MCA Monitor Blog
December 19, 2007
Final FY08 Omnibus Keeps MCA at $1.54 Billion
Posted by Sheila Herrling at 09:44 PM
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
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.
November 17, 2007
New MCA Monitor Analysis on Impact of FY08 Budget Options
Posted by Sheila Herrling at 09:32 PM
I just posted a short analysis of the current state of play of the MCA account funding in the FY08 International Affairs budget and the impact of various funding and policy differences, including the amendment introduced by Senator Lugar to change the MCA’s compact funding obligations policy, on the MCA and the countries working hard to make the grade. I've blogged these issues and my views for the last few months, but consolidate it all here for easy reference, along with some recommendations Congress and the administration to address the real issues hindering MCA implementation.
October 29, 2007
Full Senate Confrims Hackett and Frist to MCC Board
Posted by Sheila Herrling at 11:53 AM
On October 26, the full Senate confirmed Ken Hackett and Bill Frist as non-governmental members of the Millennium Challenge Corporation Board of Directors. Says Senator Mitch McConnell in comments to Congressional Quarterly about Frist:
“As a doctor and legislator with a longstanding commitment to medical humanitarian work in Africa, I can’t think of a more dedicated and qualified person to help guide this organization."
Hackett's confirmation is a reappointment to the position to which he has served for 3 years. The Congressional Quarterly didn't carry any quotes on Hackett but we all know he has done an exceptional job in both providing sound development policy and practice guidance to the Board and being accessible to civil society groups interesting in the effectiveness of the MCA.
It is great to see a full Board in place for the MCC and a reminder to folks of the innovative constitution of the MCC Board, where four of the nine members are from outside of government.
October 22, 2007
Senate Removes Hold on MCC Yemen Threshold Program But Questions Broader Program Purpose
Posted by Sheila Herrling at 12:04 PM
On October 16, Senators Biden and Lugar, Chairman and Ranking Member of the Committee on Foreign Relations, removed their two-week hold on signing of the Millennium Challenge Corporation's $20 million Threshold Program with Yemen. As we previously blogged, the decision to reinstate Yemen's eligibility for Threshold Program funding was appropriate based on demonstrated reform progress, however, such swift progression to negotiating an actual program was perhaps a bit premature.
At the heart of the Biden/Lugar hold was an issue that we have raised repeatedly: it is essential that the MCC clearly define the purposes of the Threshold Program and the criteria for country eligibility selection. And it needs to include Congress in its deliberations. There are basically two camps in the use of the Threshold Program debate: those that interpret the MCA authorizing legislation language (Sec. 616.b.2) -- "demonstrating a significant commitment to meet the requirements of [the MCA eligibility criteria] but failing to meet such requirements..." -- as strictly related to indicator performance and those that would also like to consider "windows of oppportunity" (although with positve trends on the indicators) to support reform momentum.
The two cases that have pushed the issue are Yemen and Kyrgystan, both of which at their selection date failed about half the indicators. For those in the first camp, the fact that Yemen failed 8 of 16 indicators at selection (which fell to 13 of 16 in 2007 and stays about the same in 2008 failing 12 of 17) and Kyrgystan failed 7 of 16 at selection makes it impossible to argue that these countries are on the cusp of passing the indicators and could do so with a little help via a Threshold Program. Those in the second camp see the the potential impact that the MCA program with its "good housekeeping seal of approval," even through a Threshold Program, could have in sustaining and compelling further policy reforms and deeper civil society participation at critical junctures.
As regular readers of our blog might recall, I tend to fall more in the second camp, particularly for those countries making progress on the democracy and control of corruption indicators which I believe are important undergirdings of citizen- (not just country-) owned development strategies. But having been around at the inception of the MCA, I understand the frustration expressed by Senators Biden and Lugar because it absolutely was the intent of Congress to focus the Threshold Program on that set of countries truly on the cusp of passing the indicators. Biden and Lugar suggest that those countries falling in the second camp ought to be funded via other US foreign assistance programs. Probably a valid point for some of the countries but ultimately I would like to see the MCC and Congress enter into a dialogue on experience under and future direction of the Threshold Program. In the end, I would hope to see a portion of that Program directed, at the discretion of the MCC Board, to a risk-capital fund for countries undergoing dramatic democratic reforms where assistance and the symbolic backing of the US MCA at a critical juncture could be the difference between progressive improvement in the indicators and disaster.
September 24, 2007
No MCA Money at the Finish Line for Tanzania; More to Follow?
Posted by Sheila Herrling at 07:02 AM
This blog is posted jointly by Sheila Herrling and Sarah Rose.
On September 18, the Board of Directors of the Millennium Challenge Corporation approved a $698 million compact with the Government of Tanzania. The New York Times picked up on Tanzania's compact approval in a blurb later in the week. This is the biggest compact to date, although in a country of 38 million people, it is the second-smallest on a per capita basis.
The MCC’s partnership with Tanzania is, in many respects, the model of how the Millennium Challenge Account program was designed to work -- a partnership with a country that has demonstrated commitment to both policy reform and coordination of donor (and national) resources for development; an effort to be inclusive of diverse regions within the country; a program that buids on the earlier Threshold Program that tackled reforms in governance, rule of law and procurement; and an innovative compact that targets somewhat tricky, but critical and seriously under-funded sectors.
But partnership is a two-way street and in this case -- and perhaps in more cases to come -- the United States is not meeting its end of the bargain because it doesn't have the money. Although the MCC can approve the compact, it cannot sign the compact until it has the resources to cover the entire amount, a requirement that was part of the MCA program's original design in order to assure those countries that were willing and able to tackle difficult reforms that their reward would not be in jeopardy each year. Congress has yet to complete its FY08 Foreign Operations budget. Unitl it does, the Tanzanians have to wait for their reward.
Now, the Tanzanians may not have to wait too long. The FY08 Foreign Operations budget heads into conference this week or next so the House and Senate can hammer out their differences in the bill. For the MCA, it's the difference between the House's $1.8 billion proposed appropriation and the Senate's $1.2 billion. A $1.2 billion appropriation would cover the Tanzania compact, so there is little threat to this good program, but it would leave less than $500 million for administrative costs, Threshold programs and the remaining candidates for FY2008 compact funding, including Namibia and Burkina Faso that, like Tanzania, have undertaken difficult reforms to meet the MCA program eligibility requirements and worked hard with their citizens to develop sound compacts for funding.
So here's the kicker. Realizing the credibility issues associated with turning countries away at the finish line because of lack of funding and being irritated by large undisbursed balances of prior compacts, the Senate (Senator Lugar, in particular, although he apparently has the support of Biden and other key appropriators), instead of appropriating sufficient resources, has proposed an amendment that changes the current stipulation requiring the MCC to obligate the entirety of the funds for approved compacts at the time of their signing to require that "not more than 50 percent of the entire amount anticipated for the duration of the compact" be obligated upfront.
While understanding the political and practical reasoning behind this proposal, we think it ultimately is the beginning of a slippery slope toward "un-innovating" and unfunding the MCA program. Sheila's earlier blog on the subject provides more details. Our main concern is how to provide incentives to the MCC to address its primary challenge -- making demonstrable progress in disbursing its funds and executing the compacts it has signed to date. The Lugar amendment does not address this challenge. The practical effect of the 50% cap in FY08 is that the MCC will have to sign 3-4 additional compacts above the three in the queu -- Tanzania (approved), Burkina Faso and Namibia -- or the MCC will carry a substantial unobligated balance into FY09. Given the strong criticism the MCC has faced regarding unobligated balances and given the fact that the MCC needs to re-orient its focus from signing compacts to executing compacts, arguments that this amendment somehow saves the MCA program aren't very satisfying. Rather, we should be looking for ways to shift the institution's management framework to focus more on implementation and evaluation of existing compacts than on approving more and further stretching the capacity of the MCC.
