Aid sector sees a tough year ahead, after navigating choppy waters of 2017

An emergency food distribution site by different aid agencies and organizations in Bangladesh. Photo by: Anna Dubuis / DFID / CC BY

WASHINGTON — The holiday party circuit in Washington, D.C., this year was crowded and festive, but like last year, still more gloomy than usual. Some toasts shared gratitude that 2017 — a fraught year for the global development community — was finally ending; others were hoping, even slightly pleading, with the bacchanalian gods for a better 2018. At a party in San Francisco just before Christmas, the talk over clinking glasses was much the same.

At moments of uncertainty like this, it helps to stop and assess what we know. And a full accounting shows 2018 actually holds both potential peril and opportunity.

One year ago, NGO executives and aid agency leaders were imagining what Brexit and a newly elected President Donald Trump might mean for their work and for the world. Today we know much more. But there remains uncertainty beyond what's normal, even though to a lesser extent than last year.

For one thing, an unprecedented number of major development institutions had leadership transitions of some kind last year. With avowed aid skeptic Trump heading the world’s largest aid donor with huge influence over these appointments, there was real potential for unqualified or uncommitted leaders to take charge of some of the most important organizations for health, humanitarian, and development aid. Yet instead, the roster of leaders looks downright conventional, even hopeful. There is no equivalent to Scott Pruitt, the environmental critic and climate change skeptic who now runs the United States Environmental Protection Agency. And except for the Global Fund which was a special case, there was no disarray created by obstructed appointments processes, something the Trump Administration could certainly have attempted.

New leaders appointed to some of the major development institutions over the last year.

At the United Kingdom’s Department for International Development, where the so called “media minister” Priti Patel was forced to resign, her replacement Penny Mordaunt, while quite new to the global development field — she did some volunteer work abroad before college — does seem to be committed to it and perhaps less likely to politicize aid. Already, she’s getting early positive reviews. Given the pressure from the tabloid media and some conservatives in the U.K., we could have well seen a minister with deep skepticism of DFID, like Patel. Not so.

The one unusual face among this crowd of experienced development leaders is Ray Washburne, who heads the Overseas Private Investment Corporation, the U.S. federal agency that supports global development through financing business initiatives. Washburne played a key role in the Trump campaign as vice chair of the Trump Victory Committee, but had no U.S. government or global development bonafides, and little international professional experience. That background has turned into a boon: Washburne is fully committed to the mission of OPIC, an agency whose future previously looked bleak after the president’s budget proposal zeroed-it-out, and has the political capital that might actually give the agency the authorities it needs to do its job right. One thing to look out for early in 2018 is landmark legislation in the U.S. Congress to create the first U.S. development finance bank, legislation that very much has Washburne’s fingerprints on it and, as a result, has a good shot at getting a signature from the president if passed.

It is rumored that the White House has selected, and is vetting a candidate to run the Millennium Challenge Corporation. So there remains some reason to wait before declaring that all is well in appointments-land.

United Nations reform is another major item on the 2018 development agenda, which could be good or bad depending on where you sit, but is aimed at making the U.N. a more effective global development organization. Here too, after initial concern about what this might entail, there is far more certainty now that the secretary-general has released an advance report with more details on its plans for optimizing the U.N.’s development activities, including a more system-wide approach to meeting the Sustainable Development Goals and more empowered resident coordinators in each country.

We also have more certainty around U.S. tax reform. It is not good news for the NGO sector. The Council on Foundations estimates that donations could drop off by $16-24 billion this year, as millions of middle-class Americans will no longer see a tax benefit to making charitable donations. Also potentially impacted are donations made in wills: With the estate tax now applying only to assets above $10 million, fewer people will get a tax benefit for bequeathing to charity. We’ll know more this year about the real impact on nonprofits and whether certain high-tax states such as New York and California — who are considering deploying certain countermeasures to undermine the tax law — could change the situation for the better.

Unaffected by the new estate tax limits are U.S. billionaires, and in 2017, the number of billionaires who signed up to the Giving Pledge, founded in 2010, reached 173 from 22 countries. The pledge, which is non-binding but public, is a commitment to donate a majority of an individual’s wealth during their lifetime or upon their death. Two numbers to watch in 2018 are the number of new signers — there were 17 in 2016 and 15 in 2017 — and the total wealth they will donate — today it is around half a trillion dollars. As official aid budgets stagnate in some countries, the surge of billionaire giving is likely to continue to grow, and is becoming a more and more important part of funding key issues from noncommunicable disease prevention, to climate change adaptation, to financial inclusion.

