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On December 15, the Millennium Challenge Corporation’s board of directors will hold its annual country selection meeting (the last of the Trump administration), identifying which countries will be made newly eligible for the agency’s funding. Every year CGD’s US Development Policy team highlights key issues the board will grapple with and predicts which countries the board will choose for compacts—large, five-year grant programs—and which it will select for threshold programs—smaller, more limited grant agreements. (See here for a quick overview of MCC’s country selection process). This blog post focuses on some of the top candidate countries and the most interesting decisions in play for FY2021: Sierra Leone, Benin, Côte d’Ivoire, Sri Lanka, and Ethiopia.

Overall, we anticipate another small year for MCC in terms of new partnerships. The agency already has seven bilateral compacts under development (with Indonesia, Kosovo, Lesotho, Malawi, Mozambique, Timor-Leste, and Tunisia), and is in the process of developing its first ever regional compact(s) in West Africa. Even in a normal year, this would be a full plate. When you factor in the global pandemic, which has put up operational hurdles and fomented economic uncertainty, MCC almost certainly doesn’t have the scope or appetite to add a lot of new countries to its list.

While observers typically focus attention on the selection of new countries, the board will also decide next week whether countries currently developing compacts with the agency demonstrate good enough governance and maintain a productive enough relationship with MCC to continue compact development. As always, these promise to be some of the most interesting—and challenging—decisions.

Sierra Leone: The most likely choice for new compact selection

Sierra Leone is nearing completion of its MCC threshold program focused on water and energy sector reforms, so the timing is good to begin to shift the focus of the partnership to a possible compact

MCC has had its eye on Sierra Leone for years. The board originally picked it for compact eligibility in FY2013, but relegated it to a threshold program the next year when it fell short on the scorecard (largely due to data “noise” rather than a decline in actual policy performance). But now Sierra Leone passes the scorecard again (for the second year in a row) with high scores on the indicators MCC weighs most heavily—those measuring control of corruption and democratic governance. Sierra Leone’s competitive 2018 elections brought an opposition party to the presidency and the new administration—along with the legislative branch—continue to make efforts to combat corruption. In addition, Sierra Leone is nearing completion of its MCC threshold program focused on water and energy sector reforms, so the timing is good to begin to shift the focus of the partnership to a possible compact.  

Benin: A bump in the road for MCC’s regional compacts?

MCC has undoubtedly been watching the growing restrictions on political pluralism, civic participation, and press freedoms taking hold in Benin over the last two years. A new electoral code effectively barred opposition parties from participating in several recent legislative elections. And an ensuing elections boycott and protest movement was met with a government crackdown on peaceful demonstrators, journalists, and activists, as well as periodic telecommunications restrictions. These actions have manifested on MCC’s scorecard with an 11-point decline in Benin’s political rights score. And President Patrice Talon, who is up for reelection in 2021, stands by the electoral restrictions despite a civil society campaign to reform the process.

The board must determine that Benin continues to meet MCC’s standard of good governance in order for the country to remain part of the regional investment

These actions could weigh heavily on the board’s selection decisions this year. Benin is one of the countries MCC selected two years ago to be eligible for the agency’s first regional compact(s). And the agency is exploring a potential project to rehabilitate a transportation corridor between Benin and neighboring Niger. That means the board must determine that Benin continues to meet MCC’s standard of good governance in order for the country to remain part of the regional investment. Under the current circumstances, the board may be reluctant to give Benin a full reselection stamp of approval. If Benin is reselected, our guess is that it may be accompanied by a statement of concern. The board may also defer a reselection decision until after the country’s 2021 presidential election.

(Note: Benin is currently implementing a second power focused MCC compact but the board doesn’t make reselection decisions about compacts in implementation.)

