Hearing: International Development: Value Added Through Private Sector Engagement
Testimony of Jim Kolbe, Senate Foreign Relations Committee
4 May 2017
Chairman Corker, Ranking Member Cardin, and members of the Committee:
Thank you for the opportunity to testify today. This is a timely topic, as we consider the strategic impact of United States assistance and contrast this importance with the administration’s foreign affairs budget, which would significantly reduce our diplomacy and development programs. I would like to commend the Chairman and Ranking Member for keeping the Committee focused on the importance of U.S. global leadership, effective partnership, and good development practices.
I serve as an Honorary Co-Chair of the Modernizing Foreign Assistance Network (MFAN), a coalition of international development practitioners and foreign policy experts advocating for reforms that increase the effectiveness of U.S. foreign assistance. Since its founding in 2008, MFAN has been a vocal advocate for elevating development as a national security pillar equal to that of diplomacy and defense. I also appear today with the background of having chaired for six years, while a Member of Congress, the Appropriations Subcommittee on Foreign Operations—responsible for the funding the programs we are talking about today.
Today, we face a growing number of complex crises involving failed states and terrorist organizations, and we also see a number of developing countries experiencing high rates of economic development and improved health and productivity of their citizens.
There is an important role for U.S. foreign assistance and the private sector in each of these contexts. Recent Presidents of both parties have partnered with Congress to make assistance smarter, more efficient, and more effective. These efforts – from establishing the Millennium Challenge Corporation (MCC) and the President’s Emergency Plan for AIDS Relief (PEPFAR), to enacting the Foreign Aid Transparency and Accountability Act, the Global Food Security Act, and the Electrify Africa Act – all advance in different ways our national interest and the cause of development.
The connection between U.S. foreign assistance, the private sector, and economic growth is clear: eight of America’s top ten export markets are former aid recipients, and all are now close U.S. allies.
In 1960, Official Development Assistance made up nearly 70 percent of all capital flows to the developing world. Today, that figure is under 10 percent, with the overwhelming majority of capital coming from the private sector, remittances, and philanthropy.
Thus, there are significant opportunities for the U.S. to engage the private sector to advance inclusive economic growth and our own interests, such as by supporting good governance, free market institutions, and investments in infrastructure and a capable workforce.
The Millennium Challenge Corporation is an outstanding example of this approach. And USAID has also transformed in recent years, increasing its partnership with the private sector and significantly strengthening its policy, evaluation, transparency, and learning capabilities.
By focusing further on effective engagement of the private sector, U.S. development assistance can achieve even more. I recommend six steps for your consideration:
- Strengthen U.S. development finance mechanisms, such as by establishing a new Development Finance Bank that would pull together agencies like OPIC and TDA.
- Work with partner governments to support policies and programs that are designed to foster a productive environment for U.S. and local business.
- Systematically review the effectiveness of U.S. public private partnerships (PPPs) to determine how to increase their development impact.
- Enhance coordination between U.S. development agencies and the U.S. and local private sector. One plan, the Economic Growth and Development Act, has been proposed by Senator Isakson in recent years.
- Build on the demonstrated success of the MCC by expanding threshold programs and compact agreements to more countries.
- Maintain and strengthen U.S. global engagement and development by ensuring that funding and aid agency structure reflects aid effectiveness principles, clear objectives, and a global development strategy drafted in consultation with the development community.
Thank you, and I look forward to answering any questions you may have.