MCA Monitor Blog
March 10, 2008
Warmth, Commitment, and Questions in El Salvador
Posted by Amy Crone at 10:02 AM
Filed under: El Salvador
I am here in El Salvador for the MCA Monitor Reports from the Field series.
The first thing that hits upon arrival in San Salvador is the warmth – in the climate, from the people, and through the services that are readily accessible. There is also ample evidence of this small country’s close relationship with the United States. There are American restaurant chains throughout the city, many people express themselves in English as easily as Spanish, and the U.S. Embassy compound is immense. The sheer magnitude of the grounds and the fortress-like security at the Embassy also belie the complicated history between these two nations which included significant military support for a protracted civil war and less substantial support in the area of development. With the peace accords this relationship has been recalibrated to provide more development and less military assistance, but the war remains too recent to bury history. UN monuments and graffiti proclaiming the vote as stronger than the sword serve as a reminder of this past and as a symbol of a renewed democratic contract between the Salvadoran government and its people.
This sense of commitment is also seen in the newest program of U.S. assistance to El Salvador – the MCC compact here is seen as a contract that the Salvadoran government has not only entered into with the U.S. government, but perhaps more importantly, with its own people. The theme of compromiso is prevalent in all of the discussions that I have had with various parties – from implementing entity Fomilenio representatives to the young recipients of scholarships at the National Agricultural School. The idea that El Salvador has the opportunity to determine how to use these funds is novel here, and due to a variety of political and social pressures, is being seen as more akin to a challenge. The motivation to demonstrate impacts quickly comes from the upcoming presidential elections but the fierce stanchness to complete the projects in time to utilize the $461 million dollars committed for the next 5 years is a matter of national pride.
However, this challenge and commitment also begets considerations and questions. The allocation of the influx of MCC funds through the proposal and compact designed by the Salvadoran government has garnered a myriad of queries. Some of these are standard for any international governmental assistance undertaking – how can the funds be best put to use? How to measure and record progress and impacts? What are potential stumbling blocks to success in each of the designated components? Others are a particular reflection of both MCC as an institution and the Compact in El Salvador as it fits into the panoply of politics and society here – what is the appropriate role of social audits? What is a reasonable balance between oversight and management? How can the programs engender tangible change in the lives of those in the Northern Zone? Are the MCC guidelines and procedures means by which Salvadoran capacity is augmented or are they an island of donor requirements in a sea of development programs? Where does capacity need to be strengthened – government? Civil society? And perhaps most crucial to the future of El Salvador and national development – will this newly opened dialogue amongst stakeholders lead to better allocation of resources and economic growth to lift many out of poverty in the Northern Zone?
These and more are the questions that MCC is raising around the globe. While some are addressed more easily than others, the nature of each Compact will continue to evolve with the given social and political currents and thus will beget more inquiries in each country regarding compact development, preparation, or implementation. The MCA Monitor team will attempt to examine the issues that have the most tangible impacts, taking into account the realities on the ground.
The resurrection of the Reports from the Field series is a step in this direction – to better understand from the ground up what issues will broadly impact MCC as an institution and the perception of the MCA as an innovative and meritorious experiment. Through this broader analysis, in concert with an understanding of local country environments, we hope to suggest solutions to at least some of the aforementioned questions for a given country, though it may not be possible to tackle them all. These solutions will undoubtedly come (at least in part) from the ground up – from beneficiaries through consultative processes, or via implementing entity decisions, or based on changing circumstances in world economic trends. But other aspects of solutions can be discovered through broadening the dialogue – so what are you interested in examining or answering? What do you think are the vital issues that must be solved for this grand experiment in foreign assistance to be a success?
February 25, 2008
MCC Signs Largest Compact to Date ($698m) with Tanzania
Posted by Amy Crone at 12:06 PM
Filed under: 2. Program Implementation , 5. Donor and the Policy Coordination , Africa
Last weekend, as part of his whirlwind tour of five African countries in six days, President Bush signed the Tanzania Compact – MCC’s 16th and largest to date. Although concerns about possible expansion of U.S. military presence in Africa overshadowed the development focus of his trip, President Bush was nevertheless able to draw attention to U.S. investments in “smart power,” like results being achieved through foreign assistance programs in the areas of health, infrastructure, and education.