For those interested in more details of the Tanzanian compact, read on:
The compact was developed from the national poverty reduction program and includes three main projects:
Transport: This project includes road rehabilitation on both the mainland and Zanzibar, funds for continued road maintenance and an upgrade of an airport on one of Tanzania’s islands.
Energy: The project is intended to improve the reliability and quality of energy and extend service to those not currently on the grid. Again, there are interventions on both the mainland and on Zanzibar. Since firm-level surveys show that firms in Tanzania rate access to electricity as one of the main constraints to doing business, the MCC energy project could have a real impact on private sector growth. At first the MCC was reluctant to take on an energy project since energy policies are notoriously politically charged and difficult to reform in almost all countries, however, MCC saw a movement in Tanzania toward a more feasible scenario for energy investments.
Water: The MCC is working cooperatively with the Government of Tanzania and other donors to finance a national water strategy. The MCC will provide project financing to increase the quantity and reliability of potable water for home and business use by rehabilitating/expanding water infrastructure and controlling leakages. The MCC's participation in a broad, multi-stakeholder project represents good donor coordination with the MCC finding a niche that fits its mandate within a broader strategy. The water project is also a real investment in the health of Tanzanian citizens by reducing the prevalence of water-borne diseases and by reducing the time needed (in large part by women) to fetch water from more distant sources. This project comes on the heels of several years of policy reform in the water sector in Tanzania, so the time seemed ripe for investment.
September 13, 2007
White House Nominates New MCC Board Members
Posted by Sheila Herrling at 11:36 AM
On September 12, the President officially accepted the Senate nominees Bill Frist (Republican nominee) and Ken Hackett (Democratic nominee) to serve as non-governmental members of the Millennium Challenge Corporation Board of Directors. Ken Hackett will be reappointed to the position he has held since 2004. Bill Frist, as we had earlier heard, will replace outgoing Board member Christine Todd Whitman.
September 10, 2007
Senate Good to Foreign Aid; Not So Good to Millennium Challenge Account
Posted by Sheila Herrling at 10:52 AM
On September 6, the Senate, by a margin of 81 to 12, approved a $34.2 billion FY08 State, Foreign Operations and Related Programs Appropriations bil. While the Senate and House bill provide the same overall funding level -- $3 billion above the FY07 CR level and 2 percent or $700 million less than the Administration's request -- there are specific acccount funding and policy differences that need to be negotiated by a conference committee.
One such funding account difference is the Millennium Challenge Account, where the difference between the Senate bill's $1.2 billion and the House bill's $1.8 billion appropriation will need to be reconciled. The reason for such a low Senate appropriation? Discomfort over large, undisbursed obligations when there are immediate needs for foreign aid elsewhere.
Senate staffers claim to support an overall funding level that covers the four compacts expected to be finalized between now and end-FY08 -- Tanzania, Burkina Faso, Namibia and Mongolia. At currently projected levels, however, $1.2 billion does not cover those compacts. The impact will most likely hit Burkina Faso where hard-fought reforms achieved will go unrewarded. More specifically, the Burkinabe who have been both making progress on an MCA Threshold program and working with the government to prepare a compact would need to wait another year to receive funding.
The Senate's proposed solution? Instead of increasing the overall funding level, the Senate approved unanimously an amendment by Senator Lugar (introduced by Senator Leahy) that changes the current stipulation requiring the MCC to obligate the entirety of the funds for approved compacts at the time of their signing to require that "not more than 50 percent of the entire amount anticipated for the duration of the compact" be obligated upfront. That does a couple of things. First, it technically allows the MCC to sign compacts with the four countries cited above, and more. (Although it remains unclear whether the MCC would, or should, take that path.) And, going forward, it would make the overall balance sheet optics a little better – reduces the current '"wow factor" of what are now large undisbursed balances which, theoretically, reduces the “poachability” of the MCA come budget time. The simple reality from the perspective of appropriators is that even if they support the concept of the MCA, they will see the opportunity costs (needs today) of hundreds of millions of dollars waiting to be spent in the future.
And yet, the MCA was specifically designed to challenge the business-as-usual allocation and appropriation systems of US foreign aid. The Lugar amendment removes a key innovation in the MCA program -- the predictability of aid – purposefully accommodated in the MCA’s design based on internationally-endorsed development effectiveness lessons. The idea was that countries that performed well enough to get into the MCA program, that then worked with their citizens to design a credible development program, and that met performance benchmarks during implementation would know with certainty that funding for the program they designed was guaranteed and was not at risk of being redirected to other foreign aid programs. Countries have been told that this “predictability-with-performance element” distinguishes the MCA program from USAID and countries have responded. Removing this innovation could impact how incentives for sustained reform work.
So it comes down to two big questions. One is a question of risk – how likely is it that the remaining 50% of compact funding would not be available when needed? On the one hand, I can’t think of any example of the US not fulfilling its bilateral aid commitment. On the other hand, the risks of redirection are real -- the lion's share of US foreign aid goes to ten countries, the majority of which are geopolitical allies in the war on terror or drugs. A rising deficit will continue to put pressure on international affairs spending, and maintaining political allies has trumped development spending to date.
And the weightiest question of all? What will it take to convince Congress that global development is a national priority – the right and smart thing to do – and that the MCA program, including its unique funding obligation construct, should be given a chance to demonstrate its effectiveness. Potentially the greatest innovation of the MCA is that it creates a new kind of political ally – America’s model partners in the war on global poverty and instability.
Some Congressional staffers believe that the amendment is necessary to protect both future MCA funding levels and the reputation of the MCC by allowing it to continue negotiations with countries in the final stages of compact preparation. Maybe. But the cost is the very core of what distinguished the MCA from the pack. Proceeding along these political lines is a slippery slope toward programmatic conventionalism. Instead, Congress could have provided an amendment to allow for concurrent compacts which could address the same irritation in a more pragmatic and programmatically-relevant way.
I'm not convinced that the Lugar amendment is the right approach to saving the MCA. What I am convinced of is that it's time to rebuild -- not just reform -- US foreign assistance more broadly, and to keep the MCA program and its principles as a cornerstone and critical component of any final strategy.
August 10, 2007
GAO Report on Vanuatu: A Case of He Said/She Said and What Should Have Been Said
Posted by Sheila Herrling at 10:27 AM
*This is a joint posting by Sheila Herrling and Sarah Rose
On July 26, 2007, the House Foreign Affairs Subcommittee on Asia, the Pacific, and the Global Environment held a hearing on a GAO report that claimed the Millennium Challenge Corporation overstated in its public documents the projected impact – in terms of per capita income, GDP growth and number of beneficiaries -- of its $65.7 million compact with Vanuatu. The MCC, in testimony, maintained that its projections were factually correct and never intended to mislead, although it could see the possibility for misinterpretation.
After much “he said/she said” between GAO’s David Gootnick and MCC’s Rodney Bent, subcommittee members seemed satisfied to chalk it all up to “a difference in bookkeeping.” Not so satisfying to Gootnick, whose bottom line was the lack of transparency with which the MCC portrayed the compact’s projected benefits, which becomes an issue of credibility.
Folks should read the GAO report and MCC’s testimony (or watch the video on the subcommittee website) and form their own opinions – and share them with us here on the blog. But here’s just a quick summary of some of the most important he said/she said (note that the paraphrasing is ours, but it is intended to break out all the diplomatic language and boil it down to the core messages debated at the hearing):
GAO said: The MCC projects it will increase per capita income by 15% in 2010 and 37% by 2015. This is an overstatement because these estimates reflect cumulative levels, not annual levels, which would be closer to 4-5% at 2010 and 2015.
MCC said: Our analysis is factually correct, but we see how readers could get confused. We’re sorry, it wasn’t intentional, and we’ll be more precise from now on.
