Saturday, November 22, 2003


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The following article was written by Dr. Jack N. Behrman of the University of North Carolina. It is posted here with permission. Dr. Behrman is Luther Hodges Distinguished Professor Emeritus at the University of North Carolina's Kenan-Flagler Business School, having served from 1964 to 1991, directing the MBA Program for seven years and serving as Assoc. Dean for four. He is currently Chairman of the MBA Enterprise Corps, which was founded by a Consortium of the 16 leading graduate Business Schools in 1990, now having 52 member schools. It sends recently-graduated, but experienced MBAs on year-long assignments as consultants with private and privatizing companies in countries transforming from planned to market economies. Over 650 young men and women have served in 21 countries of Central Europe, Russia, Africa, Lain America, and Central and SE Asia.

Dr. Behrman's expertise lies in the areas of international economics & business, transnational corporations (TNCs), international business/government relations, ethics, comparative management, science & technology, and creativity and innovation. His teaching and research focused on these subjects, on which he testified before Congressional and UN Committees. He worked in over 75 countries, performing governmental duties, consulting, researching, lecturing, and establishing the Corps. He has published over 40 books and monographs and more than 140 professional articles and essays.

During 1961-1964, Dr. Behrman was Assistant Secretary of Commerce for Domestic and International Business, serving with Secretary Luther H. Hodges under Presidents Kennedy and Johnson. He was responsible for the Department's international trade and investment programs, trade with the Soviet-bloc countries, and domestic industrial promotion and mobilization.

The U.S. Agency for International Development (AID) has sought over the past decades to pursue specific strategic objectives related to socio-economic-political progress in countries receiving assistance. Its main resource has been capital contributions to projects approved by it and the host governments, supplemented by technical and other assistance supplied principally by contractors. American experts in many fields have been used successfully through private volunteer organizations (PVOs) under contracts directly with AID, as partners with other NGOs, or as sub-contractors with for-profit consultants.

The importance of volunteers was stressed by President Bush in a speech before the Coast Guard Academy (May 21, 2003) in his initiative to expand volunteerism: "For more than four decades, the volunteers of the Peace Corps have carried the good will of America into many parts of the world. Interest in this program is greater than ever before. I'm determined to double the size of the Peace Corps over five years. Today, I would like to announce a new USA Freedom Corps initiative called Volunteers for Prosperity, which will give America's highly skilled professionals new opportunities to serve abroad. The program will enlist American doctors and nurses and teachers and engineers and economists and computer specialists, and others to work on specific development initiatives, including those that I have discussed today. These volunteers will serve in the countries of their choice, for however long their project takes. Like generations before us, this generation of citizens will show the world the energy and idealism of the United States of America."

Coupling volunteerism with the objective of catalyzing a private enterprise system not only promotes growth directly but it also assists in the other major elements of development, including creating infrastructure, protection of the environment, enhancement of human resource capacity, stabilization of population growth, promotion of democracy through building a middle class, and even alleviation of humanitarian needs. Yet, over the five decades of foreign aid, assistance to the private sector has not been a top priority nor has the use of volunteers in private enterprise development. Support for establishment of private enterprise systems has been extended by AID since the mid-1960s, but AID-Washington and the various Missions have considered that the business sector could and should provide for its own development.

Programs for Afghanistan and Iraq reveal little attention to the private sector. Within the private sector, small and medium enterprises (SMEs) represent the most dynamic businesses and account for the majority of employment and growth opportunities. SMEs are the easiest to help and, in emerging economies and former socialist countries, still require technical and managerial assistance to grow and achieve sustainability. Technical and managerial assistance by professional volunteers funded by private foundations and corporations, and other international donor agencies provide a demonstration of the public-private partnership that is required to generate (a) solid and sustained economic growth; (b) greater cross–cultural understanding; and (c) closer commercial ties in an increasingly open world economy.

