MCC CEO Paul Applegarth's Presentation To African Ambassadors

I’m very honored to be here, particularly to talk to this group, about the Millennium Challenge Account. It’s wonderful to see this much interest in MCC. I’m delighted to see you, some of you for the first time, and others—several of you have been working with us for the last several months. And thank you Ambassador Olhaye – and I understand they call you Mr. Dean, the leader of this group—for helping arrange this meeting today.

For those of you who are unfamiliar with the Millennium Challenge Account, I’d like to share some thoughts with you today about our mission and about the way we operate.

As many of you know, the idea for the Millennium Challenge Account was launched by President Bush at the Monterrey Summit in 2002 to provide greater assistance to countries that are themselves taking greater responsibility for their own development, by putting good policies in place that promote poverty reduction and promote growth–countries that rule justly, invest in their people, and encourage economic freedom.

Our mission- the mission of Millennium Challenge Corporation is the reduction of poverty in the poorest countries of the world. That’s our key mission. How we do it is through growth, through sustainable economic growth. Now, poverty reduction is a major undertaking— to help the over one billion people living in extreme poverty- people who live without access to clean water, without access to basic health care, who suffer through the tragic consequences of disease and drought—people with no way to sustain themselves day after day. For the poorest countries many of the Millennium Development Goals may seem far out of reach – but through good governance and sustainable economic growth, dramatic progress can and will be made in reducing—and eventually eliminating—extreme poverty. Our focus, which is poverty reduction through growth, is of course the first Millennium Development Goal, and it is essential to achieve this first goal if you want to achieve the other goals.

We opened our doors a little over a year ago—we are a year and two weeks old now— and began to implement President Bush’s vision to provide those developing countries that are going to take responsibility for their own development with the medium and long-term development assistance they need to break out of the cycle of poverty and dependency. As of now, over the last two years Congress has appropriated a total of $2.5 billion for the MCA. And I’m happy to note that the President will continue to ramp up his requests for funding for the coming years- He has asked Congress to appropriate $3 billion for the next fiscal year, and his budget request projects achieving his $5 billion per year goal by 2007.

The Millennium Challenge Account was built on the lessons of development, and it has been consciously designed to be more flexible than traditional government assistance—decisions are based on the criteria that we use to evaluate countries—without any requirements that you use the services and equipment of US-based companies, and there are virtually no limitations on the type of sector or type of program with which we can work.

Our success, and your success, will be gauged by how closely our partner countries have met the objectives that they themselves have set- objectives that will contribute to poverty reduction through economic growth, such as increasing the number of students that complete vocational training, or improving small farmers’ access to local and regional markets, or the providing more would-be entrepreneurs small business loans to get started.

We have learned over the past few decades of foreign assistance that economic growth can only take root in countries that adopt, and maintain, good policies. We’ve learned, the hard way, simply throwing cash at a problem doesn’t solve it, and that you can’t just transfer good governance, a free and open exchange of ideas, and a just legal system from one country to another. Poverty reduction and growth has to be built from within, all we can do is help to encourage that building. MCC rewards those countries that have taken the difficult steps to cultivate these policies on their own.

I should explain how MCC chooses its partner countries—they compete for assistance. We run a competition every year. We compare countries’ policies, and we select countries that are actively fighting corruption, investing in health and education, and promoting economic freedom—countries that are putting themselves on the fast track to poverty reduction and growth. The rankings we use are objective; they come from respected international institutions, such as Freedom House, Transparency International, the Heritage Foundation, and the World Bank.

For those of you who haven’t seen our website, which is, I encourage you to look at it, and you will see rankings of every country that is a part of our competition.

Countries that win this competition are those that have shown, according to these rankings, that they have policies in place that have a proven link to reducing poverty and encouraging growth. We have held that competition twice – In May and again in November of last year, and a total of 17 have been chosen to submit a proposal for MCA assistance

More than half of these countries—nine—are in Africa: Benin, Cape Verde, Ghana, Lesotho, Madagascar, Mali, Morocco, Mozambique, and Senegal. I want to point out that these countries were selected out of a pool of at least 75 candidate countries for both competitions, and to the ambassadors of those countries that are here, congratulations really are due. This group of countries is certainly in the top quartile of all emerging countries around the world in terms of their performance against the criteria we use for promoting poverty reduction and growth.

I think the fact that 9 out of 17 are from Africa is also important. There is a lot of good news coming out of Africa today, although it doesn’t necessarily get the publicity it deserves, and I believe that the people and the governments of these 9 eligible countries should be recognized for taking the sometimes difficult, but essential steps, toward building a policy environment that provides the most benefits to all citizens. Countries like Ghana and Senegal, where Presidents Kufour and Wade are taking active steps to combat corruption, and are encouraging others in NEPAD to do the same through the peer review process, are examples. I encourage you to take a look at our website, and see how these countries are performing compared with countries with similar resources all over the world. It is impressive when you look at the steps they are taking.

