With rigorous economic research and practical policy solutions, we focus on the issues and institutions that are critical to global development. Explore our core themes and topics to learn more about our work.
In timely and incisive analysis, our experts parse the latest development news and devise practical solutions to new and emerging challenges. Our events convene the top thinkers and doers in global development.
The post is part of a series highlighting ongoing analysis of US agencies’ efforts to incorporate country ownership approaches in their development activities. The authors conducted research in El Salvador from February 24 – March 4, 2016.
“If we don’t take a risk, we won’t reap the rewards.” We heard this refrain from a USAID official working in El Salvador to advance USAID’s agenda to promote greater country ownership by cultivating public-private partnerships with local actors. Partnering directly with local entities can pose potential risks to USAID, but in El Salvador the decision to increase local implementation has proved pragmatic and beneficial, as it capitalized on local knowledge and the local private sector.
Under the banner of Local Solutions, USAID set a target to direct 30 percent of program funding to local partners by 2015 as part of the Agency’s 2010 reform agenda. For many Missions this goal remains an aspiration, but in El Salvador the Agency has consistently surpassed the target. In fact, USAID/El Salvador has comfortably cleared 30 percent since 2013, even without any direct partnerships with the government of El Salvador. This is due, at least in part, to the country’s diverse landscape of local organizations with the capacity to invest in and implement USAID projects.
Percent of Mission program funds per year implemented through local entities. Extracted from USAID Forward: Strengthen Local Capacity dataset (May 2016).
Three Distinct Partnership Models
It turns out that USAID/El Salvador draws upon a mix of local and international implementing partners to achieve results. We looked at three USAID projects, and examined the partnership arrangements involved, to understand the potential tradeoffs the Agency must weigh as it considers direct partnership with local organizations.
1. SolucionES: Local Prime Grantee & Local Sub-Grantees
SolucionES: FEPADE (prime) and all sub-grantees are local.
SolucionES is a five-year project that focuses on crime and violence prevention in El Salvador. At $42 million, SolucionES is the largest Global Development Alliance (GDA, USAID’s brand of public-private partnership) in USAID’s history in which every implementing partner is a local organization. USAID is investing $20 million while its local partners are required to leverage an additional $22 million from the private sector.
SolucionES’ implementing partners have been working in El Salvador for decades. USAID even helped to create several of these institutions through initial funding in the 1980s. These organizations are now leaders in shaping El Salvador’s development agenda, showing the payoffs of USAID’s investments in institutional strengthening. USAID has not just spent money in El Salvador; it has increased civil society organizations’ capacity to exist independent of the Agency.
2. Regional Climate Change Program: Local Prime Grantee & International Sub-Grantees
Regional Climate Change Program: CATIE is a local organization
and the sub-grantees are international organizations.
The Regional Climate Change Program (RCCP) provides a platform for coordination and cooperation on climate change mitigation interventions in Central America. CATIE, a regional center focused on management, conservation, and sustainable use of resources, leads implementation. Though it’s based in El Salvador, CATIE has a well-established network of non-governmental and governmental partners with which it works throughout Central America. International sub-contractors bring technical expertise to the project that complements CATIE’s capacity to convene partners around an issue that affects the entire region. Though, from what we heard, international partners were initially apprehensive about CATIE’s ability to manage USAID resources, they’ve come to recognize one another’s comparative advantage in implementation.
3. Alianza Cacao El Salvador: International Prime Grantee & International/Local Sub-Grantees
Alianza Cacao: CRS (prime), LWR, and TechnoServe
(sub-grantees) are international organizations. Caritas and
Clusa are local organizations (sub-grantees).
The Alianza Cacao El Salvador is a GDA that aims to improve the incomes of Salvadoran farmers by establishing cacao-based agroforestry systems and strengthening the cacao value chain. Catholic Relief Services (CRS), an international organization, is USAID’s direct partner that contracts to a mix of local and international implementing entities. In speaking to a local cacao cooperative, we learned that USAID may have chosen an international organization because there was a pressing need to disburse resources and not enough time to build the fiduciary capacity of local organizations to manage the award. Local organizations may have the technical expertise to implement, but in some cases they lack the absorptive capacity to manage large grants.
What these Partnerships Tell Us about Tradeoffs
These three partnership models offer a lens through which we can explore the potential risks and rewards that Missions consider in pursuing Local Solutions efforts.
