How to Apply PSE Across Development Sectors: 7 Tips From USAID/Vietnam
“PSE is a subset of economic growth strategies and responsibilities, and is not relevant to other sectors.” So states the first entry in the “Myths and Mythbusters” section of USAID’s 2022 Private Sector Engagement Policy.
It debunks the myth by arguing that private sector engagement (PSE) is a means to an end in any and all sectors, noting the diversity of sectors relevant for PSE activities: “Half of all the Agency’s private-sector partnerships have focused on health, education, and the environment. Nearly one quarter of them have supported democracy and governance, water and sanitation, information and communication, gender equality and women’s empowerment, and humanitarian assistance.”
It’s not difficult to look across the Agency and find examples of Missions applying PSE in these more “unconventional” sectors, from countering human trafficking in India to resilient agriculture in Bangladesh. It is unusual, though, to find all those examples within a single Mission.
Look no further than USAID/Vietnam.
For several years, the USAID Mission in Vietnam has prioritized finding creative solutions to use PSE across its Development Objectives. “I think it’s noteworthy that USAID Vietnam has been able to engage in PSE across all of our Country Development Cooperation Strategy (CDCS) priorities,” said Trevor Hublin, Deputy Director of the Office of Governance and Economic Growth (OGEG) at USAID Vietnam. “Sectors like health and the environment, especially in the energy sector, won’t work without private sector solutions tied to our work.”
USAID/Vietnam CDCS: Results Framework with Development Objectives (DOs) and Intermediate Results (IRs)
The INVEST portfolio
USAID/Vietnam has been working with INVEST since 2019 to realize PSE across the Mission. One of USAID’s flagship blended finance initiatives, INVEST works with USAID Missions, Bureaus, and Independent Offices (MBIOs) to identify opportunities to work alongside the private sector — including local and new and underutilized partners — to co-create solutions that align private capital with international development needs. INVEST uses a streamlined procurement approach to tap into and get to work with a network of over 550 organizations with specialized expertise in finance, development, and private sector engagement.
USAID/Vietnam engaged INVEST through an initial $8.25 million buy-in running from August 2019 to June 2024, and has added an additional $1.88 million in funding, making Vietnam one of the largest portfolios under INVEST. The Mission broadly aimed to unlock private sector resources in support of Vietnam’s efforts to address priority development issues in infrastructure, climate and energy, health, financial inclusion, and more. Specific activities have evolved somewhat over the course of the buy-in, but touch on every Development Objective:
- Public-private partnerships for infrastructure (DO1): INVEST is strengthening understanding of and creating an enabling environment for public-private partnerships (PPP) for infrastructure in Vietnam. It built out a new web-based PPP platform to provide comprehensive information on implementing PPPs for all stakeholders, and designed two bootcamps to teach key stakeholders about the legal and regulatory context and the PPP lifecycle.
- Alternative dispute resolution (DO1): INVEST is helping enhance the country’s business environment to attract more private investment for Vietnam’s future development, by promoting the utilization of commercial and investment alternative dispute resolution (ADR). It will align Vietnam’s ADR practices with international best practices, build an online dispute resolution platform, increase capacity among judges and arbitrators to mediate cases, and raise awareness about ADR among the business community.
- Health sector sustainability (DO2): INVEST is working to increase the financial sustainability of community-based organizations (CBOs) and social enterprises delivering essential primary healthcare services. INVEST worked with 19 CBOs to develop detailed roadmaps and technical assistance plans to expand and access additional sources of financing, and will now provide additional training and tailored follow-on assistance to a few select organizations.
- Renewable energy (DO3): INVEST is supporting USAID’s ongoing efforts to reduce risk and transaction costs for project developers to encourage increased private sector investment in Vietnam’s renewable energy development. INVEST provided technical assistance to three wind and wave energy pilot projects in Vietnam to help them navigate regulatory and environmental hurdles.
- Climate change resilience and mitigation (DO3): INVEST is capturing international practices and state of play in market-based mechanisms for tackling climate change and climate financing. It is developing an accurate and competitive carbon labeling system in the country, so that Vietnamese exports can meet international standards, and providing recommendations for select industries, such as textiles, wood, and seafood. INVEST also helped increase understanding of how businesses and regulatory bodies in Vietnam can better engage with the green economy through research into barriers and opportunities for the private sector in the green economy, and design of an environmental indexing survey.
- Disability inclusion (SO): INVEST is working to deepen USAID’s network of impact investment opportunities for private investors to deliver social and environmental impact, especially in the disability inclusion space. INVEST will conduct research on innovative financing models in Vietnam and provide recommendations on how to encourage the private sector to invest in disability inclusion businesses.
Hublin commented, “INVEST has been able to offer tailored solutions to emerging private sector areas like health, where advisory services and capacity development are needed. USAID has also relied on INVEST on issues related to macroeconomic trends such as infrastructure development and public-private partnerships. We hope that our work helping the Vietnamese government harness partnerships will translate to the businesses we’re supporting downstream.”
USAID/Vietnam staff in 2022. Credit: USAID Vietnam Facebook page
Lessons learned in PSE
So what is the “secret sauce” of USAID/Vietnam’s success in applying PSE across all of these sectors? Some of it comes from the specific socioeconomic context of Vietnam, with the shift from a centrally planned to a market economy transforming the country into one of the fastest growing economies in Asia, flush with opportunities to invest in its development.
But it’s also due to intentional and effective efforts at the Mission. Hublin and colleague Nguyen Khanh Cam Chau, Digital Development Advisor and Economic Governance Head, who manages much of the day-to-day work with INVEST, cited several reasons that have made the Mission’s crosscutting approach to PSE effective, which can serve as good lessons for the rest of the Agency.
