Foreign Assistance:
Public-Private Partnerships (PPPs)
Marian Leonardo Lawson
Analyst in Foreign Assistance
June 13, 2011
Congressional Research Service
7-5700
www.crs.gov
R41880
CRS Report for Congress
P
repared for Members and Committees of Congress
Foreign Assistance: Public-Private Partnerships (PPPs)
Summary
The flow of private sector resources to developing countries has increased significantly in recent
decades. Seeking opportunity in this changing environment, government development assistance
agencies such as the U.S. Agency for International Development and the State Department are
working with private sector entities in unprecedented ways to determine when and if such
partnerships can lead to improved development results. As explained in the Obama
Administration’s 2010 Quadrennial Diplomacy and Development Review (QDDR), “private
sector partners can add value to our missions through their resources, their capacity to establish
presence in places we cannot, through the technologies, networks, and contacts they can tap, and
through their specialized expertise or knowledge.” More than 1,000 such partnerships, involving
more than 3,000 private entities, have been established since 2001.
Potential Benefits of and Concerns About Partnerships
Modern public-private partnerships (PPPs), characterized by joint planning, joint contributions,
and shared risk, are viewed by many development experts as an opportunity to leverage
resources, mobilize industry expertise and networks, and bring fresh ideas to development
projects. Partnering with the private sector is also widely believed to increase the likelihood that
programs will continue after government aid has ended. From the private sector perspective,
partnering with a government agency can bring development expertise and resources, access to
government officials, credibility, and scale.
Nearly 10 years after the formation of USAID’s Global Development Alliance (GDA), PPPs for
development have received mixed reviews. PPPs require significant effort to create and manage,
and critics argue that inadequate data exist to demonstrate that these efforts are the most effective
way to use limited development resources. Others have expressed concern about partnerships
diverting resources away from proven development programs or recipients. Still others are
concerned that PPPs, particularly those involving corporate partners and focusing on trade and
economic growth, may lead to outsourcing of U.S. jobs. Partnership proponents have varying
views as well. Some feel that the goal of mainstreaming the PPP model as a tool for development
has been achieved and they are ready to declare victory and move on, while others contend that
the potential for using PPPs in development has only begun to be realized and that expanded
partnerships are the future of development assistance.
Issues for Congress and the Scope of This Report
To date, the movement toward this “new generation of partnerships,” as it has been called by
Secretary of State Hillary Clinton, has been driven by successive administrations with limited
congressional involvement. However, recent reviews of U.S. foreign assistance policy, through
the QDDR and a Presidential Study Directive on Global Development Policy, may spur
congressional action on foreign assistance reform in the 112th Congress. As part of this effort,
Congress may consider several issues that affect or are affected by the use of PPPs, including
budget and procurement policies, interagency leadership, international commitments, and the role
of aid within broader development policy. This report discusses the evolution of private sector
involvement in U.S. foreign assistance programs over recent decades, how globalization has
driven the modern approach to development partnerships, potential benefits and drawbacks of
PPPs, and how partnerships are being used by other bilateral donors and multilateral development
Congressional Research Service
Foreign Assistance: Public-Private Partnerships (PPPs)
agencies. The report then discusses partnership-related issues that may be of interest to Congress
as part of the foreign assistance authorization and reform process.
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Foreign Assistance: Public-Private Partnerships (PPPs)
Contents
Introduction ................................................................................................................................ 1
Evolution of the Private Sector Role in U.S. Development Assistance ......................................... 2
Globalization and Development ............................................................................................ 2
U.S. Government Development Partners ..................................................................................... 4
USAID—Global Development Alliances/Private Sector Alliances......................................... 4
State Department—Global Partnership Initiative ................................................................... 7
Other Bilateral Agencies ....................................................................................................... 8
Foreign Donor and Multilateral Development Partnerships.......................................................... 9
Potential Benefits of Public-Private Partnerships ....................................................................... 10
Potential Concerns About Partnerships ...................................................................................... 12
Issues for Congress ................................................................................................................... 14
Cost Savings ....................................................................................................................... 14
International Commitments ................................................................................................. 15
Emphasis on Non-aid Development Strategies..................................................................... 15
Budget and Procurement Issues ........................................................................................... 15
Interagency Leadership ....................................................................................................... 16
Limitations on Congressional Oversight .............................................................................. 16
Figures
Figure 1. Financial Flows from Organization for Economic Cooperation and
Development (OECD) Countries to Developing Countries, 1991-2009..................................... 3
Tables
Table 1. Malawi Dairy Development Alliance ............................................................................. 5
Table 2. Oral Rehydration Solution (ORS) Campaign, India ........................................................ 5
Contacts
Author Contact Information ...................................................................................................... 17
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Foreign Assistance: Public-Private Partnerships (PPPs)
Introduction
In the last decade, the concept of government partnerships with the private sector has frequently
appeared in international development literature and U.S. development policy discussions. Goal 8
of the United Nations’ Millennium Development Goals is to “develop a global partnership,” with
an emphasis on working with the private sector to increase global access to information
technology and pharmaceuticals.1 The “transformational diplomacy” initiative in the George W.
Bush Administration included “engaging the private sector” among its six areas of focus.2 The
Obama Administration’s U.S. Global Development Policy, announced in September 2010, aims to
“leverage the private sector, philanthropic and non-governmental organizations, and diaspora
communities.”3 U.S. development activities in the last decade reflect this emphasis. The U.S.
Agency for International Development (USAID) reports participating in 1,065 public-private
partnerships (PPPs) with 3,025 different partners, leveraging partner resources valued at nearly
$13 billion, between 2001 and November 2010.4 Some observers view such partnerships as part
of a broad ongoing transformation of how foreign aid is implemented, bringing nontraditional
actors and ideas into development practice. Others view PPPs as an experiment that has not
proven itself preferable to traditional approaches to development assistance.
This report discusses the evolution of private sector involvement in U.S. foreign assistance
programs over recent decades, how globalization has driven the modern approach to development
partnerships, potential benefits and drawbacks of PPPs, and how partnerships are being used by
other bilateral donors and multilateral development agencies. The report then discusses
partnership-related issues that may be of interest to Congress as part of the foreign assistance
authorization and reform process.
What Is a Public-Private Partnership (PPP)?
A key issue in evaluating public-private partnerships (PPPs) in development is determining what constitutes a partnership.
