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Aid effectiveness, US global development policy, USAID, MCC
Casey Dunning was formerly a senior policy analyst for the US Development Policy Initiative at the Center for Global Development. Dunning previously worked as a senior policy analyst for the Sustainable Security and Peacebuilding Initiative at the Center for American Progress. Before that, in a previous position at CGD, she conducted the center’s analysis on the Millennium Challenge Corporation and researched the application of aid effectiveness principles within USAID, with a particular emphasis on country ownership, aid selectivity, and innovative aid-delivery models. She has worked on harmonizing gender violence and rule-of-law programs in Liberia with Emory University’s Institute for Developing Nations, and at the Carter Center and the International Rescue Committee. Dunning graduated from Emory University with a specialization in international political economy and has also completed studies at Oxford University and Trinity College, Dublin. She holds a masters degree in public policy from George Washington University.
With Raj Shah stepping down as USAID Administrator last week, many are taking stock of the numerous accomplishments during his five-year tenure at USAID. One of the unsung achievements of his term was announcing and implementing USAID’s Evaluation Policy.
Launched in January 2011, this policy promised to improve development effectiveness through rigorous, independent, and public evaluations. The evaluations are available in the Development Experience Clearinghouse (DEC), USAID’s repository of technical and project evaluation materials. We took a spin around the DEC and were struck by what we found.
The DEC claims to contain nearly 200,000 program documents spanning the last 50 years. In 2014 alone, USAID published just over 150 evaluations, totaling more than 18,000 pages. We applaud USAID for this tremendous transparency. Posting these evaluations in the public domain is the hallmark of what a transparent development actor should be.
Just looking at the evaluations from 2014, several themes are worth noting:
USAID evaluations value depth. The 2014 evaluations are quite lengthy, averaging just under 120 pages. Although length is not always a mark of quality, this is at least an initial sign of the complexity of these evaluations.
The evaluations don’t favor one technique. The vast majority of evaluations used a “mixed evaluation” technique, commonly including document review, key-information interviews, and occasionally surveys. We found only nine evaluations that claimed to be “impact” evaluations. Of these, only two appeared to use randomized control evaluations or quasi-experimental design. We readily agree that RCTs are not the best evaluation plan for every intervention (see recent work by our colleagues Lant Pritchett and Justin Sandefur) and that evaluators should have freedom to choose the most appropriate approach. With these caveats, this is still a very low number.
The sectors with the highest funding levels usually had the largest number of evaluations. We find that evaluations by sector are largely happening in alignment with FY2014 sector spending, as you can see in Figure 1 below. (The ideal measure here would be to compare percent of projects completed with percent of projects evaluated but that project-level data is unavailable.) Although some sectors seem “over-evaluated,” the sectors that are “under-evaluated” – namely Peace & Security and Humanitarian Assistance – are intuitive.
Figure 1. USAID Evaluations by Sector, 2014
Evaluations roughly follow USAID country expenditures. Afghanistan, where USAID spends the most (almost $1 billion in FY2014), has more evaluations than any country (11 evaluations). However, we find 90 countries where USAID spent funds without any evaluations posted in 2014. These countries have a total $2 billion in expenditures. Five countries (Iraq, Mali, Nigeria, Syria, and West Bank & Gaza) account for about half of this unevaluated $2 billion. We would caveat that Nigeria was included in two multinational evaluations in 2014 and that several projects in Iraq and Mali were evaluated in 2013.
Recommendations for USAID Evaluations in 2015
USAID has come a long way in pushing for more and better evaluations, and then making these evaluations publicly available through the DEC. But there is still room to grow. First, we’d love to see these evaluations integrated into ForeignAssistance.gov, the USG’s online home for information on foreign aid. USAID should include a link to any related evaluations within the transaction data on ForeignAssistance.gov. The potential power in connecting expenditure data to evaluations could be transformative.
Second, USAID should begin to think about how it could institute a universal rating system for all projects into its evaluations. These systems are common at the World Bank and regional development banks. For example, the World Bank assigns a single outcome ranking to every project, ranging from highly satisfactory to highly unsatisfactory, allowing Bank officials to evaluate and compare project performance at the country, sector, and overall portfolio level. These metrics have helped to inform portfolio adjustments over time, such as the World Bank scaling down support for local development banks after consistently low IEG project ratings. The DEC could be an excellent place for USAID to institute a single comparable program rating that supplements more customized and detailed evaluation frameworks for individual projects.
Secretary of State John Kerry is currently in Islamabad for a Ministerial meeting of the US-Pakistan Strategic Dialogue, the second such meeting since the countries resumed the dialogue in 2013. Much of the (admittedly limited) coverage around this meeting has centered on the security conversation: how can the United States and Pakistan counter militant groups within Pakistan and along the Pakistani-Afghan border? Should the United States continue such high levels of military aid? While security issues will no doubt dominate much of the conversation, the Strategic Dialogue should also prioritize a frank discussion on the long-term development partnership, separate from short-term security and military talks.
This Ministerial marks the first meeting since the United States and Pakistan agreed to add Education as a sixth Working Group to the Strategic Dialogue. The other five Working Groups include: 1) Energy; 2) Economic Growth and Finance; 3) Law Enforcement and Counterterrorism; 4) Security, Strategic Stability, and Nonproliferation; and 5) the Defense Consultative Group. Half of the Strategic Dialogue’s Working Groups are focused on development issues, and the importance of this development relationship is borne out in US bilateral aid. In FY2013, USAID obligated $669 million to Pakistan, the fourth highest amount to any country, and Pakistan ranked second in direct government-to-government funding with over $274 million in aid that same year. (Though confusion does abound over potential FY2014 disbursements.)
The following commitments from the United States would go a long way in cementing a long-term development partnership with Pakistan as a part of the Strategic Dialogue process.
Prioritize the economic and development policy conversation. Here the United States and Pakistan should be given relatively high marks. While media attention has largely focused on the security dimension of the relationship, the bilateral development relationship has quietly expanded with three of the six working groups focused on development and economic issues. Concrete efforts like the upcoming US-Pakistan Economic Partnership Week in Islamabad and a $250 million commitment for humanitarian aid underpin these Working Groups’ discussions.
Continue the aid relationship despite the end of KLB. The Kerry-Lugar-Berman (KLB) legislation – with a promise of $1.5 billion annually over five years – officially ended in 2014, but less than $5 billion was actually obligated. This was not a bad thing as the United States chose to spend the money strategically and slowly due to constraints on the aid-delivery machine and acute implementation challenges. However, the United States should commit to a continuation of development assistance – a sort of “no-cost extension” – as a part of a robust development relationship beyond KLB.
Focus on what the United States can do best. The focus areas of the three development Working Groups – energy, economic growth, and education – provide a ready-made (and mutually agreed upon) priority list for US development assistance to Pakistan. The United States should ensure its development and policy resources are making real gains in these areas. US attention to specific Pakistani priorities like increasing primary school completion and growing energy supply through progress on the Diamer-Bhasha dam project would further solidify the long-term development relationship.
