A year of movement: 4 biggest development business trends of 2013

Networking at the Devex International Development Partnership Forum in Nairobi, Kenya, in October. Local partnerships were among the major trends in development this year. Photo by: Jonathan Kalan / Devex

Last year at this time, many of us were asking important questions over various post-election foreign policy scenarios in the United States. How will U.S. budget clashes impact foreign affairs and development spending? How will President Barack Obama define his global development legacy? How will Hillary Clinton’s departure affect the State Department and U.S. Agency for International Development? Will we finally feel the reforms borne from the Quadrennial Diplomacy and Development Review?

Throughout 2013, the speculation has been a bit more dramatic than the reality.

This week’s U.S. budget deal appears to spare the foreign affairs budget from the devastating slashes once feared. Despite modest declines in spending and still lingering threats to foreign aid from Congress, the U.S. has more or less stayed the course on priority global development issues including food security, global health, and climate change. President Obama’s July trip to Africa unveiled the ambitious, but largely uncelebrated Power Africa initiative intended to close the electricity access gap across sub-Saharan Africa. Secretary of State John Kerry grabbed the torch and ran with it at State, getting right in the middle of the world’s toughest geopolitical challenges and pledging his deep support of international development. Meanwhile, USAID continued to promote constructive reforms, including efforts to go local with procurement and partnerships and enhance engagement with the private sector, although the agency executed only subtle changes to the way it does business.

Other segments of the global development community stole some of the limelight this year and what we witnessed in 2013 underpins the notion that the global development business is more competitive, more diverse, and more complex now than ever before. Donors are moving beyond rhetoric to make tough choices over mission, structure and spending. Like in any other industry or business, private sector implementers and NGOs are seeking out efficiencies, innovating, diversifying, and progressively moving local while thinking global. Everyone is going through a process of learning and adaptation.

For these reasons, Devex has strived to not only cover critical development finance issues in more depth this year, but also provide practical business advice to development leaders that can help their organizations navigate and grow in this new environment.

As the global development community closes out another year, we believe it’s important and helpful to reflect on some of the happenings that have influenced this new environment. Here’s looking back at just a few of the major moves and trends that shaped our industry in 2013:

NGO mergers

The Save the Children-Merlin merger was a big development business story in 2013 because it exemplified what we called “a sign of the times” — iNGOs consolidating to maximize efficiency and win funding in an increasingly competitive and globalized marketplace. Months after that merger, U.S.-based nonprofits East Meets West and Blue Planet Network also joined forces to strengthen their positioning in the water and sanitation sector.

For many, the mergers demonstrate that business, operational and, to a certain extent, sales savvy, which historically have been values of the private sector, are becoming increasingly important for NGOs. In an interview with Devex, Oxfam International Executive Director Winnie Byanyima stopped short of calling NGO mergers a trend, but did concede that “civil society has become stronger, more professional, more business-like in its work, applying corporate principles in how it works.”

To date, many mergers have been responses to certain weaknesses (as this analysis of 11 NGO mergers that took place over the past several years indicates), but as Devex President and Editor-in-Chief Raj Kumar points out, development leaders could very well begin pursing mergers and acquisitions from a position of strength which will likely result in more of them in 2014 and beyond.

Amalgamation

The year will definitely be remembered for saying goodbye to the Australian Agency for International Development and the Canadian International Development Agency. To recall, both dedicated development agencies were subsumed into their respective foreign affairs and trade departments earlier this year in an effort to facilitate collaboration between foreign affairs staff and eliminate redundancies.

By many accounts, Ottawa’s move was not all that surprising. Canada’s aid program has long been troubled by high staff turnover, budget cuts, and bureaucracy so there’s probably some sense of reprieve and even renewed morale.

The big surprise and concern continues to be AusAID — an institution that was gaining clout across the global development community (including a lot of attention from US-based implementers) for its increasing budget and special focus on emerging Asia — but could now be set for a more modest course. Among AusAID staff and other government personnel in Canberra and across the world, there’s already considerable anxiety and concern over how the re-integration will play out.

According to analysts and aid workers, the principal risk with both reshuffles is that poverty alleviation and socio-economic development will be lost or sacrificed among broader and higher-profile foreign policy interests. Time will tell if either move was right and if other countries will follow suit.

Localization

This past October, the USAID mission in the Philippines announced a $24 million Philippine-American Fund aimed at funding development projects of local NGOs so they can play a more central and elevated role in socio-economic development. The fund is one of several from OECD-DAC donors this year designed exclusively to support local groups in developing countries and facilitate sustainable partnerships between donors and local organizations.

The bottom line is that development funding and leadership is steadily moving to the local level where development really happens. At the same time, however, much more needs to be done to create the right conditions for local partnerships to take hold and succeed long-term. In 2013, we witnessed some donor agencies offering simplified procedures for local groups to bid on projects and secure funds while also working to improve local capacity in proposal writing, project monitoring, evaluation and reporting, and financial management.

While more donor funds will flow through local organizations, international donors and their partners will be called on to address structural impediments and build and sustain local capacity — which is why Devex held the first ever International Development Partnership Forum in Nairobi, Kenya this past October.

Localization made some serious headway in 2013, but still has plenty of room to run.

Private sector involvement

The private sector is now firmly seated at the global development table. So in 2013, Devex examined several private sector initiatives including Walmart’s Women’s Economic Empowerment Initiative, Goldman Sachs’ 10,000 Women Initiative, and the Clinton Global Initiative. Our analyses show just how far some of the world’s largest multinational companies have come in pursuing a triple bottom line and contributing to development in the emerging markets which they work.

The once absurd idea that development could become a viable corporate strategy in and of itself seems to have taken another leap forward in 2013. During New York Development Week this year, development partnerships were front and center, but the news was not all positive. For instance, according to a report from the United Nations Global Compact, business leaders admitted to struggling to make progress on fostering corporate sustainability. Only 33 percent of CEOs surveyed said that “business is making sufficient efforts to address global sustainability challenges” and a similarly small percentage believe “the global economy is on track to meet the demands of a growing population.”

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About the author

  • Pete Troilo

    Former director of global advisory and analysis, Pete managed all Devex research and analysis operations worldwide and monitors key trends in the global development business. Prior to joining Devex, Pete was a political and security risk consultant with a focus on Southeast Asia. He has also advised the U.S. government on foreign policy and led projects for the Asian Development Bank and International Finance Corp. He still consults for Devex on a project basis.