MCA Monitor Blog
December 13, 2007
MCC Board Selects (and Quietly De-Selects) FY08 Countries
Posted by Sheila Herrling at 11:23 AM
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.
November 14, 2007
MCC Post FY2008 Country Eligibility Indicator Scorecards
Posted by Sheila Herrling at 04:17 PM
Moments ago, the MCC posted the FY2008 country scorecards that show how all candidate countries performed on the 17 policy indicators used to determine which countries will be selected to apply for FY2008 funding. The MCC Board will meet on December 12 to select that set of countries. The MCA Monitor team will present the findings of our paper predicting which countries will be chosen and what broader policy concerns will play into this year's round at a public event on November 29. With funding tight, new countries passing the eligibility indicators test, nine of sixteen countries with signed MCC compacts failing the indicators test, and an organizational decision to shift its focus to implementation, this year's selection round will both test the MCC's adherence to its principles and perhaps set new standards. I'll send around the paper prior.
November 08, 2007
FY08 MCA Country Selection Date
Posted by Sheila Herrling at 10:01 AM
The date of the Millennium Challenge Corporation Board meeting to decide on FY08 country eligibility has been set for December 12. In the next couple of weeks, we will be releasing our annual report on which countries we predict will be selected and what issues the MCC will need to pay attention to going forward.
September 28, 2007
Mongolia Compact to Tackle Some Interesting and Innovative Projects
Posted by Sarah Rose at 11:46 AM
Earlier this month (Sept. 12), the MCC Board of Directors approved a compact with Mongolia. The compact, coming in at $285 million, is the fourth largest compact per capita since Mongolia--while territorially quite large--is the least densely populated country in the world.
There are some noteworthy components to the compact.
The bulk of the compact ($188 million) goes toward improving the efficiency and capacity of Mongolia’s ageing railway, the transportation and trade backbone of the landlocked, sparsely populated country. The setup of this particular project is slightly tricky since the railway operates as a joint Mongolian-Russian shareholding agreement (which has been in place since 1949). MCC funds, however, will go through a third party, the accountable entity, rather than to the joint venture directly, and all negotiation on the project will be between MCC and the government of Mongolia; Mongolia will in turn engage with the other members of the joint venture board when necessary.
Interestingly, the compact was originally mostly rail-focused, but was expanded during the course of negotiations to include a vocational education project, a property rights project and a health project. This expansion should please those Congressional members and NGOs that have been concerned with the MCC concentration on infrastructure (concerns which may be misplaced). Beyond that, the latter two projects listed above do represent somewhat new types of projects, either for the MCC (in the case of property rights) or for donors in general (in the case of health).
Though several other compacts have property rights projects, Mongolia’s project is unique in that its focus is exclusively urban. It addresses suburban and peri-urban land rights in the crowded suburbs around Ulaanbaatar and other cities, whereas the other MCC land and property rights projects to date have a more rural or rural-urban mix focus. Urbanization is rapidly increasing in all regions of the world (Mongolia has gone from 35.7% urban in 1960 to nearly 57% urban currently), and I expect we may see more urban/peri-urban focused projects as developing country cities look for ways to accommodate and serve an influx of new residents and laborers.
The health project is particularly innovative and noteworthy in that it targets non-communicable diseases (NCDs) and injuries. This is noteworthy because, as CGD’s Rachel Nugent blogged, despite the ubiquity of NCDs in the developing world (as reported in the World Bank’s recent report, Public Policy and the Challenge of Chronic Non-communicable Diseases), donor response has for the most part been that of inattention. A recent Economist article (“The maladies of affluence,” 8/11/07) illustrates this by saying, "Combating chronic disease is not part of what the UN calls its 'universal framework for development.'" Nugent expands on this saying there are "virtually no major donor programs to combat chronic NCDs in poor regions of the world" (although a new intiative is in the works). Meanwhile, according to the MCC, Mongolia’s mortality and morbidity rates from cardiovascular disease and cancer--what many consider, misguidedly, to be developed country diseases--are the major cause of death and disability in the country and impose a heavy economic burden. The government of Mongolia and its partnership with MCC are at the forefront of taking on these important health management issues and recognizing the gravity of non-infectious diseases in developing countries.