Tanzania is the 9th African compact signed by the MCC. The $698 million agreement will focus on the infrastructure, energy, and water sectors. The infrastructure projects consist of improving mainland trunk roads, resurfacing airport runways on Mafia Island, and rehabilitating rural roads on Zanzibar and Pemba islands. The energy component is comprised of three projects to improve island electricity, build a hydropower dam in western Tanzania, and repair transmission lines in six regions. The water projects focus on increasing the volume and quality of potable water to supply two urban areas – Dar es Salaam and Morogoro; where pollution has been caused by unplanned urban growth and adverse environmental effects of a dam. The selection of projects in the Compact to mitigate past mistakes speaks to the longer-term view of the Tanzanian government, which is also evidenced by the development coordination body Development Partners Group. The program is in line with Tanzania’s poverty reduction strategy (MKUKUTA is the Swahili acronym) which aims to increase economic growth through improved business and tourism conditions along with stimulating rural development.
As the Tanzania compact process unfolds, there are a couple of interesting things to watch. First is the extent to which smart sequencing of MCC assistance programs will yield greater, and perhaps faster, results. Tanzania is the first country to complete a threshold program and subsequently sign a compact, and also received a pre-compact grant for environmental and feasibility studies. This use of 609(g) funding could be a best practice for sequencing – the $9.8 million grant will launch the studies which must be completed for implementation. The accountable entity will be working concurrently towards meeting prerequisites to entry into force, at which point the clock starts ticking on the five-year agreement. This substantive and ordered preparatory work – addressing corruption issues through the threshold program, getting a head start on implementation with feasibility studies, and forming the accountable entity prior to compact signing – could all add up to efficient entry into force, effective and swift disbursements, and a program that can spend the $142 million each year to raise the income of every Tanzanian by about $3.50.
The second issue to watch will be how the MCC and Tanzanian authorities manage the impact of rising oil prices, depreciation of the dollar and increasing materials costs (which are derailing implementation progress on infrastructure projects in other compacts) on achievement of Compact goals. The MCC is currently reviewing its entire portfolio, as are other donors, to gauge the impact of these global economic trends. We look forward to an open dialogue on their findings.
January 31, 2008
MCC approves $23 million Threshold Program with Niger
Posted by Amy Crone at 09:05 AM
Filed under: MCA's Threshold Countries
MCC has announced a three-year, $23 million program to focus on corruption and strengthen demand for girls’ education in Niger. It is the 19th approved Threshold Program for the MCC and brings the total committed funding to approximately $419 million. This is also the first Threshold Program to exceed by design the 24 month approximate scope for action to reach Compact eligibility.
Of the four indicators targeted, Niger has consistently failed both Control of Corruption and Girls’ Primary Education Completion Rate -- making the program’s focus on these two areas fitting. The focus of a Threshold Program on the other two core components -- Land Rights and Access and Business Start Up is less clear though as Niger passes the former and already passes the category (economic freedom) which contains both of these indicators.
Niger’s main obstacle to full Compact eligibility is now the Investing in People category, in which, during the year that the Threshold program was negotiated, 2 of the 5 indicators plummeted below the median. As the program is currently constructed it is not likely to help Niger surmount the 3 of 5 indicators needed to pass this category. While there may be compelling reasons to focus on the new Land Rights and Access and Business Start-Up indicators, these aren’t the ones standing in the way of Niger becoming eligible for a Compact. This raises questions of the stated purpose of the Threshold Program overall – an issue we have raised most recently in our Country Selection Round paper; stay tuned for forthcoming Threshold Program analysis from the MCA Monitor team. And in the meantime, press releases from the MCC better explaining why the target areas are selected and how they fulfill the goals of the Threshold Program would be welcome and greatly appreciated.
January 24, 2008
CEO Danilovich Enters the Blogosphere
Posted by Sheila Herrling at 05:55 PM
Filed under: Institutional Issues
Yesterday, the MCC launched its CEO into the blogosphere with a new communications tool -- the CEO Blog. Although not the first of its kind for a U.S. government agency -- EPA, DHS, State Department, and the Library of Congress have blogs populated by staff -- only one other agency, HHS, has a blog whose main blogger is the Agency's head. Unlike Secretary Leavitt's blog, however, CEO Danilovich's does not accept comments. Perhaps this will change over time.
