MCA Monitor Update: Summer 2007
The MCA Monitor Update is a quarterly newsletter summarizing key events and issues related to the Millennium Challenge Account examined through CGD's MCA Monitor.
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Contents
- MCA Monitor Team Advises How Best to Adopt FY08 Indicator Changes
- Will MCA Face a Budget Crunch in FY2008?
- What Are (and What Aren’t) the Big Issues with the MCA: Steve Radelet Testifies
- MCC Approves Three New Compacts, Including the Largest to Date
- Two New Threshold Programs Approved
- African MCA Countries Take On Country Ownership
- MCA "Colleges"
- The GAO Audits MCA-Vanuatu
- Coming Soon: Round Five of the MCA: Which Countries Will the MCA Choose in FY2008?
1. MCA Monitor Team Advises How Best to Adopt FY08 Indicator Changes
On September 12 the MCC Board of Directors will decide how to incorporate two new natural resources indicators--a Natural Resource Management Index (NRMI) and a Land Rights and Access indicator--into the FY2008 country selection process. The MCA Monitor weighed in on this decision in a new paper, Investing in People by Investing in Data: How Best to Incorporate the New MCA Eligibility Indicators. The incorporation of Land Rights and Access in the Economic Freedom category is straightforward: the additional indicator can be offset by combining two current indicators (Days and Cost of Starting a Business) into a single index, maintaining a total of six indicators in the category. Including the NRMI in Investing in People, however, is more complicated. After exploring three options, we recommend the NRMI be included as one of five indicators in the Investing in People category for the time being. This awkward outcome, given the MCC's rules that a country must pass half the indictors in each category, puts pressure on the MCC and the larger education and development community to create incentives for the development of a viable indicator of educational quality to include in the Investing in People category in the near future.
2. Will the MCA Face a Budget Crunch in FY2008?
On June 5 the House released its mark-up of the FY2008 State-Foreign Operations spending bill with a $1.8 billion allocation for the MCA. This nod of support for the MCA (a slight increase from last year’s appropriated sum) was not returned by the Senate which came out with only $1.2 billion for the MCA a few weeks later. The Senate mark-up sparked a flurry of reactions in the news media, including an op-ed by Michael Gerson, a Washington Post editorial, and a Congressional Quarterly piece quoting MCC CEO Danilovich, all saying that cutting funding to the MCA in this budget cycle would be shortsighted.
Much of the basis for Congressional cuts to the President’s $3 billion request, are rooted in a misleading assertion that the MCC is unable to spend what it already has. A Congressional Quarterly article commenting on the MCA’s slow disbursement rate and its lack of support in Washington and among traditional development organizations was, in our opinion, off the mark. The current reality of the MCA budget is that after signing compacts with Mozambique, Lesotho and Morocco in July and August, only $600-$700 million in unobligated balances remain, which invalidates the criticism that MCC is sitting on piles on unused money from past years. It also makes the FY2008 appropriation very important to those eligible countries that have worked hard to finalize their compacts and are almost ready to sign.
3. What Are (and What Aren’t) the Big Issues with the MCA: Steve Radelet Testifies
In testimony (pdf) before the House Committee on Foreign Affairs Subcommittee on Africa and Global Health, Steve Radelet examined three common critiques of the MCA that he believes are off-base--that it selects the wrong countries, that it focuses on the wrong substantive areas, and that it cannot spend the funds that have already been appropriated--and three critiques that have more merit--that the pace of implementation has been too slow, that it should focus on low-income countries and not middle income countries, and that the restriction limiting countries to one five-year compact slows progress and adds to program complexity. He also offered suggestions for what more needs to be done for the MCC to realize its potential for bringing hope and prosperity to the world’s poorest well-governed countries.
4. MCC Approves Three New Compacts, Including the Largest to Date
This summer the MCC approved three new compacts, bringing the total number of compacts to 14 (which, combined, are worth over $4.5 billion). Mozambique and Lesotho were both signed in July, and Morocco was signed at the end of August. Morocco’s compact, at $698 million, is by far the largest compact to date, though it is the second smallest in per capita terms.
5. Two New Threshold Programs Approved
In July the MCC Board approved a $7 million Threshold Program for Guyana designed to help the country reduce its fiscal deficit by improving its ability to collect revenue and better manage the budget. In August a $16 million Program for the Kyrgyz Republic was approved to help the country target its two weakest governance indicators--Control of Corruption and Rule of Law--by supporting judicial, law enforcement and criminal justice reforms. Initially opposed to the selection of the Kyrgyz Republic as a Threshold eligible country, we note that the Threshold program comes at what may be a key window of opportunity. The government and other stakeholders have demonstrated an intent to tackle corruption and rule of law, and the FY2008 data are showing very-near-passing scores (exactly the median) for the Kyrgyz Republic on three other governance indicators.
6. African MCA Countries Take On Country Ownership
In June the Chair of Ghana’s Millennium Development Authority (the local MCA implementing agency) invited Africa’s MCA-eligible countries to Accra to share their experiences with the MCA process and offer recommendations for how the MCC could improve its effectiveness. Countries in all phases of eligibility and compact status participated, as did MCC representatives. The meeting represents a positive step toward improved communication, both among partner countries and with the MCC. It also shows that MCC’s African partner countries--by initiating a serious discussion about managing their own development process within the MCC context--are taking country ownership and accountability to a higher level.
One of the increasingly-heard criticisms of the MCC is that its compact implementation has been very slow. While some of this delay is due to the MCC’s own processes, policies and evolution from startup to full-fledged operations, some is due to the MCA model itself which puts countries in charge of the design and implementation of their development programs without fully taking into account varying levels of capacity to meet the MCC’s requirements. To address implementation constraints without sacrificing country ownership and while maintaining standards of performance-based disbursements, the MCC is trying out a creative model of MCA "Colleges." This series of workshops offers real nuts-and-bolts training as well as an opportunity for two-way dialogue with the MCC on operational issues such as procurement, monitoring and evaluation, and environmental and social assessment, so both can improve their processes.
On July 26, 2007, the House Foreign Affairs Subcommittee on Asia, the Pacific, and the Global Environment held a hearing on a GAO report (pdf) that claimed the MCC overstated in its public documents the projected impact of its compact with Vanuatu. The MCC, in testimony (pdf), maintained that its projections were factually correct and never intended to mislead, although it could see the possibility for misinterpretation. Subcommittee members seemed satisfied to chalk it all up to “a difference in bookkeeping” which was dissatisfying to the GAO, whose bottom line was that the lack of transparency with which the MCC portrayed the compact’s projected benefits is an issue of credibility. The MCA Monitor weighed in, saying that MCC should take steps to be more transparent in publicly reporting how they arrive at their impact projections (which, we hear, they are taking steps to do). They should also be held to their projections and bear the responsibility for not living up to them should they turn out to be overly-ambitious.
9. Coming Soon: Round Five of the MCA: Which Countries Will the MCA Choose in FY2008?
Which countries will pass the indicators test? Which won’t? Which do we think the MCC will select as eligible for FY2008 funding and why? Keep an eye out in November for the MCA Monitor’s annual publication on the MCA eligibility round.