August 21, 2007
MCC Approves Largest Compact to Date with Morocco
Posted by Sarah Rose at 09:13 AM
On August 9 the Board of Directors of the MCC approved a $698 million compact for Morocco (pdf), making it the largest (xls) of the 14 compacts to date (coming in at $151 million more than the next largest compact). Remarkably, however, it is the second smallest compact on a per capita basis.
With the approval of the Morocco compact (and on the heels of signing Lesotho and Mozambique in July), MCC has only around $600-$700 million left in unobligated balances, which makes it harder for Congress to justify cutting the MCA’s FY2008 budget based on its prior (and misleading) assumption that MCC is sitting on piles of unused cash.
The compact includes the following projects:
- An agricultural productivity project that helps move small farms from high water-use, low value crops to low water-use, high value fruit trees;
- A project to modernize small-scale fisheries by constructing and rehabilitating facilities, offering TA and helping to increase monitoring efforts to ensure sustainable practices;
- A project that leverages the links between the artisan sector, tourism and the cultural and architectural assets of the Fez Medina (the cultural and spiritual center of Morocco and a UNESCO World Heritage site) by strengthening literacy and vocational education for artisans (especially women and girls), offering micro-credit, and supporting the design and reconstruction of some historic sites within the Fez Medina;
- A project to broaden and deepen the market-based financial sector, including assisting micro-credit organizations to expand their services;
- A project to encourage an entrepreneurial culture and reduce unemployment among youth.
While the direct linkages to the poor are evident in most of the compact’s projects, the architectural component of the Artisan and Fez Medina project seems to be an exception. The assumption is that the reconstruction of historic sights within the Fez Medina will increase tourism, and thus, presumably, the number of customers for artisans. The success of this particular aspect of the project seems highly dependent on assumed behavioral changes at several levels (that more tourists will come, and that more will buy craftwork). The benefits to the poor are very indirect, and the MCC is relying heavily on induced benefits (which was one of GAO’s criticisms of the MCC-Vanuatu compact), so I wonder whether the MCC is really the right organization to take on this kind of program.
As a final comment on the Morocco compact, we’ve heard some questions about the depth and quality of public consultation in setting priorities and determining projects given that citizens may be reluctant to speak out against the King. We would, as always, love to hear more from folks on the ground.
May 10, 2007
MCC Puts Sri Lanka Compact On Hold
Posted by Sarah Rose at 01:03 PM
Despite appeals from Sri Lankan President Rajapakse, the MCC has put further compact development activities on hold. The compact was quite far along (pdf), having neared the end of the "due diligence" phase, and the MCC had projected (pdf) it would sign the compact this year. The decision to put the compact on hold was based on escalating violence between the government and the separatist Liberation Tigers of Tamil Eelam and concerns about increasing restrictions on certain freedoms that finally were captured in the MCA performance indicators. Among those concerned with the fragile situation on the ground was Senator Richard Lugar who wrote a letter to President Rajapakse on March 30 expressing concern about the deteriorating human rights situation and its potential to negatively impact delivery of results under the compact. A number of civil society organizations focused both on Sri Lanka specifically and on democracy and human rights more broadly have also weighed in. The key criterion for suspending activities, however, was the report (pdf) by Freedom House, the source for two of the MCC’s Ruling Justly indicators, citing a decline in Sri Lanka’s scores on both Political Rights and Civil Liberties. This was of particular relevance to the MCC since a decline in one or more of the eligibility indicators--when the decline can be traced to a specific issue--triggers a formal review process (pdf) within the MCC to determine if and what action should be taken.
The MCC is monitoring the situation closely and Sri Lanka’s eligibility status is not affected by the decision to defer activity.
October 16, 2006
MCC FY2007 Scorecards Published -- It Gets Interesting This Year
Posted by Sheila Herrling at 09:03 AM
The MCC posted the rankings of the 2007 candidate countries, with a Board meeting scheduled for November 8 to select countries eligible for FY2007 funding. The Round 4 selection process is going to be very interesting, with decisions that in some cases will set precedent for future selections. Look out for our annual review of the rankings and predictions on what countries will be selected. Early notables in Round 4 include:
1. 4 of 9 compact countries fail this year -- Ghana, Benin, Madagascar and Cape Verde.
2. Morocco -- a soon to be signed compact -- graduates to lower middle income status and fails.
3. The Gambia -- suspended last year for policy slippages -- passes this year. Will the suspension be removed?
4. Georgia passes, finally!
5. Bolivia passes -- will politics enter into the selection process?
6. LMIC pressure to sign -- with El Salvador consuming the entire FY2006 LMIC budget and Namibia's proposal in, LMIC funding is going fast.