Focus on transparency. The United States has made tangible strides in publicly reporting where US aid goes and what it accomplishes. But it can and must do more. With the conclusion of KLB, expectations about the level and consistency of US aid to Pakistan are gone. The United States should use the Strategic Dialogue to make clear the intended scope of its development commitment over the next five years, adding much needed stability and assurance to the US-Pakistani development relationship.
Last week USAID held its second Frontiers in Development conference, a two-day smorgasbord of keynotes, panels, roundtables, and an Innovation Marketplace all focused on Ending Extreme Poverty. As the agenda can attest, USAID sought to explore its role (and that of foreign assistance, writ large) in ending extreme poverty from multiple angles. From ‘Can it be done?’ to ‘How will it be done?’ to ‘Who will do it?’, the notion of Ending Extreme Poverty received a 48-hour in-depth examination from some of global development’s leading thinkers and practitioners as over 600 members of the development community observed.
I applaud Frontiers for tackling tough questions directly related to ending extreme poverty, including inequality, fragility and instability, climate change, and the spread of Ebola. While I didn’t leave the conference certain USAID had the answers to ending extreme poverty as an agency, I did come away thinking it had at least asked the right questions and was pursuing this noble, and incredibly difficult, mission with eyes wide open.
Because ending extreme poverty looks to be a global vision around which the world will coalesce for the next 15 years through the post-2015 agenda, it’s encouraging that USAID is seeking to bring intellectual and policy firepower to what could easily become rhetoric with no real substance behind it.
Frontiers offered a substantive two days. Below are my additional takeaways, observations, and general points of interest. It should be noted that this list is completely subjective as I was not able to attend every session, not yet being able to be in two places at once.
The theme of ‘Ending Extreme Poverty’ pervaded every event. With 29 separate events and more than 86 speakers, I would have forgiven Frontiers for occasionally veering off-topic – but it didn’t. The conference maintained coherence in exploring multiple sectors, issues, and populations through the lens of extreme poverty.
It wasn’t only US voices doing the talking. President Jakaya Kikwete of Tanzania, former President John Kufuor of Ghana, Foreign Affairs Minister Tedros Ghebreyesus of Ethiopia, and Winnie Byanyima of Oxfam International (just to name a few) all spoke about country and context-specific approaches to ending extreme poverty.
Frontiers rightly focused on Africa. Some colleagues thought the conference should have had a more balanced global focus, but I disagree. If we’re talking about extreme poverty, that’s where the majority of the extreme poor will reside. What’s more, Sub-Saharan Africa receives the highest levels of USAID funding (by region). This is called focus, folks; we can’t call for it and then get miffed when everything isn’t included.
Peace and stability are integral to ending extreme poverty. From Secretary of State John Kerry to President Kikwete to former National Security Advisor Stephen Hadley, I was struck by how often and how stridently numerous speakers pointed to conflict as one of the greatest drivers of increased poverty. This is nothing new, per se, but it was instructive to hear the importance of stability and good governance emerge from various perspectives. My hope is that this bodes well for the inclusion of these issues in the post-2015 agenda.
The world doesn’t have the right tools to end extreme poverty…yet. In his address, Secretary Kerry noted that, “development tools have not kept up with a changing world…too many barriers still exist.” Likewise USAID Administrator Raj Shah declared the United States must “earn the right to lead every single day. And unless we seek to evolve and get better, many of our partners—including the countries we celebrate today—will simply look elsewhere for solutions.” The entire Frontiers conference seemed to be a starting answer to this challenge, with the Innovation Marketplace offering pioneering practical solutions and the many sessions offering new approaches and models for how the world might end extreme poverty.
September 16 officially kicks off the 69th session of the UN General Assembly and the one-year countdown for negotiations of the successor framework to the Millennium Development Goals (MDGs). The latest input into the post-2015 process from the UN Open Working Group includes 17 goals and 169 targets; by way of comparison, the current MDGs include 8 goals and 21 targets. As has been discussed, some serious pruning is in order. But amid the plethora of targets, many good ideas exist, and one of them is a call for universal legal identity including through birth registration. (See below for other good ideas.)
While this target has appeared in multiple inputs to the post-2015 process, its formulation is problematic. As our new policy paper points out, legal identity and birth registration should not be conflated into the same target because they require distinctly different implementation strategies. Perhaps most importantly, they differ in what is realistically achievable by 2030. We argue that practical, achievable targets would be universal legal identity and a proportional reduction in unregistered births, such that:
by 2030, all countries at least halve the percentage of unregistered births for children younger than 5 and reduce the average age of birth registration; andby 2030, ensure that all individuals have well-defined and recognized legal identity by the time they become adult (15-18).
Why have two different targets for what seems to be the same issue? Consider the following picture that shows the progress of different regions in decreasing unregistered children since 2000.
Universal birth registration is unlikely for all regions by 2020 given progress in decreasing rates of unregistered children since 2000 (Chart represents rates of unregistered children, projected to 2020)
Source: Authors’ calculations using UNICEF 2013 data.
While 100 percent coverage for birth registration is a good aspirational aim, it is less useful as a yardstick to measure and monitor progress in the face of widely varying levels and progress across countries. A target to at least halve the percentage of unregistered births by 2030 would be a substantial challenge for countries with very low registration rates, though relatively easier for those with initial registration rates over 50 percent. Such a goal would yield overall regional targets of approximately 72 percent for South Asia and 76 percent for Sub-Saharan Africa (assuming for simplicity the distribution of births is constant across countries). Though short of 100 percent, these targets would represent a more than doubling of past progress in closing the gap.
In contrast, a legal identity target would cover a different population through different pathways. A complete legal identity target must take into account those who have previously been left out of the system, including the roughly 750 million children still under the age of 16 whose births have not been registered, as well as the new births that will fail to be registered until total coverage is achieved. While there is not one model of legal identity across countries, the goal of universal legal identity would require states to ensure that all have free or low-cost access to widely accepted and robust identity credentials.
It is critical to calibrate these targets correctly. Legal identity and birth registration can directly improve the quality of people’s lives: as a basic human right and a pathway to accessing crucial services in health, education, and the formal economy. They can also have an indirect effect on improving the quality of governance in many countries. Good data on births, deaths, and the incidence of disease allows governments and donors to effectively allocate their resources and improve people’s lives, and it allows citizens to hold their governments accountable to these commitments.
Michael Clemens expresses his excitement over migration policy finding space in the post-2015 agenda. Why? Migration is the most profitable investment available to the world’s poor, and remittances sent home far outweigh foreign aid. It can also do more to address world inequality than current drafts suggest. Read more
Amanda Glassman says countries should drive the data revolution from the bottom up, but describes four areas where the high-level post-2015 process could help support and accelerate progress in national statistical systems.Read more
Charles Kenny asks what’s the point of the post-2015 agenda, given the lack of prioritization in goals and targets so far. “It would be a huge step if the Secretary General’s upcoming synthesis report actually laid out the rationale and purpose of the post-2015 goals in a way that doesn’t suggest they are designed to be all things to all people.”
