Speech

May 3, 2010

As Prepared by

Washington, DC

Opening Remarks: MCC CEO Daniel W. Yohannes at the Initiative for Global Development Event Hosted by Brookings Institution

Good morning!  Many thanks to Jennifer from the Initiative for Global Development for that kind introduction and Kemal from The Brookings Institution for hosting us here today.  I am also grateful for the opportunity to join such distinguished panelists—Tim, Chad, and Justin—for this discussion.

And, I am pleased to join you this morning to discuss a topic near and dear to my heart: the role of business in development.  I come from the banking and finance industry that helped Americans and businesses create wealth and achieve the American dream.

One of the attractions that drew me to the Millennium Challenge Corporation was that MCC takes a business-like approach and applies it to development assistance.

One of my top priorities as CEO of the Millennium Challenge Corporation is to leverage private sector partnerships to promote economic growth and reduce poverty in well-governed, poor countries.  The reason is simple: Foreign assistance on its own, no matter how well-managed, will never be the engine for widespread economic growth. 

What will make a difference on a sustained basis are free markets fueled by private enterprise.  

  • The private sector, after all, is the engine of
    • innovation,
    • job creation, and
    • growth.  
  • Private businesses are already providing 84 percent of the resource flow to developing countries.  

  • Sixty percent of Fortune 100 companies are engaged in “development” partnerships.  

  • International finance institutions are exploring opportunities to leverage their investment dollars in frontier and emerging markets. 

At MCC, we are making significant efforts to increase prosperity by investing more than 7 billion dollars in 19 countries around the world.  Yet, we recognize we can do much more by partnering with the private sector and better leveraging our capital.  

For example, I just returned from El Salvador where I saw a public-private partnership at work.  In the country’s rural Northern Zone,

  • the Salvadoran government,
  • MCC, and
  • Virginia-based AES Corporation

combined efforts on a 33 million dollar public-private partnership.

This partnership provides 21,000 Salvadoran households access to electricity for the first time. 

Because of the private sector’s involvement,

  • routine maintenance,
  • operating cost recovery, and
  • yes, profit,

will assure sustainable access to power in this remote region of the country.  In addition, AES Corporation is growing its paying customer base and has become a key development partner in improving the quality of life for Salvadorans. 

The people I met told me how they have been able to replace kerosene, a health hazard that made breathing difficult.  With a flip of a switch, they now have lights for their children to study at night, and power to run small appliances.  Yet, bringing electricity to a region does more than make life more comfortable.  It opens up a wealth of possibilities for small businesses and feeds the entrepreneurial spirit. 

I also witnessed the growing role of business in development during my recent trip to Ghana.  MCC’s investments throughout the entire agricultural value chain—

  • from cold storage facilities,
  • to technical training,
  • to access-to-credit programs,
  • to major roads

—have become a magnet for businesses in Ghana.  We want to make sure potential investors know that by the time our investment matures, Ghana will be a more reliable supplier of globally certified fruits and vegetables. There will be improved irrigation and post-harvest infrastructure and as many as 60,000 export-ready farmers will be trained to meet global market demand.

Chiquita and Dole, for example, have noticed and begun sourcing trial shipments of pineapples from MCC-supported farms. 

VegPro, a company from Kenya, is preparing to export vegetables from Ghana to Europe.  By working with MiDA, the local entity responsible for implementing Ghana’s MCC compact, VegPro is leasing a 250-hectare farm next to the MCC irrigation perimeter.  VegPro will be providing farmers with direct employment on its own farm and sourcing vegetables from MCC-supported farmers next door.  Over the next four years, VegPro is planning to expand operations, creating additional opportunities for local farmers.  As their incomes increase, these farmers can

  • grow their production,
  • send their children to school, and
  • afford a higher standard of living.

What I saw in Ghana and El Salvador reaffirms for me the strong multiplier effect of private sector engagement.  One of the most effective ways to make our investments sustainable is to provide MCC partner countries with the

  • tools,
  • resources, and
  • information

they need to

  • attract,
  • develop, and
  • sustain

partnerships with the private sector.  This approach reinforces MCC’s country ownership model and dovetails with a partner country’s own growth strategy.  And, on many levels, MCC has been working to expand the private sector multiplier effect. 

First, we are working hard to create an attractive environment for private sector investment.  Tying the award of MCC’s development dollars to a country’s policy performance creates a strong incentive for reform. 

In Nicaragua, for example, before MCC’s investment, the country was maintaining an average of 500 kilometers of roads, with about a 2.4 million dollar annual maintenance budget.  Through our advice and counsel, the government established a permanent road maintenance fund.  Nicaragua is now maintaining more than 2,700 kilometers of roads annually, with a more than 25 million dollar maintenance budget. 

This tremendous progress on road maintenance is just one example of MCC’s ability to achieve significant policy changes that create new opportunities for private sector firms.  This kind of policy reform makes our investment more effective, and paves the way for private investors to operate more efficiently in MCC partner countries.  Partnering with MCC practically gives countries a “seal of sound investment approval.”  I want to make sure that seal is real.

