Making policies work

GREAT insights Magazine

Open Source Development

Unlocking Innovation Through Transatlantic Partnership

01-10-2012

Gonzales, S. 2012. Open Source Development: Unlocking Innovation Through Transatlantic Partnership. GREAT Insights, Volume 1, Issue 8. October 2012. Maastricht: ECDPM

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An agronomist funded by USAID may have kick-started the Green Revolution, but today’s development revolutions in mobile banking, off-grid renewable energy and social media are hybrids born of public and private resources and ingenuity.

Development’s greatest open secret is that despite the universally recognized value of these public-private partnerships, our ambition still outpaces the will, expertise and humility of donors and corporations to translate overlapping interests and diverse expertise into pragmatic, operational coalitions.

Transformative solutions require a fresh mindset. USAID calls it “open source development,” – providing a platform to connect development’s most intractable challenges with the world’s brightest problem solvers. Institutionally, we have assembled a toolbox of instruments – some novel, some borrowed from fellow donors and the private sector – and we have established a Bureau of Policy, Planning and Learning and an Office of Innovation and Development Alliances where we harness science and technology, test and evaluate groundbreaking solutions and tap underutilized public and private resources.

I would like to share three modest insights that have led us to identify practical ways in which USAID, European development agencies and the European private sector can marshal our collective resources, networks, and expertise to solve global challenges confronting peace, prosperity and economic opportunity.

Partnership delivers strategic benefits for all participants

Let’s embrace pragmatic alliances at the intersection of development objectives and commercial interests.

Donors and multinationals once existed in an uneasy tension, based on misperceptions and divergent interests. Today, in an era of limited development budgets, intense global competition for markets and increasingly decentralized innovation, a new understanding has emerged: it is mutually beneficial to assemble diverse coalitions based on common interests, shared responsibilities and complementary capabilities.

A decade ago, the private sector began looking to USAID to guide its corporate philanthropy and found that partnerships thrived when sustainable development outcomes and core business objectives were strategically aligned. So USAID worked with major corporations across the globe, in every sector and region of the world to shape a new model that translates corporate social responsibility into enlightened social investment.

Through Global Development Alliances, USAID and our private sector partners jointly identify impediments to growth. We co-design, co-manage and co-fund projects that help build healthy and well-trained work forces, strengthen local supply chains, provide access to new markets, and build local government capacity. Our private sector partners deliver technical skills, technologies and market-driven approaches that donors cannot offer, while USAID offers our policy influence, development expertise and decades of local experience.

Since 2001, USAID’s investment of $2 billion has produced $8 billion worth of development projects, and we are proud to claim many of the United States and Europe’s premier brands among our partners, including Intel, Starbucks, Chevron, Swiss Re and Unilever.

For example, USAID and The Coca-Cola Company formed the Watershed Partners Program in 2004 based on a shared interest in clean water and conservation; the cost of productivity losses linked to unsafe water and poor sanitation amounts to two percent of GDP in developing countries, and water is a key ingredient in Coca-Cola’s products. Today, we jointly manage a $10 million program in eight countries, including a garden irrigation project that uses recycled wastewater from a local bottling plant to deliver clean water to 21,000 people in Mali.

Invest in innovation and market-based solutions

Let’s dream big and nurture technologies and business models that can drastically and sustainably improve development outcomes at lower cost.

Donors must become the Silicon Valley of social investment – we must identify, test and scale development solutions that promise to usher in our generation’s next revolution in poverty reduction.

USAID’s Development Innovation Ventures is our in-house venture capital firm. Research scientists, start-up entrepreneurs and local civil society leaders compete for grants that will fund new technologies, business models and processes or novel combinations of tried and true techniques. We look for ambitious solutions with the potential to impact tens of millions of beneficiaries within ten years.

Next, we test if the idea delivers the targeted development outcomes, and at a significantly lower cost than current best practice. We award funds incrementally and offer three stages of financing: seed financing for basic research and proof of concept, start-up funds to test at the national level and, finally, funds for transitioning to scale.

In the past year, USAID has funded field tests in Ghana of a simple balloon tamponade that stops postpartum hemorrhages at a cost of less than ten dollars per use. We also supported basic research that helped develop a portable fuel cell that operates at one-sixth the cost, weight and volume of existing battery technologies and can power a mobile clinic or a water filtration system.
These are public goods. For that reason, USAID is working to spin off its Development Innovation Ventures into a multi-stakeholder venture capital fund that can offer not only grants but also debt and equity financing. We are discussing a partnership with European donors and companies and we hope others will join this important transatlantic venture.

