Opinion: USAID can leverage the private sector to promote democratic governance. Here's how.

A view of the 53 megawatt Cap des Biches power plant in Senegal, constructed by ContourGlobal with funding from Power Africa partners OPIC and IFC. Photo by: US Embassy Dakar

Can the magic of the marketplace improve the most critical kind of U.S. foreign aid programs: those seeking to strengthen the rule-of-law, combat corruption, and build stronger, more transparent governments?  

The Trump administration is embarking on an effort to bring business sector savvy to the operations of government, including presumably the provision of foreign assistance — the long-standing American policy to help other countries develop their economic, political, and security systems so they can be strong partners of the United States and positive contributors to the global community.

Exclusive Devex interview: Mark Green on why he is an 'optimist' about USAID

In the first part of our exclusive interview with the U.S. Agency for International Development chief, Devex speaks with Green about his vision for the agency, where he will focus his reform efforts, and why the end of aid doesn't have to be a bad news story.

U.S. Agency for International Development Administrator Mark Green brings to his post a unique combination of relevant experience. He is an expert in international development and has worked in sub-Saharan Africa, as well as on the strengthening of democratic and transparent governing systems, having served as an elected legislator and most recently as president of the International Republican Institute. Under Green’s leadership, USAID can be expected to continue its focus on democratic accountability and improved governance in the countries it supports.

The private sector plays an increasingly significant role in global development at large. The time has come to combine these two, so that the business community can support the strengthening of democratic systems, in partnership with the U.S. and other donors.  

The private sector and global development 

Private sector engagement is an umbrella term for the efforts of development organizations to work with business to achieve development results, which means the strengthening of systems to address deficits in health, education, sanitation, agriculture, economic well-being, and democratic governance. Through PSE, private sector partners contribute their expertise, financing, market access, distribution channels, and technologies to development initiatives in beneficiary countries in tandem with official donor efforts.

USAID has been particularly proactive on the PSE front, developing more than 1,600 partnerships with private sector partners since 2001. Some are quite significant, including Power Africa and Feed the Future, both of which Green highlighted in his confirmation hearing. These efforts are channeling hundreds of millions of dollars in private sector investment to extend access to electricity in sub-Saharan Africa and to improve global nutrition and ending hunger. USAID’s Center for Transformational Partnerships (USAID/CTP) is considered a leader among donor agencies in PSE and supports efforts across USAID and around the world to promote private sector partnerships and engagement across all sectors of development. In partnership with USAID/CTP, SSG Advisors has provided strategic guidance to missions and bureaus and private sector partners on building joint initiatives that advance business development and social objectives.

Other bilateral donors also cooperate with the corporate sector to accelerate development. For instance, a European nonprofit cooperative called EUCORD has teamed with the Dutch government and the brewer Heineken to buy grains locally in Africa. This joint venture, known as the “Dutch Diamond” approach, provides job opportunities, as well as farming and marketing expertise, to farmers in five African countries. The activities are 60 percent Heineken-funded and 40 percent funded by the Dutch government. Of the Heineken portion, half is cash and the other half is in-kind funding. To ensure there are real development benefits for the local economy, the Dutch government, as a condition of its participation, sets targets about how much of the higher quality product goes to household consumption or into the local marketplace.

This emphasis on PSE is also reflected in the Sustainable Development Goals adopted by world leaders in 2015, after an extended multilateral negotiation that included private sector participation in the drafting. The SDGs reflect a global aspiration to make the development process in poor nations self-sustaining, so that donors can phase out their involvement — precisely as Mr. Green has called for in his first statements since arriving at USAID. The SDG process has included the creation of a Private Sector Advisory Group, the establishment of a private sector-funded SDG Development Fund, and platforms and tools for tracking private sector contributions to development initiatives.

Applying these lessons to promote democratic governance

Enhanced democratic accountability and transparency benefits the private sector in many ways. A stable, independent judiciary sets predictable “rules of the game” and facilitates the resolution of commercial disputes; successful anti-corruption measures allow businesses to operate free of bribery and extortion. Alternation of power (through periodic and genuine elections) precludes entrenched incumbents who exert undue pressure on business interests or throw their weight behind crony interests. Effective municipal service delivery — related to education, health, police, and roads — contributes to a more productive and stable labor pool and open access to markets.  

At the same time, efforts to promote effective democratic governance need new tools, ideas, and energy. Indicators are worsening around the globe as a global democracy recession enters its second decade. The time is right to work with the business community in support of democracy and governance. Relevant models exist at all levels. For instance, at the international level, the Extractive Industries Transparency Initiative is a multi-stakeholder effort comprised of governments, donors, and leading companies to improve transparency and accountability in the mining, oil, and gas industry. At the country level, private sector actors provide critical input and political impetus through public-private dialogue platforms, such as those supported by the Center for International Private Enterprise, on policies ranging from trade to crime prevention to agricultural development to transparency in government procurement systems. For example, in Kyrgyzstan, USAID has supported an ongoing public-private dialogue platform focused on the country’s mining sector — one of the country’s most important and politically contentious industries. At the municipal level, in countries as varied as Peru and Afghanistan, USAID has supported partnerships between companies and local governments to improve service delivery and promote local economic development.  

