USAID's Shah on Elevating Development in U.S. Foreign Policy

Three False Choices, Three Crucial Opportunities

Remarks by Dr. Rajiv Shah, USAID (U.S. Agency for International Development) Administrator

Council on Foreign Relations - New York, NY

March 7, 2012

[As Prepared]

INTRODUCTION - What it Means to Elevate Development

Two years ago, President Obama and Secretary Clinton both called for elevating development in America's foreign policy, alongside diplomacy and defense. They both believe that the development work USAID's staff does around the world was just as vital to our interests as the work of our soldiers and diplomats.

Many people in the development community assumed their call to elevate development was about recognizing the importance of the work USAID and others have done for decades.

But elevating development was not a show of gratitude. It was not a reward. It was a challenge.

It meant that USAID - and the entire community had to respond to the key trends and pivotal opportunities that will shape our future.

Development agencies like ours - whose origins lie in the decade after WWII - had to finally come to terms with the new world they were a part of.

Where before development assistance was seen as essential because capital did not flow to low-income countries, now foreign direct investment to the developing world outpaces aid by nearly ten to one.

Where in the past, countries in South East Asia and big nations like China, India and Brazil were our largest recipients, today they are donors increasingly investing in the developing world to secure their own economic future.

Where once institutions like ours and the World Bank represented nearly the entire ballgame of development expertise, today there an explosion of interest and support from faith groups, entrepreneurs, students and scientists who now are empowered to engage in development work directly.

Value for Money, Innovation, Partnership

To respond to this new context, we've changed our approach to deliver better results in three key ways.

First, we focus on delivering value for money. In two years, we have moved to close 11 missions in countries like Panama and Montenegro that have move past the need for our assistance. We rebuilt and repositioned our global workforce to concentrate on priority countries in Africa. We closed or shrank maternal health work in several countries in order to focus on those that represented the most acute need and the best chance for success. In total, we made tough tradeoffs to cut 165 projects and programs from our budget.

We also prioritized comprehensive evaluation and transparency so we - and others - could see the value of our work. We introduced a state-of-the-art rigorous evaluation policy that the American Evaluation Association called a model for the federal government. We joined the International Aid Transparency Initiative and launched foreignassistance.gov, an easy-to-use dashboard that anyone can use to track the flow of our foreign assistance dollars.

Smart trade-offs and a focus on measurement and transparency may seem straightforward in a well-run business. But pushing these reforms is incredibly hard work in government.

Second, we prioritized innovation. We Grand Challenges for Development, global competitions that encourage new solutions to intractable development problems. We brought in science and engineering fellows, created a geospatial lab in partnership with NASA and are creating new partnerships with universities and research institutes like the National Institutes of Health and National Science Foundation.

Those investments are paying off. We helped researchers in South Africa prove a gel microbicide could be an effect tool in fighting HIV and our support of AIDS vaccine research identified 17 novel antibodies that may hold the key to fighting the pandemic. And the support of new seed varieties is allowing farmers in Haiti and Bangladesh to produce bumper crops of rice.

But above all, we are committed to a new model of partnership with those we serve around the world. Over decades of staff attrition, we became far too reliant on contractors, especially in conflict zones. We've broken through bureaucratic red tape and challenged conventional wisdom to create new ways to work directly with local entrepreneurs, civil society organizations and partner country governments instead of costlier Western consultants and contractors.

Right now, teams on the ground in Lima, Cairo and Nairobi are working to source these new partnerships. Because of their work, we were able to partner directly with Transparencia - a subcontractor of ours for over nine years - to sponsor an accurate count of Peru's presidential runoff.

We're also investing in local entrepreneurs. Through our Development Innovation Venture fund, we're using the latest energy technology to bring power to millions who live without electricity. We're supporting a business in India that is bringing low-cost solar power to rural villages and a startup in Kenya that is converting waste into biogas.

And we are now able to work far more closely with partner governments.

BUILDING INSTITUTIONS

A few years ago in Afghanistan, we were faced with a choice. We could continue to rely solely on contractors and NGOs to build clinics and deliver care, or we could start to invest in the Afghan Health Ministry, building up their capacity to provide basic health services.

We decided to invest directly in the Afghan Health Ministry - headed by Dr. Suraya Dalil, a woman who wasn't even allowed to practice medicine under the Taliban's rule.

The investment paid off better than anyone could have hoped. The Health Ministry expanded access to basic services from only nine percent of the country to 64 percent. And just a few months ago, we learned that over the last decade, Afghanistan had the largest increase in life expectancy and largest decreases in maternal and child mortality of any country in the world. The average Afghan woman will now reach the age of 64 and has a 500 percent higher chance of surviving childbirth.