Fiduciary. USAID has strict regulations in order to protect US taxpayer dollars from fraud and waste. Missions must undertake an intensive due diligence process to ensure partners’ financial, procurement, and management systems – among other things – are reliable, especially in difficult country contexts. This is likely why USAID chose to partner with CRS to implement Alianza Cacao.
Programmatic. Because many are first time direct partners, local entities don’t always have a proven track record of achieving results with USAID. In order to transfer management responsibility to a new organization, USAID must embrace a greater tolerance for programmatic risk. Though it’s a first-time direct partner, USAID knew of FEPADE’s reputation for achieving results in other projects, thus mitigating programmatic risk.
Longer timeline. It often takes significant time and resources for local partners to adopt USAID’s administrative and operational requirements to become a direct partner.
Local knowledge. Local organizations have long-standing relationships with the communities in which they work, enabling greater flexibility to improve projects based on community feedback. CATIE has a presence in several Central American countries, which gives it flexibility to adapt USAID’s regional program to specific country and community needs.
Cost effectiveness. Local organizations require lower overhead costs than an international organization, which means more of USAID’s dollars can go directly towards project results.
More resources. As is the case with SolucionES, organizations have access to different networks, including the local private sector – an untapped resource in many countries where USAID works.
Staying power & sustainability. The Salvadorans within these organizations will be directly affected by the outcomes of the projects they implement and therefore have a greater stake in sustaining results.
What the Example Set in El Salvador Tells Us about USAID’s Broader Effort
Merely funneling money through a local organization doesn’t necessarily lead to better results. USAID must carefully weigh the risks and rewards when choosing a local partner for direct implementation. But when local organizations have the capacity to achieve program outcomes, USAID’s calculation should systematically measure the additional benefits of partnering locally, such as sustainability, cost effectiveness, and increased capacity.
Without evidence to support the linkages between ownership and sustainability, USAID will continue to underestimate the value of its local partnerships. In choosing its implementing mechanism, we encourage USAID to consider how local implementation will affect results at the end of a project as well as 5, 10, and 20 years into the future. By budgeting for ex-post evaluations in project design, USAID will have more opportunities to identify how local ownership contributes to sustainability of results.
One of the biggest questions donors grapple with is how to balance implementing specific projects with building local capacity to execute similar programming in the future. Indeed, this question is central to the conversation—now active at USAID—about how donors can “work themselves out of a job.” One good example of how this can look comes from the Millennium Challenge Corporation’s (MCC) 2005-2010 partnership with Honduras. In this story, a key part of MCC’s legacy is not about what the agency funded but how it funded it. Through its commitment to country-led implementation, MCC helped set the stage for the government of Honduras to sustain and expand upon the structures and processes put in place to manage the MCC compact. The result: a new—and wholly Honduran—government unit that, over the last decade or so, has built a reputation for sound program management and a solid track record of efficient implementation.
At the origin: MCC’s commitment to country ownership
The idea that country ownership is critical for successful, lasting development programs is a central tenet of MCC’s model. A key way the agency puts this into practice is by giving the partner country the lead role in implementing the agency’s large-scale, five-year grant programs known as compacts. To do so, the partner country sets up and staffs an accountable entity called a Millennium Challenge Account (MCA)—usually as a separate government unit—to manage all aspects of the compact, including coordination with government ministries, procurement, contract management, maintenance of project timelines, and monitoring results. The MCA is overseen by a local board of directors with membership from government ministries, the private sector, and civil society. While MCAs usually wind down or dissolve at the end of a compact, for MCA-Honduras (MCA-H), implementing the compact was just the beginning.*
Expansion to manage other funds
Since the compact concluded in 2010, the government of Honduras has transformed MCA-H into a permanent government structure and expanded it to be the primary platform for managing donor funds in the areas of infrastructure, rural development, and food security. Rebranded as INVEST-Honduras in 2014, the unit has managed over $1 billion in funding from the government of Honduras and donors including the Central American Bank for Economic Integration (CABEI), the Inter-American Development Bank, the World Bank, and USAID.
As part of USAID’s own pledge to increase local partnerships, including government-to-government partnerships (G2G), USAID/Honduras had its eye on INVEST-Honduras, which it had watched develop through the MCC compact. USAID’s own standard pre-G2G procedure risk assessment tool reaffirmed INVEST-Honduras’ reputation for sound program management and relatively low risk. Thus, in 2014, the mission began funding a nutrition, watershed, and agricultural development program through INVEST-Honduras. Still ongoing, the program has expanded from its original $24 million to $60 million, and USAID points to additional benefits of directly funding INVEST-Honduras. Channeling money in this way has leveraged substantial cash contributions from the government of Honduras and better enabled the government to adopt the program as its own and build upon USAID interventions with other sources of funding.
