Ideas to Action:

Independent research for global prosperity


US Development Policy


This is a joint post with Erin Collinson

Happy 2014!

2013 wasn’t exactly a bang-up year for US development policy. Then again, it wasn’t exactly a bang-up year for anything involving politics. But keep those party hats and your sparkling beverage of choice out!

Here’s our personal list of some of the best ideas to come out of CGD for what the United States could do to make its development policy truly toast-worthy in 2014 (with the caveat that some are more politically feasible than others).

  • Don’t Limit US Development Policy to a 70’s-style Model:  Unleash OPIC.

The USG is still letting traditional aid lead its development efforts, while the Overseas Private Investment Corporation (OPIC), the US development finance institution (like the World Bank’s IFC), is hamstrung by a Nixon-era authorization. With a few budget-neutral tweaks, like letting the agency retain a small percentage of its profits to increase staff and granting it equity authority, OPIC could lead the world in the 21st century era of leveraging private investment for development. OPIC could draw more US investment into developing countries, all while returning greater profits to the US Treasury. It’s a win for development, for US businesses, and for US taxpayers, too.

  • Pay for Development Outcomes:  Pilot COD Aid at USAID and MCC.

Leveraging private money with OPIC-style development finance might be the wave of the near future, but that doesn’t mean that the United States shouldn’t be making traditional aid more effective. Rather than paying for inputs, US aid agencies should shift aid resources to paying for development outcomes by piloting Cash on Delivery Aid. US taxpayers would know their dollars are going to development programs that work, while the approach would also strengthen partner country capacity, innovation, and governance. The Education and energy sectors are ripe for pilots. USAID and MCC should race to see who can be first with a pilot, then share notes on what they learn.

  • Modernize the Delivery of US Food Aid.

The US system designed to deliver food aid to hungry people abroad is devastatingly inefficient. Regulations that mandate in-kind donations of surplus US commodities and require that food supplies be transported aboard US-flagged vessels make this much-needed assistance unnecessarily slow and costly. Efforts to reform this antiquated system made headlines on several occasions in 2013: a proposal in the President’s Budget, a tight vote on the House floor, delivery challenges in Syria and the typhoon-ravaged Philippines, and a parody video on The Daily Show. Fingers crossed that the growing momentum for reform will propel real change in the year ahead.

  • Get Strategic about Bilateral versus Multilateral Allocations.

Wonks know that the multilateral development banks (MDBs) provide a lot of development bang for the US buck. But because of misperceptions about how to leverage aid and what the MDBs actually do, as well as divisions in the House committee structure, MDBs tend to be overlooked in conversations about making US foreign assistance more effective. There’s also a shortage of thoughtful discussion about which multilateral institutions make the best use of budget dollars. This is a case where the Administration can lead. For its part, Congress should continue steps that House appropriators took last year to support a routine transfer authority between State and Treasury for bilateral and multilateral assistance. This kind of smart flexibility could go a long way.

  • Build Power Africa into the Bipartisan Development Legacy it Deserves to Be.

We were among several of our CGD colleagues cheering on the President’s Power Africa initiative. The President deserves serious props for identifying reliable electricity access as a key to economic growth in sub-Saharan Africa. Now the Administration should work with Congress to pass a strong Electrify Africa bill to make this a bipartisan initiative that lasts beyond President Obama’s second term, much like President Bush did with PEPFAR and the MCC. Truly powering Africa will also mean being realistic about how much electricity is needed; unleashing OPIC; implementing new projects, not just existing ones; leveraging the MDBs; and seeking to expand the initiative beyond the initial countries.

  • Pass Immigration Reform that Recognizes the Link Between Migration and Development.

While the prospects of Congress passing meaningful immigration reform legislation in 2014 remain murky at best, we’re still hoping for US immigration policy that recognizes the link between migration and development. Even small adjustments to existing policies could take advantage of this under-realized connection. US programs that extend temporary work visas, for example, allow workers from developing countries to fill labor shortages faced by US employers and add value to the US economy, while offering guest workers a chance to increase their earning potential dramatically. Such programs yield tangible benefits to sending countries since workers frequently use higher earnings to support family back home. Globally, remittances from workers abroad actually exceed foreign aid, but this is not the case in some of the poorest and least developed countries. Designing and implementing programs that help workers from these countries seize the opportunity afforded by temporary employment visas could have dramatic development impacts.

What else do others at CGD hope to see in 2014 from US development policy?

A more effective PEPFAR, an aid program aligned with recipient priorities, aid transparency, a variable gas tax (this has been on Nancy’s list for a while now), duty-free quota free market access for LDCs, congressional reauthorization of the Generalized System of Preferences (GSP), consideration of a balance between public health needs in developing countries and private sector IP rights in the new regional trade agreements, and better leveraging of the private sector for development using Development Impact Bonds.

Many of our colleagues also hope to see a final rulemaking from the Securities and Exchange Commission (SEC) on Section 1504 (Cardin-Lugar) of Dodd-Frank, the provision that instructs the SEC to issue rules to require resource extraction issuers to publicly disclose payments made to governments for "the purpose of the commercial development of oil, natural gas, or minerals.” Cheers to Oxfam, Publish What you Fund, and Senators Cardin, Leahy, Levin, Markey, and former Senator Lugar for continuing to push for a new rulemaking following a district court’s vacating of the 2012 rule.

Stay tuned to CGD for new toast-worthy development policy ideas in 2014!


CGD blog posts reflect the views of the authors drawing on prior research and experience in their areas of expertise. CGD does not take institutional positions.