FY06 Threshold Countries - Some Disturbing Choices

The MCC Board’s selection last week of 23 counties eligible to apply for funding for FY 2006 held relatively few surprises, and was very close to what we had anticipated. Although it is unfortunate that the MCC decided to add the lower-middle income countries this year, the Board limited the number of selected countries to two – El Salvador and Namibia.The choice of 13 threshold countries has received much less attention. In fact, it is still very unclear what criteria the Board is using to choose threshold countries. While many of the countries seem to be reasonable picks, two choices are very difficult to comprehend and raise deep questions about the selection process: Jordan and the Kyrgyz Republic.Although Jordan passes the indicators tests for the lower-middle income countries, it is not a democracy, and the Board passed over every other non-democracy that passed the tests (except Morocco). One could say, "thank goodness it wasn't chosen as a compact country," but putting it in the threshold program sets the stage for that progression, a decision that could seriously undermine the MCC. More to the point are the questions of the opportunity cost and the development impact of scarce MCC resources. Jordan already receives substantial USG financial support from the State Department and USAID. Jordan received assistance from the US totaling over $1.3 billion dollars in 2003 and 2004 alone, more than any country in the world other than Iraq and Afghanistan. With the MCC budget smaller than expected, the prospect of providing even more funding to Jordan at the expense of other countries makes little sense. Will a threshold program truly support development policy reforms in Jordan and even more critical, would the MCC be able to hold Jordan to the same performance standards to which it holds other MCC countries given its special status as a key ally in the war on terrorism? Don’t get me wrong – I fully support the US providing strong financial assistance to Jordan, a key ally. But these funds should continue to come from the State Department, as they do now, and not from the MCC.The Kyrgyz Republic just has no business being a threshold country. It passes zero of the governance indicators – none – and scores particularly poorly on all the democracy related indicators. It is a very good example of the kind of country the MCC was designed to NOT provide financial assistance to. There are many other countries that are much more suitable for the threshold country than the Kyrgyz Republic. This choice cries out for explanation.These two cases are particularly disturbing and deserving of an explanation from the MCC and reinforce our calls for greater transparency of Board decisionmaking.We will be providing a more complete analysis of the threshold choices in the near future. Stay tuned.