Advisory Committee on Voluntary Foreign Aid:
Democratic Governance and Economic Growth Integration
Room 6.9-073 RRB
1300 Pennsylvania Avenue, NW
Washington, DC 20523-7600
Tel. 202-712-4002 Fax 202-712-0077
July 1, 2008
The Advisory Committee on Voluntary Foreign Aid (ACVFA) was invited by USAID in
February 2007 to provide to agency leadership feedback and recommendations regarding
the U.S. foreign assistance reforms.
Two areas of the Committee’s recommendations addressed economic growth and
governing justly and democratically. Presented for draft discussion at the ACVFA’s
Spring 2007 public meeting, the papers were finalized in July 2007.
It is the Committee’s belief that greater integration of USAID’s democratic governance
and economic growth programs would enhance their implementation and the overall
goals of development. As a result, the ACVFA’s February 28, 2008 public meeting was
a forum on creating greater synergy between these two sectors, focusing on both
USAID’s programs as well as cutting-edge partnerships.
Based on the positive response received at the February meeting, the Committee is
pleased to present the following case studies highlighting the “real world” integration of
economic growth and democratic governance programs. Representing a variety of
sectors and a diverse group of countries spanning Latin America, Europe, Asia, Africa,
and the Middle East, the studies reflect the various facets and benefits of program
The ACVFA would particularly like to thank ACDI/VOCA, America’s Development
Foundation, the Center for International Private Enterprise, Communications Cooperative
International, Land O’Lakes International Development, and Research Triangle Institute
for their contributions. In addition, we would like to acknowledge the editing prowess of
Johanna Fernando and Caroline Scullin of CIPE and Drew Cleveland, an ACVFA intern,
who oversaw this project at its inception. The ACVFA welcomes feedback as continued
engagement will enhance the success of future programs.
The Advisory Committee on Voluntary Foreign Aid
Democracy That Delivers
Expanding Economic Opportunity in Peru, 1984–1996 Challenge
In the early 1980s, millions of poor Peruvians
needed access to public institutions that would
give them legal identity and legal recognition of
their property and businesses. Gaining legal
recognition was essential to the participation of
these Peruvians in the formal market economy.
The Institute for Liberty and Democracy (ILD),
founded by Hernando de Soto, helped Peruvians
voice this need for property rights so they could
escape the trap of informality and prosper under
the rule of law. Peru: A woman receives the title to her home at a
ceremony in Peru. Initiative
The Center for International Private Enterprise Impact
supported ILD as it publicized the costs of
informality and demonstrated that the poor
8.5 million poor Peruvians now legally own
themselves are part of the solution. ILD succeeded
their real estate assets (as of 2007)
in convincing the Peruvian Government to establish
an Office of the Ombudsman, which received
1.7 million urban real estate assets were
complaints about people’s difficulties in gaining
formalized; the net value of these assets has
formal ownership of their homes and businesses.
increased by $2.9 billion
ILD also prompted government initiatives and laws
to issue property titles to the poor, register small
382,100 businesses – belonging mainly to the
businesses, and simplify numerous administrative
poor – were formalized
requirements. These reforms gave the poor a stake
Newly formalized businesses created 554,000
new legal jobs and paid $7.8 billion in
*USAID provided principal funding for ILD’s programs.
CIPE supported ILD’s advocacy initiatives with funding from
the National Endowment for Democracy.*
The Shining Path terrorist movement was
deprived of popular support Center for International Private Enterprise
Expanding Small Business Participation in Reform
Egypt SME Advocacy Capacity Strengthened, 2007‐2009
One of the key challenges for Egypt’s small and
medium‐sized enterprise (SME) community is to
increase its participation in reform, advance their
interests and expand participatory governance.
SMEs employ nearly 66 percent of the non‐
agriculture labor force in Egypt and are a significant
economic force. Despite this, their voice is heard in
the reform process.
Initiative Egypt: Team‐building among SBAs at ADF Egypt.
America’s Development Foundation (ADF)’s two‐
year Small Business Association Advocacy Initiative Impact
works with 26 small businesses associations (SBAs)
to help them conduct more effective advocacy with
• 17 campaigns are being conducted across Egypt
the goal of more fully engaging small business in
by SBAs with improved advocacy skills.
Egypt’s political reform and democratic governance
Campaigns will improve women’s economic
efforts. With better advocacy and networking skills,
situation, develop policies for youth
employment and occupational health and
safety, and establish a process for regular
(1) participate more effectively in public decision‐
making; (2) undertake local, regional, or national
advocacy campaigns on issues of importance to
• SBAs in Egypt have a stronger, united voice in
SMEs and that contribute to needed political
the reform process.
reforms; and (3) build stronger regional and
national SBA networks to serve as focal points for
These reforms will lead to an improved business
action and for enhancing participation of the SBA
development environment for entrepreneurs and
community in Egypt’s political arena.
small business owners. As important, stronger civic
awareness among SBAs, combined with more
To date, ADF has built the capacity of 19 SBAs from
interaction and partnerships among SBAs and
15 governorates by providing training, technical
between SBAs and local and national government
assistance, and a forthcoming online networking
bodies, will produce greater government
site and resource databank. ADF is providing small
responsiveness and dialog and hasten reform.
grant support for 17 SBA advocacy campaigns.