On the front lines against corruption
Late last year, INVEST-Honduras was appointed by the president to chair a commission to liquidate and restructure the government’s road maintenance fund (Fondo Vial) in response to allegations of widespread dysfunction and corruption, including linkages with criminal networks. As of December, INVEST-Honduras is now executing all road maintenance functions, and is empowered to suspend personnel and revoke or renegotiate contracts with irregularities. The expectation is that such a move will close opportunities for corruption present in the previous model and increase the efficiency of contract execution.
Longevity and stability
INVEST-Honduras/MCA-H is now 13 years old. It has survived intact—with the same structure and largely the same staff—through five different governments. A number of factors seem to have contributed to its endurance, including competitive compensation and contracts that give donors a say over changes to key personnel, as well as a broad recognition that what the government was able to implement through the unit is worth preserving.
While MCC had a key role in INVEST-Honduras’ origin story, and other donors—including USAID—deserve credit for supporting its continuation, like all good country ownership stories this one ultimately owes its success to the local actor—in this case, the government of Honduras. And that’s how it should be. At the end of the day, it’s important to recognize that donor funds—in and of themselves—will not “transform” a developing country. The best hope is that a donor seeds something that local actors sustain and build upon. So make no mistake, the credit here goes to the government of Honduras. But let’s give MCC a quiet nod, too.
*While it is not the norm for partner country governments to preserve MCA structures post-compact, Honduras is not the only example. MCAs have also persisted post-compact in Lesotho, Tanzania, Morocco, Burkina Faso, and Ghana.
For over a decade, donors and developing countries alike have embraced the notion that “country ownership” should be central to the way aid is designed and delivered. Ownership is widely considered critical for achieving and sustaining program results, building local capacity to help countries transition from aid, and strengthening the citizen-state compact by shifting accountability for results to the partner government.
Last week the US Development Policy Initiative (DPI) launched new research (plus a brief) that explores how two key US foreign assistance agencies—USAID and MCC—conceptualize country ownership and implement the principle in practice. The new paper, Implementing Ownership at USAID and MCC: A US Agency-Level Perspective, complements our earlier quantitative look at perceptions of US approaches to country ownership practices. The paper finds strong commitment to ownership by both MCC and USAID. It also identifies several challenges with implementing the principle, including balancing country priorities with other agency needs and weighing tradeoffs between ownership and programmatic/fiduciary risk. We propose several recommendations for how the two agencies might build on their existing practices to focus on country ownership, as they do, generate a body of evidence around the results of ownership-oriented practices.
To amplify the discussion on country ownership, we convened a panel of high-level policymakers from inside and outside the US government to talk about their experience applying the principle, reflect on its importance, and discuss challenges and trade-offs. Much of the conversation echoed—and added to—the findings in the paper. Here are three key messages I heard from the expert panelists:
The United States has made great strides incorporating ownership. Patricia Rader from USAID highlighted the evolution of the agency’s approach to ownership. USAID starting with a heavy focus on providing inputs (channeling money through local organizations and institutions), but is now fostering a more holistic approach by working with country partners to identify priorities, design and implement programs, and put local resources toward them. MCC, whose foundational model underscores the importance of country ownership, applied lessons from its early days to develop an approach to partnership that emphasizes the leadership role of partner countries in a more structured and constructive way. As Scott Morris noted, the fact that the US government has made such progress incorporating ownership highlights its value to stakeholders in US foreign assistance, especially since ownership runs counter to two core political tendencies in foreign assistance—the desire by donors to dictate how aid money is spent and the instinct to tightly control fiduciary risk.
