Remarks at the Global Impact Economy Forum
Secretary of State
I’m also delighted to welcome Sir Richard Branson. Thank you so much for being here. I love the fact that he is such a strong proponent for business as unusual. And I’m excited he’s here because many, many, many years ago, I wanted to be an astronaut, and I think he may be my last chance to live out – (laughter) – that particular dream.
You’re here because you know that we have an opportunity with the convergence of the recognition on the part of government, the private sector, civil society, that we can be so much more effective working together than working at cross-purposes. And for me, this is a great moment to look at where we stand in the world in the pursuit of economic growth and prosperity that is broadly inclusive and sustainable. You know the statistics as well as anyone: One out of three people in the world today living on less than $2 a day; the challenges we face from finite resources, climate change, and other environmental degradation; looking at how people themselves are being empowered from the bottom up in large measure because of the phenomenon of social media. And it’s not only happening somewhere out there, it’s happening everywhere.
And the fact is, these trend lines, apart from the headlines that we all spend most of our time looking at, are profoundly important to foreign policy and national security of all of our countries, because governments everywhere, including most particularly our own, are grappling with what challenges like these mean for our citizens. We believe expanding economic opportunity is fundamental to achieving our own national interest. We want more prosperous societies. We want to see people moving into the middle class. We want to see that creativity and entrepreneurial spirit fostering growth. And we have been working within the Obama Administration to bring our various institutions together to try to put forth that as a focus for us.
So the State Department, the U.S. Agency for International Development, the Department of Commerce, the Overseas Private Investment Corporation, many other of our own institutions working together with international and multilateral institutions are trying to crack the code on removing the obstacles that limit growth. But we have to be more intentional about it. And that’s part of what this forum is meant to both represent, but far more importantly, help us achieve.
And we recognize that so called official development assistance is no longer the leading edge indicator or tool that it used to be. In the 1960s, official development assistance represented about 70 percent of capital flows into developing nations. Today that number is about 13 percent. Where does the rest come from? Well, you know it comes from the private sector, comes from increased trade revenues, it comes from the flow of remittances, and any number of other non-governmental sources. So we’ve made it a goal of this Administration to do more to engage with and coordinate with the private sector, non-profits, philanthropists, diasporas, and anyone else who has value to add.
We know we need partnerships and innovative alliances, which is why one of the first things I did at the State Department was to set up this Office of Global Partnerships. We needed to tear down the silos that prevented us from working creatively and smartly together. We needed to facilitate and scale up the impact economy. And we needed to make it clear that we were over the separation mentality that for too long has guided our efforts.
What do I mean by that? Well, in the past, we looked at corporate revenue and corporate responsibility as separate concerns. We looked at government activity and everything else as separate concerns. Now we know that there’s so much out there that is happening but may not be shared broadly enough so that it both inspires and catalyzes others to do the same. There is a market waiting to be filled in every corner of this world.
So if we can open the doors to new markets and new investments, we can tap as many as 1.4 billion new mid-market customers with growing incomes in developing countries. Taken together, they represent more than $12 trillion in spending power. That’s a huge potential customer base, not only for American companies, which is my primary concern, but also for others. So when we make investments from the three stools of this strategy, official development assistance, not-for-profit philanthropic assistance, private sector investments, we are not only helping to grow and strengthen middle classes in developing nations, we are also supporting the businesses that create jobs here at home. We know that working with the private sector can bolster both our foreign policy interests and our development efforts. But we hope the private sector knows that working with government and civil society also offers value. And increasingly our goals, I would argue, overlap.
Consider just a few examples: Each year, India’s farmers produce nearly 200 million metric tons of rice and wheat, but they lose nearly one-tenth of it after harvest. Just the portion of grain that farmers lose because they don’t have a good way to dry and store their crops would feed about 4 million additional people. And I believe that Sachpreet Chandhoke is here today. Is Sachpreet here? Yes, yes. Well, last year, she led a team of students from Kellogg School of Management to take on this challenge. They designed and pitched the Grain Depot Fund as part of the International Impact Investing Challenge. They proposed building village-level warehouses where local farmers can access the proper equipment to dry their crops and store them, protected from insects, humidity, and theft. Investors in these warehouses will see returns of almost 20 percent while also helping prevent the needless loss of grain, increasing the farmers’ incomes by as much as 15 percent, and creating dozens of local jobs around the storage centers. So with numbers like that, it’s easy to see why Sachpreet and her colleagues won the competition. (Applause.)
Or look at northern Haiti. With its proximity to the U.S. market, the area has great potential to be a regional manufacturing hub. But for decades, despite interest, there was a lack of industrial facilities, limited electric supply, inadequate ports, which all held back private investment. Today, the north of Haiti ranks as one of Haiti’s poorest regions, and of course, Haiti is the poorest country in our hemisphere.
