[As prepared]

Ladies and Gentlemen:

It is a great honor to address this forum on the challenge of delivering effective development assistance in a changing global landscape, characterized by what I call "the democratization of development."

I've had the pleasure to partner with Interaction members for more than three decades, from the mid-70's when I was a first-tour economic and development officer in the Central African Republic all the way to visiting your projects in Egypt, Sudan, Georgia, Peru, Colombia, Haiti, and many other countries since returning to government 20 months ago.

I've learned much from this experience: most of all, I've learned that no government agency, international organization, or private group has a monopoly on good ideas, ground truth, financial resources, or moral authority. I've admired the professionalism and dedication of your humanitarian, recovery and development work and I believe that in the darkest corners of the world, you serve as the eyes, the ears and the conscience of the global community.

We are at a moment of change in the development arena, a time of great hope and great challenge. There has been more progress in global development since the end of the Cold War than in any time in history. In the decade and a half since the mid-90s, real incomes have risen 60 percent across developing countries, infant mortality rates have plunged by a third, and primary school enrollment rates jumped nearly 15 percent.

The number of people with incomes below $1.25 a day has fallen by more than 600 million, a drop of nearly one-third in just 15 years. Democracy is much more widespread -- in sub-Saharan Africa alone, the number of democracies has grown from 3 in 1989 to more than 20 today. Never before have so many of our partner countries been democracies.

As we address the daunting and continuing global challenges of disease, illiteracy, unemployment, corruption, bad governance, food insecurity, and climate change, we know that the world in which we operate has fundamentally changed.

First, throughout the world, assistance budgets are tighter and our funders are demanding greater effectiveness, accountability, transparency and attention to potential corruption. They want to help countries help themselves to join the ranks of those generating their own capital for development, like South Korea, Brazil and India, but they're insisting on creating sustainable country systems able to stand on their own.

Second, donor government assistance isn't the driving force behind development that it once was. In broad terms, official U.S. development assistance now totals about $30 billion a year - yes, still less than 1 percent of the federal budget. By contrast, NGOs, foundations, faith-based groups and corporate social responsibility generate and distribute some $36 billion. Another $100 billion is provided by American residents in remittances; and around $1 trillion goes to developing countries in private capital flows. Private capital flows to developing countries are seven times larger today than just a decade ago.

Third, we're in an age of empowerment - again, reflecting what I call the democratization of development. Governments and civil society in partner countries no longer accept programs and policies "made in America," or Brussels, London or Beijing, for that matter. They demand ownership over their own development drives. And with the rise in democracy and civil society, there emerges the opportunity for strong partnerships that reflect the voices and aspirations of the citizens of developing countries.

Fourth, there is a growing consensus on the discipline of development among donors, partners, IFI's, foundations, NGOs and private companies, reflected in the outcome document of the Busan Conference.

Busan put results at the center of our collective development agenda, backed by tough monitoring mechanisms to ensure accountability. Transparency was brought front and center, including with the U.S. accession to the IATI accord. Busan also brought emerging donors - including China and India - under the tent.

Building on the Monrovia principles, there was an emphasis on the unique needs and challenges of fragile states in a "new deal" for these countries. We reaffirmed our common commitment to disaster risk reduction and building resiliency, including preparatory actions, creation of safety nets, and long-term mitigation.

Finally, there is a new focus on inclusive development that addresses marginalized groups, including women, people with disabilities, the LGBT community, and displaced persons. The Arab Spring in particular reminds us that stable societies need more than 6 or 8 or 10 percent per capita growth rates.

Development is a "whole of society" exercise where all groups are planners, implementers and beneficiaries under the watch-phrase: "Nothing about us without us." And the commitment of donors and partners alike in Busan to ensure space for civil society actors at least gives us a tool in the face of growing restrictions on them in many developing countries.

These broad changes demand new business models for all of us in the development arena. I don't presume to tell you how NGOs should adjust, but at USAID, our response is coming in the form of our USAID Forward reform agenda. We are reassessing the government's role in development, resulting in a new approach that is both more ambitious and more humble than before. If official assistance is now scarcer and no longer dominates capital flows to developing countries, we need to focus on areas where governments and ODA have a comparative advantage.

And so we're using our convening authority to draw together partners across governments, international institutions, civil society, and the private sector, making strategic investments that leverage other people's money, including by reducing risk factors.

A coherent package of aid, trade and investment promotion includes working with partner countries to reduce barriers to investment, ease trade restrictions, promote local tax capacities, encourage entrepreneurship, improve infrastructure, and more. This is the driving concept behind the President's Partnership for Growth program, which is going beyond aid to identify constraints to growth in El Salvador, Philippines, Tanzania and Ghana, and addressing these directly.

We're taking a new look at public-private partnerships, and develop rigorous standards for results, accountability and evaluation. We can't simply slap a "public-private partnership" label on any government interaction with a non-government actor and thus exempt it from tough standards of effectiveness. As a community, we're reviewing best practices in the 1200 or so partnerships in which we've engaged. Our forthcoming food security initiative for the G-8 in May and the child survival summit in June are drawing on this review.