Neither AID nor its European counterparts have given the private enterprise system the priority it deserves in economic development, partly because of the need for basic infrastructure and governmental reform. But for these to be effective in promoting growth, they must be accompanied by the development of a dynamic private enterprise system. The best teachers for this are those who have managed such enterprises and the complementary institutions in the advanced countries. Volunteer Experts (VEs) are available in the various sectors involved.

Strategic Objectives

The fall of the Berlin Wall and the emergence into the world economy of formerly socialist or planned economies required new strategic objectives in AID programs facilitating the entry of these countries into a world characterized by democracy and capitalism. The primary objective of accelerating economic growth providing useful employment had now to be accompanied by assistance in the establishment of democratic institutions and development of a private enterprise system almost "de novo". These two systems had few (if any) historical roots in the countries of the Former Soviet Union, out of which most of the emerging economies were coming.


(1) Macro-programs

During the years since 1989, AID has instituted programs in these transitional countries at both the macro and micro-economic levels to catalyze growth and help prepare them to compete in a globalizing economy.
The macro programs focused principally on monetary and fiscal policies and the public and private institutions that would formulate and implement them.

Thus, assistance has been given to central banks, to state-owned and private commercial banks, to investment banks, stock exchanges, brokerages, and insurance companies. These are critical in mobilizing and investing the necessary capital for growth of the new enterprises, yet none had adequate experience with financing enterprises in a market economy.

Formation and conduct of enterprises was often blocked by tax laws and regulations held over from socialist-planning regimes. Authorities at all levels of government were counseled under AID programs on appropriate statutes and regulations, and provincial and municipal governments were assisted in budget and management. Counsel was also given to parliaments on appropriate legislation to guide and supervise policy implementation and to regulatory agencies responsible for local implementation.

In many of these programs, volunteer experts were used to assist in the formation and implementation of legislative and statutory aspects.

(2) Private Sector Assistance

At the micro level, assistance was given in the promotion of a private enterprise system and the controls necessary to guide and constrain it to fit with broad socio-economic-political objectives. One of these, of course, was the promotion of democratic institutions at all levels of government; assistance was given directly but also indirectly through the development of a market economy. The initial objective was that of removing the controls under the former planned economies so enterprise could flourish in a "free market". But this was soon seen as inadequate, for what quickly arose was a type of “cowboy capitalism” unfettered by either ethical or legal constraints as is required to serve the interests of consumers rather than producers.

The drive for quick profits by entrepreneurs moved these economics closer to an “acquisitive society”—draining the real and financial resources of the country through monopoly, corruption, and criminal activity--than to a “civil society”. Private entrepreneurs sought to control the politicians and government for their benefit; as one Russian entrepreneur was quoted: “Politics is the most profitable game in town”.

The entire statutory complex supporting the growth of private enterprise and constraining it had to be constructed. Assistance was needed by all levels of government from public policy and planning to formulating and implementing the promotion and regulation of private enterprise, including laws on formation and incorporation of enterprises, contract and regulatory law, accounting and auditing, means of gathering and disseminating information, advertising, securities markets, as well as means of fighting corruption in business and government. It was also needed by enterprises that were privatized out of state-owned enterprises, start-ups, and those entering joint-venture negotiations. Their needs covered the full range of managerial and enterprise functions—from organization and governance to marketing, accounting, inventory and quality controls, financial controls, supply chain management, personnel and worker training, and acquisition and application of new technologies. AID assistance was offered sporadically and unsystematically to various sectors of industry, finance, and services--from trade associations, to consulting firms, to NGOs supporting the commercial sector, to business education, and to the role of women in a market economy.

Business service organizations were notable by their scarcity—e.g., accounting firms, law firms versed in commercial law and governance, tax counsel, advertising firms, brokerages, trade and industry associations, and the various NGOs that, in the Western world, look after consumer, labor, community, or environmental interests. Nascent enterprises and existing small- and medium enterprises (SMEs) were without the varied supports provided or available in advanced countries.