This report focuses on partnerships in which a U.S. development agency works with a private sector entity, with each
contributing resources (cash or in-kind) to achieve a shared objective that has significant development benefits. Agencies
may define PPP somewhat differently. USAID, for example, defines its Global Development Alliances (GDAs) as having a 1:1
leverage of USAID resources, a nontraditional resource partner, a jointly defined solution to a social or economic
development problem, shared risks and results, and sustainability.5 The Department of State describes its “new generation
of public-private partnerships” as “a collaborative working relationship with non-governmental partners in which the goals,
structure, and governance, as well as roles and responsibilities, are mutually determined and decision-making is shared.”6
What these partnerships have in common, and what makes them distinct from many U.S. government relationships with
private sector entities, is that that the private partner is not a vendor, contractor, grantee, or government-funded
implementer, but rather, ideal y, an equal partner invested in every stage of the partnership activity.
1 See http://www.un.org/millenniumgoals/global.shtml.
2 “A Call to Action: Report of the Advisory Committee on Transformational Diplomacy,” Department of State
Publication 11484, Office of the Secretary, January 2008, p. 11.
3 “Fact Sheet: U.S. Global Development Policy,” available at http://www.whitehouse.gov/the-press-office/2010/09/22/
fact-sheet-us-global-development-policy.
4 Data provided to author by USAID/PSA via e-mail, November 5, 2010. Note that leveraged fund data are based on
both cash and in-kind partner contributions. The value of in-kind contributions is determined by partner organizations
and is not audited.
5 See “An Intro to GDA” at http://www.usaid.gov/our_work/global_partnerships/gda/intro.html.
6 See GPI’s Partnership Guide at http://www.state.gov/s/partnerships/guide/index.htm.
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Evolution of the Private Sector Role
in U.S. Development Assistance
USAID and other U.S. agencies have worked with the private sector for decades, but they have
expanded their means of engaging the private sector over time. Starting in the mid-1970s, USAID
began using nonprofit nongovernmental organizations (NGOs) as development program
implementers more frequently, primarily as an alternative to full government staffing. The shift
allowed for greater flexibility, and arguably cost savings, while maintaining full government
control of development policy and programs.
In the 1980s, the Reagan Administration’s foreign aid policies focused on supporting indigenous
for-profit private enterprises as a means of improving economic development processes and
outcomes. The Private Enterprise Initiative, begun in 1981, focused largely on improving the
policy environment for indigenous private enterprise in developing countries, but it also explored
ways to use the private sector to implement traditional aid programs.7 This approach was also
reflected in the establishment of several enterprise funds, beginning in 1989, which primarily
used USAID funds to invest in small and medium-sized private businesses, initially in Central
and Eastern Europe, as a means of spurring private sector development in countries transitioning
toward market-based economies.8 Microenterprise programs, through which USAID supports
local financial institutions or organizations providing small loans and support services to small
entrepreneurs, first became popular in this period as well.
These models of private sector engagement continue to this day. Government aid agencies work
with private entities both as implementing partners and drivers of economic growth in which to
invest. In the last decade, however, a new model of public-private engagement in development
has emerged. Rather than funding private entities to implement USAID-designed programs, or
investing in the growth of private enterprise within a developing country (both approaches are
ongoing), the new model is designed to take advantage of the growing presence of international
corporations, foundations, and other private entities in developing countries through formal
relationships marked by common objectives, mutual resource contributions, and shared risk. This
is the type of activity, now commonly referred to as a public-private partnership (PPP), addressed
in this report. Nevertheless, there is no official definition of PPP in the international development
context, and an understanding of the wide range of activities that are referred to as PPPs is
important for understanding the debate around PPP efficacy.
Globalization and Development
The rise of PPPs in development assistance is closely related to significant changes in the flow of
funds to developing countries in recent decades. Liberalized trade policies and information
technology innovations have led to a surge in global actors. Private financial flows to developing
countries—including commercial lending, charitable giving, and money transfers between family
7 For a detailed review of the Private Enterprise Initiative, see “The Private Enterprise Initiative of the Agency for
International Development,” a report prepared for the U.S. House of Representatives Committee on Foreign Affairs by
Curt Tarnoff, Congressional Research Service, September 1989 (Washington: GPO).
8 For more information on enterprise funds, see GAO Report NSIAD-99—221, “Enterprise Fund Contributions to
Private Sector Development Vary,” available at http://www.gao.gov/archive/1999/ns99221.pdf.
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members—are now significantly and consistently higher than official development assistance,9 a
dramatic change from just 10 years ago. Foreign aid from government donors accounted for only
21% of the estimated $575 billion in total financial flows between the Organization for Economic
Cooperation and Development (OECD)10 and developing countries in 2009 (Figure 1).
Figure 1. Financial Flows from Organization for Economic Cooperation and
Development (OECD) Countries to Developing Countries, 1991-2009
(in billons of current U.S. dollars)
Source: Hudson Institute Center for Global Prosperity, The Index of Global Philanthropy and Remittances, 2011,
Executive Summary, Figure 3, as modified by CRS.
Note: CGP = the Hudson Institute’s Center for Global Prosperity. The “More complete CGP total private
flows” data reflect a change in 2004 from using private flow data from OECD to using methodology developed
by the Center for Global Prosperity for calculating private flows.
Looking at U.S. financial flows to the developing world in 2009, official flows (development aid
from the government) accounted for only about 13%. Private capital flows, remittances, and
philanthropy made up the bulk.11 The quality of private flow data is questionable, and some
analysts assert that much of the private flow is not going to the least-developed countries, where
official aid is still paramount. Still, the trend is unmistakable. Donor governments are no longer
the key foreign players in many developing countries. Aid policies and priorities are affected by
evolving trade, investment, and migration trends and policies. In this changing context, PPPs are
9 Official development assistance (ODA) is defined by the Organization for Economic Cooperation and Development
(OECD) as grants and concessional loans (with a grant element of at least 25%) intended to promote the economic
development and welfare of developing countries.
10 The Organization for Economic Cooperation and Development (OECD) is a primary source for information on
global official (government) financial flows.
11 Hudson Institute Center for Global Prosperity, The Index of Global Philanthropy and Remittances, 2011, Executive
Summary, Table 1.
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viewed by many policymakers as an opportunity to leverage private resources toward solving
problems that hinder development and business interests alike.
