Amid a contentious FY2008 budget round between Congress and the White House, foreign assistance -- particularly that for development -- may face cuts during negotiations. The Millennium Challenge Account (MCA) -- one of few U.S. foreign aid programs specifically targeted to long-term development objectives -- is especially vulnerable. In a new MCA Monitor Analysis, senior policy analyst Sheila Herrling presents a path forward for Congress and the administration to address the real issues hindering MCA implementation, and argues against an amendment introduced by Senator Lugar to change the MCA's compact funding obligations policy because it erodes key innovations that distinguish the MCA from other aid programs.
The Millennium Challenge Corp. (MCC) will soon release performance data that will form the basis of its FY2008 country selection round. The only indicator that countries must pass to qualify for MCC money is Control of Corruption. CGD's Sheila Herrling and Sarah Rose have crunched the numbers for the corruption indicator data and offer an early preview of which countries will clear the hurdle—and which are likely to trip. In early November the MCA Monitor team will release their predictions of which countries will be deemed eligible for Millennium Challenge funding. The MCC Board is scheduled to announce its decision on December 4.
Investing in People by Investing in Data: How Best to Incorporate the New MCA Eligibility Indicators
The board of the Millennium Challenge Corporation will soon 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. In a new paper by CGD’s MCA Monitor team, Sarah Rose, Sheila Herrling, and Steve Radelet explore how to integrate these new indicators into the MCA's three eligibility criteria categories: Ruling Justly, Investing in People, and Economic Freedom. They recommend adding the Land Rights indicator to the Economic Freedom category, and the NRMI to Investing in People. They also urge the MCC to offer incentives for a third party to create an educational quality indicator, thereby bringing the total number of investing in people indicators to six, equal to the number of indicators in the other two categories.
Since its inception in 2004 the Millennium Challenge Corporation (MCC) has been an experiment in improving the effectiveness of U.S. foreign aid in a small set of poor but well-governed countries. This new MCA Monitor Analysis brief based on visits to seven Millennium Challenge Account (MCA) countries between July 2005 and March 2007 draws broad lessons about the MCC’s first years of operation.Learn more
As Congress gears up to allocate some $36 billion in the international affairs budget across a multitude of foreign aid programs, CGD senior policy analyst Sheila Herrling and research assistant Sarah Rose ask whether the MCA should receive the full $3 billion requested by the president for the initiative. The authors applaud the MCA as one of the few U.S. foreign aid programs specifically dedicated to long-term global growth and poverty reduction and argue that reduced funding could jeopardize its core credibility.
Expand and Enhance: A Proposal to Strengthen the MCA Eligibility Process When Adding the Natural Resource Indicators
This week the Millennium Challenge Corp. briefed staff-level representatives of its Board on plans to add two new indicators, for Natural Resources Management and Land Rights and Access, to the country eligibility criteria starting with the FY 2008. Expand and Enhance: A Proposal to Strengthen the MCA Eligibility Process When Adding the Natural Resource Indicators, a new MCA Monitor paper by Steve Radelet, Sheila Herrling, and Sarah Rose, offers suggestions about how to incorporate the new indicators into the existing three-part criteria: Ruling Justly, Investing in People, and Economic Freedom.
As the first country to sign a compact with the Millennium Challenge Corporation, Madagascar has been the global guinea pig for the MCA approach. Its early experience offers important lessons for countries following in its path - both about the real challenges of program administration, and the real potential of the MCA as a source of transformation and innovation.
This analysis from CGD's MCA Monitor describes two new indicators of governance and policy performance that determine a country’s eligibility for Millennium Challenge Account (MCA) finance: Natural Resources Management Index and Land Rights & Access. The authors analyze the process that led to their selection and assess the suitability of the indicators for the MCC's use.
The MCC Board of Directors faces many important decisions in the upcoming FY07 selection round. Perhaps the most controversial will be decisions about whether to select Indonesia and Jordan to be eligible this year. The MCA Monitor predicts that it is likely that the Board will select both countries due to a desire to include more predominantly Muslim countries and reward political allies. In this note the authors explain why they do not believe either would be a good choice.
The Millennium Challenge Account (MCA) was intended to complement-not replace-existing aid structures. But there are concerns that increases in MCA funding are diverting funding away from USAID. In this study, the authors find that core development aid targeted specifically at poverty reduction and economic growth has remained stagnant for several years, but that this downturn may be part of a more general trend. They recommend that the Director of Foreign Assistance establish a centralized and comprehensive database to help spur more effective decision making and oversight by the U.S. government and key aid constituencies.
When the MCA was first introduced, many assumed it would deliver some of its funding through general budget support. But so far it has continued funding via traditional project finance. In this paper, Herrling and Radelet review trends in development assistance toward general budget support and propose an option for the MCC to phase in the disbursement of compact funds through increasing levels of budget support to select countries that prove their capacity to manage and monitor them.
Sarah Lucas May 2006 Download the full text version of the field report (PDF, 89KB)
Ghana is expected to sign the largest MCA compact to date--upwards of $500 million over 5 years--by the end of July.
One of the Millennium Challenge Corporation’s (MCC) key innovations is its transparency criteria for country selection. But is the MCC as transparent in its decision-making process, particularly in decisions that are exceptions to rules? This paper argues that the MCC should deepen its transparency agenda, particularly with the consistency and clarity of the country selection decisions and the compact and threshold program development process.
On September 23, 2005 Malawi signed a funding agreement with the MCC under the MCA's Threshold Program. Malawi was only the second threshold country to reach this step, and the first to reach agreement on a proposal that tackles the thorny issues of corruption and financial management.
The MCC Between a Rock and a Hard Place: More Countries, Less Money and the Transformational Challenge
In this companion note to "Round Three of the MCA: Which Countries are most likely to Qualify in FY 2006" Sheila Herrling and Steve Radelet offer advice to the MCC Board on how to balance the increase in qualifying countries, the desire for larger compacts, and limited funding.