Speech

April 8, 2008

As Prepared by John J. Danilovich, Chief Executive Officer

Washington, DC

‘How the private sector can partner more effectively in the development world’

Introduction

Thanks, Stephen [Jordan],for those kind words of introduction.  

It’s also good to see Stephen Bruggerhere.

Many thanks to the

  • U.S. Chamber’s Business Civic Leadership Center
  • and the European Council of American Chambers of Commerce

for organizing this forum, and for your interest in the Millennium Challenge Corporation, a different and demanding U.S. program for development assistance.  

Your promotion of commerce and trade is a strong testament to your important role in building global prosperity through the innovation and creativity of entrepreneurship.

And, your role transcends the number on the bottom line as your efforts have a positive impact on the lives of millions worldwide, who are experiencing a better life in their local communities because of your investments in their wellbeing.  The commitment of American and European companies worldwide to community development projects—

  • from schools,
  • to health programs,
  • to water and sanitation,
  • to housing,
  • and to myriad other projects

—proves that what is a good thing to do is also good for business.

So, I welcome this opportunity to be part of this transatlantic conversation on corporate social responsibility, and to discuss the importance and power of private-public partnerships in tackling some of the world’s most pressing challenges. The Millennium Challenge Corporation, created by an Act of Congress in January 2004, is a different and demanding model of development assistance and is proof of positive American engagement around the world to help solve these challenges.   

However, at MCC, we also know that our aid alone—or any government aid, for that matter—will not end global poverty.  MCC recognizes that real growth is the single most important factor in poverty reduction, and that the private sector is the key driver of real growth.

MCC delivers what many call "smart aid” by partnering with countries committed to

  • good governance,
  • investments in the health and education of their citizens,
  • and economic freedom.

Through our approach, we work to empower countries to build their capacity and lead their own development. While this creates an excellent, solid foundation, more is needed. 

MCC’s approach to development assistance can only be sustained over the long term if it is coupled with the

  • creativity,
  • innovation,
  • and entrepreneurship

of the private sector. What leverages our aid and creates a sustainable development impact in the lives of the poor is combining our investments with those of the private sector, through early and continuing private sector engagement. That’s why MCC’s mission of reducing poverty through economic growth is linked inextricably to private enterprise.

I’d like to explain this link between MCC and private enterprise by

  • updating you on MCC’s progress to date in the pursuit of our mission and
  • highlighting the critical role the private sector plays in this pursuit. 

MCC 101

MCC fights poverty by stimulating economic growth, by partnering with some of the world’s poorest countries and providing them with development assistance in the form of grants, not loans.

MCC’s approach to development assistance is predicated on the three key principles of

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

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, those countries that pass our scorecard are invited 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 because we see country after country make policy reforms to qualify for our program.  Many have called this phenomenon the "MCC Effect,” where the promise of qualifying for our aid and maintaining eligibility for it motivates continuous policy reform.  It also serves as an incentive for investment.

Second, countries invited to join the MCC program because of good performance are empowered—and expected—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 women,
  • to nongovernmental organizations,
  • to civil society groups

—and outline their own priorities for eliminating barriers to poverty reduction and growth.

Third, once their proposals are approved by MCC, we ask countries to take charge of implementing their programs to deliver tangible results. We believe 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 have not been asked to assume this responsibility before.  Capacity is often lacking.  But, MCC is not a handout; 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 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 to contain 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.

Role of Private Sector in Development

While the emerging results on the ground are impressive and confirm the effectiveness of our development assistance, poverty will not be defeated through aid alone.

The only way countries can combat poverty is to not depend exclusively on development assistance but, rather, to use it to promote a growing private sector, in which the poor can fully participate. MCC grants to developing countries are designed to be that gateway to private investment.  

MCC’s goal is to have the private sector drive a country’s self-sustaining economic activity in order to eventually replace our aid. Because we demand performance on indicators evaluating

  • fiscal,
  • monetary,
  • regulatory,
  • and trade factors,

including the costs and days required to start a business, we foster conditions that will

  • expand trade and commerce,
  • promote local entrepreneurship,
  • attract investment capital,
  • and ignite private enterprise—

the true engines of long-term growth.

MCC eligibility and selection send a powerful signal to the private sector that a favorable business environment is being created—one that is conducive for investing and doing business.