By investing directly in the health ministry instead of foreign contractors, we saved more than $6 million last year alone. As a result, we can plan to draw down our health support in Afghanistan more quickly knowing the country has the capability to successfully manage the transition.

If we invest in local organizations in a responsible and focused way, we can save money and leave behind a legacy long after our dollars are spent.

Many donors simply write big checks to poor countries and call it development. Not only can that practice empower corrupt politicians, it can actually undercut a country's motivation to invest in its own people. A study in the British medical journal Lancet showed that African countries receiving that kind of budget support decreased their investments in public health over time.

We've worked hard to target our assistance to governments toward priorities they are also invested in. And over the last few years, we have designed assessments that ensure the money we invest in government institutions isn't lost due to poor financial management or corruption.

We also made some important progress in increasing the transparency of our investments and those of our partners. Last November, I travelled with Secretary Clinton to the Aid Effectiveness forum in Busan, South Korea, where she announced U.S. support for the International Aid Transparency Initiative.

As a result of all these reforms, we're fundamentally changing the way we do business. In 2009, only 13 percent of our assistance was invested in local systems. By 2015, we will drive 30 percent of our funding to local governments, business and NGOS - a rate higher than any other development Agency.

CHALLENGES OF OUR TIME

With this new approach, we are better positioned to address the challenges of our time and move past the false choices that have held us back.

One of the most prominent of these false choices is that between democracy and development.

Development practitioners have too often fallen victim to defining welfare solely in terms of GDP or mortality and overlooked the power of self-determination.

Opportunity doesn't just come from a vaccine or a percentage point of growth; it also comes from a free and fair society where people can speak freely, protest and choose their representatives. And it comes from checks and balances that can ensure the benefits of growth don't simply accrue to a corrupt elite.

There's a reason protestors in Tunisia were chanting: "Dignity before bread." As protest formed in Tunis, filled Tahrir Square and led a revolution in Libya, we acted quickly to put that understanding into practice.

After President Ben Ali fled Tunis, we helped establish an independent elections commission and draft electoral procedures. We also worked with citizens as they embraced new freedoms and actively participated in the political process for the first time in their history.

In Egypt, our reforms allowed us to quickly drive funds to civil society groups. Together with the State Department, we flew in veterans of revolutions in Eastern Europe and Latin America to talk to Egyptians about building political parties and organizing elections. We were even able to invest and consult with hundreds of new democracy organizations that formed in the wake of the revolution.

And as the revolution gathered momentum in Libya, we focused on supporting the Transitional National Council and independent media outlets and civil society organizations that could help the country transition toward democracy after four decades of dictatorship.

The fate of Tunisia, Egypt, Libya and other countries swept up in this wave of transformation, will ultimately depend on the citizens in those countries. It will often face setbacks as we've clearly witnessed. But we - and the development community broadly - must embrace a role that supports those who struggle for dignity and self-determination, even if we can't deliver democracy tomorrow.

Conflict

Our tight partnerships with the military on the frontlines in places like Afghanistan are also controversial. Today, we have doubled our workforce in Afghanistan since the start of the war. Those teams are taking daily risks to help the Afghans deliver stable results can accelerate the exit of our troops.

Many worry that work signals a militarization of development - that humanitarian needs will be overtaken by political or military interests. And they claim the money we spend in warzones robs other poor parts of the developing world.

But the truth is, the costs of conflict - developmental, economic, human - can't be ignored.

Countries that faced violence over a period of 20 years had poverty rates 21 percent higher than those that saw peace. And no country currently in conflict is on pace to meet even one of the Millennium Development Goals.

As many stable developing countries transform into prosperous emerging markets, the poorest countries left in the world are often those plagued by war, violence and instability. And as we've painfully witnessed, conflicts fueled by despair can quickly cross borders and threaten us here at home.

That's why the work our teams are doing in Afghanistan - in the face of great risk - is so crucial. Despite frequent setbacks and daily violence, over the last decade we've helped triple access to electricity, enroll 7 million children in school, grow wheat yields by as much as 70 percent and build or rehabilitate more than 1,800 kilometers of road. Those are great results and they are helping our military draw down their presence. But our challenge now is to ensure those results last.

A crucial plank of that effort will be increasing the Afghan government's ability to collect taxes to fund programs that benefit its people. By centralizing the governments collection systems, we helped increase customs revenue by over 400 percent and taxes by 225 percent.

We have no illusions about how difficult the road ahead in Afghanistan will be. But we're working with our partners to ensure the gains we make can last as our troops responsibly exit.

Partnering with the Private Sector

And one of the most prominent false choices we face is that we can we can do our work without partnering closely with the private sector.

Many in our community still have a bad taste in their mouths from early corporate activity that caused great harm in poor countries. Sweatshops, infant formula, Bhopal - all words that conjure images of corporations taking advantage of bad regulations to exploit the poor.

