Kerry & Lugar to MCC CEO: Innovate but Stick to the Original Mandate and Model

In a letter to newly confirmed MCC CEO Daniel Yohannes, Senators Kerry and Lugar describe themselves as "strong supporters of the MCC model and its mandate to fight global poverty though economic growth."  They say the core principles of the MCC--competitive selection based on clear policy performance indicators and country ownership--have allowed the MCC to become a development leader.  The predominately supportive letter from the heads of the Senate Foreign Relations Committee gives the new CEO and his management team some running room to innovate and improve upon the model, but that running room come with limits.  The letter contains some good food for thought for the MCC and some parameters within which the new team can navigate the challenges ahead.You can read the letter in full but the key messages to CEO Yohannes from the senators are:1.      Stick to the original mandate. In short (and more diplomatically put in the letter): don’t lose your focus -- the MCC mandate is promoting growth and fighting poverty in a select group of well-performing countries.  A substantial part of the letter is dedicated to advising against MCC funds to middle income countries like Colombia and Albania (who arguably have greater access to private finance and other U.S. government foreign aid accounts, as well as fewer poor people). 2.      Be distinct from but coordinate with others.  Kerry and Lugar argue the success, innovation and results of the MCC are partially due to MCC’s relative independence from the rest of the aid apparatus and its ability to create its own systems, concepts and policies. (Not mentioned, but hugely important to its effectiveness is that its funds are not subject to congressional earmarks.) That said, U.S. foreign assistance would benefit from better coordination between agencies and the MCC should complement U.S. foreign policy, but Kerry and Lugar “are not in favor of merger or consolidation” and believe strongly that the MCC should maintain its focus as an indicator-based development agency. 3.      Rethink the threshold program. Muddled mandates, diffuse results and an unclear threshold country selection processes cause Kerry and Lugar to call for an overhaul of the program. Among the big questions are whether it should focus on countries at the “tipping point” of eligibility, or should be a longer-term program to improve policy performance over time.  They give the MCC wide berth to consider major changes to this program.4.     We will support a request for concurrent and longer-term compacts. Kerry and Lugar express their support for the MCC’s requests to undertake concurrent compacts and to extend, where warranted, the length of existing compacts beyond the strict 5-year limit. (Indeed, I understand that their draft State Department Authorization Bill contains such language.)  They are not as positive on requests for regional compacts, something asked for by the prior administration, but do allow some running room to for the MCC to explore regional approaches within individual compacts.5.    Keep on innovating, but build on comparative advantage. Kerry and Lugar want to see more emphasis on using civil society and the private sector to generate project ideas and undertake implementation.  And they encourage the MCC to consider "bold and creative project ideas."  (Unfortunatley, more precision on what that means is not included in the letter.)  At the same time the senators give the MCC some running room to keep on innovating, they caution against abandoning the MCC’s “comparative advantage in U.S. foreign assistance” in implementing economic growth programs and large-scale infrastructure related projects.Most of this will be seen as welcome support and insight into the challenges that Mr. Yohannes and his management team will be navigating in the coming months. MCC staff have been grappling with many of these issues internally for some time now, and it’s good to see leadership in Congress maintaining strong support for the MCC model, while acknowledging and pushing the MCC to take on key reform issues to deliver on the model’s promise.  Above all, the senators are reaching out a hand of support to the new team.  The new MCC management team should grab that hand of support and, in partnership with Congress, tackle reforms specific to the MCC and related to other U.S. foreign aid programs.  Such an approach will also help the MCC team more fully understand the boundaries of each of the five points above and perhaps discover, together, additional ways to help the MCC overcome the constraints of the current model.I suspect one of the big challenges not mentioned in the letter will be ensuring congressional support for the MCA during a tough appropriations cycle. We hear that national security budget items, including the 150 account and MCC funding, will be exempt from the federal spending freeze. While this is a strong signal from the administration of the critical importance of U.S.development investments on both domestic and global security and prosperity even in difficult financial times—it also runs the risk of putting a bulls-eye on accounts like the MCC when the extremely difficult work of meeting appropriations needs across the entire budget begins.The MCC will need to redouble its efforts to not only stick to its mandate and maintain the model, but also focus on increased selectivity, continue to demonstrate results and execute a strong communications strategy with the Hill—with both supporters and skeptics—and the major development reviews underway.   What challenges do you think the MCC will face in the coming months?