Investing in Development: On the Road to Better Aid, MCC is Paving the Way

I am glad to be among so many friends of the Millennium Challenge Corporation.  Thank you for coming, and thank you for your support of MCC. 

Let me especially thank President Saakashvili for that gracious introduction. 

Thank you to our friends at the American Enterprise Institute and the Center for American Progress for co-hosting this event. 

I would also like to acknowledge our newest MCC Board member, Ambassador Mark Green, whose congressional, diplomatic and non-governmental experience will be a great asset for MCC. 

In December 2009, I was sworn in as MCC’s new CEO.  I was then, and remain now, humbled to lead MCC’s mission of reducing poverty through economic growth. 

This has been a great year.  The role of the United States in a vastly changing world has become a critical part of the national dialogue.  And how the U.S. engages with other countries to promote development and invest its development dollars has become a necessary and evolving piece of U.S. global leadership.  In this tide of change, we have discovered that far more unites—than divides—in our vision for the future of development. 

Let me take this opportunity to outline five ideas that I believe enjoy broad agreement both in Washington and throughout our country.

  • First, America’s global leadership position should include leadership on the development challenges faced by the world’s poor countries.  Helping those in need is not only the right thing to do – – it is the smart thing to do for our own national security and for overall global economic growth.
  • Second, I believe there is broad agreement that we need to focus our development efforts on economic growth.  Providing support and assistance in time of crisis or disaster is critical.  But, in my view, it is also critical to support countries in their efforts to foster growth, including tough policy reforms and things like regulatory reform, institution-strengthening, and road building.  These things are not easy to accomplish, but they will yield a much greater return on our investment. 
  • Third, there is broad consensus that we need more accountability.  Part of that is being more selective in how our foreign assistance is allocated.  In this time of economic hardship within the United States, we have a heightened obligation to direct our assistance to where it will be most useful.  I see broad consensus around focusing more of our resources toward countries that have shown that they are accountable for good governance; are addressing the needs of their people; and are committed to creating an environment that promotes self-sufficiency and fosters private sector-led growth.
  • Fourth, we all agree that countries are our partners, not our clients.  This means engaging them on equal footing in the planning and implementation of our assistance activities.  “Partnership” also implies mutual accountability.  This means working together to overcome challenges.  And, sometimes, it means ending a relationship—simply saying “no more”—when a partner fails to hold up their end of the bargain.
  • Fifth, and finally, I see broad consensus to focus more attention on what we actually achieve in development rather than on how much money we spend on development programs.  I am talking about real results.  Demanding results and learning from them are key to development success.

That makes for a healthy list of important areas where I see evolving agreement.  Not 100 percent agreement, of course.  I am sure that I have raised issues that do not resonate with all of you. 

However, building on lessons from decades of development efforts, these fundamental principles have emerged as critical to how the global community and the United States are approaching development.  Unfortunately, good ideas often languish, even when they enjoy broad support.  In this case, however, I am happy to report that these principles are already being put into action.  They are reflected in the President’s new Global Development Policy and, of course, have been in practice at MCC since we were founded.

Like so many of you, I have witnessed the changing face of American assistance.  President Obama’s new global development policy is building on the best ideas of the Bush Administration and calling on American development agencies to build the next set of emerging market economies to partner with us in building a better, more stable, more prosperous world. 

The President’s new policy calls on the United States to invest in sustainable economic growth in a select number of well-governed countries and to partner with these countries on tackling the tough policy reforms necessary to create an environment in which the private sector can thrive; citizens can hold their governments accountable; and U.S. taxpayers can see they are getting a good return on their investment.  As many of you know, the MCC model embodies many of these principles, and I am delighted to bring the lessons of our model to bear on our nation’s evolving global development policy. 

My own background is in banking.  I bring a banker’s perspective to my role as CEO of MCC.  I have a client — the U.S. taxpayer.  I have a partner — the countries receiving MCC assistance and the citizens they represent.  And, I have a goal — to get the best return on America’s investment. 

Let me offer my views on what I believe matters most in the MCC model in terms of accountable and effective aid:

First, we focus on selectivity.  The ability to say no is a critical component of effective aid.  MCC’s focused mandate and transparent selection process allow us to say no to those countries that are not accountable to their people and not pursuing policies that promote free markets and economic growth. 