As a result, when development professionals do work with the private sector, it's typically centered around charity or corporate social responsibility. When companies wanted to make philanthropic investments, donors like USAID would step in to help.

But we have to get past our mistrust and shift our focus.

Today, the best corporations have a much more enlightened understanding of the interests they share with the development community. They see the fortune at the bottom of the pyramid.

And, for good measure, they are subject to far higher standards of transparency and accountability. International charters require them to act responsibly and citizens can use YouTube to increase accountability.

Corporate social responsibility alone can't yield the kind of sustainable economic progress that can raise incomes at scale. Only investments that generate real financial returns for corporations and real income for the poor can do that. We need to help companies find profit opportunities abroad, not photo opportunities.

Seizing Opportunities

By breaking through these false choices, we can seize the unique opportunities that exist to expand the reach of human dignity, prevent conflict and build markets that can create jobs at home. And by taking advantage of those opportunities, we can clearly express America's values to the rest of the world.

Building Resilience

The first opportunity is to build resilience to humanitarian disasters, not just provide relief. Instead of just responding to crisis, we have to focusing on helping people persevere through them.

Last year, I travelled to Dadaab, Kenya, site of what has now become the largest refugee camp in the world. In 2011, the worst drought in six decades forced more than 290,000 Somalis to seek refuge in neighboring countries. The drought caused chaos throughout the Horn of Africa; over 13.3 million people were put at grave risk, in need of emergency assistance.

In southern Somalia, where twenty years of conflict wore down the country's ability to cope and a group openly affiliated with al Qaeda prevented humanitarian aid from getting through, the drought led to an outbreak of famine.

I heard the stories of this tragedy first hand in Dadaab. While there, a young woman told me about the brutal choice she had to make while travelling 100 miles on foot with her children from Somalia to the refugee camps. As they made their way across the dry terrain, her children eventually became to weak to stay on their feet. She carried them, first one, then the other. But when she herself was pushed beyond her limits, she was left with no choice but to leave one of them behind.

No mother should ever have to make that choice ... a choice made even more devastating by the fact that it doesn't have to be this way. We can't prevent these catastrophes from occurring but our community can do more to help people withstand them.

Thanks to an early warning system we established years ago, we were able predict the severe drought in the Horn months in advance. We shipped food to storage sites in the region so we could quickly distribute it. We stockpiled vaccines, health supplies and clean water because studying past famines showed us that preventable disease, not hunger, is the leading cause of death amongst children under five.

We also partnered with Swiss Re to pilot cutting edge microinsurance programs that could compensate farmers and herders who faced grave losses. Last October - during the height of the drought - those programs made payments to over 600 cattle herders who had purchased coverage for their animals earlier that year.

But perhaps most crucially, we worked with the Ethiopian government to support a life-saving social safety net. In 2002, droughts left 14 million people in Ethiopia in need of emergency aid. From that tragedy grew a government-led program heavily supported by the US and other donors, designed to provide regular payments and food directly to vulnerable communities in exchange for work building community projects like roads, wells and schools. Because of that program, 7.5 million people in Ethiopia were able to withstand last year's drought without seeking emergency food or medical.

We are taking lessons about building resilience to heart as we face other weather-related crises this year in the Sahel, Sudan and again in the Horn. But we should do much more to strengthen food security so that drought no longer leads to famines or food crises.

Strengthening Food Security

The same day I visited Dadaab, we went to KARI, the Kenyan Agricultural Research Institute. There I saw improved seed varieties that breeders had been working on for years, designed to improve farmers yields even in drier and harsher settings.

Despite the astounding growth of slums like Dharavi in Mumbai and Kibeira in Nairobi, poverty is by and large a rural phenomenon. The majority of the very poor live in rural settings, not cities. It's especially true in countries like Ethiopia and Tanzania, where three out of every four people work in agriculture.

That's why almost every country that has emerged as a developed economy has done so by increasing the productivity of its farms. Economic growth means agricultural growth in those countries, almost by definition, accounting for as much as 25 percent of GDP

In fact, just a one percent gain in agricultural GDP can generate a four percent increase in the purchasing power of the poor. As a result, growth tied to gains in agricultural productivity is nearly three times more effective in raising the incomes of the poor than manufacturing or service growth.

To put it simply: if you care about fighting poverty, then you should care about boosting harvests.

That's the thinking behind our major food security initiative, Feed the Future. In 20 countries, we're investing in the specific crops and regions that countries believe will most rapidly spur economic growth and fight malnutrition.

Last year in Haiti, we saw staggering results when we piloted a program designed to intensify rice planting in the areas surrounding Port-au-Prince. Haitian farmers saw their yields increase by almost 190 percent, while using fewer seeds and less water and fertilizer. The farmers even cut 10 days off their normal. Today that program is being expanded to reach farmers in other development corridors throughout the country.

