Download Millennium Challenge Corporation

Background and Overview of
MCC Processes
2007
Millennium Challenge Account
 Formally established in 2004 as a new, independent government
corporation managed by a CEO and overseen by a Board
 Fulfills President Bush’s 2002 Monterrey commitment to “provide greater
resources to countries taking greater responsibility for their own
development”
 Illustrates that development is a key pillar in our national security strategy - helps to build democratic societies
 Mission: Poverty Reduction Through Economic Growth
 MCA resources add to other U.S. aid
Policy, Ownership & Results
Make aid more effective
Sound governance,
economic and social
policies
Spur private investment and increased
trade, the real
engines of growth
Maximize growth benefits by giving the
poor access to accountable institutions,
education and health, and economic
opportunity
Broad countryownership of
development efforts
Clear objectives,
measurement of results
and transparency
Increases responsibility
Builds capacity
Yields better results
Increase accountability
Contribute to development success
Eligibility
 MCA eligibility intended as a reward to countries for good policy
performance and be an incentive to improve further
 Two competitions in FY07: Low Income and Lower Middle Income
 Countries measured against others of similar income level
 Eligibility based on scoring above the median on Corruption and on at
least half of 16 indicators in each of the three policy categories:
 Ruling Justly
(pass 3 of 6)
 Investing in People (pass 2 of 4 indicators)
 Economic Freedom (pass 3 of 6 indicators)
 For FY07, MCC adopted as non-binding supplements two new
indicators, a Natural Resources Management Index and a Land Rights
and Access Index, and will propose their full adoption for FY08
 Eligible Countries must maintain strong policy performance as measured
by the indicators as a condition for continued eligibility
Indicators Used in FY07
Ruling Justly
Investing in People
Economic Freedom
Natural Resources
 Civil Liberties
(Freedom House)
 Public Expenditure on
Health (Nat’l)
 Cost of Starting a
Business (WB/IFC)
 Land Rights and
Access Index
(UN/IFAD, WB/IFC)*
 Political Rights
(Freedom House)
 Immunization (WHO)
 Inflation (IMF, WEO,
IFS)
 Natural Resources
Management Index
(CIESIN, YCLEP)*
 Voice and
Accountability (WBI)
 Primary Education
Spending
(WB EdStats)
 Fiscal Policy (IMF,
WEO, other)
 Government
Effectiveness (WBI)
 Girls’ Primary
Education Completion
(WB EdStats)
 Days to Start a
Business (WB/IFC)
 Rule of Law (WBI)
 Trade Policy
(Heritage)
 Control of Corruption
(WBI)
 Regulatory Quality
(WBI)
WBI: World Bank Institute
WB/IFC: World Bank/Int’l Finance Corp
IFS: Int’l Financial Statistics WHO: World Health Organization
WEO: World Economic Outlook
UN/IFAD: Int’l Fund for Agricultural Development
CIESIN: Columbia U Center for International Earth Science Information Network
YCLEP: Yale Center for Environmental Law and Policy
* Non-binding Supplemental information for FY07
Country X Indicator Ranking (Pass)
Country Y Indicator Ranking (Does not pass)
Current MCA Eligible Countries
 FY07: 2 new Low Income Countries* (LIC) and 1 Lower Middle Income
Country** (LMIC) selected
 25 countries currently eligible to compete for MCA Compact funding
Africa
Benin
Burkina Faso
Cape Verde
Namibia
Ghana
Madagascar
Mali
Morocco
Mozambique
Senegal
Lesotho
Tanzania
Latin America
Bolivia
El Salvador
Honduras
Nicaragua
Eurasia
Armenia
East Timor
Georgia
Mongolia
Sri Lanka
Vanuatu
Jordan**
Ukraine*
Moldova*
MCA Funding
 Congress has appropriated to MCC a total of $5.99 billion for FY04 through FY07.
MCC has to date committed $3.39 billion -- just over $2.98 billion to 11 Compacts
and nearly $310 to 13 threshold programs. MCC expects to commit substantially
more in the next year to a robust pipeline of proposals
 MCA money is “no-year” grant money and does not expire. Once a Compact
enters into force the full amount is obligated and set aside
 There are no limits on Compact amounts that countries can request
 MCC has no inherent preference as to sectors or activities proposed, but elements
must spur growth and poverty reduction
 Final Compact amounts will be primarily based on program quality, estimated
costs, and available funds
 For Compact-eligible threshold countries, successful threshold program