GAO said: MCC’s public documentation looks as though the compact is projected to contribute to an additional 3% GDP growth per year. This is misleading since Vanuatu’s GDP growth will more likely (after a year of 6% growth in 2007) remain around 3% with or without the compact. It would have been more accurate for the MCC to state that the compact is projected to increase the level of GDP by 3% and avoid vague wording that could be interpreted as a growth impact.
MCC said: GAO misinterpreted our portrayal, as any “reasonable reader” might do. We always meant to portray that Vanuatu’s GDP would be perpetually three percent higher with the compact than without and that the compact would have a moderate but rising effect on the per capita CGD growth rate, albeit much smaller than three percentage points.
GAO said: MCC’s documentation states that the beneficiaries of the compact will be 65,000 rural poor when actually only 43% of the compacts benefits will accrue to these rural poor. The remaining 57% benefit tourism and transport companies and other local businesses.
MCC said: We are confident that are numbers are credible, based on best available information which often times is very old. More broadly, a focus on reducing poverty through economic growth inevitably means that households above the poverty line (and many are not far above) will also benefit from economic growth.
GAO said: MCC failed to properly account for key risks in its calculations, such as: sufficient cost contingencies to cover potential cost overruns; more accurate (slower) phasing of compact benefits; Vanuatu’s historically weak maintenance record (higher risk over the longer-term than calculated by MCC); and the potential beneficiaries’ (uncertain) response to new opportunities generated by the projects (efficiency gains from the roads and bridges may not translate into economic gains).
MCC said: We just chose different risks than GAO, but believe they sufficiently capture a credible threshold and we will rigorously monitor progress and adapt to any unanticipated events.
So, you can see why the subcommittee wanted to chalk it up to “a difference in bookkeeping” or “a difference in interpretation.” Here’s the dilemma: the issue GAO raises on transparency is a serious one, and we sincerely hope that when the GAO completes its review of the other 12 compacts it doesn’t find that the MCC consistently chooses a less than straightforward portrayal of its projected impact. On the other hand, all parties agree that the projects funded by the compact are the right ones for growth and poverty reduction; that the MCC is way ahead of other donor agencies on transparency of its selection and evaluation indicators; and that there is pressure from all sides for the MCC to show implementation results. We think Congresswoman Watson (D- CA) hit the nail on the head when she said, “we need quality data at the outset and impact evaluation at the end.”
If the MCC overstated the projected impact of its investments in Vanuatu, and Congress, the MCC Board and American taxpayers are serious about the accountability-for-results component that grounds the MCA program, then the biggest losers will be the MCC and Vanuatu if their partnership fails to deliver its stated results. Even if the Vanuautu compact achieves significant results, if MCC’s estimated target for impact was inflated, the project will appear to have failed. So, where does this leave us? Where should Congress and the public focus their oversight and energy?
Sheila and Sarah said: Somewhere between “let’s chalk it up to a difference of bookkeeping” and Congressman Lantos’ press release on the GAO report’s findings that indicts the MCA (talk about overstatements!) are important questions for the MCA and MCA-watchers to tackle. First, transparency and presentation of facts matter. The MCC may not have intended to mislead but it did. One quick and easy remedy would be for the MCC to make public its country Investment Memos which contain the deeper analysis and justification for funding. Much like the World Bank and IMF make public their staff appraisal documents, the MCC should follow suit. Second, efforts redirected from implementing and measuring the progress and impact of the programs on the ground to reassessing the math and presentation of the projected impact is not the best use of scarce staff time and resources. Rather, the MCC’s feet should be held to the fire at the end of the compact for delivering the results they initially said they would (allowing, of course, for adjustments when new baseline data become available during the course of the compact). If they and the country under-perform relative to expected results, another compact should not be forthcoming, hence the incentive for straight-forward and realistic portrayal of impact benchmarks from the outset. Recalculating and/or re-portraying in a new way the originally calculated impact to more positively portray the end results should be rejected.
Second, good and timely data is hugely important. Without it, countries and donors cannot credibly measure the impact of their interventions. The MCC is substantively contributing to data collection and monitoring and evaluation practices in each of its compact countries. The question is: do they do it early enough? Should we be factoring the availability of good and timely data into the MCA selection process and using more of MCA’s 609(g) resources to help countries improve their data before compact development?
Third, it’s time to define the word “transformational.” The Vanuatu case provides good context for addressing this issue. Does the compact “transform” the economy of Vanuatu? It certainly adds value. It funds infrastructure that is critical to building a strong economy and would have gone unfunded without the MCA. Is that transformational? In a time of scarce resources for the MCA, the question of ability to be transformational needs to be an increasingly important factor in compact choices, while avoiding merely pumping up the appearance of transformational impact in projecting results.
Lastly, accountability for results--impact in particular--is what’s truly innovative about the MCA and where the bulk of our energies should be focused. There is a lot riding on the ability of the MCA to deliver better results than existing aid programs. Its inability to do so could, in fact, jeopardize the already precarious support for development assistance. That doesn’t mean Congress should abdicate its important oversight role now, but it does mean a little patience and flexibility should be given to the MCA to implement so we can see what it does differently and whether it does indeed deliver better results.
July 10, 2007
Danilovich Says $1.2b. MCA Appropriation Would Be Devastating
Posted by Sheila Herrling at 12:34 PM
In response to the Senate Appropriations Committee $1.2 billion figure for the Millennium Challenge Account, MCC CEO Danilovich says: to Congressional Quarterly (subscription required):
"the funding reduction greatly undercuts our partnership with poor countries that are making political, social and economic reforms.”
Staff of Senator Leahy. chairman of the Appropriations Subcommittee on State and Foreign Operations, acknowledged that the cuts would slow down the aid program, but said:
"[We] had to make difficult choices to help meet what we view as the more pressing needs of other programs, including U.N. peacekeeping missions."
It's true that there were difficult choices to make, but the sooner Congress, the Executive Branch and the public take up the larger issue of overhauling US foreign assistance to make sure that the right countries are getting the right aid for the right reasons the better. It seems a shame that the offset for pressing development needs will be the program that is rewarding those countries that set the example for fragile states to stay the tough reform course.
For more, see our earlier blog postings.
June 21, 2007
A Slouching Report on the Millennium Challenge Account
Posted by Sheila Herrling at 03:03 PM
Usually a big fan of the succint and balanced reporting of Congressional Quarterly, last weeks article by Tom Starks entitled "A Slouching Millennium Challenge." was a let down. A lost opportunity to provide a balanced view to some of the stale assertions. Readers know that because I care about the success of the MCA as a new foreign aid program for a new era, I am often a constructive critic But this article screams for more food for thought:
Says Starks:
"...the Millennium Challenge has been on a leaner-than-expected financial diet since its creation three years ago. And in some respects, the program’s administrators have only themselves to blame. They have been slow to distribute funding, giving out more than $83 million of the approximately $6 billion appropriated so far. (Though they also say they have $3 billion obligated, pending benchmark-certification in recipient nations.)"
Two things rubbed me the wrong way about this statement. First, that a rather important point -- that the MCA has obligated half of its total appropriations -- is relegated to a parenthetical. But second, that the rate at which an organization can throw money out the door seems to be the primary success measure. For those interested in reading more of my thoughts on this, click here, but the main points are that the country-driven, public participatory nature of the program was inevitably going to result in slower disbursement rates, greater attention needs to be paid to results on the ground and policy reforms incentivized, and the credibility of the US will be damaged when countries that have taken bold reforms required to meet the standards of te MCA program are met at the finish line without a reward.