I think this is a tremendous addition to an already stepped-up communications and public outreach effort by the MCC. And I think it could prove to be a valuable tool through which the MCC can publicly share the successes as well as the lessons learned by both the MCC and its partner countries during the compact design and implementation phase. Danilovich, in fact, does exactly this in his first posting. Bravo!
January 01, 2008
International Housing Coalition Argues for New MCC ERR Analysis
Posted by Sheila Herrling at 03:48 PM
Filed under: MCC Policies
The International Housing Coalition published a new report that assesses how the Millennium Challenge Corporation uses rates of return analyses to assess project funding proposals from qualifying countries, evaluates the usefulness of this approach in estimating economic growth and poverty alleviation potential, and offers recommendations to improve the approach to better capture the returns from investments in urban infrastructure. It's an interesting piece and one which gets at the broader issue of whether the MCC's economic rate of return analysis captures well the distributional effects of growth and reminds me of issues others have raised regarding whether it allows for investments in social sector projects that can have longer term return horizons. While the paper makes a compelling link between investments in urban infrastructure and economic growth, I can't help but be reminded of how often sectoral interest groups push for changes in foreign aid to better accomodate their particular agenda. I wonder whether there is an unmet demand from the MCC compact countries themselves (since they drive the proposal process) that is in fact being rejected because it cannot meet the ERR requirements. Any thoughts?
December 19, 2007
Final FY08 Omnibus Keeps MCA at $1.54 Billion
Posted by Sheila Herrling at 09:44 PM
Filed under: 4. Congress and the MCA
Last night, the Senate approved the FY08 Omnibus spending bill with $34.31 billion in base funding for the International Affairs budget. The House-approved $1.54 billion for the Millennium Challenge Account stayed in tact through the Senate approval process.
December 17, 2007
Latest FY08 Omnibus Spending Bill Gives MCA $1.54 Billion
Posted by Sheila Herrling at 08:53 PM
Filed under: 4. Congress and the MCA
Today we got our first look at the results of Senate and House Appropriators' weekend wrestling with the FY08 Omnibus Appropriations bill, comprising the remaining 11 appropriations bills, including State-Foreign Operations. In an effort to meet the president’s demand that aggregate discretionary spending be held to his request of $933 billion, the current Omnibus slashed an additional 4% from the Foreign Operations discretionary spending level earlier passed by both chambers to arrive at $32.8 billion. The Millennium Challenge Account ended up at $1.54 billion, though like several accounts, it may be vulnerable to further cuts as the Bill moves forward.
It is with some amusement that I read the Congressional Quarterly headline (subscription required) on the Bill, "Bush's Signature Foreign Aid Program Takes a Hit." The fact that it halves the President's original request is old news. The fact that it is middle ground between the billion figure and the House's $1.8 is new and good news. And the fact that the Lugar Amendment that would have changed the requirement to obligate full compact funding upfront was dropped is a terrific outcome in terms of maintaining the program's innovative partnership construct.
Perhaps most important about the $1.54 billion MCA spending figure -- and compelling reason to withstand any attempts to reduce it as the Bill moves forward -- is that it allows the U.S. to save face with its developing country partners that have worked hard to design compacts and might have been turned away at the finish line if the figure was any less. From what I can piece together, a $1.54 billion FY08 appropriation would allow the MCC to sign the pending $700 million compact with Tanzania as well as the compacts with Namibia and Burkina Faso that are in the very final stages of negotiation. It would, however, leave little room for new Threshold Programs.
So, considering what might have happened to the MCA, its current standing is not bad...all things considered. Hopefully, the MCC and its partner countries will demonstrate progress on program milestones -- beyond disbursements which, unfortunately, have dominated the discussion thus far -- and enter the FY09 budget round with positive momentum.
December 13, 2007
MCC Board Selects (and Quietly De-Selects) FY08 Countries
Posted by Sheila Herrling at 11:23 AM
Filed under: MCA-Eligible Countries
Yesterday, the Millennium Challenge Corporation Board of Directors decided which countries to add to -- and if you look closely, which countries to withdraw from -- the list of those eligible for funding. For Compact program eligibility, the Board chose one new country -- Malawi -- to add, and it looks like The Gambia, Cape Verde and Sri Lanka were quietly removed. On the Threshold program, the Board added Mauritania to the eligibility list and it announced a "Stage II" program for Albania, Paraguay and Zambia whose current programs expire in 2008.
