Public-Private Partnerships: The Key to Successfully Implementing the SDGs

The Brookings Institution and the Organization for Economic Co-operation and Development (OECD) recently partnered to present a talk on utilizing public-private partnerships (PPPs) in order to effectively implement the United Nations’ (UN) Sustainable Development Goals (SDG). The SDGs are a list of goals, proposed by the UN, that target issues related to health, poverty, hunger, inequality, education, and climate change. According to the expert panel, partnerships connect decision-makers at the global level with the private sector, local governments, and civil society in an effort to capitalize on their specific strengths and balance their weaknesses.

Bill Gates speaking at a press conference at the end of the GAVI Alliance pledging event
Bill Gates speaking at a press conference at the end of the GAVI Alliance pledging event

For example, Gavi, The Vaccine Alliance, is a PPP that provides access to vaccines in developing countries. The major players in this alliance consist of the World Health Organization, UNICEF, The World Bank, and the Bill and Melinda Gates Foundation. Together, these organizations have successfully contributed scientific research, vaccines, and financial tools. According to Gavi, “Since its launch in 2000, [the alliance] has helped developing countries to prevent more than 7 million future deaths…Gavi support has contributed to the immunization of an additional 500 million children.” Gavi’s objectives were strategically implemented to produce results that protect developing populations and improve healthcare, which aligns with SDG 3 that aims to “ensure healthy lives and promote well-being for all at all ages.”

Partnerships are arguably the driving force behind the successful implementation of the SDGs. Governments are often slow and unreliable, while existing institutions like private corporations and civil society organizations have “on the ground” experience navigating the challenges inherent to their industry. The success of a PPP is determined by inclusivity, local implementation and ownership, transparency, accountability, political engagement, and strong focus on results. According to a study conducted by the OECD, “effective partnerships must have strong leadership, be country-led and context specific, apply the right type of action for the challenge, and maintain a clear focus on results.”

The SDGs also focus on more specific goals such as improving infrastructure, conserving oceans, and sustaining energy, which leaves room for partnerships to narrow their focus and innovate, particularly in the private sector. According to Devex, “Business leaders are still trying to understand the concept of sustainability, too, and how to integrate it into their business models.” The ODA method of developed countries donating funds to developing countries is ineffective since monetary aid does not specifically encourage the creation of new and sustainable systems. According to the Wall Street Journal, “Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s.” As is often the case, this money is lost in transit and never reaches the local level due to corrupt bureaucracies and weak relations with civil society organizations. Financial contributions from the private sector, when combined with effectual and enabling political leadership, move beyond temporary alleviation to foster a more permanent impact.

Public-private partnerships are a vital part of Goal 16, which seeks to “promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.” Ultimately, PPPs allow for a more inclusive and communicative atmosphere conducive to tackling important development issues on a more direct and practical platform that enables self-sufficiency and citizen accountability. If the SDGs are to be achieved, the vital role of PPPs cannot be ignored.

Beyond ODA: Integrating Philanthropy into the Post-2015 Development Agenda

Last month, representatives at the United Nations Third International Conference on Financing for Development agreed to a number of proposals to fund the upcoming Sustainable Development Goals. Collectively known as the Addis Ababa Action Agenda, these proposals cover a range of financing sources, from domestic tax revenues and official development assistance to private sector financing and philanthropy. The Agenda also included measures to support international trade and capacity building. World leaders now hope that the financing mechanisms laid out in the AAAA will encourage countries to adopt both the SDGs and a climate change accord scheduled for negotiation in Paris this December.

 

Secretary General Ban Ki-Moon congratulates delegates on adopting the Addis Ababa Action Agenda. Source: UN Economic Commission on Africa
Secretary General Ban Ki-Moon congratulates delegates on adopting the Addis Ababa Action Agenda. Source: UN Economic Commission on Africa

 

The SDGs are a proposed set of 17 goals that are meant to provide benchmarks for a variety of development issues over the next 15 years. The goals cover poverty, hunger, health, education, gender equality, energy, the environment, and a host of other global challenges. Each goal is accompanied by a number of targets that serve as tangible metrics of a country’s progress towards the SDGs. These new goals are a follow up to the Millennium Development Goals, a 15-year set of eight benchmarks that world leaders agreed to back in 2000. To improve their drafting process for the new goals, the UN organized the largest consultation program in its history that combined government input with surveys of the general public.