Alex Cobham finds that current post-2015 proposals to reduce illicit financial flows need to have more specific goals and a more explicit delegation of responsibility. He proposes three targets already grounded in well-established practices. The first: eliminate anonymous ownership of companies, trusts, and foundations. Read more
Lant Pritchett argues that the focus on extreme poverty goals effectively removes improving the lives of billions of the world’s poor from the development agenda. “The battle for 2015 will be between the elite countries’ attempt to ‘define development down’ to a narrow, extreme poverty–focused agenda and the rising power of the billions in the rising global middle class and their countries to have their desires for prosperity—in all its
forms—fulfilled.” Read more
Universal legal identity through birth registration has consistently remained as a potential target for the post-2015 agenda through several rounds of negotiation. However, as it has been put forth, it conflates legal identity and birth registration. This policy note clarifies the differences between legal identity and birth registration and offers measurable, achievable target language for each component to ensure that this important issue remains in the post-2015 development agenda in an impactful way.
After a splashy launch in April 2014, USAID’s Global Development Lab has been relatively quiet as it seeks to expand the Agency’s capacity in science, technology, and innovation. For the broader development community, however, much remains in question about how the Lab will function, what it will accomplish, and how it will contribute to USAID’s newly stated mission to end extreme poverty.
I took the opportunity to chat with former USAID chief scientist Alex Dehgan in an effort to answer some of these questions. In 2010, administrator Raj Shah appointed Dehgan as USAID’s first chief scientist in over 20 years, and Dehgan was a major architect behind the Lab which originally brought together USAID’s Office of Science and Technology (OST) with its Global Development Alliances and Grand Challenges for Development programs. In Dehgan’s words, the purpose of the Lab is to “rethink assumptions and harness the power of the crowd and America’s leading research institutes and universities, coupled with the democratization of science and technology, to lead to new breakthroughs that it can bring to scale.”
Excerpts below offer Dehgan’s insights on the genesis of the Lab and its seeming drift from its original raison d'être. He finds the Lab struggling to find its place within an Agency largely divided along bureaucratic and sectoral lines. This could prove detrimental to the long-term utility of the Lab, at best hindering its efficacy, at worst making it a fleeting effort of the current administration. You can see a transcript of the full interview here.
Casey Dunning: USAID has been quite vocal about its new mission to end extreme poverty by 2030. How will the Lab contribute to USAID’s efforts to end extreme poverty?
Alex Dehgan: The question is not how the Lab will respond to USAID’s efforts to end extreme poverty, but whether it should. For the Lab to achieve its vision as a DARPA (Defense Advanced Research Projects Agency) for Development, which the Administrator reiterated at its launch, it cannot duplicate the focus and political activities of the rest of the Agency. It must choose to rethink assumptions, identify alternative areas that can be truly disruptive, and be sharply focused on those areas that have the greatest potential for development. This however takes time. The Lab’s focus should not be a mere mirror of a constantly shifting political agenda.
CD: USAID has identified nine problem sets for the Lab that seem to cover a vast majority of the issues on which the Agency works. In this initial phase of the Lab, can you identify which problem set you think holds the most potential for unlocking solutions using the Lab’s distinct approach?
AD: The Lab probably shouldn’t be approaching questions that follow the Agency’s disciplinary lines, but should consider how it can look at questions that cross between them. Innovation happens at the boundaries, not in the center…There is a tension between whether the Lab can create transformative new products, but at the same time, transform/serve the Agency. This is tied to how we institutionalize the gains made in this Administration. One is to make the Lab much closer to the rest of the Agency so that it endures. The second is to maintain its distinctiveness, craft a different culture from the Agency with a different staff and set of authorities, and create a Skunk Works, a Bell Labs, a Xerox Parc, that then feeds back in.
I am concerned the Lab may be institutionalizing the wrong things – bureaucracy rather than adaptability, technical substance, creativity, and a hacker culture. The Lab will fail if it merely creates a new bureaucracy that lacks the ability to take risks, to be creative, to be innovative. The failure to take risks — the failure to fail (or iterate) — may ultimately be a greater risk than continuing with the same programs and expecting different results. The Agency should ensure that the majority of the positions of the Lab – perhaps 90% – are not permanent, but are time limited. This is a persuasive argument to Congress that we aren’t creating a bureaucracy, but truly opening up the Agency to new ideas. This means maintaining a startup mentality, allowing for iteration, and taking risks, and not building and reinforcing bureaucracy that incentivizes maintenance of the status quo.
CD: What makes the Global Development Lab different from USAID’s previous efforts in science, technology, and innovation during the Obama administration? What is the value-add of an entity like the Lab?
AD: Worryingly, science and technology programs which made up the majority of the Lab at its founding (it was a merger of 18 OST programs with 4 Office of Innovation and Development Alliances (IDEA) programs, one of which has been largely outsourced) appear to be a diminishing part of what the Lab is doing. Even the advisory board – whose initial purpose was to connect us with external technical communities – has mostly lost its scientific character. The Agency continues to expand the number of nontechnical staff in the Lab, without considering what the impact will be on the technical quality of what we will do. Most importantly, the leadership and make-up of the Lab needs to reflect the Lab’s technical nature, but have not done so. The gains we have made in building science & technology in the Agency are ephemeral; they can be turned back as there is an astonishing elasticity to the Agency to regain its prior form.
CD: Will USAID continue the role of a chief scientist and will that position lead the Lab? What is the role of science and technology in the Lab?
AD: We substantially enhanced the reputation of the Agency with respect to science and technology in the last four years. The Agency is a hybrid institution – it is half a technical agency, and half a foreign affairs agency. However, over the last two decades, the Agency prioritized the foreign affairs aspects of its role, but saw its technical strengths atrophy. It was mainly viewed (with a few exceptions, not limited to its longstanding food security research programs and global health’s work on HIV, implementation science, emerging infectious diseases, the demographic health survey, and its famine early warning programs and climate change program) as a contracting body (foreign assistance), rather than an institution that does technical development (e.g., a development agency). However, the Agency has been trying to change that perception under Raj Shah’s leadership. Development is a technical field, and we can harness the exponential gains in science and technology and connectivity, to accelerate our outcomes. However, we can’t do this without a focused, concerted effort to do so across the entire Agency – the Lab needs to lead that effort and there is no other entity better suited to play that role.
The UN Open Working Group (OWG) on Sustainable Development Goals completed its outcome document a few weeks ago, putting forth 17 goals and 169 targets. The optimistic take: that’s only just over twice the number of goals in the Brazil-Germany World Cup match. But for all the space devoted to targeting almost every conceivable area of global progress, there was one topic on which the OWG was notably silent: what’s the purpose of all of this?
Since talks began seriously in 2012, the post-2015 agenda has become an all-things-to-all people process, thereby doing nothing really well. Nowhere was this more evident than in the lengthy OWG outcome document.
So what could be the purpose of post-2015 sustainable development goals?