U.S. Government Development Partners
USAID—Global Development Alliances/Private Sector Alliances
USAID is the primary U.S. agency promoting international development. The agency has been
the U.S. government leader on PPPs for development since establishment of the Global
Development Alliance (GDA) Secretariat within USAID in 2001. The Secretariat was tasked with
developing partnership models that could become a new standard for USAID programs. It was
intended to link growing private financial flows in developing countries to U.S. development
assistance programs, enabling both private and public gains by promoting common interests.12
USAID reports participating in more than 1,000 PPPs since 2001, with more than 3,000 distinct
partners.13 Private partners include corporations, universities, and foundations and other nonprofit
organizations.
USAID uses PPPs in every development sector. For example, in the Jordan Education Initiative,
USAID brought a dozen private sector technology companies, including Cisco and Dell, together
with the Jordanian Ministry of Education’s program to modernize curriculum content and
broadband information technology as a key step to education reform. USAID contributed $11.25
million to the partnership between 2005 and 2007, while the private partner contributions were
valued at $25.6 million.14 In the Sustainable Tree Crops Alliance, USAID brought together public
and private stakeholders in the cocoa industry, including Mars, Hershey, Nestlé, and other
international chocolate processors. The project was designed to improve the income of small tree
crop farmers and the environmental sustainability of cocoa production systems in West and
Central Africa through technology transfer, marketing, and institutional innovations. USAID
contributed $2.18 million to the effort in 2002, while other partners contributed $7.55 million.15
Table 1 and Table 2, below, show the objective and partner roles for two fairly typical USAID
PPPs. The text box on page 6, in contrast, highlights a more innovative partnership model focused
on leveraging the knowledge and resources of developing country nationals who reside in the
United States.
12 Assessment of USAID’s Global Development Business Model, USAID Bureau for Policy and Program
Coordination, Evaluation Working Paper No. 11, April 2005, p. 3.
13 See Fact Sheet: Office of Development Partners/Private Sector Alliances, available at http://www.usaid.gov/
our_work/global_partnerships/gda/resources/PSA_Fact_Sheet.pdf.
14 See USAID GDA Database, available at http://gda.usaid.gov/alliances/detail.asp?s=
SVHTWWJYBVBXBPDSHGDMHRBQYLYTQYNT&id=413&t=.
15 See USAID GDA Database, available at http://gda.usaid.gov/alliances/detail.asp?s=
SVHTWWJYBVBXBPDSHGDMHRBQYLYTQYNT&id=126&t=.
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Table 1. Malawi Dairy Development Alliance
Objective. Build the capacity of small dairy farmers, local milk processing plants, and farmer-owned milk bulking
programs in order to improve production and profitability.
How It Works. Partners collaborated on improving the entire dairy value chain, including loan programs that allow
farmers to purchase new heifers, improved feed and cattle health, loan guarantee programs for local milk processing
facilities, and improved milk bulking practices. The alliance provides rural dairy farmers, feed producers, and small and
medium-size dairy processing facilities with the resources and tools required for a successful local dairy industry.
Partner
Contribution
Motivation
Land O'Lakes
Technical expertise, significant experience in Malawi,
National visibility, social
introduction of new cattle breeds.
responsibility.
Local milk
Investments in new practices and technology, capital for
Higher, more predictable
producers/dairies
farmer loan programs.
income.
General Mills
Financing.
National visibility, social
responsibility.
Monsanto
Soybean seeds and technical assistance. The mature beans
National visibility, social
are used for cattle feed.
responsibility.
USAID
Technical advice, financing, partner and alliance
Economic growth.
coordination.
Government of Malawi
Extension agents that worked in the value chain, assistance
Economic growth.
with animal importation, assistance with processing
paperwork quickly.
Source: USAID, “Building Alliances Series: Microenterprise,” available at http://www.usaid.gov/our_work/
global_partnerships/gda/micro_guide/micro10.html.
Table 2. Oral Rehydration Solution (ORS) Campaign, India
Objective. To increase knowledge and use of high-quality, World Health Organization (WHO)-approved Oral
Rehydration Solution (ORS) for the treatment of diarrhea.
How It Works. USAID/India and ICICI Bank explained to ORS manufacturers the health and business advantages of
switching to WHO’s new low-osmolarity formulation. Once these manufacturers had developed ORS that met WHO
standards, they were allowed to place the campaign logo on their product packaging. Media outlets advertised the
new products, including placing them on popular TV shows.
Partner
Contribution
Motivation
ICICI Bank
Staffing for implementation, budgeting and financial
National visibility, social
management.
responsibility.
ORS manufacturers
Millions of free samples of WHO-approved ORS,
Market expansion, consumer
and staff, materials, and funding for product
confidence.
promotion and outreach.
Media outlets
Staffing and air time for integrating ORS messages
National visibility, social
into TV shows.
responsibility.
Indian Academy of
Advocacy resources and technical expertise.
Improved health-provider knowledge
Pediatrics
of the importance and correct use of
ORS.
Government of India
Funding to develop and air TV advertisements.
Improved children’s health.
USAID
Funding and technical assistance for overall
Improved children’s health.
implementation.
Source: Case study from USAID, “Building Alliances Series: Health,” available at http://www.usaid.gov/
our_work/global_partnerships/gda/health_guide/health7.html.
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The GDA Secretariat was intended to be a
Innovation in Partnership:
temporary entity that would be phased out
African Diaspora Marketplace (ADM)16
when the GDA business model was
The African Diaspora Marketplace (ADM), a PPP
mainstreamed throughout USAID. However,
between USAID and Western Union, is a recent example
mainstreaming did not occur as quickly as
of USAID trying to leverage private funds for economic
planned, and in 2005, rather than disappear,
growth.17 This partnership model builds on both
the Secretariat evolved into the Office of
Western Union’s interest in increasing financial flows to
Global Development Alliances and later into
Africa, thereby increasing the market for the company’s
money transfer services, and the knowledge and drive of
the Private Sector Alliance (PSA) Division of
Africans living in the United States.
USAID’s Office of Development Partners.
