MCC FY2014 Board Decisions: What, Why and What Next

By now, you’ve read about the MCC Board of Directors’ decisions of which countries are eligible for fiscal year 2014 MCC compact funding.   The decisions are never easy; this year was no exception. But the board’s annual process of selecting which countries are the right partners for MCC shows what it means to be evidence-based and transparent, committed to good policy performance, and subject to uncertain budget realities. It also hints at what’s ahead in 2014.

MCC’s country selection process:

To understand what happened at the December 10th board meeting, it’s helpful to remember how the MCC Board selects country partners and why:

  1. It uses data. By law, the MCC Board of Directors (composed of five public and four private sector members) selects countries based, to the maximum extent possible, upon objective and quantifiable indicators of a country’s demonstrated commitment to ruling justly, encouraging economic freedom, and investing in people. 
  3. It focuses on good policy performance (for good reasons). The policy areas aren’t random. Good policy performance in these areas is expected to increase the opportunity to reduce poverty through economic growth and get a bigger bang for the American taxpayers’ buck. MCC currently uses twenty publicly available third-party indicators and countries must pass half of the indicators, including the Control of Corruption indicator and either the Civil Liberties or Political Rights indicators (the democratic rights indicators) to pass the scorecard.
  5. It considers additional factors. The Board also relies on supplementary information (you can read the sources here)  and is legally required to consider the opportunity to reduce poverty and generate economic growth in a country, and the availability of funds.
  7. It’s transparent. Both the indicators and the rules for determining whether a country passes or fails are subject to annual review, public comment, board approval and public reporting to Congress.  MCC must explain its decisions to Congress and the public.

What happened?

So what happened last week? There’s a lot to be excited about: Lesotho is eligible to develop a second compact proposal, and Ghana,  Liberia, Morocco, Niger and Tanzania can continue developing compact proposals in normal fashion.  (My colleague Alicia Phillips Mandaville explains much more about the decisions in the video of our town hall meeting.)

But the Board members expressed concern that two of those countries, Liberia and Morocco, passed only nine indicators in their latest scorecards (one short of what is needed to pass the scorecard). Cases like this aren’t new. When they occur, Board members always ask what is happening with the data and whether it reflects a decline in a country’s policy performance. 

This time around, the Board concluded that the changes on Morocco’s and Liberia’s scorecards were not due to any policy decline on the part of the government, but rather a result of changes in how the data is measured by external sources (i.e., not MCC). In Morocco’s case, the IFC changed its methodology for the Gender in the Economy indicator. In Liberia’s case, the Natural Resource Protection indicator was updated to reflect more recent maps. Based on this, the Board voted to reselect Morocco and Liberia,  but made it clear that it expects both countries to pass the scorecard before the MCC Board would approve a compact.

Two other countries currently developing compact proposals, Benin and Sierra Leone, were not reselected.  While Benin and Sierra Leone have worked hard to address corruption, they did not pass the Control of Corruption indicator on their most recent scorecards.  Because Control of Corruption is such a key indicator, and a hard hurdle for passing the scorecard, the Board decided not to vote on reselecting them. 

  However, the Board reviewed supplemental information (including from the Open Government Partnership, Transparency International, and Global Integrity) on anti-corruption efforts in Benin and Sierra Leone, and because they did not find evidence of a meaningful policy decline, the Board urged continued but limited engagement with both countries while supporting their continued efforts to address corruption. The Board indicated it expects both countries to pass the control of corruption indicator before it would approve a compact with them.

What it means:

  The Board’s annual selection decisions matter not only for our country partners, but also for MCC’s mission and model. Most obviously,  they show that the Board takes MCC’s commitment to policy performance seriously (especially control of corruption), and that there is fierce competition for resources. But they also really show what evidence-based decisions and transparency look like in practice. At MCC, we’re proud that evidence-based decisions and transparency are built into our model. The country selection process is one of many ways you can see when and how decisions are made. The scorecard and supplementary data drive the process, but the Board,  rightly, as it responsibly allocates American taxpayer dollars, uses its judgment to understand what the data says and weigh the opportunity to reduce poverty through growth.