This section identifies key issues and questions that emerge from the Tanzania experience and are echoed in other countries. They represent some of the fundamental issues that the MCC must grapple with as it moves beyond the start-up phase and solidifies its approach in working with partner countries across the globe. All of these issues have one thing in common: a need for clearer MCC definition and articulation of its approach.
The relationship between the MCC and USAID
The Tanzania case offers one illustration of the unclear relationship between USAID and the MCC. USAID has quietly gone from having a leadership role in the Threshold Program to a distant back seat in the Compact design without any clear discussion of changing responsibilities. While this might make sense in terms of focus areas (USAID has already done a lot of work on DG issues in Tanzania, and not in infrastructure), it could impede compact development. According to one government official in Tanzania, USAID was a "crucial broker" during the Threshold Program deliberations because the Agency “understands Washington better than we do and they understand Tanzania better than Washington does.” USAID’s vantage point, he argued, would undoubtedly be useful in the Compact development process as well. But no clear or formal structure is yet in place to bring USAID expertise to bear on the planning of MCA Compact-funded programs in Tanzania.
This ambiguity in Tanzania is consistent with the MCA experience in other countries. Early stories from the first-round of eligible countries highlighted a discord between the MCC and USAID, the MCC restriction on USAID support in proposal development, confusing signals from USAID Washington about missions' responsibilities in both Threshold and Compact programs, and the MCC’s reliance on USAID for logistical support but not for substantive programmatic planning. Three years into the MCA experiment it seems that the animosity is subsiding, but the relationship is neither clearer nor more formalized. What should the USAID/MCC relationship look like going forward? The answer is clearest in the case of Threshold countries where USAID has come to have a formal leadership role. But what happens in cases like Tanzania, when a country moves from Threshold to Compact? Or in countries like Ghana or Mozambique whose Compact proposal builds solidly on existing USAID programs? The role of USAID in these countries desperately needs to be clarified.
Both the MCC and USAID stand to gain from a clearer relationship that formalizes more cooperation between the two agencies. USAID has a lot to offer the MCC in terms of on-the-ground expertise in specific program areas, the delicacies of working with a given set of government officials, navigating donor relations, and identifying reliable civil society partners. The MCC also has a lot to offer USAID in terms of approach. USAID officials have reported that watching the MCC operate has pushed their thinking on efficiency, fostering country ownership and strengthening monitoring and evaluation practices. A clear definition and articulation of the MCC/USAID relationship in Compact countries would improve synergy in US aid programs, increase learning and exchange of ideas between the two agencies, and lead to more successful programs in both.
The relationship between the Threshold and Compact programs
Related to the issue of the MCC/USAID connection is the question of the relationship between the MCC’s Threshold Program and the Compact process. While GoT and USG officials may be sanguine about the separation between them in Tanzania, there are plenty of reasons to hope for better coordination between them as a matter of standard practice. Tanzania may be unique in having both programs running simultaneously, but the intention of the Threshold Program is that many of its countries will eventually be eligible for an MCA Compact. In other words, if the Threshold Program works, additional countries will experience the MCC’s two programs sequentially. In some respects, this makes the Threshold Program an introduction to the larger operating framework of the MCC.
Keeping the two processes separate misses the opportunity for a country to develop systems under the Threshold Program that will later benefit it in the Compact design process. Maintaining separate structures also risks missing opportunities to more strategically use the Threshold Program to enhance the effectiveness of future Compact programs. For example, crafting a Threshold Program that builds capacity of the government and/or indigenous NGOs could make for more rigorous public consultation or poverty impact assessments at the Compact development stage. And Threshold Program investments in combating corruption could be directly applied to ensuring proper use of MCC Compact funds in major infrastructure investments. The MCC's clearer definition of the relationship between the two programs would open opportunities for improvements in both.