Côte d’Ivoire: A controversial election and questions about scorecard performance…but MCC will likely stay the course

Like Benin, Côte d’Ivoire is in the running for participation in one (or more) of MCC’s inaugural regional compacts. The agency is currently exploring a potential power project connecting Côte d’Ivoire and Burkina Faso, and possibly a transportation infrastructure project between the neighboring countries. The board will need to reselect Côte d’Ivoire for these projects to advance, but the decision may not seem straightforward.

First there’s the issue of the scorecard. After having continually improved its performance on MCC’s indicators since it emerged from a 2011 civil war, Côte d’Ivoire fails the “must pass” control of corruption indicator this year.

If Côte d’Ivoire had remained in the lower income scorecard category this year it would have scored in the top quartile of countries on the control of corruption indicator

Now, this sounds like a bigger deal than it is. Higher national income levels pushed Côte d’Ivoire from the lower income scorecard category to the higher income scorecard category this year. Because MCC scores countries on relative performance, Côte d’Ivoire doesn’t fare as well among its new, higher income—and more competitive—group. In other words, its failure to pass the scorecard doesn’t reflect a real shift in the country’s anti-corruption policy. In fact, if Côte d’Ivoire had remained in the lower income scorecard category this year it would have scored in the top quartile of countries on the control of corruption indicator.

There are perhaps bigger questions surrounding recent changes in Côte d’Ivoire’s political climate. Côte d’Ivoire has experienced several outbursts of political violence in the last year. In October, President Alassane Ouattara’s won a third term—after reneging on a promise to step down after constitutionally mandated two terms in office. The violence that ensued left dozens dead and spurred thousands more to flee their homes. Ouattara had claimed eligibility to run again following the unexpected death of a handpicked successor, asserting that reforms adopted in 2016 meant a third term would be constitutional. In response, opposition candidates called for supporters to boycott the polls. While international groups questioned the competitiveness of the election, they have broadly accepted the result and didn’t allege direct fraud. And Ouattara has since made overtures to his chief political rival, with a meeting held in November. Ultimately, the board will likely reselect Côte d’Ivoire to continue its eligibility for a regional compact, but MCC will likely keep a close eye on further developments.

(Note: Côte d’Ivoire is also implementing a regular, bilateral compact, but this program would not be affected by the board’s reselection decisions pertaining to the regional compact(s)).

Sri Lanka: How long will MCC play the waiting game?

Sri Lanka doesn’t need to be reselected this year. MCC’s board approved its compact back in April 2019. But the Sri Lankan government has yet to sign it, the program hasn’t moved forward. While Sri Lanka’s reselection isn’t technically on the docket, next week’s meeting presents the board with an opportunity to consider whether and how to progress with the stalled program.

The compact was given initial approval by the prior Sri Lankan government, which was supportive of the MCC partnership. But a new administration came to power in 2019 and has been much less friendly toward MCC. Over the past year or so, the compact has become deeply politicized. Earlier this year a Sri Lankan commission, tasked by President Gotabaya Rajapaksa with reviewing the compact, recommended the government “unconditionally reject” the agreement.

Critics of the compact contend the compact amounts to foreign interference, which would undermine Sri Lankan sovereignty and would put the country in the middle of a dangerous US-China rivalry. While approval has been stalled, disinformation about the compact has emerged. Proposed land reforms in the compact have been portrayed as a land grab for international corporations drawing concerns from civil society. As recently as November, President Rajapaksa stated he wouldn’t sign the agreement even “in his dreams.”

And while MCC’s compact remains in limbo, China has ramped up its assistance to Sri Lanka in response to the pandemic and its economic effects; Chinese news sources have also contributed to the politicization of the pending compact agreement.

But with no indication that tensions between the government and MCC will ease anytime soon, how long will the agency leave its scarce resources on the table when they could be put to other use?