If they’re a shared vision of where we all agree we want to see the World in 2030: (i) you’d actually want the document to be broader (we’d want the whole text of the universal declaration of human rights incorporated); and (ii) you wouldn’t slough off bits just because there happens to be another UN-mandated body looking at it (IPCC, WTO…). And, this being a visionary document, it would matter less whether targets were measurable and practical.
If they’re a shared vision of where we all agree we want to see the World in 2030, and how we’re going to get there, you’d want a lot more on ‘how to get there.’ This would include: (i) a heavy focus on means of implementation (goal 17 in the OWG’s outcome document); and (ii) member state negotiations tackling big questions around partnerships and financing for the new agenda.
If they are to prioritize the most pressing sustainable development challenges over the next 15 years, the agenda would have to: (i) answer the fundamental question ‘prioritize for what’? (Are these targets for assistance, UN activities, policy changes of member states?); and (ii) you’d definitely need fewer priorities.
If they are about ‘global challenges’ that we need the global community to address: (i) you’d only include global public goods (and back to the first point, not exclude issues around climate and trade because the UN was dealing with them elsewhere); and (ii) have to get into specifics around “common but differentiated responsibilities” – the UN lingo for burden sharing – which has thus far been a stark dividing line between countries.
If they are to hold governments to account, you’d want to make sure: (i) the goals and targets were realistic (zero violence against women and children?); and (ii) they were easily and uncontroversially measurable (zero violence against women and children?). You’d probably also need to include far fewer goals and targets so governments might stand a chance of tackling even half what a post-2015 agenda would include.
We all knew the point of the MDGs (or at least how they were mostly used): setting a framework for global aid discussions. Everyone has agreed that the world should be much more ambitious this time around, but there’s been no agreement on what all that ambition should be aimed at accomplishing. At the moment we have an outcome document that is essentially useless for prioritizing anything, goes far beyond global public goods (and excludes key ones), is very weak on ‘how do we get there,’ is full of unrealistic targets, and yet fails as a complete vision of where we’d love to see the world in 2030.
It would be a huge step if the Secretary General’s upcoming synthesis report actually laid out the rationale and purpose of the post-2015 goals in a way that doesn’t suggest they are designed to be all things to all people. If his report offered a coherent and singular purpose for the post-2015 agenda, member states would at least be operating from the same rationale as they move into the final year of what looks to be a difficult and lengthy drafting process.
CGD and the Brookings Institution recently released the third edition of the Quality of Official Development Assistance (QuODA), a joint venture that measures donor performance across a series of aid quality indicators to encourage governments, institutions, and agencies to disburse more effective, transparent, and efficient assistance. QuODA uses four dimensions of aid quality assessment: maximizing efficiency, fostering institutions, reducing burden, and transparency and learning.
QuODA assesses the quality of aid against agreed upon priorities and best practices, but it faces the considerable challenge of comparing metrics across agencies with a wide range of structural and operational differences. So while QuODA provides an important starting point for a discussion of aid quality, it can’t offer each agency a customized recipe for reform.
QuODA covers 14 US government agencies that deliver development assistance. Here’s a closer analysis into how two of them—the US Agency for International Development (USAID) and the Millennium Challenge Corporation (MCC)—stack up.
USAID in QuODA: Better than Expected
In this third edition of QuODA, USAID demonstrates the positive effects of a strong internal push for reform. Since 2010, USAID has implemented USAID Forward, a reform agenda designed to return policy and budgeting expertise to the agency, expand scientific and innovative capacity, and build and utilize local systems, among other reforms. Compared to the first edition of QuODA (which relied on 2008 data), USAID has improved relative to the aid system as a whole on two dimensions of aid quality measured by QuODA: fostering institutions and transparency and learning.
While USAID logs average scores in this year’s assessment on transparency & learning and reducing burden, the agency performs better than other aid agencies on fostering institutions. This dimension of aid quality judges an agency’s use of recipient country systems and share of aid recorded in recipient budgets, for example. This high score no doubt reflects recent efforts to channel more USAID program funds to partner governments and local civil society. Indeed even as overall funding for the agency decreased by 5 percent, USAID managed to increase its spending to local entities by 18 percent from FY2012 to FY2013. The agency is also working to ensure that every country in which it operates has a jointly-developed Country Development Cooperation Strategy that outlines how USAID engagement will further recipient country priorities in the long term.
However, it’s not all good (or at least average) news for USAID. The agency scores below average in QuODA’s maximizing efficiency dimension, which includes an examination of USAID’s share of allocation to well-governed countries and focus/specialization by recipient country. Here, you could argue, USAID gets penalized for actions beyond its control. The aid landscape of the United States is such that USAID is the agency with the remit to handle humanitarian efforts, deal with fragile and conflict-affected states, and play a key role in frontline states. USAID has major operations in poorly governed places like Afghanistan and the DRC, and USAID isn’t going to stop working in these places – nor should it when there’s a strong strategic and development interest.
USAID also gets knocked for lacking focus. Again, the agency is tasked with being the US development presence in the most difficult of places across a range of sectors, based on identified needs within a country. This operational rationale will always run counter for calls to a singular focus in well-governed places. So, USAID should applaud itself for making great strides in targeting its aid to foster local institutions and performing reasonably well on reducing the burden to local entities and promoting transparency and learning. Given USAID’s current remit and role within the US development apparatus, it will have a hard time improving its score in the maximizing efficiency dimension. One place to start would be to reduce the number of countries in which it operates and push for a focus on things the agency does really well like humanitarian aid and social sector programs in health, education, and water.
MCC in QuODA: An Aid Effectiveness Model in Practice
It’s not surprising that MCC performs above the USG and global average on most (11 of 15) of the agency-level QuODA indicators. After all, MCC’s model and practices are based on many of the aid effectiveness principles the index seeks to measure. For instance, MCC funds only a limited number of relatively well-governed countries, uses open international procurements, pursues country-led strategies, and commits to a high level of transparency.
Interestingly, a look at the handful of QuODA indicators on which MCC performs less well (below average) shows that, in many cases, low scores in one area may actually reflect good aid effectiveness practice in another. This suggests that it may not be possible for an individual agency to maximize all aspects of aid quality at once.
For instance, MCC gets relatively low marks on its share of allocation to poor countries. This might seem counterintuitive since, by law, the agency can only fund low or lower-middle income countries, but the income levels of MCC partners range widely within those boundaries. So while MCC does fund some of the lowest income countries in the world, its partners are not altogether concentrated at the lower end of the income distribution. This is largely because MCC was established to fund only countries that are relatively well-governed (it ranks 5th globally on the QuODA indicator of share of allocation to well-governed countries), and these countries are also not concentrated at low income levels. This suggests that it can be hard for countries to score well on both allocation to the poorest countries and allocation to well-governed countries (in fact, scores on these two QuODA indicators are negatively correlated at -0.6).