Former state-owned enterprises that were recently privatized frequently were owned and managed by ex-employees of the state, having little understanding of a market economy and the requirements of competition. Management styles were authoritarian, rigid, and centralized with little delegation or even dissemination of information. Mutual funds were formed to own (and control?) multiple newly privatized enterprises, but their management also knew little of a market economy and the requirements for obtaining (long-term) equity financing or (short-term) working capital. The major scarce resources were capital, management, and technology—and remain so in the first years of the 21st century. But, emerging private enterprises (and governments) focused on the capital needs, not realizing sufficiently that private capital requires assurance of competent management and relevant (competitive) technology in the enterprise.

In pursuit of all of these strategic economic objectives, AID and its Missions relied on several PVOs—notably the merged Agriculture Cooperative Development Initiative and Volunteers for Overseas Cooperative Action (ACDI/VOCA), Citizens Democracy Corps (aka Citizens Development Corps – CDC), International Executive Service Corps (IESC), and MBA Enterprise Corps (MBAEC). They were given separate contracts, or in collaboration with each other or with private consulting firms. These volunteers were used successfully in almost every aspect of private sector development—mainly in direct firm-level assistance but including teaching in business schools and institutes and in programs to train future trainers.

At times, these organizations have collaborated in the field with volunteers from the Canadian Executive Service Organization (CESO), the British Executive Service Overseas (BESO), the British Know-How Fund, and the Senior Volunteer Service Corps (an amalgam of several national entities). Each of these has been involved for a number of years in providing the same types of assistance to developing countries and emerging-market economies around the world as the American PVOs but funded by their national governments, the EBRD, or the European Commission.

Roles of PVOs

The PVOs negotiated with AID Missions on the specifics of assistance programs to determine how they fit with the Strategic Objectives for a given country as stated in Requests for Proposals(RFPs) or Requests for Assistance (RFAs). Each PVOs responded individually or in conjunction with one or more of the others to create an appropriate proposal to the Mission. These responses were often made in competition or collaboration with U.S. consulting firms. The PVOs were, on many occasions, able to help design the programs to make them more effective in achieving the strategic objectives.

Once a contract was signed with an AID Mission, the PVO set about recruiting the specified experts, matching them to the client enterprises or organizations (public or private). Country directors or Chiefs of Party were posted in the host country to manage the PVO activities; they would find appropriate clients and diagnose their needs, support and monitor volunteer activity, and report to AID and PVO headquarters.

Volunteers to the several PVOs devoted to private sector development have come from a wide range of sources, bringing a variety of experiences. ACDI/VOCA and IESC are the oldest in the group and have the largest rosters of volunteers available for assignment abroad. ACDI/VOCA draws from the agricultural community in the main, including Schools of Agriculture in numerous universities in the U.S. and Extension Services. Its volunteers go on short and long-term tours, covering all aspects of agriculture and agri-business, including formation of cooperatives and financing of projects and equipment.

IESC has a roster of more than 11,000 senior-level U.S. business executives and professionals interested in assignments abroad as volunteers. These assignments are typically four to six weeks in length, although some last up to a year. Assignments may be "piggy backed" for a second or third client to reduce the costs of overseas travel. IESC volunteers are principally senior level executives, collectively, they have been involved in almost all of the sectors and activities noted above. In addition, its recently acquired affiliate, Geekcorps, has a database of younger volunteers who are experts in communications and information technology.

The CDC and the MBAEC were both instituted in 1990 and merged in 2001 to meld the more experienced managers on CDC’s 6,000 person roster and MBAEC’s recently minted MBAs from 50 of the leading U.S. graduate business schools.

On occasion, the AID Mission extended the contract for assistance to an American consulting firm, which in turn sub-contracted with a PVO, sometimes under instructions from the AID Mission to use their resources and expertise. The contract procedures adopted by most Missions results in placing the PVOs at a competitive disadvantage in bidding. For-profit firms are preferred since they offer greater control opportunities to the Mission through its use of Requests for Proposals (RFPs) rather than Requests for Applications (RFAs) in offering contracts. Missions prefer to deal with large-scale, multi-faceted consulting firms rather than PVOs. And, the former practice of accepting unsolicited proposals has virtually vanished, despite the fact they offered PVOs more opportunity to design programs in which they would be most effective.

