When it comes to development financing from the U.S., the amount from the government has been steadily shrinking in proportion to the rising amount from the private sector. We have seen this shift occur over the last two decades, and today development financing from the U.S. government accounts for just 13 percent compared to 87 percent from the private sector.
In a new paper from the Center for American Progress, The Role of the U.S. Government in Promoting Private-Sector Development Solutions, CAP Chair John Podesta and MFAN Principal John Norris examine this “seismic shift” and how it should affect the mindset and policies of both public and private development practitioners. They note that the share of development financing coming from the U.S. government will only continue to decline as other sources of funding such as private sector flows and domestic resource mobilization grow. In order to adapt to this change, the U.S. government must become more flexible and realize that its funding needs to be complementary of the ever-expanding crop of new donors.
There is a growing recognition that public-private partnerships (PPPs), or as Podesta and Norris note, what should really be seen as private-public partnerships, are now more important than ever. This is evident from a global perspective, as it has been a core part of discussions around the post-2015 development agenda, as well as from a U.S. perspective, as the Obama administration highlighted PPPs in the Presidential Policy Directive on Global Development released in 2010. Since then, the Obama Administration has embraced PPPs creating initiatives such as the New Alliance for Food Security and Nutrition, the Child Survival Call to Action, and most recently, Power Africa.
Despite these positive steps to embrace the changing development landscape, especially the growing role of the private sector, Podesta and Norris say that U.S. development policies and programs have not yet “sufficiently evolved.” They make several key recommendations as to how the U.S. can become a better development partner, including:
- Apply constraints to growth analyses on a regional basis, noting the work of the Partnership for Growth program;
- Work with multilateral and private sector partners to spur investment in post-conflict and transition countries; and
- Support and fund “early-stage, market-based solutions.”