The Concept

The international development community has increasingly recognized that many development challenges can be overcome more effectively if governments do not act alone. A number of development agencies are thus seeking to leverage the expertise, technology, scale and financing of private sector actors through various partnership mechanisms. As Maura O’Neill of USAID told the Committee, “…no one host country, one company, NGO, or donor, however large, can afford to do this alone. That is the basis of what we believe partnership is about: using the assets of each of us in a smart way that accelerates development goals cheaper and faster.”[140] There is also evidence that businesses themselves are seeing the benefits of working with government agencies and non-governmental organizations in order to achieve mutual interests. In his appearance before the Committee, the President of Coca-Cola Refreshments Canada, John Guarino, expressed this sentiment by stating that: “We believe that no company can have a significant impact in sustainability by working or thinking alone. Instead, we must rely on partnerships that connect business, government, and NGOs.”[141]

Several witnesses underscored that partnerships are intended to bring together the skills, approaches and capabilities of public and private sector entities so as to enhance project inputs and create the conditions where outcomes are possible beyond those that could be delivered by any one partner on its own. Partnerships come in varying sizes and forms. As Dr. O'Neill explained, they are based on the existence of overlapping interests:

Where USAID is interested in guaranteeing access to clean water, major beverage producers see the need to protect the source of their needed product input. That’s where our development goals and their profit goals overlap. When a company is concerned with supply chain stability, or when global demand requires a company to dramatically increase its sourcing, USAID seeks to improve opportunities for smallholder farmers or youth entering the workforce.[142]

Furthermore, partnerships are not limited to one public sector aid agency and one company. They can involve various bilateral and multilateral aid agencies, and different companies, industry associations and NGOs.[143]

A concrete example of such cooperation is Project Nurture, one of Coca-Cola’s international initiatives discussed by Mr. Guarino. The project has worked to encourage over 50,000 farmers in Kenya and Uganda to grow mangoes and passion fruit for use in fruit juice beverages that are sold locally, instead of importing the same fruit from afar. The company partnered with the Bill and Melinda Gates Foundation and Technoserve (a non-profit business organization), bringing the expertise and resources of each partner to ensure that the fruit met the necessary quality standards. The Foundation has been providing the training and the company the specifications. Mr. Guarino said, “We work with them in the communities in terms of looking at the soil, what needs to be added to the soil, and how to plant.” Another critical aspect of the project is that Coke guaranteed that they “would buy the output.”[144] Overall, the project benefits the company and local farmers, given that it helps Coke to ensure that it “can source enough juice to meet the demand,” building its business, while simultaneously “creating sustainable livelihoods at the farm level.”[145] Mr. Guarino also pointed out that “A third of the participating farmers are women.”[146]

Another example is the Zinc Alliance for Child Health, which was announced in Canada in June 2011.[147] It involves:

• CIDA;
• The Micronutrient Initiative (MI) — an Ottawa-based NGO; and
• Teck Resources, a diversified resource company headquartered in Vancouver, which has major business units focused on copper, steelmaking coal, zinc and energy.

Christina Dendys, the Director of External Relations at MI, explained that this public-private-civil society partnership is intended to address a major development challenge: vitamin and mineral deficiencies that negatively impact that health of children in many countries around the world. With respect to the specific challenge being addressed by the Zinc Alliance, she explained that diarrhoea kills over 4,000 children every day. But, “a new and extremely powerful treatment for reducing diarrheal disease” is available which combines oral rehydration salt (ORS) with zinc supplements.[148] A representative of another partner in the alliance, Doug Horswill, Senior Vice-President for Sustainability and External Affairs at Teck Resources, told the Committee:

The world challenge is not that there is an insufficient quantity of zinc in the world. It’s really about distributing it and getting it into the hands of the mothers who look after their children and understand the need to get zinc into their diets. ...[149]

Christina Dendys told the Committee that, “Teck is providing MI with $5 million in new funding to scale up our zinc and ORS programming. Their generous contribution is being matched three to one with funds from CIDA...” She framed the zinc partnership as “integral” to meeting her NGO’s mission.[150] Doug Horswill described the benefits of the partnership as follows: “With our resources, MI’s knowledge and capability on the ground, the support of CIDA, [and] other partners as we go forward...we can strengthen health programs around the world.”[151] He also expressed hope that the alliance will lead to the mobilization of some additional private sector resources.