For those of you who read our Round Five of the MCA pre-selection paper, you probably know my reactions, but here they are:
1. First and foremost, there must be greater transparency around country selection decisionmaking. Without a public record of the principles that guided the decisionmaking process, it is extremely difficult to understand, explain and support the selection of Malawi and Mauritania vis a vis other countries. The press release gives a bit of context but tends to raise more questions than provide answers. The annual Congressional Report on country selection (see the FY07 report for reference) offers an opportunity to enhance public transparency, particularly for the countries that passed the indicators and were not selected. Clarity on the degree to which performance on the democracy indicators factors into decisionmaking should also be addressed in this report. Equally important will be reasons for deselecting countries and to what extent they set policy going forward.
2. On Compact Program eligibility, it appears that the reality of a low FY08 budget number for the MCA, heightened scrutiny on the democracy indicators, and concerns over cost over-runs and failing performance on existing compact countries framed the selection decisions. There were some good results and some bad results from these filters. On a positive note, the decision to select no new lower middle income countries (LMICs) due to budget constraints was both bold and right. It was bold considering there is typically more political support for countries in this category and right because, until there is a substantially larger annual MCA budget, scarce development dollars should be prioritized to lower income country reformers. I also think the decision to not select Rwanda and Uganda (to a lesser extent), presumably due to their performance on the democracy indicators, was a good decision; a premium on democracies makes perfect sense for the program in general and particularly given budget shortfalls. That said, I fear that extreme selectivity at the selection stage -- particularly turning countries away that cleanly pass -- risks hindering continued efforts by countries to reform their policies to qualify. Countries that fought hard to both undertake difficult reforms and wait for the data to finally capture those reform efforts (in most cases, there is a year or two lag) ought to be rewarded with selection. Selected countries can then compete to design the best compacts, a process that has taken most MCA countries over a year, and to sustain their performance on the indicators. The fact that countries continue to pass the indicators test each year is something to be excited about, the role that the MCA is playing in incentivizing countries to reform is something to be proud of, and Congress should feel and respond to the pressure to meet its end of the bargain.
3. The critieria for Threshold Program eligibility remains unclear.and this year's selection doesn't help, particularly when it is publicly compared to a comparable country not selected. This year, the MCC chose to add Mauritania, a country that missed passing by three indicators, fails all three democracy indicators, fails all five indicators in the Investing in People category, and has shown little overall progress in the indicators over the last few years (some have improved, others have worsened). The press release indicates that the Threshold program is designed for countries that "are close to qualifying and have demonstrated commitment to enact the reforms necessary to improve policy performance that may eventually help them qualify." Most Africa watchers agree that Mauritania is making progress on advancing difficult democracy reforms. Those reforms, however, are not yet captured in the indicators so the selection decision appears to be more about encouraging forward momentum and, in some observers' minds, supporting an ally in the global war on terror. The problem is that it's hard to see a Threshold Program enabling Mauritania to fully pass. To make matters more confusing, eyebrows already raised as to whether Mauritania is really "close enough" to passing to justify Threshold Program eligibility are raised higher when, in the press release, is compared to the decision not to select Liberia. Liberia also misses by three indicators, but passes all three democracy indicators, has shown improvement in every single indicator for which there are data over the past two years, showed the second-largest improvement in corruption in the world last year, and must offer as much evidence as Mauritania on commitment to sustained reform. It is hard to see the rationale for one over the other, not to mention the fact that if decisions were based on which country is "close to passing," Ethiopia trumps them both. Lastly, on this topic, the introduction of Stage II Threshold Programs is probably programmatically smart, however, it does highlight the need to either make sure to choose countries legitimately on the cusp of passing in two-years or redefining the program to focus on countries not necessarily on the cusp but in need of incentives for sustaining reforms.
4. The dilemma of what to do with current compact-eligible countries that are failing the indicators, some for the second and third year in a row, is a serious issue for the MCC and one that they are not taking lightly. The decision to not reselect three currently eligible countries was a step in the right direction but, in the risky business of development, it is going to continue to be an issue. Remediation programs -- efforts to help countries understand why they are failing and what needs to be done to improve their scores -- are to be a new business line for the MCC. The MCC needs to be careful about the extent to which it becomes more (or even equally) responsible for performance than the countries themselves. Part of the innovation of the MCA was that countries made it into the program because they were better governed and better governors of their own reform program. I am optimistic that the MCC understands the right balance to strike.
