American Enterprise Institute
Ambassador John J. Danilovich’s keynote speech at a conference hosted by the American Enterprise Institute
Thank you, Roger.
I also want to recognize Ambassador Brito of Cape Verde, and the panel who will follow me: Clay Lowery, Sean Mulvaney, Maureen Harrington and Alan Meltzer. They will offer important insights into the MCC.
I want to thank the American Enterprise Institute for inviting me here to speak in recognition of the Millennium Challenge Corporation’s second anniversary. I greatly value the contribution that the leaders and scholars at AEI bring to the policy debate and admire your commitment to promoting more effective government, to expanding private enterprise, and to strengthening US foreign policy.
Today is an exciting and landmark day. Two years ago today, Congress appropriated nearly $1 billion to establish the Millennium Challenge Corporation, furthering the vision President Bush first articulated in 2002 when he said, “The needs of the developing world demand a new approach…we have a tremendous opportunity to begin acting on a new vision of development. This new vision unleashes the potential of those who are poor, instead of locking them into a cycle of dependence. This new vision looks beyond arbitrary inputs from the rich, and demands tangible outcomes for the poor.”
The President’s message was clear: Foreign aid should be about results, not simply giving a donation. In demanding a return on investments made with US taxpayer dollars—-which is not too much to ask—- we work with countries that are committed to taking the difficult steps toward social, economic and political reform. That assistance has the potential to achieve improvements in institutional infrastructure, physical infrastructure, and standards of living far greater than any aid program in history.
The MCC experienced the usual difficulties inherent in all startups. Coming from the private sector I am well aware of how difficult startups can be. And I confronted similar challenges while I was Ambassador to Costa Rica and Brazil. Lessons have been learned; the startup phase is over, and we are moving ahead –confident that we can fulfill our mission and mandate. We and our partner countries are now in the right place to go forward as we move further into the 21 st century.
I am going to share with you some numbers that you may have already heard, or have seen on our website. They are important numbers because they tell a story about the significant progress that has been made:
We are working with 23 eligible countries and 18 Threshold countries.
We have signed and are implementing five Compacts—with Madagascar, Honduras, Cape Verde, Nicaragua and Georgia—and two Threshold Agreements—with Burkina Faso and Malawi. Three more Compacts will be completed in the immediate future. These Compacts represent a combined commitment of over one and a half billion dollars.
We will add several more Compacts and Threshold Country Programs by the end of the year.
These are no small achievements for a young organization.
But despite these achievements, I do not believe we have any laurels to rest on; and we must move with greater focus and alacrity. Nearly half the world’s population struggles to live on less than $2 a day. We are committed to helping the world’s poor, and to loosening the grip of chronic poverty. This commitment was made very clear to me when the President made the unusual, but gracious, gesture of presiding and speaking at my swearing-in ceremony last month. He made plain his expectations for me and for the Millennium Challenge Corporation:
make a bigger difference
– and if you need support from the top, you’ve got it. Expectations are a powerful motivator, especially when they are combined with the confidence of others that you can get the job done.
Looking forward, I want the Millennium Challenge Corporation to be more assertive—both internally and in our interactions with partner countries.
In the last two months, we restructured several parts of the organization to streamline the proposal evaluation and Compact development processes;
We are now providing clear guidance to countries immediately after they are selected so they can move swiftly to develop their Compacts.
We are finding ways to shorten the time between Compact approval and disbursement so that funding can flow more rapidly after signing.
We are bolstering our staff to 300, over the next year and are recruiting the best talent so we can be more aggressive in our approach, attack our organizational priorities, and manage the risks in our investments.
I am encouraging my colleagues at MCC to show the courage to be creative and innovative in challenging our working assumptions and models.
As we forge ahead to fulfill our objectives, we will also remain committed to our core principles.
First, Millennium Challenge funding is performance based. The Millennium Challenge Account is built on the belief that sustainable economic growth occurs fastest in countries that adopt and adhere to good policies. Countries are selected to apply for MCC assistance based on sixteen policy indicators in three areas: ruling justly, investing in people, and promoting economic freedom. Countries that do not perform well in these areas are encouraged to improve and try again in the next selection round – and many are doing just that.
Millennium Challenge is not for everyone. Since selection is driven by scores and data, countries suffering from corruption, poor governance, and instability won’t receive our assistance. Further, countries accepted into the program but that fail to maintain passing scores on their policy indicators, or fail to design good proposals, or fail to implement their Compacts well—risk losing their eligibility. We will not hesitate to say “no” or “no more.”
In November, the MCC Board suspended Yemen from our Threshold program for significant drops in its policy indicators. We will welcome Yemen’s return when it reverses its slide and puts itself back on track.
In December, I also issued a warning to Armenia that its eligibility may be re-examined if the trends in its “ruling justly” category continue to weaken.
Our Second core principle is that partner countries, not MCC, have ownership of their Compacts. This is difficult and complex work. It stretches capabilities and in some cases establishes capabilities that did not previously exist. Countries have not been expected to take on this level of accountability and responsibility before … but it is absolutely necessary if we are serious about improving the effectiveness of our assistance and if the recipient country is serious about reducing poverty
Third, we believe that a great many of the poor will thrive if they are provided access to healthy economic systems and if wealth creation strategies are made available to them. We support programs designed to encourage increased incomes and create opportunities for the poor to overcome barriers that keep them from fully participating in basic economic activity. MCC Compacts are removing these barriers by improving roads in Nicaragua, increasing the productivity of high-value crops in Honduras, and overhauling the antiquated land titling system in Madagascar.
As part of this overall strategy, we welcome activities that help remove impediments to growth and poverty reduction, such as health and education projects.
Fourth, as the President said at my swearing-in, lifting nations out of poverty requires partnership—not paternalism. From the outset, we insist that each country outline what our joint efforts will achieve. By focusing on these results, we hope our partnership will provide lasting hope and opportunity to those living in poverty. That is our aim. That is our objective.
I think it is only appropriate to ask on behalf of the American taxpayer as well as on behalf of the citizens of the countries we are trying to assist that Millennium Challenge become the foreign aid program with clear, measurable objectives at the front end and with an exit strategy at the back end. The MCC is about human beings transcending statistics, and enabling and empowering citizens of poor countries to grow out of the poverty trap. Our success is defined not only in terms of dollars spent, but also on the long term sustainability of the institutional reforms put in place to support the efficient and effective use of our foreign aid to reduce poverty and to achieve lasting political, economic and social transformation in our MCC countries.
Our ultimate success will be fully manifest only when we are no longer necessary.
Earlier I mentioned the challenge President Bush gave to me: Be bolder. Be Faster. Make a bigger difference.
We all know that is a tough assignment. You know it is a difficult assignment for me and the MCC; and I know that your endeavors are no less difficult.
But I also know that working with you, we can together achieve our objectives. Next year, if you are generous enough to invite me back to speak to you, I am confident that I will at that time be able to report to you impressive achievements in 2006.
Thank you for your support and your attention. I am happy to take your questions.