Ownership is a balancing act. While ownership is seen as a necessary condition for aid effectiveness, it’s not the only thing that donors need or want to pursue. For instance, Kyeh Kim from MCC acknowledged the tradeoff between building capacity of local implementers and getting things done quickly. While MCC staff understand that their job is “not to do, it’s to teach, facilitate, and mentor,” Kim recognized competing pressure to ensure MCC’s large scale investment programs are fully executed within a fixed timeline. Antoinette Sayeh, a distinguished visiting fellow at CGD, highlighted the complexities of ownership in donors’ policy reform efforts, especially in the face of resistance from local vested interests. Drawing on her years of experience at the International Monetary Fund and her time as Minister of Finance in Liberia, she cautioned against equating ownership with preservation of the status quo and noted the important role donors can play in supporting reformist leaders. Recognizing the additional risks associated with direct local partnerships, USAID’s Rader suggested that these risks should ideally be weighed against the purported benefits (e.g., strengthened capacity, more sustainable results) on a case-by-case basis to decide when local partnerships are the right approach. However, she acknowledged that assessing the benefit streams of local partnerships is challenging since hard evidence on the additive value of ownership approaches is currently scarce.
Incorporating ownership remains a work in progress: USAID has brand new operational guidance that advances the agency’s ownership efforts, but the agency will need a shift in organizational culture and the right incentives for staff to work in a new way. MCC, which built in a focus on ownership from the outset, is still learning what works and what doesn’t (and in what contexts) in locally-led program design and implementation. It will fall to the new administration to build on this positive momentum around ownership and make US foreign assistance more effective as a result.
“We're going to have global markets still operating,” says Nancy Birdsall confidently, but “the big issue is, will we have a good global politics operating?”
And that is indeed the question, as turbulent 2016 draws to a close and 2017 rolls into view. It’s one that will continue to occupy Birdsall, who is stepping down at the end of December as CGD’s first and only president, but will stay on as a senior fellow. No doubt she will join me on the CGD Podcast in the future, but the somewhat symbolic occasion of her last podcast as CGD president offers a chance to reflect on what’s changed, and what she hopes development folks will think about over the coming years.
CGD’s founding—just two months after the 9/11 attacks on the US—coincided, according to Birdsall, with a shift in thinking among US politicians, to embrace the idea that nurturing stable, prosperous societies overseas has direct benefits to the US. That logic continues to underpin much of CGD’s work. Now Birdsall, like many, are concerned that political thinking in some major economies is turning inward again.
A Greater Premium on Cooperation
For development advocates, Birdsall points out three factors to think about in the coming years. Firstly, “development is a long-haul game,” she says, as much a reminder as a strategy, “so I think we just have to think of a five, ten, 15, even 20-year horizon... and keep our eye on the ball.”
“It means I suppose there's a greater premium on thinking about cooperation among nations, particularly on issues like climate but also in general, that we're all in this together in the world.”
Birdsall further defends global cooperation: the rise of China, India and other emerging economies takes us deeper into the multipolar world where the US may still be the only superpower, but by a slightly diminished margin; the dawn of the age of the SDGs brings not only ambitions for all countries, but also a recognition of our interconnectedness—and that some of the biggest problems in the world require global solutions, such as climate change and fast-moving pandemics.
The Plight of Strugglers
Secondly, despite huge reductions in global poverty, there are still many who Birdsall calls “strugglers.”
“Their families have been lifted out of the worst form of abject poverty,” she tells me. “$1.90 is the international poverty line, but $1.91 is not that different. These are people that have gotten to $4 a day, $6 a day, $8 a day even, but in many countries they are extremely vulnerable to a fall back below their current income level." (Check out Birdsall’s co-authored paper on strugglers.)
"In that sense, we can compare them to the problem of the white working class that we are all more familiar with in the US—those are people whose expectations are not being realized and who are frustrated."
The plight of the strugglers is exacerbated, Birdsall says, by inequality and weak states—a combination of factors that the development community cannot ignore in the coming years.
“The reality is that most people, until they get into something I would say is the middle class with relative income security, they probably live in settings where life is not fair, where the state is not protecting them. It might actually be the oppressor.”
Get Out of the Way
Not only is effective government necessary at the national level, but—and this is the third flag Birdsall plants for the future of development—we must also think more about better macroeconomic policies that make the rules of global systems fairer. This, she points out, is something CGD has been doing since its inception 15 years ago, and something that it will continue to do under new president Masood Ahmed. It harks back to a simple mantra Birdsall and CGD have been repeating: get out of the way.
"Much of the future of developing countries, and the people in those countries, is in their own hands,” Birdsall says. “In a way, the task of us outside who want to see development happen, is as much not to get in the way. That's at the heart of the problem we all face: how to do good without doing harm.”
Nancy Birdsall steps down as CGD president at the end of December 2016, having led the organization for its first fifteen years. Below, some recent visitors to CGD pay tribute to her accomplishments. Masood Ahmed will join us in early 2017.