While many USAID Missions have included some elements of private sector development in their Strategic Objectives, most have not recognized the value of or the best strategies for enterprise and economic growth - and their contract procedures tend to squeeze PVOs into a sub-contract position, making them subject to the dictates of for-profit organizations that have no incentive to use them as a major delivery mechanism, despite their effectiveness and their traditional creation and implementation of public-private partnerships. Time and again, business volunteers report that private sector development is the best kind of foreign aid. U.S. volunteers are welcomed and listened to in most developing countries, especially those that have grown wary or weary of high priced consultants.

The outcome of these procedures and preferences is to significantly favor the use of consulting firms - which cost more but can be more closely managed under contracts than PVOs under cooperative agreements. Yet, comparatively, PVOs have deeper and broader long-term impact, are more cost effective, and build the necessary bottom-up support for both economic and democratic development.

Country Programs

Despite the fact that many Missions have similar Strategic Objectives relative to private sector development, their programs have not been patterned after each other. In the early part of the 1990s, Missions contracted with each of the four PVOs separately and coordinated their activities within the Mission itself—if there was any coordination. Each was used in ways determined appropriate by the Mission, which has been the principal funding source. Private corporations and foundations have contributed funds, but always less than 30% during a budget year and usually less than 10%; these funds have been largely unrestricted as to country or type of assistance.

In order to offer an integrated package of assistance to the Mission in Ukraine, an Alliance of four PVOs was formed, which then negotiated with the Mission as to the program that would be most appropriate and effective. IESC was the lead organization, responsible for administering the contract and selecting and monitoring the Chief of Party. The budget was allocated among the four PVOs according to their ability to meet the specific terms of the contract, which was successfully extended over six years.

In Bulgaria, all private sector assistance was coordinated under an administrative coalition of seven PVOs and consultants. This Firm Level Assistance Group (FLAG) was under the supervision of a unit from the University of Delaware; it coordinated the selection of client organizations, monitored specific activities, and assessed results.

To enhance Sustainability of private sector development, several AID Missions decided that the best approach would be to develop Business Service Programs (BSPs) or –Organizations (BSOs) or –Centers (BSCs). These entities were established to provide management courses and seminars to local enterprises and to follow up with direct consultation as needed by those attending. Since the BSOs did not have sufficient local consultants to provide the courses or direct firm assistance, the PVOs were requested to send their volunteers.

Contributions of Volunteers

The impacts of the volunteers depended not only on their own experience, which was substantial because of their long tenure in responsible positions in industry, commerce, and finance, but also on the willingness of host management and public officials to respond, which was not always high. Volunteers were sometimes requested for what was later seen as a mere “showing off” of connections and prestige. An expert volunteer could work through or around such obstacles, if the time was available.

Another obstacle was a mis-diagnosis of the problems in the client enterprise. Volunteers frequently found that the major bottleneck to competitive success was some other problem—e.g., not the lack of funds, but the difficulty of collecting from buyers, or the low level of sales, or the poor quality of marketing or of the products themselves, or the failure to test materials, poor inventory control, or inadequate cost controls and accounting, or outdated manufacturing processes and technology, or low worker morale from rigid and authoritarian management. Volunteers spent initial weeks ferreting out the problems that needed solutions and convincing management that these were, in fact, the major problems.

For example, one volunteer saw that a strong marketing effort was needed with solid advertising, but on making his recommendation, the CEO replied that this was too costly; the volunteer argued that customers would not know of the product without such an effort. But the CEO replied that “No one wants our product anyway.” “How do you know?” “Because we have a large inventory outside and no one has come to get it!” This, of course, was the procedure under Communism, where the enterprises produced and the government picked up the products for delivery to the government stores.