So last year, working with the Government of Haiti and the Inter-American Development Bank, the State Department facilitated a $500 million public-private partnership with the leading Korean garment manufacturer Sae-A. This partnership will develop a globally competitive industrial park in northern Haiti, one of the largest in the Caribbean. It will include an onsite power plant, a waste water treatment facility, and executive residences. Sae-A has projected that it will create 20,000 jobs by 2016 and they will be investing more than $70 million in northern Haiti. The region will continue to benefit from ongoing investments in housing and health clinics, a new container port, and electrification projects for the towns surrounding the industrial park. Sae-A began moving into the first two new 100,000 square feet factory buildings this week, and we expect other tenants to follow later in the year.
At a larger level, our Overseas Private Investment Corporation offers institutional proof that impact investing works. Throughout its 40-year history – and is Elizabeth Littlefield here, our current head of OPIC? – they have been making investments with positive social and environmental returns at the same time as OPIC has generated a profit for American taxpayers. Last year, OPIC issued a call for proposals to catalyze a greater commitment to impact investing. And so far, it has approved $285 million in financing for six new funds that will invest in projects improving job creation, healthcare, combating climate change, and the like.
These are just a few of the examples I could give you of what we are really focused on making happen. And that’s why we are sponsoring and hosting this Global Impact Economy Forum. You’re here because you understand creating shared value is actually in all of our interest. We need all the potential partners, not only here, but who are not in the room, to understand that as well. Our goal is to create an inclusive economic ecosystem that fosters this kind of investing.
So today, I’m proud to announce two exciting new partnerships. USAID – I don’t know if Raj Shah – is Raj here? Ah, oh good, you’re here. USAID’s Development Innovation Ventures, or DIV, invests in breakthrough development solutions that truly have the potential to change millions of lives at a fraction of the usual cost. And now, through a new Global Development Alliance between USAID and the Skoll Foundation – I don’t know if Jeffrey Skoll is here as well – we are dedicating more than $40 million to focus on scaling up game-changing innovations that are cost-effective and sustainable.
This was one of Raj’s and my principal goals when we both came into our positions. It is obviously important to provide humanitarian relief when people are starving because of bad government policies that undermine agricultural development or because of drought or other acts of nature. But it’s better to get ahead of the curve and to invest in new, more effective agricultural production. It’s fine to set up clinics, to take care of people when they’re sick or they’re suffering from disease, but it’s better to get ahead of it and to find interventions like bed nets that will actually prevent disease in the first place. So we’re investing a lot of money in Development Innovation Ventures because we think it will save money, but we need private sector support and ideas as well.
Secondly, we are committed to doing development and diplomacy differently. That’s why I commissioned the first-ever Quadrennial Diplomacy and Development Review to take a hard look at ourselves and make sure we knew what we were doing that worked and do more of it and stop what we were doing that didn’t work. So our second program is part of our ongoing investing with impact initiative. It’s called Accelerating Market-Driven Partnerships, or AMP. It’s very important in Washington you get a good acronym – (laughter) – so people spend a lot of time trying to figure out what the initials will sound like. AMP will bring a business eye to taking on social and environmental problems in developing markets. We will launch it in Brazil, focused first on building sustainable cities, from providing low-cost housing, to offering skills training that builds capacity of local workers, to improving urban waste management systems. AMP will draw on the resources of the private sector, civil society, and multilateral partners in both Brazil and the United States, including Arent Fox, Machado Associados, Grupo ABC, HP, the Rockefeller Foundation, the World Bank Group, and Mercy Corps.
So we’re bringing a whole-of-government approach and a broad base of partners to this, creating an innovation toolkit looking at the critical elements necessary to strengthen science and technology to support entrepreneurship and innovation. We’ll be sending our first innovation delegation to Brazil. We’re collaborating with Department of Housing and Urban Development through the Energy and Climate Partnership of the Americas to advance this initiative. If it proves successful in Brazil, we’ll obviously want to expand it and invite you to join us.
Now, I’m not the only one who will be announcing new commitments today. Many of you are here to do the same. This forum fundamentally is built on the idea we don’t have to choose between doing well and doing good. The only choice we have to make is to do better – do better in government, do better in business, do better in civil society. And one thing is clear: We cannot solve our problems or address our challenges without working together. That goes for countries working together and all of us as well. So I have high hopes for this forum. I thank everybody who has been contributing to it to bring it to reality, and I look forward to working with you on the partnerships and opportunities that it helps to midwife for all of us. Thank you very much. (Applause.)