7. The natural resources management indicators are listed on the scorecard. What would the impact have been of applying them in the FY2007 eligibility process?
We will tackle these issues and more in our Round 4 analysis. Let us know what issues you find notable so we can consider them as we prepare our paper.
April 11, 2006
Big Money, Big Gains? Morocco Proposal on the Horizon
Posted by Kaysie Brown at 01:00 PM
According to murmurings around town and a smattering of news coverage, Morocco is putting together a whopper of a proposal to submit to the MCC for Compact funding: upwards of $750 million to finance a range of projects, the bulk of which are reportedly aimed at improving agricultural productivity in rural parts of the country. The proposal is rumored to include over $200 million, devoted to implementing the Moroccan National Initiative for Human Development (INDH).
This could be a welcome move. The INDH represents the sort of broad-based approach that the MCC should be supporting, and involves a comprehensive national development plan that sets out to explicitly target poverty reduction and social cohesion. Until the proposal is made public, however, it won't be clear how the MCC funds will be allocated, much less how Morocco intents to convert the funds into results. Of course, these details may come out in the application process, and it would be great to hear from anyone knowledgeable about the MCC proposal that is due to be submitted by the end of the month (especially since some may be predisposed to the view that Morocco's strategic importance to the United States --rather than the merits of its proposal--account for the size of the program and any subsequent funding).
Another issue worth raising is whether Morocco's proposal, even given its rumored size and comprehensiveness, has the potential to be truly transformative. Since this is the largest price tag we've encountered thus far--with the potential to more than triple forecasted FY06 US development assistance aid to Morocco--it represents a major test for an organization whose sizeable aspirations have been juxtaposed against somewhat modest disbursements to date. But to really assess the transformative potential of the proposal, it will be important to consider (in addition to content) the financial nitty-gritty, including the program's size relative to other donors, as well as on a per capita basis. After all, it appears that even if the full program were approved, MCC aid could play second fiddle to French development assistance, which has come in at over $300 million a year, and double the potential yearly $150 million for MCC funds. And in a country of 30 million, even a program of this size would amount to about $5 a person a year.
This all brings us back to the philosophical underpinning of the MCC, which is that aid programs can have big effects if they are leveraged by smart programs and a genuine commitment to key principles, like good governance and the coordination of aid. If the rumors are to believed, this idea may be put to the test in Morocco.
December 06, 2005
Armenia Tests the MCC's Willingness to Say No
Posted by Sheila Herrling at 05:45 PM
Days before the MCC is supposed to sign its compact with Armenia, an article from Open Democracy, "Armenia's Emptying Democracy," flags major slippages in political rights, civil liberties and corruption -- all policy indicators measured by the MCC in determining country eligibility.
And, recall that Freedom House flagged Armenia for the MCC in the FY 06 selection round as one of the weakest performers in political and civil rights.
If you look at the data used by the MCC to track policy performance, there will inevitably be linkages between the events outlined in Open Democracy's article and future MCC indicator performance. Indeed, Armenia has already showed policy slippages in the MCC indicators since its original selection in 2004. The rubber meets the road here for the MCC. Is the road too far paved to restrict driving?
I'd love to hear more from folks closer to the details on Armenia. This raised all sorts of theoretical questions, including use of foreign aid as an incentive vs. a reward, and whether the MCC can be different from other aid agencies in the ability to say no.
November 08, 2005
MCC Announces FY2006 Countries
Posted by Sheila Herrling at 06:43 PM
Today, the MCC Board of Directors selected 23 countries as eligible to apply for FY 2006 assistance. It also announced 13 countries eligible for threshold program funding.
We just put this press release with Steve Radelet's reaction to the announcements out to the newswires: Hope you find it useful. - Sheila
Washington- November 8, 2005 – Foreign aid expert Steven Radelet welcomed new country selections announced today by the Millennium Challenge Corporation (MCC), the Bush administration’s flagship foreign aid program, but questioned the decision to include for the first time two lower-middle income countries.
Radelet, a senior fellow at the Center for Global Development and a former Deputy Assistant Secretary of the U.S. Treasury who served under both Democratic and Republican administrations, said he was pleased that the MCC had resisted pressure to rapidly expand the number of middle-income countries in the program, and had largely kept the focus on the poorest, so-called low-income countries.
