MCC in FY2011: What It Needs, What It Wants to Do, and How It’s Going to Get There

Next week Millennium Challenge Corporation CEO Daniel Yohannes will appear before the House State, Foreign Operations Subcommittee to answer questions about the MCC’s $1.28 billion allotment in the FY2011 presidential budget request.  This hearing will provide important insights into how Mr. Yohannes envisions utilizing MCC resources in the coming years, especially given his comments that the MCC will “not be able to fund all the projects [it] would like to.”  This means some tough choices to ensure that the MCC sticks to its core mission and focuses on the poorest countries, as CGD President Nancy Birdsall advocated for in a recent NPR interview.Ahead of the March 11^th hearing, the MCC’s recently published FY2011 Congressional Budget Justification offers a blueprint for how the MCC intends to use its scarce resources.  (Kudos to the MCC public affairs team for hosting a small roundtable session – as we suggested – to walk us through the CBJ!)  Because concept papers have not yet been received from most of these partner countries, the following is an estimate of the level of FY2011 funds and compact projects:

• Zambia has $350 million budgeted for possible projects in sanitation and water supply infrastructure, education and capacity-building, and eco-tourism expansion.
• Indonesia has $521 million budgeted for investments in four potential areas: education, infrastructure, environmental sustainability, and governance (with a particular emphasis on continuing anti-corruption activities begun in Indonesia’s Threshold program).
• Cape Verde has $100 million budgeted for its second Compact, though detailed discussions with the national government have not yet begun.
• Malawi is being jointly funded with FY2010 carryover and roughly $100 million from FY2011 resources.  In Malawi, the MCC will focus on the energy sector as it looks to increase access to reliable supplies of electricity and address policy reforms required to attract future investments in the power sector.

Linked with the FY2011 budget request and CBJ are two proposals that require legislative language to:

1. Give the MCC concurrent, subsequent, and longer compact authority.
2. Allow a candidate country graduating out of an income category to retain its candidacy at the lower income category for the year of its transition and for one subsequent fiscal year.

Senators Kerry and Lugar’s Foreign Relations Authorization Act for Fiscal Years 2010 and 2011 addresses both of these issues.  It allows a compact to possibly extend to seven – as opposed to five – years with congressional approval.  The act further spells out guidelines for how concurrent compacts might work, specifically that no more than three may be in effect at a given time.This legislation is critical as the FY2011 CBJ explicitly assumes concurrent compact authority for Indonesia in its budgeting.  Concurrent compact authority means that projects which are investment-ready can begin in FY2011 while those projects that may need further analysis can be funded at a later date without delaying the entire compact process.  Concurrent compact authority ensures the highest levels of oversight while offering greater predictability and added incentives for ongoing policy reforms within partner countries. The FY2011 MCC CBJ highlights other important developments that could come up in Mr. Yohannes’ hearing:

• For the second year in a row, the MCC has requested no funds for any new threshold programs.  This is no doubt an indication of the on-going internal debate at the MCC of what the threshold program is and how it should be used.
• The MCC has increased requests in the areas of due diligence and M&E initiatives by a total of $7 million.  As the MCC seeks to demonstrate results to Congress and the American public, these are important places to keep funding robust.
• Colombia may still be considered later this year due to the new legislative authority described above, even though Colombia is currently an upper middle income country.

To fulfill its mission, the MCC will need to ensure that it receives the full $1.28 billion in the FY2011 president’s request and gets its requested legislative fixes.   Next week’s budget hearing will be a chance for Mr. Yohannes to demonstrate the inherent linkages in these two requests and advocate for their full implementation.With so many important issues at stake, what would you like to ask Mr. Yohannes at his upcoming hearing?