Program Problems

Besides the management and enterprise problems met by the volunteers and consultants engaged in private sector development, AID Missions faced several problems in the conduct and assessment of the private-sector programs: time-frame, continuity, results assessment, bias against business, and sustainability.

1. Congressional support is required from year-to-year and budget allocations are made annually so that there is concern to demonstrate effectiveness on an annual basis, but private enterprise development is a long-term matter—on the order of decades, not years, when the transition of an entire economy and polity is involved. Yet, the career assignment of Mission officers is usually three years at any post, leaving the fruits of the assistance to be garnered by future personnel.

Unlike project assistance, one cannot point to new housing, dams, roads, or even new government agencies, for which there is physical evidence at least within three years. It requires strong dedication on the part of Mission officers to maintain private sector development as a part of their Strategic Objectives. Therefore, the support for private enterprise varies from Mission to Mission and within the same Mission as personnel are moved to new posts.

2. The continuity of assistance to the private sector is difficult to maintain also because of changes in budgetary priorities on the part of both the Executive Branch and Congress. Greater attention to Russia shifted funds from Central Europe during the last decade of the 20th century, and from the three Visegrad countries to the Baltics and Balkans as the former group was considered to have moved well into their transition despite the fact that there was much yet to be done. Programs that could have solidified the strategic objectives were terminated, leaving a weaker foundation for further development than had been anticipated initially.

3. Support for the private sector was difficult to maintain for lack of clear results on a cost/benefit basis. In dealing with enterprises seeking to succeed in a market economy, complex forces play on the competitive strength of the company or business service organization being assisted. In the case of enterprises, success of the volunteer expert depends on the willingness of management (and owners) to absorb and apply the counsel offered. Not only the attitude of management but also the structure of the organization and practices as to delegation and information dissemination affect the transmission and response to recommendations. Further, it is difficult to attribute a given success—e.g., reducing mobility of workers or managers, increasing exports, raising quality control, increases in productivity, improvement in sales organizations or marketing procedures and advertising, improved accounting, better data gathering, higher morale of workers, and so on—to the presence or advice of a single volunteer expert. Even if there is a specific recommendation and it is followed, the desired results may not be evident for a few years.

In attempting a cost/benefit analysis, it is not difficult to determine costs, but it is difficult to pinpoint results attributable to the volunteer. There are too many factors affecting success or failure of a firm—from attitudes and competence of personnel to environmental and market factors-- to calculate the "value" of a volunteer. Even if there is an apparent failure in assistance to a given enterprise, individual members of the company may gain substantial training from the volunteer, using it in subsequent positions.

4. A further problem faced in Mission programming is the historical priority within AID toward humanitarian, health, housing, and poverty programs as distinct from those aimed at the business community, against which there has been a long-standing bias. This was, certainly, the case within the European Recovery Program—though the Productivity Teams sent to the U.S. for training in the 1950s were quite successful—and the Alliance for Progress in Latin America in the 1960s.

But, in the transitional countries of the FSU from the 1990s-- the enterprises (management and owners) did and do not have the background of market systems that existed in Europe and Latin America. And, in many instances, Mission officers did not have experience or preparation in the institutional requisites for building a functioning private enterprise system, or in assessing the needs within companies. Thus, many Missions have given a priority to formation and development of business service organizations, which could only be useful if a critical mass of successful enterprises arose to require their services.

5. Building a private enterprise system requires the establishment of institutions (public and private) and support organizations that are sustainable over the long term so that businesses can determine their
strategies, product lines, markets, and financial needs with some certainty.

