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Foreign Aid Reform: The Road Ahead

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Over the past two years, experts on global development have come to a consensus that the current system for managing U.S. foreign aid is outdated, is insufficiently coordinated, and lacks an overarching strategy. These shortcomings have made aid less effective than it should be.

Reforming foreign aid is thus now on the map, thanks to many groups including the Center for Global Development, Oxfam America, the Modernizing Foreign Assistance Network, and InterAction, among others. The question is, how can we get to our destination?

Much of the recent debate has been about structure and the strength of the "development voice" in foreign policy. In other words, on how much prominence the U.S. strategy should give to development, compared to defense and diplomacy, which together are the "three pillars" of U.S. foreign policy. Even though these issues are not fully resolved, we need to move on to the next phase of the debate: HOW assistance is provided and HOW it is implemented. These are the factors that determine whether aid is effective, whether real impact is achieved, and whether results are sustainable.

At the heart of the discussion has been the most basic principle of aid effectiveness: that sustainable results are best achieved when host countries own and lead the development process. But, how best to do this? How best to provide assistance to achieve results and build sustainable, local capacity?

All of us involved in the debates bring different perspectives to the table, and the discussion has therefore been rich. What does "host country ownership really mean?" How much is "owned" by governments? How much by civil society? How do we get a "whole of society" ownership and leadership?

Even when the right balance of "ownership" is achieved, donors need to decide the degree to which aid should be channeled directly to host country governments. Most observers agree that the U.S. Agency for International Development (USAID) had shifted too far away from direct support to governments over the past decade, but how far should it go in reversing course? And, even if one does directly invest more in host country government efforts, how best to do it? Through basket funding? Through sector program assistance? Through generalized budget support? Through line-item "projectized" support? Through innovative new approaches such as "Cash on Delivery?" Through multilateral mechanisms such as World Bank Trust Funds or the Global Fund for AIDS?

The answers to these questions have major implications for aid effectiveness - and for international nongovernmental organizations (NGOs) and contractors that implement most U.S. financed development programs. Is there still a role for these international organizations and for the technical assistance they provide? If so, how should it be structured to assure consistency with the goal of host country ownership? Should international NGOs be intermediaries, sub-contracting to local NGOs? Or, should it be the other way around, local NGOs sub-contracting with international NGOs for the services they want?

Many of us, including my organization CEDPA, have traditionally worked through local NGOs in the field and have always focused on local capacity building, but even we will need to change how we work. We, too, will need to relook at how we are organized in the field. Should we have local offices to direct our work in developing countries, or only affiliations with truly independent local NGOs that provide the leadership on the ground?

All of us will need to make changes - and we need to be engaged now with USAID and others in the government on how best to build new, more effective assistance instruments and approaches.

Unfortunately, some of the recent dialogue on foreign aid reform comes close to "contractor bashing." That is not helpful, and it confuses the issue. All agree that USAID has contracted out too many of its responsibilities, but that is not to say there is no longer a role for technical assistance contracting. U.S. contractors and NGOs, working in partnership with local entities, can strengthen local capacity and facilitate global exchanges of information and lessons learned. The key is to define the appropriate role of the contractor or NGO upfront - and to make sure that the focus is always on partnership and capacity building.

And, now to the bottom line. While encouraged by the quantity of dialogue, it is very disparate. Some is taking place in think tanks; some as new government initiatives are crafted, such as the Global Health and Food Security Initiatives; and some on Capitol Hill. Some is being done within USAID; some as part of other government deliberations; and some by NGOs under the leadership of groups like InterAction.

USAID must play a much stronger leadership role in these efforts. It can and must provide a common roadmap that keeps us moving toward our destination, bringing the multiple strands together and helping us reach a new foreign assistance framework that places development at the center. Otherwise, I fear we will lose sight of our ultimate goal: to alleviate extreme poverty, create opportunities for growth, and advance human rights in developing countries.