commencement is a precondition for Compact signing
MCA Compact Funding
(in millions of dollars)
Nearly $3.0 Billion for 11 Compacts Approved
$460.94
El Salvador
$109.8
Madagascar
$110 Cape Verde
$295.3 Georgia
$461 Mali
$307.3 Benin
$215 Honduras
$175 Nicaragua
$547 Ghana
$235.65
Armenia
$65.69
Vanuatu
Country Ownership Critical
 Countries establish and fund core teams with relevant skills to lead Compact
proposal development
 Countries consult with civil society/private sector to develop Compact
program proposals consistent with overall development efforts and an
approach to economic growth shared by the country and MCC
 Proposals rigorously “due diligenced” on consultation process, growth and
poverty reduction potential, coherence, measurable development results and
impact, technical and administrative feasibility and environmental and social
impacts
 Countries also work with MCC to evaluate and establish structures for fiscal
accountability, high procurement standards and effective program
management, and to set performance benchmarks
 Once Compact proposal is refined, MCC Board-approved and formally
signed, countries must staff up and implement program activities, with MCC
guidance and oversight
Focus on Growth and Poverty Critical
 Accelerating economic growth sustainably needs to be a central part of any
successful poverty reduction strategy
 Increasing levels of private investment, both domestic and foreign, and
enhancing the efficiency of the economy, are often essential elements of a
sound growth strategy
 MCC grant funds represent a new opportunity for eligible countries to look
for ways of accelerating investment and growth
 Constraints Analysis: Eligible countries begin with an economic analysis to
identify critical barriers to economic growth
 A small national team, including economists and private sector representatives,
undertake this assessment
 The results of this analysis form the basis for consultations with MCC that lead
to mutually agreed document, the Joint Framework, which establishes the
economic basis for the development of a proposal
MCC is Results-Based
 Early, ongoing engagement with partners provides detailed
guidance on core teams, consultation processes, Compact
proposals and governance of the process
 Specific objectives and beneficiaries, intermediate performance
and results benchmarks, and measures of impact and success
are agreed on in the Compact
 A monitoring and evaluation plan is an integral part of each
Compact, to promote measurable growth and poverty reduction
 Quarterly disbursements depend upon planned activities
meeting agreed benchmarks for program implementation
Characteristics of a Strong Program
 Promotes faster, sustainable growth and poverty reduction
 Builds human and institutional capacity; improves relevant policies
 Creates complete and comprehensive approach to new economic
opportunities
 Reflects inclusive domestic consultation and broad support for priority
elements
 Identifies specific activities, beneficiaries, measurable results, and
development impacts, as well as implementation strategy
 Builds on development strategies and other donors’ activities
 Economically, socially, technically and environmentally justifiable
Steps in the MCC Process
Step 1: Proposal Development & Program Design
Step 2: Due Diligence and Program Refinement –
Analysis of Viability and Sustainability of
Proposed Activities, and of Process Quality
Step 3: Mobilization and Start-up
Step 4: In-country Implementation
Step 1: Proposal Development &
Program Design
 Meet with MCC on Compact Process
 Identify and fund full-time senior Point of Contact and core
team to manage process
 Initiate broad and meaningful consultative process
 Identify primary constraints to economic growth and poverty
reduction, and objectives, potential activities (and
beneficiaries) for MCA funding
 Dialogue with MCC on proposal activities
 Countries may receive MCC funds for elements of Compact
development or implementation, if appropriate
Step 1: Proposal Development &
Program Design (cont.)
 Country presents MCC with a proposal that reflects analysis of
growth constraints and poverty reduction
 If the proposal review is positive, MCC authorizes formation
of an MCC Transaction Team (TT)
 TT engages country team on growth opportunities, poverty
