CGD’s New MCC at 10 Series: How the First Decade Stacked Up and What Should Come Next

A year ago this month, the Millennium Challenge Corporation turned 10 years old.  To commemorate this noteworthy event, CGD visiting fellow Franck Wiebe and I spent most of last year taking a deep dive into MCC’s first decade of operations.  The result is a new MCC at 10 series of papers focusing on the distinctive features of this innovative bilateral aid agency. These products draw upon our personal experiences on staff at MCC, extensive conversations with past and current staff as well as informed observers, and publicly available documents.  

MCC at 10 exhaustively examines the three main aid effectiveness pillars of MCC’s groundbreaking model —policies matter, results matter, and country ownership matters.  In particular, we wanted to know:

• To what extent has MCC’s aid effectiveness model actually governed its operations?
• How should MCC strengthen and expand its model and operations during the next 10 years?
• How is MCC still different than other modes of US foreign assistance, such as USAID?

In short, MCC has been a worthy experiment, and it is important that the institution continue.  When the Bush Administration established MCC in 2004, there was widespread skepticism about the effectiveness of foreign aid, even as a growing international consensus was emerging around best practices.  MCC was meant to transform how the US delivered foreign assistance (at least a portion of it).  The agency has a singular mission – reducing poverty through economic growth – that allows it to pursue development objectives in a highly targeted way.  Its model incorporates key principles, in particular focusing on: (1) supporting and encouraging strong policies and institutions in partner countries; (2) giving partner countries the lead role in identifying and implementing aid programs; (3) predicating investments on projections of impact and cost-effectiveness; and (4) monitoring and evaluating all programs in a transparent manner.

In general, our analysis finds that MCC’s overall record implementing its model has been strong.  This has made it stand out among other donor agencies, both in the US and globally.  However, translating aid effectiveness principles into actual operational practice is complicated.  MCC has had to grapple with a number of practical issues, like balancing founding principles with other operational or political needs or desires—things like implementing projects expediently, justifying budget requests, and ensuring accountable use of funds, among others.  This balancing act has at times resulted in MCC taking actions that are inconsistent with its aid effectiveness model.  As such, there are several ways MCC could further strengthen its model and operations going forward.

For a quick overview of the highlights and our recommendations, explore our packet of briefs: 

• Focus on Policy Performance
• Focus on Results
• Focus on Country Ownership
• plus a short MCC 101 with some basic agency background

For detail, data, and supporting information, check out the three core papers:

• Focus on Policy Performance
• Focus on Results
• Focus on Country Ownership

With MCC soon embarking on a new five-year strategic plan, with key leadership on some Congressional committees having turned over, and with a new presidential administration due in a couple of years, we hope these products will be a useful resource and guide.

In addition, save the date (Feb. 26) for a public conversation with MCC’s CEO Dana Hyde, CGD’s Nancy Birdsall, and Brookings’s Homi Kharas about MCC at 10…and what’s next for the agency.