Second, we are working to facilitate more investment opportunities around the projects we fund.  We encourage private sector businesses—those domestic and international—to add to and complement MCC’s initial investments through their own

  • financing,
  • technical expertise, and
  • innovative operations. 

This is why MCC insists that the private sector get involved—and remain involved—in developing and implementing MCC projects.  Additional private sector investments can turn our initial MCC investments into economically-productive assets. 

MCC has launched an Agribusiness Development Initiative, for example, to bring private businesses to the table to complement existing commercial activities throughout the value chains of MCC-funded programs.  The initiative, aimed at investment promotion, is being piloted first in Morocco and Ghana, both MCC partners.  And, we can already point to VegPro’s cooperation with MCC-supported farmers in Ghana as an example of the progress we are making.  

Third, we are working to bring the expertise and experience of the private sector to bear much earlier in our decision-making processes.  While I am proud of the work that has been done at MCC, so far, to engage the private sector in our investments, my sense is that, too often, these partnerships have been retro-fitted into existing operations, rather than designed right from the start.  I would like to change this approach now, and we are taking several steps in that direction.

  • We need to be more pro-active internally and with partner countries to include the private sector from the very beginning of the design stage, as countries analyze their constraints to economic growth.  MCC partner countries can
    • learn best practices from the private sector,
    • solicit information about technology solutions to identified growth constraints, and
    • discuss leveraging opportunities.
  • We need to explore better ways of integrating private sector partners in MCC’s peer review of the proposed projects countries ask us to fund. 

  • And once projects are approved, we need to aggressively publicize procurement opportunities for businesses to bid on during the implementation of MCC compacts.  MCC’s 7 billion dollar global investment generates procurement opportunities that are

    • real,
    • sizeable, and
    • worth your attention in frontier markets worldwide. 

In Africa alone, MCC is investing more than 5 billion dollars, 60 percent of which supports infrastructure development and agricultural productivity.  We invite the private sector to consider procurements resulting directly from the implementation of MCC-funded projects.

While we’ve made progress, our sights are set on doing more to help partner countries achieve their development goals through private sector-led growth.  We are still thinking through all the dynamics.  That is why we are taking a pragmatic country-by-country, project-by-project approach and seeking partnerships with the private sector that

  • leverage additional resources for development,
  • enhance returns on investments, and
  • improve the efficiency and sustainability of our programs. 

MCC is committed to intensifying private sector engagement in more sophisticated and sustainable ways.  Looking ahead, our plans call for this at the transactional level.

Achieving our mission of poverty reduction through economic growth requires targeted partnering, which will enable us to:

  • increase the scope and scale of our investments to address development challenges,
  • allocate or mitigate risk for investors and other market participants, and
  • accelerate the transfer of technical or managerial expertise into a developing market.

We are also exploring new development partnerships—from stand-alone investments to parallel and co-investments—that will be commercially viable and sustainable.  We are looking at innovative ways to:

  • apply existing, successful investment models to frontier markets,
  • involve non-traditional investment partners, like NGOs,
    • social investors,
    • foundations,
    • and other donors, and

  • deliver both economic and social development returns.  


As we look for better ways to leverage the private sector, there are certain things MCC will not do. 

  • We will not take the easy road and cherry-pick the best projects, those that the private sector could and should be financing directly in the first place. 
  • We want to “crowd in,” not “crowd out,” the private sector. 
  • We will not subsidize the private sector. 

We will not displace the good work of others, particularly those within the U.S. Government, like OPIC or the U.S. Trade and Development Agency, but rather work to create synergies and look for a more distinct MCC role in this important space. 

And, I welcome discussing ways we can uniquely deepen private sector involvement in development.  As part of our conversation, I would submit the following questions to you:

  • How can we gain a better understanding of the specific constraints companies face to investing in the sectors that MCC countries are most interested in developing?
  • What innovative approaches can we use to manage and mitigate risks for businesses working with us toward sustainable development?
  • What approaches can we encourage countries to use, including providing risk capital to entrepreneurs, to stimulate more innovation on the part of the local private sector?
  • How can we access new sources of capital that are interested in both financial and social returns? 

As U2’s lead singer and poverty reduction champion Bono reminded us in his op-ed in The New York Times a few weeks ago, “Smart aid can be a reforming tool,

  • demanding accountability and transparency,
  • rewarding measurable results,
  • reinforcing the rule of law,
  • but never imagining for a second that it’s a substitute for
    • trade,
    • investment or
    • self-determination.”

The sustainable development so many poor communities seek will not come from handouts of assistance.  Rather, change will come when we use our development resources as a springboard to

  • empower entrepreneurs,
  • attract businesses and investors, and
  • ignite the engine of market-led growth.  

This is why the Millennium Challenge Corporation is committed to deepening our engagement with the private sector, so together we can invest in programs that offer

  • opportunity,
  • hope, and
  • prosperity for the world’s poor. 

Today’s event provides a perfect forum for us—businesses and government, think tanks and NGOs—to share ideas and learn from one another. 

I’m looking forward to that conversation.