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Last week I predicted that the MCC board of directors would not select any new countries for compact eligibility, and that they would re-select all seven countries currently in the compact development stage.  I was wrong on three counts. 

On Tuesday, the MCC’s board newly selected Lesotho as eligible to develop a second compact.  It also re-selected five of the seven countries in the process of developing compacts: Ghana, Liberia, Morocco, Niger, and Tanzania.  The other two compact development countries—Benin and Sierra Leone, both of which failed the Control of Corruption “hard hurdle” indicator—were not re-selected, though MCC said it would maintain “continued but limited engagement” with them. 

All things considered, I’m not terribly surprised about Lesotho.  It’s a consistent high performer on the MCC’s policy indicator criteria, a factor the board might view more favorably than ever, after facing  a record number of countries that are developing compacts but don’t meet the indicator criteria this year.  And while Lesotho’s first compact did experience some implementation delays and has delivered mixed results, it’s hard to say whether this is much different from other countries previously selected for second compact eligibility.  The limits on public information about first compact implementation, combined with the lack of a clear, transparent standard for what is “good enough”, make it very hard for external stakeholders like me to assess whether a country’s first compact implementation performance is sufficiently acceptable to be considered for second compact eligibility. 

Now…I am surprised about Benin and Sierra Leone.  I find the decision (and how it was decided) to be—frankly—a bit odd.  I’d like to get to the bottom of a few questions: 

  • What is USG telling these countries?  Both Benin and Sierra Leone just miss passing.  Neither country’s score is statistically different from a passing score and neither have had a statistically significant decline in their Control of Corruption indicator score since the year they were first selected; simply put, the data don’t suggest a real, meaningful deterioration in performance (I’ve said this before, and I’m not the only one saying it).  So will the MCC be able to point to a significant, specific policy decline when explaining the board decision?  Or will they essentially have to say, “no, no, it’s nothing you did, we just decided you didn’t make the cut after all—see this color change on the scorecard?”  Either way, the governments of Benin and Sierra Leone will want to know what they can do to improve their Control of Corruption scores to regain eligibility next year.  And, truthfully, the MCC’s answer will have to be “nothing.”  Because the indicator has a one-year time lag, the underlying data that will be used on next year’s scorecards will cover the events and policy practices from this year.  So the die has already been cast for next year’s eligibility – we just don’t know the results yet.  All this suggests that the MCC has some very tricky conversations ahead of it.
  • Why didn’t the MCC board vote?  It’s a bit odd that the board did not put the decision of whether or not to re-select Benin and Sierra Leone to a vote.  In the past, when countries were not re-selected due (at least partially) to their performance on the Control of Corruption indicator, the board voted on the decision.  Was the board so unanimous that both countries should not be re-selected that the decision didn’t require a vote?  Not if this article (which is wrong about a lot of things) is right; it clearly implies that this was a big question for the board.  Perhaps it was an attempt to soften the decision by making it a passive rather than an active act (“we didn’t pick you, but we didn’t vote no, either”).  It’s all quite bizarre.
  • What does “continued but limited engagement” mean?  Legally, both countries can continue compact development using funds from a previous year in which they were selected as eligible, at least until those funds are depleted.  But to what extent will compact development continue?  Will the Governments of Benin and Sierra Leone be more reluctant to put resources into compact development because of greater uncertainty around reaching the finish line?  Or will they redouble their efforts in order to prove they are serious about partnering with the MCC?  What does the MCC expect of them?
  • Is tying compact approval to passing the Control of Corruption indicator betting too big on unreliable data?  The board “expects both countries to pass the control of corruption indicator before it would approve a compact.”  The MCC has made this kind of proclamation once before (with respect to the Philippines), and luckily, things worked out.  But it was, as it is now, little more than a risky bet.  The indicators are imperfect, subject to substantial noise, and tend not to reflect statistically significant changes over short periods of time.  All of this means that for middling performers like Benin and Sierra Leone, in any given year, it’s hard to predict on which side of the pass/fail threshold they’ll fall, even if they’ve had no material change in policy performance.  Tying compact approval to a country’s rank on the Control of Corruption indicator basically amounts to a gamble—a pretty high stakes gamble—that noisy data will happen to work out favorably in the year the MCC and the country need it to. 
  • Is this a precedent that the MCC will apply consistently in the future?  Before yesterday, only twice had the MCC’s board not re-selected countries in compact development due to their performance on the Control of Corruption indicator (at least partially).  In both cases, the board initially re-selected them the first year they failed, and only cut them off after repeat failure.  This is very different than what happened yesterday.  This was the first time that Benin and Sierra Leone fell short on the corruption indicator.  Does this mean the board will consistently apply this same approach in the future, regardless of the country and the stage of compact development?  

All in all, the MCC is closing out 2013 with a bang.  And based on the decisions made yesterday, next year’s selection process promises to be just as complex and contentious.  

UPDATE (Dec. 12, 2013): I was happy to see that the MCC addressed a few of my questions at this morning’s town hall meeting.  In short:

  • The MCC acknowledged that Benin and Sierra Leone did not have a decline in their policy performance.  They noted that the board recognized this, too, but decided that maintaining a passing score (however imprecise) on the Control of Corruption indicator is more important. (This is a bit of shift from how the board has behaved in the past, since, as noted above, countries that fell short on the Control of Corruption indicator had previously been re-selected for at least one year).
  • The decision on Benin and Sierra Leone wasn’t put to a vote because the private (i.e., non-USG) board members would have voted “no”.  While I’m conjecturing somewhat, this seems to imply that the USG board members—State, USAID, Treasury, USTR, and MCC—would have favored re-selection for the two countries (and could have out-voted the three private members).  If so, this highlights the seriousness with which the board seeks to strike the right balance among the varied opinions of its public and private members.  
  • “Continued but limited engagement” means the MCC will less proactively push forward the compact development process and defer more to the country to lead the pace (to an even greater degree than MCC’s usual country-ownership-based approach).

Well done, MCC, for being so frank about some tough issues.  Keep it up.