Since the implementation of the Marshall Plan after World War II, America’s foreign assistance operation has grown considerably. In that time, one would expect the overall strategy would be refined and streamlined to effectively balance the foreign policy goals of the U.S. while meeting the needs of the developing world. Unfortunately, the U.S. aid structure has evolved to become a bloated and unwieldy behemoth with no clear, overarching strategy.

The Foreign Assistance Act (FAA) of 1961 sought to organize the international development goals under a single act. In the time since the passage of the FAA, over 400 objectives have been identified through nearly 400 directives, all of which is managed by 12 different departments, 25 agencies, and nearly 60 government offices. To understand the complex and often confusing maze that is U.S. foreign assistance, one can marvel at Lael Brainard’s “Messy Web of the U.S. Foreign Assistance System.” (attached)

Such a muddled structure inevitably leads to miscommunication among the many different entities and a breakdown in the process. With little coordination and virtually no communication, development agencies are often tripping over one another, managing similar projects in the same area. In his article, “Aid Needs Help,” Ray Offenheiser noted “two separate USAID contractors recently discovered by chance they were doing virtually the same project, in the same town” in Afghanistan. To combat the replication of projects and ensure the deliverance of aid, action must be taken to reform the process and elevate a coherent national strategy for development.

Overall, the U.S. foreign assistance process lacks the transparency necessary to effectively meet the needs of the world’s poor and is in dire need of significant reform. Paramount to this reform effort is a comprehensive, national strategy for development policy. As a first step in creating a manageable and effective foreign assistance structure, a national strategy would serve to elevate development as a key component of U.S. foreign policy and increase coordination and transparency within the foreign assistance structure. But what should be included in such national strategy?

The chief component of a national strategy for U.S. foreign assistance would be a cohesive set of clearly established goals and objectives with both short and long term implications for poverty reduction. These objectives should be developed independently of diplomatic strategies and concerns to ensure aid is targeted to those most in need as opposed to partner countries. While foreign assistance goals should be developed separate of other policies, they must be able to interact with other policy areas at a high level, making sure that trade, agriculture and industrial policies complement rather than hinder aid programs.

To ensure such a national strategy would be able to function effectively, the foreign assistance structure must undergo certain institutional reforms. Rewriting the FAA of 1961 would be a necessary first step in clearly defining the role of each institution in the U.S. foreign aid structure. Most important to the coordination and success of a national development strategy is an elevated and empowered USAID, or a cabinet level department of foreign aid.

Accountability and results are also central to creating a foreign assistance structure that will support effective and sustainable development. Within a national development strategy, the U.S. should create systems of monitoring and evaluation systems in the government and independent of the foreign assistance system. Such evaluation mechanisms will simultaneously increase transparency and ensure the national development strategy is being implemented by all development entities, thus increasing coordination. Monitoring development activities by the government and independent entities will also foster a results-based approach to foreign assistance programming, leading to more effective and sustainable project designs.

Without a national strategy for development the foreign assistance structure will continue on its path to become even more of a bloated, bureaucratic mess. For more information on Global Washington’s recommendations for ways to restructure U.S. foreign assistance, please refer to our white paper.

Jim Kolbe, from the German Marshall Fund website

Jim Kolbe, former republican member of Congress and foreign aid champion, wrote on the German Marshall Fund’s blog that Congress may be the best hope for foreign aid reform.  He points out that with all the delays in releasing the QDDR (the State Department’s review of development & diplomacy) and the appearance of major disagreement on aid reform principles between the White House, State Department, and USAID, Congress has an opportunity to take the helm and make aid reform actually happen.

Jim Kolbe is not the only one who senses the promise of reform leadership from Congress.  Last week, his MFAN comrade Larry Nowels gave a talk on the foreign aid process here at Global Washington, and he cited agreement among key players in Congress as one of the reasons why the time is ripe for foreign aid reform.

