Congress can make it better for Americans to do business in the international economy
The Better Utilization of Investments Leading to Development Act of 2018, or BUILD Act, has the potential to greatly increase the scale and frequency for U.S. companies to invest in emerging markets. This is good news for corporate America, which sees other donor governments’ development finance institutions support foreign competitors far more aggressively. The bill, which aims to modernize and strengthen the Overseas Private Investment Corporation (OPIC), has bipartisan, bicameral, and White House backing and represents an auspicious chance to address one of the major shortcomings of current development policy.
For over a decade, governments and non-governmental organizations alike have increasingly invoked the private sector as a source of innovation and capital, and a model of efficiency that will help unlock solutions to the profound challenges facing poor countries. Meanwhile, business has largely opted to sit in the backseat, both unwilling and unwelcome to take the lead. Yet with the international development landscape rapidly changing, both sides, public and private, need to raise their game to overcome mutual mistrust and bias and ultimately achieve their shared goals of socio-economic development and global growth.
{mosads}Having worked for years on both sides of the development divide — in a U.S. government development agency and at a multinational corporation — I know this task won’t be easy. A large slice of the development community still sees the private sector as monolithic, rapacious, and “part of the problem.” The private sector views government as bureaucratic, deaf to its needs, and burdened with labyrinthine procurement processes.
Despite these conflicting perspectives, the prospects of diminishing foreign aid in the face of persistent underdevelopment has made global economic growth a universally accepted imperative. In fact, international organizations like the World Bank and United Nations have set audacious goals — to end poverty, hunger and spur economic growth — which are all predicated on private sector investment, training and jobs. Today, governments, aid agencies, and NGOs are finally trying to match their rhetoric with accommodative policies and creative financing to attract private sector engagement. The BUILD Act is just one example of how the public sector is trying to bring business in with new and more robust tools to grease the skids of foreign direct investment.
In a remarkable appeal to private investors earlier this year, the Organization for Economic Cooperation and Development’s (OECD) Development Assistance Committee Chair Charlotte Petri Gornitzka put the onus of attracting investment in emerging markets on the development community. By putting the private sector in the “driver’s seat” and asking them to “do the agenda for us,” she suggested the development community should help address barriers to market entry. For his part, USAID Administrator, Mark Green, routinely calls for his agency “to work to put itself out of business,” by helping to create the conditions where free markets and the private sector flourish.
Despite this new openness to business, the two sides remain divided and often ineffective in their development partnerships. To bridge public/private interests in emerging markets at scale, several fundamental changes need to be made in how the two sides work together.
It’s time for the private sector to wake up to the changing international development environment and lead. U.S. Corporations and business associations need to not only support institutional and policy reforms like those proposed in the BUILD Act, they need to help shape them. It’s not too much to demand a “seat at the table” to help set the government’s development agenda. Indeed, if long-term development strategy assumes private sector engagement and eventual hand-off, the current approach to partnership needs to be turned on its head, so that business is asked to help create, not just validate, government plans.
Second, in order to build trust and clarify objectives in emerging markets, the private sector needs to articulate more strategic and long-term goals that include the social impact of their business engagement. Only a handful of large companies currently do this, but as BlackRock Chairman and mega-investor Larry Fink pointed out in a recent letter to CEOs, “To prosper over time, every company must … show how it makes a positive contribution to society.”
Narrowing the private/public gap to create effective, win-win development partnerships will take time and concerted effort. Past differences between the two sides must be transcended with new emphasis placed on shared goals. Business must step up to help shape, support and encourage well-crafted public sector initiatives like the BUILD Act. It’s time for a fresh start. The conditions for creating strong and mutually beneficial public-private partnerships for economic growth and development have never been better.
Tim Docking co-chairs the Private Sector Advisory Council at the Millennium Challenge Corporation, an independent U.S. government foreign aid agency.