AID Missions have been insistent on leaving a “legacy” of a sustainable mix of enterprises and business support organizations. And both volunteer experts and contract consultants have been used to pursue this goal. However, the lack of adequate continuity of funding year-to-year plus the absence of local funding for NGOs and other service organizations means that U.S. assistance is not likely to achieve the sustainability objective in any country of the CEE or CAR regions. Rather, success is a matter of efforts by local enterprises, government agencies, and NGOs establishing the proper atmosphere ("favorable climate") and keeping their eyes on the goals of democracy and a private enterprise system. A higher probability of success would arise if the volunteer assistance were continued for a longer term—buying more time--which could be done at minimum cost compared to much concessional aid, which does not develop the commitment and responsibility necessary to buttress continued growth.

Cost-Benefit of Volunteers

The cost of the volunteers consisted of a recruitment process, orientation and preparation, travel (abroad and locally), per diem for meals and housing, and medical insurance. Normal practice is for the host enterprise or organization to pay the local costs of living for the volunteer plus a translator, if needed, with the donor organization paying all dollar costs. The value of a donated work-day varies among the PVOs, ranging from $200 to $500, depending on their experience. The dollar costs include recruitment and administration, airfare, insurance, orientation and training, and (for long-term volunteers) a resettlement stipend. Total per work-day costs paid by USAID have ranged from $125 to $1000, depending on the host country and project-year under consideration. Assignments are generally with one host organization, but piggy-backing and short-term instructional assignments are also made to reduce costs and spread the benefits.

These costs amounted to a fraction of the cost of personnel from consulting firms that were often contracted by AID. Preference for these contractors rested on the desire of Missions to deal with one (rather than several) sources and, more importantly, the lack of familiarity of the Missions with volunteers and how to fit them into the desired programs.

The benefits can be counted in terms of the contributions to national, regional, or local progress, to the productivity and competitiveness of the client enterprise, to management development, to worker morale, and to the volunteer as well, who gained knowledge, understanding, friends, and contacts that could develop into commercial ties. All of these benefits continued long past the period of the volunteer’s visit, for questions and answers were continuously communicated, return visits occurred, and managers became interested in further training or education or visits to the U.S. for “hands-on” observation of U.S. practices. These latter were promoted by East-West Management (a unit of Civil Society) and the Center for Citizens Initiative (CCI), which selected key managers in the CEE region to be hosted by volunteering companies in the U.S. Again, close contacts were made that often culminated in commercial ties or joint ventures. Thus, long-term bridges were built between the U.S. and host countries through greater cross-cultural understanding and mutual interests.

The success stories of these volunteers can be numbered by the hundreds over 50 or more emerging countries – whether or not transitioning from socialist or planned economies. They show the altruism and dedication of the volunteers themselves, the gratitude of the recipients, the pleasure of the AID Missions and U.S. Embassies, the welcome by the host governments; and they have contributed to the Strategic Objectives in each country. An AID survey of PVO contributions to development of private enterprise in Poland concluded as follows:

“There are numerous examples where the assistance provided made a significant and lasting contribution to the performance of an individual firm. Positive results were found across sectors, regions, and providers. Examples of this assistance range from the general, e.g., changing management style, to the specific, e.g., revising product lines, implementing new accounting procedures. One oft-repeated outcome of assistance, although difficult to quantify, is that the advisor’s assistance changed the management style and/or the way senior management looked at a problem.” (SME Field Survey of Poland, 1997, p.11)

The benefits to the client enterprises have been both immediate and long-term. For those managements that were responsive, improvements were noted in -

· business strategies and management skills;
· information gathering and dissemination within the firm;
· commercial contacts provided through direct introductions or through trade fairs and exhibits;
· mind-sets toward market-decisions and competition;
· international accounting and ISO-2000 quality standards;
· marketing skills and financial controls;
· enterprises qualifying for new financing;
· export marketing;
· advertising programs;
· establishment of stock markets and brokerage firms;
· establishment of business associations and advocacy roles;
· product analysis and rationalization of product lines;
· procedures for the conduct of business meetings internally and negotiations externally;
· methods for influencing policies toward business and its regulation;
· establishment of entities for continued consultation and training.

Governments at all levels, if responsive, improved their policies in support of private sector development, including more reasonable, simple, and certain taxation, regulations on consumer protection, corruption, transparency, corporate governance, auditing. property rights, incorporation law, and commercial regulations.


