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MCA Monitor Update: Spring 2009

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

1. MCA Budget: FY 2009 Submitted, FY 2008 At Risk
2. Tanzania Signs $698 Million Compact
3. Two New Threshold Programs Signed
4. CGD Hosts Event to Launch MCC Economic Rate of Return (ERR) Online Tool
5. 2007 Annual Report “Changing Lives” Released
6. Namibia Granted $3.25 Million Pre-Compact Grant
7. MCC Marks Fourth Anniversary
8. Three Memoranda of Understanding Signed; Value-Added Unclear

1. MCA Budget: FY 2009 Submitted, FY 2008 At Risk

The MCC submitted a $2.225 billion FY09 budget request in February and later defended by CEO Danilovich in testimony before the House Appropriations Subcommittee on State and Foreign Operations. The request, a 46% percent increase over the FY08 enacted budget but less than the $3 billion requested annually for the past 3 years, was a sensible and smart request. It reflected both the reality of an extremely tight budget cycle, a shift of focus to implementation and disbursement challenges, and an optimist (but credible) pipeline of new country compacts.

Of note, however, is the fact that the $1.54 billion FY08 Omnibus spending bill approved in December is now in jeopardy. On May 22, the Senate passed a supplemental bill carrying two amendments by Senator Gregg (R-NH) that rescind $525 million from the FY 08 MCA budget as an offset to fund cyclone relief in Burma, support Jordan in its efforts to deal with Iraqi refugees, and fund food security programs. Funding these programs makes the U.S. look good, but funding right programs the wrong way is not smart. Poaching from the one agency dedicated to investing in long-term global development and poverty programs to service short-term humanitarian and political objectives is a short-sighted response. It does not provide lasting solutions to the problems at hand nor help as much the very countries the amendments are trying to help. It also undermines the ability of the MCC to remain good-faith partners with countries who have been working towards compacts for years. If the rescissions hold, Burkina Faso and Namibia would be forced to wait yet another year to sign a Compact; ironically it would also further delay a potential large compact with Jordan.

2. Tanzania Signs $698 Million Compact

President Bush signed a Compact with Tanzania on February 17 as part of his week-long tour of Africa. This is the largest compact to date, coming close upon the completion of the Tanzania threshold program focused on corruption. The Compact addresses infrastructure in the areas of transport, energy, and water – including an improved road network, increased access to more reliable electricity, and a larger cleaner water supply. The Compact is off to a strong start, with the Governing Board established by December of 2007 and the accountable entity legally established within months of the compact signing.

3. Two New Threshold Programs Signed

In March, the MCC signed two new threshold programs. A $23 million, 3-year program with Niger aims to improve rights and access to land, reduce costs and number of days to start a business, increase girls’ primary education completion and enrollment rates, and improve Niger’s performance on the World Bank Institute’s Control of Corruption Index. The $16 million, 2-year program with the Kyrgyz Republic was awarded to take advantage of a small window of opportunity and it is less clear how the program will lead to passing the indicator test as it failed the entire Ruling Justly category in FY08.

4. CGD Hosts Event to Launch MCC Economic Rate of Return (ERR) Online Tool

In celebration of its efforts to increase transparency and in consideration of the challenges of using economic analysis as the basis of project funding, CGD hosted an event to launch the MCC online ERR tool. A presentation by Franck Wiebe, MCC Chief Economist was followed by a panel discussion on the merits and shortcomings of the ERR model of analysis, and issues of beneficiary analysis, distributional effects, and methods by which to best target and impact poverty in developing countries. The MCA Monitor looks forward to the publication of the remainder of the Compact spreadsheets as well as the related beneficiary analyses that will illuminate how difficult tradeoffs are being decided in light of increasing oil prices, the depreciation of the dollar, and the international construction boom affecting input costs.

5. 2007 Annual Report “Changing Lives” is Released

In April the MCC released its Annual Report for 2007, entitled “Changing Lives”. The report is organized by the themes “who, what, and why” and aims to provide various stakeholders with information on achievements in 2007. The document provides basic information on all of the Compact, Threshold, and Administrative aspects of the MCC as well as illustrative stories and pictures of progress and projects underway in partner countries.

6. Namibia Granted $3.25 Million Pre-Compact Grant

The MCC announced a $3.25 million pre-compact grant (609g funding in MCA parlance) with Namibia in April to support the final stages of its compact development. Eligible since FY06, Namibia has been working with the MCC to hone its Compact to focus on the areas of agriculture, tourism, and education. The use of 609(g) funding to ensure a thorough and well-vetted compact proposal should pave the way for a clear path to entry-into-force for Namibia if the budget funding survives current Congressional maneuvers to rescind it (see the FY08 funding risks above).

7. MCC Marks Fourth Anniversary

A public event on Capitol Hill was held in January to celebrate the fourth anniversary of the establishment of the MCC. Several congressional representatives and board members delivered supportive remarks, and Ambassador Danilovich gave a short speech on the state of the MCC.

8. Memoranda of Understanding Signed with DFID, GE, and PSF; Value-Added Unclear

Over the course of the spring, MCC signed three Memoranda of Understanding (MOU):

• An MOU with the UK’s Department for International Development (DFID) focuses on Africa in “practical areas of cooperation on the ground” in countries where both development agencies are already working.
• An MOU with General Electric Company (GE) outlines a “framework for future collaboration” on issues of sustainable development.
• An MOU with the Phelps Stokes Fund (PSF) promotes diversity in development by increasing “leadership and career development opportunities” for members of the PSF Ralph Bunche Societies in Washington, DC.

The value added of these MOUs is unclear, particularly when the MCC needs to focus its scarce resources and staff effort on implementation and delivering results on the ground.

MCA Monitor