“The rubber is meeting the road this year and the MCC faces some critical choices in terms of its mission, its institutional capacity, and its placement within the broader foreign assistance apparatus,” he said.
Of the 34 countries that passed the performance indicators, the Board chose to add only 6 new countries to its current list of 17 eligible for MCC funding. Two of the six—El Salvador and Namibia—are lower middle income countries, with average incomes much higher than the countries previously covered by the program.
“It’s great news that more countries passed the basic eligibility tests of good governance and strong economic policies. But not all of these countries that passed the tests were selected. Faced with a budget appropriation that will fall well below the requested $3 billion, the Board appears to be sending some clear signals that it will reward a more selective group of countries with larger, higher-impact programs,” he said. “I hope that the Board will clarify to the public why several countries that passed its criteria were not chosen for the program.”
Radelet said he disagrees with the MCC decision to expand from low-income countries to lower middle-income countries this year, or ever. “It makes little sense for the United States to be considering providing grants to countries that are three times richer than the low-income group on average, have access to other sources of financing, and for the most part have already graduated from other aid programs,” he said. “Faced with the budget reality and lack of accumulated experience, expansion was premature. But it could have been worse. The Board deserves credit for only selecting two lower-middle income countries this year,” he said.
Radelet, a leading expert on foreign aid and economic growth, was previously Deputy Assistant Secretary of the U.S. Treasury for Africa, the Middle East, and Asia developing policies on U.S. financial relations with the countries in these regions, including debt rescheduling and programs with the IMF, World Bank, and other international financial institutions. CGD’s MCA Monitor Initiative http://www.cgdev.org/section/initiatives/_active/mcamonitor tracks the progress of the Millennium Challenge Account.
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October 21, 2005
Guest Post- Mark Mullen, Transparency International- Tbilisi, Georgia
Posted by cgdadmin at 12:49 PM
Today, Mr. Levan Bezhashvili, Chair of Legal Affairs Committee of the Parliament of Georgia held a meeting today with Millennium Challenge Georgia representatives, non-governmental organizations and diplomatic missions to announce that the Committee intends to prepare a draft law to accompany parliamentary ratification of the Millennium Challenge Compact with Georgia. In the meeting, Mr. Bezhashvili mentioned that there should be legal guarantees that the parliament has sufficient information to exercise its oversight role and issued a request for advice on how best to accomplish this legislative goal.
Any relevant recommendations in Georgian or Russian may be sent directly to the committee at starkhnishvili@parliament.ge or may be sent in other languages to Transparency International Georgia at ani@transparency.ge which will forward to the committee. The committee particularly requests advice from NGOs in other Millennium Challenge counties as well as from other interested individuals and organizations.
June 27, 2005
Assessing Nicaragua's Compact
Posted by at 11:03 AM
This afternoon CGD hosted a panel discussion on Nicaragua's MCA compact. The event featured Manuel Agosin, Regional Economic Adviser at the Inter-American Development Bank, Manuel Orozco, Senior Associate and Executive Director for the Remittance and Rural Development Project at Inter-American Dialogue, Salvador Stadthagen, Nicaragua's Ambassador to the United States, and James Vermillion, Managing Director for Latin America at the Millennium Challenge Corporation. Steve Radelet, CGD's Senior Fellow, moderated the discussion.
Speaking on behalf of his government, Ambassador Stadthagen expressed his satisfaction with the MCA approach to development. He underlined country ownership as an important aspect of the program, which allows for meaningful consultation on project design between the donor and the recipient. That significant element, he said, has been lacking in development programs.
Ambassador Stadthagen insisted it was important that the MCA be additional to, but not a replacement of, current development aid, such as USAID funds.
Responding to misgivings about Nicaragua's selection as an MCA country, James Vermillion said they were misplaced.
"Nicaragua was not picked at the MCC Board's discretion," he explained. "They met MCA selection requirements."
The panelists shared their views on the $175 million compact's main components, namely, transportation infrastructure, rural business development, and property rights. They also discussed corruption and the current political crisis.
We will post the transcripts of the discussion as soon as they become available.
