Speech

October 10, 2007

As Prepared by John J. Danilovich, Chief Executive Officer

2007 U.S.-Africa Infrastructure Conference

Remarks by MCC CEO Ambassador John Danilovich at the Corporate Council on Africa

Thank you for that introduction, Terry, for including the work of the Millennium Challenge Corporation in the Corporate Council on Africa’s premier conference on infrastructure development.  It’s a pleasure to be part of this distinguished panel.

Let there be no mistake about it: The Millennium Challenge Corporation is committed to infrastructure development in Africa. I’d like to take this opportunity to explain how and why we are committed.

You can see how MCC is committed through the scope of our partnerships in Africa.

Since our establishment by an Act of Congress in 2004, MCC has approved a total of 16 compacts worth $5.5 billion in grants—not loans—with 16 partner countries around the world. Of these 16 approved compacts, 9 are with countries on the African continent: 

     
  • Benin ($307),
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  • Cape Verde ($110),                             
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  • Ghana ($547),                      
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  • Lesotho ($363),                           
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  • Madagascar ($110),                          
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  • Mali ($461),                                
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  • Morocco ($698),                         
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  • Mozambique ($507),                        
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and

     
  • Tanzania ($698).                        
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These 9 compacts alone total about $3.8 billion,  meaning that over 70 percent of what MCC’s Board has approved so far benefits Africa.  We anticipate up to 2 more possible compacts in Africa in 2008—since we are in negotiations with Namibia and Burkina Faso—further confirming MCC’s commitment to Africa’s development.

And, we are benefiting Africa’s poor by investing in Africa’s infrastructure.

     
  • In Ghana,  we are investing in 950 kilometers of rural roads and making improvements to the Lake Volta ferry services.  The roads and ferries will reduce transportation costs and travel time, while increasing access to
    •  
    • markets,
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    • schools,
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    • clinics, and
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    • hospitals
    •    

for the rural poor. In the northern areas, it is estimated that households benefiting from the MCC compact will see their crop and farm incomes rise by 135 percent at the end of the compact in 5 years. We are also investing in water and sanitation facilities as well as rural electrification.

     
  • In Benin,  we are rehabilitating the Port   of Cotonou, which will result in
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    • fewer delays,
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    • lower operational costs,
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    • lower import costs, and
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    • an increase in the volume of merchandise traffic. 
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The improved Port of Cotonou will not only provide efficient and reliable access to international markets for Beninese producers but will also reduce the price of goods for Beninese consumers. 

     
  • In Cape Verde,  we are improving roads and bridges, which will strengthen transportation links,  making it easier to commute to work and move goods to markets.  Some 60,000 people on the islands of Santiago and Santo Antão will benefit.
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  • In Lesotho,  system upgrades will improve the reliability of water supply and sanitation for industrial and residential uses. 
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  • In Mali,  we are improving irrigation systems in the Niger River Delta and modernizing the airport with an industrial park that will boost agriculture productivity and expand access to markets and trade.
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  • In Mozambique,  we are allocating more than $200 million to improve access to water and sanitation in eight cities and towns and 600 rural villages.  We are also directing $176 million to rehabilitate the national transportation network. 
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  • In Morocco,  MCC funds will construct up to 20 fish landing sites along the Atlantic and Mediterranean coasts to transform small-scale fisheries and provide fishermen with greater access to markets.
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  • And, in Tanzania,  we will make strategic investments in
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    • water,
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    • energy, and
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    • transportation.
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These investments in infrastructure do not occur in a vacuum. Rather, as the title of this conference highlights, we are “Building on Stability” and minimizing risks by partnering only with those countries in Africa that—compared to their peers—

           
      • govern justly,
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      • invest in the health and education of their citizens, and
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      • promote economic freedoms
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—all of which create a strong and stable foundation for economic growth as well as security and stability. We use objective indicators taken from third party sources to evaluate a country’s performance in these three areas. And, we use our Threshold Program to assist those countries that come close to qualifying for a compact but still need to address certain policy weaknesses.  We have provided about $360 million for 17 country-specific threshold programs, including seven in Africa.

African threshold programs focus mainly on fighting corruption or expanding education opportunities.

The countries with whom we partner have already created a culture of responsibility and are looking to us to help them help themselves. Our model is based on mutual accountability—accountability on MCC’s part and accountability on the part of each partner country. 

On our part, it’s about taking our fiduciary responsibility to the American taxpayer seriously. It’s about awarding grants only to countries with sound

     
  • political,
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  • economic,  and
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  • social policies
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in place to put our assistance to the best use.

On the part of our partner countries, it’s about consulting with their people and identifying their own priorities for development.  It’s about countries

     
  • making reforms,
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  • implementing their own programs,
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  • measuring progress against benchmarks,
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  • and delivering tangible results in the lives of the poor.
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It’s also about sustainability.  Infrastructure improvements are only temporary without adequate maintenance.   MCC does not want to be in the business of rebuilding the same road every 7 years.  For that reason, we work with countries to ensure that policies and funding are in place to maintain MCC investments before we invest.   