reduction, and the consultative process
 TT prepares an Opportunity Memo to the MCC Investment
Committee requesting full “due diligence” resources
Step 2: Due Diligence and Program Refinement Detailed Technical Analysis of Proposed Activities
Management
Oversight and
Fiscal
Accountability
Environmental and
Social Safeguards
Implementation
Feasibility and
Sustainability
Consultative
Process and Donor
Coordination
Due Diligence
Plans for Monitoring
and Evaluation
Impacts on Growth ,
Poverty Reduction
and Beneficiaries
Step 2: Due Diligence and Program
Refinement
 MCC and Country teams undertake implementation planning (e.g.
procurement and monitoring and evaluation plans, accountable entity,
financial mechanisms)
 Once due diligence and program refinement complete, TT prepares an
Investment Memo for MCC Investment Committee detailing proposed
Compact elements and implementation plans
 Country team continues to work with MCC on final Compact to reflect
agreed Program
 Based on Investment Memo, Investment Committee reviews the final
Compact elements and requests MCC Board approval
 Once the Board approves the Compact, MCC notifies Congress of its intent
to enter into a Compact
Step 3: Mobilization and Start Up
 Legal documentation completed
 Compact signed by Country and MCC
 Accountable entity staffed and audit/marking procedures
negotiated
 MCC and country experts complete documentation to permit
entry-into-force
 Baseline data for monitoring and evaluation collected
 First disbursement is made
 Fiscal and procurement agents and contractors secured
Step 4: In-Country Implementation
• Compact provisions in effect
• Partner country teams managing implementation
• Country teams begin providing Quarterly progress,
Procurement performance and Financial reports
• Small MCC staff in place to guide, advise and assist
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Opportunities for Civil Society/Private
Commercial Sector Involvement
 Participate in Country-led Consultative Process that identifies
key constraints to and opportunities for economic growth and
poverty reduction
 Carry out Due Diligence of Compact proposal components (in
response to MCC procurements)
 Participate in accountability processes during Compact
implementation
 Compete in country-led, open, program procurements related
to implementation
Procurement Practices
• Procurements by MCC for due diligence services will be listed under
“MCC Procurements” and “Consultants” at:
http://www.mcc.gov/jobsandprocurement/
• The Millennium Challenge Corporation (MCC) funds contracts under
its Compacts to recipient countries. These contracts are solicited,
awarded and administered by Compact countries through an
Accountable Entity in each country.
• Such compact-funded, country “Program Procurements” are done under
MCC-agreed “Procurement Guidelines,” which apply open, fair and
competitive procedures used in a transparent manner. These
procedures apply to all firms -- US-based, international and
Compact-country.
• Significant “Program Procurements” will be linked to the www.mcc.gov
website and posted to the UN site, www.devbusiness.com, and the World
Bank’s Development Gateway Market, www.dgmarket.com
Threshold Program
• Threshold program reinforces incentives for good
performance and further improvements
• Threshold countries close on the indicators and have
demonstrated reform commitment
• Threshold countries may propose funding to improve on MCC
indicators, and raise chances of Compact eligibility
• MCC to date has funded 13 threshold programs totaling nearly
$310 million
• If a threshold country becomes eligible for Compact funding,
significant progress on threshold program implementation is a
prerequisite for Compact signing
Policies Matter
MCC Eligibility FY 2004-07
Threshold Countries
Africa
Latin America
Guyana
Kenya
Paraguay
Malawi
Peru
Uganda
Zambia
Sấo Tomé and Principe
Burkina Faso*
Tanzania*
Niger
Rwanda
Eurasia
Albania
Indonesia
Kyrgyz Republic
Jordan*
Moldova*
Philippines
Ukraine*
East Timor*
Yemen**
* Burkina Faso, Tanzania, East Timor also became eligible for Compact funding in FY2006,
and Jordan, Ukraine and Moldova in FY2007
** Yemen was suspended from the threshold program in FY2005 and reinstated in February 2007,
after addressing corruption and governance deterioration
Overview: MCC Africa Engagement