How MCC thinks about its next steps with Sri Lanka is likely colored by perceptions of its past history with the country. The agency’s board originally selected Sri Lanka for one of MCC’s first compacts, but engagement ended in 2007, before a final agreement was reached, due to the escalation of the Sri Lankan civil war. MCC would undoubtedly want to be extra careful about (possibly) walking away from the same country twice. But with no indication that tensions between the government and MCC will ease anytime soon, how long will the agency leave its scarce resources on the table when they could be put to other use? The board doesn’t have to decide what to do next week. But this question is undoubtedly on its radar.

Ethiopia: Will recent conflict and unrest color the board’s decision?

After being selected for a threshold program two years ago, Ethiopia is working with MCC to finalize a program. It will need to be reselected this year.

MCC typically awards threshold programs to countries they think have potential to be a future compact partner but for which they have questions about the trajectory of the country’s policy performance or the quality of the potential partnership. Usually, the agency picks countries that pass the scorecard inconsistently or those that haven’t yet passed but are close. Ethiopia’s scorecard performance has never particularly stood out, even when it was first selected for a threshold program. At that time, it passed only eight of the 20 indicators (a country must pass at least 10 to be considered for a compact). But the board was encouraged by the wave of reforms spearheaded by then new prime minister Abiy Ahmed. While Ethiopia has improved its performance on the scorecard’s two democracy indicators, its overall scorecard performance brings it no closer to compact eligibility, (passing only six indicators in total). Since scorecard requirements are looser for threshold programs, however, this alone would be unlikely to prompt the board to reconsider the partnership.

Far more concerning are the developments that have unfolded over the past two months. In March, the Ethiopian central government issued a federal order to delay the country’s elections due to the coronavirus pandemic. The Tigray People’s Liberation Front (TPLF)—the ruling party of the country’s powerful northernmost region—went ahead with elections that the central government characterized as illegal. Following an alleged TPLF attack on a federal military command, Ethiopian Prime Minister Abiy Ahmed ordered a military campaign targeting the region’s leadership. The TPLF have claimed responsibility for several missile attacks against Ethiopian airports and a cross-border attack on Eritrea, with which Ethiopia only recently made peace following decades of conflict. Telecommunications shutdowns have made obtaining independent information on the conflict difficult but the central government has made a disputed claim of victory.

This latest conflict follows a summer of unrest in Ethiopia. In early July, the military was deployed in response to violence that broke out after a popular singer from an ethnic minority was shot and killed. Over one hundred people died in the unrest and the government shut off mobile and internet service for several weeks in an effort to calm ethnic tensions, prompting concerns about crackdowns on civil liberties and excessive use of force.

Not only that, Ethiopia took a unilateral decision to move ahead with a major, disputed dam project, much to the concern of Egypt and Sudan. In response, the United States temporarily suspended some of its bilateral aid to Ethiopia.

So how will MCC’s board think about all of this? State Department officials have characterized the current conflict as originating with a TPLF strike against the central government. But Secretary of State Mike Pompeo, who chairs MCC’s board, has urged Prime Minister Ahmed to end the conflict and allow humanitarian access to Tigray (which was recently granted in a deal made between the Ethiopian government and the United Nations). The board will almost certainly consider where an MCC reselection decision fits within the US government’s broader diplomatic management of a live and unfolding situation.

Ethiopia is a strategic East African ally, and while MCC’s selection decisions are based primarily on policy performance, geostrategic considerations aren’t entirely absent from eligibility decisions

In the end, while the potential for escalation rightfully raises concerns among those closely following the region, there’s a good chance the board will reselect Ethiopia in FY2021. Ethiopia is a strategic East African ally, and while MCC’s selection decisions are based primarily on policy performance, geostrategic considerations aren’t entirely absent from eligibility decisions.  Furthermore, since the threshold program has a lower—and less well defined—bar for policy performance, reselection seems possible. Taking such a position could be met, however, with some criticism from human rights groups and/or some congressional stakeholders. So, another possible option could be deferral of an affirmative reselection decision to allow MCC to take a more wait and see approach to a rapidly evolving situation.

We’ll be watching for MCC’s press release next week to read about the outcomes of these important decisions. 

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

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