September 6, 2006
Annual Report of International Finance Corporation Highlights Reform Incentives Created by Millennium Challenge Corporation
Washington, D.C. Countries partnered with the Millennium Challenge Corporation (MCC) are making great strides in adopting policies that stimulate private investment, promote trade, and create jobs according to an annual report that ranks 175 countries.
Doing Business 2007, produced annually by the International Finance Corporation (IFC), a World Bank subsidiary, highlights MCC’s incentive effect as a catalyst for reform efforts now underway in 13 countries, including Burkina Faso, El Salvador and Madagascar. The report also identifies three MCA-eligible countries among the 10 most aggressive reformers of the past year: Georgia; Ghana; and Tanzania.
The report reinforces what many of us already know: MCC’s competitive country selection process is creating important incentives for economic reform, said Ambassador John J. Danilovich, Chief Executive Officer of the MCC.
Eligibility for MCC Compact assistance is based on countries demonstrated commitment to policies that promote political and economic freedom, investments in education and health, control of corruption, and respect for civil liberties and the rule of law, using 16 third-party policy indicators.
Among the measures catalogued in the IFC report are: the time and cost of starting a business; the ease of registering property; the administrative burden of paying taxes; the enforceability of contracts; the efficiency of customs administration; and the existence and strength of investor protections.
The incentive of becoming MCC eligible has prompted many countries to re-evaluate their policies, regulations, and legislation related to good governance, health and education, and their business climate, Danilovich said, adding, this is a welcome result of something I call the MCC effect.
According to the Doing Business 2007 report, Georgia led the world last year in its reform efforts. Since 2004, Georgia ‘s global ranking on the Ease of Doing Business index has risen from 112 to 37. Its government streamlined customs procedures, reduced the time and cost of business registration, and made it easier for employers to hire new workers. In 2005, MCC signed a $298 million development Compact with Georgia.
Since the Millennium Challenge Account introduced conditions for grant eligibility based on performance in the time and cost of business start-up, 13 countries have started reforms aimed at meeting the criteria, the IFC report states.
Since its establishment in 2004, MCC has approved Compacts totaling more than $2.1 billion with nine nations: Armenia; Benin; Cape Verde; Georgia; Ghana; Honduras; Madagascar; Nicaragua; and Vanuatu. MCC is also actively engaging with other eligible countries in Compact negotiations.
Millennium Challenge Corporation (MCC), a U.S. government corporation designed to work with some of the poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, economic freedom, and investments in people that promote economic growth and elimination of extreme poverty.