We're also applying tough standards of focus and selectivity, concentrating our efforts with depth and scale on food security under the Feed the Future Initiative, global health, climate change, democracy and governance, economic growth, and humanitarian response.

We're sharpening our tools of accountability, adopting a gold standard system of monitoring and evaluation.

At the same time, we must be prepared to take calculated risks ourselves - not, I stress, in the sense of risking taxpayers' dollars by working with potentially corrupt or inefficient entities, but by seeking well-designed innovative and potential game-changing investments.

And we're broadened our efforts in inclusive development, bringing on coordinators charged with mainstreaming and integrating gender, disabilities, youth, and LGBT issues into all our programs, infusing these principles into our agency's DNA.

Let me turn now to a core of these efforts: the effort to build sustainable country ownership in our partner countries through implementation and procurement reform. As you know, USAID seeks to obligate 30 percent of its assistance through local systems - governments, NGOs and private firms - by 2015.

We're pleased that most actors in the development space have embraced local empowerment and country ownership. Indeed, in a report published last November entitled, "Country Ownership: Moving from Rhetoric to Action," a highly influential organization wrote:

"The importance of country ownership is of particular salience…[I]n the current era of shrinking aid budgets and mounting financial, food and climate crises, providing assistance in a way that strengthens and empowers local capacity becomes ever more critical."

That organization, of course, was InterAction.

InterAction members have a proud history of assisting partner governments and civil society - including their local affiliates - to develop capacity, and we've learned much from your experience. We've taken on board the core elements of country ownership outlined by InterAction, including creating an enabling environment, insisting on transparency and accountability, and engaging in broad and inclusive consultation.

The push towards more "country-led" strategies over the last decade is driven by, and makes most sense with, more democratic and accountable governments, vibrant civil society, and socially conscious business. These local actors are demanding a much stronger role in setting priorities, developing strategies, evaluating programs, and accounting for results. Donors must explore creative ways to invest more in building institutions and systems in these countries, and to utilize these systems for their investments.

Strengthening local systems requires using them, but again, not at the expense of opening the door to corruption or inefficiency. In government-to-government assistance, for example, USAID uses public financial systems assessments and reimbursements for agreed expenses, amongst other mechanisms. A USAID team conducts an assessment of financial management and auditing systems in government agencies.

If - and only if - they meet tough fiduciary and governance standards, USAID and the government negotiate a partnership agreement in which the government commits to implementing policy changes and investing in certain areas and USAID reimburses them for certified expenditures. To work, this process must be augmented by technical assistance and training to assist countries to build their systems, areas in which our implementing partners have a key role.

Let me reiterate: implementation and procurement reform doesn't mean traditional budget support or blank checks for governments, any more than it means that we're easing our standards regarding anti-corruption and democratic governance. Nor are we applying a "one-size fit all" approach. The 30 percent figure is a global target for all local systems, and we recognize that each country situation is unique.

We know that our local empowerment programs introduce a new element of uncertainty in the business models of many of our implementing partners. This comes at a time when you, yourselves, are adjusting and adapting to the very same global changes that have prompted our changed behavior.

So let me make two pledges to you. First, USAID will consult on a regular basis with you, individually and collectively, to learn from your experience, to ensure that programs draw on the ground truth you can provide, and to address any unintended consequences you identify.

As you know, our collective success in the Busan conference was based in part on the regular consultations USAID and Interaction held in 2011, including in June on the enabling environment for civil society; in August on country ownership; in September on transparency, accountability and results; in October on fragile and conflict-affected states; and in November on the private sector role in development. Let's use this as a model.

Second, I pledge that USAID will make every effort to implement these policies on a consistent basis around the world, and to harmonize our efforts with other U.S. government agencies involved in international development. In your "country ownership" report in November, you said that implementing partners need "a clear definition of inclusive country ownership, supported by operational guidelines and accountability mechanisms. " To quote our friends from Chevron, "We agree."

You have a right to expect predictable, transparent behavior from my agency. USAID is a highly decentralized multinational with 100 subsidiaries, and there will be inconsistencies and misinterpretations at times. Bring these to our attention, and we'll address them together.

The changes I've described are essential to ensuring that we will continue to get the public support we collectively need. If we can show taxpayers and private donors alike that we know what we're doing, that we are producing measurable and sustainable results, and that we are channeling their resources through a modern development enterprise, they will continue to support us. Because ultimately, I think the American people get it.

They know that prosperity and human security abroad is in our national interest. It is in our national security interest: stable, prosperous countries are less likely to traffic in arms, drugs, and people; they don't send off large numbers of refugees across borders and even oceans; they don't serve as hosts for pirates, terrorists; they don't incubate pandemic diseases, and they do not require foreign troops on the ground.

Development is in our economic interest as well: growth in developing countries will be the primary market for American exports and American jobs over the next decades. Most of the fastest growing export markets for the United States are in former aid recipient countries.

Equally important, the American people want us to project our values abroad. They want to live in a world that's peaceful, prosperous, democratic, respectful of human rights and human dignity.

In a changing global landscape, the generosity and humanitarian spirit of the American people is one thing that has not changed. Thank you.