The artcile continues:
"Then there are the rival aid agencies. Millennium Challenge was supposed to award aid to countries as a supplement to their grants from the U.S. Agency for International Development, or USAID. But Nita M. Lowey, the New York Democrat who chairs the House subcommittee on foreign aid spending, contends that the opposite has occurred, that countries getting MCC money have seen their USAID grants curtailed. The Congressional Research Service recently reported that that has largely been the case in this fiscal year."
It's true, the MCA was supposed to be additional foreign assistance. Unfortunately, a common definition of "additional" is hard to find. On the global level, requests for MCA have been additional. The rubber meets the road at the country level. In my own mind, defining additionality means ensuring that new MCA resources (or the prospect of future MCA resources) does not de facto displace existing US foreign assistance in a country. The problem with contending that MCA money is displacing USAID funding is that numbers in and of themselves do not tell the full story. Sometimes there are good reasons for reductions in USAID funding -- the end of long-term Hurricane Mitch rehabilitation funding in Honduras for example. Or the fact that MCA money is strategically scaling up a USAID agricultural pilot project in Ghana. The problem, as we are finding out ourselves in trying to rigorously assess the question of additionality of MCA resources, is a lack of detail in the budget justification documents of both State Department and the MCC. (Although there is considerably more detail in State's FY08 CBJ, it's just hard to take it entirely on face value given the centrality of decisionamking in the F-process.) Instead of simply using global numbers to make assertions, Congress should specifically ask the two agencies to defend the complementarity of their budget requests and country programming.
For those looking for clarification in the Congressional Research Service study cited in the article, don't bother. It essentially says it's too hard to tell.
Finally, my favorite:
"Some non-governmental organizations and contractors that operate under traditional models of development funding have begun to feel frozen out of the process — because, under the MCC rules, countries are permitted to create their own plans for the aid they get."
That this is a fact is not the issue. The issue is that the MCA was quite purposefully created as a new institution to rid it of the development and operational success constraints that have plagued USAID programs. The fact that NGOs and US companies can't operate in a business as usual mode is a good thing. International bidding on MCA-funded contracts will bring efficiencies, the countries writing and managing their own development plans will likely bear greater results. The whole point of the MCA was to be less traditional. Unfortunately, US business, NGOs and Congress are not creating the space for the MCA to experiment in what could be more effective programming of our foreign assistance.
It's time to seriously undertake a major overhaul of our entire foreign assistance strategy, policy and architecture to leverage real impact on the ground by joining up all the good programs that educate kids and keep people alive through new medicines (Development Assistance and PEPFAR) with the broader programs that build economies with jobs (like the MCA) for those people to have livelihoods. It's less about additionality than it is about strategy and coherence.
June 05, 2007
Senator Frist to the Millennium Challenge Corporation Board?
Posted by Sheila Herrling at 12:49 PM
A few weeks ago, we blogged on the status of filling the four NGO chairs on the Millennium Challenge Corporation's Board of Directors, two of which have remained vacant since the MCC's inception. With the president's nomination of Alan Patricof and Lorne Craner, based on the recommendation of the House majority and minority leaders respectively, we've been waiting to see what happens to the Senate recommendations given the term expirations of current Board members Ken Hackett and Christine Todd Whitman. I am delighted to hear that Senator Reid has apparently recommended that the president renew Ken Hackett's term; he has been a real asset to the governing body of the MCC. And early rumors that Senator McConnell is recommending Senator Bill Frist to replace Christine Todd Whitman (who announced her intent to step down at the end of her term) are looking to be true.
What do you hear?
Today's the Day: Marking Up the Millennium Challenge Account 2008 Budget
Posted by Sheila Herrling at 12:34 PM
Today at 3:00, House appropriators are scheduled to mark-up the FY2008 State-Foreign Operations spending bill. Insiders expect the subcommittee will provide less funding than the president requested overall but significantly more for a program to combat AIDS, tuberculosis and malaria. The Millennium Challenge Account is rumored to come in at $1.8 billion, a touch above last year's appropriation perhaps signaling a nod of continued support for the programt despite the subcommittee's concerns over low disbursement rates.
Followers of the blog will know that I think a strong case could have been made for a figure closer to the president's $3 billion request. Check back this afternoon for the final outcome.
April 20, 2007
Filling the NGO Chairs on the MCC Board: Action At Last
Posted by Sheila Herrling at 12:47 PM
Since its inception, the Millennium Challenge Corporation Board has governed with only 2 of the mandated 4 non-governmental members -- appointments that, per the MCA authorizing legislation, are nominated by the majority and minority leaders of the House and Senate. The Senate -- and then the President -- moved quickly to nominate and appoint Christine Todd Whitman and Ken Hackett, both of whom have served the institution and external stakeholders well. The three-year terms of Whitman and Hacket expire in July. Whitman has already announced her intent to leave, leaving another vacancy. Hackett's term could be renewed for a 2-year period on the recommendation of the Senate, an action I sincerely hope occurs as his hard-nosed, soft-hearted approach, complimented by his on-the-ground development experience, brings enormous credibility to the MCC.
In the midst of what was looking to be three vacancies on the MCC Board, the President announced yesterday his intention to nominate Alan Patricof to be a member of the Board. Patricof's nomination would fill the vacancy reserved for the recommendation by the House (then Minority Leader of the House of Representatives, Nancy Pelosi). Patricof's name has been in the rumor mill forever as the House Democrat's nominee but was apparently awaiting a Republican recommendation to go in tandem to the President. (Current rumor frontrunner: Lorne Craner, President of International Republican Institute. I've heard other names, but Craner's is the most cited.)
So, let's say Patricof and Craner are appointed to the MCC Board and Hacket is offered (and accepts) a 2-year re-appointment. That leaves one vacant NGO seat to be recommended by Senate Republicans. Patricof brings solid private sector experience and an outside-the-beltway perspective and (hopefully) reach. Craner brings much USG policymaking experience, issue expertise in governance and democracy, and an understanding of Congressional operations and relations. What is sorely needed on the Board is more on-the-ground development experience and someone who can strategically transition the laudable principles of the Millennium Challenge Account from " Bush's flagship prorgram" to a bipartisan-endorsed innovative foreign assisatnce program.
March 30, 2007
Will the MCA Get Caught in the Budget Crosshairs?
Posted by Sheila Herrling at 09:35 PM
In the coming weeks, the two chambers of Congress will head into conference committee to decide how to allocate some $36 billion in the international affairs budget across a multitude of foreign aid programs. In a federal budget dominated by defense and domestic spending, every penny of the international affairs budget--particularly development assistance--will be hard fought. Sarah Rose and I did a short paper on whether the Millennium Challenge Account deserves the full $3 billion request. Share your thoughts.
March 28, 2007
Robbing the MCC to Pay for Pork
Posted by Sheila Herrling at 03:04 PM
As MCC watchers worry about the fate of its $3 billion FY08 funding request within a tight International Affairs account and during a time when global engagement in poverty reduction and instability is most pressing, comes a shot across the bow. Senators Domenici and Hutchinson filed budget amendment 722 rescinding $21.7 million in already appropriated funds to the MCC to fund a canal project in the Rio Grande. The vote could come up as early as an hour from now, or perhaps tomorrow morning.
Keep a look out for our next piece on the larger funding situation of the MCC...
March 15, 2007
Millennium Challenge Account Budget Hearing: Is An Uneventful Event A Good Thing?
Posted by Sheila Herrling at 04:23 PM
Last Tuesday, MCC CEO Ambassador John Danilovich faced the House Appropriations Sub-Committee on Foreign Operations in what attendees hoped would be an engaging discussion on the fate of the $3 billion FY08 budget request. Well, Danilovich was engaging but the overall hearing was not. It is a critical year for the MCA -- implementation is poised to take off, countries better understand relations with the MCA and are finalizing compacts, and with a Democratically-controlled Congress the rhetoric behind the bipartisan support for the concept of the MCA will be tested in working out the FY08 budget allocation. Although committee members came prepared with and delivered some good questions, none seemed particularly interested in having a discussion, and it is entirely unclear whether any of them will fight hard for (or against, for that matter) the budget.
