Speech

April 4, 2007

As Prepared by John J. Danilovich, Chief Executive Officer

location

Remarks by CEO Ambassador John Danilovich at the Society for International Development-Washington, DC

“Current and Future Directions within MCC”

Good afternoon and thank you for inviting me here today.

MCC Model

                The mission of the Millennium Challenge Corporation is to reduce poverty through economic growth. Our innovative model, based on such American ideals as accountability and responsibility, awards development assistance to partner countries around the world

  • that practice sound policies supporting good     governance, investments in the health and education of their citizens, and     economic freedom;
  • that are actively engaging in and pursuing their own     development by identifying and realizing strategies for poverty     reduction and economic growth; and
  • that demand nothing     less than measurable and tangible results

Impact on Beneficiaries and Stories from the Field

MCC’s work is complex and challenging, but through the ongoing implementation of our Compacts and Threshold programs, we are seeing our mission spring to life in tangible ways for the people who benefit from our programs.   It is the impact on the beneficiaries that counts if MCC is to make poverty reduction through economic growth real, not just a tagline.

As I visit our Compact and Threshold countries, this positive impact on the lives of the poor is increasingly visible and incredibly gratifying. 

In February, I visited Madagascar,  which is implementing a $110 million Compact—MCC’s very first—and  handed out land titles and microloan certificates to poor farmers and saw firsthand what it means for a woman to own her own land—not only tremendous pride but also economic security, dignity, and empowerment.  I met with farmers, who received technical assistance from local agricultural business centers made possible through our Compact, and who are now tapping into microloans to expand their productivity.   I planted geraniums with farmers supported by our program, who had already secured buyers for their new, high-value oil produced by their geranium crops.  One farmer explained how he managed to enlarge his farm from one to 15 plots of land because of MCC’s investment.

And, you can imagine our surprise when our car was flagged down along a country road so that a group of local villagers could present me with a rooster as an expression of their personal gratitude for the help they are now receiving because of MCC. 

I told the farmers that I was very honored that they should offer me the rooster to bring back to the States, but that I would like them to keep it for me and look after it and allow it to roam free on their farm as a symbol of the MCC—as long as they agreed to name the rooster John.

In March, I visited Burkina Faso,  where we have almost completed construction of 132 “girl-friendly” schools,and sat with young children in their brand new classrooms built through MCC’s Threshold agreement valued at $13 million.  By making sure day-care centers are on-site to take care of younger siblings, and that boys and girls have separate bathrooms, and that take-home food rations are provided for the families of those girls who maintain at least a 90 percent attendance rate, the schools are making an education for girls a reality.

Transforming the lives of the poor in ways that raise their standard of living and their quality of life is a goal that unites all of us in this room as we work in international development.  This is what we all most care about.   At the MCC, we do not look to replace other agencies or donors; rather, we believe in complementing other efforts in a spirit of coordination and cooperation, not competition. All of you deserve great praise for the tremendous work you carry out around the world. Though our specific objectives and programs may be different at our various agencies, we share the common purpose of working diligently to improve the human condition.

MCC’S Current and Future Directions

To achieve our purpose, let me share with you four key priorities that are setting the current and future course at the Millennium Challenge Corporation. 

First, performance-based aid allocation will continue to define MCC.
Our use of 16—soon to be 18—indicators to assess whether a country

  • rules     justly,
  • invests in     its people,
  • and promotes     economic freedom

clearly creates an expectation that policy performance matters in ensuring the most effective use of aid.  Often,  MCC is adding to a country’s ongoing reform agenda. In other cases, countries are initiating or accelerating their reforms to better position themselves on our indicators, something we call the MCC Effect.

For instance, the Dominican Republic, which is not yet one of our countries, launched a campaign to immunize 5 million citizens for measles and explicitly attributed this tremendous undertaking to its effort to qualify for MCC assistance.  Without spending a cent, MCC caused positive change in the Dominican Republic that will impact the lives of the poor in a concrete way.

MCC’s insistence on good governance within this policy framework makes us the only donor that currently ties eligibility for assistance to performance on a transparent and public control of corruption indicator. This has raised the profile of corruption as a policy issue and created a powerful incentive for countries to

  • adopt tough anticorruption laws,
  • strengthen oversight institutions,
  • open up the public policymaking process     to greater scrutiny,
  • and step up corruption-related     investigations and prosecutions.

Anticorruption measures increase a government’s operating revenues so that more can be invested in sustainable social programs that impact the lives of the poor in transformative ways.  These measures improve the delivery of essential public services and build confidence in public institutions.  In fact, our Board of Directors has approved anticorruption assistance programs totaling more than $220 million over the past three years with a number of countries.

Moving forward, MCC will continue to make fighting corruption one of our highest priorities if we are serious about delivering effective development assistance that, in turn, delivers results.

Second, building country capacity increases ownership of the development process and makes it sustainable.

At a recent event where I was invited to speak, the Ambassador from Zambia,  a country with which MCC has a Threshold agreement, commented during the question-and-answer period that “MCC is a partner right from the beginning and works on our priorities.

MCC is and will remain committed to this fundamental premise that countries must be part and parcel of the development process if poverty reduction and economic growth are to be sustainable.  The idea of country ownership is fundamental to our model.

We expect much from our partner countries.  We ask that they develop their proposals for funding after identifying their barriers to poverty reduction and economic growth in consultation with their civil societies. We ask that they implement their proposals. And, we ask that they partner with us to monitor performance and evaluate the impacts of their proposals.