It is important to underscore that partnerships are not just about leveraging financing; bringing together different types of expertise is arguably just as important. Mr. Guarino highlighted this fact in describing the rationale of Coca-Cola partnering with USAID on water issues in Africa. He told the Committee: “We are not the experts, in that we are a business first and support the community second. They allow us to be more effective. We take their expertise on how we can do things properly in that town.”[152] Carlo Dade also emphasized the fact that partnerships facilitate exchanges of knowledge, which serves to strengthen all the participants involved. Referring to some of the criticisms that have been raised about CIDA partnerships with private sector extractive industry companies, he argued: “The private sector is already involved. By working with them, you’re not subsidizing them. You’re not giving them money. Just like working with the diaspora, you’re helping to make them better development actors. Likewise, they help make CIDA a better development actor.”[153]

Daniel Runde argued that while partnerships should not be viewed as a “panacea,” they do “enable public actors to leverage non-traditional resources to address problems through market-based means.” Based on this analysis, he expressed to the Committee his belief “that partnerships with non-state actors, including diasporas, philanthropic and religious groups, and for-profit companies, are a central part of the future of international development.”[154] Yet this should not be taken as implying that partnerships should be the sole form of development cooperation going forward. Daniel Runde noted that recognizing the benefits of partnerships does not mean that they should be treated as a blanket approach to tackle all development challenges. Rather, they are an important tool that has been underutilized by most development agencies. Because of their very nature of solving problems “with synergies”[155] they can, in the right circumstances, lead to results that would not be possible through other cooperation mechanisms (e.g. government-to-government assistance) in solving development challenges.

The USAID Model

In addition to various other initiatives being pursued by USAID,[156] one of its key mechanisms for partnerships with private sector actors is its Global Development Alliance (GDA).[157] Since the creation of the program more than 10 years ago, USAID has become a leader among development agencies in this field. When USAID was peer reviewed by the Development Assistance Committee of the OECD[158] in 2011, the review found that “The US has become a leader in creating public-private partnerships. Its approach recognises the importance of private sector flows to developing countries, and ways in which official aid can be used as a lever to maximise development benefits.”[159] It is for this reason that USAID receives so much attention in this section of the Committee’s report. Its model provides years of hard evidence for CIDA in terms of examples, lessons learned and best practices.

Dr. O’Neill told the Committee that USAID currently has “283 active partnerships...which have an estimated value of about $8.8 billion.”[160] For a partnership to be considered a GDA, it must meet the following criteria and characteristics:

• “At least 1:1 leverage (in cash and in-kind) of USAID resources;
• Common goals defined for all partners;
• Jointly defined solution to a social or economic development problem;
• Non-traditional resource partners (companies, foundations, etc.);
• Shared resources, risks and results, with a preference for increased scale of impact; and
• Innovative, sustainable approaches to development.”[161]

As was noted above, partnerships are intended to create shared value, advancing private and development interests. Therefore, not all possible combinations of public and private resources and expertise would fulfil this criterion. Explaining the process that USAID engages in to identify suitable partnership opportunities, Dr. O’Neill told the Committee that there must be an appropriate balance of interests. She said,

If a tremendous amount of benefits accrue to the private sector partner but little or nothing accrues to the country or to the people who live there, then that would not be a public-private partnership we would be interested in.

On the other hand, if all the benefits accrue to the locality, we know that there is a high likelihood that the private company will exit that opportunity well before the term of it. We're looking for that balance where they truly overlap — and to be honest with ourselves about where there's a bridge too far.[162]

The process itself is critical. Dr. O’Neill explained that USAID has a system that makes it very easy for prospective partners to bring forward ideas, using a process that is nimble enough to allow for a significant amount of screening work to be done up front. It is based on an “open call 365 days of the year for a five-page concept note.” She added:

That tends to separate the people who are serious players and really want to partner with us from those who are just trolling for opportunities. We ask in that five-page paper what development outcome you might share with us, how much money and other resources you're willing to put up, and what you would like from us. That gives us an opportunity to start from where they're at. Sometimes that is far from where we finally negotiate a deal, but it actually gives us a point of contact. We understand at the front end what's important to them, what they are willing to do as part of this partnership, and what they are expecting from us. ...[163]