Tell me what you think about this year's selections.
December 10, 2007
MCC Signs $36m Threshold Program with Peru
Posted by Sheila Herrling at 11:28 AM
Filed under: MCA's Threshold Countries
On November 30, the MCC signed a $35.6 million Threshold Program with Peru to combat corruption and improve immunization. Peru becomes the 18th country to sign a Threshold Program with the MCC, bringing the total amount committed to the Program to about $400 million.
Interestingly, although Peru failed both the control of corruption and immunization indicators in FY2007, the year it was deemed eligible for the Threshold Program, it now passes both indicators, making it a bit odd to have a program aimed at improving them. Indeed, the indicators now standing in the way of Peru passing the full eligibility performance test are spending on health and education (which are incredibly low) and the recently added Natural Resources Management Indicator (NRMI). And so, as good as I'm sure the program is, the fact that the indicators it targets no longer need improvement to "pass the threshold" bring us back to the broader question of what the Threshold Program's objective is. Is it to provide assistance to get countries over the threshold? Is it technical assistance in key policy areas that are good for development and helpful to countries the MCC doesn't yet want to declare fully eligible? Is it a program to support reformers without an expectation that it will make a substantial difference in the country's ability to pass the indicators at the end of the program? For those interested in our thoughts on what to do with the Threshold Program, read that section iin our recent FY08 MCA Country Selection Round paper.
NYT on the MCA: Good Article, Horrible Headline
Posted by Sheila Herrling at 11:18 AM
Filed under: Foreign Aid
Friday's front page of the New York Times ran a terrific article by Celia Dugger on the Millennium Challenge Account. Unfortunately, the headline reinforces the excuse that Congress is using to cut the MCA's budget -- that it can't spend the money it already has. Now you will see from my quotes in the article that I believe the MCA programs should be further along at this point but there are some compelling reasons why they are not and some decisionmaking streamlining happening within the MCA to reduce red tape while maintaining credible safeguard standards.
My own sense is that the "slow pace" argument has become a convenient excuse for Congressional appropriators who, as Patrick Leahy says in the article, are faced with a budget where "the only thing that got a blank check is the war in Iraq." What really endangers foreign aid is lack of a common strategic vision for its use, that elevates development and diplomacy as national interest priorities and that would protect long-term investments in development from the poaching for immediate needs that our annual budget cycle encourages. Is the MCA really in competition, as Leahy suggests, with proving it is spending faster or better than other development programs (like maternal health, AIDS, refugees) or is it more that Congress is willing to sacrifice its original innovation in the MCA program -- guaranteed funding for the entirety of the country compact -- for more defense funding and less confrontation with sectoral-based development lobbies? Unfortunately for the MCA there aren't a whole lot of interest groups knocking on Congress' doors saying, "how can you possibly stop growing those poor countries economies!" It is unfortunate in the bigger scheme of things as broad based economic growth is the way out of poverty.
And so today as I headed into the much anticipated release of the HELP Commission's final report "Beyond Assistance" with these thoughts on my mind, I couldn't help but be struck with how often Commissioners and panelist raised the MCA as an example of a model of good development assistance. It was used as an example of an innovative ambitious program that gets caught in the crosshairs of our annual budget cycle. It was used as an example of results-based assistance. It meets the Commission's recommendations for country-led development, economic growth focus, enhanced monitoring and evaluation of aid, and support for democratic principles. And it certainly is a program that is providing much needed resources to infrastructure, an oft-cited challenge to real development by the panelists. Indeed, the Commission report's key recommendation on trade and the importance of strategic links with aid included granting duty-free/quota-free acess for MCA countries because as Commissioner Bill Lane, CEO of Caterpillar said, "even in this set of solid reformers, the U.S. is taking more in trade revenues than it is giving in MCA assistance."
And, so, it seems that despite the fact that the MCA has been slow to get going, it sure does appear to be on the right track. It needs to show results in terms of milestones achieved along the way, so that its progress -- and let's remember here that it is really the country's progress -- can be seen and measured in other ways that disbursement rates. A good start was made by the MCC this week -- check it out.
