MCC Looking to Top $1 Billion in FY2016

February 03, 2015

The President’s FY2016 budget request is out with the biggest ask—$1.25 billion—MCC has seen in five years.  This is a nice vote of confidence for MCC, and it suggests that the administration is eager to see the agency strengthen its position now that it’s in its second decade of operations.  In the agency’s Congressional Budget Justification (CBJ), I was happy to see that MCC flags a number of important priorities for the coming year.  On the other hand, in the context of a potential funding increase, it will be important to watch how some of these goals—especially the one related to developing compacts faster—will play out.

Here’s what I’m happy to see in the request:

Commitment to exploring a regional approach.

The big piece of this is a request for new legislative authority to enter into concurrent compacts.   This would be the best way to enable the agency to pilot regionally-focused investments in adjacent countries.  Important constraints to growth can be cross-border in nature, and MCC often invests in projects (like infrastructure) that have an inherent regional component. However, MCC often cannot fully exploit this characteristic because neighboring countries are rarely concurrently at the same stage of compact eligibility or design, hampering coordination. There are certainly some practical questions about how MCC would pursue a regional approach in the context of its unique model that focuses on partnering only with well-governed countries, tackling binding constraints to growth, and ensuring investments yield benefits in excess of their costs. But the agency should be given the flexibility it needs to fully articulate and pilot such an approach.

Highlights of how MCC’s work has created private sector opportunities.

The catch phrase in foreign assistance these days is “leveraging the private sector.”  Increasing acknowledgement of the limited scope of what foreign aid dollars can be expected to accomplish in terms of generating incomes and growth has increased pressure on lots of agencies, including MCC, to show how their investments are helping improve private sector participation in developing country economies.  In fact, MCC’s new CEO has expressed particular interest in this topic.  Fortunately for MCC, whose sole mission is to reduce poverty through economic growth, creating conditions for increased private sector activity (the source of the increased incomes that MCC seeks to achieve) is part and parcel of what it does.  Sure, there are doubtlessly ways MCC could increase its leverage (and the agency outlines some of its plans to do so), but it’s also nice for MCC to take the opportunity to showcase some of its achievements in this area.

Continued commitment to sharing (and learning from) results. 

MCC promises to strengthen its already noteworthy efforts to share its results data, including what will be an increasing stock of evaluation findings.  A focus on improving the collection and use of sex-disaggregated data to better inform programming decisions is welcome, as are MCC’s efforts (in partnership with PEPFAR) to help stakeholders in partner countries access and use data for decision-making.

But here’s my big question:

Big pipeline + more money to spend + new emphasis on speed = ?

One of MCC stated priorities is to develop compacts faster.  I had some reservations about this goal when I first heard it.  After all, MCC’s history contains periods in which efforts to push compacts through in a hurry led to projects that weren’t well focused or fully due diligenced (for instance, in MCC’s early days when there was pressure for the new agency to get its operations underway and around 2006-2007 when MCC was getting a lot of questions from Congress and others about its large unobligated balances).  This rush to the finish line was one of the factors that led to the need for mid-course re-structuring of a substantial portion of the early compacts.

Months between eligibility determination and compact signing

Fortunately, it sounds like MCC is bearing all this in mind and focusing on areas that have often taken a long time but aren’t related to the quality of the compact—things like the time it takes to pull a country team together. MCC requires its partner countries to set up a locally staffed unit to develop the compact (in cooperation with MCC) and later implement it.  As it turns out, governments don’t always have spare funds immediately accessible for such purposes, so MCC is planning to provide some pre-compact funding to accelerate recruiting and hiring of team members.  Other time-saving efforts include things like providing better guidance to country teams and improving coordination.  These all sound like smart adjustments. 

However, in the context of a large pipeline of 9 countries currently developing compacts, plus a potentially big pot of new money the agency will have to prove it can spend, I hope that the goal of increased speed doesn’t supplant the goal of putting together good compacts that meet MCC’s own stated expectations for cost effectiveness and high-bar standards for environmental protection, gender considerations, etc. 

After all, when it comes down to it, the most important measure of MCC’s success is not its top-line budget number, nor how fast it brings countries to the finish line.  It’s the results it delivers to beneficiaries and the cost-effectiveness of those results.  And these results are predicated on MCC and its partners developing high quality—that is, well targeted and thoroughly-analyzed—programs.


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.