Since that time, some assert, PPPs have in fact
The ADM was a business plan competition through
which Africans living in the United States competed for
become an integral part of program planning
matching grants of up to $100,000 to establish or expand
and development strategy at many U.S.
a business in their home countries, with local partners.
missions abroad. Efforts to institutionalize the
More than 700 applications were submitted, from which
alliance concept have been bolstered in recent
58 finalists were chosen to attend a January 2010 event
in Washington, DC. Finalists presented their ideas before
years, in particular, by new foreign service
judges and the public; participated in learning sessions on
officers, hired through the Development
business planning, access to credit, and USAID technical
Leadership Initiative, who have been trained
assistance opportunities; and took part in networking
and designated as alliance builders before
events. Among the 14 proposals chosen as matching
beginning their first overseas assignments. As
grant recipients were a cell-phone application that allows
remote farmers to get real-time information on
a result, some have questioned the ongoing
commodity prices and an entrepreneurial nursing
need for a distinct partnership office within
franchise.
USAID.
USAID contributed $600,000 to the ADM, using the
Academy for Educational Development (AED) as an
The PSA Division in Washington continues to
implementing partner. Western Union contributed
assist mission staff in developing strategic
$800,000, along with publicity and program design
alliances, serves as a point of contact for
support. The partnership was viewed by many as a
private sector entities wishing to engage in
successful pilot, and USAID has announced that a second
ADM will be launched later in 2011. A Global Diaspora
partnerships, and focuses on advancing
Forum held in May 2011, sponsored by the State
knowledge of best practices in alliance
Department, USAID, and the Migration Policy Institute,
building and evaluation.18 In recent years,
further indicates a concerted effort to engage diaspora
PSA-Washington has also focused on
communities in development partnerships.
identifying opportunities to improve alliance
efficiency through establishing Global Framework agreements with companies that collaborate
with USAID in a specific sector or type of activity in multiple countries. For example, USAID
works with Cisco and Hewlett-Packard in more than 60 countries to provide information
technology training that creates job opportunities and lays the foundation for a global information
technology infrastructure. USAID currently has Global Frameworks with Starbucks, Coca-Cola,
Intel, Evensen Dodge, Global Sustainable Tourism, Rotary International, Seaboard, and Microsoft
Corporation as well.19
16 All data on ADM are pulled from the competition website at http://www.diasporamarketplace.org/about-adm.
17 The alliance also included Ecobank, a pan-African bank, and the George Washington University Center for
International Business Education and Research.
18 USAID, “History of Global Development Alliance,” available at http://www.usaid.gov/our_work/
global_partnerships/gda/history.html.
19 See USAID’s Global Frameworks website at http://www.usaid.gov/our_work/global_partnerships/gda/
frameworks.html.
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State Department—Global Partnership Initiative
The State Department is focused primarily on diplomacy, but it manages certain foreign
assistance activities as well.20 State has a long history of working with the private sector, but its
current PPP strategy stems from Secretary of State Condoleezza Rice’s “transformational
diplomacy” initiative in 2006, which included engaging the private sector among its objectives. In
accordance with the recommendation of the Advisory Committee on Transformational
Diplomacy’s working group on partnerships, a Global Partnership Center (GPC) was created at
State in 2007 within the Bureau for Resource Management. The stated goal was to “expand the
Department’s use of partnerships that achieve policy, programmatic and management objectives
by leveraging the resources, expertise and creative culture of private sector and non-governmental
entities.”21 As with USAID’s GDA, the GPC was focused on mainstreaming the use of PPPs as a
tool throughout the department, rather than establishing and managing its own partnerships.
In January 2009, soon after the Obama Administration took office, the GPC became the Global
Partnership Initiative (GPI), housed within the Office of the Secretary of State. The change
appears to indicate the importance that the Obama Administration places on what Secretary
Clinton has called the “new generation of partnerships.” The elevation within State was intended
to make the division more effective in leading State efforts, in addition to providing more clout in
interagency efforts. The transition, however, did not come with any additional resources.
While the State Department often supports partnerships that have development objectives, its
interests are primarily diplomatic. Common objectives of State Department PPPs are enhancing
the United States’ reputation and visibility abroad and building relationships between people with
common interests that transcend political and cultural divisions. For example, the Global
Women’s Mentoring Partnership, begun in 2006, places emerging women leaders from all over
the world in three-week mentoring programs in the United States with women chosen as
Fortune’s Most Powerful Women Leaders. State provides grants to an NGO to manage program
logistics and vets candidates through overseas posts, while Fortune provides mentors with
appropriate expertise and experience whose companies pay for the international air travel and per
diem expenses of the participants.22 In the 2008 Breast Cancer Global Congress, State partnered
with the Avon Foundation to organize a one-day forum in Germany to connect experts and public
health representatives from more than 40 countries to share ideas and encourage public-private
initiatives related to the treatment of breast cancer.23 More recently, the Partnership for a New
Beginning (PNB) was established in 2010 as a “collection of public-private partnerships” to bring
together American private sector leaders and their counterparts in Muslim communities.24 State
does not provide funds to support PNB partnerships, but describes its role as the convener of the
alliance, which includes the Aspen Institute, Coca-Cola, and the Stonebridge Group among its
leading partners. Many partnerships promoted by GPI also include USAID and other U.S.
20 For more information on the role of the State Department in U.S. foreign assistance, see CRS Report R40213,
Foreign Aid: An Introduction to U.S. Programs and Policy, by Curt Tarnoff and Marian Leonardo Lawson.
21 U.S. Department of State Action Memo on Establishment of the Global Partnership Center, July 11, 2007.
22 See a case study of the program on the State Department website at http://www.state.gov/s/partnerships/release/
124981.htm.
23 See a case study of the program on the State Department website at http://www.state.gov/s/partnerships/release/
125049.htm.
24 See http://www.state.gov/s/partnerships/newbeginning/index.htm.
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agencies as partners, such as the Global Alliance for Clean Cookstoves (GACC; see text box
below).
The Global Alliance for Clean Cookstoves (GACC or the Alliance)
The Global Alliance for Clean Cookstoves (GACC or the Alliance), announced by Secretary of State Clinton in
September 2010, was created to address the problem of dangerous, inefficient, and environmental y harmful use of
traditional cookstoves. The World Health Organization (WHO) estimates that nearly half the world’s population is
negatively affected by such stoves. The smoke and toxic fumes from traditional cookstoves damage human health and
the environment; significant effort must be devoted to gathering wood to fuel cookstoves; and the demand for wood
fuel promotes deforestation. Cleaner stoves, fueled by plants, gas, or solar power, are designed to address these
problems while also creating opportunities for local small businesses. The Alliance’s goal is for 100 million homes to
adopt clean and efficient stoves and fuels by 2020.
