Tracy Shanks is a director in Chemonics’ West Africa and Haiti Division and a former senior vice president of the Afghanistan and South America divisions. She has 18 years of experience in private sector development, trade, and investments, and has served as the chief of party for three USAID projects in the economic growth sector.
You’ve had experience stimulating investment in different countries, from Paraguay to Palestine. What are some ways that you’ve attracted investors in your career?
I’ve been able to work directly with businesses to attract investment on a few different projects, and this is frequently one of my favorite project components.
For example, both the USAID Poverty Reduction Program (or Vende) and the Millennium Challenge Corporation Threshold (or MCC Umbral) project in Paraguay had trade facilitation components. For MCC Umbral, we first researched regional sectors that would have a competitive advantage if they moved their operations to Paraguay and then began conversations with representative business associations and targeted businesses within those associations. We worked directly with Brazilian and Argentinian businesses to convince them to expand their businesses to Paraguay, bringing investment, know-how, and jobs. The Umbral team, working jointly with the government investment promotion agency, secured investments in 16 new export-focused businesses, solidifying initial private sector investment of $8 million in one year. Another strategy to expand the businesses (and jobs) in Paraguay through Vende was simply to identify their constraints to growth and support the businesses as an honest broker to address those constraints and mitigate risk. At the request of the businesses, we sought to expand the global reach of Stevia. Stevia is originally from Paraguay, but when we were working there between 2003 and 2005, it wasn’t yet internationally recognized. In fact, it wasn’t even permitted in the United States and European Union markets. We worked with private companies to help them obtain approval for Stevia from the Codex Alimentarius Commission, the European regulatory agency for food safety and trade.
In contrast, on the USAID Investment Climate Improvement Project in Palestine, we worked exclusively on the policy side to create an enabling environment for investment. On that project, we used the World Bank Doing Business indicators as a guide to make changes that would encourage investment. The benefit of having a project that is solely dedicated to the policy side is that the project can purposefully focus on creating laws, policies, and procedures. Personally, though, I think it works best to combine that sort of enabling environment work with some direct engagement with businesses, because the private sector and the public sector each have important roles to play.
Admittedly, my preferences stem from my personal experiences. In Paraguay, we were asked to work with business associations rather than individual companies to identify policy constraints, but we found that we were better able to identify those constraints through one-on-one conversations, because people are more close-lipped when sitting next to their competitors at a business association event.
Why do you think it’s important for investment enabling environment projects to also work directly with businesses?
I think it’s important to combine both enabling environment projects with private sector-focused projects in order to facilitate a public-private dialogue. In development, we play the role of both a catalyst and an honest broker, but we’re not there for the long haul. We need to create a platform for businesses to talk to the government, and continue to collaborate after development projects end.
An example of a project serving as a facilitator is that during the USAID Paraguay Vende project, we worked with a number of companies in Ciudad del Este that weren’t operating entirely legally. There is a long history of smuggling and triangulation on the border between Paraguay, Brazil, and Argentina, and companies have long underreported their sales. After working with a few companies on different initiatives, we built enough trust that several companies came to us and admitted that they were tired of operating under the table because it was no longer financially viable. We were able to negotiate between the businesses and the governments so that these companies could operate compliantly and legally without being required to pay prohibitively expensive back taxes.
Ultimately, this strategy of first gaining the trust of the businesses and then involving the government tends to work well, because we are able to play the role of facilitator and advise the businesses on how to approach the government. We wouldn’t have been able to accomplish what we did if we’d gone to the businesses at the beginning of the project and encouraged them to work with us to report 100 percent of their business activity overnight, or if we’d broached the subject directly with the government to forgive them from past underreported tax debts. Instead, we created a relationship of trust with the businesses and simultaneously gained credibility with government counterparts so we could serve as the honest broker in the negotiations.
You’ve worked in challenging environments. How did you balance creating a development impact with ensuring the safety of staff?
This is an important question. It’s tempting to establish red lines that we won’t cross when it comes to keeping people safe, but in reality every situation is fluid and the approach will always differ. In the case of Afghanistan, we are limited by the security situation and must continuously work around those limitations. But we have both expatriate and local staff in Afghanistan who are working there day in and day out promoting positive change, and that energizes me. As long as our staff on the ground are committed to creating change, I believe that it’s worthwhile for Chemonics to support them.
Any conflict environment, especially where Chemonics is managing the project remotely for safety reasons, challenges us to be more creative in project management and leadership. In these situations, it’s especially important to do political economy, stakeholder, and change management analyses on a regular basis to understand the environment and how it continues to change. If we are well-versed in who the stakeholders are and how the political dimensions impact our operations and our technical approach, we can work more effectively and better protect the security of our staff.
Learn more about Chemonics’ work in economic growth and trade.