June 23, 2005
Guest Column -- Armenia and Human Rights: A Test for the MCA
Posted by at 05:40 PM
We are delighted to post our very first guest column. The column provides MCA watchers an opportunity to share their opinions with the rest of us who follow this program. In Armenia and Human Rights: A Test for the MCA, Jennifer Windsor, Executive Director of Freedom House, discusses democracy and human rights standards in the MCA selection process.
Windsor writes:
The Millennium Challenge Account (MCA) process is designed to reward countries that make the "right choices" for their people, including meeting certain standards related to ruling justly. The democracy and human rights community to date has largely welcomed MCA decisions on country selection, as poor performing countries on democratic measures such as Vietnam and Mauritania were not selected.
However, the MCA has also selected several countries with a dubious commitment to human rights and democracy as being eligible to apply for MCA funds. Armenia is a striking example, and a test for the MCA. Among other key criteria, the MCA is supposed to reward countries that make sustained commitments to human rights, rule of law, and anti-corruption. On all of these counts, Armenia comes up short. Moreover, Armenia's leadership has been taking the country in precisely the wrong direction as the country has experienced significant democratic deterioration in recent years.
When the first MCA decisions were made in May 2004, democracy indicators had yet to be updated to reflect the impact of Armenia's flawed presidential and parliamentary elections in the fall of 2003. The regime has since responded to political unrest and demonstrations in the aftermath of these controversial elections through the use of force, the detention of opposition figures, as well as the harassment of journalists and human rights defenders considered to be sympathetic to the opposition's cause. Armenia's judiciary, which is plagued by corruption and is not independent of the executive branch, is not up to standard. These and other critical issues were highlighted in a detailed report on Armenia as part of Freedom House's Countries at a Crossroads governance survey released in 2004.
Just before Freedom House released its annual global freedom findings from Freedom in the World in mid-December 2004, (in which Armenia was downgraded in the political rights index), the MCA Board decided to recertify Armenia in November 2004. Since then, Freedom House has noted in its 2005 Annual Global Press Freedom survey the deterioration of press freedom in Armenia. And in a report released in June 2005 as part of Freedom House's Nations in Transit survey , further deterioration in the areas of judicial practice and media independence are evident.
A more vigorous discussion is needed on the inclusion of democracy and human rights standards in the MCA selection process. Giving these indispensable standards a back seat will hinder the overall potential of the MCA concept. To date, the MCA Board has not reached out for specialized briefings from groups like ours before taking decisions in order to ensure that they were aware of recent troubling trends which may not yet have been reflected in available indicators.
Of greater concern for the future success of the MCA is the seeming laxity of the Administration on the inclusion of poor democratic performers in the MCA process. Indeed, we can find no record of concern by the Administration about the political downturn in Armenia. It is imperative that senior U.S. Government decision makers communicate to the Armenian government the implications of that country's democratic deterioration and that such a downward trajectory places its continued participation in the MCA process in jeopardy. This dimension of the MCA process reveals a larger weakness in the current system. Namely, the MCA provides important potential leverage to encourage governments to make the right political choices, but only if the U.S. has a deliberate diplomatic strategy to raise issues of concern before and after decisions are made about MCA participation.
Armenia has not yet signed a compact with the MCC. To do so before concrete steps are taken to reverse the downward slide in political rights and civil liberties in that country would send an unfortunate signal: that the U.S. is willing to turn a blind eye to countries that are clearly not making the "right choices" for their own people.
June 13, 2005
MCC Board Approves Cape Verde and Nicaragua Compacts, Signs Honduras Compact
Posted by at 07:09 PM
The MCC today approved two new five-year compacts, and held a signing ceremony for the recently approved $215 million compact with Honduras.
Speaking at the ceremony, Secretary of State Condoleezza Rice said that the compact was the reflection of the commitment of the people of Honduras to change. "Honduras compact embodies the new approach to development embraced by nations at the Monterrey Summit in 2002," she said.
Honduran President Ricardo Maduro Joest said that the compact came at a good time for Honduras. "Our citizens must see that our democracy delivers more than promises," he said as he listed a number of reform initiatives.
Following on the Honduran success, the board of directors approved a $110 million compact for Cape Verde and one for $175 million for Nicaragua.
Cape Verde's compact focuses on infrastructure development ($74 million), agricultural development ($11 million), and private sector development ($7.2 million). In addition, $8 million and $4 million will be allocated to program administration and monitoring and evaluation, respectively.
