Speech by MCC CEO Daniel W. Yohannes at Mississippi State University

Millennium Challenge Corporation: Innovating the Delivery of U.S. Development Assistance

Thank you very much, Dr. Keenum, for your kind introduction and for inviting me to the beautiful campus of Mississippi State University! Let me also thank Senator Cochran for his support of the Millennium Challenge Corporation’s work around the world. His advice and counsel have been tremendously helpful to us. It is also a pleasure to see my close friend—Dr. Raj Shah. He is doing a great job of running USAID.

The late Steve Jobs of Apple once said that “innovation distinguishes between a leader and a follower.” Well, I agree with Steve 100 percent. As a businessman from the private sector who accepted the call to public service, I am proud to serve as the CEO of a U.S. Government development agency that is innovating how we deliver U.S. assistance to reduce global poverty and promote economic growth. Since our creation in 2004 by President George Bush with strong support from both Republicans and Democrats in Congress, MCC has been a clear leader—a game-changer—in setting a new standard for development effectiveness.

Today, I want to take this opportunity to talk about how we do that. But, before I explain our innovative model, let me make one point very clear: Development is in our national interest.

Why Development Assistance Matters
I recognize that investing abroad can seem like a misplaced priority while our economy here at home is working to recover. Yet, making strategic investments in the world’s poorest countries is tied to our own security and prosperity.We invest less than one percent of the federal budget in development assistance. But, think about what we get in return.

First of all, development dollars strengthen U.S. economic prosperity. Building stronger economies in the developing world opens new markets for American products and investments and creates more American jobs for American hometowns. Nearly half of U.S. exports already go to developing countries, and U.S. exports to the developing world are growing three times faster than exports to other economies. With 95 percent of the world’s consumers living outside the United States, exporting to them supports more than 10 million American jobs. Studies suggest that for every 10 percent increase in exports, U.S. jobs grow by 7 percent. Mississippians appreciate the globalized nature of today’s American economy. Less than a decade ago, Nissan chose nearby Canton as the site to build their cars. Since 2003, the hard work of Mississippi workers prompted Nissan to expand this production plant twice to meet growing demand. Now, Nissan is one of the state’s top employers, creating thousands of jobs and contributing to a stronger local economy.

Equally important, investing in development assistance is an investment in U.S. national security. Transforming poverty into opportunity supports U.S. security and values. I was at a conference with former Defense Secretary Bob Gates who said it best, “Development is a lot cheaper than sending the Marines.”

In addition, helping the world’s poor is, morally, the right thing to do. Some 1.4 billion people still live in extreme poverty—on less than $1.25 per day—trying to exist without adequate food, shelter, clean water, health care, and education. Poverty robs people of their dignity, and we have the compassion to help them make their lives better.  Mississippi is a state that embodies American values, like being a good neighbor to someone in need. What we do at MCC demonstrates American values to the world.

How MCC is Innovating the Delivery of U.S. Development Assistance
The correlation is real: Helping the world’s poor helps us too. It furthers our national security and economic interests.

The challenge, therefore, is not to stop investing in development. Rather, it is to make sure that we are investing smartly. We want to make sure that we are getting the best return for every dollar invested. This is not easy. In fact, it is very difficult. But we owe it to you—the taxpayer—to make sure you see a return on your investment.

Innovators are constantly learning—and applying what they learn—to improve their business to deliver those returns. MCC lives by this definition of innovation. As we mature from our start-up days, we are more and more focused now on embracing a culture of change, adopting processes for continuous improvement, learning lessons, and innovating how we do business. So, let me tell you how MCC pushes the frontier of development to make the business of aid more business-like. With our specific focus on poverty reduction through economic growth, MCC is designed to set a new standard for development effectiveness by testing innovative practices through our model.We demand good governance.We insist that our partners work hard to design and implement their own programs. This is how they can become more self-reliant. And, we expect accountability and transparency. We do all this by practicing three main principles that we continue to refine and improve in order to prove what is possible in development. Let me talk about each one very briefly.

First, we are extremely selective. This means we work hard to choose the right investment partners.In other words, MCC is not for every country.In fact, it is not for most countries. It is only for those poor countries committed to ruling justly, fighting corruption, investing in the health and education of their citizens, managing their financial resources effectively, and creating business-friendly environments that allow the private sector to prosper.We use 20 indicators, taken from independent, third party sources, like the World Bank and Heritage Foundation, to assess how countries perform in these areas. In the spirit of continuous learning, we have updated our indicators since MCC’s creation to assess additional areas of growing importance to sound governance,including freedom of information as it relates to the Internet, the role of gender in the economy and a country’s commitment to democratic rights.We do all this because, at MCC, policy performance matters.

