September 9, 2009
MCC Board of Directors Upholds Importance of Country-Led Development and Accountability
Board halts funding to portions of MCC Compact with Honduras
Washington, D.C. – The Board of Directors of the U.S. Government’s Millennium Challenge Corporation (MCC) today reviewed the status of its poverty reduction grants worldwide and stressed the importance of country-led development and accountability in leveraging these funds to spur economic growth. U.S. Secretary of State Hillary Rodham Clinton chaired the meeting after recently returning from a trip to Africa that included meetings with leaders of Cape Verde and Kenya, which are MCC partner countries, and of Liberia, which is developing an MCC threshold program. MCC’s Acting Chief Executive Officer Darius Mans informed the Board that MCC was on target to reach its 2009 goals for both disbursements and contract commitments. MCC is rapidly approaching cumulative disbursements of $1 billion and contract commitments of $2 billion focused on programs to reduce poverty around the world. The MCC Board also previewed the September 16 signing of a $540 million poverty reduction compact with the Republic of Senegal, which will invest in the country’s agriculture and transportation sectors.
“Today’s Board meeting is a reminder that MCC funds are earned and not automatic,” said Acting CEO Darius Mans. “Our country partners propose projects that matter to them because they matter to their people, but there is an ongoing responsibility that rests with country leaders.” Mans continued, “Good governance and accountability are at the heart of our poverty reduction programs, and governments that are inconsistent in these areas jeopardize not only MCC funding, but also the long-term impact that good policies can have on growth in their local economies.”
MCC’s Board today announced that, given recent events in Honduras that are inconsistent with a commitment to democratic governance, MCC will terminate two planned activities in the transportation sector totaling approximately $11 million from its Compact with Honduras. As a result of the meeting, MCC also will put on hold approximately $4 million of its contribution for work on the CA-5 road project jointly funded with the Central American Bank for Economic Integration (CABEI). MCC will continue with existing activities for which funds have been contractually obligated and with the administration of the Compact with Honduras to ensure proper use of funds. MCC also will continue to monitor the situation in Honduras in close coordination with the State Department and other U.S. Government agencies.
During the meeting, MCC’s management updated the Board on a Compact under development with Moldova that will spur growth and reduce poverty through investments in the transportation and agriculture sectors.
The Board also discussed its ongoing poverty reduction compact with Mongolia. In April 2009, the Government of Mongolia notified MCC that it would not be able to implement the $188 million rail component of its $285 MCC compact. MCC management updated the Board on the proposed use of approximately $52 million of these funds to expand three current projects, given the strong economic rates of return and strong opportunities to reduce poverty. The projects include health, vocational training and property rights activities. MCC management expects to make a recommendation to the Board on these and any other projects at or before the December 2009 Board meeting.
MCC’s Board also reviewed the process undertaken to terminate its poverty reduction compact with Madagascar. MCC and MCA-Madagascar, the entity implementing the program, are on track to complete the closeout of activities. Previously, MCC’s Board of Directors had voted to terminate the compact with Madagascar due to a significant pattern of actions inconsistent with MCC’s policy criteria that occurred when the country experienced an undemocratic change of government earlier this year. At today’s meeting, the Board noted that the compact had achieved significant results in helping to reduce poverty in the country by increasing land security and investments in farms and businesses and modernizing the country’s financial sector in an effort to improve the lives of hundreds of thousands of Madagascar’s poor. The Board expressed regret that conditions in the country did not permit MCC to bring the full compact program to completion.
The Board also discussed recent events in Niger that could signal that the country is moving away from the positive reform agenda that made it eligible for an MCC threshold program. The pattern of actions being pursued by Niger may be inconsistent with MCC’s eligibility criteria, and MCC will raise these concerns with the Government of Niger. MCC emphasized that disregard for democratic norms and constitutional order not only will preclude the country from eligibility for future MCA compact funding, but also jeopardizes the $23 million threshold program focused on girls’ primary education and land rights currently being implemented.
Finally, the Board approved two congressional reports related to the annual selection process. The Board’s next regularly scheduled meeting will take place in early December; at that meeting, the Board will select countries as eligible for MCC funding. MCC, a U.S. Government agency designed to work with developing countries, 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 help eliminate extreme poverty. For more information about MCC, visit www.mcc.gov.
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