Do you have a great idea for a new approach to the political, economic, and social empowerment of women and girls around the world?  On April 28^th, Secretary Clinton announced a new award, funded through the Rockefeller Foundation, to find and bring to scale the most innovative programs to empower women and girls.  Each awardee will receive a grant of up to $500,000 to implement their idea.

To apply, submit your concept paper to SGWIRFPInnovation@state.gov by June 1st, 2010.  A jury panel will select a group of applicants to submit a full proposal, and select awardees by the end of the year.

For more information about this award, see the State Department’s Office of Global Women’s Issues website, where there are instructions and an FAQ about the award.

Written By Lindsey Engh of Lumana

Microfinance has a variety of outcomes. There are huge, best-case scenario outcomes that microfinance experts usually preach: escape from poverty, empower yourself, send all your children to school, invest in your business, create jobs, and access quality healthcare. Then there are smaller outcomes, such as ONE rural villager sending their child to school, or ONE person being able to expand their business based on a micro-loan. The best way to talk about these outcomes is by story-telling, or using qualitative methods such as interviews and group meetings to find out how microfinance has made an impact in the lives of individual clients. This is a very important part of outcome analysis in microfinance.

However, microfinance also has more economic and quantitative outcomes to measure as well. These include measuring net impact, like how much a client’s income has actually increased since receiving a micro-loan, or how much they are putting away for savings each month. These outcomes are hard to measure by story-telling, but are equally important.

In the past six months, the first two extensive and rigorous evaluations of the impact of microfinance have been published. One was done in India, lead by Esther Duflo and Abhijit Bannerjee of J-PAL the other in the Philippines led by Dean Karlan and Jonathan Zinman of IPA. The main research questions for both are centered around the question, ‘does access to microcredit have a significant impact on household expenditures and welfare?’ Their findings included both economic data and some story-telling, through a case by case approach.

Their findings? That microfinance has a positive, but mostly small impact. For example, access to microcredit has an important effect on household expenditure patterns and the creation and expansion of businesses, but no effect on health, education, and women’s decision making in the short term – which are the main qualitative, story-telling outcomes that has made microfinance so popular in the first place.

I have been discussing how transparency is important in microfinance. If followers believe that microfinance can change a client’s life by directly benefitting their health, education, and decision making, but data and other studies (such as the two above) shows that in the short-term, microfinance only really impacts a client’s income, this is not transparent. It’s important to show advocates and followers exactly what a loan can do for clients. That’s why it’s so important that Lumana has integrated both qualitative story-telling AND quantitative changes, such as aggregate household expenditure, to fully outline our impact and outcomes.

This week, six major microfinance organizations issued a response to these two studies. Several other bloggers and microfinance advocates found this response wanting, because they felt the general idea of the response stated that despite the news from these two rigorous, academic evaluations, they are going to continue telling nice stories and operating exactly as they have been, continuing to say that microfinance directly impacts health, education, and women’s decision-making, among other major poverty indicators.

It’s important to be realistic about the impacts of microfinance, in order to further innovate and progress the field. At Lumana, we believe that microfinance is an enabler – this means that microfinance can open the door to basic financial services, which we believe are the building blocks for any one person to start saving money and raising their income. However, we also believe that poverty is a definition for many other problems, such as a lack of health and sanitation rules, clean water, and education. Poverty is a complex puzzle.

That’s why it is important to share information and data, because it takes a lot of different knowledge and work to create a sustainable difference in the lives of developing communities. If an academic source comes out with an evaluation saying that microfinance, in itself, can only have a certain number of outcomes for an individual, then that information should be used to bring in other services or products to a developing area that can deliver those health, education, and decision making outcomes.

At Lumana, we believe that although we can’t solve all of the problems in the villages in which we work, we can share our knowledge of the area and our clients with other organizations who can help to solve those problems.

Saying that microfinance delivers only small outcomes isn’t a negative, or defeated, outlook on microfinance at all. It is a realistic view from a different source, meaning that microfinance delivers the basic financial infrastructure that is important to an individual’s well-being. We need a cadre of charities, donors and policymakers who will look at rigorous evidence that shows small gains and celebrate, not lament—and then look at the data again to see how we can extend or expand those small benefits.