Efforts to strengthen democratic governance would benefit from private sector innovation and technology. For instance, in order to protect civil society organizations, journalists, and citizens from government repression, technology companies can support software security against hackers, panic buttons on mobile phones, platforms for offshore data storage, and circumvention technologies to avoid censorship. The Kenyan-based organization Ushahidi has partnered with software companies for crowdsourced mapping during large-scale emergencies and with Facebook to enable election monitoring via Facebook Messenger.

Meanwhile, cloud service companies such as Box, DocuSign, Splunk, and others have products and services with the potential to greatly increase the transparency and efficiency of host governments at the national and local level alike. For example, DocuSign’s audit trail function registers officials who have reviewed and approved documents. Working in partnership, donors, government agencies, audit chambers, and anti-corruption NGOs could tailor and monitor tools such as this one to improve public sector transparency. Along similar lines, USAID has facilitated a partnership in Ukraine with Microsoft and the International Renaissance Foundation to eliminate longstanding corrupt practices in university admissions through transparent online registration processes and the development of a standardized external testing program.

Strategies to use the private sector for governance objectives

Despite the need and potential benefits, a recent report found that democratic governance accounts for only 7 percent of all USAID partnerships. This may be due to more limited market connections, but likely also reflects some of the sensitivities implicit in democracy projects, which touch on issues of politics, partisanship, and even sovereignty. With this in mind, partners on all sides should proceed with eyes wide open, cognizant of the risks and taking steps to avoid misunderstanding. The following strategies can assist in fostering collaboration between the private sector and democracy stakeholders (including donor agencies, governments, and civil society).

• Learn and apply PSE lessons from other sectors to democracy and governance in terms of the conditions that make PSE most productive and mechanisms for tracking mutual accountability.

• Apply DG programming lessons to PSE partnerships, particularly in terms of “thinking and working politically,” following a flexible and adaptive approach, and focusing on targeted governance solutions over comprehensive reform.

• Develop new metrics for accountability and decision-making that are appropriate to private sector engagement in DG programming. To date, indicators have focused on PSE monetary value or number of partnerships, rather than the desired (development or DG) impact. Specific targets within SDG 16 — which focuses on “justice for all” and “accountable and inclusive institutions”— can provide a roadmap for collective learning and tracking of progress on key measures.

• Look for links to core business interests. While corporate philanthropy can be a useful tool, effective, strategic partnerships require alignment with core business interests. Partnerships that speak to business bottom lines or mitigate business risk are more likely to benefit from highly motivated and committed private sector partners.

• Seek opportunities to build on existing partnerships with the private sector. For example, in Southeast Asia, SSG expanded its USAID-funded public-private partnership program focused on sustainable fishing to monitor labor conditions and prevent human trafficking in the same seafood supply chains.

• In dominant party contexts, avoid tilting the playing field even further toward businesses aligned with the regime. This could entail targeting actors outside that circle or working with broader business coalitions, as mentioned above, to further open up the political landscape. If not, other companies may be put at an even greater disadvantage.

• Recognize the value of local companies. Business is not homogenous. Local companies often bring unique capabilities in terms of market reach and deep understanding of the local political context. Recent analysis illustrates the power of partnerships with local companies. 

• Expand and strengthen public-private dialogue platforms as a means to break away from backroom lobbying and improve transparency and accountability.

• Realize that the private sector can be risk averse and has a different role to play than government. Companies are often wary of antagonizing political players or having their business or brand even appear to be politicized or taking sides in elections. For this reason, consider partnering with coalitions and industry associations rather than individual businesses, or creating an ad hoc group of prominent business persons rather than organizations themselves. Ensure clear understanding and full respect for any agreements about the degree of publicity around a DG partnership.

• Support research and communication campaigns, in partnership with the private sector, to build understanding of the critical role of democratic governance in quality of life and sustainable economic development.  

Business as usual is not an option. Democracies are facing new threats and challenges around the world. It’s time to engage new allies and test new approaches to bolster democratic governance. Administrator Green could start by inviting in a wide range of potential corporate partners for a strategic discussion of where their respective interests and capabilities intersect.

Join the Devex community and access more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.

About the authors

  • Thomasmelia

    Thomas O. Melia

    Thomas O. Melia was assistant administrator of USAID from 2015 to 2017. From 2010 to 2015 he was deputy assistant secretary of state bureau for democracy, human rights, and labor. He has held senior positions at Democracy International, Freedom House, and the National Democratic Institute for international affairs.
  • Kristensample

    Kristen Sample

    Kristen Sample is a senior associate at SSG Advisors. She worked with the International Institute for Democracy and Electoral Assistance from 2004-2014 and has consulted with UN Democracy Fund, UN Women, Global Partners Governance, Open Society Foundations, and Club de Madrid.