Keynote Remarks by MCC CEO Daniel W. Yohannes at the Business Civic Leadership Center (BCLC)
'How MCC is Reshaping U.S. Foreign Assistance: Merging the Interests of Business and Sustainable Development'
Thank you for that great introduction. As you said, my entire career, before joining the Obama Administration as head of the Millennium Challenge Corporation, has been in the private sector, in banking and finance. So, I’m delighted to be here with you all this morning. I understand the value private enterprise brings to our own national economy and to the prosperity of economies around the world.
That is why one of my top strategies for achieving MCC’s mission of reducing global poverty through economic growth is to engage, partner with, and leverage the expertise of the private sector. The reason is simple: Foreign assistance on its own, while an important complement, will never be the engine for widespread economic growth. I say this even as MCC effectively and wisely manages worldwide grants that top over 7 billion dollars.
Improving the lives of the poor in developing communities starts, instead, with open, competitive markets fueled by private enterprise. Even in the face of great challenges, frontier markets are places of great opportunity. That’s why private businesses are already providing 84 percent of the resource flow to developing countries. Sixty percent of Fortune 100 companies are engaged in "developmentâ€ partnerships. More and more international finance institutions are exploring opportunities to leverage their investment dollars in frontier and emerging markets.
MCC wants to be where the action is, where our investments can make a sustainable difference in the fight against global poverty. To do this, MCC is committed to cultivating and sustaining a special relationship with the private sector. Let me share with you what this includes. It is a matter of looking at three things:
- the political context we face,
- what we are currently doing, and
- what we still want to accomplish.
First, the context.
I was at the unveiling of President Obama’s new U.S. Global Development Policy in New York last week. This policy recognizes the important role development must play, alongside diplomacy and defense, in addressing global challenges.
According to the President’s strategy, ending global poverty requires:
- investing in economic growth,
- promoting country-led development that engages government, civil society, and the private sector in designing and implementing investments,
- demanding accountability from partner countries, and
- focusing on transparency and results.
MCC’s innovative, accountable, and transparent approach to poverty reduction through economic growth already embodies a set of principles and practices that are at the center of the President’s vision. We already partner with countries that are practicing sound policies, leading their development, and delivering tangible results.
The principles that define MCC’s model—results, selectivity, ownership, and transparency—are not new. They reflect decades of global development experience and are part of what makes aid effective. Yet, MCC’s way of putting these principles into practice places us at the forefront of accountable and innovative development assistance. It also makes us a key contributor to the Obama Administration’s new approach to global development.
As part of this new vision, we are committed to transitioning countries from development assistance to private sector-led economic growth. Our business-like model funds financially-viable programs that aim to yield better development outcomes and build local capacity, so our partner countries can attract private investment. The private sector, after all, is the engine of sustainable economic growth. The private sector creates jobs and incomes, promotes trade and investment, and drives innovation.
The U.S. Global Development Policy talks about promoting innovation in the development of new partnerships. During these challenging times, working with partners allows us to leverage our resources and do more with less. This is a responsible way of maximizing U.S. investments abroad. For these reasons, MCC is pursuing innovative ways of working with the private sector as a key partner in sustainable development.
Already, we are involving the private sector in all stages of our operations around the world.
I saw this firsthand when I traveled to El Salvador to see our MCC investment at work. Thousands of households in the country’s poor and rural Northern Zone have access to electricity for the first time because the Salvadoran government, MCC, and Virginia-based AES Corporation combined efforts on a 33 million dollar project.
I also witnessed the growing role of business in development during my trip to Ghana. MCC’s investments throughout the entire agricultural value chain—from cold storage facilities, to technical training, to access-to-credit, to roads—have become a magnet for businesses in Ghana. Chiquita and Dole, for example, have begun sourcing shipments of pineapples from MCC-supported farms. VegPro, a company from Kenya, is leasing a farm next to the MCC irrigation perimeter and is preparing to export vegetables from Ghana to Europe.