USAID partnerships are not limited to U.S.-based companies. Dr. O’Neill told the Committee that her agency engages in partnerships “with businesses in both developed and developing countries, small businesses as well as large.” She also said: “More often than not, we have partnerships with large businesses, which can be in-country or all around the world. So long as we share a development goal, we're fine with whoever it is.”[164] While noting USAID’s requirement for a minimum 1:1 matching investment, she reported that “on average” the leverage that has been generated “over the last decade has been four to one.”[165] In terms of final decisions on partners, USAID engages in a process of due diligence whereby several facets are examined. She told the Committee:

We do extensive due diligence on each of our partners. We make a judgment call on whether there are any black spots on their record, whether they're significant enough that we want to walk away from a deal, or whether we see a change in management and the way they are going forward. So it is a very important part and an extensive part of our analysis of whether we would walk away from a deal or whether we would enter a deal.

The other thing that's of consideration to us is to what extent the indigenous people benefit or are harmed by any public-private partnership. It's incredibly important to us that the indigenous people who live in the area in which this public-private partnership will take place are advantaged by this rather than disadvantaged.[166]

She added that USAID’s other criteria is determining whether a prospective partnership could “risk damaging the U.S. government’s reputation.”

Dr. O’Neill provided the Committee with details regarding two partnerships that have been undertaken by USAID involving Canadian companies:

• One, related to mobile banking in Haiti, is discussed in this report’s case study on financial services.
• The other, which began in 2011, involves Canadian mining company Barrick Gold and is focused on economic development issues in Peru. As she explained, the project has seen the creation of “two economic centres in northwest Peru, where 30% of the residents are living below the poverty line.” Dr. O’Neill told the Committee: “Barrick matched our investment of $590,000 over a three-year period to establish an economic centre in La Libertad, and in Ancash they contributed another $270,000.” The project’s target “is the creation of 800 permanent jobs and $4.8 million in incremental sales.” She underscored, however, that “most importantly, long after we've gone, long after the mining company's gone, the kind of infrastructure that will allow long-term sustainable markets for these farmers will remain.”[167]

She described a variety of other examples of partnerships which illustrate both the range of possible partners that CIDA could be approaching, and the breadth of development sectors that can benefit from a partnership approach:

• An initiative in Afghanistan partnering with a cell phone company. Police officers are now being paid salaries via cell phones (mobile money). This initiative has helped to cut corrupt middlemen out of the payment process, thus increasing the salary that is actually pocketed by the policemen, while also reducing the inefficiencies and absenteeism associated with the time involved with receiving payments through traditional banks, which are rare in Afghanistan. Partnering with the mobile operator was a critical element of this initiative as only the company, not the U.S. government agencies operating in Afghanistan or the Government of Afghanistan itself, had the infrastructure to implement mobile payments.[168]
• A partnership to tackle what are known as neglected diseases (e.g. intestinal worms). In this example, USAID recruited what many would consider an unconventional partner: a hedge fund based in the United Kingdom. The foundation established by this hedge fund has attracted $2 billion, which is funding the distribution throughout Kenya of deworming pills donated by pharmaceutical companies. The project is predicated on an evidence-based study that was conducted on the impact these pills can have regarding improvements in school attendance records.[169]
• Various partnerships involving NGOs as implementing partners. As just one example, Dr. O’Neill told the Committee how USAID partnered with the Coca-Cola Company and an NGO following the 2010 earthquake in Haiti. Dr. O’Neill explained that for the purposes of one of its juice brands, Odwalla, Coca-Cola “wanted to source more mangos from Haiti.” Despite that country’s “huge production of mangos,” the fruit was not of export quality and thus could not be used for making juice. So, USAID “partnered with an NGO to work with the local farmers and the processing so that they could teach them the world-class standards for mangos.” She explained that as a result of this work, the company “could be in the position to buy more [fruit]."[170]

These are just a few examples of USAID partnerships initiated in the last decade.[171]

Many of the other witnesses who appeared before the Committee focused their remarks on three pilot partnerships that CIDA launched in 2011 with mining companies and Canada-based NGOs. Witness opinions were divided on those specific projects, as is noted in greater detail in the report’s case study on natural resources. Without seeking to minimize that debate, it is important to emphasize, as the above information demonstrates, that partnerships can involve a wide range of companies, foundations and civil society organizations, and they can be designed to address an equally wide range of development challenges from agricultural productivity to watershed management.