Several recommendations for policy improvement arise from AID's experience with PVOs in private sector development:

1) A much higher priority should be given by AID-Washington and the Missions to the firm establishment of private enterprise systems in recipient countries. It is through such a system that a middle class is formed that supports democracy and spreads the wealth of the nation, both of which increase the stability of the country. To raise the priority will require that AID and Mission personnel be given instruction in the critical roles of private enterprise and the means of supporting the private sector.

2) Mission programming should give a high priority to use of PVOs. Volunteer experts are the most appropriate means of assisting the development of a private enterprise system in transitioning economies. They are the prototypical American method of mutual assistance by business managers, as is reflected in the programs of the American Management Association, U.S. Chamber of Commerce and its affiliates, and the multiple Executive Programs provided by graduate business schools across the United States in which managers exchange experiences and assess management techniques collectively. These exchanges are a “least-cost” way of spreading learning from practice and building long-term relationships. The volunteers take “best practices” to the client companies, adapting them to the local situation and capabilities. They establish long-term relations with foreign personnel and organizations, developing cross-cultural sensitivity and mutual understanding—in support of long-term commercial interests, democratic orientations, and continued progress toward civil society and peace. Finally, volunteers represent the "American Way" of altruistically helping others to stand on their own feet and thereby contribute to the welfare of all.

3) Private sector development should be seen as a "systems problem", requiring inputs from a variety of sources to establish the various entities and institutions that comprise a "civil society". Such a society is characterized by freedom and democracy, by the "rule of law", by adequate education, by altruistic organizations and philanthropic foundations, by appropriate government regulations and stimulus, and grounded on a set of ethical values leading to proper rules of governance, the avoidance of corruption, and the transparency of decision-making that permits citizens and clients to have adequate information. A systems approach would integrate agricultural development with agri-business—transport, storage, processing, and retailing—and this, in turn, with other firms and educational institutions to make possible a fully competitive economy.

Each of these aspects is necessary to buttress and constrain a private enterprise system. They can be assisted through the combining of volunteers and experts from the many NGOs and PVOs in the U.S. that are available. But it will require a more informed and longer-term approach than hitherto evidenced within AID and its Missions.

4) To implement a systemic approach, the principal PVOs should be encouraged to present (under a Request for Application or Unsolicited Proposal) more comprehensive and integrated programs for assistance. They are capable of spanning much of the needs for private sector development, and their collaboration would produce greater benefits at less cost than presently.

5) If AID cannot make the policy and structural adjustments necessary to implement the above recommendations, Congress should institute and fund an independent entity directed to provide the systemic assistance needed. It should also instruct this entity to draw on the various volunteer organizations dedicated to private sector development so as to maintain the critical volunteer resources available.

Precedent for withdrawing elements of AID and instituting the services in an independent agency is found in the formation of the Overseas Private Investment Corporation (OPIC) when the need for guarantees against various risks of private foreign direct investment was recognized but AID refused to offer them. A formal institution would them be established by Congress to coalesce existing PVOs or induce their collaboration for contracting with Missions on a number of Strategic Objectives. It is conceivable that this approach will be necessary to raise the priority of the private sector, removing it from competition for funds within the multiple goals of AID.


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The following article was written by Rami Khouri, Executive Editor of the Daily Star newspaper in Beirut. It is posted here with permission.