To drive home this point, we have done something unheard of. We have literally stopped the flow of development dollars to those countries that really failed our principles.After all, these are tax dollars workers in America provide, and we believe that we should only invest in countries committed to good governance.

Second, we practice country ownership. This means that after we choose the right partners, we listen to them.We believe that our partners are in the best position to come up with their own homegrown solutions.  One size cannot fit all if we are serious about country-determined and country-led solutions. We welcome the diversity of views and the differences of opinions. In May, I joined President Kikwete of Tanzania, our partner country, for a discussion in Washington where he made this point very clear. He said that the beauty of MCC is that countries have the freedom to describe what they need, and the United States has the freedom to decide what we can do to help.

Investing in local priorities for economic growth means that MCC is investing in infrastructure as well as energy and water projects. It also means we are investing in agricultural productivity and greater food security. In fact, MCC’s investments have long addressed food security priorities. Our food security investments strengthen agricultural and rural economies in poor countries and promote reliable access to sufficient, safe and affordable food. The facts speak for themselves:

  • 21 of MCC’s 25 signed compacts include food security-related investments.
  • $4.4 billion—more than half of MCC’s investments—are related to improving food security.
  • 20 percent of MCC’s food security investments fund irrigation projects.
  • 60 percent support rural infrastructure like roads, ports and storage facilities to help farmers get their produce from farms to markets. We expect to complete 3,500 kilometers of rural roads, which is more than the distance from Jackson, Mississippi to Sacramento, California.

All these investments share the same goal: to lift people out of poverty through economic growth.

And third, to make sure we are achieving this goal, we embrace an evidence-based continuum of results. This means that we hold ourselves and our partners accountable for results and impact.

Perhaps to a greater extent than others in development, MCC is committed to rigorous and transparent methods of measuring how our investments perform throughout the entire continuum of results. We track policy reforms associated with our investments, like reforms to ensure that the roads we finance are sustained and that conditions are improved for a new business to register. We assess inputs and outputs that indicate whether projects are on track, like how much money we have invested in a given quarter and the number of farmers trained or the miles of new roads built. We measure interim outcomes as programs reach completion, like increased traffic on improved roads or if farmers are growing more high value crops to sell. And, because the ultimate result MCC wants to see is additional income for the poor, we use independent impact evaluations to determine if the income gains we seek are a direct result of our investments. We hire outside firms for those evaluations that apply scientific methods to determine if our investments actually did increase household incomes.

By using this whole continuum of results from the start to the finish of our projects, we are able to determine what is working and what is not working. And we do this with one purpose in mind: To do more of what works and to stop what’s not working.

But this requires that we must always be honest with our partners and with ourselves. That is why we operate with complete transparency. That is why we will share the results of all evaluations, even when we miss planned targets. This is essential for accountability, and it is key to learning.

The Way Forward
Through this approach, we are taking on the hard work of pushing ourselves to set a new standard for development effectiveness. Our experiences are not only helping us learn; they are also motivating how others think about development. We actually put into practice the principles many say are key for how development will work best.  And now, others are changing their programs to embrace those principles.

For example, President Obama turned mainly to MCC’s principles to develop a U.S. Government-wide global development policy—our principles of economic growth, selectivity, country‐led planning, transparency, and accountability for results.

Our model, evidence-based decision-making, country selection process, and technical expertise served as a foundation for the Partnership for Growth, or what is known as PFG. This partnership between the United States and a select group of high-performing developing countries works to accelerate and sustain broad-based economic growth.

And the World Bank specifically mentions MCC as a defining influence for its new Program-for-Results. This program draws on such MCC lessons as the link between transparency, accountability and results and the various definitions of results during different times in a project lifecycle.

By pushing our own practices and those of others, MCC is innovating the delivery of development assistance. I am extremely proud of this.Our commitment to cost-effective and efficient development continues to be the model. MCC has been breaking—and will continue to break—new ground on the cutting edge of development innovation.We will continue to challenge ourselves to learn and evolve and make the business of development more business-like with a disciplined commitment to impact, accountability and transparency.

This is good news for the world’s poor.This is good news for the people of Mississippi and for all Americans who rightfully demand more from their government as we spend their tax dollars to fight global poverty and promote economic growth that, ultimately, will benefit all of us.

Make no mistake about this: MCC is setting a new standard for development effectiveness that will continue to innovate and inspire the way forward.  Thank you very much.