 

The Addis Ababa Action Agenda, a vital part of the new development goal drafting process, is a step towards recognizing the role of international philanthropy and the private sector in supporting global development. The agreement makes several references to the importance of the private sector in economic growth, particularly the role of the financial sector in enabling small businesses. Furthermore, Article 10 of the agreement explicitly lists philanthropies and foundations as vital members of the “global partnerships” that are required to meet the SDGs. This is a substantial improvement over the funding section of the MDGs, which overwhelmingly relied on official development assistance and did not reference to international philanthropy.

 

However, there is still a lot more that the Addis Ababa Action Agenda and the SDGs could do to support philanthropy’s vital role in development. In June, the CGP cohosted the Conference on Policy Coherence for Mobilizing Private Financial Flows for Sustainable Development with the OECD Development Center. The purpose of this conference was to discuss how to best utilize private funding for the SDGs in the lead up to the Third International Conference on Financing for Development. Dr. Carol Adelman, director of the CGP, provided a number of recommendations, summarized below:

 

  • Efforts to measure private financial flows and to publicize philanthropic best practices should be increased
  • Private and philanthropic actors should be included in drafting the SDGs
  • Innovation should be the primary criteria for creating public-private partnerships as part of the SDG targets for global partnerships
  • Philanthropy should be recognized as a unique source of development practices rather just an additional funding source for official development goals
  • Countries should strive to improve their legal environments for investing in both for-profits and not-for-profits
  • Intergovernmental organizations should facilitate the distribution of private resources to developing countries by evaluating best practices and identifying successful ventures

 

Though these suggestions were not explicitly included in the Addis Ababa Action Agenda, countries looking for ways to finance their SDG efforts should still consider them. Many of these suggestions simply entail engaging with the private and philanthropic sectors, and collecting new data. However, some countries may balk at evaluating their legal environments. A major finding of the CGP’s new Index of Philanthropic Freedom is that laws created to serve the legitimate interests of the state, such as capital controls and illicit financial flows legislation, often hinder philanthropic efforts as well. Examining their legal requirements will require states to evaluate the benefits of combating illicit finance or managing volatile financial flows against the benefits that come from international philanthropy.

 

As Dr. Adelman noted in her comments, 80% of the developed world’s economic engagement with the developing world comes from the private sector, philanthropy, and remittances. The Addis Ababa Action Agenda is an important first step in acknowledging these essential flows and how they can help meet the SDGs. But the international community needs to go further in developing a more holistic funding plan for the SDGs, and the recommendations made at the Conference on Policy Coherence are an excellent place to start.

Quantity vs. Quality: Rethinking ODA

The UK has met its .7% Official Development Assistance (ODA) target for 2013, but from the limited coverage of this issue you would never know. Britain barely advertised this huge accomplishment, only sending out a single tweet of acknowledgement. The UK is just one of 7 countries currently meeting the ODA requirement set by Development Assistance Committee (DAC) countries in 1969 and it is the first of the world’s largest economies to do so. The other countries include Norway, Sweden Luxembourg, the Netherlands, and Denmark. By comparison, the US only uses about .2% of its GNI on foreign assistance programs. The timing of the UK achievement is interesting considering the recent criticism of the country’s Department for International Development (DfID).

imgresDfID is the primary channel through which UK ODA flows. It is responsible for almost 88% of UK ODA.  But just last week the Independent Commission for Aid Impact, a watchdog agency evaluating DfID learning strategies, gave the UK agency an “amber-red” rating for its ability to research and apply its findings to foreign assistance programs. The report criticized DfID for poor returns on investment and emphasized the organization’s inability to translate research into effective action. This creates the notion that the UK could achieve the same development goals at a much lower cost if it were to employ more effective investment strategies.

The UK’s interesting situation is a stark reminder that quantity does not ensure quality in development assistance, and begs the question of which is most important for development: the quantity of foreign assistance or its quality? A higher quality means greater returns on investment, but a higher quantity means a larger investment overall. It seems, however, that by increasing the funding for an ineffective organization, the UK is wasting an opportunity to more effectively use its high ODA level but the achievement of reaching the .7% of GNI achievement masks the underlying organizational problems.

