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US Development Policy


Last week, President Obama announced his intent to nominate the MCC’s CEO, Daniel Yohannes, to be the next US ambassador to the OECD. That sounds like a pretty sweet gig. Who wouldn’t want to spend some time working in Paris, right? As with any passing of the guard, this will be a natural opportunity for reflection at the MCC and perhaps even a few new ideas. In fact, it’s much more than that. The MCC will be celebrating its 10th birthday next January along with developing a new multi-year strategy. That presents both an opportunity to chart an ambitious course for the duration of the Obama Administration, but also to lay the groundwork for whoever comes after.

We’ll be talking more about the MCC soon, but here are six quick off the cuff thoughts for whoever takes over the helm:

  1. Continue Making the Case for Greater Resources: Ordinarily, I wouldn’t make this point in a highly constrained budgetary environment. But, the MCC remains an under-resourced and under-utilized development tool. By illustration, Pakistan has received more U.S. funding than the MCC’s entire global budget for several years running. That’s just plain shocking, even if there are fewer MCC-eligible countries these days. Turning this around will mean spending a ton of time on the Hill. Especially since over half of congressional members weren’t around when the MCC was created a decade ago.
  2. Continue Leading on Evaluation and Transparency: The MCC is the USG leader when it comes to rigorous evaluations. Not just that, but it has consistently demonstrated courage by publicly posting these assessments in easy to access formats – warts and all. Plus, it has been ahead of the USG curve in terms of publishing data in IATI format. That kind of openness and honesty should be continued – and recognized by outsiders.
  3. Explore Ways to Better Crowd in Private Capital: The MCC has been thinking about this for some time now. But, fresh blood should come with fresh ideas. Especially if the new CEO has a deep business background. There’s no question that MCC compacts could be structured to better unlock private co-financing – particularly for large infrastructure projects. I’m hearing that this will be coming in several Power Africa countries, perhaps even in conjunction with OPIC activities. That’d be a welcome development, and one worth scaling across every MCC compact.
  4. End the Second Compact Debate Entirely: It’s time for a final, conclusive break with the thinking that a single MCC compact can catalyze economic growth so large that future U.S. assistance won’t be necessary. I only wish that were true. Granted, this is more a demon from the early MCC days that simply hasn’t been fully exorcised. But, the debate needs to conclusively move beyond unrealistic expectations (with Congress) towards a serious discussion of what true MCC success could or should look like. One option is to unveil a graduation policy that extends beyond GNI per capita to also include things like creditworthiness considerations (see #5 below).
  5. Bring Clarity to the MCC’s Role (or lack thereof) in Middle-Income Countries: It’s been challenging, to say the least, to justify why the MCC should provide grants to countries like Morocco or the Philippines. Both have enjoyed investment grade credit ratings since before their MCC compacts. Plus, excluding MICs will reduce political pressures for the MCC to give generous handouts to better off allies. I understand that the US needs to make friends in the world. But there are different tools for different needs. If the MCC is bent on keeping its MIC operations, then it should introduce differentiated financing terms.
  6. Think Hard About How to Execute Successful Compacts in Fragile States: The MCC has moved into uncharted waters by approving compact eligibility for fragile states like Liberia and Sierra Leone. That’s not a policy problem per se. It simply reflects the trend of more and more countries graduating to MIC status, thereby leaving fewer and fewer non-fragile low-income countries. In other words, it’s the future for organizations like the MCC (and IDA). But it does raise a whole set of new programmatic challenges. For starters, the MCC teams should voraciously consume the lessons learned from institutions like the World Bank and African Development Bank. Otherwise, the MCC could stumble into making similar mistakes common in weaker institutional settings.

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CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.