Two years ago, the Committee suggested that the MCC had more money than program, but now, Danilovich says, "we have more program than money." He said the MCC’s large, unobligated balances are not truly reflective of available funding since much of those funds are actually committed to signed compacts (obligation only occurs at Entry into Force which to date occurs, on average, several months after signing). MCC’s current unobligated and uncommitted balance is $700 million, and adding that to the $1.75 billion allocated to MCC through the FY07 Continuing Resolution, the MCC has under $2.5 billion to award to the remaining 14 eligible countries preparing proposals. MCC expects to use all of this in FY07, with the funds going toward compacts with Mozambique, Morocco, Lesotho, and Sri Lanka. This will leave 10 countries competing for FY08 funding, with possibly eight (at a projected $400-$500 million apiece) that will be ready to sign in that year.
The MCC fears that insufficient funding would diminish " the MCC Effect" that has inspired countries to want to earn the MCC seal of approval for good governance. In other words, that countries that make targeted policy changes to meet the indicators (either on their own or through the MCC’s Threshold Program) will ultimately not receive assistance, not because of their performance, but because of unavailable resources.
Nita Lowey, Subcommittee Chair, was generally positive about the MCC with some questions and reservations, particularly regarding MCC’s slow disbursements (hence the large, unobligated balances) and the concern that funding to MCC is not additional (as promised by the president) and, in fact, is displacing core development accounts, especially social sector funds. (The latter point was shared by Rep. Jesse Jackson.)
Danilovich acknowledges that disbursements have lagged behind the “original, optimistic projections” because in-country implementation capacity was slower to develop than expected, and it wasn’t acceptable to begin disbursements until implementation staff/procedures were in place. MCC is taking steps to speed up implementation by offering templates for basic forms, TA for management information systems, and other resources to country management teams. On the social sector issue, Danilovich emphasized that programs are country-driven, and that some do request assistance for social programs. He referenced the social programs in El Salvador, Ghana and Burkina Faso (education-related) and Indonesia (health-related), and also mentioned that investments in basic infrastructure complement social spending by governments and other donors by enhancing all-season access to clinics and schools. This last point is important and perhaps merits more emphasis. Some countries and sectors are saturated by social sector aid (both in terms of the sheer number of donors who must coordinate and the amount of money which may exceed countries’ absorptive capacity in some cases), and countries look to the MCC to fill holes largely under funded by donors who prefer the more politically marketable interventions of health and education.
Other questions were focused on the need to ensure strict monitoring and evaluation, including the wilingness to cut off funds for non-performance. Concerns were expressed about the current compact with Armenia (in light of transparency concerns surrounding the upcoming elections) and the upcoming compact with Sri Lanka (considering the persistent violence between the government and the Tamil separatists). And Rep Knollenberg asked for the status of the two House -recommended NGO vacancies on the MCC Board,. Danilovich replied that both Democratic and Republican nominees were with the White House for approval and he hoped to have a "full Board by the next Board meeting on May 22." We assume the Democratic nominee is still Alan Patricof; any confirmations on the Republication nominee? Rep. Lowey ended the hearing with a specific request for the poverty and social impact assessment tools used by the MCC to make program and beneficiary decisions. Great question!
So, in all, a rather uneventful event. Maybe that's a good thing -- no major criticisms, no difficult questions, pretty congenial atmosphere. Particularly given the the overall budget scenario which seems more than ever to pit defense and domestic challenges against international affairs. That said, the emotionlessness of it all left me disappointed.
Join the dialogue -- if you were there, what did you think? If you weren't, what do you think will be the fate of the budget request?
March 13, 2007
Senators Salute Women's Rights in Lesotho and the MCC Effect
Posted by Sheila Herrling at 12:45 PM
In honor of International Women's Day (March 8th), Senator Lugar and 15 of his colleagues (from both sides of the aisle) passed a resolution commending the government of Lesotho for the enactment of a law to improve the status of married women and ensure the access of married women to property rights. The resolution and Senator Lugar's floor statement also recognize the role played by the Millennium Challenge Corporation in making it happen:
"The MCC supported passage of the Legal Capacity of Married Persons law by stressing that potential MCC financing would be more effective if gender equity was addressed in Lesotho. The MCC's emphasis is consistent with continued U.S. efforts to improve the status of women worldwide, and a 2006 MCC gender policy that integrates gender analysis into all phases of Compact development and implementation to ensure that programs benefit both men and women."
See our earlier posting on the MCC's gender policy.
March 09, 2007
Danilovich Heads to the Hill: Questions I'd Like to Hear Answers To
Posted by Sheila Herrling at 03:49 PM
On Tuesday, John Danilovich faces the House Appropriations Subcommittee on State, Foreign Operations and Related Programs to defend the President's FY2008 $3 billion request for the Millennium Challenge Account. Budget requests for the past two years have been halved by a Congress that saw low disbursement rates as justification for poaching. This year, Congress will unfortunately be facing a similar situation...save for one major difference: a decision to cut funding could jeapordize the core credibility of the program itself. The MCC has ironed out many of the kinks associated with a slow start-up; countries, finally understanding the MCA is not a business-as-usual aid program, have worked very hard to propose locally-owned development programs. This is the year to give the MCA a fighting chance, to reward well the select group of countries deserving resources, while at the same time, demanding better communications from the MCC on the lessons learned and results of implementation to date.
I'd love to hear the following questions answered on Tuesday:
1. Implementation has been slow for the first few compacts -- an average of five months passes between signing and entry into force, and actual disbursements are less than half of what was projected for the first year. What are the three biggest lessons you have learned about the challenges of getting programs off the ground? How much of that delay is due to staying true to the country-ownership principle that distinguishes the MCA from other aid programs? How much is due to insitutional and staffing issues internal to the MCC?
2. Even assuming the MCC receives its full FY08 request, it still faces a situation of a lot of countries vying for a limited amount of resources. It seems that right now the MCC uses a business model that focuses on getting countries to the signing stage and it is unclear whether that business model is sustainable through the implemention stage. Have you given any thought to enforcing greater selectivity at the country selection stage to shift more attention to implementation and result-delivery issues? Do you have the right number and right skills set of staff to meet the demands of implementation?
3. The MCC has moved to larger compacts over the years. Is bigger necessarily better? How would the the ability to sign concurrent and/or longer-term compacts with countries change your current operating mode?
4. From the beginning, the administration described MCA as representing U.S. aid above and beyond existing development assistance. But when one looks closely at the administration’s budget increases, this promise is fulfilled at the global level but not necessarily at the country level. The FY08 foreign aid budget proposes cuts in traditional development assistance accounts (DA, CSH, ESF) in all MCA countries that also have USAID programs (9 of the 11 MCA compact countries). And the "economic growth" component of the FY08 foreign aid budget is cut by 16%. How did you coordinate with Randall Tobias in the "foreign aid reform" exercise? What is your take on the additionality of MCA assistance?
5. There are many in the NGO community who think that the MCC is too growth-focused; that it pursues a trickle-down approach to development that assumes that the poor will automatically benefit from macroeconomic growth. What exactly is the MCC's focus and what diagnostic tools does it use to assess whether the growth gains it anticipates from its programs benefit the poor? Does the MCC work with countries to assess the poverty-impact of the geographic areas it invests in -- e.g., does it target the "poorest of the poor" or what some people call "poor with potential"?
6. The threshold program provides assistance to countries that are close to passing the indicators test in the hopes of raising failed scores. Most of the programs appear to be stand-alone anti-corruption programs that might be useful in and of themselves, but seem unlikely to make the difference on a country's corruption indicator. Have any of the threshold programs actually made the difference between a failed and passing score?
