Partnerships introduce a commercial edge

New models of financing and delivering development programmes are bringing far-reaching changes to the international public sector.

Traditional government-to-government transactions are giving way to complex networks of partners – some of them from the private sector – to provide everything from anti-retroviral drugs and girls’ education to emergency food supplies.

The changes have implications for the way non-governmental organisations (NGOs), aid agencies and non-profits are funded and managed, as well as how they assess their performance and report back to donors.

In addition, as the structure and strategy of the organisations in global development is evolving, so is the geography.

At the Centre for Global Development (CGD), an independent US policy research organisation, Ben Leo and his colleague Todd Moss have studied the client countries of the International Development Association (IDA), the World Bank’s grant and soft-loan arm.

They predict a shift in lending patterns as some of the wealthier recipient countries “graduate” from IDA membership, meaning the countries still eligible for IDA help are smaller, fragile or post-conflict states and mostly in Africa. “The operational implications are huge in terms of staffing for these countries,” says Mr Leo, a senior research fellow at the CGD.

Some of the transformation of the development world is being prompted by the global downturn as aid budgets shrink. “We’re seeing increasing constraints in terms of aid budgets,” says Mr Leo. “That has significant implications for the US and other donor countries in their ability to follow through on commitments they’ve made to multilateral institutions.”

This could lead donor countries to give more help to organisations that need less government funding. One example is the Overseas Private Investment Corporation (Opic), a US development agency whose mission is to promote private sector development in overseas markets by fostering US investment into these markets.

“Opic is self-sustaining,” says Mr Leo. “It doesn’t need congressional appropriation – it actually pumps money into the coffers. So it will be sensible for governments to focus on these types of instruments, to enhance them and to build them up on a greater scale.”

Meanwhile, recently established organisations are playing a prominent role in global development, providing new sources of funding – often on a substantial scale – and working with a wide range of implementing partners. These include big foundations, such as the Bill and Melinda Gates Foundation and the public-private partnerships, such as the Global Fund to Fight Aids, Tuberculosis and Malaria.

In this new world, long-established organisations such as United Nations agencies and multilateral banks such as the World Bank are also having to change the way they operate.

For the UN and the World Bank, as well as for large non-profits such as the Gates Foundation and the Global Fund, this means forming partnerships with grass roots non-profits and other civil society organisations. “The biggest challenge is how to find and assess the capacity of local implementing partners – and these can be very small grass roots organisations,” says Simon Kingston, who leads the global development practice at Russell Reynolds, the executive search firm.

“In some cases, this is the best way of getting drugs and treatment to the people who need them,” he adds. “But how do you assess the quality of what they’re doing and establish proper lines of communication? That’s a big challenge.”

Increasingly, partnerships are being formed with businesses. Budgetary constraints, plus a general recognition that public sector and philanthropic funds cannot alone solve the world’s problems, mean global institutions are turning to the private sector to extend the impact of their work.

Multilateral institutions and aid agencies have recognised that corporations have skills, knowledge and powerful distribution networks that can support their activities. Organisations fighting malaria, for example, are no longer limited to international donors and national ministries of health but now include corporations such as Exxon-Mobile, Standard Chartered Bank and BASF, the German chemical company.

Indeed, it is now hard to find a UN agency, development bank or large NGO that does not have a business-facing division. The UN World Food Programme, for example, now has partnerships with a diverse set of corporations ranging from logistics companies such as TNT to life sciences companies such as DSM and food groups such as Yum Brands.

“Governments feel as though they’ve reached a ceiling as to how far they can go as funders and implementers,” says Nancy Roman, WFP’s director of communications, private partnerships and public policy. “So they’re looking creatively at how they might leverage other people’s funding and help some of the private sector initiatives that are under way.”

Moreover, as companies look to establish their credentials as responsible businesses, many are lining up to work with development banks and multilateral agencies. “It’s clear that private sector engagement is going mainstream,” says Georg Kell, executive director of the Global Compact, the UN’s corporate citizenship network.

However, this also poses a challenge to the global public sector. For while aid agencies and multilateral institutions are keen to bring the private sector into development efforts, they cannot be seen to be giving unfair advantage to profit-making enterprises.

With this in mind, the UN has issued guidelines on such things as how to select business partners, ensuring competition law is respected and how to adhere to ethical standards on avoiding corruption. “The whole ethical dimension of engaging the private sector is extremely important,” says Mr Kell.

In fact, across the development world, calls for transparency and accountability are getting louder – with donors demanding more evidence of what has been achieved with their dollars.

And as web technology pulls back the curtains on organisations of all kinds, development banks, NGOs and aid agencies feel the pressure to be far more open about their sources of funding and how they are spent.

The Global Fund, for example, reports publicly on how many lives have been saved by providing Aids and anti-tuberculosis treatment and on the number of insecticide-treated nets that have been distributed for the prevention of malaria.

All these trends mean organisations must change how they manage their staffing. “There’s a new need for very senior people [in development organisations] who are experts in measurement and evaluation to prove the impact of what they do,” says Mr Kingston. “And for leaders who can create and maintain complex partnerships with multiple civil society and grass roots organisations.”

Mr Kell says organisations will also need people who are good at relationship building, recognising opportunities for cross-sector collaboration and creating the right incentives for that to take place.

“It’s clear that development agencies will be organisers, enablers, network connectors and catalysts, rather than just handing out funds,” he says. “And that’s a key shift in how you do your work.”