FY2009 Eligibility Selection: MCC Board Sets the Stage for the Incoming Administration

The annual selection process for country eligibility in FY2009 brought some remarkable decisions by the outgoing MCC Board of Directors. This was the final meeting of the Board as it is currently composed – the five government representatives will change as the new administration takes shape in the coming months.Notable decisions included:• Zambia and Indonesia were both selected as compact eligible for the first time, which we applaud as each squarely passed the indicators test.• Colombia was selected as the only new LMIC country, a decision with which we do not agree, as we noted in our predictions paper.• In a first for the MCC, the Board partially suspended Nicaragua’s compact. At the next meeting the (new) Board will review the extent to which the Nicaraguan government has taken steps to address the yet-to-be-defined “set of measures to address concerns regarding the government’s commitment to democratic principles.”• In another first, the Board decided to revoke Timor-Leste’s compact eligibility, and instead designate it as eligible for the threshold program.• The Board reviewed reform progress by the Armenian government to address governance concerns, and will revisit the case at their next meeting in March.• The Philippines remains compact eligible despite failing the hard hurdle corruption indicator; however the Board made clear that the MCC will not sign a compact until the Philippines passes this indicator. Compact development usually lasts for a year or more, so with this additional stipulation a Philippines compact will probably not be finalized prior to FY10 or FY11.• The Board decided not to select Guyana for eligibility, despite the country passing 15 of the 17 indicators. Apparently the Board has decided not to select small countries even when they perform well, a decision with which we do not agree as it undermines the performance-based eligibility process. The Board could have considered a smaller compact, say on the order of $40m over 3 years, which could make an important contribution to the economy of Guyana.• For the threshold program, the Board selected Liberia for the first time, and re-selected Paraguay so that the development of its Stage II program can continue apace.All in all the MCC has set up a tall order for the new administration – with 18 signed compacts to implement, 8 compacts under development, and 3 potential new threshold programs to design, the incoming team will have a lot on their plate with uncertain funding.