October 16, 2006
Millennium Challenge Corporation Releases 2007 Country Data Measuring Performance on 16 Benchmark Indicators; MCA Eligibility Creating INcentives for Policy Reform in Countries
Washington, D.C. Countries working to qualify for the Millennium Challenge Account (MCA) are making progress in their performance on the policy benchmarks used to determine eligibility for investments of U.S. assistance.
Today, the Millennium Challenge Corporation (MCC) released performance scorecards for 98 countries that are candidates for project funding under the Millennium Challenge Account (MCA). The list includes countries already eligible for MCC Compact or Threshold assistance in fiscal years 2004 - 2006.
Each year in November, the MCC Board of Directors meets to select countries eligible to develop a poverty reduction proposal for MCA assistance and those that are eligible for a threshold program which provides assistance to improve their scorecard performance. To date, MCC has signed nine development assistance Compacts with a value of almost $2.1 billion.
The scorecards, produced by MCC annually, include information about how the poorest countries of the world have performed on 16 independent and transparent policy benchmarks, or indicators. These indicators measure countries’ demonstrated commitment to policies that promote, among other things, political and economic freedom, investments in education and health care, control of corruption, and respect for civil liberties and the rule of law.
MCC was designed to reward good performance but also to create incentives for countries to adopt good policies that create a foundation for poverty reduction and economic growth. Many countries are doing the hard work of reform to enhance their chances of becoming an MCA-Compact eligible or Threshold Country by making improvements in governance, fighting corruption, ramping up investments in health and education, and adopting micro- and macro-economic reforms. MCC has learned that 12 countries have established inter-ministerial committees and presidential commissions to devise, implement and track reform strategies that address the MCA selection criteria. Several countries have established public websites to track their progress against the MCA indicators.
A number of trends from this latest round of data reinforce the view that MCC is creating a powerful incentive for policy reform. Since last year, the Days to Start a Business median has fallen from 41 days to 33 days for Lower Middle Income Candidate Countries. MCC has also seen significant improvements in the median for Low Income Candidate Countries: from 62 days in 2002 to 43 days in 2006. The International Finance Corporation has found that these kinds of business start-up reforms can add between a quarter and a half a percentage point to growth rates in the average developing economy.
It also appears that MCC is providing a stimulus for reform with its Control of Corruption indicator. Countries participating in the Threshold Program a program for countries that are close to meeting MCC’s selection criteria and are implementing policy reforms in order to improve their prospects for MCA qualification and assistance—are focused heavily on fighting corruption. The data for this year bears that out as the Threshold Countries are now registering a significantly higher rate of reform on the Control of Corruption indicator than other MCA candidate countries.
MCC sees ongoing progress and sustained commitment by Compact countries to address policy weaknesses as critical to MCC’s partnership with them, said Ambassador John J. Danilovich, chief executive officer of MCC . While we are prepared to suspend assistance to countries if we see a serious erosion of policy performance, I believe it is integral to MCC’s approach that we continue our constructive efforts to engage with our partners on reform efforts even after they have achieved Compacts if we are to deliver on the promise of poverty reduction through economic growth, he added.
MCC will provide guidance to its partner countries on the policy areas where they are falling short for this year, including guidance on potential corrective measures to be taken by the country. The President of Benin, a country which recently entered into a Compact but which does not meet the corruption test for this year, has pledged his commitment to seeing the country get on track. Cape Verde received a Compact as a Low Income Country and subsequently graduated to the Lower Middle Income category, where it must meet a higher standard of performance. Cape Verde which was measured on the indicators measuring the days and costs to start a business for the first time this year has already put in place remediation plans to address the failing indicators.
Georgia , which entered into a $295 million Compact during the past year, has continued to adopt dramatic anti-corruption reforms even after being selected as an MCA-eligible country, as well as improvements in political rights, civil liberties, immunization rates, fiscal policy and days to start a business. The Government of Georgia has arrested scores of corrupt public officials and made important legislative changes that facilitate the prosecution of corruption cases. The World Bank Doing Business in 2007 report also identifies Georgia one of the most aggressive economic reformers in the World. The International Finance Corporation points to Georgia as an example of reform that can be attributed to MCC’s incentive effect.
To view the performance ranking sheets for FY 2007, click on the following link: http://www.mcc.gov/countries/rankings/FY07/index.shtml
For more information about the selection process and the indicators used to measure policy performance, please click on the link below: http://www.mcc.gov/countries/selection/index.shtml
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.