WASHINGTON, D.C. — Florida Representative Ted Yoho will likely introduce his foreign aid reform bill to the House of Representatives sometime in March. The Economic Growth and Development Act aims to bring private sector contractors into the U.S. international development arena. This would be possible through the creation of an inter-agency “one-stop shop” program to open up foreign aid proposals and engagements to both the public and private sectors. President Obama’s Global Development Council recommended the creation of this agency in an April 2014 report.
The Economic Growth and Development Act would increase public-private partnerships between development finance agencies and private contractors. Yoho is chairman of the Congressional Caucus for Effective Foreign Assistance, and said the bill “will revolutionize how we give our foreign aid out, and you’ll see more of it transfer or move over to models like OPIC [Overseas Private Investment Corporation] or MCC [Millennium Challenge Corporation].”
The two primary forms of finance for international development are Official Development Assistance (ODA) and Foreign Direct Investment (FDI). ODA is aid that flows from the federal government through agencies such as the Overseas Private Investment Corporation and the U.S. Agency for International Development. FDI comes from the private sector by opening offices abroad or buying an interest in foreign companies.
In an increasingly globalized world, capital is flowing between countries at an unprecedented rate. In the last two decades, FDI, philanthropy and remittances have grown to account for 90 percent of all international financial flows. The face of international development is changing. In 2015, all 193 U.N. member states adopted the Addis Abba Action Agenda, which contains a comprehensive policy action and framework for financing the U.N. Sustainable Development Goals. According to the early reports on this framework, a large barrier to sustainable development is a lack of ODA and FDI.
In short, current FDI and ODA are not sufficient. The estimated additional annual investment needed to realize the SDGs is between $2.5-$4.5 trillion. Bringing the private sector into the picture could boost U.S. involvement abroad. The new Economic Growth and Development Act has the potential to modernize the way the U.S. thinks about international aid.
– Josh Ward