There are also countries that currently fall short, but are very close to qualifying, and have demonstrated a commitment to reforms. We have a pool of funds that will go to these countries as well, they are called “threshold countries.” We are working closely with US AID to assist them with their programs to improve their prospects for qualifying for the MCA. Like the primary programs, if these countries want to undertake the challenge, we will support their efforts. There are currently 13 threshold countries; 7 of which are in Africa: Burkina Faso, Kenya, Malawi, Sao Tome and Principe, Tanzania, Uganda, and Zambia.

Again, congratulations are in order, but in this case the congratulations are somewhat more qualified- there are some significant policy changes that need to take place. Nonetheless, the fact that over half of these countries are African I think says something.

And we continue to hear good news from these Threshold countries as well – we have been watching closely what has been happing in Malawi now, with President Mutharika’s efforts to deal with corruption and to take some fairly significant steps.

We would appreciate some feedback from all of you as to how you see the MCA process is going in your countries, and to hear your perspective on it, because we do think of you Ambassadors as our partners. Many of you know that we view this as a true partnership and that we rely on all of you to give us your honest opinions- and we do welcome your advice and feedback, and appreciate your role in communicating our message to your home governments.

Of course, for all countries striving to improve on the indicators and become eligible, we realize it isn’t just a matter of turning on a light switch and things change. It takes time; it takes patience; and it takes a steady, consistent effort. We don’t expect that most Threshold countries will immediately become eligible for MCA assistance, many of these issues are hard- but over time, we think many of them will.

Countries eligible for MCA or threshold assistance submit to us their own programs in the form of a proposal- basically an implementation plan for development. The plans must be the result of an extensive consultative process—priorities must be set after Non Governmental Organizations, academia, the private sector, parliamentarians, and even political parties not in power—are consulted. We expect these programs to list expected results, desired outcomes, and measures of success- not just inputs— and to include a detailed implementation plan, and plans to ensure financial accountability.

MCC evaluates each proposal and conducts due diligence on each proposal it receives to determine if it will reduce poverty and promote growth. We ask some tough questions, like, “Once the Compacts are signed, what are you going to do the day after the signing? Who is going to show up for work, and what are they going to do, and how are they going to achieve your objectives?” We want this well understood by you and by us before the Compact is signed.

If a country’s proposal is approved for funding—approval is NOT automatic—a Compact is signed, and MCA money comes as a grant, not a loan. We’re not looking for a financial return, but we are looking for a poverty reduction and growth return.

We received our first proposals about 6 months ago- in mid August, and now 15 of 16 of our first eligible countries have submitted proposals. One of the countries has yet to submit its proposal, and I think that’s indicative of how country responsibility drives our process. The timing of our commitments and disbursements ultimately resides with out partner country. We will help, but our business is not to do the job of building capacity and country ownership, that is up to our eligible countries.

We are hoping to sign our fist Compact sometime in the next few weeks. We have an investment committee that is meeting in the next couple of weeks to review the Compact internally, then it will go to our Board, and we will notify Congress, and if all goes well, we will be able to sign a Compact before the end of March.

To summarize- I would like to reiterate that being selected to be eligible for MCA assistance is itself an honor—it is a recognition that your leadership and your people have taken the sometimes difficult steps that will bring great benefits to all people.

It is also an opportunity. Unlike other funding, MCC funding is unprecedented in its size, its flexibility, and freedom of procurement. Remember it is you who will determine the priorities.

And it is a responsibility: A call to use these substantial resources wisely- to reach out to the broadest spectrum of society to make sure all citizens take ownership of their country’s plan for development, and are committed to meeting the objectives that you collectively have set.

The most important thing for you to know is that we want all countries, over time, to succeed. We want all countries to look at our indicators, and to continue to strive to be eligible. We want eligible countries to submit good, well-thought-out proposals that will be a good investment of US taxpayer dollars. For those countries with which we’ve signed a Compact, we don’t want the money back, but we do want you to succeed in reducing poverty and in moving closer to economic independence. We’re depending on that. And we are here to help you help yourselves succeed.

There are currently 16 African countries, 9 eligible for MCA and 7 Threshold, and all have been recognized by MCC and have been working with us to improve the lives of their people.

I encourage the rest of you to join us, and to urge your governments to take the steps necessary to qualify for MCC. By taking those steps, even without MCC funding, you will be reducing poverty and promoting growth. In many ways, encouraging good policy can be far more helpful than the money itself. The money is the carrot, but the reality is that what will really drive poverty reduction and growth is adopting and adhering to the kinds of policies that have a proven link to poverty reduction and growth.

I think I’ve probably talked enough. I’m sure you have lots of questions, so I’m going to turn the program over to you.