The GACC is led by the United Nations Foundation, a private entity devoted to promoting the work of the United
Nations. Among the 20 founding partners, four of the five largest contributors are U.S. government agencies (the fifth,
and largest, contributor is Shell Corporation), with the United States pledging a total of $50.82 million over five years.
Several U.S. agencies will participate in accordance with their comparative expertise. The State Department describes
its role as convening stakeholders, providing diplomatic and policy guidance, and catalyzing the support of fundraising
partners. USAID will support operational research into how people use improved cookstove technology and how
indoor air quality interventions can improve the household environment and promote economic opportunities for
women. The National Institutes of Health will conduct clinical trials and epidemiological studies, while the Centers for
Disease Control will evaluate implementation and integrate the new technologies into public health programs. The
Environmental Protection Agency will work with partners on stove testing and evaluation focused on health and
exposure benefits, and the Department of Energy will conduct research on technical barriers. The governments of
Germany, Denmark, Norway, and the Netherlands are also founding partners, along with several private entities,
including Morgan Stanley and the Shell Foundation.
Source: “Global Alliance for Clean Cookstoves: The United States Commitment by the Numbers,” U.S. State
Department fact sheet, available at http://www.state.gov/r/pa/prs/ps/2010/09/147494.htm. See also the “2010
Commitment to Action” on the Alliance’s website at http://cleancookstoves.org/wp-content/uploads/2010/09/
CGI-Commitment-to-Action.pdf.
Other Bilateral Agencies
While USAID and State are the key U.S. players in development PPPs, several other U.S.
agencies work with the private sector on international development issues. The Millennium
Challenge Corporation (MCC) is in many ways well positioned to utilize PPPs for development,
as the agency works in countries that have shown a commitment to open markets and fighting
corruption, and should be attractive to private investors.25 To date, however, most MCC work
with the private sector does not reflect the development alliance model, but rather involves the
contracted outsourcing of management services for infrastructure projects supported by MCC
compacts, such as the maintenance of a rehabilitated airport in Mali. However, the MCC Private
Sector Initiatives Office reports a move toward more resource and risk-sharing activities with
private companies, such as co-financing of a wastewater treatment plant expansion in Jordan.26
The U.S. Trade and Development Agency (USTDA) also uses PPPs in its mission to advance
both economic development and U.S. commercial interests in developing and middle-income
25 The MCC is a U.S. development agency created in 2004 to assist developing countries that have demonstrated
relatively good governance in implementing their own development plans. For more on MCC, see CRS Report
RL32427, Millennium Challenge Corporation, by Curt Tarnoff.
26 See http://www.mcc.gov/mcc/bm.doc/2010-002-0134-01-private-sector-participation.pdf.
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countries. USTDA supports infrastructure development and fair trade by providing technical
assistance, feasibility studies, and “reverse” trade missions intended to spur private investment by
filling information gaps and improving the business environment. For example, USTDA provided
$540,000 to the Georgian International Energy Corporation to fund a study, conducted by a U.S.
company, to examine the possibility of recovering methane from coal mines in Georgia.27 While
such activities are PPPs, development professionals disagree over whether they are foreign
assistance activities, given the strong emphasis on supporting U.S. commercial interests.
Just about every U.S. agency involved in foreign assistance is also involved in development
PPPs, often as partners in alliances created by USAID.28 For example, the Department of
Agriculture is a partner in the Sustainable Forest Alliance, contributing its forestry expertise to
efforts to combat illegal logging in the Amazon. The Department of Energy provides technical
and financial support to the Clean Cities Program, a PPP that promotes alternative fuel vehicles.
The Department of Justice has partnered with USAID and local entities in the Criminal Justice
Strengthening Alliance in South Africa.29
Foreign Donor and Multilateral Development
Partnerships
In addition to the United States, most other major bilateral donors of Official Development
Assistance are increasingly working with the private sector as well. Some of these activities are
quite similar to USAID alliances, such as a BMZ (German development agency) partnership with
Kraft Foods to benefit small-scale cocoa farmers in Côte d’Ivoire through market-oriented
sustainable production techniques.30 Others focus on helping their national businesses establish a
foothold in developing countries, much like USTDA activities, and to provide funding directly to
corporate partners.31 The Canadian development agency uses PPPs, for instance, to support
investment studies and pilot programs, covering up to 75% of the cost of viability studies and
startup investments of Canadian firms in developing countries. One example is a CIDA-funded
study to explore the viability of a Canadian business to drill hand-pumped water wells and
provide related maintenance and repair services in Togo.32 The United Kingdom’s Department for
International Development (DFID) uses “challenge funds,” through which private businesses
apply for grants to help establish new business ventures or improve the development impact of
existing ventures, in developing countries. The African Enterprise Challenge Fund, for example,
awards competitive grants to private sector companies to support new and innovative business
models in Africa, while the Food Retail Industry Challenge Fund provides grants to partnerships
27 For more details on this and other USTDA projects in the oil and gas sector, see http://www.ustda.gov/program/
sectors/oilgas.asp.
28 While the vast majority of bilateral U.S. development assistance is managed and implemented by USAID, State, and
MCC, more than a dozen U.S. federal agencies report funding development-related activities that fall under the
definition of foreign assistance from the Foreign Assistance Act of 1961.
29 These examples are pulled from the USAID Global Development Alliance Database, available at
http://gda.usaid.gov/alliances/index.asp?s=SVHTWWJYBVBXBPDSHGDMHRBQYLYTQYNT.
30 Andrea Binder, Markus Palenburg, Jan Martin Witte, “Engaging Business in Development,” GPPi Research Paper
Series No. 8 (2007), p. 24.