Another indicator on which MCC scores below average is focus/specialization by sector. For this measure, agencies are docked for funding lots of sectors rather than specializing in a few. The logic behind this is compelling (donor proliferation in a particular area can create inefficiencies and coordination problems). But part of the reason MCC has a relatively low score on this indicator is because it doesn’t pre-determine the sectors in which it will operate in a country. MCC’s model places high importance on country ownership and achieving results, so the agency’s investments in a given country are determined based on economic analysis and country-identified priorities. If MCC decided in advance to invest only in limited sectors, the agency could undermine these two pillars of its model.
Interestingly, MCC only registers average performance on the indicator measuring the share of aid to recipients’ top development priorities, ranking about the same as USAID. This result is rather different than my colleague, Ben Leo’s, findings that MCC does better, at least in Africa, at investing in things citizens say they want. So it raises some questions—like how well MCC’s process of working with a country government to identify priorities effectively captures citizens’ preferences for investment and whether the way the QuODA indicator is constructed fully captures the link between MCC investments and a country’s development priorities?
All in all, the main takeaway for MCC—that even many of the lower scores confirm—is that the agency does relatively well applying practices associated with aid quality and effectiveness to its operations, and that it should continue to strive to make the right tradeoffs when best practices in delivering quality aid conflict with one another.
“Can you help us PFG this country?” is not yet a common query heard throughout the U.S. government, but CGD had the opportunity to discover why “PFG-ing” a country could be the next phase in the evolution of U.S. development efforts. Last week, CGD hosted a panel on Partnership for Growth (PFG) with USG representatives and ambassadors from the four PFG partner countries – El Salvador, Ghana, the Philippines, and Tanzania. The discussion sought to answer two central questions: what’s really new here and what’s the big deal?
What is PFG?
Partnership for Growth is an approach that embodies the principles of the Presidential Policy Directive on Global Development by trying to operationalize a whole-of-government approach. The administration selected four “emerging, emerging markets with skin in the game” as the initial PFG countries. After selection, each partner government and the USG undertook a joint constraints-to-growth analysis and developed joint country action plans to focus on the highest priority barriers to growth. These plans will be implemented over a five-year period with rigorous monitoring and evaluation throughout PFG implementation.
What Makes PFG Different?
The Administration is championing the PFG model as a new way forward for USG development activities, but many of the hallmarks of PFG – a singular focus on economic growth, country ownership, rigorous M&E – are already established practice in agencies like the MCC and USAID. Here’s what makes it (kind of) different:
Interagency coordination. As Gayle Smith in her keynote noted, “dividing up development with different agencies wasn’t getting the results we wanted” so the PFG model explicitly seeks to draw on the strengths of multiple agencies. The MCC, State, USAID, USTR, Treasury, Commerce, and OPIC (just to name a few) are all at the table. All of the panelists extolled the novel interagency process and its success thus far. Interagency coordination is no doubt a difficult feat (I recently heard coordination defined as an unnatural act between nonconsenting adults* – seems quite apt here) but stronger interagency coordination is not a compelling reason for a new model and certainly should not be the legacy of PFG.
Data-driven prioritization. Unlike in some other USG development efforts, the selection of focus areas is driven by data and priorities rather than anecdotal evidence. A rigorous constraints-to-growth analysis, borrowing from work at Harvard by Ricardo Hausmann and Dani Rodrik, determines the one or two sectors that most impede broad-based economic growth. Ambassador Francisco Altschul of El Salvador noted that this process allowed space to make difficult decisions in a more open way and that this transparent, data-driven approach helped to build bridges and bring a normally wary private sector to the table.
No new money. Discipline supposedly drives the PFG model, not resources, and this may well be the biggest difference of PFG. The lack of an attached check has, panelists claimed, already helped to change the nature of the dialogue on both sides. (But it should be noted that all four countries see increases in the FY2013 budget request.)
Potential Challenges for PFG
Discussion of the challenges currently facing both the partner countries and the USG as they implement this new approach was noticeably absent—perhaps because it is all still new. However, three potential pitfalls did arise during the panel.
Complex M&E plans. El Salvador is the furthest along in PFG implementation and as such is the only country to have an M&E plan. For the two identified constraints to growth – insecurity and low tradeables productivity – there are 14 and 6 attached goals, respectively. Each of these goals then has a number of indicators behind them (33 in total) and each indicator has an associated strategy. Can’t keep it straight? Me neither. The M&E plan needs to be simple and clear. (Though kudos for transparency.)
More than investment roadshow PR? The PFG claims it will engage the private sector in a new way, but we didn’t really hear anything new. The Ambassadors seemed to just claim that PFG helped them promote the country to potential investors.
Leadership & sustainability. Who’s in charge? It’s unclear who has final say and who will ultimately be responsible for demonstrating the results of the PFG approach. Without an institutional home, how will PFG last once Gayle Smith has moved on?
The verdict is still out on whether PFG will be the future of U.S. development efforts. The panel offered areas where PFG has the chance to take risks and offer a new approach to development. Let’s hope that the USG and four PFG partner countries take advantage of this model and capitalize on the opportunity to do things differently.
*This pithy definition courtesy of Rob Mosbacher at a recent Consensus for Development Reform event.
Bingo. The State of the Union. You and your friends from the Center for Global Development. It’s that time of year again for CGD’s annual State of the Union Bingo! Please join us for the 2014 State of Union address, where we’ll be listening to discover what global issues are on President Obama’s agenda.
On January 28th, we’ll be bringing our annual SOTU game night in-house to our new Conference Center. Doors open at 8:00 pm and the State of the Union is scheduled to start at 9:00 pm.
And the space isn’t the only thing that’s new. In addition to our regular game of bingo during the speech, we’ll have a pre-SOTU trivia game and live polling.
This brief considers how the United States Agency for International Development (USAID) and the Millennium Challenge Corporation (MCC) conceptualize ownership and apply the concept in practice. We focus on three pillars: ownership of priorities (the willingness and ability of donors to align their efforts with country priorities); ownership of implementation (the degree to which donors involve local partners in the design, implementation, monitoring, and evaluation of programs); and ownership of resources (the degree to which a partner country contributes its own finances to the objectives receiving donor support).
With Raj Shah now departed as USAID Administrator, there has been much speculation on who might replace him. It is critical that the Obama administration nominate a new USAID Administrator quickly. But with two remaining years and much development work to do at the Agency, what characteristics should President Obama look for in his new Administrator?
Knowledge of the Agency and its Missions. 2015 is a big year for USAID, and development writ large. The Agency will be moving to implement its vision to end extreme poverty while two major conferences on financing for development and the post-2015 agenda will set the global development agenda for the next 15 years. The Agency must have leadership in place, and that leadership should be ready to hit the ground running once nominated and confirmed.
In addition to guiding USAID through the gauntlet of 2015 development conferences, a new Administrator will have much work to do inside the building. USAID Mission staff around the world have reported difficulty in translating multiple new, DC-generated objectives and priorities into action on the ground. It will fall to a new Administrator to better connect priorities out of DC with Missions’ programming on the ground.