The global development blogosphere is abuzz with commentary on the leaked draft Presidential Study Directive (White House review of U.S. global development policy).  We are working on our own analysis of this document, but in the meantime, browse what the pundits are saying about “A New Way Forward on Global Development.”

First, the original article that started all this buzz, posted by Josh Rogin to Foreign Policy’s blog The Cable.

Read what devex, the development professional’s news source, has to say here.

The Center for Global Development’s blog gives us their quick take on the good, the bad, and the unknowable.

Three members of MFAN (the modernizing foreign assistance network) have contributed their original insights to the raging policy debate: read the summary here, or see the individual contributions by Jim Kolbe, Carol Peasley, and Jim Kunder.

The Stimson Center’s blog Budget Insight provides a deep analysis of the promise and pitfalls of this document, with a heavy emphasis on the pitfalls.

InterAction shares its thoughts on the paper in its blog here.

The USGLC applauds the document, and summarizes it here.

Bill Easterly’s blog AidWatchers is more skeptical about the effect this PSD would have if it were released as the final document.

George Mason professor Philip Auerswald writes about what it means to “elevate development” in his blog, “The Coming Prosperity.”

And of course, in case you missed it, we posted our own little piece about the PSD soon after it was leaked.

compiled by Eugenia Ho, Global Washington volunteer

New Timing for Strategic Reviews

The interim findings of the Quadrennial Diplomacy and Development Review (QDDR) were expected to be released in January.  After months of delay, it is likely that they will not be released at all.  However, the QDDR still expects to release its findings in September, which is when the discussion on the progress of the Millennium Department Goals will be held at the UN General Assembly meeting.

Discussion with USAID Administrator Rajiv Shah

 “Our time to change is now” according to USAID Administrator Rajiv Shah, at an event hosted by U.S. Global Leadership Coalition in Washington DC.  He rolled out the four overarching themes that will guide USAID reform:  recommitting to the Millennium Development Goals; investing more in country-led plans for growth; increasing the focus on science and technology to assist development; and improving implementation of development programs in conflict areas.  Shah also stressed a new commitment to transparency.  To watch the video of the event, please click here.

Despite billions wasted, more foreign aid needed: Oxfam

Oxfam International released a report coinciding with the gathering of international development ministers from the G8 nations last week, suggesting that foreign aid dollars have been wasted on corrupt and ineffective foreign-aid programs over the past several decades.  The report recommends that governments and donor agencies such as the UN should make aid funding more predictable, so recipient countries can plan better. The report also recommends strict transparency and accountability conditions for aid funding, requiring the money to be used to pay for public services.

Foreign Aid Reform: Spaghetti, Leaks and Hope

The National Security Council (NSC) has leaked a document which calls for the elevation of development as a central pillar of U.S. national security; it calls for a strengthened development agency (USAID) and independent development voice at the table when relevant policy is debated; and it calls for greater coherence in U.S. development policy through the framework of a quadrennial U.S. Global Development Strategy.  Although there are still many important issues to be debated and discussed, the vision outlined for the future has a lot to cheer for.  Click here  to view the full draft of the leaked NSC document.  Also see the Global Washington blog post about this document.

Hearing on Human Rights and Democracy Assistance:  Increasing the Effectiveness of U.S. Foreign Aid

The House Foreign Affairs Committee will hold a hearing on Human Rights and Democracy Assistance:  Increasing the Effectiveness of U.S. Foreign Aid, on Wednesday, May 12, 2010 at 9:30am.  For more information (and to see the live webcast), please click here .

