MCC Approves 2 New Threshold Programs-One Aha! One Hmmm...

February 09, 2006

Yesterday the MCC Board approved threshold programs with Albania and Paraguay, both of which seek to tackle corruption. The Albania program raises many of the questions Sheila discussed in her blog on the Tanzania Threshold Program, on whether the programs approved to date stack up to the MCC's stated objective. The Paraguay program, however, appears to get it right.As the MCC has stated:

The Threshold Program is designed to assist countries that are on the 'threshold' of Millennium Challenge Account (MCA) eligibility for Compacts, meaning that they are committed to undertaking the reforms necessary to improve policy performance and eventually qualify for MCA Compact assistance. Threshold Program assistance is used to help such countries address the specific policy weaknesses indicated by the country’s scores on the 16 policy indicators that are central to the criteria and methodology for MCA Compact eligibility.
Albania's $13.85 million program will attempt to reduce corruption through reforms in tax administration, public procurement and business registration. Now, Albania failed every single ruling justly indicator and most of the economic freedom and investing in people indicators as well. In fact, Albania only managed to pass 4 of the 16 indicators. Admittedly, it seems as though Albania failed on a number of these only by a small margin, after turning in an average performance. That's a lot of cusps to be on and it's questionable whether this program will bring them over any of them.Paraguay's $34.65 million program is another story --a real standout, targeting all the right areas based on its indicator performance, and it looks quite comprehensive and interesting to boot. Adopting an innovative approach, the MCC targeted Paraguay's surging informal economy and the length and cost of the business registration process by allocating funds for 10 specific initiatives.The Paraguayan program is a good example of what the Threshold Program should be about: targeted projects that really attempt to improve a select number of indicators that can help the country "graduate" to the next level. One of the key advantages of the MCC's objective approach to development has always been the potential to quickly recognize obstacles to participation in the program. In that sense, the Threshold Program has the potential to serve as more than a finishing school for those who don't meet the MCC's standards; it can also provide a road map to becoming a good performer. With luck, the Paraguayan program can serve as a model for future Threshold Programs.


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