*This program is funded by USAID *
Ethiopian Coffee Cooperatives
An Ancient, Indigenous Crop Takes on New Value
Ethiopia – the birthplace of Arabica coffee – grows
a wide variety of highly differentiated, exemplary
coffees, most of which are produced by
smallholder farmers and are shade‐grown without
In 1999, the challenges to the coffee industry
seemed overwhelming: poor processing resulted in
low and inconsistent coffee quality, export sales
were regulated through a national auction that
mixed coffees from different locations, investment
in production and processing and loan funds for Ethiopia: “Without cooperatives,” said Asnake Bekele, general
manager of the Sidama union, “Ethiopian growers would be out
marketing were unavailable, coffee cooperatives of the market.”
were institutionally and technically weak, and lack
of market understanding resulted in a Impact
concentration on quantity rather than quality.
• In 2004, $1.63 million was paid to the Initiative
producers in dividends.
ACDI/VOCA helped the country’s statist
• In 2005, in an internet auction of top co‐op
cooperatives reorganize, hire professional
coffees run by the ECafe Foundation and
managers, expand access to credit, and secure bulk
supported by ACDI/VOCA, the average price
input and marketing deals. ACDI/VOCA has helped
paid to growers was $3.22 per pound – $1.30
cooperatives representing 150,000 growers
more than the market price.
improve quality and, in many cases, obtain Fair
Shirkina sun‐dried coffee produced by the Fero
New cooperatives, especially four powerful
Cooperative was Starbucks’ eighth Black Apron
second‐tier cooperative unions, helped farmers
Exclusive®. Its retail price was over $25 per
attract a higher price and a bigger share of the
price. The cooperatives gained licensed export
authority, thus bypassing the government’s central
*This program was funded by USAID*
auction to make high‐margin direct sales.
Zambia Dairy Cooperatives
Improving Business Opportunities for Farmers
Small‐scale Zambian farmers were traditionally
served by government‐sponsored, highly
subsidized cooperatives that were disbanded in the
shift to a market economy. Land O’Lakes (LOL)
worked in Zambia to introduce agricultural
cooperatives, which are now an example of
catalyzing economic growth and investment in a
former socialist economy.
Initiative Zambia: Agricultural cooperatives have catalyzed economic growth.
To enhance productivity and increase farm Impact
incomes, in 1996, LOL began to establish self‐
managed farmer‐owned cooperatives to source
• During the 2002 and 2003 drought, secondary
inputs, diversify, and market crops.
cooperatives doubled maize and legume yields
for 30,000 farmers.
The program worked with local staff, who
undertook intensive, community‐based training to
• Participating groups increased their collective
build production, business, financial, and
income by $1.8 million over five years.
organizational skills among cooperative members.
Local trainers and a strong field presence allowed
• 14,000 farmers have adopted conservation
loan distributors to know and trust individual
farming practices, allowing them to move away
farmers. The cooperatives have helped farmers
from subsistence farming and increase yields
access credit for inputs, with excellent repayment
for maize, sunflower, and soya.
*This project was funded by USAID*
Independent cooperatives continue to grow: today,
members have formed 371 primary cooperatives
(called rural group businesses) and 97 secondary
cooperatives (called depots‐associations).
Assisting Local Governments
Effective Management In A Transitioning Indonesia
In the late 1990s, Indonesia’s economic crisis,
resentment against central control of local
resources, and the impracticality of a central
system in an ethnically diverse and geographically
spread‐out country, led Indonesia to initiate
ambitious decentralization program in response to
calls for more democratic participation in
governance processes. Initiative Indonesia: RTI and the Ministry of Home Affairs lead a conference on regional governance for local and regional government and civil
The Performance‐Oriented Regional Management society participants.
(PERFORM) project supported the Government of
Indonesia’s implementation of the Impact
decentralization program. PERFORM worked in 80
districts throughout the country to develop
• PERFORM and Ministry of Finance
participatory planning and budgeting mechanisms.
recommendations were incorporated into
Research Triangle Institute (RTI) prepared
national law guiding local taxes and user
participatory development plans, introduced
charges, creating more open local business
performance‐based budgeting, and improved
intergovernmental transfers and tax policy.
• Public‐private dialogue was initiated in 80 local
For many Indonesian local governments, this was
government jurisdictions, addressing economic
their first experience in developing and
development planning and implementation.
implementing local economic growth priorities.
Such cooperation was virtually non‐existent
prior to decentralization.
*This project was funded by USAID*
Providing Local Governance
Support in Indonesia
During Indonesia’s long period as a centralized state,
local governments had little authority to plan based
on community needs, raise and manage local
revenues, or develop and execute local budgets.
With decentralization, local governments have been
required to rapidly expand their role. However, not
all municipalities were prepared for the challenge.
Initiative Indonesia: LGSP helps local governments adapt to their expanded roles in core governance areas.
Through the Local Governance Support Project
(LGSP), RTI is working with stakeholders in 75 Impact
localities across Indonesia to help them adapt to
their expanded roles in core governance areas. Local
• The Kediri and Enrekang regions created
stakeholders have identified a number of key
procedures for a stakeholder forum to identify
priorities, including small and medium‐sized
target groups, design transparent eligibility
enterprise (SME) business development services,
criteria, and provide SME business management
more efficient and supportive SME regulation, and
microfinance services for SMEs.
• Local governments in Kediri and Enrekang have
LGSP helps improve management systems and
made their operations more transparent and
service delivery, and encourages service providers to
shared governance decisions with stakeholders.
leverage limited local government resources. LGSP
works to ensure that improved practices are adapted
• Business clinics in Jeneponto and Tebing Tinggi
to local government planning and budgeting cycles,
regions assist the local SME community with
built into performance management and evaluation
business development, marketing information,
systems, and made available to other local
consultation, and advocacy.
governments in Indonesia through documentation of
*This project was funded by USAID*