Engaged with 20 countries:
Compact:
Cape Verde, Madagascar, Benin, Ghana, Mali
Eligible:
Burkina Faso*, Lesotho, Morocco,
Mozambique, Namibia, Senegal, Tanzania*
Threshold:
Kenya, Malawi, Sao Tome and Principe, Uganda, Zambia, Niger, Rwanda
Over $1.5 billion approved:
COMPACTS
THRESHOLD PROGRAMS
Cape Verde -- $110 million
Malawi -- $20.92 million
Madagascar -- $109.8 million Burkina Faso -- $12.9 million
Benin -- $307.3 million
Tanzania -- $11.15 million
Ghana -- $547 million
Zambia -- $22.7 million
Mali -- $461 million
Kenya -- $12.7 million
Uganda -- $10.4 million
* Current eligible countries with active threshold programs
Compact Countries in Africa
Madagascar:
 First MCC Compact, signed April 2005; $109.8 million, 4-year program includes
Reforms in Land Tenure and Financial Sector, and Agribusiness Services. Collaborating
with World Bank on National Land Reform Program
Cape Verde:
 $110 million, 5-year Compact signed July 2005. Focus on watershed
management/agriculture development, infrastructure (roads, bridges, port development),
private sector development. Partnered with the World Bank on roads and bridges aspects
and the IFC’s PEP Africa on private sector development
Benin:
 $307.3 million Compact signed in March 2006. Includes port infrastructure and
management reform, financial and business services modernization, and justice system
and land tenure reform to enhance enterprise development and economic activity
Compact Countries in Africa, cont.
Ghana:
 $547 million Compact signed August 2006 is to improve productivity and
commercial performance of agriculture, which employs over 60% of
Ghana’s labor force, upgrade road and ferry transportation to support
agriculture and social services, and to improve education, water and
sanitation, power and other services in rural areas
Mali:
 $460.8 million Compact signed November 2006 is to expand and modernize
irrigated agriculture and related policies, as well as improve the international
airport and develop nearby a platform for industrial activity, including agroprocessing
African Threshold Program/Eligible
Countries
Burkina Faso:
 Currently, a $12.9 million threshold program funded by MCC focuses on
improving Girls’ Education, including by constructing new classrooms and
raising awareness of the issue
Tanzania:
 Tanzania’s $11.15 million threshold program focuses on Controlling
Corruption by improving public procurement, establishing a Financial
Intelligence Unit, building monitoring capacity in the non-governmental sector
and strengthening the rule of law
African Threshold Program Countries
Malawi:
 Malawi has a $20.92 million threshold program
 Focuses on Controlling Corruption; strengthens legislative and judicial branches
and independent media coverage, builds the capacity of lead agencies, and
enhances the role and work of civil society organizations
Zambia:
 Zambia has a $22.74 million threshold program
 Program will fight corruption and improve government effectiveness. Its threepronged strategy focuses on preventing corruption in targeted government
institutions, improving public service delivery to the private sector, and
improving border management of trade
African Threshold Program Countries, cont’d
Kenya:
•
•
Two-year, $12.7 million program to reduce corruption by improving oversight, transparency,
records management, regulatory quality and overall efficiency (e.g. via online systems) in the
public procurement system
Specific attention to strengthening capacity and management in health care procurement and
delivery, to reduce and prevent waste, fraud and abuse
Uganda:
•
•
Two-year, $10.4 million program to strengthen and develop oversight, financial management
systems, auditing, professional certification and registry programs, public information
dissemination and administrative efficiency in public procurement watchdog agencies
Specific efforts will be made to enhance the role and capacity of civil society organizations to
engage effectively with public agencies, including by improving access to information and
legal support.
Overview: MCC Western
Hemisphere Engagement
 Engaged with 7 countries
 Currently, 4 programs approved for over $875 million:
Compact
Honduras -- $215 million
Nicaragua -- $175 million
El Salvador -- $460.9 million
 Currently Compact Eligible:
Bolivia
Threshold
Paraguay -- $34.65 million
Threshold Eligible:
Guyana
Peru
Western Hemisphere Compact Countries
Honduras:



MCC’s second Compact, signed in June 2005; $215 million over 5 years
Focus on upgrading critical Northern highway (including road management), farm-to-market roads, agricultural
productivity, access to credit and know-how
Impact will be higher incomes, lower transportation costs and enhanced capacity to trade locally, regionally and
globally. Complements CAFTA
Nicaragua:



MCC’s third Compact, signed in July 2005; $175 million over 5 years
Program to strengthen property rights in the north, upgrade key roads, institutionalize road maintenance,
improve farm and forestry water supply, and enhance rural farm, enterprise and agribusiness development
Impacts include higher profits/wages, lower transportation costs, more business start-ups and successes, and
better capacity to trade. Complements CAFTA
El Salvador:



Signed in November 2006; $460.94 million over 5 years
Program will provide education and training and basic services to communities in the north, improve
transportation infrastructure, and enhance rural agricultural productivity
Impacts include enhancing the livelihood and welfare of hundreds of thousands of poor Salvadorans through
improved and lower cost power, water, transport and financial services. Complements CAFTA
Western Hemisphere Threshold
Program Country
Paraguay:
 Paraguay has a $34.65 million threshold program
 The program aims to reduce corruption, lower tax
compliance and cumbersome business registration
procedures
Overview: MCC Eurasia Engagement

Engaged with 14 countries**

Over $700 million approved:
Compact
Threshold
Georgia -- $295.3 million
Albania -- $13.85 million
Armenia -- $235.65 million
Philippines -- $21 million
Vanuatu -- $65.69 million Ukraine -- $44 million
Jordan -- $25 million
Indonesia -- $55 million
Moldova -- $24.7 million

Currently Eligible:
Compact
Threshold
Mongolia
Sri Lanka
East Timor
Jordan*
Ukraine*
Moldova*
Kyrgyz Republic
Yemen
* Ukraine, Jordan and Moldova are Compact-eligible for FY2007, and have active threshold programs
**Yemen was reinstated to threshold eligibility in Feb. 2007, after addressing corruption and governance deterioration
Eurasia Compact Countries
Georgia:
 $295.3 million, 5-year Compact signed in September 2005
 Focus on regional infrastructure (roads, gas pipeline, agricultural productivity,
municipal services, enterprise development) to unlock growth
Armenia:
 $235.65 million, 5-year Compact signed in March 2006
 Focus on rural road rehabilitation and irrigated agriculture to raise agricultural
productivity and reduce rural poverty
Vanuatu:
 $65.69 million, 5-year Compact signed in March of 2006
 Focus on civil works reconstruction of roads, wharfs, an airstrip, and
warehouses on eight islands, and support with program administration
Eurasia Threshold Programs
Albania:

Albania has a $13.85 million threshold program

Aims to enhance performance on Ruling Justly and Economic Freedom via improvements in tax
administration, public procurement and business registration
Ukraine:

In December 2006, a two-year, $44 million threshold program aimed at reducing corruption was
signed with the Government of the Ukraine

Program will strengthen civil society monitoring and exposure of corruption, promote judicial reform,
improve government ethics and administrative standards and relevant regulations, as well as root out
corruption in higher education admissions
Philippines:

In July 2006, the Government of the Philippines signed a 2-year, $21 million threshold program
funded by MCC

Program to fight corruption by strengthening Office of the Ombudsman, which prosecutes senior
officials, and revenue and customs procedures in the Department of Finance
Eurasia Threshold Programs, Cont.
Jordan:


In October 2006, $25 million threshold program signed
Program will strengthen local democratic governance capacity and modernize customs services
Indonesia:



In November 2006, a $55 million threshold program was signed with the Government of Indonesia
Program will substantially improve immunization rates for key childhood diseases and improve health
Program will advance Indonesia’s battle against corruption through judicial reform and strengthening
the Corruption Eradication Commission and Financial Transactions Report and Analysis Center
Moldova:


In December 2006, the MCC signed a $24.7 million threshold agreement with the Government of
Moldova
Program will underpin anti-corruption efforts involving the judiciary, the health care system, the main
anti-corruption Center, and the tax, customs and police agencies
MCC Web Site Information
• At www.mcc.gov you can find useful information, e.g.:
 The full country guidance package, including MCC
points of Contact, at “Countries” link
 Candidate country indicator ranking sheets
 MCC background, press releases, fact sheets
 MCC partner country pages, including links to
government web sites and key contacts
 Compact and Threshold program documents
• If you need help finding information on the website,
either e-mail an inquiry via the web site, at “Contact us,”
or call MCC at 202-521-3600