U.S. foreign aid has so far dodged the bullet that is U.S. president Trump’s proposed budget, which had called for draconian cuts of approximately one-third. Unable to pass a budget, the U.S. Congress continues to operate under stop-gap funding measures known as a continuing resolution, and that has kept aid at, and evenly slightly above, its Obama-era level. With tax cuts completed, all eyes will turn this year to the budget and aid supporters in Congress will be called upon to continue their defense. That said, bipartisan support for foreign aid has proved itself strong in 2017, particularly in the U.S. Senate, so a budget deal that addresses the president’s priorities — especially increased defense spending — is unlikely to entail draconian cuts to aid. And if a budget deal doesn’t get done, which is a real possibility, and Democrats win seats in November as is expected at this point, it will make it harder for the president to get the aid cuts he has proposed later in his term.

Still, an administration skeptical of foreign aid can make trouble beyond the budget. The U.S. President's Emergency Plan for AIDS Relief, the government’s global HIV/AIDS program, has already begun planning as though it will face severe cuts including by reducing the number of countries it considers priorities. Also early this year we’ll learn what the Trump administration has in mind for reorganizing the U.S. State Department and the U.S. Agency for International Development. Under Secretary of State Rex Tillerson, the State Department was a particularly dark spot for the global development community in 2017, mainly because of the exodus of senior, experienced leadership there. But what would be more consequential is a wholesale takeover of USAID by the State Department. That seemed more possible early in the Trump Administration, but as the potential reorganization has dragged on and the U.S. Congress has flexed its oversight muscles, it is now much less so. We will know more, we hear, in February, when the administration releases its plans.

Brexit is still a reality and its potential impact on the global development community remains murky. Some 1 billion pounds of British aid ($1.35 billion) spent through the European Union are at stake, and another 140 million euros ($168.74 million) that U.K. NGOs receive from the EU. But the latest word from the May government suggests they are taking a collaborative approach, and her government, including Brexiteers such as Boris Johnson, continue to fend off those — especially the UK tabloid media — who are seeking to undermine the country’s commitment to spend 0.7 percent of its gross national income on aid. Of course, their defense of aid is that they will increasingly link it directly to British national security and foreign policy interests, which is itself highly controversial, and something to watch for in 2018.

Meanwhile, French President Emmanuel Macron, newly resurgent in opinion polls, has more political capital than ever to spend on his goal of a 45 percent increase in French foreign aid by 2022. And in stark contrast to his American and British counterparts, he is taking up the mantle of multilateralism. Along with him is China’s Xi Jinping, who enters 2018 with more authority and an extended rule after the party congress in October. Chinese foreign aid is now larger in some countries than U.S. aid, and the Chinese-led Asian Infrastructure Investment Bank is entering its third year of operations, now with 80 member countries.

Politics beyond the donor countries will be among the most important things to watch in 2018. At least 18 countries across Africa and, especially, Latin America hold elections this year, and many — including in Mexico, Brazil, and South Africa — are taking place under highly polarized circumstances. No wonder the theme at Davos this year, the World Economic Forum has announced, is “Creating a Shared Future in a Fractured World.” There are real divisions that pose serious risks to the broad ecosystem of NGOs, foundations, companies, and global development professionals of all stripes trying to make the world a better place. But this is also a time of tremendous growth and potential: Innovative business models and approaches, made possible by new technology and partnerships, are transforming the way global development work is done. That is something the development community will tune into on June 12, at the next Devex World convening in Washington, D.C.

Global development professionals are right to be wary and watchful for what this year might bring. It is certainly not the time for unfettered celebration, even at holiday parties. But if we have learned anything from 2017, it is that we don’t have to be passive observers to broader political forces. Our community has real successes to point to, and a strong perspective to share. Our voice has been a key part of the relative success that was 2017 — as Connie Veillette, a senior fellow at the Lugar Center, told us recently about the fight for influence on Capitol Hill, “if it’s a battle, the aid community is winning.”

Update, Jan. 8, 2018: This story has been updated to clarify the context of Connie Veilette’s quote.

About the author

  • Raj Kumar

    Raj Kumar is the Founding President and Editor-in-Chief at Devex, the media platform for the global development community. He is a media leader and former humanitarian council chair for the World Economic Forum and a member of the Council on Foreign Relations. His work has led him to more than 50 countries, where he has had the honor to meet many of the aid workers and development professionals who make up the Devex community. He is the author of the book "The Business of Changing the World," a go-to primer on the ideas, people, and technology disrupting the aid industry.