The Gulf of Mexico Oil Spill‏

While the disaster is continuing to materialize and the cause is still under investigation, the recent event of the explosion of the Deepwater Horizon drill rig and the subsequent oil spill has led to discussions on its impact on U.S. energy policy, especially efforts to increase leasing acreage and oil and gas production in the Outer Continental Shelf (OCS).  Governors of California and Florida have already withdrawn their support for the idea of expanding offshore drilling, and some congressmen have warned that they can no longer support energy reform legislation if it includes such provisions.  In this article, Frank A. Verrastro, senior VP and Director of the Energy and National Security Program at the Center for Strategic and International Studies in Washington, D.C. answers critical questions relating to the impact on U.S. energy policy.  Policy changes as a result of this oil spill may have direct and indirect implications for developing countries.

Book Review: Development and its Discontents

In her new book, “Missionaries, Mercenaries and Misfits,” Kenyan newspaper columnist Rasna Warah explores the root causes of poverty and inequality in Africa and the value of development.  She concludes that by treating poverty as a “problem” to be solved with technical expertise and outside assistance, “development” in the form of donor-inspired policies ignores, and even contributes to, the very issues that are at the heart of Africa’s underdevelopment.  This book is reminiscent of Dambisa Moyo’s popular book “Dead Aid,” and is critical of World Bank officials and global development activists alike.

Nigerian President Yar’Adua dies after long illness

Nigeria is one of the top 10 recipients of US Foreign Aid, according to 2008 USAID figures.  Although the Vice President, Goodluck Jonathan, has now sworn in as President, following the death of President Yar’Adua, there will not be an election in 2011.  Will instability in Nigeria change the level of US foreign aid to the country in the next couple of years?

Ronald Reagan Building, home of USAID

In an interesting twist, a White House document outlining a new paradigm for development policy has been leaked this week.  The document is a draft of the White House review of U.S. development policy, known as the PSD-7 (Presidential Study Directive).  We were not expecting to see anything from the White House until after the release of the State Department’s review, the QDDR (the Quadrennial Diplomacy & Development Review).

Real development policy change may be on the horizon.  According to this document, the “United States will pursue a new approach to global development that focuses our government on the critical task of helping to create a world with more prosperous and democratic states…”  This approach will be built on three pillars:

1)      “A deliberate development policy that places a premium on economic growth and democratic governance, game-changing innovations, and sustainable systems for meeting basic human needs;

2)      A new business model that positions the United States to be a more  effective partner and to leverage our leadership and;

3)      A modern architecture that elevates development as a key pillar of U.S. foreign policy and harnesses the development expertise now spread across government in support of common objectives.”

Overview of Proposed Changes:

• Implement a national development strategy, to provide explicit policy guidelines on competing objectives (such as the trade-off between real-time national security challenges and creating the conditions for long-term economic growth).
• Increase investments and engagement in development-focused innovation.
• Tailor development strategies to the unique challenges of the individual situation: no one-size fits all approach to similar problems in different countries.
• Hold long-time recipients of assistance accountable for achieving development results, even in countries where efforts have been driven largely by national security or foreign policy imperatives.
• Include the USAID Administrator in National Security Council (NSC) meetings as appropriate, though he/she will still report to the Secretary of State.
• Assess the development impact of other major policies affecting developing countries, such as trade policy, intellectual property, immigration, etc.
• Seek greater flexibility from Congress: fewer earmarks, and the ability to reallocate funding from less to more effective programs.

All of Global Washington’s Four Principles of Aid Effectiveness are accounted for in this document, with the exception of any explicit reference to local ownership.  It is somewhat strange that there is no mention of local ownership, at least as a preference over supply-side solutions.  Our three other Principles, including targeting the poor, consolidation & coordination, and transparency & accountability, are  at least in some way addressed in this document.  Click here for more information on Global Washington’s Four Principles of Aid Effectiveness.

One important fact to keep in mind is that this is a draft document that was written a few weeks ago- it is possible that changes have been made already, and that the final study may reach different conclusions.

compiled by Eugenia Ho, Global Washington Volunteer

Heated Debate over the Proposed Cut to International Affairs Budget

Thursday, Bloody Thursday: Bono calls out senator over aid cuts

While receiving his Atlantic Council Humanitarian Leadership Award, lead singer of U2 and co-founder of ONE Campaign Bono pleaded for Washington to resist Senator Conrad’s proposed cuts of $4 billion from the $58.8 billion President Obama is requesting for FY11 budget in foreign aid funding.  He said that defense and development, while they are very different, are linked – both are “essential if we really want to build a world that’s more secure, more prosperous, and more just.”  Read full article by Josh Rogin in The Cable. 

