Thursday, November 12, 2009

The New USAID Administrator: Transactional or Transformational?

As the Obama Administration’s pick for USAID Administrator, Dr. Rajiv Shah is highly credentialed and experienced in the field of foreign assistance and development as well as in the political ways of the world. The question I have for him is whether he will be a transactional or a transformational leader? Will he continue business as usual or finally do the much needed makeover of foreign aid - one that recognizes that the developing world and the delivery of foreign assistance have fundamentally changed, now needing an entirely new government aid business model. (See my previous work with Nick Eberstadt in the Weekly Standard, or in AEI’s Development Policy Outlook.)

If he listens to the concerns of most in the development field, he’ll be transactional – busy moving boxes on organizational charts at USAID and throughout the rest of the government, fighting for more money and people, trying to make USAID a preeminent and independent agency, and decrying the number of USG offices that dispense foreign aid and the lack of coordination therein. In short, he'll be focusing on much loved topics among government officials and the contractors and NGOs who receive billions of USAID dollars.

The topics, however, are of little concern to the people in poor nations. They would much prefer a transformational leader who views developing countries and the people in them as partners, not “recipients,” who expects those partners to have local ownership in aid projects by contributing their own resources and time, and who demands the utmost transparency and accountability in the management of aid funds. They would prefer a leader who focuses on the results of a project in the field, who surveys people in developing countries on what their problems are and how USAID projects could be improved, who provides funds for locally identified problems which will vary from country to country and not necessarily fit into all the earmarks and special interests in Washington, DC.

U.S. Government foreign aid is now a minority shareholder – only 9 percent in the total U.S. financial flows to the developing world. Philanthropy, private investment and remittances make up the rest and dwarf USAID’s budget. This is the new reality of how assistance and investment to the developing world is being delivered. The new USAID Administrator should open up the USAID bidding process to the thousands of privately funded programs by foundations, corporations, PVOs, religious organizations, and individuals, so they can more easily compete with their ongoing successful initiatives or their new innovative ideas.

Most importantly, the new USAID Administrator - to be transformational - needs to understand that the current USAID business model is very broken. By that I don’t mean broken organizational charts, lines of reporting, coordination or morale. (All the new USAID Administrator has to do is read up on what
African and other leaders, have been saying about our foreign aid to know that they don’t care which government aid agency is providing resources, or whether Dr. Shah or Deputy Secretary Jack Lew is signing off on projects, or whether aid officers are demoralized or not.)

They care about being a real partner in USAID projects, having their own skilled, local talent used in projects, and having money spent to develop local capacity and institutions so that they can help themselves and graduate from foreign aid the future. They prefer this demand driven assistance versus the predominant top down project design process where USAID gives huge awards to expensive contractors with high overheads, who then write a lot of reports, make a lot of trips, and hold a lot of meetings with astonishingly poor evaluation of results. (See previous work by
Bill Easterly, Raj Desai and Homi Kharas.) President Obama expressed his concerns on how "western consultants and administrative costs end up gobbling huge percentages of our aid overall." Also, in this same radio address he has noted the importance of demand driven ideas, good governance, and value of investment in addition to aid.

Once the broken business model is fixed, the government aid development community won’t have to call for new organization charts, new seats at the National Security Council, or elevating the topic of “development” as a core pillar of U.S. foreign policy. All this will miraculously happen when there are results that everyone can see and that are delivered at reasonable costs. USAID slipped onto the back burner because it lost its way and didn’t adjust to a new developing world with local talent to work with and a large and vibrant private sector engaging in innovative, faster and more efficient ways of delivering foreign aid. Its new role is still very important – as a convener of resources, helping to identify and support those private and public programs that are working and to bring them into countries that need them - to work with local talent.

Dr. Shah, leave the org charts alone and just find 12 good people who share a new vision for foreign aid, hire them, and get on with it. Nothing raises the stature of any USG agency than projects that work.

Carol Adelman
Director & Senior Fellow
Center for Global Prosperity

Tuesday, November 3, 2009

Where are the outcomes behind health aid?

The Bill and Melinda Gates Foundation have initiated a new endeavor called: Living Proof Project. Through it, they intend to show that American aid has materially improved the health of people in the developing world, and that Americans should see that their investments are working.

Prof. William Easterly's blog,
AidWatch, has criticized the Gates Foundation, mainly on the grounds that its positive contentions about aid are based on WHO data showing improvements in reductions in malaria incidence rates. The Foundation uses the WHO 2008 World Malaria Report as justification and proof that aid has produced positive outcomes. Initially, before the Report was published, WHO's director for malaria programming, stated that there were significant success in a number of countries. But then his report was never finalized and its specific claims were contradicted by WHO's own September 2008 World Malaria Report, by which time the director was no longer chief WHO's chief of malaria programming. Nonetheless, the Gates Foundation continued using his positive data, and it has surfaced in its Living Proof Project.

The larger question, though, is: does health aid affect health outcomes? Over the past few years, studies by competent organizations have wrestled with this issue. In 2001, the World Bank's Development Research Group published a
report showing "that the major driver on reductions in infant mortality is economic and educational: public health investments account for 5% of this decline."

In 2007, the International Monetary Fund released
a policy paper on health aid and infant mortality. It found that "despite the vast empirical literature considering the effects of foreign aid on growth, there is little systematic evidence on how aid effects health, and none at all on how health aid affects health."

In 2000,
the Bulletin of WHO discussed a 1997 examination of cross-national variation in child and infant mortality, finding that "95% of the differences could be explained by differences in income, income distribution, women's education, ethnicity, and religious activities."

A global health study which appeared
in Social Sciences and Medicine found that "public spending on health was statistically insignificant at conventional levels and total public spending explained less than one-tenth of the observed differences."

On evaluations of health projects, it is rare to find any of them based on base line departure points and control groups. Without these, we don't know what effect, for instance, a USAID health program has vis-a-vis other donors working in the same sector in the same country, and within that, if there has been a reduction in infant mortality, what portion of that can be assigned to the public sector vis-a-vis the private sector. For instance, according to the 2007
World Health Report, in Kenya, 78% of all national health expenditures are in the private sector. When there are improvements in infant mortality or maternal mortality, where does the credit lie?

Lastly, when there are health improvements, can they really be attributed to health inputs? Beginning some 30 years ago, USAID funded a rural electrification program in Bangladesh through the
U. S. National Rural Electric Cooperative Association. In 2007, a local research group in Bangladesh conducted an evaluation, using a control group (those homes not in the cooperative). The cooperative had 21 million members. The evaluation found that cooperative members' households had significant reductions in infant mortality, maternal mortality, increases in literacy, land ownership, higher educational levels, female education, and job acquisition. Although Bangladesh is one of the poorest countries in the world, it has reduced infant mortality rates by two-thirds--accompanied by an equal reduction in official aid flows.

In the form of public-private partnerships, those are living proof projects that were initiated by non-governmental organizations in which American’s can find reason for pride. Some 30 years ago, Merck started
a program to combat river blindness. It donated all the therapies required in whatever amounts needed, for the needed duration, into perpetuity. Today, some 20 different public and private organizations participate in this program which has prevented blindness in tens of millions of people, main children living in Africa. A World Bank Evaluation showed that once villagers were able to return to abandoned lands, 17 million hectares were returned to agricultural production, enough to feed 25 million people.

Returning to the Gates Foundation - the goals established by the Living Proof Project are laudable. However, they need to be matched by empirical-based studies that prove information on what the Gates Foundation has set out to show the American people and the world at large.

Jeremiah Norris
Senior Fellow
Hudson Institute
Center for Science in Public Policy