Economic Growth and Development Act to Build New Partnerships
The Economic Growth and Development Act, currently under review in the House and the Senate, promises to create a partnership between private sector donations and U.S. foreign aid. Mobilizing corporate donations could be a crucial component in reaching the underfunded Sustainable Development Goals by 2030.
The Sustainable Development Goals (SDG) are 17 goals that lie within five focus areas: people, the planet, prosperity, peace and partnership. SDGs continue building upon the achievements of their predecessor, the Millennium Development Goals (MDG). The goals operate under the principle that ending poverty is a crucial component in attaining sustainable development.
The “people” goals of SDG target poverty and hunger while fostering equality and access to quality education and healthcare. The “planet” goals promote sustainable management of resources and encourage environmentally-friendly consumption and production practices. The “prosperity” goals cultivate green economic, social and technological development to protect the environment for future generations. The “peace” goals advance peace, justice and inclusivity. The “partnership” goal acknowledges that successful implementation of the prior goals requires a global partnership and encourages nations to collaborate for sustainable change.
Currently, SDG efforts are severely underfunded. The Brookings Institute estimates that the successful implementation of these goals will require additional annual funding of $2.5-$4.5 trillion. An additional $13.5 trillion will be needed to fulfill the Paris climate accord.
Filling this funding gap might require new sources of revenue. MDG programs were largely financed by official development assistance given by donor governments targeting specific milestones in needy countries. Official development assistance, once a prominent funding source for developing nations, now only accounts for 10 percent of financial flows into poor countries. Private flows, including private capital and philanthropy, now account for 90 percent of financial flows into developing countries.
The proposed Economic Growth and Development Act could help provide the additional capital necessary to help the SDGs become a reality. The Sustainable Development Goals depend more on domestic and international finance for funding than the Millennium Development Goals. Implementers of the new goals foresee a prominent role for the private sector as a catalyst for inclusive economic growth.
The Economic Growth and Development Act aims to boost market-based economic growth in target countries by encouraging private sector investment in development. To accomplish this, the Act will mandate the creation of an inter-agency facility to intertwine private sector foreign aid initiatives with the U.S. government’s agenda. Furthermore, the Act will ensure better coordination between different U.S. departments to ease private sector immersion into government programs.
The Act will align U.S. foreign aid projects with the domestic economic and social agenda of developing countries. This eliminates potential tensions between the development goals of the U.S. and recipient countries. Ultimately, the initiative will supplement government funding of priority sectors in target countries.
Partnerships between public and private sector foreign assistance initiatives have proven successful in the past. Two Obama-era programs, Feed the Future and Power Africa, both benefitted from corporate donations. Feed the Future has received $10 billion from more than 200 companies, while Power Africa has received $20 billion from more than 100 companies.
Engaging the private sector in development projects creates shared value by creating a public good in a vulnerable area while simultaneously increasing profits for partner businesses.
The bill was introduced in the House by Rep. Ted Yoho (R-FL) and has 22 cosponsors, 13 Republicans and nine Democrats. The bill is cosponsored in the Senate by Sen. Johnny Isakson (R-GA), Sen. David Perdue (R-GA) and Sen. Christopher Coons (D-DE).
Mobilizing private sector donations with the Economic Growth and Development Act could increase financial flows to Sustainable Development Goal programs. Linking private philanthropy with U.S. foreign aid programs could contribute to the successful implementation of these goals by 2030.
– Katherine Parks