Making Sustainable Development Work: Governance, Finance and Public-Private Cooperation

It is a great pleasure for me to be here attending this important forum today. And I'm sure you will be hearing a lot about next month's World Summit on Sustainable Development. As this country's lead agency on foreign assistance, we expect to play an active role at the summit. We hope it will be a success. But it will only be a success if the nations represented there adopt a realistic approach to development and take a good, hard look at what works and what does not.

One of the key points that we at USAID have emphasized at the Financing for Development Conference in Monterrey and the World Food Summit in Rome and that we will press again in Johannesburg, is the importance of agriculture to sustainable development. Over the past decade and a half, international donors have cut back their investments in agriculture rather substantially.

Like the World Bank, the UN, and most bilateral development agencies, we at USAID did the same. We are now doing our best to rectify that, and we plan to add $200 million to our agricultural budget over the next 2 years. We hope that other donor nations and organizations will come to the same conclusion and make the necessary adjustments to their programs so that agriculture regains the prominence it once had in international development strategies.

This would represent a huge step forward for sustainable development and mark the summit as a milestone in the history of international development. Virtually, every developing country in the world is predominantly agriculture-based. Three-quarters of the world's poor live in rural areas. Most of them depend on farming and herding to sustain their families.

It stands to reason, therefore, that the best way to help people out of poverty is to help them improve agricultural productivity. Doing so means more food security, it means raising incomes in the countryside, improved nutrition, and lower child mortality rates. It means more opportunities for families to educate their children or start a business. And it means a more equitable balance between urban and rural development, the need for which has often been overlooked.

I would like to discuss now some aspects of the Millennium Challenge Account which Glen Hubbard also discussed in his remarks. We see MCA as a genuinely new look at foreign assistance. It will influence our entire approach to what we are doing in the future. We intend to maintain our existing programs which are currently underway in almost 85 countries around the world. But we want to have our existing programs also support efforts of countries to progress and to ultimately qualify for the MCA program themselves.

Sustainable development can mean many things to many people. For me, at its essence, it is the ability of a nation to achieve levels of income and rates of economic growth that allow it to finance its own future. The MCA will seek to achieve this. Its emphasis on development success and results get at the specifics of how that is done in ways that benefit everyone. It is not a simple task. All the complications that development practitioners have come to know are still there.

What level of income will be necessary? How fast do economies have to grow? What sectors have the greatest income growth potential? What are the trade-offs and synergies between developing human potential and increasing growth? How will the Millennium Challenge Account get at this in ways that strengthen our existing development efforts? How will it help to achieve sustainable development? I suggest it will do so in three ways.

One, by acknowledging the basics of economic growth. The MCA starts with a simple and clear idea, and Dr. Hubbard has mentioned these elements, that maintaining sustainable economic growth is a function of ruling justly, investing in people, and establishing and protecting economic freedoms. Without national responsibility and commitment, there will not be sustainable growth.

Two, by working where the environment for efficient use of increased development resources exists. The MCA says that nations that have established the basics for their development, that have created or are creating environments conducive to accelerating income growth and sustaining higher economic growth, are the nations in which increased financial resources will be most likely to achieve measurable development results -- such as lower poverty levels, increased agricultural and industrial production, higher literacy and education rates, and better health status.

Three, by addressing local priorities through local commitment. A basic element of sustainability is a high level of local involvement and commitment to the growth strategy and to specific investment projects. There must be local ownership. USAID's most successful projects over the years have been defined and implemented by recipient countries, organizations, governments, and private sector entities. Therefore, MCA programs and projects must respond to local needs and potential, and engage local resources for execution.

What is really new here? There are two things so far. As you may know, the exact arrangements and defining characteristics for MCA are still under discussion and being designed by an interagency group. So there remains ample room for further input. The two new components embodied so far include performance-based selection, which we have been discussing, where countries must show that they have implemented real policy changes. Countries will be selected on the basis of clear, concrete, and objective criteria. And the second is that the actual overall levels of resources are significant. With only a select group of countries eligible at any given time, and with the resources that the President has announced, there will be significant resources available for individual countries which will make a major difference.

Possible investment sectors include agriculture, the environment, education, health, finance and business, entrepreneurship, public management, international and regional trade. Throughout, the underlying objectives will be to finance programs that contribute directly to lifting people from poverty. We want them to lead healthier lives and get the education they need to compete in today's world economy. But we have to be honest with ourselves and with those who seek the aid. We can only help when countries choose policies that encourage economic growth.

I would like to quote from the President's speech at the Inter-American Development Bank when he announced MCA. He said, "The world's help must encourage developing countries to make the right choices for their own people, and these choices are plain. Good government is an essential condition of development. So the MCA will reward nations that root out corruption, respect human rights, and adhere to the rule of law. Healthy and educated citizens are the agents of development. So we will reward nations that invest in better health care, better schools and broader immunization programs.

Sound economic policies unleash the enterprise and creativity necessary for development. So we will reward nations that have more open markets and sustainable budget policies, nations where people can start and operate a small business without running the gauntlets of bureaucracy and bribery. While we at USAID are very pleased that the MCA will mean that the U.S. will allocate more resources for international development, we know that public dollars will never be enough to meet the needs of the developing world. The private sector's role is critical in this respect, and it is the great engine of economic growth.

Recognizing this, Secretary Powell launched the Global Development Alliance last year as USAID's business model for the 21st century. We at USAID are seeking to marry our financial resources and expertise with the resources of a wide range of businesses, non-profits, universities, foundations, NGOs, and even individual private foundations. All of these entities have become very important actors in development in recent years. Our Global Development Alliance program has been appropriated funds. And the objective here is to link these resources with resources provided by the private entities that are engaged or want to become engaged in development activities in the poor countries of the world.

Thirty years ago, 70% of all the money flowing to the developing world from the U.S. came from Official Development Assistance (ODA). Today, only 20% of the resources come from ODA. The rest come from trade, investment, remittances, foundations, private donations, and a host of other sources. Given this fact, it makes sense that we work with these new actors on projects where our interests coincide. Indeed, I hope that the public/private partnerships that you will be discussing this afternoon will pave the way for more such alliances.

Whatever comes from the World Summit, and the outcome of the conference is never certain, the President's MCA initiative has changed the way we look at foreign assistance. With a strong emphasis on accountability, governing justly and economic freedom and investing in people, this is all to the good. And we look forward to working with the Congress, other components of the U.S. Government, as well as the private sector in making it work. Thank you.