7. Tell me the 3 things you are most proud of achieving since assuming the helm of the MCC.
What would you like to hear asked?
February 17, 2007
Not afraid of commitment...but can it deliver?
Posted by Sarah Rose at 11:55 AM
The MCC released its FY 2008 Budget Justification on February 5. By laying out its achievements of the past years and detailing plans for the future, the MCC hopes Congress is finally convinced to give it the full $3 billion requested by the President.
The MCC plans to spend the bulk of its budget (87%) on compacts, which would increase both in number and in size over the next couple of years. MCC expects to sign three to five more compacts by the end of FY 2007 (Lesotho, Morocco, Mozambique, Tanzania and Sri Lanka are cited) using a combination of FY 2007 money and balances from past years. This sounds as if MCC plans to commit all currently available funds by the end of the year, and with a Continuing Resolution capping '07 funding at $1.75 billion, demand for funding is expected to exceed available compact resources. This will leave -- they claim -- at least nine eligible countries to compete for FY 2008 funds. MCC hopes to sign compacts with up to six of these in FY 2008, projecting an average compact size of $400-$500 million (in a focused attempt to move more towards its original mandate of providing "transformative" levels of funding). And that would basically eat up the requested $3 billion. MCC counts the three newest additions, Jordan, Ukraine and Moldova as among the likely contenders for '08 funding.
MCC has spent the last couple of years working hard to streamline and improve the process by which they bring countries to the signing table. That hard work has paid off, and it is entirely conceivable that the MCC could sign another eight to ten compacts by end-2008. But what happens then? The MCC is great at committing money, but disbursing it has been another story. Implementation has been slow for the first few compacts -- an average of five months passes between signing and entry into force, and actual disbursements are less than half of what was projected for the first year. Staying true to the country-ownership principle that distinguishes the MCA from other aid programs justifies some of the delays. And MCC says that implementation will improve rapidly over the next few years as they work out their "new organization/new phase" kinks, just as the country selection process did. With up to eleven compacts coming in the next two years (doubling the current number), and eyes turning toward implementation results, it is imperative that it does. Here are some questions we're examining:
1. Is the lean and mean, predominantly Washington-based, transaction team business model of the MCC sustainable? Particularly in terms of supporting countries during implementation, not just getting them to the signing table?
2. Is greater selectivity at the country selection process necessary to shift greater attention to implementation and result-delivery issues?
Share your views.
October 11, 2006
Congressional Push-back on MCA Natural Resources Indicators
Posted by Sheila Herrling at 10:19 PM
Congressmen Tom Lantos and Earl Blumenauer of the House International Relations Committee sent a letter to MCC CEO Danilovich expressing their dissatisfaction (but understanding) that the MCC was unable to fully incorporate a natural resources management indicator into the FY2007 selection process. They also oppose the MCC's recommendation to place the Rights and Access to Land inidcator in the Investing in People basket.
Much agreement with the issues we raised in our earlier paper on the topic.
June 11, 2006
House Passes $2 billion for MCC
Posted by Sheila Herrling at 09:56 AM
On June 9, by a vote of 373 to 34, the House passed a $21.3 billion FY07 foreign operations bill, $2 billion of which is funding for the MCC. The overall bill is about 10% less than the President requested and 3% more than approved in FY06. The MCC approval is $1 billion less than the President requested, but not an entirely bad outcome for the MCC (see my earlier posting).
May 19, 2006
The Numbers are In -- House Approps Marks the MCC at $2b.
Posted by Sheila Herrling at 04:52 PM
Today, the House Committee on Appropriations released its mark-up of the FY07 foreign aid bill. It put the MCC at $2 billion, $1 billion below the President's request and $250 million above FY06 enacted. And, by far, the biggest cut within the development-focused aid programs.
How do I look at this outcome? Well, I think it's unfortunate that the MCC didn't get its full request. It has a dynamic new leader, is beginning to roll out more (and bigger) compacts, and it has a credible budget justification that showed it would likely use the $3 billion. But the $2 billion outcome is actually OK, and in this tight budget environment, OK is in many respects really good. I think the MCC should, overall, be relieved at the outcome, actively lobby the Senate Appropriations Committee (likely to meet after Memorial Day) to go above the House $2 billion, and use FY07 to roll out some big, bold programs and build an implementation track record that distinguishes it from other foreign aid agencies.
March 30, 2006
Danilovich Testifies on MCC Budget
Posted by Sheila Herrling at 12:50 PM
Yesterday, MCC CEO Danilovich testified in front of the House Appropriations Subcommittee on Foreign Operations chaired by Jim Kolbe (R-AZ) and attended by reps Lowey, Kilpatrick, Sherwood, Fattah, Jackson, and Rothman -- a good turnout. A readout below from our friends at Interaction shows that Committee memberswere a well informed bunch, engaged on many of the same issues I had raised in my Tuesday blog.
Here's Interaction's readout: I would love to hear from others in attendance.
The House Foreign Operations Subcommittee hearing on the MCA took place on March 29th. In his opening remarks Chairman Kolbe welcomed Ambassador Danilovich and stressed that the MCC is at a critical year. No longer a startup organization, the MCC needs to prove itself to the public. The Chairman noted a range of emerging criticisms that the MCC is slow to act, that it is funding the wrong types of projects, that it is not transparent, and that it remains uncoordinated with other aid agencies. He added that he does not share all these criticisms, but noted that Ambassador Danilovich has a difficult job to convince the Subcommittee that the MCC needs an addition $3 billion in the context of a tight budget environment. Ranking member Lowey added that she is concerned that MCC increases have come at the expense of development assistance accounts and that the President's promise of additionality appears to be broken on the country level.
In his opening statement, Ambassador Danilovich outlined the mission and the innovative aspects of the MCC, calling it "foreign aid with accountability." He reviewed the expected benefit of MCA funding to the poor in Georgia, Armenia, Madagascar, and Benin, among other countries. Ambassador Danilovich noted that he is seeking to accelerate the pace of compact approvals. At least 3 more compacts are expected to be signed in FY06 and 9-12 are expected in FY07. Ambassador Danilovich said that the MCC expects to run out of funds already appropriated in the second or third quarter of FY07. In light of the increasing size of country compacts, Ambassador Danilovich said he expects to be able to utilize the full $3 billion of the President's request. Without the assurance of a full appropriation, the incentive-driven policy reform effect of the MCC may be lost, he said.
In the question and answer session, Ambassador Danilovich received many questions on the budget projections and the poverty impact of the MCC. In response to a question put forward by Chairman Kolbe, Ambassador Danilovich noted that the size of compacts and the speed with which they are signed are increasing as the MCC staff and the MCA leads in the eligible countries become more comfortable with the process. He admitted that given the previous pace of up to five country compacts per year, it is unlikely that the MCC will sign a full 12 compacts in FY07. Questioned by Rep. Jackson on the poverty impact of the MCC as well as its history of funding infrastructure and financial sector projects, Ambassador Danilovich said that the MCC is articulating its openness to health and education projects, citing the examples of Ghana, Burkina Faso, and Mongolia. He said that the MCC measures impact on poverty through the life cycle its compacts. Asked by Rep. Jackson about the additionali ty of MCC funding, Ambassador Danilovich said that MCC funds are 100% additional in 2 of the eight compact countries. Asked by Chairman Kolbe about the use of discretionary 609(g) funding for compact development, Ambassador Danilovich said that the MCC finds 609(g) funding to be very useful and has utilized $33 million. Asked by Ranking Member Lowey about donor coordination, Ambassador Danilovich said that the MCC is actively coordinating with British and German donor agencies and looks forward to doings this more effectively as the organization matures
March 28, 2006
If I Were a Congresswoman, Here's What I'd Ask Tomorrow
Posted by Sheila Herrling at 04:06 PM
Tomorrow morning, CEO Danilovich heads to the Hill to defend the Presiden'ts $3 billion FY07 budget request. To date, the MCC has signed 8 compacts representing commitments of $2.7 billion.