Ability to Prioritize. The incoming Administrator will no doubt have priorities of his or her own, whether in a particular sector or in how the Agency operates. Former Administrator Shah launched 12 new initiatives and reforms during his tenure, all of which have yet to be institutionalized through legislation. The incoming Administrator will need to combine his or her priorities with the initiatives of the Shah tenure into a prioritized (read: short!) list.
Two years is sufficient time to see some of the significant advancements over the past five years embedded into the Agency. It’s probably even enough time for a new push, should the incoming Administrator be particularly seized with an issue. But there’s not enough time to get it all done. The new Administrator should pick 2-3 initiatives and fully internalize them into the way the Agency does business. This will entail close engagement with Agency staff in DC and in Missions, changes to internal USAID guidelines, and unending trips to the Hill. The new Administrator need not be a caretaker, but he or she should recognize that there’s a lot to work with right now at the Agency. The real challenge will be deciding which to prioritize.
Experience with the Hill If this were a wish list, I’d hope for the incoming Administrator to have preexisting relationships with key international affairs’ authorizers and appropriators. Absent that, the most important characteristic of an incoming Administrator is a deep recognition that Congressional members have a major say in how the Agency functions.
Congress is currently considering legislation that covers Feed the Future, Power Africa, and the Global Development Lab, to name a few, but it has passed none of these bills. The next two years are vital for securing durable bipartisan endorsement of new USAID approaches and initiatives. The incoming Administrator should take advantage of current Congressional champions – and make new ones – to advance the Agency’s agenda.
A new Administrator with these characteristics would hit the ground running, building on and solidifying the prodigious work of the past five years. When CGD asked former Administrator Shah to offer a piece of advice to the next Administrator in a recent podcast, he advised that the incoming person should “listen to everybody with open ears, with a genuine desire to learn [so that] we can build the kind of big tent politics that can elevate USAID.” The Agency has made great strides over the past decade in its self-proclaimed journey to become the world’s premier development agency; a new Administrator should stand willing and ready to continue this march.
The post is part of a series documenting ongoing analysis of US agencies’ efforts to incorporate country ownership approaches in their development activities. The authors conducted research in Liberia from January 15-24, 2016.
When you think of Liberia over the past two years, what’s the first thing that comes to mind? Probably not a hydropower plant. Since 2014, the devastating impact of Ebola and Liberia’s nascent recovery has dominated media headlines. But during the same period, the Millennium Challenge Corporation (MCC) quietly developed its first compact with the government of Liberia to address one of the country’s pressing needs outside of the immediate health crisis: energy access.
Through the compact development process, the MCC demonstrated unprecedented levels of flexibility to accommodate Liberian priorities in a post-Ebola landscape. Further pushing its emphasis on country ownership, the MCC also adopted new modalities of compact implementation. The agency elected to invest in Liberian systems already operating in the energy sector, rather than create new and parallel implementation structures.
The compact’s signature investment, the Mt. Coffee hydropower plant, has the potential to become Liberia’s largest source of electricity. This generation facility will have the power (pun intended) to generate up to 88 Megawatts (MW) when fully operational, nearly a third of the 300 MW Liberia aims to generate by 2030. In a country where the cost of electricity to consumers is among the highest in the world, and less than two percent of the population is connected to the grid, this increase in generation could have a dramatic impact on the livelihoods of Liberians.
Roughly $164.9 million, or 64 percent, of MCC compact funds are budgeted for the rehabilitation of Mt. Coffee. The government of Liberia had previously planned to contribute about $45 million to the rehabilitation but was forced to redirect resources towards much-needed Ebola response efforts. MCC pivoted to Mt. Coffee to fill a critical investment gap in the wake of the Ebola epidemic.
Investment in Mt. Coffee is a priority for Liberia and, consistent with MCC’s model, addresses one of the most binding constraints to economic growth in the country. However, the US agency had to do things a bit differently in order to make this investment a reality.
Demonstrating Flexibility: MCC works with Mt. Coffee’s existing implementation unit
In every MCC compact country, a Millennium Challenge Account (MCA) handles compact implementation. The entities are locally managed and staffed, serving as one of the MCC’s strongest and most visible symbols of country ownership. Liberia is in the process of constituting its MCA to manage and implement the compact, with one big exception. MCA-Liberia will not directly manage Mt. Coffee implementation, the bulk of MCC’s investment. Rather, MCA-Liberia will participate within the project and financial structure of Mt. Coffee’s existing project implementation unit (PIU).
The Mt. Coffee rehabilitation project began in 2013 with funding from the government of Norway, KFW Development Bank (Germany), and the European Investment Bank. Mt. Coffee’s PIU, which sits within the Liberian Electricity Corporation, a government utility, is leading implementation.
This marks the first time MCC has agreed to finance a project that its MCA counterparts will not directly manage. So what will that mean for country ownership? There’s no doubt that this arrangement will pose additional challenges in coordination, implementation, oversight, and accountability due to multiple investors and implementers. But it also showcases MCC’s dedication to country ownership through its willingness to work with existing systems and adapt to needs and realities on the ground. The existing PIU is also managed by a Liberian entity, which coordinates closely with MCA staff. According to several Liberians, the MCC “earned a big feather in its cap” for its flexibility.
Additionally, several Liberian stakeholders noted that the MCC’s strict guidance, particularly regarding gender, social, and environmental regulations, made the existing PIU far more robust. As one Liberian put it, “For the first time, someone was asking [the PIU] the right questions.”
A need to begin disbursements for time-sensitive Mt. Coffee rehabilitation projects triggered early entry-into-force (EIF) in Liberia. MCC elected to move forward with EIF (despite the absence of an MCA or MCC Resident Country Director) in response to the needs of the Liberian government and the Mt. Coffee project. Because the systems for Mt. Coffee were already in place, there was arguably a lower risk for time wasted, similar to what occurred in MCC’s earliest compacts. However, only time will tell what effect this accelerated timeline will have on MCA-Liberia’s ability to set up the necessary systems to absorb and manage MCC resources to successfully implement the remaining compact projects.
Out of the MCC’S 28 compacts that have entered-into-force, Liberia’s compact had one of the shortest signing-to-EIF turnarounds in the agency’s history at a mere 110 days. This rapid timeframe is unusual – especially since MCC notes that countries typically take nine months to reach this stage.
The rigidity of MCC’s model – scorecards to determine compact eligibility, strict five-year timelines, sector selection based on constraint-to-growth analysis, project selection based on economic rates of return – is critical in keeping the agency focused on generating poverty reduction and economic growth results in relatively well-governed countries. But MCC’s compact in Liberia also does an excellent job in showcasing the importance of flexibility for ensuring programs fit well with countries’ needs and appropriately adapt to realities on the ground.
The post is part of a series highlighting ongoing analysis of US agencies’ efforts to incorporate country ownership approaches in their development activities. The authors conducted research in El Salvador from February 24 – March 4, 2016.
“If we don’t take a risk, we won’t reap the rewards.” We heard this refrain from a USAID official working in El Salvador to advance USAID’s agenda to promote greater country ownership by cultivating public-private partnerships with local actors. Partnering directly with local entities can pose potential risks to USAID, but in El Salvador the decision to increase local implementation has proved pragmatic and beneficial, as it capitalized on local knowledge and the local private sector.
