April 1, 2011
MCC Finalizes $350 Million Compact with Malawi
Signing Ceremony To Take Place in Lilongwe, Malawi on April 7
Washington, D.C.—The U.S. Government’s Millennium Challenge Corporation (MCC) today announced that it will sign a $350 million, five-year Compact with the Government of Malawi to invigorate the country’s power sector, spur private investment, and promote long-term, sustainable economic growth.
MCC’s Board of Directors approved the Compact with Malawi on January 5, 2011, with a focus on improving the availability, reliability, and quality of the country’s power supply, and implementing policy reforms needed to attract private sector investment and ensure the sustainability of MCC’s investments.
Malawi, a landlocked nation in southeast Africa, is among the world’s least developed and most densely populated nations. Currently, only seven percent of Malawians have regular access to electricity, and the lack of high‐quality, reliable power is a critical constraint to economic growth. MCC and the Government of Malawi have worked in close partnership to develop a Compact investment that will reform the power sector, while investing in much-needed energy infrastructure improvements. MCC’s investment is expected to generate $2.4 billion in income for more than 5 million Malawians.
The MCC Compact with Malawi will center on two activities to help reduce poverty through economic growth. The first activity will focus on increasing the efficiency of existing power generation and upgrading the transmission and distribution network. The second activity will provide support for Malawi’s policy reform agenda and build capacity in critical institutions, including the nation’s electric utility (ESCOM), energy regulator (Malawi Energy Regulatory Authority) and executive policy-making ministry (Ministry of Natural Resources, Energy and the Environment).
MCC’s approach leverages its investments through Malawi-led policy reform that will drive the energy sector’s development and sustain outcomes by working through these national institutions. The economic returns of the investment are increased substantially by Malawi’s reform of the utility and strengthening of the regulator. These reforms are expected to provide the conditions necessary for Malawi to make further public investments and attract new private investment in the sector.
“The Compact with the Government of Malawi provides a particularly innovative approach to reduce poverty through economic growth,” stated MCC CEO Daniel Yohannes. “Focused on critical a road-block to development, the absence of reliable electric power, the compact is expected to increase incomes to 5 million impoverished individuals by $2.4 billion over 20 years. While MCC’s investment in improving infrastructure is important, our efforts to help the Malawians with institutional reforms to strengthen energy policies, energy regulatory systems, and utility operations will potentially reap even greater dividends.”
MCC has engaged in a high-level dialogue with the Government of Malawi regarding recent penal code amendments, which MCC was concerned could be used to restrict media freedoms and individual human rights. The Government of Malawi has since clarified and publically affirmed the constitutional protections of freedom of the press. MCC has made it clear to the Government of Malawi that laws criminalizing homosexual conduct are inconsistent with human rights obligations and MCC’s indicators. Criminally punishing lesbian, gay, bisexual, or transgender individuals under laws will prompt MCC to initiate the investigation required for suspension or termination of the Compact. MCC has decided to move forward with the Compact, but will maintain a dialogue with the Government of Malawi regarding human rights, and continue to closely monitor Malawi’s commitment to good governance and civil liberties.
Mr. Yohannes emphasized that, “MCC partners with poor, well-governed countries that demonstrate and maintain a clear commitment to governing wisely, investing in their people, and promoting economic freedom. MCC will not compromise on these core principles, particularly with respect to basic human rights and liberties. We expect all of our partners, including the Government of Malawi, to uphold these standards throughout the five-year partnership.”
MCC looks forward to working with the people and the Government of Malawi to help reduce poverty and create sustainable economic growth.
Millennium Challenge Corporation, a U.S. Government agency designed to work with developing countries, is based on the principle that aid is most effective when it reinforces sound political, economic, and social policies that promote poverty reduction through economic growth. For more information, please visit http://www.mcc.gov.