31 Ibid., p. 27.
32 Ibid., p. 18.
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that bring UK grocery retailers together with African farmers to establish “fair trade” supply
chains.33
Multilateral development institutions also have increasingly used PPPs in recent years, in various
forms. The United Nations Development Program, for example, is working with Nestlé in
Pakistan to train rural women in livestock management.34 The work of the World Bank’s
International Finance Corporation (IFC), which provides finance and advisory services to private
sector enterprises in most developing countries, could also be considered a multilateral PPP
model. IFC bills itself as a convener of private sector players in development, bringing
foundations and charitable organizations together with businesses to address shared development
goals.35
Mega-PPP Example: Global Alliance for Vaccines & Immunization (GAVI)
A few public-private development partnerships are so large and global in nature that they are in a class of their own
and cannot be reasonably compared to typical PPPs. Some experts see them as functioning more like coordination
mechanisms than PPPs. One example is GAVI, the Global Alliance for Vaccines & Immunization. Established in 1999
with a $750 million seed grant from the Bill & Melinda Gates Foundation, GAVI reports more than 17 official
contributors and dozens of private sector partners, including large foundations, financial institutions, pharmaceutical
companies, and research institutes. Each partner has a role designed to play to its strengths. The Gates Foundation
establishes alliance funding priorities and raises awareness of alliance success through its Living Proof Project, a
campaign to highlight the value of global health activities. Government donors provide funding, both directly and
through pledges to the International Finance Facility for Vaccines, which gives GAVI large one-off grants, and the
Advanced Market Commitment, which encourages new vaccine development by reducing market risk. The
International Federation of Pharmaceutical Manufacturers provides technical assistance, while WHO provides policy
expertise. The United Nations Children’s Fund, UNICEF, purchases and distributes most of the vaccines. The alliance
spent $4.5 billion between 1999 and 2009 in support of programs to accelerate access to vaccines, strengthen
country health systems, and introduce new immunization technology. As of February 2011, the United States has
contributed nearly $647 million to the partnership.36
Potential Benefits of Public-Private Partnerships
PPPs have become more common because both public and private partners believe PPPs achieve
shared goals more effectively than entities could by acting alone. Commonly cited advantages of
PPPs include the following:
• Shared Risks and Resources. While development officials are quick to point out
that PPPs are not primarily a means of saving taxpayer dollars, sharing the cost
and financial risks of development activities is a key attraction of modern
partnerships that involve joint resource contributions. Both the government and
private entities are sometimes willing to participate as partners in a project they
would not be able or willing to support in its entirety. Partnership may also allow
for project implementation on a larger scale, and for cost savings based on scale,
33 For additional information, see the Business Opportunities page of the DFID website at http://www.dfid.gov.uk/
Working-with-DFID/Funding-opportunities/Business/.
34 See “Fast Fact: UNDP and the Private Sector,” available at http://www.undp.org/partners/business/resources/
business_call_to_action_%20factsheet.pdf.
35 See http://www.ifc.org/ifcext/about.nsf/Content/Foundations.
36 All data on GAVI are from the GAVI website at http://www.gavialliance.org/index.php.
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resulting in each partner achieving a greater development return on its investment
(or a diluted cost of failure).
• Sustainability. A common criticism of traditional development activities is that
they never become self-sustaining and fade away when government funding
ends. PPPs attempt to avoid this problem by tapping into core business interests
and making sustainability profitable. In the SUCCESS Alliance, for example,
small Vietnamese cocoa farmers were integrated into Mars’s global supply chain,
having elevated their cocoa production and processing to international standards
with assistance from USAID, Mars, and the World Cocoa Foundation. In theory,
market demand should sustain the partnership and the improved farmer incomes.
While the sustainability argument seems logical and is supported by anecdotal
evidence, there has been no comprehensive study of how PPP sustainability
compares to that of non-PPP approaches.
• Market Access/Networks. Corporations and private entities often have networks
of customers, suppliers, supporters, and employees that can broaden the reach of
a development program beyond where a development agency could go. By
partnering with MTV in several regional alliances, for example, USAID tapped
into a vast global audience of young people for its messages against human
trafficking and promoting HIV/AIDS prevention in the EXIT alliance. MTV, for
its part, saw an opportunity for positive public relations and an association with
USAID that could potentially enhance its reputation in developing countries.
• Technology and Intellectual Property. Effective use of technology, which many
experts believe is crucial to economic development, can be a daunting challenge
in developing countries. Through partnering with Cisco, Microsoft, and other
global technology companies, development agencies are able to overcome
technical, legal, and financial barriers to accessing certain technology. The
technology companies, in turn, are developing relationships and support
infrastructure to position themselves to compete for the next generation of
technology consumers, many of whom will live in developing countries.
• Cutting-Edge Business Practices. While USAID and other federal aid agencies
can provide technical expertise in a wide range of development sectors, they
often do not have the specialized industry knowledge that a private company has.
In Guatemala’s Inclusive Market Alliance for Rural Entrepreneurs (IMARE), for
example, Walmart supplies crucial market information that augments the impact
of technical assistance and access to credit provided through NGO partners by
enabling better farm planning and quality control of targeted crops. More than
600 rural small-scale farmers earned higher incomes by selling to the region’s
largest retailer, while Walmart strengthened its supply chain.37 In partnering with
Sesame Street, USAID gained access to advanced pedagogy and production
capacity, while Sesame Street was able to extend its global reach into more
developing countries.
• Reputation Enhancement. Positive public relations are often a significant
consideration for corporate entities entering into PPPs. Partnering with a U.S.
government entity can lend legitimacy to a private entity, and association with
37 For more on IMARE, see http://www.usaid.gov/our_work/global_partnerships/gda/resources/IMARE.pdf.
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development activities can enhance a corporation’s reputation for being socially
responsible. The Small Export Vegetable Alliance in Zambia, for example, was
inspired in part by private sector partner Agroflora’s desire to project a more
populist image. The company was concerned that land seizures in neighboring
Zimbabwe could spread to Zambia and affect its business if it was not seen as
benefitting smallholder Zambian farmers.38 Participating organizations and
corporations may also anticipate that partnerships will improve their relationships
with national and community leaders.
Potential Concerns About Partnerships
The advantages of partnerships from a business perspective are sometimes viewed as points of
concern from the development perspective. While many development experts see PPPs as having
the potential to be mutually beneficial, some are also wary of unbalanced partnership
relationships and the resource demands of partnership management leading to a number of
potentially negative impacts. Among the most often-cited concerns are the following:
• Management Burdens and Inadequate Evidence of Value Added. Most PPPs
require more time and effort to design and implement than traditional contract-
based development programs. Considerable effort is required to manage the
partner relationships and fulfill the reporting needs. It is difficult to judge
whether this effort is justified by development impact because evaluation efforts
to date—of both PPPs and traditional development projects—have not been
particularly useful for demonstrating whether or not PPPs have more
development value than other approaches to development assistance. Without a
standard definition of PPP within and across government development agencies,
meaningful evaluation of PPPs as a development tool has been difficult, and
critics have asserted that development resources may be better directed toward
more proven aid models.