Under the banner of Local Solutions, USAID set a target to direct 30 percent of program funding to local partners by 2015 as part of the Agency’s 2010 reform agenda. For many Missions this goal remains an aspiration, but in El Salvador the Agency has consistently surpassed the target. In fact, USAID/El Salvador has comfortably cleared 30 percent since 2013, even without any direct partnerships with the government of El Salvador. This is due, at least in part, to the country’s diverse landscape of local organizations with the capacity to invest in and implement USAID projects.
Percent of Mission program funds per year implemented through local entities. Extracted from USAID Forward: Strengthen Local Capacity dataset (May 2016).
Three Distinct Partnership Models
It turns out that USAID/El Salvador draws upon a mix of local and international implementing partners to achieve results. We looked at three USAID projects, and examined the partnership arrangements involved, to understand the potential tradeoffs the Agency must weigh as it considers direct partnership with local organizations.
1. SolucionES: Local Prime Grantee & Local Sub-Grantees
SolucionES: FEPADE (prime) and all sub-grantees are local.
SolucionES is a five-year project that focuses on crime and violence prevention in El Salvador. At $42 million, SolucionES is the largest Global Development Alliance (GDA, USAID’s brand of public-private partnership) in USAID’s history in which every implementing partner is a local organization. USAID is investing $20 million while its local partners are required to leverage an additional $22 million from the private sector.
SolucionES’ implementing partners have been working in El Salvador for decades. USAID even helped to create several of these institutions through initial funding in the 1980s. These organizations are now leaders in shaping El Salvador’s development agenda, showing the payoffs of USAID’s investments in institutional strengthening. USAID has not just spent money in El Salvador; it has increased civil society organizations’ capacity to exist independent of the Agency.
2. Regional Climate Change Program: Local Prime Grantee & International Sub-Grantees
Regional Climate Change Program: CATIE is a local organization
and the sub-grantees are international organizations.
The Regional Climate Change Program (RCCP) provides a platform for coordination and cooperation on climate change mitigation interventions in Central America. CATIE, a regional center focused on management, conservation, and sustainable use of resources, leads implementation. Though it’s based in El Salvador, CATIE has a well-established network of non-governmental and governmental partners with which it works throughout Central America. International sub-contractors bring technical expertise to the project that complements CATIE’s capacity to convene partners around an issue that affects the entire region. Though, from what we heard, international partners were initially apprehensive about CATIE’s ability to manage USAID resources, they’ve come to recognize one another’s comparative advantage in implementation.
3. Alianza Cacao El Salvador: International Prime Grantee & International/Local Sub-Grantees
Alianza Cacao: CRS (prime), LWR, and TechnoServe
(sub-grantees) are international organizations. Caritas and
Clusa are local organizations (sub-grantees).
The Alianza Cacao El Salvador is a GDA that aims to improve the incomes of Salvadoran farmers by establishing cacao-based agroforestry systems and strengthening the cacao value chain. Catholic Relief Services (CRS), an international organization, is USAID’s direct partner that contracts to a mix of local and international implementing entities. In speaking to a local cacao cooperative, we learned that USAID may have chosen an international organization because there was a pressing need to disburse resources and not enough time to build the fiduciary capacity of local organizations to manage the award. Local organizations may have the technical expertise to implement, but in some cases they lack the absorptive capacity to manage large grants.
What these Partnerships Tell Us about Tradeoffs
These three partnership models offer a lens through which we can explore the potential risks and rewards that Missions consider in pursuing Local Solutions efforts.
Fiduciary. USAID has strict regulations in order to protect US taxpayer dollars from fraud and waste. Missions must undertake an intensive due diligence process to ensure partners’ financial, procurement, and management systems – among other things – are reliable, especially in difficult country contexts. This is likely why USAID chose to partner with CRS to implement Alianza Cacao.
Programmatic. Because many are first time direct partners, local entities don’t always have a proven track record of achieving results with USAID. In order to transfer management responsibility to a new organization, USAID must embrace a greater tolerance for programmatic risk. Though it’s a first-time direct partner, USAID knew of FEPADE’s reputation for achieving results in other projects, thus mitigating programmatic risk.
Longer timeline. It often takes significant time and resources for local partners to adopt USAID’s administrative and operational requirements to become a direct partner.
Local knowledge. Local organizations have long-standing relationships with the communities in which they work, enabling greater flexibility to improve projects based on community feedback. CATIE has a presence in several Central American countries, which gives it flexibility to adapt USAID’s regional program to specific country and community needs.
Cost effectiveness. Local organizations require lower overhead costs than an international organization, which means more of USAID’s dollars can go directly towards project results.
More resources. As is the case with SolucionES, organizations have access to different networks, including the local private sector – an untapped resource in many countries where USAID works.
Staying power & sustainability. The Salvadorans within these organizations will be directly affected by the outcomes of the projects they implement and therefore have a greater stake in sustaining results.
What the Example Set in El Salvador Tells Us about USAID’s Broader Effort
Merely funneling money through a local organization doesn’t necessarily lead to better results. USAID must carefully weigh the risks and rewards when choosing a local partner for direct implementation. But when local organizations have the capacity to achieve program outcomes, USAID’s calculation should systematically measure the additional benefits of partnering locally, such as sustainability, cost effectiveness, and increased capacity.
Without evidence to support the linkages between ownership and sustainability, USAID will continue to underestimate the value of its local partnerships. In choosing its implementing mechanism, we encourage USAID to consider how local implementation will affect results at the end of a project as well as 5, 10, and 20 years into the future. By budgeting for ex-post evaluations in project design, USAID will have more opportunities to identify how local ownership contributes to sustainability of results.
The post is part of a series documenting ongoing analysis of US agencies’ efforts to incorporate country ownership approaches in their development activities. The authors conducted research in Liberia from January 15 - 24, 2016.
The recent Ebola outbreak in Liberia underscored the need to focus on health systems strengthening and local resiliency. But who should take the lead? As the case of Liberia shows, even in a country still reeling from a health crisis and with perpetually low capacity, there are opportunities for donors to take a more ambitious approach to country ownership and institution strengthening.
For the last five years, USAID/Liberia has partnered directly with the Ministries of Health and Finance to improve health outcomes and strengthen health systems throughout Liberia. To undertake this partnership, USAID/Liberia made use of a Fixed Amount Reimbursement Agreement (FARA), a financing mechanism that enables the use of country systems, specifically for procurement and financial management, in project implementation. The FARA allows USAID funding to flow directly through Liberia’s Ministry of Finance (MOF) to the Ministry of Health (MOH), rather than the typical USAID arrangement where funding flows through a (often non-local) non-governmental implementing partner.
