New MCA Monitor Analysis Fine-Tunes the MCC Selection Process

A new report from the MCA Monitor, Fine-Tuning the MCC Selection Process and Indicators, takes a close look at the Millennium Challenge Corporation’s (MCC) annual selection process.  At the heart of the review is the question: Does the selection process produce the best group of countries with which the MCC should be partnering?  We reviewed the MCC’s selection approach including the indicators that guide selection and the decision rules that govern the process.  Our number one recommendation: the system is working well in applying tough criteria to select well-governed, poor countries, and the MCC should avoid making major changes to the overall method.The MCC’s selection process could, however, benefit from minor changes that would ensure it has the opportunity to partner with the best pool of candidate countries.  Our five recommendations are:

1. If it ain’t broke, don’t fix it (too much): Keep the indicator system clean, clear, and color-coded. The MCC’s selection process and eligibility indicators are generally working well to assess countries’ relative performance and guide the MCC board’s thinking during selection.
2. Power to the people: In the ruling justly category, government capacity and political voice matter. We propose a new rule for the ruling justly category: a country must pass half of the indicators in the category including at least one in the government capability sub-category (control of corruption, government effectiveness, rule of law) and at least one in the voice and democracy sub-category (political rights, civil liberties, voice and accountability).
3. Some categories are more equal than others: Give the investing in people category an equal number of indicators. A country must pass at least three indicators in each of the three categories to pass the indicators test, but the investing in people category is currently under-represented with only five indicators compared to the six indicators in each of the ruling justly and economic freedom categories.
4. Watch for countries that punch above (or below) their weight: Look out for income bias. Despite the MCC’s low income and lower middle income groups, incomes vary greatly within each of these sets of countries.  The poorest low income country (Burundi with a GNI of $150) is measured against the same median as the richest low income country (Kiribati with a GNI of $1890).  We offer a method by which a country’s performance on an indicator can be more closely tied to its income.
5. The indicators aren’t everything: Use discretion, but be transparent. The MCC board can and should continue to use its discretion in choosing the final group of countries eligible to apply for a compact.  But, it should be transparent about the reason behind a country’s selection (or lack of selection despite passing the indicators test).

These recommendations work to equalize the system and create a level playing field for all low income and lower middle income countries.  The MCA Monitor has undertaken this review as the MCC has conducted its own review of the selection process over the past year.  The MCC will submit its final recommendations on any changes to the selection system to the MCC board in September.  If the Board approves the changes, they will be enacted in the FY2012 MCC selection process.