This level of expectation has stretched capabilities in our partner countries and motivated them to develop new capabilities.  It is making them think critically about what policies are needed or what institutions need to be strengthened or created to sustain development. In short, it is building country capacity. 

In Ghana,  for example, a critical component for the successful implementation of its Compact includes training public procurement specialists.  Procuring

  • goods,
  • works,
  • and services

in a

  • transparent,
  • timely,
  • and     competitive

manner ensures the best use of public funds.
Therefore, the Compact includes a procurement capacity-building initiative within the Ghanaian government itself designed to strengthen the effectiveness of various procurement entities. 

Building procurement capacity has widespread implications and benefits Ghana’s public finances.  In a given year, government procurement represents between 11 and 15 percent of Ghana’s GDP.  By improving the efficiency of government procurement and creating better value for money, substantial government resources can be saved in future years—resources that could be directed toward health and education.  Fair and competitive procurement also strengthens business confidence and encourages an open environment for innovation.

Building on our success in Ghana, we will continue to work in partnership to help our MCC countries develop their own tools to help themselves. We applaud Ghana’s decision to host a forum later this month in Accra, of those African countries that are MCA eligible, in order to share peer-to-peer experiences and assist each other in the Compact process.  In a climate of tight budgets and finite resources, we are directing our attention and energies at MCC now, and in the future, to those countries that are working hardest for themselves.

Third, creating a framework for private enterprise engagement is necessary if countries are to graduate from foreign assistance.

By insisting on country ownership, MCC is preparing for the day when our aid can be replaced by the self-sustaining economic activity driven and spurred from within our partner countries themselves.  We also seek to create the conditions that attract outside investment capital. We realize that even the most generous investment of development assistance will not sustain economic growth unless profitable opportunities are created for private investment to become the long term engine of growth and poverty alleviation.

Because MCC demands performance on indicators evaluating

  • fiscal,
  • monetary,
  • regulatory,
  • and trade     conditions,

including the costs and days to start a business—and insists on transparency and a rejection of corruption—we create a powerful incentive for countries to foster a business climate where the private sector can flourish and can do business.   This stimulates

  • homegrown     entrepreneurship,
  • small     business development,
  • increased     trade,
  • and investor     opportunities

both domestically and for international companies.

Consider the expected impact of the access to financial services component of MCC’s Compact with Benin. This component is improving the capacity of small rural enterprises to respond to new business opportunities by reducing the cost of credit and facilitating access to financial services. Within five years, we expect that this will generate substantial new investment in Benin—creating jobs, raising incomes, and helping to lift lives out of poverty.

In Nicaragua,  I participated in the Investment Summit,  which has already sparked a number of foreign direct investments. By creating favorable business conditions, MCC has helped attract a $6 million investment,  for instance, from Grupo Beta, a textile manufacturing firm that will create some 1,500 jobs.

This is the transformation that MCC is working to facilitate.  When aid ends—and we want it to end—we would like to see dynamic economies kick in—driven by private enterprise, investment,  and trade—that will expand and sustain opportunities for the poor.

Given the importance of private sector-led economic development, I have created a Private Sector Initiatives unit within MCC to recommend specific ways to spur this critical activity and to cultivate further relationships with the private sector moving forward. 

Fourth, effective implementation of Compacts is essential to impacting the lives of the poor in tangible and transformative ways. 

Compact implementation has joined Compact development as one of our core competencies at MCC and will be the mainstay of our work in the long term.  We are instituting a number of streamlined processes to ensure that countries can ramp-up and proceed as quickly as possible toward implementation.  Through implementation, we are able to gauge the effectiveness of our programs, designed around the idea that sustainable poverty reduction requires a vibrant, dynamic,  growing economy that generates wage-paying jobs that directly improve the  lives of the poor.

Countries that have grown rapidly have seen the number of people living below the poverty line decrease;  countries that have not grown rapidly have seen poverty levels stagnate or rise.
Sustained growth in household income means more money is available for consumption: for

  • better food,
  • better     housing,
  • better     education,
  • better     healthcare.

As MCC makes investments in secondary roads and other infrastructure projects, we are providing the poor better access not only to markets and jobs but also to

  • health     clinics,
  • schools,
  • other social     services,
  • polling     booths,
  • judges,
  • and land     titling offices. 

Take, for instance, El   Salvador’s Compact, which is improving the lives of almost 1 million poor Salvadoreños through strategic investments in

  • education,
  • public     services,
  • agricultural     production,
  • rural     business development,
  • and     transportation infrastructure. 

This will increase incomes by 21 percent over the five-year life of the Compact and make an incredible difference in the quality of life of the poor farmers in the Northern Zone.

Conclusion

Good policies, country ownership, private sector engagement, and the beneficiary at the core of all we do define MCC’s work now and in the future. 

Will there be challenges along the way?   Of course there will be. After all, “challenge” is our middle name. 

  • Adjusting our     model,
  • working     through implementation,
  • cooperating     with our partner countries,
  • coordinating     with donors in the field,
  • working with     nongovernmental organizations,
  • coping with budget     and staff constraints,

are all challenges that will continue to demand our ongoing attention.

And, with 11 Compacts signed to date totaling $3 billion and 13 Threshold agreements totaling $310 million, we have a track record of success on which to build as MCC moves forward.   We have become a viable and accomplished organization and, in the hope that success breeds success, we look forward to engaging with even more countries as they strive to qualify for our assistance or conclude negotiations to finalize a Compact or Threshold agreement.  The model is working.

I want to thank you for the opportunity to speak to you today about the MCC and to thank you, on behalf of myself and my colleagues, for your support of our efforts to reduce poverty through sustained economic growth amongst the world’s poorest.