"Fully funding the President's request for FY07 wil enable the MCC to sign 9 to 12 new compacts comprising commitments of more than $3 billion...the MCC will have total commitments approaching $6 billion with 20 or more countries."
"Conservative projections show that sometime in FY 2007, MCC's existing compact program funding levels of $3.8 billion will be exhausted. This would cover 14 to 15 compacts. Without full funding of the Presiden''ts request, MCC will not be able to commit to transformational compacts with the remaining eligible countries..."
I hope members of the House Appropriations Committee show up and engage with new CEO Danilovich tomorrow on what is going to prove to be an important year for the MCC. With two years of operations under its belt, the MCC no longer has the luxury of being a start-up organization. There's enough experience under its belt to inspire some probing questions tomorrow. If I were a Congresswoman on that Committee, here's what I'd like to hear Danilovich answer:
1. Tell me, with concrete examples, how I talk to my constituents back home about the importance of foreign aid in general and how the MCC is not going to be "just another aid agency."
2. MCA funding was to be an additional and complementary foreign assistance tool, building on the investments in human development that traditional development accounts make. It appears that the increased request for MCC funds comes at the expense of other core development accounts this year. Do you see evidence that this is true, and how will MCA's economic growth emphasis have the intended poverty reduction impact, without the foundational investments in human capital that the core development accounts make?
3. Your Congressional Budget Justification shows that you can use the $3 billion request to fund the remaining eligible countries. If you do that, and considering that compacts last 5 years and countries can't have concurrent compacts, does that mean we won't need to appropriate substantial funding in FY '08-'10?
4. The MCA mission laid out in the original legislation is economic growth and poverty reduction. The MCC has extensive measures for assessing economic growth prior to the compact being signed, but not to assess the expected poverty impacts and the distributional impact of that growth. What diagostic tools does the MCC use to assess the expected poverty impacts and the distributional impact of growth prior to the compact being signed?
5. Civil society outreach and participation was one of the hallmarks of the MCC model, yet the quality has been uneven across countries. Would you support greater use of 609(g) monies and/or threshold program monies to support better consultation and participation?
6. The MCC gets high marks for the level of transparency in its selection critieria and public availability of its performance indicators. That said, greater transparency can be brought to bear in eligibility decisionmaking, disbursements and, eventually progress against stated benchmarks. Do you agree with CGD's transparency agenda?
7. Is the Threshold Program delivering on its stated objectives and do you think there is room to use the Program differently? For example, to support improvements in fiduciary institutions and processes or to enhance more meaningful civil society participation in priority setting and evaluation?
Understanding that I'd probably exceed my allotted time, I'd have to stop there. But, it'd be a good start...and, there's always the ability to submit questions to the record for written response.
What do you all hope will be asked?
March 08, 2006
Barak Obama Has At Randal Tobias
Posted by Sheila Herrling at 09:45 PM
Amongst a bunch of more seasoned foreign aid senators, newcomer Barak Obama asks the most probing questions of Randal Tobias at his Senate Foreign Relations Committee nomination hearing, including one on the MCA. My good friends at the GII did a nice blog on this event -- kudos guys!
January 25, 2006
MCC, Foreign Aid & Transformational Diplomacy
Posted by Kaysie Brown at 10:30 AM
Much of last week’s presentations on the new "transformational diplomacy" agenda by officials such as Secretary Rice and Director for Policy Planning at the State Department Steve Krasner focused on the implications of the move for USAID. But what does "transformational diplomacy" hold in store for the Bush Administration's other, newer US aid agency, the MCC?
It seems that for now the MCC will remain a distinct entity, with extensive "coordination" with Tobias, who has been chosen to take on a dual role as both the Administrator of USAID and a newly created position as Director of Foreign Assistance at State. Secretary Rice, at a presentation last week in front of USAID staff, was explicit that initiatives such as the MCC and PEPFAR would remain distinct entities, albeit with greater interaction among USAID and State. So while the MCC will technically remain unaffected by this round of reorganization, the changes nonetheless brings about some potentially tricky questions.
For instance, will this new foreign aid structure have any effect on MCC Board decisions? The dual-hat role of new aid czar Tobias could cause some tension in MCC Board meetings, where key decisions are made regarding country eligibility and program funding approval. The presence of another representative from State (Secretary Rice chairs the Board) risks further importing political considerations into the body; at the very least, Tobias' involvement may send the wrong signals to applicants, who could perceive the MCC as no longer exempt from broader political considerations.
Additionally, what exactly does Secretary’s Rice statement -- that the MCC will work more synergistically with USAID and State -- mean both at an operational level here in DC and on the ground? Do the architects of transformational diplomacy envision coordination by applicants? Interagency links here in Washington? Or something less formal?
And will more closely joining up the efforts of USAID and State on foreign assistance -- an important plank of the Secretary's plan to reorient diplomacy to better serve our national security interests -- leave the MCC on the periphery of the larger foreign aid agenda? It is too early to say for certain. But the explicitly political thrust of the recent changes underscores a challenge the MCC has faced since its inception: proving that it has the mandate and the will to remain independent, impartial and de-political by rewarding good performers, not necessarily strategically important states.
December 23, 2005
Reforming Foreign Aid: Where Does the MCA Fit?
Posted by Kaysie Brown at 11:37 AM
The Financial Times recently reported on a rumored shake-up in the way US foreign aid is administered. According to the FT and flagged by Stewart Patrick, a Fellow here at CGD, the President may soon propose the centralization of foreign aid, with certain key agencies - principally USAID - placed within State's existing chain of command. According to the anonymous leakers of this revelation, the changes would revitalize foreign aid by bringing development assistance explicitly into a political sphere. In essence, the proposed reorganization attempts to make aid more effective by integrating it into the calculus of national interest, alongside traditional national security pillars such as defense and diplomacy. While much of the ensuing talk has been focused on the repercussions that this might have for USAID, an already marginalized agency in the eyes of many, the proposal could also bear heavily on the fate of the MCC.
The FT briefly mentioned the MCC in its December 14th article, Making Aid Effective, noting:
President George W. Bush has twice launched big foreign aid programmes: the Millennium Challenge Account and the HIV/Aids Initiative. Reality has not always matched rhetoric: the administration failed to secure Congressional funding for the MCA.
While the article made a good argument against incorporating USAID into State, it neglected to localize the MCC within the overall debate over the direction and design of a consolidated foreign aid system. In my opinion, the proposal could impact the MCC in two distinct ways:
1. The MCC could be incorporated into the newly streamlined organizational chart, with some oversight role for the Aid Czar at State over the Corporation's operations. This could ineluctably lead to the politicization of the MCC, which is anethema to the original objectives and organizing philosophy of the Corporation.
2. In the second scenario, the MCC doesn't get incorporated which, oddly enough, could be just as detrimental. If the MCC is left behind, mere flotsam in the wake of a wholesale reorganization of the aid community, it risks becoming marginalized as the center of gravity in the US aid community shifts over to the new organization. This marginalization could be exacerbated by the short attention span of the MCC's political overseers, who will be more likely to fight for the new body at budget time.
Whether or not this foreign aid talk is all hot air, as this discussion moves forward the MCA will surely be in the hot seat to prove its commitment to its organizing principle of depoliticized aid.
November 04, 2005
Tough Road Ahead for the MCC
Posted by Kaysie Brown at 02:27 PM
This week has turned out to be tough for the MCC. On Tuesday evening, House and Senate conferees approved by voice vote the FY 2006 Foreign Operations appropriations bill in the amount of $20.9 billion, nearly $2 billion less than President Bush had pushed for. Far and away the biggest loser from this affair was the MCC, which accounted for over half of the foreign ops budget reduction.