Nicaragua's compact will improve transportation infrastructure ($92.8 million), promote rural business development ($33.7 million), and strengthen property rights ($26.5 million). An additional $22 million will be allocated to the program oversight and monitoring and evaluation.
Today's approval brings the total number of compacts to four. The MCC signed a compact with Madagascar in April.
June 01, 2005
Honduras Closer to MCA Vision
Posted by at 02:21 PM
MCA watchers have been concerned about a seeming lack of civil society participation in proposal design in MCA-eligible countries. That participation is one of MCA's main objectives. Some observers claim that in some countries civil society contributes only at the periphery of the debate while the business community leads the process. Honduras may be different.
The government of Honduras consulted with the MCC and, based on the PRSP, decided to invest the grant in urban development, rural development, employment creation and road infrastructure. That was the plan -- until civil society groups disagreed.
"When we called the civil society to show them our selection from the PRSP, it quickly became clear that the civil society preferred rural productivity enhancement and the transportation segment," said Victoria Diaz, the Honduran government's MCA Coordinator, at a recent event at the Center for Strategic and International Studies. "So we adjusted the proposal to concentrate on those two large components. Not because the civil society wanted that, but it was an important input. One that made the government and the MCC realize that concentrating on two areas would yield better results."
Diaz spoke at the Center for Strategic and International Studies and at InterAction on May 26. Based on her remarks at these two meetings, it seems that in the end Honduras submitted a proposal that is aligned with the PRSP and incorporates civil society recommendations.
Diaz was frank. "This is not a program for the poorest," she said. "We have HIPC for that. This program is for small and medium farmers, and not for the rich. It is designed to give them greater access to the market."
Honduras will use other complementary development funds to support programs targeting the poorest.
Observers have wondered about MCA's compatibility with other donor programs. The Hondurans designed a proposal that would bring various donors to work side by side. For instance, the highway project, which runs from the Pacific to the Atlantic, requires coordination between the Inter-American Central Bank, the World Bank, the MCA and Scandinavian development agencies, as each organization will finance a portion of the project. This undertaking will test the donors' will to collaborate.
In an effort to keep the implementation process transparent, the government of Honduras set up a five-member monitoring and evaluation board. Two civil society representatives will sit on the board with full voting powers along with government appointees. In addition, two other civil society representatives will have observer status for two and a half years while they wait for their rotation. All four represent different umbrella groups.
Honduras' experience may provide an example for the other countries that are still struggling with proposal design and the consultative process. It may also help the MCC improve its guidelines on the consultative process.
Access the CSIS event transcript
Listen to audio from the event
May 24, 2005
MCC Board Approves Honduras Proposal
Posted by at 11:11 AM
A month after the MCC signed its first compact with Madagascar, the Board of Directors has approved a compact with Honduras. The five-year $215 million compact approved on May 20 aims to boost rural development and revamp a weak transportation infrastructure.
A $72.2 million rural development component aims to strengthen Honduran farmers' skills to grow and market their crops, particularly horticultural products. According to the proposal, farmers lack both the technical skills and infrastructure that horticulture requires. Poor road infrastructure and limited access to credit has resulted in high transportation costs, stifling economic growth.
The compact allocates $125.7 million to a transportation project that will build a section of a major highway and a network of feeder roads. The goal is to increase the flow of goods and people between ports on the Atlantic and Pacific and production centers in Honduras, El Salvador and Nicaragua.
If properly implemented, the investment could spur economic growth in the entire sub-region. For instance, neighboring Nicaragua, also an MCA eligible country, considered Honduras development program in its proposal design.
The grant will support the Honduras Poverty Reduction Strategy Paper, which aims to raise real GDP growth to at least 4.5 percent annually (from 3 percent in 2003) and lower the poverty rate by 1.6 percent a year on a sustainable basis. Forty-four percent of the population survive on less than two dollars a day.
The initial proposal asked for $257.5 million for investment in infrastructure, education, governance and finance over four years. It is not clear how the proposal evolved from the earlier version. MCA observers were similarly perplexed about the evolution of Madagascar proposal.
The grant for Honduras' compact is almost twice as big as Madagascar's $110 million. In Madagascar, a projected annual disbursement of $27.5 million would make the MCC the fifth largest donor. With a yearly average disbursement of $43 million, the MCC is the fourth largest donor in Honduras. This funding level may be insufficient to create the incentive for reforms President Bush envisioned when he announced the program in March of 2002.
