Clinton, Innovation, and the MCC

Secretary of State Clinton’s speech highlighted steps currently being taken to strengthen the role of development in U.S. foreign policy. First among these: a new emphasis on partnerships – “not only to the countries where we work, but to other countries and organizations working there as well.”Developing new partnerships requires a departure from business-as-usual. To minimize costs and lower risk, it may make sense to pilot new approaches through agencies that might serve as incubators. Of the nearly 20 agencies involved in delivering U.S. foreign assistance, one candidate would be the Millennium Challenge Corporation. For MCC, new partnerships with private or non-governmental entities – particularly those with potential to promote new investment ideas directly from citizens in partner countries – would not only demonstrate the potential for innovative approaches to U.S. foreign assistance but could also strengthen adherence to MCC’s founding principle of country ownership. MCC’s legislation authorizes provision of assistance “in the form of grants, cooperative agreements, or contracts to or with … regional or local governmental units … [or] a nongovernmental organization or a private entity.” Even so, moves by MCC toward more innovative approaches would need to be done in close consultation with Congress.The theme of new partnerships – as well as Secretary Clinton’s emphasis on investment in innovation as another key approach for U.S. development policy – is also consistent with MCC’s new CEO’s stated interest in exploring “more innovative ways to reduce global poverty, new ways to work with the private sector, and more creative ways to deliver results.”For example, one can see the potential for innovation funds in new MCC compacts with countries in early stages of compact development such as Indonesia, Malawi or Zambia. One can also see the benefits of including innovation funds in compacts that may need to be restructured, as was recently the case with Mongolia and has been done in other compacts. Partnering with an online marketplace such as GlobalGiving, which allows donors to find and fund grassroots projects that appeal to their specific interests, would allow MCC to work in sectors – such as education, health or energy – where these are identified as priorities by partner countries. Such an approach would also offer a turn-key opportunity to direct funds through a proven delivery channel within the relevant timeframe for both MCC and partner countries.In addition to direct benefits for project beneficiaries, potential benefits from piloting new approaches include fostering new roles for local project sponsors, expansion of new ideas for tackling poverty reduction and promoting economic growth, spillover effects for U.S. policy makers in other government and donor agencies, and greater public interest in and political support for foreign assistance.Innovation necessarily involves taking calculated risks and accepting trade-offs. Achieving timely results may require proactively identifying qualified private and non-governmental partners. As MCC states, the “due diligence process includes the estimation of the economic rate of return (ERR) for projects in the proposal from each compact-eligible country. An ERR is a comparison of costs and the potential benefits of those costs.” MCC may have to accept that some investments may not have an ERR that can be known at the time of investment. But maybe that is exactly why investment is necessary: to demonstrate the value of such innovative approaches before they are taken to larger scale. The MCC or other U.S. agencies might not know if something new works until they try.The author is a Visiting Fellow at the Center for Global Development. He is also a member of the Advisory Board of Global Giving and a former director for compact development at the Millennium Challenge Corporation.