The Administration had requested $3 billion for the MCA, but lawmakers, citing tight budget constraints and disgruntled by the MCC's slow performance to-date in signing compacts and spending the money, authorized only $1.77 billion for FY 2006. According to an editorial in today's NYT, entitled Where’s That Veto Threat? , "budget cutters in Congress say that until the program starts actually giving money to poor people, they're hard pressed to give it money."
A smaller than originally envisioned budget was to be expected, but it is disheartening nonetheless. As discussed by CGD in a recent publication, with such tight purse-strings foisted upon the MCC, it will be increasingly difficult to fund Compact countries in accordance with MCC’s transformative aims. And with the Board meeting on Tuesday to select an ever-growing number of eligible countries, such financial constraints make it exceedingly difficult to square the circle of having less money and more qualifying countries itching to get Compact funding.
The appropriations bill language regarding the MCC does have some perks. Chief among them, it calls for a report to Congress on the governance structures for indigenous civil society participation in MCC countries. It's unfortunate, however, that appropriators didn't draw more concretely from some good language in the reauthorizing bill, like:
• Compact proposal timelines: which would have directly addressed Congress'' concerns about the time MCC takes from eligibility to disbursement of funds.
• Allowing for concurrent and subsequent compacts in a country: rewarding those countries making significant progress by giving larger amounts of funding.
The bill is expected to be approved by both the House and Senate and then sent to Bush for his signature, which may very well take place early next week.
October 28, 2005
MCC Reauthorization Language
Posted by Sheila Herrling at 11:11 AM
Just a note to interested readers that Congressmen Henry Hyde (R-IL), Chairman of the House International Relations Committee, and Tom Lantos (D-CA), the Committee's ranking Democrat, introduced a 3-year reauthorization of the MCC with language that in some cases appears productive and in some cases appears worrisome. Word has it that Congress will not take up this piece of legislation before the recess. In the next week or so, we will be looking more closely at issues in the legislation such as:
-- increased Congressional reporting and consultation requirements
-- number of compacts per country and capping of compact durations
-- calls for enhanced poverty impact assessments of MCC programs
-- call for increased staff, but without guidance on skills set
-- transfer of MCC from the Consolidated Appropriations Act of 2004 to the Foreign Assistance Act
I would welcome any comments from those of you following this issue. Of particular interest is the impact of transferring the MCC to the FAA with its reporting, procurement and legislative mandate directives.
September 30, 2005
Nomination hearing for Danilovich to be CEO of the MCC
Posted by Steve Radelet at 12:53 PM
This week the Senate Foreign Relations Committee held a nomination hearing for John Danilovich to be Chief Executive Officer of the Millennium Challenge Corporation. CGD's Kaysie Brown, our new research assistant working on MCA related issues, attended the meeting and provides the following report:
Overall, the Committee-represented at the hearing by Committee Chair Sen. Richard Lugar (R-IN), Sen. Russ Feingold (D-WI) and Sen. Norm Coleman (R-MN)-did not appear to object to Mr. Danilovich, who was subjected to mostly polite questioning by the three Senators in attendance. Instead, the Senators' questions focused much more on concerns about the MCC itself, rather than on Mr. Danilovich as CEO.
On the positive side, Mr. Danilovich sounded many of the right notes when the discussion turned to refining and strengthening the government corporation. In particular, Danilovich is supportive of enhancing MCA guidance to countries earlier on in the process as well as of providing much larger compacts to eligible countries, which he believes is key to guaranteeing the transformative nature of the program.
Danilovich's support on Capitol Hill could be a valuable asset for the MCC. Indeed, the strength and vitality of the MCC will be based in large part on the presence of a CEO who can reach out to Congress and mobilize bipartisan support for the program, which has been the subject of increasing questions and concerns over the past several months.
However, the relatively light scrutiny given to this nomination was offset by consistent rounds of questions about the effective and timely use of budget funds. With the recovery effort in the Gulf Coast region and the war in Iraq gobbling up ever larger pieces of the federal pie, the Senators returned several times to the pressing issue of speeding up MCA projects and delivering results as a way of increasing the confidence level of Congress. As Senator Lugar stated:
As new compacts are being concluded, we must ensure that U.S. taxpayer funds are closely monitored and the process for selecting countries and evaluating proposals is carried out in a transparent process...The enthusiasm members of Congress will have for the MCC in a difficult budgetary climate will depend greatly on the results the agency achieves and the effeciency of its activities.Other queries concerned MCC's monitoring and evaluation procedures in compact countries, the role of contractors on the ground in M&E, preventing duplication of programs by other donors such as the World Bank, and the relationship between USAID and the MCC. These are the questions that supporters of the MCC will be asking, and Danilovich and his team would do well to address, as the nomination process continues.
It is expected that the Senate Foreign Relations Committee will meet as soon as next week at a business meeting to vote on Mr. Danilovich. If he passes this stage, which looks likely, the nomination will go to the floor for final approval by unanimous consent by mid-October.
Sen. Lugar's Opening Statement
September 26, 2005
Congressional Republican Study Committee Would Eliminate MCC Funding
Posted by Steve Radelet at 12:55 PM
A plan released on Sept. 21 by the Congressional Republican Study Committee (RSC) proposes dramatically cutting expenditures on a wide array of programs, including eliminating the Millennium Challenge Corporation. The RSC report, dubbed "Operation Offset," calls for cuts across the government totaling $139 billion for 2006. Of that, $1.75 billion would come from money intended for the MCA and $900 million would come from other foreign aid spending, including level funding for peacekeeping operations, the Global AIDS Initiative and the Peace Corps. The RSC report was produced by Rep. Mike Pence (R-IN) and Rep. Jeb Hensarling (R-TX).
My view? The proposals on foreign assistance would have only a minor impact on the budget deficit but would have a major impact on the ability of the U.S. to act in its national interest abroad, for two reasons. First, these cuts would substantially undermine the credibility of the President, and of the United States more broadly, at a time when much of the world questions our motives and objectives. The President boldly proposed both the MCC and the Global AIDS Initiative, and both were strongly endorsed by Congress. To eliminate one and level fund the other would reinforce the view that the United States was never fully serious about these initiatives, and that they were designed just to garner favorable publicity. This would raise serious doubts about future "commitments" made by the President.
Second, and more importantly, these cuts would directly undermine the ability of the United States to achieve some of its most important foreign policy goals at a critical juncture in U.S. global leadership. Foreign assistance is a key tool for the United States in global leadership towards promoting its vision for a more open, prosperous and democratic world, especially through innovative mechanisms like the MCA and the AIDS Initiative.
At a time when an increasing number of groups around the world promote radical ideologies that blame the United States and the values we and others espouse as the problem, not the solution, the United States needs poor countries as well as rich countries to support the values we champion, and to believe that they, too, can climb out of poverty and achieve economic and political freedom. It is directly in our national interest to help low-income countries achieve these goals, and these innovative programs are important instruments towards that end. Ironically, these initiatives sprang from widespread recognition that our international efforts were insufficient to meet our goals, and to cut them now would be short-sighted and against our own long-run interests.
May 17, 2005
MCC's First Year of Operations - GAO Report Highlights
Posted by at 10:18 AM
For two days, April 26 and 27, the United States Congress held hearings on the Millennium Challenge Corporation, for the Senate Foreign Relations Committee and the House International Relations Committee, respectively. The Congress wanted a full report on the MCC's first year of operations.
In his introductory remarks during the HIRC hearing, Chairman Henry Hyde (IL), expressed some growing concern about the MCC's progress:
"The same observers who once received this initiative with such optimism now feel underwhelmed by the cautious pace and the modest scope of the MCA writ large...a program struggling to get off the ground and fund