Our innovative model for delivering development assistance—based on sound policy performance, country ownership, and sustainable results—allows us to achieve our mission to reduce poverty through sustainable economic growth in poor countries in Africa and elsewhere. And, only with Congress providing sufficient funding will we be able to continue to fulfill our mission.

There are two main reasons why we are committed to infrastructure development in partner countries in Africa.

First and foremost, it is the country, not MCC, which selects investments in infrastructure improvements as vital for fighting poverty. 

Each MCC partner country evaluates its own constraints to economic growth and poverty reduction and develops it own proposals for what it believes to be the most effective strategies for overcoming those constraints.  They do this through

     
  • meaningful,
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  • participatory,  and
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  • broadly-based
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consultations that engage all members of civil society—including the private sector. We then analyze these proposals.  Only those that have 

     
  • an economic return,
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  • a sufficiently good poverty impact,
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  • technical feasibility, and
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  • environmental and social sustainability
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are funded.

In short, it is Africans themselves who are selecting infrastructure projects as part of their development program. We are noticing a growing realization among African leaders that Africa cannot meet the United Nations Millennium Development Goals—that it cannot

     
  • eradicate extreme poverty and hunger,
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  • provide universal primary education,
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  • promote gender equality and empower women,
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  • reduce child mortality,
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  • improve maternal health,
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  • combat HIV/AIDS, malaria and other diseases,
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  • ensure environmental sustainability,
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  • and participate in the global trading and financial system
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—without investing in infrastructure. 

This is not to say that spending on social matters is unimportant.  It is critically important. And, MCC investments are being made, for instance,

     
  • to combat HIV/AIDS in Lesotho,
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  • to provide skills training in Morocco,   
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  • to expand the availability of basic community services in Ghana, and
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  • to increase girls education in Burkina   Faso. 
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Yet, spending on infrastructure is just as vital for making access to those social services possible and generating the growth that makes the self-financing of services possible. 

This leads to the second reason why we are committed to infrastructure development: there is link between investing in infrastructure and reducing poverty.

To escape poverty, the poor need

     
  • access to employment,
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  • access to markets,
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  • access to local, regional, and international trade,
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  • access to schools, and
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  • access to health clinics. 
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Infrastructure gives them such access, and that’s why investing in infrastructure directly benefits the poor.

Better infrastructure improves access to health care and education. In many cases, it frees up significant amounts of time spent carrying water or firewood, and walking on roads too dangerous to drive a car on.  Water system upgrades in Mozambique will allow Mozambican girls and women, for example, to attend school or engage in income-generating activities rather than spend their days fetching water.

Better infrastructure also increases economic opportunities. It allows farmers to get their high value, perishable agriculture products to market.   This translates into jobs and incomes.  Consider Mali’s situation. As a landlocked country, it faces difficulties getting its products to market. Rail and road networks are inadequate so air traffic has become its lifeline for moving both passengers and agricultural exports. It is no surprise, therefore, that the Malians are using their MCC investment to upgrade their airport in Bamako.

Of course, better infrastructure—

     
  • from roads and transportation networks,
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  • to information and telecommunication technologies,
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  • to water and sanitation,
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  • to energy and electrification
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—is a must for investors exploring business opportunities.

Sound infrastructure creates a more conducive business climate. The Finance Minister of Indonesia, where we have one of our largest threshold programs, has said that money is not the only reason to partner with the MCC.  

It is also about the “good housekeeping seal of approval” they receive, which sends a signal to private investors that conditions are improving in MCC countries and are right for investing and doing business.

We see private sector activities as the true engine of sustainable economic growth that will increase the incomes of the poor. 

This is precisely why MCC welcomes partnering with the private sector; let me reiterate that: we want to partner with private enterprise. Our MCC investments will succeed only to the extent that they foster continuing economic activity—whether by a farmer in her field who now invests because she has title to her land or by local entrepreneurs or international companies who invest because of the improved business climate, created by the reforms and conditions MCC makes possible in partnership with African countries.

     
  • I invite members of the business community—like those of you here today—to be part of the compact development process from start to finish and to leverage MCC investments as a springboard for parallel or complementary investments and commercial activities of your own. 
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  • I invite you to explore procurement opportunities for country- and compact-specific projects in Africa.  
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  • I invite you to talk with us about areas of mutual synergy. I created the new Private Sector Initiatives team within MCC precisely to increase private sector linkages to MCC programs. Details are available on our website at www.mcc.gov.
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The power of infrastructure development cannot be underestimated; it is a prominent feature of MCC’s work in Africa. 

     
  • Infrastructure is good for business, providing a platform for investment.  
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  • Infrastructure is good for partner countries, complementing their economic development agendas and connecting them to markets.
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  • And,  infrastructure is good for the poor, making access to social services,  products, jobs, and increased incomes a reality.
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In many ways, infrastructure becomes a bridge—no pun intended—from poverty to prosperity.

Because of this, infrastructure development—achieved in partnership with MCC countries and with the private sector—will remain vital for the ongoing fulfillment of the Millennium Challenge Corporation’s mission in Africa and around the world: to reduce poverty through sustainable economic growth.

Thank you so much for your interest in the Millennium Challenge Corporation’s work.