The “Agreement on Political Process” that was signed days ago by the US occupation authority in Iraq and the American-appointed Iraqi Governing Council is an important document that will be interpreted in different ways. It is idealistic, bold and ambitious in its stated quest to define a transition from American-occupied Iraq to a situation of full Iraqi sovereignty in a free and democratic country.
The agreement embodies powerful principles of democratic pluralism, equality before the law, representational federalism and the consent of the governed. It is audacious in the sweep, speed and clarity of the proposed democratic transition (the text is available at the Coalition Provisional Authority website: In just 66 lines it offers a blueprint to wipe out three decades of Iraqi-engineered Baathist tyranny and the previous five decades of British-made post-colonial incoherence, and replace them with an American-inspired Thomas Jefferson on the Tigris.
The specifics are impressive, and hard to argue with. The document drips with references to “freedom,” “equality,” “rights,” “due process,” “independence of the judiciary,” “transparency” and other such fine political values. Its democratization procedures include selection of representative individuals to regional bodies that will ultimately draft a national constitution, ratification of the constitution by the citizenry, caucuses at governorate level to select individuals who will collectively form a transitional national assembly, a constitutional convention of directly elected Iraqis, and other such ringing aspects of accountable democratic governance as it has been successfully practiced for many decades in … Iowa and Idaho.
This document encapsulates the best and worst of America today. It spells out and offers others the finest American governance traditions. If this were a commercial website, I would want to put all these democratic values in my shopping cart. The US gets an A+ for intent. But it gets a D- for implementation. For the manner of Washington’s attempt to transform Iraqi despotism into Iraqi democracy is naive and unrealistic, and its realization will be bumpy for at least four main reasons:
l It totally ignores the points of tension, even incompatibility, that will surface during the meeting of American and indigenous Iraqi-Arab-tribal-Islamic-Kurdish-etc. cultural values (these tensions will be resolved over time by Iraqis, just as they were resolved in the European and American transitions from feudalism-and-slavery to democracy from the 16th to the mid-20th centuries). Forging a new Iraqi nationalism and democracy with the crucible and moulds of American republicanism is as unrealistic as it is noble.
l This agreement is fundamentally imposed by the US, and includes numerous explicit American veto powers over implementation; this “democratization” process is also peculiarly undemocratic, and at second glance seems more colonial than collegiate.
l The Governing Council itself was appointed by the US occupation authority. Many of its members are credible national or tribal leaders, but the council collectively enjoys very mixed legitimacy and credibility among Iraqis (flashback to the Israeli occupation of Palestinian lands: Two decades ago, the Israeli occupation authority created Palestinian “village leagues,” tried to reach political accords with them and failed miserably and predictably. Why? Because political bodies appointed by an occupying military power and designed to achieve the occupier’s strategic goals enjoy no indigenous legitimacy or credibility, whether in Palestine, Iraq, South Vietnam, Afghanistan ­ or 18th-century Virginia.)
l This agreement reflects American policymaking by panic, which is dangerous for all concerned. The agreement’s content, power balance and hasty promulgation suggest that it aims more to get the US out of Iraq than to allow Iraq to define itself. Intent and credibility usually drive implementation in the adult world, and Washington’s intent and credibility here ­ just as before its war on Iraq ­ remain culturally confused, politically simplistic, motivationally suspect and diplomatically hasty. Washington has taken a good idea ­ transforming tyranny into democracy ­ and implemented it badly, because it largely acts unilaterally, militarily and through narrow American worldviews.
This agreement to turn over sovereignty to Iraqis is flawed but fascinating, and imposed but important. It mirrors a deeper history of how power and culture are exercised in the world ­ how the strong influence the weak and try to reshape them in their own image, and how colonial adventures end.
This process in Iraq today is sad and ugly on two counts: The United States embarrasses itself as an incompetent and dizzy colonial power, as it changes governments and tries to reshape the entire Middle East; but also the Arab governments and peoples throughout the Middle East embarrass themselves even worse, as they prove to be incompetent and docile spectators, passively watching their own post-colonial history of autocracy, passivity and powerlessness replayed over and over again.
The antidote must include a more realistic, humble and multilateral American policy, along with a more profound, activist, honest and credible policy from the Arab countries. Iowa and Idaho became prosperous and democratic because their people demanded, and forged, good governance. America offers us ennobling lessons, along with ugly, imposed colonial treaties. We should beware of, renegotiate and improve the bad treaties, but embrace and achieve the promise of good governance.