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MCC’s Selection Process:
Monitoring Government
Performance
Thomas Kelly
Senior Director, Economic Policy
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Millennium Challenge Corporation
• Fulfillment of Monterrey commitment to “provide
greater resources to countries taking greater
responsibility for their own development.”
• Established in law January 2004.
• Mandate is to “reduce poverty through
economic growth”.
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Based on Key Lessons of Aid
• Policies
• Country Ownership
• Results
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Policy Performance
• Aid is most effective when it reinforces good
governance, investments in people, and
economic freedom
• Why MCC was created - Reward and
Incentive
• Selective Program – one tool in USG toolbox
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Eligibility for MCC Programs
• Quantitative measures of policy performance
– Objective third party in indicator institutions
– 17 indicators in 3 categories
• Ruling Justly
• Investing in People
• Economic Freedom
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Country Selection: Policies Critical to
Growth & Poverty Reduction
Ruling Justly: A country’s commitment to…
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promote political pluralism,
equality and the rule of law;
respect for human and civil rights;
private property rights;
transparency and accountability of government;
commitment to combating corruption
Investing In People: Investments in
– broad based education
– public health
– sustainable management of natural resources.
Encouraging Economic Freedom: economic policies that promote…
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trade
macroeconomic stability
private sector growth
sustainable management of natural resources
market forces
respect for workers rights.
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Indicators: 3 Categories
Ruling Justly
Economic Freedom
Investing in People
Civil Liberties
Business Start-Up
Public Expenditure on Health
as percentage of GDP
Political Rights
Inflation
Immunization rates: DPT3 &
Measles
Voice & Accountability
Fiscal Policy
Public Expenditure on
Primary Education as
percentage of GDP
Government Effectiveness
Trade Policy
Girls Primary Education
Completion Rate
Rule of Law
Regulatory Quality
Natural Resource
Management
Control of Corruption
Land Rights and Access
Transp. in Foreign Aid Administrat.
Transparency in Public Procurement
Accounting of Public Expenditures
TI Corr. Barometer
TI Corr. Barometer
Gallup World Poll
IFAD CPIA
Global Integrity
FH Crossroads
ADB CPIA
Policies and Institutions Citizen Perceptions
Budget Transparency
Info on Services for Disadvantaged
Enforcement of Laws/Standards
Legal Rights to Public Information
Legal/Reg/Judicial, Transparency
Whistleblower Protections
Media Coverage of Corr. Allegations
Investigation of Corr. Allegations
Corruption Laws/Standards
Effectiveness of Indep. Auditing Ag,
Internal Audit Systems in Tax Adm.
World Bank CPIA
World Comp. Survey
Exec. Opin. Survey
Firm Experiences
Corruption in Higher Education
Mechanisms to Report Corruption
Environment to Protect
Against Corruption
Laws to Prevent/Punish Corruption
Asia Risk Survey
World Markets
Business Risk Intel
Pol. Risk Services
Merchant Int.
Econ Intel. Unit
BERI
Firm Perceptions
Conflict of Interest Protections
Income and Asset Disclosure
Separation of Public/Private Roles
Excessive Involvement in Economy
Excessive Red Tape/Regulation
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WBI Control of Corruption Index
Citizen Experiences
Government Transparency
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Selection Process
Process:
• 17
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indicators, 3 categories
income categories
• Indicator Score > median  pass
• Pass > ½ indicators in each
category & control of corruption
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Indicator Category: Economic Freedom
Kenya FY08
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Indicator Category: Investing in People
Kenya FY08
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Indicator Category: Ruling Justly
Kenya FY08
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FY ’08: Countries in LIC and LMIC Income
Categories: 108
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FY ’08 Candidate Countries: 95
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FY ’08: Countries that pass all three
categories: 34
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FY ’08: Countries that pass all three
categories and Corruption: 25
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Threshold Program
• For countries that didn’t qualify but are close and
moving in the right direction
• This program focuses on the indicators the
country does not fulfill
• Ideally, a threshold country will become an
eligible country
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The Incentive Effect
• “In a short span of time…[by tracking very simple
indicators on investment climate]…you can see that the
Millennium Challenge Account has affected two dozen
countries… 24 countries in one way or another have come
to us and either have asked for ways to reform, have
already reformed, or would like to be bench-marked so
that they are considered for the Millennium Challenge
Account…. That is, in my view, quite a success.”
Simeon Djankov Manager of the Monitoring and Analysis Unit,
International Finance Corporation June 24, 2005
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Where Are We?
• 25 countries eligible for MCA Compacts.
16 Compacts signed and 9 others in the
pipeline.
• About $5.5 billion committed to date for
Compacts.
• 21 countries eligible for Threshold Program that
aims to help countries improve policies in areas
where they fall short so they might qualify in the
future. 18 Threshold programs approved to date
for roughly $400 million.
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