It is difficult to deny the benefits of ODA quotas. ODA quotas hold countries accountable for their continued foreign assistance. Bilateral development assistance relies on ODA, and because of the OECD agreement from 1969, developed nations have a mutual obligation to maintain a substantial foreign assistance program. By setting the quota as a percentage of GNI, each country has a high, yet attainable goal to achieve. Even if countries do not reach that goal, just by attempting to do so they contribute a large amount to development programs. The quota also serves the purpose of being an easily measurable target that ideally allows for comparisons across countries. The percentage encourages countries to contribute the same relative amount, creating a sense of equality.

The UK has drastically increased its ODA recently
The UK has drastically increased its ODA recently

The greatest negative aspect, however, of ODA as a percentage of GNI is the measure’s strict simplicity. As demonstrated, the benchmark only demonstrates how much money is spent on foreign assistance. It says nothing about the types of programs and, more importantly, the quality of these programs. Is this foreign assistance money used in the most effective way or in the areas in most dire need of assistance? It allows countries to abuse the ODA system. Countries are already under fire for suspicious ODA practices. A recent post on this blog highlighted how countries use ODA as a way to turn a profit often at the expense of a developing nation. Simply setting a high ODA target for developed nations without addressing organization issues could further contribute to this problem.

Has the age of ODA quotas come to an end? It might be time to move away from a system of ODA targets as a percentage of GNI. Development work is all about the quantifiable measures. Perhaps it is time the development community creates a quantifiable measure for ODA quality instead of merely the quantity. It is not enough for developed nations to merely donate a portion of their GNI, especially when that money is not funneled to effective development programs.

Between a Schoolhouse Rock and a Hard Place

In both developed and developing countries, governments are trying to figure out the vital components of a successful education system. Partially, this stems from the rate of return on education, with as little as 8.5% in OECD for primary education to 25.4% in Sub-Saharan Africa for primary education as reported by the World Bank, though some of these figures are disputed. The solutions range from teacher accountability through standardized tests to competition from private schools. Some trends have been emerging from the data, and common themes are starting to become apparent.

 

Top 10 countries in categories according to PISA

Recently, the OECD came out with the results from the Programme for International Student Assessment (PISA), a cross-country test comparing the results in math, science, and reading of 15-year-old students. PISA is taken every 3 years in all 34 OECD countries, along with 31 developing countries who wish to participate, such as Jordan, Kazakhstan, Thailand, and Indonesia, among others. The stark results from this year was the drop of Finland and the rise of the East Asian states. Meanwhile, a number of developed countries underperformed the average, including the United States and Sweden. The mean score for OECD countries ended up being 494, with Shanghai-China attaining 613 and Peru propping up the table with 368.

 

Test scores and economic growth vs. years of education and economic growth.

PISA has found certain elements in school systems to be correlated with higher educational outcomes through test scores. High-performing school systems are more likely to distribute resources more evenly between socio-economically advantaged and disadvantaged areas. The better performers also tend to give more autonomy to schools, principals, and teachers over curricula and assessments than the lower performing schools. Better school systems also recruit and retain high quality teachers through higher salaries and more autonomy, although the correlation only works for countries with GDP per capita over $20,000. Finally, the less stratification there is in classes, by tracking gifted students into a separate track, the better the school test scores are.

Other reports from various academics tend to corroborate the data that OECD has been producing. Eric Hanushek and Ludwig Woessman have done a large amount of research using PISA and data from other test scores. They found that 73% of variation between test scores is down to educational quality, with a higher effect in countries below the median GDP per capita. This effect is also magnified through the openness of trade withing a country. Over a long time horizon, a 20 year reform leads to 5% higher GDP, with the effect over 75 years after the room resulting in a 36% higher GDP than without the reform. Meanwhile, the effect of dollars spent or number of years of schooling have little to no effect on educational outcomes.

 

Finnish primary education classroom

The question then turns to the factors that improve educational quality. Charles Kenny found that an increase in school autonomy over budgets, hiring teachers, and course content improves scores on average 17 points, which would be a big swing for most countries. Adding a couple hours of instruction, assessments for student promotion, and monitoring by principals for lessons makes scores leap 42 points, which would be almost a 10% improvement for the OECD average. This highlights the how autonomy and accountability complement each other. Private schools have also been shown to improve schooling in Indiaand Kenya, though other reports on private voucher programs in Chile and Catholic schools in the United States show no effect. The idea from these mixed results is that private schooling in countries with weak public institutions could benefit from private schools while in developed countries its questionable.