1. Championing PSE needs to start with leadership.
“PSE was successful here because of the high commitment of leadership and the Front Office,” said Nguyen. “Even though that leadership has changed, that commitment to PSE remains, because it’s now instilled among project staff as well.” Applying PSE requires intention, because it can sometimes get left behind if it’s not front of mind. However, when leadership puts it first, it’s not just checking the box, and it can’t get forgotten because it’s a requirement. In this case, the Front Office asked all the program offices to get together and design a common scope of work with INVEST, to include each sector and Development Objective.
2. Ensure that PSE is baked into projects from the beginning.
PSE is a mandate for all project design within the Mission. All projects need to specify how they will engage the private sector. While this is central to projects in OGEG, it’s also required for other offices. “INVEST is one of the most successful cross-office initiatives I’ve seen since I joined USAID in 2019,” said Nguyen, “because it has commitment from Mission leadership from the design of the buy in.” This means that they can have a systematic engagement on PSE, rather than trying to incorporate it mid-stream, when it’s more difficult to change the structure of the project.
3. Look beyond the Economic Growth office.
At the Mission, the INVEST buy-in is managed by OGEG but works across the other program offices, from the Health Office to the Reconciliation and Inclusive Development Office (RIDO) and Office of Climate Change, Energy and Environment (OCEE). Each office designs its own portion of the buy-in, but share a mandate to coordinate, and the work overall shares the same goals and objectives. While coordination can have its challenges, since each office has its own priorities and is busy with its own projects, it’s easier due to the initial mandate. “It starts with the technical sector,” said Hublin. “Health and environment won’t work without private sector solutions. We didn’t dream this up in my office [OGEG], but are trying to enable it.” The Economic Growth (EG) team can provide useful guidance on the private sector landscape, complemented by the technical expertise in the other program offices.
Building PSE expertise across the Agency is in line with the new policy framework, announced in March 2023. The policy has an entire section on deepening engagement with private companies and organizations, and the recent PSE Modernize initiative includes a number of organizational strengthening components to build expertise across the Agency’s workforce. Hublin stressed the importance of building expertise outside of the EG sector. “This would increase our impact, because it makes the Mission less dependent on the EG office to run PSE efforts, and just let us focus on harnessing or coordinating.”
4. Use existing PSE tools to your advantage.
USAID has a number of tools to help MBIOs with PSE, from identifying opportunities to operationalizing it. USAID/Vietnam started with a Private Sector Landscape Assessment (PSLA), an offering provided by the PSE Hub. A PSLA maps relevant companies across sectors, industries, or geographies to help USAID identify opportunities to harness private sector collaboration. Vietnam’s 2019 PSLA highlighted potential in areas like improving the business enabling environment, supporting renewable energy actors, and strengthening the health sector. These recommendations informed the 2020–2025 CDCS.
Following the PSLA and CDCS processes, the Mission engaged INVEST on a scoping project to take a deeper look sector by sector, finding it an effective tool to promote PSE in areas in which they hadn’t necessarily had a chance to work before. “This is the first time we’re really doing this kind of crosscutting work across different offices. We have had other efforts to coordinate with other offices, but not necessarily at this level,” said Nguyen. “Working with INVEST also gives us the chance to support other private sector requests that we couldn’t have done in a more traditional way.”
5. Consider how PSE fits into the local context, and pay attention to relationship management with local partners.
The appetite for private sector engagement will vary depending on the country in which USAID works. Vietnam, for example, has transitioned from one of the poorest in the world to a lower-middle income country experiencing rapid growth and demographic change. With a growing private sector and dynamic international manufacturing and export base, Vietnam has the opportunity to leverage domestic and foreign investment and corporate resources in its development.
Private sector engagement is also a priority for the Vietnamese government, so it’s helpful that USAID and the Government of Vietnam are aligned. USAID and INVEST have good relationships with local counterparts, many of whom are partners or beneficiaries on the INVEST buy-in.
6. Use formal and informal channels for PSE coordination across the Mission.
“We coordinate formally through a Mission-wide PSE working group, as well as informally by answering questions among ourselves,” said Nguyen. There is a designated advisor for each technical topic that has the role of promoting PSE. Staff often find the technical knowledge they need within their program offices, but when they want to learn about or use Agency PSE resources, they go through the Mission’s PSE point of contact (POC).
7. Leverage your Mission’s PSE POC.
The Mission depends on their designated PSE POC to play that important coordination role and disseminate information across the Mission. Nguyen observed that “staff are always short on time and we don’t always have the time to go searching for appropriate resources, so we also depend on that POC to point us in the right direction. I know USAID has a lot of PSE resources, such as through the PSE Hub, but we don’t always have time to spend on them in depth. The PSE POC has given us a lot of tips and tricks.”
The next frontier of PSE
USAID/Vietnam is looking long term when it comes to PSE, especially as it starts getting ready for the next CDCS process. “We continue to find creative solutions to engage in PSE,” said Hublin. “Not all projects have the same PSE focus — it’s not all transaction support or technical assistance.”
As to what the next frontier in PSE is, both Hublin and Nguyen see great potential in building PSE expertise across sectors or offices. They suggest making more training available to non-EG audiences to cultivate and retain PSE talent across the Agency. “We need to realize that PSE is an all hands and all sectors approach. We have the trappings of a community of champions.” Hopefully Vietnam can continue to serve as a champion and model for effective PSE at USAID.
This piece was originally published on INVEST's Medium blog, which contains many other learnings from INVEST's work to mobilize investment for development.