Ambassador John J. Danilovich's keynote speech at the Society for International Development Conference “Pulling Together to End Poverty”

February 14, 2006

AS DELIVERED

Ambassador John J. Danilovich

Society for International Development Conference

“Pulling Together to End Poverty”

Thank you, Asif, for your kind introduction, and I want to thank the Society for International Development for inviting me here today to talk about my vision for the Millennium Challenge Corporation and its role in development.

It's an honor to be included in this important forum for the exchange of development experience and knowledge with such an impressive line-up of participants and guests.

I approach the theme of “Pulling Together to End Poverty,” with some trepidation, having just completed my third month on the job as CEO of Millennium Challenge Corporation. As you know, our mission is the reduction of poverty through sustainable economic growth in the world's poorest nations. Two weeks ago I returned from my first trip abroad for the MCC to Benin and Morocco—where I was able to witness first-hand how the countries we work with are tackling the challenges of development. In Benin, I was particularly impressed by the deep involvement of civil society organizations in determining their own role in the county's economic development plans. President Kerekou views his commitment to the constitution and holding elections on March 5th, as well as his country's engagement with Millennium Challenge, as his legacy. And with that commitment we are confident in going forward with the signing of the Benin Compact on February 22nd here in Washington .

My visits to Rabat, Marrakech, and Casablanca, were also very positive. Prime Minister Jettou told me how Morocco's Millennium Challenge Account proposal reinforces national efforts to put more focus on the human element of their economic policy. In Morocco I also saw grassroots efforts to include more women in literacy programs, job creation, and programs for economic growth, all are areas in which MCC takes a great interest.

The Millennium Challenge Corporation is a key component of the President's foreign aid portfolio.

President Bush has dramatically increased the foreign assistance budget, and since taking office, Official Development Assistance grown faster than at any time since the Marshall Plan.

When President Bush first articulated the idea for the Millennium Challenge Account he laid out what would become our core operating principles, which are that growth occurs fastest in countries that adopt and adhere to good policies, that countries must take ownership of their own path to development, and that assistance must produce measurable results.

Congress passed legislation creating the MCC in January 2004 and as a fledgling organization, the MCC experienced the usual difficulties inherent in all startups. Coming from the private sector I am well aware of how difficult startups can be.

However, our startup phase is over and we are moving ahead – confident that we will fulfill our mission and mandate.

I am going to share with you some numbers that you may already be aware of, or may have seen on our website. These are important numbers because they tell a story about the significant progress that has been made in just two years:

We are working with 23 compact eligible countries and 18 Threshold countries.
We have signed and are implementing five Compacts – with Madagascar, Honduras, Cape Verde, Nicaragua and Georgia – and two Threshold Agreements—with Burkina Faso and Malawi . Three more Compacts, with Armenia, Vanuatu and Benin, and two more Threshold Agreements, with Albania and Paraguay, will be completed in the immediate future. Together these represent a combined commitment of over one and a half billion dollars.
And we plan to add several more Compacts and Threshold Programs by the end of the year.

Despite these achievements, I do not believe we have any laurels to rest on; and we must move with greater focus and speed. We understand the urgent need to help the world's poor and loosen the grip of chronic poverty. This urgency was made very clear to me when the President laid out his expectations for me and for the Millennium Challenge Corporation at my swearing-in:

BE bolder,
BE faster,
MAKE a bigger difference

– and if you need support from the top, you've got it. Expectations are a powerful motivator, especially when they are combined with the confidence of others that you can get the job done.

Looking forward, I want the Millennium Challenge Corporation to be more assertive in our interactions with partner countries, and more cooperative in our work with other organizations. We have already made progress along these lines:

In the last three months, we restructured several parts of the organization to streamline the proposal evaluation and Threshold and Compact development processes;
We are now providing clear guidance to countries immediately after they are selected so they can move swiftly to develop their Compacts or Threshold Programs.
We are increasing our staff to 300 by the end of this year, and recruiting the best talent. I have asked my colleagues to be courageous, creative and innovative in challenging our working assumptions and models.
We are also reaching out to other organizations that have the experience and skills that will help make our Compact and Threshold programs as successful as possible.