Key Lessons and Challenges

As a number of reviews of USAID partnership initiatives make clear,[172] while the value of public-private partnerships has been demonstrated, some work remains to be done to ensure that they are a consistently effective tool of development policy. For any development agency seeking to harness the full potential of partnerships, challenges must be addressed from the perspectives of:

• Structure — ensuring that a development agency has the appropriate staff skill sets, procedures and decision-making authorities in place;
• Communications — ensuring that all parties understand their respective interests and the objectives of a partnership, that consistent contact points are in place within a development agency for prospective businesses and NGOs, and that input and feedback can flow between the parties throughout the project life cycle; and
• Evaluation — developing the appropriate indicators and other tools to monitor and measure a partnership's outcomes.

The formation of a partnership is not an end goal in itself. Partnerships are a mechanism that can be very effective when pursued under the right circumstances and according to clear guidelines. Like any other tool of policy implementation, they must be continually evaluated to determine their development impact, particularly in comparison to other possible cooperation mechanisms.

Witnesses who appeared before the Committee highlighted some of the key lessons learned from the experience of agencies such as USAID and issues that must be resolved in the formation of a successful partnerships strategy. The Committee has used these points of view to help formulate its recommendations regarding the approach that it believes CIDA could take with respect to partnerships, which will be detailed in the final section of this report.

As a first point, while emphasizing the need for Canada to draw on the experiences of public aid agencies like USAID, DFID and the GTZ and BMZ in Germany, which have an institutional history with partnerships, Carlo Dade told the Committee flatly: “Staff are key.” He recalled his previous experience working on partnerships with USAID, having been brought on board because of his expertise working with the private sector. Mr. Dade argued: “It’s a particular skill set. Development agencies do not have this. It has to come from outside or it has to be trained.”[173] Wendy Hannam of Scotiabank recommended to the Committee that it is important to “ask whether CIDA is currently structured to have the flexibility and mandate to effectively engage with the private sector.”[174] Similarly, when referring to the Zinc Alliance for Child Health described above, Daniel Runde posited that the ability of development agencies like CIDA to work more strategically with the private sector will “require some significant organizational change.” He said, “Examples like the zinc initiative are the sorts of things CIDA needs to be putting on steroids, if you’ll allow me to use that expression.”[175]

On the issue of staffing and skills, Dr. O’Neill emphasized that a successful partnerships strategy requires “top support and incentives.” She told the Committee, “If people don't see it as part of what they are going to be evaluated on they're not going to do it...”[176] In her written submission to the Committee, she recommended that regardless of the internal incentives used by a development agency, “providing training and setting up quality safeguards are valuable.”[177] Carlo Dade also argued that given the “disruptive” nature of any new public-private entity to status quo practices, such an entity has to be protected.[178]

Dr. O’Neill also pointed to key lessons that her agency has identified in the process of initiating partnerships. She told the Committee that there needs to be “an easy on-ramp for partners so you become the preferred partner.”[179] On a related point, Carlo Dade emphasized that many Canadian companies are already engaged in partnerships with agencies like USAID or the International Finance Corporation arm of the World Bank. Despite the lack of expertise within CIDA on partnerships in comparison to these other agencies, he argued that Canadian companies would ideally prefer in many cases to partner with CIDA, but there have been insufficient opportunities to do so to date. He told the Committee that these companies are “proud to be Canadian. They want to extol that virtue and enhance the Canadian brand, and they want to bear the cost. You’re not doing them a favour. They’re already doing these projects. They’re doing CIDA a favour in terms of bringing them along.”[180]

Again, the partnership aspect must be emphasized throughout the process. A publication by Committee witness Daniel Runde and his colleagues at the Center for Strategic and International Studies argues for private sector actors to be involved in the planning and design stages of a project, instead of being brought in at the end when all the project decisions have been made by development agency officials. The authors note that “Not allowing partners in at the front end discourages a larger number of partnerships.”[181] In general, they argue that if public sector development agencies are to be successful in engaging with the private sector, they need to shift their overall mindset from seeing themselves as the “biggest wallet with the largest rule book” to that of a “catalytic wallet with a flexible rule book.”[182]

