical business operations.
Operational Integration
USAID has integrated its emergency, transition, and food operations into a single capacity to respond to failing states, complex crises, and post-conflict reconstruction, and augmented it with a new conflict mitigation and management focus.
Alignment of Foreign Assistance and Foreign Policy Objectives
USAID is carefully aligning its foreign assistance and foreign policy objectives and resources with the Department of State to assure maximum impact of foreign aid targeted on the right objectives.
The Evolving Role of Foreign Assistance
Thus, U.S. foreign assistance now must be understood as addressing five core operational goals:
- Promoting transformational development
- Strengthening fragile states
- Providing humanitarian relief
- Supporting U.S. geostrategic interests
- Mitigating global and transnational ills to advance development. In fact, assistance actually may mask underlying instability or contribute to state fragility. Hence, it is critical to invest resources in these countries very carefully, with clear expectations as to what is possible in the short term, and with flexibility tailored to changing circumstances.
External factors that will challenge USAID's ability to achieve its desired outcomes include:
Global/Transnational Issues and Other Special Foreign Policy Concerns: primarily HIV/AIDS but also other infectious diseases, climate change, narcotics, and other issues that need to be addressed in various countries that might belong to either group. These concerns affect to varying degrees development prospects and progress in fragile states—the two core concerns identified above. However, they are typically addressed as self-standing concerns that call for their own distinct strategic approaches and guiding principles.
Humanitarian Response: relief from both manmade and natural disasters. Again, this is a concern for various (but not all) countries in each group. Humanitarian aid has been required at different times for relatively stable countries in Central America, Africa, and Asia, and also more typically for weak or failing states. Apart from disasters, there is also ongoing humanitarian aid in countries such as India and Bangladesh, which are stable and making progress. Again, these humanitarian concerns are arguably separate and distinct from the challenges of development and fragile states.
Specific Strategic Foreign Policy Priorities Pertaining to Countries: (e.g., key partners in the war on terrorism, Middle East Peace, and the Stability Pact) that call for funding such as Economic Support Funds (ESF—formerly known, quite aptly, as Security Supporting Assistance). These priorities are not necessarily separate and distinct concerns. Instead, for some of these countries the two core concerns—development progress (e.g., at times in Egypt, Jordan, Pakistan, Indonesia, Philippines, Costa Rica) and strengthening fragile states (in Iraq, Afghanistan, Haiti, Kosovo) have been especially important from a foreign policy standpoint. In others (Israel, Turkey) neither development nor fragility are central programmatic concerns.
Private resources play a large and increasing role in addressing many of the challenges discussed above. USAID will continue to emphasize the Global Development Alliance (GDA) as a vehicle for leveraging private resources through partnerships. The GDA and other alliance-building mechanisms can also help foster a more vibrant and effective civil society as a force for public sector accountability and responsiveness.
Financial Implications: USAID's costs of doing business are funded through a separate account, Operating Expenses (OE). Because OE is set at a fixed level that does not vary with the total program the Agency manages, the Agency faces the risk that large scale program growth will swamp its ability to provide quality administration of its program portfolio. Over the first half of this decade, program levels rose by as much as 90 percent from the FY 2000 base, while total growth in the OE account was only 23 percent.
USAID is addressing this challenge by establishing a marginal administrative cost rate for program surges. The marginal cost of managing additional program dollars is about seven percent. The Agency has successfully negotiated with the Millennium Challenge Corporation and the Department of State to provide administrative funding at this rate for select program increments that USAID will manage.
International challenges present unexpected exigencies that require increased flexibility to meet changing priorities. Flexibility could be enhanced by continuously identifying excess and unneeded funds; maintaining a comprehensive, Agency-wide database, including improved linkages between budget and financial databases; obtaining authorization to pre-program recoveries irrespective of previous earmarks; better management of future funding expectations; updating budget projections throughout the budget formulation process; and withholding a percentage of New Obligation Authority (NOA) annually in a contingency fund.
Global Development Alliance
Private resources play a large and increasing role in addressing many of the challenges discussed above. USAID will continue to emphasize the GDA as a vehicle for leveraging private resources through partnerships. The GDA and other alliance-building mechanisms can also help foster a more vibrant and effective civil society as a force for public sector accountability and responsiveness.
USAID's GDA Secretariat has taken the lead in promoting alliance building through organizational and business process change since FY 2002. The primary goal of the GDA Secretariat is to increase the capacity of Agency staff and enhance the Agency business operations to develop and manage public-private alliances. This commitment has fostered increased cooperation between USAID and nontraditional partners, and has allowed USAID and its partners to achieve greater programmatic impact than any one organization could achieve on its own.
Since its inception, USAID has worked with the private sector and other partners to carry out development and relief programs. But today more than ever before, the reality of private resource flows from the United States to developing countries dictates a changed approach. In the 1970s, 70 percent of resource flows from the United States to developing countries consisted of Official Development Assistance. Thirty years later, 80 percent of the total resource flows come from U.S. corporations, foundations, private giving, and personal remittances among other sources, while Official Development Assistance accounts for only approximately 14 percent.
Secretary of State Powell launched the GDA Initiative in May 2001 to engage new stakeholders and harness the power of public-private alliances to address challenges in the developing world. While USAID has long engaged in successful partnerships, the GDA represents a more strategic approach to alliance building in order to bring significant new resources, ideas, technologies, and partners together to address development problems wherever USAID works. The GDA model is particularly tailored to allow the Agency to expand joint efforts with nontraditional partners.
In FY 2005, USAID operating units worldwide continued to mainstream public-private alliance building as a principal business model for the Agency. In the course of this mainstreaming process, USAID achieved impressive results in new or strengthened alliances with businesses, trade groups, foundations, universities, multilateral donors, faith-based organizations, indigenous groups, immigrant communities, and government agencies. The resources united were as diverse as the alliances themselves, including technology and intellectual property rights, market creation, policy influence, in-country networks, and expertise in development programs that ranged from international trade to biodiversity protection.
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