The MCC's approach to consultation
The MCC's streamlined approach to consultation in Tanzania raises a complex set of issues that apply in many MCA countries. The MCC has set a high standard for civil society participation in the planning, implementing and monitoring of MCA programs, and claims this high standard as one hallmark of its approach. But most MCA countries have already implemented some sort of participatory planning process, usually in the development of the PRS or equivalent national strategy (and often with the encouragement and support of other donors). The MCC's challenge is to help partner countries find the right balance between building on previous consultative processes, and creating space for civil society to weigh in on specific MCA program plans. The truth is, the right balance will look different in different countries, so the MCC has to be especially diligent in assessing the processes that have come before it and striving to build on and improve them.
The MCC has resources at its disposal to be a leader in fostering participatory planning in its partner countries. It has financial resources in the form of 609(g) funds.[1] The MCC could make these available to support capacity building and consultation expenses for civil society groups during the compact development phase. It also has two types of political capital as a resource, one at home and one in partner countries. First, both the Congress and US-based NGOs support the MCC in working to make consultation meaningful, and for keeping high standards for civil society involvement in all phases of the MCA process. Second, civil society in partner countries tends to be quite supportive of MCC investments in sticky areas like infrastructure and policy reform. For example, in Tanzania NGOs are extremely supportive of MCC plans to invest in infrastructure for energy, water and transportation (at least the roads component). The same is true in Ghana, where NGOs are broadly supportive of an MCA plan that focuses on private sector development and on infrastructure investments. In both cases NGOs have supported the MCC’s reliance on the PRS to set priorities. But in both cases they have also been frustrated by the lack of a formal and timely opportunity to weigh in on specific program design. The MCC and country teams argue that full consultation will occur once the proposals are developed enough for meaningful discussion (and indeed this is starting to happen in Ghana). But how much consultation is enough? When is consultation too early or too late? At what stage of program design should communities be involved in assessing poverty impacts? And perhaps most importantly, what criteria should the MCC use to assess the strength of previous participatory planning, and to decide how much to rely on these processes to set priorities for MCC support?
The MCC has done a lot of thinking about civil society consultation, and deserves praise for offering formal guidance in this area. But after two years of experience, it is time to grapple more concretely with these tough questions, and formalize a way to address them on a country-by-country basis. If the MCC is going to keep high standards for consultation, it will need to articulate clear criteria to judge processes on which its support is based, have mechanisms to hold partner governments accountable to participatory principles, and be transparent in its rational for choosing a given approach to civil society consultation, especially if it is streamlined.
The MCC's approach to investments in infrastructure
Tanzania has followed a trend among MCA countries; it has targeted the MCC for support of infrastructure investments. All eight compacts the MCC has signed to date, and the Ghana compact scheduled to be signed August 1, include significant investments in infrastructure. The Tanzania compact is also slated to include major investments in infrastructure. There are many theories about why countries choose this focus for MCA compacts: other donors are reluctant to give grants for infrastructure; the MCC signals greatest interest in this area; the MCC’s promise of big money entices countries to propose big-ticket items; the social sectors already receive a lot of support; and it is easiest to show high rates of return and immediate impacts on growth in this area.
Whatever the reason, the MCC continues to receive proposals for and commit funding to infrastructure. It also continues to get grief from the US Congress and US-based advocacy community for this. Congressional and NGO concerns are centered on two issues that have plagued donor-funded infrastructure projects for decades: susceptibility to graft and a belief that there are fewer direct benefits for the poor. The MCC is designed to take both of these concerns head-on with its emphasis on good governance, and its mission to directly connect economic growth to poverty reduction. But it has not clearly made its case on how it will avoid the pitfalls of the past. The MCC would benefit from more explicitly and publicly sharing what it has learned about how to address corruption (which is present in even the best performing of the poor countries) and to linking the poor to the growth benefits from infrastructure investments.