And, two weeks ago I was in Honduras for the closeout of their MCC program. The private sector is playing a key role in our investment’s success in Honduras. The program maximized impact and sustainability by linking farmers trained in new agricultural techniques to private sector buyers, including supermarkets. Having outlets for their products translates into real opportunities for income increases that make a difference in the lives of the poor. Honduran private sector representatives also served as advisors, alongside others from civil society, to help anchor the program through three political transitions.
What I saw in Honduras, 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 partner with the private sector. On many levels, MCC has been working to expand this multiplier effect.
It starts with a sound policy environment. As a policy-performance model for awarding development assistance, MCC works with partner countries committed to good governance, investing in health and education, and economic freedom. These partners are working hard to respect the rule of law, fight corruption, create a predictable regulatory and legal environment, enforce contracts, protect intellectual property rights, safeguard land rights, and apply transparent procurement standards. Clearly, countries Committed to these policies are creating pro-growth conditions. They are creating an attractive business and investment climate.
As we partner with countries, MCC also works to build relationships with the private sector to maximize our investments. We are turning to the private sector to:
- analyze constraints to commercial activity, so we are able to analyze solutions jointly that will create investment-ready markets;
- identify commercial opportunities that MCC’s support can help bring about;
- solicit advice on program design, including new solutions to inefficiencies in doing business and investing;
- seek co-investment or parallel investment;
- secure practical advice on designing innovative financing models for specific commercial needs; and, of course,
- encourage bidding on MCC procurements, which amount to 3 billion dollars just through 2011.
We want to see more American companies compete successfully in emerging and frontier markets where we operate. I am personally committed to doing everything I can to promote the competitiveness of American businesses in these markets. For example, we have implemented an aggressive outreach strategy to encourage U.S. businesses to bid on MCC-funded projects. As a result, American companies have won more—and a higher value of—MCC-funded contracts than any other nation’s firms.
- American businesses have won 77 percent of contracts administered directly by MCC.
- Combined with contracts administered by MCC partner countries, a total of 18 percent of MCC-funded contracts are going to American firms for a value of about 600 million dollars.
We see American companies actively bidding on technical services contracts—and winning a significant number of them. However, they are not bidding on many of MCC’s large-scale construction projects. We want to work with American companies to explore this untapped opportunity and compete for these contracts too.
Looking ahead, we are also challenging ourselves at MCC to think more broadly and more deeply about what we actually mean by private sector engagement.
- To us, this means engaging the private sector as traditionally defined as well as the whole community of non-governmental and non-traditional actors, like social entrepreneurs and foundations.
- We are looking at the role small- and medium-sized companies—not just the large multinationals—can play in development. Often, these smaller firms are executing impressive niche strategies in emerging markets.
- We want to work with firms and foundations dedicated to social entrepreneurship. They see the value of maximizing their bottom lines and their ability to do good in the communities where they operate.
- We need to create a stronger climate for local entrepreneurship. How can our investments help developing countries—locally, nationally, regionally—develop homegrown capacity and skills to compete, do business, innovate, and create jobs?
- We want to pursue more innovative solutions. We may not be able to come up with new products, but we may be able to come up with new processes. We can be innovative in adapting our experiences and expertise to new solutions. We can learn from the successful development experiments others have undertaken and explore innovative ways to scale them up to long-term viability and sustainability.
In all these ways, the Millennium Challenge Corporation is committed to the fullest definition of partnership to achieve the greatest impact we can in the fight against global poverty.
I firmly believe we can—and should—find ways to work together to align business interests with sustainable development objectives. To borrow BCLC’s motto, we can do well by doing good. Or, as Secretary of State Clinton, who chairs our Board, said, "There are business opportunities in solving the problems of the poor.â€
Our partnerships, responsive to local needs and homegrown priorities, can tackle poverty and transform today’s frontier markets into tomorrow’s centers for growth. This is how we can all take part in creating a global community of greater opportunity and prosperity for the poor.
I am ready to discuss, strategize, and plan with you to achieve this goal. Work with us. Share your ideas and experiences with us. We need your input to fully achieve the special relationship we seek with the private sector to reduce global poverty and promote sustainable economic growth.
Together, let us forge strong partnerships for progress that will benefit our missions and business interests as well as the lives of the world’s poor.
Thank you very much.