Speech

April 2, 2008

As Prepared by John J. Danilovich, Chief Executive Officer

Hunter College, New York City

‘A Different Model for Development: Millennium Challenge Corporation’

Introduction

It’s a pleasure to be on the campus of Hunter College, and I appreciate the invitation to be here. 

I welcome the opportunity to share the story of the Millennium Challenge Corporation with you—particularly with a group of students like this one who, together with your faculty, will hopefully participate in our great undertaking and who will, in any case—as our next generation of leaders—use our experience as your foundation.  I appreciate your interest in international affairs and, specifically, in the work of the Millennium Challenge Corporation, a different and demanding U.S. program that is revolutionizing the delivery of development assistance. 

I’d very much like for this to be an interactive discussion, but let me take just a few moments to outline the tenets that are at the heart of the MCC model.

MCC 101

MCC fights poverty by stimulating economic growth.  That is our mission—to reduce poverty through economic growth.  

Half of our fellow world citizens live on less than $2 a day, and we, as Americans, have always considered it our duty to reach out to the poor; it’s the right thing to do and it reflects one of the most fundamental values of the American character—to help those in need. 

Congress created MCC in 2004 as an independent government agency to partner with some of the world’s poorest countries and provide them with development assistance in the form of grants, not loans.

Fighting poverty around the world is not only changing the lives of the poor for the better but also making our lives safer right here in communities across this country.  In a speech at the Carnegie Endowment for International Peace, National Security Advisor Stephen Hadley summarized this link best when he said, "…[W]e also recognize that helping people in the developing world is very much in our national interest. People who are

  • free,
  • educated,
  • healthy,
  • empowered,

and able to use their freedom to enhance their economic well-being are less likely to support terror or attacks on others. If this new century has shown us anything, it is that our own

  • prosperity,
  • freedom,
  • and security

are increasingly intertwined with those of less developed nations.”

Americans have always been a generous and compassionate people, but—while this country’s development assistance has doubled in the past 7 years—our aid still amounts to less than one-half of one percent of the total U.S. budget.  In order to maximize the effectiveness and impact of U.S. aid in reducing poverty, MCC takes a

  • different,
  • innovative,
  • demanding,
  • and strategic

approach. 

This approach is predicated on three key principles:

  • good government policies,
  • country empowerment, and
  • tangible results.

Let me explain what we mean by each of these.

First, we believe policies matter, so MCC funding is performance based.Each year, we create a summary of performance—a scorecard—for every poor country in the world, using 17 policy indicators that measure whether a country

  • governs justly,
  • invests in health and education,
  • promotes economic freedom,
  • protects the environment,
  • and fights corruption. 

Non-U.S. government organizations—like the

  • World Bank,
  • IMF, 
  • the World Health Organization,
  • UNESCO,
  • and Transparency International

—create the indicators we use.

Using these results, we invite only those poor countries that pass our scorecard to join our program.  In this way, we create a competition among countries for MCC funding based on sound policy performance.  We don’t think it’s too much to ask of countries receiving American taxpayer dollars that they practice good policies and demonstrate the political will to use our aid effectively.
And, we know this performance-based approach to aid works.  Anxious to partner with MCC, we see country after country make necessary policy reforms not only to qualify for our program but also to improve the lives of their citizens.

Those already in the program must keep up their performance to stay in.  Many have called this phenomenon the "MCC Effect”—wherethe promise of qualifying for our aid and maintaining eligibility for it motivates continuous policy reform.
Second, countries invited to join the MCC program because of good performance are empowered to lead their own development.MCC places the responsibility with the recipient country itself to examine its own constraints to poverty reduction and economic growth and to design its own solutions—country-driven solutions to country-determined challenges

To do this, we ask countries to consult extensively with their citizens—from the

  • private sector,
  • to nongovernmental organizations,
  • to civil society groups

—and outline their own priorities for eliminating barriers to poverty reduction and growth.  MCC’s gender policy is acknowledged as being one of the best—you can’t exclude half of your population when you are trying to reduce poverty for all the population.  Women must be included in this process. Hence, we demand that all citizens—men and women—work side by side to develop and implement their development strategy. 

Third, once their proposals are approved by MCC, we ask countries to take charge of implementing their programs to deliver tangible results. It is essential for countries to take the responsibility for—to buy into—the creation and implementation of their own program.  We say to countries: Do it for yourself; we’ll give you the money, but you take the responsibility for the success of your own development.  This is not easy.  Countries are usually not asked to assume this responsibility. Capacity is often lacking.  But, MCC is not a handout; rather it is a hand up.

In the four short years since MCC’s creation, we have signed 16 large-scale antipoverty agreements—what we call compacts—with countries in

  • Africa,
  • Central America,
  • Eurasia,
  • and the Pacific

totaling $5.5 billion. 

We are investing almost $400 million in 18 additional countries with whom we have threshold programs.  These smaller threshold programs are intended to help countries improve their performance on a few of the

  • political,
  • economic,
  • or social

policy indicators we use to measure performance in order to move them over the "threshold” to closer compact eligibility.

We are now implementing these programs, and early, impressive results include:

  • issuing land titles,
  • increasing farmer incomes through better agriculture techniques,
  • creating jobs,
  • increasing market access for small businesses,
  • improving infrastructure, such as
    • seaports,
    • bridges,
    • airports,
    • roads,
    • storage facilities,
    • and irrigation canals,
  • opening health clinics and containing the spread of HIV/AIDS and other diseases,

  • building and operating girl-friendly schools,

  • expanding vocational training,

  • strengthening financial services and access to credit, and

  • improving access to water and sanitation services.

These results prove that the MCC model is working and we are seeing sustainable and measurable change take root in our partner countries as they advance their efforts to reduce poverty and stimulate economic growth.

I was recently in Morocco and the Minister of Agriculture said exactly this, "We have many donors, but the MCC will be remembered for having changed our lives.”

Conclusion

The Millennium Challenge Corporation has made enormous progress in four short years, and we are extremely proud of our role in fighting poverty and making the vision of prosperity a reality in our partner countries around the world.

I will stop at this point and would be happy to take your questions.  I am looking forward to our discussion.  Any questions?