Overall, since we began the initiative in 2008, our 20 target countries have increased their total agricultural production by an average of 5.8 percent. That's over eight times higher than the global average increase of 0.7 percent

The point of these efforts isn't to reshape the world's farms in America's image. It's to address the growing rates of malnutrition that rob children around the world of their potential. If a child can't get enough nutrients during the first thousand days before their second birthday, they suffer irreversible limits to their potential. They earn 10 percent less over their lifetime and recent MRI images show that their brains do not develop as fully.

To give these children a chance to reach their potential, we have to help their families grow more food. And if we can do that, we can help overcome hunger and malnutrition by the time the world's ninth billion citizen is born in 2040.

Reaping a Demographic Dividend

If you look at some of the fastest growing countries in Latin America and East Asia today, you'll see a pattern in the age of their population. The percentage of those who are able to work - usually described as between 15 and 64 - is much larger than the percentage of the very young or very old.

That means those nations have greater economic potential and can concentrate on improving, rather than expanding services. Instead of worrying about building more schools and hospitals, they can focus on building better ones.

That phenomenon - known as the demographic dividend - was rooted in decisions those countries made in the '60s and '70s to educate girls, expand access to voluntary family planning and improve child survival. Those efforts led to a fall in birthrates, leaving behind demographic boom of working-age adults.

Take Thailand: Fifty years ago, the average Thai citizen made just over $100 a year and the average family had over six children. But with support from USAID, the country expanded access to family planning, fought malaria - the country's leading cause of child death - and made educating girls a priority.

Birthrates fell quickly. The average family now has fewer than two children, supporting a demographic dividend that made Thailand the fastest growing country between 1985 and 1996.

Several countries in Africa are poised to follow in Thailand's footsteps. Birth rates are beginning to fall in big cities like Kinshasa and Addis Ababa but families of five or six children are still the norm in most of Africa, making it the only continent that will double in population by 2050. Populations in Liberia and Niger are growing even faster, set to double in just 20 years.

Whether those demographics yield a dividend or strain an economy beyond its capacity will depend on choices made today to increase child survival.

It may sound counterintuitive that family sizes decrease when children live longer, but in country after country, we've seen families choose to have fewer children when they know their children will have a chance at a healthy life.

The good news is we have made remarkable progress when it comes to helping children survive.

New vaccines that protect against pneumonia and diarrhea are being shipped out today in large part because of the investment the Obama Administration and other donors made to the GAVI Alliance last year. That marks the first time ever that a vaccine is reaching the developing world at the same time our children receive it here in the U.S.

Improved, long lasting bed nets are driving not just malaria infections down, but child mortality from all causes. In country after country, we've seen the President's Malaria Initiative produce drops in child mortality by as much as 30 percent because of the cascade of benefits that keeping kids out of hospitals can provide.

Thanks to those - and other technical breakthroughs like rapid TB diagnostics and cheap tools to fight birth asphyxia - we are on track to end preventable child deaths in a generation, bringing child deaths down from 8 million a year to 1.5 million.

Development is full of problems we have limited ways to solve. Helping a child reach their fifth birthday is not one of them. It will require us to continue to create low cost solutions and expand their reach by empowering community health workers. But we can do those things if we maintain our commitment and help countries reap a demographic dividend in the process.

For the American People

We know these efforts can work. We have seen this in individual sectors and we've seen it in aggregate.

Just this past Monday, the World Bank showed that even in the midst of the worst economic crisis since the 1930s and the biggest food-price increase since the 1970s, global poverty fell, in every part of the world. Most of that progress has been concentrated against the poorest of the poor - those that make less than $1.25 a day.

And though the estimates for 2010 are only partial, they show that global poverty was half its level in 1990. The world has reached its first Millennium Development Goal.

And when it works, it shows our assistance is not just "from the American people, it's for the American people."

By strengthening private sector activity in developing countries, we have the potential to enrich not just our partners but ourselves through increased exports and new markets for trade.

By working on the frontlines in places like Afghanistan, we deliver results that help suppress extremism and speed the exit of our troops.

And by working to promote democracy in the Arab world and elsewhere, we are emphasizing our core American values. That, as the President said, "America values the dignity of the street vendor in Tunisia more than the raw power of the dictator."

Those values are what drive faith-based organizations to raise money to buy bed nets and fight human trafficking. They are what drive people to join or military, to fight for freedom and protect their families from extremism and terror. They are what drive college students to oversubscribe courses in development and global health. And they are what drive us - the staff of USAID - to fulfill an incredible mission.

Thank you.

(Distributed by the Bureau of International Information Programs, U.S. Department of State)