According to Board Chair Condoleezza Rice and CEO Paul Applegarth, Nicaragua, Cape Verde and Georgia are in the final stages of compact negotiations and the MCC will be voting on their proposals in the next couple of months. Will these compacts reflect the original boldness of MCA vision?
As the MCC faces greater scrutiny and a tough fight in Congress for scarce foreign aid dollars, the organization needs to show results. What do you think of the Honduras compact? Will it help the MCA live up to its promise?
May 18, 2005
MCC Board Meets on Honduras Compact
Posted by at 09:08 AM
The Board of Directors of the Millennium Challenge Corporation will meet Friday, May 20, from 10:30 am to 12:00 pm at the State Department. Most of the meeting will be devoted to a review of Honduras' MCA compact proposal. The first 15 to 20 minutes will be open to the public. Board Chair Condoleezza Rice and CEO Paul Applegarth will speak during the open session.
Check the notice of meeting for more details
April 29, 2005
Georgia: U.S. 'Challenge' Aid For Tbilisi Seen As Catalyst For Development
Posted by at 05:37 PM
Radio Free Europe's piece, U.S 'Challenge' Aid for Tblisi Seen as Catalyst for Development offers a description of and rational for Georgia's MCA Compact proposal. According to the article, the proposal includes a major road project, the rehabilitation of a gas pipeline, and an equity fund for investments in agriculture.
According to the piece, Georgian and World Bank officials are discussing cooperation between the bank's Municipal Development Fund, which has already created a structure for funding urban infrastructure, and the anticipated Millennium Challenge funds.
Read CGD's summary of the Georgia compact proposal
April 27, 2005
Leadership, Results Gets Madagascar $110 Million
Posted by at 02:23 PM
"I am a man of action," Madagascar's President Mark Ravalomana told his audience at the Johns Hopkins' School of Advanced International Studies today. Ravalomana was in Washington DC, for the signing of a $110 million poverty reduction compact between his country and the United States.
Madagascar is the first country to receive funds from the Millennium Challenge Account (MCA). The compact is cause for celebration not only for Madagascar, but also for the Millennium Challenge Corporation (MCC), the grant-making institution. Currently, seventeen developing nations meet the eligibility criteria for the fund. But, only Madagascar has qualified for a grant.
A self-made businessman, Ravalomana became president in 2002, after a stint as a mayor of the capital city of Antananarivo. As a mayor, he rehabilitated public services and restored efficient city management.
Drawing on his entrepreneurial skills that served him well as a businessman and mayor, Ravalomana has implemented sweeping political and economic reforms, fighting corruption and increasing transparency in government. The result has been remarkable. According to the Wall Street Journal-Heritage Foundation's 2005 Index of Economic freedom, Madagascar registered the greatest increase in economic freedom in 2004.
"I am a man of action," he said. "I want to see results instead of reports."
Results, and only results, drive the Millennium Challenge Corporation. Accountability in public administration is the foundation of economic progress, an important driver of poverty reduction. Madagascar is on the right track.
In March 2002, President Bush called for a
"new compact for global development,"which would link greater contributions from developed nations to greater responsibility from developing nations. Congress set the MCA, providing $2.5 billion to support Bush's initiative. In January 2004, the U.S. government established the MCC to administer the account. MCA funds would be provided to those countries that rule justly, invest in their people, and encourage economic freedom.
Madagascar needs a lot of action. Eighty percent of the population lives in poor rural areas, surviving on 41 cents a day. With a staggering 47 percent illiteracy rate, Ravalomana can only ask for results.
His leadership helped Madagascar secure $110 million to support national development programs that aim to reduce poverty and create economic growth. The funds will be invested in land titling, financial sector reforms and the agricultural sector.
"We have a lot of confidence in this development program," said Paul Applegarth, CEO of the Millennium Challenge Corporation. "It will create ways for the rural poor to generate income by giving them the opportunity to obtain title to their land, improve their access to credit, and get assistance in identifying market opportunities and production management and marketing techniques."President Bush's new compact for global development calls for greater responsibility from developing nations in the fight against poverty. As he contemplated the development challenges facing Africa, Ravalomana echoed that message.
"We should be proud and self-confident, ready to shape our future, taking destiny in our hands," he said. "It is up to us to lead and accomplish prosperity. Africa should stand up to meet that challenge. We have to take on leadership and responsibilities."