• Distortion of Development Priorities. Some development officials are
concerned that opportunities to access private resources through partnerships can
pull mission staff away from established country plan priorities. The availability
of private funding, they argue, is hard to ignore, even when a proposed
partnership does not fit well within an established mission priority. Given very
limited staff resources at many USAID missions, the opportunity cost of
following through on PPPs that are not necessarily aligned with stated mission
priorities can be high.
• Disadvantage to Least-Developed Countries and Individuals. Some
development experts have expressed concern that the type of private capital
flows that have spurred modern PPPs are concentrated in the relatively advanced
developing countries. They assert that the emphasis on leveraging these flows
through PPPs could steer more aid resources to these countries at the expense of
the poorest countries, particularly in sub-Saharan Africa, where opportunities for
such partnerships may be limited. It has been suggested by analysts, for example,
38 Assessment of USAID’s Global Development Business Model, USAID Bureau for Policy and Program
Coordination, Evaluation Working Paper No. 11, April 2005, p. 12.
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that WHO’s participation in GAVI has hindered its commitment to bringing
traditional vaccines to the hardest-to-reach populations, as it diverts resources
toward supporting new vaccines for better-served communities.39
The majority of PPPs created by USAID and other U.S. bilateral agencies are
funded through mission budgets rather than a central account, reducing the
potential for PPPs to influence country and regional funding levels. Still, some
argue that the use of PPPs, particularly those involving global corporate partners,
can increase development disparities within countries by introducing
international standards. The concern that those who are relatively well off and
better able to meet international standards will prosper, while those who
cannot—often the most poor and least educated—will fall farther behind, is
common to almost all aspects of globalization.
• Unfair Advantage to Private Partners. PPPs raise potential concerns about
taxpayer funds supporting private interests and possibly creating unfair
advantages for private participants. However, there are risks as well as potential
benefits to partners, and USAID neither gives money to private partners nor
guarantees any share of a partnership’s product. For example, while Starbucks
may benefit from establishing a positive reputation among Rwandan coffee
growers through participating in an alliance with USAID to improve coffee
production practices in the country and establish growers’ cooperatives, the
Rwandan cooperatives may still sell their improved products to Dunkin’ Donuts
if it makes a better offer.
• Bad Bedfellows. While PPPs can enhance the reputation of all involved, there is
the potential for damage to U.S. agencies through association with disreputable
private sector entities. USAID tries to avoid such problems by vetting potential
corporate partners for social responsibility using a due diligence process, but
concerns persist. Some development professionals are uneasy, for example, about
USAID partnering with extractive companies in Angola, the Democratic
Republic of the Congo, and Ghana because of the corruption and exploitation
often associated with these industries. On the other hand, partnerships could
incentivize more responsible business practices. One official explains that
USAID partners only with companies that agree to support and conform to the
Extractive Industries Transparency Initiative and other recognized industry best
practices related to transparency, human rights, security, and environmental
practices.40
• Threat to American Jobs. Observers have expressed concern that PPPs may in
some circumstances support the outsourcing of American jobs to developing
countries. This could be particularly true for partnerships that link developing
country producers with global supply chains, creating potential competition with
American suppliers, or partnerships that promote employment skills and training
that may put beneficiaries in competition with American workers. For example,
USAID has been criticized by Members for partnering with technology and
39 Kent Buse and Amalia Waxman, “Public-Private Health Partnerships: A Strategy for WHO,” Bulletin of the World
Health Organization, vol. 79 no. 8, Geneva, 2001, p. 4.
40 Afiya McLaughlin-Johnson, “Partnerships with Extractives Industries: Lessons learned,” USAID Alliance
Innovation Newsletter, Spring 2009, p. 4.
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outsourcing companies in Sri Lanka to provide advanced information technology
training to local workers, who are then provided on-the-job training in business
process outsourcing and call center support by partner companies.41 USAID was
funding an English language training component of the program in Sri Lanka,
which has been suspended, further raising concerns about competition with
American workers. Such concerns are not unique to PPPs, however. Foreign
assistance programs have always had to strike a balance between improving
economic opportunities in developing countries (with the objective of supporting
U.S. humanitarian, commercial, and security interests) and ensuring that such
assistance does not create a competitive disadvantage for Americans.
Issues for Congress
The 112th Congress is likely to consider U.S. foreign assistance programs from a variety of
perspectives. The Administration’s Quadrennial Diplomacy and Development Review (QDDR)
and Presidential Policy Directive on Global Development, both released in the final months of the
111th Congress, have raised policy issues and proposed reforms related to aid efficiency and
effectiveness that the 112th Congress has begun to respond to through appropriations legislation
and oversight hearings. Meanwhile, significant fiscal constraints have many legislators looking at
foreign assistance programs as potential sources of savings, even as foreign assistance is
increasingly recognized as a component of U.S. national security policy. Public-private
partnerships are one approach to foreign assistance that Congress is likely to consider as part of a
broader review of foreign aid policies and activities. As part of that consideration, the following
issues may be of particular interest and relevance to lawmakers.
Cost Savings
PPPs appeal to many observers as a potential means for government to do more with less by
sharing the cost burden of development among a broader range of stakeholders. The State
Department’s Global Partnership Initiative (GPI) was originally proposed as a “force multiplier
for appropriated funding,” and to “yield efficiencies and cost savings,”42 while USAID’s Global
Development Alliance (GDA) concept sought to “create a bigger pie” for development
assistance.43 Partnerships to date have been evaluated largely by the amount of nongovernmental
development funds they have leveraged. However, officials most active in partnership building
are slow to tout any cost savings from this approach, arguing that the most strategic partnerships
are those that do not necessarily leverage the greatest funding but bring technology, networks, or
skills that would not otherwise be accessible to official development activities. Furthermore, the
staff time needed to negotiate and adequately monitor PPPs can be substantially more than is
required for traditional forms of aid implementation, and these costs are not reflected in leverage
ratios. Nevertheless, in the face of budget constraints, the 112th Congress may look to PPPs as a
means of sustaining development programs while reducing development aid levels. The
Administration has already suggested such an approach, requesting reduced funding for the
African Development Foundation and the Inter-American Foundation for FY2012 while
41 See http://timbishop.house.gov/index.cfm?sectionid=79&parentid=3§iontree=3,79&itemid=1770.
42 “Establishment of the Global Partnership Center,” Action Memo for Under Secretary Fore, July 11, 2007, Table 1.