Dr. O’Neill also discussed the importance of honesty and clarity when approaching partnerships. She underscored the importance of having “candid discussions about the core competencies of each partner and their motivations" and advised: "...don't fall in love with the deal. Be willing to walk away from it if you smell a rat or you don't think the objectives align sufficiently.” Overall, Dr. O’Neill stressed a focus on three elements in a partnerships strategy, “impact, scale, and sustainability,” noting that, “If you don't think about those at the very beginning, they won't miraculously happen in a partnership or when the partnership is coming to an end.”[183]

Referring to the trend in the development community and at CIDA to increase engagement with private sector companies, several witnesses emphasized the need for an evidence-based approach to partnerships. Alex Counts, of the Grameen Foundation, made the general comment that “It's very easy to be patting yourself on the back and saying you've got a private sector solution — it's reducing poverty or claiming some other thing — but there should be an accountability mechanism to figure out if you're really doing that.”[184] Others also stressed the need for greater transparency in CIDA’s rationale and justification for pursuing partnerships. Kenneth Georgetti, President of the Canadian Labour Congress, pointedly expressed his organization’s disagreement with the premise “that partnering with the private sector to fund foreign-aid projects is the best way to improve the lives of the world's poor.”[185] He also argued that, “At the core of any analysis about poverty is the question of jobs.” With this in mind, he went on to ask:

So where's the analysis to show the impacts of company operations on full-time and part-time jobs that will be created or lost, and what is the quality of those jobs, and what are the conditions of the work environment and the human rights in the workplace? What about the livelihood issues for community well-being? What other scenarios for investment or for CIDA expenditures would create more jobs than the paltry few that have been talked about here? I repeat, where is the analysis on all of this?[186]

Professor Stephen Brown also raised concerns about the new CIDA corporate social responsibility (CSR) pilot partnerships and questioned whether they are an appropriate and effective use of public development funding. He stated: “CIDA claims these partnerships will improve the effectiveness of aid, but I have not seen any convincing arguments yet.”[187]

CIDA’s approach to partnerships will thus need to incorporate a clear statement of objectives in terms of development outcomes and robust monitoring and evaluation mechanisms to track and measure them. Those results, along with the original objectives of the partnership, and the contributions and roles of each involved party will need to be transparent. It is important to underscore here that monitoring — testing the results of an initiative and making future decisions based on those results — is an integral part of private sector work culture. When Doug Horswill appeared before the Committee to discuss Teck Resources’ contribution to the Zinc Alliance for Child Health, he explained: “…as part of a company engaged in this and just learning it, I think that last point is the key one — measuring, monitoring, reporting, and keeping transparency. That’s how we run our business. That’s how this business needs to be run.”[188]

As a final point, identifying partnership opportunities in low-income countries in particular will, in many cases, likely require creative solutions, including working with locally based companies in sectors such as agricultural productivity for small-holder farmers. On the communications side, it will also likely require an organizational mentality on CIDA’s side of reaching out to private companies, and to NGOs and foundations, with partnership ideas, rather than waiting for those ideas to be brought to the agency through traditional bidding processes. Initiatives like those to increase the poor’s access to financial services through mobile banking are already being pursued by the private sector, so it is a matter of CIDA and other development actors getting involved to provide support and expertise to maximize the development impact of those initiatives. However, partnerships that aim to, for example, expand the availability of health care services in rural areas, will likely require a far greater degree of conceptual work and initiative on the part of the agency.

Overall, the Committee drew from this testimony the importance of flexibility, transparency and realism in the process of identifying partners and partnerships. On flexibility, it is clear that the type of private sector actors that bring the business practices and expertise that are so coveted by development agencies will not wait patiently at the doorstep for a cumbersome bureaucracy to make up its mind. If it is private sector efficiency and creativity that is desired, the process of selection and communication on the public sector side must adapt to meet the realities of the private sector’s work culture. Regarding the last two points — transparency and honesty — it is equally apparent that the expectations and contributions of all involved partners must be made clear throughout the process of decision-making and project execution. Not all partners or partnership ideas are viable from a practical perspective — the probability that the proposal will deliver the desired outcomes in a cost-effective manner — or desirable from the perspective of alignment with an agency’s development mandate, which must be the bedrock underpinning all of its funding decisions.