The Tanzania case offers an opportunity for the MCC to clearly articulate its approach in infrastructure and its rationale for supporting given investments. For example, where will the MCC invest in the energy sector? Will it support the MCA-TZ if it wants to focus on making the existing grid and power supply more reliable? This would imply a focus on the urban areas that provide the engine of growth, and where businesses try to thrive and create jobs. Or will it invest in extending the grid to rural areas? This would reach the rural poor more directly, but may have less aggregate impact on income generation and job creation--the keys to poverty reduction. Would the MCC be content with a focus on policy reform to attract private investment to make the sector sustainable? This would allow the sector to improve existing services, become more financially stable, and thereby have the resources to extend to more remote areas. How will the MCC navigate the debate on tariffs and help the MCA-TZ strike the right balance between ensuring the poor’s access to services and the sector's financial sustainability?
Parallel questions could be posed about other infrastructure areas for which the MCC has received (and funded) proposals--roads, airports, water, bridges, ports, pipelines, etc. How the MCC and partner countries answer these questions will have different implications for the poor. Decisions about where the MCC invests lie primarily in the hands of partner governments. But the MCC has an important role in setting the standard for ensuring that investments are used well and reflect citizens’ priorities and the outcomes of rigorous poverty impact assessments. The MCC would probably get more public support at home, and have an easier time setting high standards, if it made a special effort to publicly explain how it will keep its infrastructure investments clean and committed to directly benefiting the poor.
Innovation in the MCC model The Tanzania case is an indication that the MCC is increasingly billing itself as a team player. It is engaging with other donors, building on existing national plans, and appears to be more interested in filling already-identified gaps than introducing an MCA-specific process to set priorities. This is all very good news. But where does it leave the MCC's goal of being innovative--a principle on which the MCA was launched and that the MCC continues to espouse?
One innovative aspect of the MCC, of course, is the selection process. No other donors partner with countries chosen primarily by the use of quantifiable indicators. But what is going to be different about the MCC in terms of program design and implementation? The MCC faces a challenging balancing act--working with and learning from other donors and national strategies, yet being a driver of innovation in the aid business. As interested parties look to the MCC to deliver more effective development assistance, perceptions on the ground are important. Here is what USG officials and some MCA observers in Tanzania had to say:
- The MCC's focus on growth is innovative in itself. While other donors talk about growth, the MCC is committed to making it happen and measuring the results.
- The MCC has the guts to take on the hard-core interventions like infrastructure and policy reform. (The World Bank is also heavily involved in these areas, though with loans rather than grants).
- The MCC is eager to look beyond the aid business for ideas. MCC team members commented that they are examining best practices from the private sector, and exploring creative mechanisms like community-based maintenance plans for infrastructure.
- The MCC could be innovative in terms of scale. The MCC's allocation to Tanzania will never trump that of the UK's Department for International Development (with annual budget support scheduled to ramp up to over $180 million in 2008, not including other project funds) or of the World Bank ($550 million in IDA loans this year). But the MCC may be willing to commit enough to make it a very influential player in the sectors in which it invests.
- The MCC is willing to talk straight. Other donors may not push too hard on corruption, or be too vocal about criticizing national policies, in order to maintain the good reputations of partner countries. But the MCC has been clear about expectations for tough reforms in the energy sector. And, of course, the MCC targeted corruption directly in the Threshold Program agreement in Tanzania--apparently the first donor-funded program with the guts to specifically name “corruption” rather than general improvements in governance.
- The MCC showed it is willing to cut off support to countries that are not performing, as in the case of The Gambia.
With strong government capacity and robust development planning processes, MCA countries like Tanzania are, on average, safe environments in which to be innovative. As the MCC continues to grow from start-up to mature agency, it will be well-served to more clearly articulate what is innovative about its model. The MCC's clarity and transparency on all the emerging issues mentioned here will count as an important innovation in itself, and will win it more support among MCA observers even as the Corporation strives to blaze its own trail.
[1] The term 609(g) comes from that section in the legislation establishing the MCC (http://www.mcc.gov/about_us/key_documents/MCA_Legislation.pdf) that refers to the use of funds “for any eligible country for the purpose of facilitating the development and implementation of the Compact between the United States and the country.”