8 out of 8 former Secretaries of State agree (with President Obama’s FY11 $58.5 billion International Affairs Budget Request)

In the ONE Campaign blog, Chris Scott reported that USGLC has posted a letter signed by all eight former Secretaries of State in support of President Obama’s FY11 $58.8 billion International Affairs Budget request.  The letter to Congress emphasizes that “programs funded by the International Affairs Budget provide critical investments in global development, diplomacy and democracy.”  Although the International Affairs budget has had modest increases over the last decade, it still represents less than 1.5 percent of all federal spending.  Therefore, all 8 Secretaries of State stressed that the requested $58.8 billion is essential to achieving the goals of protecting national security, building economic prosperity, and providing humanitarian assistance.

Letter Sent by 8 Former Secretaries of State to Congress:

Check out a copy of the letter here.

Other Development Policy News

The Initiative for Global Development summarizes a few updates on Global Development Policy 

1.  QDDR Interim Report

The Quadrennial Diplomacy and Development Review (QDDR) interim report was discussed at the National Security Council Deputies’ Committee meeting last week, but the date for publication is yet to be confirmed.

2.    Chart by Lael Brainard Highlighting the Need for Reform of U.S. Development Policy. 

Lael Brainard, previously with the Brookings Institution and recently confirmed as Under Secretary of the Treasury for International Affairs, designed a visual illustration of how the current U.S. Foreign Aid system, which was created in 1961 under the Foreign Assistance Act, is disorganized and creates confusion.

3.  USAID Administrator Raj Shah said:  This Year is a “Once-in-a-Lifetime” Opportunity for Foreign Assistance Reform.

USAID Administrator Raj Shah recently testified before the Senate Appropriations Subcommittee on State and Foreign Operations on the FY 2011 budget request for USAID. Shah described this year as a “once-in-a-lifetime” opportunity for foreign assistance reform.

4.  MCC CEO Daniel Yohannes’s Three Top Priorities for Furthering the MCC’s Mission of Reducing Poverty Through Economic Growth

On April 14th, MCC CEO Daniel Yohannes testified before the House Appropriations Subcommittee on State and Foreign Operations on the FY 2011 budget request for the MCC. His three top priorities for furthering the MCC’s mission of reducing poverty through economic growth: “being innovative,” “leveraging partnerships” and “delivering results and showing impact.”

Please see this link for Administration update details.

Haiti on the road to recovery

Ally Pregulman shared the news in One Campaign blog that the Haiti Debt Relief and Earthquake Recovery Act of 2010 was signed into law on April 26, 2010.  This legislation encourages using U.S. influence to cancel Haiti’s remaining debt to international financial institutions, currently totaling $1 billion, and directs these institutions to offer grants rather than loan assistance to Haiti in order to end the debt-relief cycle.

Though we may wish to believe that the world has developed into a largely egalitarian society with equal opportunities for all, regardless of gender, this is a regrettably idealistic approach to the current global atmosphere. Studies have been conducted, goals have been presented, laws have been passed and conferences have been convened, all serving to raise awareness of gender equality around the world. But it has not been enough to solve the problem of the global suppression of women.

Nowhere is this inequity experienced more than in the developing world. Women and girls contribute to 60% of the world’s poorest people. Human traffickers target women and girls, forcing them into lives of prostitution and manual labor. Ill-equipped and under funded health care systems in the developing world lead to abysmal maternal and child survival rates.