Talent is everywhere, but opportunity is not

Let’s use our convening power and our collective resources to engage the world in the search for development solutions.

For the last half century, donors have issued calls for proposals and big contractors have dutifully implemented projects that serve a pre-defined outcome; but that model assumes donors already have the answers, and it leaves the creativity of millions of potential problem solvers untapped.

The Grand Challenges for Development initiative turns that outdated model on its head. Instead, it draws upon shared experiences to define major constraints to development, then uses its partners’ collective convening power to garner widespread public interest in the search for a solution. In three separate challenges thus far – to save lives at birth, get all children reading and power agriculture through clean, off-grid energy – USAID and its partners have encouraged more than 1,500 innovators to submit proposals, with nearly half from developing countries. For example, researchers at Boston University developed a device that screens for substandard and counterfeit antibiotics, while a faith-based organization in South Sudan developed a solar-powered digital audio player that enables a local reader to impart basic literacy to children who cannot attend school.

The Grand Challenges represent true transatlantic partnerships. USAID’s partners include the U.K., Sweden, Germany, the Gates Foundation and Duke Energy, and USAID is actively working to engage additional European donors and companies.

Pragmatic Alliances: Right for Europe?

It is sometimes argued that this approach is too pragmatic, too business-friendly or too “American” to work in Europe – that USAID is too optimistic in its vision of development coalitions that are public and private and transatlantic.

Public concern that corporations might “capture” public resources is valid, but some European donors have not yet found a healthy balance between cautious due diligence and skepticism, and so they let pass the skills, technologies and resources of the private sector. On the other hand, the political imperative to champion domestic companies’ aspirations in emerging markets may prevent other donors from identifying the most appropriate private sector partners. In this regard, the European Commission faces a unique challenge in forming a private sector engagement strategy that respects those member states that prefer to maintain an exclusive partnership with their domestic multinationals.

Many European companies, for their part, still regard corporate philanthropy as a “cost center” apart from core business objectives; they will not seize the partnership opportunities that exist until they conclude that social investment is the path to sustainable markets and billions of new consumers.

Ultimately, it is the responsibility of both donors and businesses to establish better public-private networks within Europe. In doing so, donors need not worry that dialogue with the private sector makes them beholden to corporate interests, nor should business groups be reluctant to design and advocate for policies that serve development objectives. As such, several European actors are leading the way toward locally-appropriate partnership mechanisms that pinpoint intersecting interests, optimize diverse competencies and sidestep political sensitivities.

The Dutch Ministry of Foreign Affairs has repositioned itself as the catalyst for multi-stakeholder consortiums that jointly design and fund innovative projects in the fields of water sanitation and management. In so doing, the Netherlands leverages its world-renowned expertise in the water sector and offsets cuts in official development assistance, without relinquishing control over national development priorities. At the same time, Swedish SIDA has established a “business for development” unit that explicitly seeks out partnerships with companies of all nationalities, delinking development policy from commercial advocacy.

Among multinationals, GDF Suez has established a 100 million euro social investment fund to nurture promising ventures that cater to new consumers, while BASF has assembled its own alliances with civil society organizations and UN agencies to deliver its food fortification products to vulnerable populations.

The Transformative Promise of Transatlantic Partnership

There is no doubt that the challenges are great and that the public and private sector both must build the political and institutional space for these strategic alliances. But let me conclude with a snapshot that captures the potential upside:

Imagine a Kenyan farmer who grudgingly accepts a below-market price for his crops, while a mother in Haiti anxiously stockpiles cash to pay next month’s school fees, and a police officer in Afghanistan grumbles when his salary does not arrive. Ten years later, the Kenyan farmer accesses real-time crop prices via mFarmer, a program jointly designed by USAID, the Gates Foundation and the European-led GSMA. The Haitian mother earns interest, accumulates savings and transfers school payments with her mobile phone using a platform developed by USAID and Citi. And the Afghan police officer enjoys a 40 percent raise since a USAID-Vodafone partnership ensured reliable and on-time delivery of his monthly salary.

This progress is all made possible by development innovations driven by transatlantic partnerships already underway. Let’s be more deliberate, more pragmatic and more inclusive so that we can continue to fuel this innovation-driven revolution at the nexus of public and private interest. If this approach piques your interest, USAID encourages you to contact me in Brussels to explore avenues for cooperation.

Sarah Gonzales is USAID Representative to the EU and can be reached at GonzalesSG@state.gov

This article was published in Great Insights Volume 1, Issue 8 (October 2012)

Economic Transformation and Trade

External authors

Sarah Gonzales