Over the past decade, the US government has repeatedly committed to incorporate greater country ownership into the way it designs and delivers aid programs. Though a range of factors—including strong domestic pressures—influence foreign assistance, US aid agencies have taken concrete steps to strengthen country ownership in their programs. A new policy paper, The Use and Utility of US Government Approaches to Country Ownership: New Insights from Partner Countries (with AidData co-authors Bradley Parks and Takaaki Masaki), draws upon survey data from government officials and donor staff in 126 developing countries to explore partner country perceptions of 1) how frequently the US government engaged in practices associated both favorably and less favorably with the promotion of country ownership, and 2) how useful each of those practices was.
Previous efforts to measure the implementation of donors’ commitment to aid effectiveness principles, including the promotion of country ownership (notably QuODA and the OECD’s 2011 monitoring survey), have tended to focus on the more easily quantifiable aspects of donor engagement—offering little on how development policymakers and practitioners in partner countries perceive individual donor efforts.
This study provides a useful complement to the existing body of evidence. We explore a range of donor practices—some widely considered to be useful for promoting country ownership (e.g., alignment with country strategies, delivering funds through country procurement or financial management systems), others with a more ambiguous or even unfavorable association with ownership (e.g., the provision of technical assistance, use of parallel implementation units).
Several interesting insights emerge although limitations in the data prevent us from drawing airtight conclusions:
The US government is generally perceived to align its programs with partner country priorities, though there are differences by agency (MCC is perceived to emphasize alignment more frequently than USAID) and partner country characteristics (the US aligns with national strategies more in better governed countries).
The US government relies heavily on professional training and technical assistance (especially international experts), while less frequently adopting practices that make use of in-country systems.
Host country respondents and US government staff disagree on which practices are most useful. Most of the practices that are in principle more favorable for the promotion of country ownership (ensuring alignment, providing budget support, paying for outcomes) are those considered most useful by partner country officials. US government staff favor their more common practices (professional training, the provision of technical assistance).
Practices that let countries lead tend to be underutilized compared to their perceived utility.
These findings support several policy recommendations to improve how the US government can better adhere to its commitment to support country ownership.
Increase flexible spending for USAID. For the US government to be more responsive to country priorities, USAID must have much more flexible spending authorities and greater freedom from earmarks and spending directives. One way to test this could be through a series of “effectiveness pilots” in which—in a small set of countries—directives, earmarks, and other spending requirements are removed or significantly reduced in exchange for greater adherence to more effective aid delivery practices.
Evaluate use of country systems. As the US government increasingly seeks opportunities to channel funds through the public financial management or procurement systems of partner countries, agencies should evaluate and draw lessons from their past experiences to understand whether and under what conditions using country systems helps to strengthen them.
Provide more flexible, results-oriented support to partner country institutions. The US government should encourage innovation, experimentation, and adaptation, allowing local partners to develop the context-specific forms that get results, instead of prescribing the structure of an organization.
Increase funds to the multilateral development banks. MDBs tend to pursue the practices that put countries in the driver’s seat (e.g., paying for results, using country systems) to a greater degree than US agencies. There are many compelling reasons for the US to direct more funds through multilateral channels; increasing support of aid modalities that seek to increase ownership is one.
Stay tuned for more work on country ownership coming soon from CGD’s US Development Policy Initiative. In January, Casey Dunning and Sarah Rose will release an in-depth, agency-level analysis of USAID and MCC’s approaches to country ownership. We reflect on progress made in implementing the principles of country ownership, identify constraints and tradeoffs the agencies face, and offer recommendations for better implementation of a country ownership approach in practice.
The paper draws on data from the 2014 Reform Efforts Survey conducted by the College of William and Mary in partnership with the National Opinion Research Center at the University of Chicago (a full methodological description and topline findings can be found here). The research team identified a sampling frame of nearly 55,000 development policymakers and practitioners who held government or donor staff positions in 126 low- and middle-income countries between 2004 and 2013. The survey consisted of questions about firsthand experiences and observations about international donors and development partner organizations. Our paper analyzes a subsample of 3,256 individuals who responded to questions about practices related to country ownership. When interpreting the results and recommendations, it is important to keep in mind several limitations, including a relatively low response rate (though it is on par for surveys of this type), the nature of perceptions-based data, and the fact that the data do not reflect current perceptions, which may have shifted in more recent years.