43 Global Development Alliance Conceptual Framework, p. 2 (obtained from USAID/GDA).
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suggesting that they could maintain current program levels through partnerships with the U.S.
government and the private sector.44
International Commitments
PPPs can have both a positive and negative impact on meeting the United States’ international
development commitments. Increasing use of PPPs can support, in part, the global partnership
goals of the Millennium Declaration. When partnerships involve other official development
agencies, they can also support donor coordination in a particular country or sector, consistent
with commitments in the Paris Declaration on Aid Effectiveness, which the United States signed
in 2005. However, an increasing use of PPPs could undermine other international donor
commitments. For example, in supporting the Paris Declaration and the follow-on Accra Action
Agenda, the United States committed to making greater use of recipient country budget and
procurement systems and supporting recipient country development programs rather than
independent projects that are not incorporated into recipient country budget and policy processes.
Some might argue that providing assistance through PPPs could further undermine that effort by
emphasizing the common goals of donors and private sector interests rather than the common
goals of donor and recipient country governments, and by using private resources that cannot be
“on-budget.”
Emphasis on Non-aid Development Strategies
The Obama Administration’s new global development policy, officially announced in September
2010, acknowledges the roles and responsibilities of the many nonofficial entities that have a
stake in international development. Much of its emphasis on PPPs, however, seems to be focused
on trade policy and the promotion of foreign direct investment as tools for economic growth and
development. This approach is consistent with the policy’s emphasis on foreign aid as a single
component of a broader U.S. development strategy. Increasing attention to non-aid drivers of
development, prompted by both strategic and budgetary pressures, may shift attention away from
public-private aid partnerships in the coming years should Congress focus on non-aid means of
engaging the private sector in achieving common development goals, such as through trade
agreements.
Budget and Procurement Issues
Many development officials involved in partnerships report that the standard foreign assistance
procurement rules and the unpredictability of future year budgets are significant obstacles to
partnership formation. Procurement regulations and processes, particularly at USAID, have long
been considered overly bureaucratic and a reflection of a risk aversion at the agency that some
call prudent and others view as driving the agency into obsolescence. The procurement system is
particularly challenging in the context of modern PPPs, resulting in agencies having a hard time
being proactive with the private sector. Agency officials report that it is hard to maintain a long-
term relationship with private partners because of competition requirements, and slow approval
processes make companies feel uncertain about commitment. Procurement reforms are a key
component of the USAID FORWARD reform agenda announced by USAID Administrator Rajiv
44 Congressional Budget Justification: Foreign Operations, Fiscal Year 2012, pp. 122-123.
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Shah in November 2010, but Congress will consider whether additional funding requested to
implement the reforms is a priority.
The annual appropriations process also makes it hard to plan and commit to reasonable multiyear
time frames. The lack of predictability increases transaction costs and raises uncertainly to a level
where, some officials report, corporate partners do not see government agencies as dependable
partners. USAID’s original GDA utilized an incentive fund, set aside for PPPs, as a means of
making funding more predictable. Funds were provided out of the Development Assistance
appropriations account and were intended to encourage partnership building and smooth the
process by making funds more readily available. The prevailing view, however, was that the
incentive fund distorted mission objectives and kept PPPs out of the mainstream.
Interagency Leadership
While USAID has long been the U.S. government leader on PPPs for development, other
agencies are becoming more active in this field. Under Secretary of State Clinton, the State
Department has moved toward a leadership role on PPPs. GPI was established, in part, to
coordinate international PPPs for the whole of government, or at least to be a single point of
contact for potential partners. Interviews with development officials indicate that this is not
happening, however. The QDDR clarifies that GPI is the single point of contact for partnerships
at State, but in the interagency arena, the role of GPI is less clear. The QDDR addresses but does
not resolve the interagency issue, stating that “State and USAID will standardize the partnership
process through a uniform partnership template” and “create a central database of all existing
partnerships so that U.S. agencies and potential partners know what we are doing, with whom,
and where.”45 Congress may seek organizational clarity as part of foreign aid reform legislation,
or it may be asked to provide funding to implement the partnership process integration mentioned
in the QDDR.
Limitations on Congressional Oversight
PPPs may pose potential challenges to congressional control and oversight of development
activities, as Congress does not have the same control over private funds as it does over
appropriated funds. Theoretically, this means that development officials could work around
congressional restrictions on agency activities by developing PPPs in which restricted activities
are funded and carried out by private partners. Such concerns are largely hypothetical, but they
raise the issue of how Congress can best manage public resources involved in PPPs. A further
challenge to oversight stems from inconsistent data quality associated with private partner
contributions. USAID Inspector General audits in 2005 and 2009, for example, found that data on
private partner contributions to USAID alliances did not meet the agency’s data quality
requirements and may not be reliable for use in decision making within the agency and,
presumably, by Congress.46 While the agency has revised its guidance and reporting process in
response to these audits, the ongoing difficulty of applying consistent valuation standards across a
diverse array of partnerships47 has led the Private Sector Alliances office to agree to add a
45 “Leading Through Civilian Power: The First Quadrennial Diplomacy and Development Review,” 2010, p. 68.
46 USAID Office of the Inspector General, Audit of USAID’s Reporting on Global Development Alliances, Audit
Report #9-000-09-007-P; June 4, 2009.
47 It is difficult, for example, to determine the dollar value of the youth access provided by an MTV partnership, the
(continued...)
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disclaimer of sorts when reporting public-private partnership resource data, noting the nature and
limitations of the available information.
Author Contact Information
Marian Leonardo Lawson
Analyst in Foreign Assistance
mlawson@crs.loc.gov, 7-4475
(...continued)
intellectual property provided by a technology company, and the use of a Coca Cola supply chain in a comparable way.
As a result, USAID generally allows PPP partners to determine the value of their own non-cash contributions, provided
that the USAID staff managing the partnership understand and approve of the valuation methodology used by the
partner.
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