USAID will be launching a new development fund to help attract private sector funding for global development, its Administrator Samantha Power announced on January 18, during the annual World Economic Forum held in Davos, Switzerland. Known as the Enterprises for Development, Growth, and Empowerment (EDGE ) Fund, it will be used by USAID to build “innovative and impactful partnerships” with private sector businesses.
To tackle the world’s biggest challenges we need the private sector & the public sector to act together.
I just launched @USAID’s EDGE Fund – a new fund that will ramp up our work to build innovative and impactful partnerships with the business community.https://t.co/ztYGvJXAPW pic.twitter.com/1J6XdTh2D3
— Samantha Power (@PowerUSAID) January 18, 2023
Although the legislation framework for enacting the EDGE Fund has not yet been perfected, the goal of the new fund will be to leverage private sector investments to further USAID’s development goals. Starting with a proposed $50 million, that is to be approved by Congress, the EDGE Fund will seek funding from private sector businesses in order to provide greater resources to USAID projects, missions, and offices.
According to the design documents, the EDGE Fund will require private businesses to invest at least $1.5 million dollars in the fund in order to be eligible. These contributions can be in the form of cash, staff contributions, and/or in-kind contributions. The EDGE fund will accept investments from businesses of all sizes and from all countries, including for-profit commercial entities and consortiums of enterprises so long as they adhere to USAID’s rules and regulations.
All contributions to the EDGE Fund will be used solely to support USAID’s activities. USAID is now actively seeking Expressions of Interest from private businesses who might wish to fund a specific project or area of focus.
See also: Key takeaways from Davos 2023
Private-Public Partnerships (PPP)
For many years, there has been a concern in the global development community that most of the financing for projects and campaigns has come directly from governments (such as Official Development Assistance or ODA) or international agencies with very little contribution from the private sector.
“The problem isn’t a lack of available financial resources. The problem is where and how to invest them,” said Vera Songwe, the Chair of the Board of the Liquidity and Sustainability Facility during the same forum in Davos.
In some cases, PPPs are difficult to form as some people believe that large-scale infrastructure and development projects are the responsibility of governments, not-for-profit businesses. In other cases, private investments in development projects have been hampered by their low rates of return and/or poorer countries defaulting on their debts.
In 2022, the United States Government along with the other six members of the G7 group of wealthier industrial nations launched the Partnership for Global Infrastructure and Investment (PGII) to “mobilize” hundreds of billions of dollars in private sector investments in development projects in conjunction with some $200 billion in financing from the U.S. Government. This is highly similar to the Build Back Better World (B3W) announcement at the G7 meeting in 2021 that aimed to “catalyze” hundreds of billions of dollars in private sector investment in infrastructure development.
See also: Results of the 2022 G7 Meeting
Currently, the B3W, PGII, and EDGE Fund all remain theoretical frameworks for attracting private sector investments in government-led development projects, but they do serve as a solid foundation for guiding American investments and international relations abroad.
The United States Agency for International Development (USAID) was founded in 1961 by President Kennedy to focus on long-range economic and social development assistance abroad. The current USAID Administrator, Samantha Power, previously served as the US Ambassador to the United Nations during the presidency of Barack Obama.
See also: A brief history of USAID