  • The MCC resident country director in Morocco, where we have a $698 million compact, recently conveyed a very interesting story to me that illustrates this.  She was chatting with a senior Moroccan government official who thinks that the compact has already accomplished a great deal, though it has yet to officially start its implementation.  Why such success so soon?  In the words of the Moroccan official, it’s because various private sector representatives are already visiting his office to explore Morocco as a good place in which to invest, drawn to the country by the fact that it passes MCC’s selection criteria.

That’s the power of MCC.  And, such power is amplified by partnering with the private sector. We continue to explore a number of ways to do so.

  • First, we have created a Private Sector Initiatives team to look closely at the intersection between
      • poverty reduction,
      • development,
      • and the private sector.

Many corporations are moving away from pure philanthropy toward more socially responsible investments that not only serve their corporate interests but also meet overall development objectives.  MCC offers the private sector such options, and our Private Sector Initiatives team is pursuing ways to encourage such private sector activity in development.  

      • It is in this spirit that MCC signed a Memorandum of Understanding last year with
        • Microsoft,
        • the United States Agency for International Development,
        • and the President’s Emergency Plan for AIDS Relief

to explore opportunities to collaborate on specific projects in partner countries worldwide.

      • Just last week, I was in New York City to sign a Memorandum of Understanding with General Electric to advance common development goals. This memorandum provides a framework for future collaboration between MCC partner countries and GE that will help them take advantage of GE
        • technology,
        • expertise,
        • and best practices

in many of the sectors where MCC is active.

      • Similarly, in early January in the true spirit of transatlantic cooperation, I signed a memorandum of understanding with the UK Department for International Development.  This MCC-DfID MOU identifies practical areas for on-the-ground cooperation in countries where both the United States and the United Kingdom are engaged in poverty reduction, including
        • Ghana,
        • Malawi,
        • Mozambique,
        • and Tanzania.  

We hope to coordinate approaches to issues such as

          • environmental protection,
          • infrastructure projects,
          • and transparency in large-scale procurements. 

We welcome further opportunities for public-private partnerships like these to address development challenges and to lead specific development projects in countries in which we are invested.

  • Second, to further our partnership with the private sector, we are looking at ways to weave the private sector into the fabric of MCC compacts from the very beginning of our process. During compact development, we encourage MCC partner governments and the international and domestic private sector to work together to address constraints and opportunities for
      • growth,
      • trade,
      • and investment.

This early conversation accelerates the

  • jobs,
  • technology,
  • and know-how

the private sector can bring.  It also helps MCC make "smarter investments” that address private sector constraints, while encouraging the private sector to make investments that fill in behind our projects to help them succeed and be sustained long after MCC leaves.

  • And, third, we are creating a comprehensive roadmap of private sector opportunities that are expected as a result of MCC’s investments. We want the private sector to be aware of upcoming procurement opportunities as well as opportunities to partner with MCC countries in MCC or MCC-related investments. To do this, we are cooperating with other agencies of the U.S. government and trade and investment multipliers like BCLC to proactively market potential ways for the private sector to work with MCC.

Call to Action

I invite members of the business community to look closely at MCC investments in our partner countries and explore complementary or parallel investments of their own.  We want the private sector to examine what MCC is doing and take notice of what is happening in our partner countries.  MCC’s significant investments to

  • build infrastructure,
  • strengthen human skills of interest to the private sector,
  • increase agricultural productivity,
  • and improve the business climate

create tangible ways for the private sector to grow.  I would encourage you to share these opportunities with business members and friends of the American chambers of commerce you represent across Europe.

I also invite foundations and companies with strategic corporate social responsibility initiatives to consider building on MCC programs in countries in which they have an interest.  In conversations we have had with the Bill and Melinda Gates Foundation and the Rockefeller Foundation, for example, we have identified a number of mutual synergies.  As a result of our recent MOU with GE, we will be doing more in MCC partner countries with the GE Foundation programs that provide capacity building for education.  

We all want our efforts

  • to be more effective,
  • to produce lasting results,
  • to have a sustainable impact,

and there is no question that we can achieve the goal of

  • reducing poverty,
  • stimulating economic growth,
  • and making a tangible, meaningful difference in the lives of the poor

when we work together rather than when we work alone.

I ask you to join with us in this great effort.

Thank you very much for your interest in the Millennium Challenge Corporation, and the private sector’s critical role in the fulfillment of our mission.  Again, thank you for inviting me to join you, and I would be happy to take your questions.