Two decades ago, the Egyptian Center for Economic Studies think tank was formed with a ten million dollar endowment by USAID. According to the Washington Post, the think tank, which “gathered captains of industry in a small circle”, then advocated for a privatization program that eventually led to the sell-off of state assets worth 104 billion dollars. Apparently, less than ten percent of that value went into state coffers – the rest was lost to high-level corruption involving senior officials closely tied to the think tank. In total, the Washington Post reported, the losses to the Egyptian taxpayer of that privatization program exceeded the total amount of aid provided by the US to Egypt over the course of six decades.
While it would be facile to pin the blame for this sorry saga on a single think tank, it does highlight that some donor-funded think tanks can punch far above their weight when it comes to influencing political and economic decisions with massive implications for economic development and poverty reduction efforts.
Throughout the developing world, donor-funded think tanks are now weighing in on domestic political debates on issues as diverse as democratic reforms, foreign affairs, military doctrine, economic governance and social policy. Having worked for a think tank in an emerging economy ourselves, we at Transparify strongly believe that think tanks can play a positive role in enriching national debates and decision-making, especially where there is limited capacity for policy analysis by other players. However, as long as most think tanks remain opaque, it will remain impossible for stakeholders in these debates to separate the wheat from the chaff.
Many think tanks in developing countries are predominantly or even exclusively dependent on foreign donors to carry out their work. Far from requiring these think tanks to be transparent, some donors – notably USAID – on occasions actively abet opacity by their non-profit grantees. Such opacity is not helpful at a time when developing countries are increasingly suspicious of donor-funded think tanks, a suspicion that often extends to all NGOs receiving support from abroad. For example, India is reportedly considering further restricting foreign funding for think tanks and other non-profits.
Policy decisions matter hugely, and developing country think tanks can play an important role in informing and improving them. Donors wishing to improve the quality and integrity of policy-making inside developing countries should do two things. First, donors themselves should disclose which think tanks they fund, with how much, and for what work. Second, they should require think tanks to be fully transparent about all the funding they receive before even considering their applications for grants. Financial transparency is not a panacea, but it is an important step on the road to making policies work better for the poor.
This blog is an abridged version of a longer piece written by Transparify that was originally posted on the website of Publish What You Fund, a not-for-profit organisation that campaigns for aid transparency.