Liberia’s FARA 1.0 and FARA 2.0
Around the world, USAID uses FARAs to reimburse implementers for agreed-upon deliverables that have pre-determined, fixed costs. USAID typically uses FARAs to reimburse partner governments for delivering material outputs such as roads, schools, or electricity infrastructure. FARAs are rarely used for service delivery outcomes like those envisioned in the Liberia case because estimating the costs of services is far more difficult than physical outputs. What’s more, USAID’s operational guidance recommends using this mechanism for short-term projects of two years or less – a stark difference from the consecutive five-year agreements in Liberia.
So, how did this bold application of government-to-government spending come about in Liberia’s health sector? And what does it say about USAID’s approach to ownership in a country like Liberia, where institutional capacity remains relatively low?
Can an enabling environment and political will encourage ownership?
In the post-conflict period, and specifically since 2006, USAID has worked to strengthen Liberian institutions, including the MOH, in financial management, procurement, and auditing functions. These years of capacity and relationship building between USAID and MOH laid the groundwork for USAID to incrementally shift greater financial responsibility to the Liberian government through the FARA. In addition, the government of Liberia (GOL) demonstrated political will by identifying short- and long-term needs for the health sector, and recognizing the need to strengthen its Ministry of Health to efficiently deliver essential services.
But using Liberian systems required commitment from USAID/Liberia. The Mission needed to adopt a higher level of risk-tolerance as well as expend greater time and resources. While the reimbursement mechanism shifts fiduciary risk to the Liberian government, USAID still faces programmatic, political, and reputational risks. USAID mitigated these risks by focusing on activities in the FARA that the MOH had experience implementing and USAID had experience managing through previous capacity-building activities.
How does greater ownership affect results?
While it’s too early to evaluate how greater country ownership through the FARA will affect outcomes in the health sector, the midterm evaluation of the first agreement (FARA 1.0) offers a few preliminary findings:
Service delivery didn’t regress, as evidenced through maternal, newborn and child health indicators.
MOH had greater stewardship and more effective management through FARA implementation.
There was evidence of cost-savings through the use of MOH financial systems and fixed procurement costs.
Despite these gains, challenges remain. One of the biggest impediments to FARA implementation from the partner perspective is the pre-financing requirement. GOL’s budget is strained, making the process of marshalling the necessary resources for FARA activities a burden. The FARA exacerbates GOL’s liquidity constraints; in a country where development priorities are expansive, it can be difficult for MOF to front the additional resources for health-related FARA activities.
Liberia will continue to benefit from USAID assistance, but the FARA stands as a turning point. Both Liberian officials and USAID staff noted that the agreement reoriented the relationship from donor-recipient to partnership. There are now processes in place for joint decision-making about FARA activities and deliverables, use of Liberian institutions for implementation, and, in FARA 2.0, a financial contribution from GOL towards achieving project objectives. The FARA in Liberia is one example of how USAID is utilizing existing mechanisms in creative ways to encourage greater local ownership.
The Millennium Challenge Corporation (MCC) board of directors made three big decisions at its recent quarterly meeting. It selected Tunisia as threshold-eligible and conditionally approved a $600 million compact with Indonesia. (For more information on these programmatic developments, see here.) Perhaps most importantly, the Board endorsed a number of changes to the MCC’s selection system and criteria. The new system incorporates improved data and learning from the MCC over the past nine years but also calls into question the MCC’s historic commitment to clarity and an equal emphasis on a country’s commitment to rule justly, invest in its people, and encourage economic freedom.
After eight years of selection, the MCC decided to review its selection process to ensure that it was still using the best available criteria to identify well-governed, lower income countries. The MCC spent over a year evaluating the process and new data as well as collecting input from the development community. In Fine-Tuning the MCC Selection Process and Indicators, we at the MCA Monitor undertook a parallel review and made recommendations to keep the indicator system clean, clear, and color-coded; institutionalize the “democracy indicators” hurdle and ease the corruption hard hurdle; give the investing in people category an equal number of indicators; account for income bias in indicator scores; and be transparent about the Board’s use of discretion.
The MCC’s new system takes into account a number of CGD’s recommendations but falls short on maintaining clarity. The revised selection process incorporates the following changes to the indicators and the rules that govern them. (For a full explanation of the new system and new indicators, see the MCC’s Guide to the MCC Indicators and the Selection Process for FY2012.)
Three New Indicators Added: A Freedom of Information indicator will replace Voice & Accountability in the Ruling Justly category. The Economic Freedom category will see two new indicators: Access to Credit and Gender in the Economy. The MCC is also breaking the current Natural Resources Management indicator into two indicators based on its component indices: Child Health and Natural Resources Protection.
Democratic Rights Hard Hurdle: The MCC adopted a hard hurdle for democratic rights, requiring a country to pass either Political Rights or Civil Liberties to pass the indicators test. These two indicators will also now be judged with an absolute threshold rather than a median. To pass these indicators, a country must score above 17 for Political Rights and 25 for Civil Liberties.
New Indicator for LMICs Only: The MCC made changes that will apply to lower middle income countries (LMICs) only in the Investing in People category. A new Girls’ Secondary School Enrollment indicator will replace the Girls’ Primary Education Completion Rate indicator. The Immunization Rates indicator will also now be judged on an absolute threshold of 90 percent for LMICs only.
New Pass Half Overall Rule: Emphasis on the MCC’s three hallmark categories is reduced; now a country must pass half of the indicators overall (instead of half in each category) and one indicator in each category.
Again, one goal of the selection process is to evaluate the policy performance of lower income countries and identify good policy performers. On this, the changes to selection do much to improve the targeting of potential MCC partners. The new indicators focus on key constraints to economic growth, and the added dimensions will further expand the opportunity for policy discussion around these sectors. The adoption of democratic rights absolute thresholds and a hard hurdle sends the message that countries must value the input and rights of their citizens, no matter the income level.
But another goal of the selection process is to produce clear, simple scorecards for the MCC to use in policy dialogue with candidate countries. The new rule specifying that a country must pass half of the indicators overall and one in each category muddies the MCC’s historic emphasis on a country’s ability to rule justly, invest in its people, and encourage economic freedom. In an interview, MCC Board member Mark Green opposed the change, expressing concern that the new rule “will be perceived as a weakening of MCC’s commitments to all three of the core values that have been at the heart of this program since its birth.”
Green was also disappointed in the process by which the sweeping changes were approved. The MCC Board is still without two of its four public board members, meaning the Board accepted the change in selection without all of the statutorily designated Board members present. It is crucial that the administration fill these vacancies. It (and the MCC) missed the chance to have a full MCC board weigh in on changes to the selection system, and selection decisions will only become more important at the upcoming December board meeting.
With compact eligibility decisions only a few months away, how will the new system be implemented? To allow for a period of transition, the MCC will run both systems for FY2012 selection, but neither will be binding or dominant. This means there will be clear winners and losers (those countries that pass or fail on both systems) and some countries who pass under one system but fail under the other. The Board will use its discretion on these country cases but should be transparent in its decision-making about why it favored one system over another.
Stay tuned for upcoming MCA Monitor analysis of how countries fare on the two hard hurdles and full FY2012 selection results.