Let me extend my warmest welcome to each of you this morning. I’d also like to express my thanks to Dr. Philip Rutledge and Melvin Foote who were instrumental in putting today’s forum together.
On August 1, the Millennium Challenge Corporation and the Government of Ghana formally signed a five-year $547 million Compact. Designed by Ghanaians for the benefit of Ghanaians, the agreement is the largest of the 9 MCC Compacts signed since the MCC’s inception more than 2 years ago. At that signing ceremony, held in the Benjamin Franklin Room at the Department of State, President Kufuor of Ghana and Secretary Rice spoke eloquently of Ghana’s commitment to reduce poverty through economic growth.
Let me share with you what Ghana’s leaders have said about their Compact with the MCC.
After calling the signing a “masterstroke” and a “truly great day for Ghana,” President Kufuor revealed the essence of why the MCC approach is working when he said, “The projects are Ghana’s. The money is not a loan, and the money has not been given as charity or just for friendship. It is given on carefully studied and prepared feasibility for investments that Ghana has decided to do in agriculture, where most of our people reside.”
Minister Ndoum, who is leading the MCA effort for Ghana, testified before his Parliament recently with these words: “Unlike other traditional development assistance programs, the MCA is designed to allow developing countries to take ownership and responsibility for funds provided by the Millennium Challenge Corporation. … Our professionals have designed a program that belongs to us and one that we Ghanaians can implement successfully.”
In the words of our Ghanaian partners, we hear clearly expressed about this new approach to foreign aid. Indeed, we are witnessing a significant departure from the way in which the U.S. has traditionally dispensed foreign assistance to help the poor escape grinding poverty.
We have learned that donor nations, including our own, cannot impose economic development and poverty reduction on other countries. Nor can donors want a development program to work more than the country they are trying to help. It must be championed from within, by the country itself.
Secretary Rice has said that, “transformational diplomacy is rooted in partnership, not paternalism. It is in doing things with other people, not for them. We don’t want our foreign assistance programs to be a kind of permanent dependency for countries. We want them to take on their own problems.”
While real growth, development, and poverty reduction must be “homegrown,” outside support can be most effective when it is targeted to those countries committed to improving themselves. And the U.S. has taken the lead in this regard.
Under President Bush, not only has American annual official development assistance nearly tripled from $10 billion in 2000 to nearly $30 billion in 2005, but – more significantly – the U.S. is trying to change the very way development is done.
Although we believe that increased funding is critical, success cannot be measured by inputs alone; it must also be measured by the outcomes achieved. What is the outcome that we seek to achieve? It is nothing short of helping poor countries successfully graduate themselves out of poverty.
Here’s where the Millennium Challenge Corporation plays a role.
It’s been two-and-a-half years since the MCC began operations.
- We now have over 250 top-flight professionals working with 22 MCA-eligible countries, 13 of which are in Africa.
- 9 countries have already signed large-scale development Compacts worth more $2.1 billion.
- 2 more countries will come on line before the end of this year, giving us a total of 11 Compacts, valued at nearly $3 billion.
The MCC’s innovative approach to foreign assistance is captured in our 3 core operating principles:
- The first MCC core principle is grounded in “performance.” We believe that policies matter. We annually assemble profiles of the world’s poorest countries based on 16 indicators from independent, non-U.S. Government organizations to measure how these countries perform in political, economic and social categories, which we call: ruling justly; investing in people; and economic freedom.
- The second core principle is “country ownership.” Taking an approach much like an investor – rather than a donor – MCC puts the onus on the country to come up with its own development strategy. It is the country, not the MCC, which must identify its barriers to poverty reduction and economic growth. The countries are the ones that must create, develop and implement their Compact proposal. And, they are the ones responsible for implementing their program throughout the Compact’s life.
- The third MCC core principle is our focus on “results.” From the outset, we insist that each country outline what they believe our joint efforts will achieve. We integrate monitoring and evaluation plans into our programs because we believe that it is not too much to ask that aid invested by the American taxpayer should yield results – and if it doesn’t yield results it should be stopped. I call this “aid with accountability.”
In this context, the MCC approach is not for everyone. Governments that are corrupt, that tolerate poor governance, and that stifle economic freedom won’t receive our assistance. Countries in our program that fail to maintain passing scores on the indicators – and that do not demonstrate the political will and commitment to take the necessary steps should their indicator performance show signs of slipping – risk being suspended.
Implementing this approach is challenging … and it will take time. Our partner countries have not been expected to take on this level of responsibility before … but it is absolutely essential for them to be the driver of their own success. What we have seen, even in the poorest countries and to our great satisfaction, is that their willingness to take on the job usually transforms into their capability to do the job and to pull their own people from the grips of poverty into the hope of economic independence.
Ghana understands this new reality and, as I have mentioned, signed the most recent and largest Compact to date with the MCC. The MCC has committed more than $1.1 billion in development Compacts in Africa, including sizable investments in Benin, Cape Verde and Madagascar as well.
In February, the MCC signed a $307 million Compact with Benin to address the poor investment climate and lack of dynamic private sector activity that the people of Benin identified as the main impediments to sustainable economic growth and poverty reduction. The MCC Compact with Benin addresses these constraints by: reducing the time and cost of securing land titles; improving access to financial services for small and medium-sized enterprises; improving the ability of the judicial system to resolve claims; and increasing access to markets by reducing delays at the Port of Cotonou and growing the volume of exports.
In Cape Verde, the $110 million MCC Compact supports reforms of the financial sector; improves infrastructure leading to increased economic activity and provides access to markets, employment, and social services; and increases agricultural productivity and raises the income of the rural population.
In Madagascar, the MCC Compact of $110 million supports a program to raise incomes by bringing rural communities from subsistence agriculture to a market economy and helps rural Malagasy secure formal land property rights; provides access to credit and protects savings; and supplies training in agricultural production, management and marketing techniques.
In addition to our work with our Compact countries, MCC has signed Threshold agreements with Burkina Faso ($12 m), Malawi ($20 m) and Tanzania ($11 m), and is actively negotiating additional Compacts with Senegal, Mali, Namibia, Lesotho and Morocco.
A s we become bolder and more innovative in our fight against global poverty, economic growth must be at the very heart of Africa’s development strategy. The MCC model of foreign assistance can help create the conditions for growth – whether for a farmer because he now has title to his land or for a local or international investor because conditions are increasingly profitable on the continent. The handoff at the end of our Compacts is a transition from aid to trade and investment led by the private sector.
The challenge from President Bush to adopt a fresh approach to development – to reduce poverty through economic growth – is a tall order and the road ahead is long and arduous. But, the MCC’s success in institution-building is already acknowledged, and we now look forward to the demands presented by the implementation of our programs. We face the future with confidence, optimism and enthusiasm, and I encourage and welcome your support and partnership in this important endeavor.