What’s new with localization

Localization has been a major theme in the development community over the past several years. But recently I’ve noticed a change. After moderating a session last week on the topic, writing an op-ed and speaking with a number of people at the center of the issue in some of the biggest development institutions, I have sensed that we may be reaching a new moment in the localization debate. Here’s what I’m picking up and I’m hoping to hear from the Devex community on what you see wherever you may be around the world.

In 2010, the world’s largest bilateral development agency — the U.S. Agency for International Development — set a target to dedicate 30 percent of its contracts and grants directly to local implementing partners. That was an inflection point. International nongovernmental organizations and contractors who typically implement such programs found themselves positioned as “middlemen” and felt scapegoated and pitted against local NGOs and contractors — causing heated debate about what localization is really all about.

But while USAID’s push toward localization may have been particularly aggressive, it fits within the context of a larger trend that dates back further. The United Kingdom’s Department for International Development, the European Commission, and numerous European bilateral agencies had long sought to get money directly in the hands of developing country governments through budget and sector support. The core idea behind direct support to governments and local contracting were the same — development efforts are most likely to succeed when countries themselves are in the driver’s seat, setting their own priorities and building up their own capacity, and when local organizations and citizens are implementing their own development programs. The frame of the argument has largely stayed the same: local versus global. But that may now be changing.

A consensus has begun to emerge around the sustainable development goals that are set to replace the Millennium Development Goals next year. Development leaders looking at these ambitious goals and the challenges of development around the world have realized that there is no way to bridge the funding gap with official development assistance. In fact, most people in our community predict ODA will remain relatively flat, given the fiscal challenges among wealthy members of the Organization of Economic Cooperation and Development. So where will the new money come from?

A big part of the answer is “domestic resource mobilization” — a technical phrase that removes all the heat from what is actually a highly politicized idea. In essence, we’re talking about taxes, illicit financial outflows and corruption here. There is a coming step-change in the emphasis on developing country governments raising their own tax revenues to fund their own development.  And, similarly, we’ll see a newly invigorated focus on cutting down on tax avoidance and corruption that robs resources that could otherwise be used for development.

All of this will become much more high profile at the Financing for Development Conference in July in Addis Ababa, Ethiopia, and it has the potential to significantly shift the localization debate from how to spend more locally to how to raise more locally.

Development has long been an oligopsony — an industry where just a few people buy everything (in this case, the biggest aid agencies). That has shifted dramatically in the past decade with the rise of private and corporate philanthropies, crowdfunding, and emerging donors. In the coming decade, we’ll see a further shift, with domestic resources — from taxes, philanthropy and domestic corporations — making up a bigger slice of the “blended finance” pie. All of this means that arguments about how ODA gets spent may diminish in importance.

Today, because ODA is so dominant in so many countries, localization has led to real competition between implementing organizations that are truly local, indigenous, and organic, versus those that are affiliates of INGOs. But these divisions will become less important as ODA becomes a smaller part of the funding base for NGOs and contractors. USAID itself has shifted its thinking in this regard and now barely mentions the 30 percent target, instead saying that what it’s after is “100 percent sustainability.”

What does USAID mean by “sustainability” in this context? Essentially that the real waste in development is a failed project, one that doesn’t meet its objectives and shuts down because it can’t find local funding and support. So my sense is building local capacity, working through governments, and empowering local organizations — while remaining important — may begin to take a back seat to a newly framed argument that isn’t local versus global, but rather sustainable versus unsustainable.  

In a piece I wrote last year during a reporting trip to Kenya, I asked “How local can you get?” in reference to development programs that start in places like New York and Silicon Valley, but aim to foster development in the most remote settings. Now, we may need to begin framing the question slightly differently as “How sustainable can you get?” I welcome your views.

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