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MOSBACHER & GREEN: Repeating Korean miracle through private enterprise
Better investment tools would help U.S. business stimulate developing nations
U.S. foreign policy is most successful when it projects conservative values of limited government, economic opportunity and respect for democracy and human dignity. Such values should guide the U.S. commitment to global development as world leaders, including Secretary of State Hillary Rodham Clinton, complete the fourth High Level Forum on Aid Effectiveness, which began Tuesday in Busan, South Korea.
While much of the delegates’ focus is on the progress made in implementing the Paris Declaration on Aid Effectiveness, which concerns the local ownership of and accountability for overseas development assistance, this year’s forum should look beyond the old debate on traditional aid tools and donor funding commitments. The growing role of private investment and trade must be a central part of the forum’s agenda if it is to remain relevant and drive real, sustainable results toward reducing global poverty.
It is fitting that Korea plays host to this conference, as this country more than any other demonstrates how strategic aid investments can produce remarkable returns.
Following the Korean War, South Korea was poorer than two-thirds of sub-Saharan Africa. The United States made a strategic decision to invest in Korea’s infrastructure, education, health and agricultural programs. In addition, the U.S. trained thousands of Korean business leaders and government officials who helped guide the country’s industrialization through an aggressive export strategy.
Our investment paid impressive dividends. In 50 years, Korean literacy jumped from 13 percent to 99 percent, life expectancy from 54 to 79 years, and annual gross domestic product per capita from $152 to $17,078. Today, South Korea is one of our strongest military and political allies, as well as our seventh-largest trading partner, bringing in nearly $39 billion in U.S. exports annually.
The “Korean Miracle” was not an accident. The Korean government complemented U.S. assistance with a commitment to democratic governance, open markets and rule of law, creating an enabling environment for foreign direct investment and economic growth. Korea’s example should guide delegates at Busan to look beyond one-way aid flows. The lesson from Korea’s economic growth is to focus greater attention on how to better mobilize private capital to serve the needs of developing economies.
In areas of the world where the private sector is absent or weak, foreign assistance always will respond to the needs of the most desperate and vulnerable citizens. However, overseas development assistance should be viewed increasingly as a catalyst for private-sector investment and growth, not an end in itself. During President George W. Bush’s tenure in the White House, a revolution in U.S. foreign assistance was started, seen most clearly through the creation of the Millennium Challenge Corporation. Programs such as this recognize that aid can never be the primary driver for growth, but that aid can play a key role in creating the conditions that lead to economic growth by rewarding good governance and investing in critical infrastructure.
The international delegates at Busan must also recognize that the composition of global capital flows has changed dramatically in the past 40 years. While development assistance accounted for roughly 70 percent of all resources flowing to developing nations several decades ago, today 87 percent of the resources flowing into the developing world come from private sources. Therefore, aid programs must be designed with a much clearer intent to steer and to leverage these private capital flows, which are the primary driving force for growth in the developing world.
International trade, finance and investment policies, which for too long have been disconnected from development, should suffuse Busan’s development discourse. Today’s fastest-growing markets are in the developing world, which now accounts for half of U.S. exports and support 1 in 5 jobs in the United States. The engine of this growth is a growing consumer class in Asia, Africa and Latin America that is eager to purchase American goods and services.
Global economic competition in these emerging markets is fierce, and major U.S. corporations anticipate that the majority of their growth in the next decade will be driven by consumers outside of the United States. Therefore, a critical objective of U.S. aid efforts must be to develop improved finance and investment tools to support the greater entry of American businesses into burgeoning markets in the developing world. The calculation is quite simple: Today’s development investments secure tomorrow’s trading partners and market access, which will create expanded growth and jobs here at home.
Rob Mosbacher was chief executive officer of the Overseas Private Investment Corporation. Mark Green, a former congressman and U.S. ambassador, is senior director at the U.S. Global Leadership Coalition. They serve as the co-chairmen for the Consensus for Development Reform.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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