It would be unrealistic to expect that the compacts we have signed will show immediate results on the ground. But we have been impressed, and even a little surprised, by the results that we have already seen in the area of policy reforms and improvements, both in the countries we are working with, and even in those striving to become eligible.

MCC selects as partners the countries that are most actively fighting corruption, that are ruling justly, that are providing an environment for a free and open exchange of ideas, that are creating a just and equitable legal system, that are investing in health and education, and that are promoting economic freedom. These are countries that are putting themselves on the fast track to poverty reduction and economic growth.

We make this a transparent and competitive process because we want to reward countries that are undertaking these reforms, and to provide an incentive for other countries to do the same. One Finance Minister put it this way, “It's not about the money. It's about the recognition that we're doing the right thing. MCA will help us win the battle of public opinion and convince the people that we are doing the right things.”

It is gratifying to be able to report to you that countries are responding to the incentive that MCC provides to adopt good policies. For example:

According to the managers of the Doing Business project at the International Finance Corporation, 80 percent of the business start-up reforms that they have observed are directly linked to the incentive effect of the MCC. We can refer to this as “the MCC Effect.” To date, twenty-four countries have specifically cited the Millennium Challenge Account as the primary motivation for their reform efforts.
El Salvador, which was selected for the first time this past November, slashed the number of days to start a business by two-thirds—so dramatic an improvement that the World Bank cited the country as the one of the most aggressive business start-up reformers in the world.
MCC has proven to be an effective lever and incentive for good policies. Our policy staff has met with representatives, at the highest level, of almost 60 percent of the countries we monitor. These Presidents, Prime Ministers and senior government officials are working with the MCC to make key political, economic and social reforms in order to become eligible.

Another reason that the Millennium Challenge Corporation is unique is our reliance upon the countries we work with as partners to come forward to conceive, to create, and eventually to implement their own development strategies. This is partnership, not paternalism.

In this as well we have seen some impressive results, in terms of building local capacity, encouraging broad consultation, and in thinking about the policy environment that will sustain in the long term the programs they are designing.

In Benin, for example, over 100 local civil society organizations participated in electing their own representatives to the working group that designed Benin's proposal. This degree of civic participation is unprecedented, and will carry though to implementation once Benin's compact is signed. Other MCC countries are following suit.

To better prepare its proposal, Lesotho initiated a number of policy reforms, including enabling married women to own land and bank accounts, reforming civil and legal systems, and giving more support for small businesses. MCC is financing some of this work in advance of concluding a Compact with the country.

But the Millennium Challenge Corporation is not for everyone. Governments that tolerate corruption, poor governance, and instability won't receive our assistance. Further, countries that are accepted into the program but fail to maintain passing scores on their policy indicators, or fail to design good proposals, or fail to implement their Compacts well— risk losing their eligibility. We will not hesitate to say “no” or “no more.”

As we look to the future, for MCC to be successful, we will need to engage more effectively with other U.S. agencies and departments. We need to forge stronger ties with Congress. And, we need to reach out and enlist the support of the private sector and civil society organizations, both at home and in the countries where we are working.

I am eager to work together with you in this process. We would like to continue our dialogue and knowledge-sharing, and all of us at MCC would like to take full advantage of your experience and knowledge. I like to say that MCC is “assistance with accountability” -- accountability on the part of all concerned. And I want our partner countries and you to hold us accountable. You can help us determine whether our assistance is producing the results that we intend it to produce. You can let us know where we can do a better job and how we can work together in partnership on the development front.

In closing, I'd like to say that I don't think it's too much to ask, on behalf of the American taxpayer, as well as on behalf of the citizens of the countries we are trying to help, that Millennium Challenge become the foreign aid program with clear, measurable objectives at the front end and with an exit strategy at the back end. MCC is about enabling and empowering citizens of poor countries to grow out of the poverty trap, and our success will be defined not only in terms of dollars spent, but also on the long-term sustainability of the institutional reforms put in place to support the effective and efficient use of our foreign aid. We aim to reduce poverty through economic growth and to achieve lasting political, economic and social transformation, and our ultimate success will be fully manifest only when we are no longer necessary.

I thank you for your attention, and again thank you for the opportunity to be with you today. I welcome any questions you may have.

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