MCC’s guidelines for economic returns on our investments allow us to say no to projects that might be popular with our partner governments, but are not sound investments and, therefore, will not give Americans a return on their investment.  MCC’s eligibility standards allow us to say no to countries that experience significant reversals in policy performance, something we have not shied away from. 

That leaves us saying yes to partnering with a smaller set of poor but well-governed countries and investing scarce U.S. development dollars in programs that show an economic return by raising beneficiary incomes — the only way to reduce poverty.

Second, we focus on accountability.  Being accountable means telling the whole results story.  Most people think of results as what comes at the end of the story—the happy ending.  In part, we think about it that way too.  But, the result we are most interested in seeing is increased incomes. 

Achieving these real results takes time and requires planning from the very beginning.  MCC’s rigorous approach requires that we only invest in those proposals with the strongest potential to reduce poverty and increase incomes.  This enables us to answer the fundamental question of aid effectiveness: Do the expected results from our investment justify the use of scarce aid dollars? 

Ultimately, accountability is built on transparency—transparency about how we select partners and how we assess results.  We look forward to sharing the results of our independent, third-party impact evaluations, which will objectively measure how our investments are improving the incomes of the poor. 

Third, we are embracing partnerships.  To further advance our partnerships with developing countries, we need to work more with our U.S. Government partners, other donors, and the private sector — both in the U.S. and in our partner countries.

Ultimately, however, it is the countries themselves and the private sector that will drive real economic growth.  Governments—and government-funded programs—are never the whole solution.  MCC investments look to remove constraints to growth so that the private sector will invest and flourish. 

We are doing more to engage the private sector.  We are funding more public-private approaches that can leverage our effort and bring in the private sector from the beginning.  We are focusing on policy reform conducive to greater private sector engagement.  We are providing direct support to small businesses in our partner countries. 

By laying the foundation for economic growth in countries worldwide through effective partnerships with the private sector and others outside of government, MCC generates sustainable impact in the fight against global poverty.  This creates viable economic partners for the United States and benefits our own prosperity here at home.

Fourth, we are investing in development that benefits both men and women.  Gender inequality can be a significant constraint to economic growth and poverty reduction.  Since 2006, MCC has had a widely-acclaimed Policy on Gender to ensure that gender is considered from the selection of eligible countries, through the development and implementation of MCC-funded projects, to the evaluation of program impacts. 

Because I believe strongly that it is the right way to do development, I have made gender integration an even higher priority for MCC. 

MCC, like other US government agencies, is operating in a budget-constrained environment.  We challenge ourselves to make tough choices as good stewards of American taxpayer dollars.  We employ a business-like approach to development investments, evaluating economic rates of return to decide which investments will deliver the greatest poverty reduction impact from every taxpayer dollar. 

We do this because investing in the fight against global poverty returns dividends for the world’s most disadvantaged and for America’s own economic recovery and national security. 

At my swearing-in, I spoke about the promise of opportunity and how global poverty robs that promise from millions worldwide.  I recognize MCC’s great potential to change that dynamic and broaden opportunities for the world’s poor. 

We have made noteworthy strides during my first year at MCC:

  • Nearly a billion dollars in new Compacts and Threshold Programs have been launched.  These programs will benefit the people of Moldova, the Philippines, Jordan, Liberia, and Timor-Leste.
  • We have successfully concluded two Compacts—in Honduras and Cape Verde—and are on track to see five more countries conclude their Compacts this year.
  • I have met with farmers and entrepreneurs in partners countries, who have personally shared with me how MCC’s investments are making a difference in their lives, increasing their incomes so they can invest in their businesses, improve their homes, and keep their children in school.

There is an emerging bipartisan consensus on aid effectiveness.  President Obama noted in New York this Fall that the Administration’s new development policy is based, in part, on the lessons learned from MCC over the last seven years.  We are building on the best ideas of Democratic and Republican administrations, and Democrats and Republicans in Congress.  We are looking for ways to break new ground, to innovate, and to continue to improve our results, particularly during these tough budgetary times, when we all must do more with less. 

Our goal is to create brighter futures for the world’s poor—one person, one family, one community, one country at a time.  And, this will serve U.S. interests too.  MCC’s commitment to global poverty reduction through economic growth is more than the right thing to do; it is how we expand opportunities and support security, stability, prosperity, and progress to benefit us all. 

Thank you very much.