 

Growth and education reform

A final factor on improving educational quality is equity. Another study by Hanushek and Woessman showed that the earlier that tracking, or placing students into different classes or schools based on ability level, the more inequality there is in the system. As family socio-economic background is one of the major determinants of educational attainment, Hanushek and Woessman show that background is negated the longer that there is no tracking. This partially why Pasi Sahlberg, director of the Finnish Ministry of Education’s Center for International Mobility, has been emphasizing that the Finnish school system reformed decades ago to make education more equitable. Subsequently, test scores improved.

Education and its effect on human capital is probably one of the most important factors in development. Slowly, we are moving away from the model of just building schools, and realize that the quality of instruction also matters. In different circumstances, pre-primary education, choice in schools, autonomy, and equality have all been shown to have some impact in multiple countries. Now it’s simply a matter of determining which course of action is the best and for what circumstance.

Money For Nothing: Overstating Official Development Assistance

Aid projects can help young children in Africa obtain access to fresh drinking water.
Aid projects can help young children in Africa obtain access to fresh drinking water.

Recently a report by The Guardian exposed the troubling reality that some nations overvalue their ODA. By exploiting the antiquated formula for calculating ODA, which calls for interest rates on foreign aid loans to be less than 10% (grants are held to a 25% rate), countries like Germany, France and Japan, are taking credit for more aid than they actually give. Just how much more? David Roodman, the author of the Guardian article, estimated that billions of dollars in ODA is tacked on each year by manipulating one simple calculation. Last April, former chairman of the DAC Richard Manning warned in a letter to the Financial Times that fewer and fewer loans given by OECD countries are “concessional in character.”

The 2008 Financial Crisis upset the ODA equilibrium.
The 2008 Financial Crisis upset the ODA equilibrium.

After the 2008 Financial Crisis, interest rates fell but the 10% discount benchmark rate for ODA loans stayed the same, causing the imbalance that upset the equilibrium of ODA calculations. Roodman writes, “Today, rich nations can borrow at 2% or 3%, lend at 4% or 5%, and make a profit while calling the loan aid.” Further compounding the problem, the profits made on these loans go back into the financial system of the lending country.  These interest repayments, as they are called, are not subtracted from net ODA like capital repayments, skewing the final figures. In the case of Japan, who in 2011 took in $2.6 billion in interest repayments, a nation can actually receive more money from developing countries than it gives to them in ODA.

But which nations are receiving these loans? Manning explains in his letter that “France, Germany and the European Investment Bank” give loans to the middle-incomes countries of Latin America and Asia. These loans count as concessional ODA, but in reality they do not reflect the “real cost of capital” and rake in huge profits for the lending countries. As more countries have discovered this type of loan practice, Manning writes, we have seen a recent surge in ODA to middle-income countries and a slight drop-off in ODA to sub-Saharan Africa. In their defense, some lending countries argue that the rates also must reflect default risk. And to be fair, default risk is always a factor when lending to countries in dire straits.

Thankfully, Roodman reports, nearly all of the DAC countries employ a more effective calculation method in their handling of export credit arrangements. This method uses calculated differentiated discount rates based on currency values and the rate at which each country pays to borrow money. Unlike the 10% benchmark, which has held steady since 1972, differentiated discount rates are updated yearly to reflect current market forces.  In applied, this could be an effected method of calculating rates for ODA as well. But no matter the ultimate solution, the fact remains that our fifty-year-old method of ODA calculation is in desperate need of an update.

China in Africa: Bad Influence or Bad Rep?

For some time now, Western development aid has been criticized as ineffective. Over the past 60 years, the West has given an estimated trillion dollars in aid to Africa, and there is a growing body of evidence that this aid has actually made the continent worse off than before. Aid, argues Dambisa Moyo, in her book Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa, is to African governments what oil is to Middle Eastern ones.  It perpetuates bad governance and enriches rulers at the expense of everyone else. Moyo points out that Africa is more in debt and more impoverished than it was 40 years ago. She believes that aid is partially, if not mostly, to blame.

Over the last few years, China and the other BRIC countries have significantly increased their spending on international development projects, particularly in Africa.  These countries are supplanting Western donors as Africa’s major suppliers of foreign aid, and redefining the aid paradigm. Continue reading