The continuation of such practices and norms is even more unconscionable when taking into account that women are the backbone of society. Women are increasingly becoming the majority of the world’s farmers, health care providers, factory workers, and business entrepreneurs. While women have proven to be integral to the development and stability of society, they are continually left out of the development process and their power goes untapped. Thus, as Hilary Clinton would argue, providing equal opportunity to everyone, regardless of gender, is not only an issue of human rights and humanitarian values, it is a necessity to the progression of humanity and a prerequisite to sustainable development.

Secretary Clinton highlights the benefits investing in women brings to local societies and the world as a whole. “When women are free to vote and run for public office, governments are more effective and responsive to their people. When women are free to earn a living and start small businesses, they become drivers of economic growth. When women are afforded the opportunity of education and access to health care, their families and communities prosper. When women have equal rights, nations are more stable, peaceful and secure.”

Similarly, Nicholas Kristof noted in his keynote speech at the first annual Global Washington Conference that investing in women provides “so much bang for the buck.” Empowering women promotes smarter spending on education and health care, resulting in a more stable and secure environment.

In order to accomplish gender equality in the face of the global subjugation of women, the United States has embarked on a foreign policy strategy that aims to improve equality worldwide. By focusing on women in the three priorities of its global development policy, global health, food security, and climate change, the U.S. is working to improve the living conditions of women around the world. Senator John Kerry recently introduced the Enhancing Quality Assistance and Leadership and Improving Transparency (EQUALITY) Act that would create offices in the Department of State and USAID committed to elevating women’s empowerment and integrating gender equality into foreign assistance strategies.

Even with the actions taken by the United States and other international actors, we must change the way we view gender equality in global development in order to accomplish true gender equality. We must garner the vast array of benefits women can contribute to society. We must view gender equality as not only empowering women, but also empowering humanity as a whole.

Since 2002, foreign donors have allocated nearly $36 billion to Afghanistan in an effort to assist in reconstruction efforts. In that time, however, little has changed for the Afghan people, particularly in rural areas. Access to electricity is difficult to come by and is inconsistent in its operation. Clean water, though paramount to survival, is a struggle to find and often a luxury to keep. Roads are little more than dirt paths that are prone to flooding making them barely traversable. With such a large-scale international effort to rebuild Afghanistan, why has so little progress been achieved? According to Pino Arlacchi, a prominent EU parliamentarian, only 20 to 30 percent of the foreign assistance funding has reached the citizens of Afghanistan in the past eight years due to corruption and waste. Corruption in the Afghan government is coupled with a high level of corruption in international assistance projects, preventing aid from flowing freely to those who are most in need. International donors are also guilty of high levels of waste and unnecessarily high salaries for development workers. According to Matt Walden of Harvard University, 40 percent of aid money goes to the salaries of aid workers and contractors rather than directly to projects that would benefit the Afghan people. However, some of these facts and figures can be misleading. It is indisputable that the Afghan people do not receive some aid, but not all of the aid is meant to directly reach the hands of Afghan civilians. More than half of the funds appropriated by international donors are meant for security assistance, which does not have any direct development implications for the general population. Also, with decades of violence and political instability, the Afghan infrastructure has been severely weakened and many technically skilled workers have emigrated. As a result, foreign workers are necessary to work on development projects until enough Afghans are trained are ready to take over the projects. Nevertheless, significant reform is needed to curb corruption, cut waste, and reduce inflated wages in an effort to improve the quality of development projects. Much like the corruption seen in the construction of schools and hospitals in Herat province, development projects in all of Afghanistan suffer from a lack of regulation. With little oversight of public funds appropriated to these construction companies, the companies are able to use low quality materials and pocket the left over funds. Such a lack of oversight will only encourage corruption on a national scale. This phenomenon serves to show that more attention must be paid to strengthening monitoring and evaluation systems within the Afghan government and international donors. This lesson can also be applied to any development project, anywhere in the world. Such oversight will help to make development budgets and processes more transparent. As one of Global Washington’s four Principles of Aid Effectiveness, transparency serves to make donors more accountable for their actions, leading to more sustainable development projects. For more information on Global Washington’s four Principles of Aid Effectiveness, read our white paper.