|FY 2021 Enacted||FY 2022 Annualized Continuing Resolution||FY 2023 President’s Budget|
MCC’s request for new compact assistance funding focuses on two programs: compacts in Indonesia and Mozambique. Both of these programs include impactful climate-related and sustainable infrastructure opportunities that are aligned with the U.S. Government’s climate commitments, the B3W initiative, and MCC’s partners’ objectives. Critically, both of these programs are anticipated to be approved by the MCC Board of Directors and signed in FY 2023. In short, this request represents the essential funding MCC requires to move forward with these compacts and deliver significant impact in line with the agency’s mission and strengths as well as the administration’s priorities.
In addition, MCC expects to complete and sign an ambitious number of compacts in FY 2022, which will require intense support and oversight from the agency in FY 2023, although no additional compact assistance funds will be needed. Support for this work is outlined in the Compact Development and Oversight section.
These compacts to be signed in FY 2022 and FY 2023 will be funded by a combination of prior-year funds and MCC’s FY 2023 request, as noted below:
|Country||Prior Years||FY 2022||FY 2023||Total|
In December 2018, MCC’s Board of Directors selected Indonesia to develop a subsequent compact, following the initial compact that closed in April 2018. During the initial compact period, $474 million was disbursed to support the modernization of public procurement functions, improvements in health and nutrition, and sustainable energy and natural resource management. For additional information, the Indonesia Compact Star Report is linked here.
For the subsequent compact, the Government of Indonesia convened a panel of experts to work closely with MCC on a constraints analysis, which revealed three primary constraints to Indonesia’s economic growth: (1) barriers to export-oriented competitiveness, (2) barriers to the productivity and innovation of non-tradable-sector firms, and (3) costly and underdeveloped financial intermediation.
Following an examination of the root causes of these constraints, the Government of Indonesia and MCC are considering opportunities to improve financial intermediation for sustainable infrastructure and for micro, small and medium-sized enterprises (MSMEs). Projects would particularly target problems related to the limited supply of finance for transport and logistics infrastructure investments, as well as the inability of the infrastructure sector to absorb what finance is available; the limited supply of finance available to MSMEs; and the inability of MSME borrowers to access financial products.
In early July 2021, the Government of Indonesia submitted two project proposals for MCC’s assessment to improve access to finance for infrastructure and MSMEs, particularly women-owned MSMEs. Both proposals have a geographical focus in five priority provinces: South Sumatra, Riau, North Sulawesi, Riau Islands and Bali. MCC will review the proposals to determine which components and provinces have synergies with project planning, meet MCC’s rigorous investment criteria and are consistent with the government’s priorities.
In parallel, MCC has identified opportunities to maximize the impact of the proposed projects’ climate-related components, consistent with Indonesia’s climate goals and MCC’s Climate Strategy. For example, MCC is engaging with the Government of Indonesia on the potential development of a stand-alone project preparation facility that would focus solely on “green infrastructure” in Indonesia to de-risk and increase the bankability of such projects. MCC is also preparing to conduct due diligence on specific demonstration projects that underpin Indonesia’s climate ambitions in priority provinces.
MCC expects to conclude compact development and submit a compact to MCC’s Board of Directors in FY 2023.
In December 2019, MCC’s Board of Directors selected Mozambique to develop a subsequent compact. The country’s $506.9 million initial compact, which closed in September 2013, invested in four project areas: water and sanitation, roads, land tenure, and agriculture. For additional information, the Mozambique Compact Closed Compact Report is linked here.
For the subsequent compact, MCC completed a diagnosis of the root causes of the binding constraints to growth in the agriculture and transport sectors and is developing projects focused on three strategic areas: connectivity and rural transport, investment promotion in commercial agriculture, and integrated climate management and coastal development. Mozambique—a country the size of Texas and California combined—depends heavily on agriculture, which is the main source of income for more than 70 percent of the population and provides employment for more than 80 percent of the workforce, including 90 percent of women. These sectors offer significant opportunities to invest in Mozambique, including developing industrial, climate-smart agriculture; addressing infrastructure gaps connecting farmers to markets; and implementing policy and institutional reforms to improve the business-enabling environment and ensure sustainability of investments. With more than 70 percent of Mozambique’s poor people living in rural areas and surviving on subsistence agriculture, a compact with Mozambique—a country severely affected by climate change—will be uniquely positioned to unlock constraints to economic growth and spur private sector investment.
There is abundant opportunity in Mozambique to invest in climate resilience activities consistent with the objectives of the proposed program and the identified binding constraints to growth. For example, the potential program is currently focused on integrated land use management and coastal ecosystem restoration, which involves spatial planning, restoration of mangroves and seagrass areas, and development of scalable partnerships to lay the groundwork for a carbon credit system. Collectively, this work can benefit communities and support ecosystem restoration in areas vulnerable to natural disasters, while also helping the government to incorporate expansion of nature-based solutions, ecosystem restoration and landscape management into its planning.
MCC expects to conclude compact development and submit a compact to MCC’s Board of Directors for approval in FY 2023.
West Africa Regional Energy Interconnection Program
MCC is assessing a regional energy integration program with enhanced ties to Côte d’Ivoire and the greater West African region. MCC has been working with the West African Power Pool (WAPP) since MCC and WAPP signed a cooperative agreement in May 2021, and work has commenced on a feasibility study for a transmission line that would connect vital portions of WAPP’s master plan for the regional power pool. This study will also help MCC and WAPP determine the extent to which there could be broader benefits to the region and the potential for greater support for policy and institutional reforms and strengthened regulatory efforts. As a part of this process, MCC continues to explore alignment with the Government of Côte d’Ivoire’s goal to become a net exporter of power in West Africa.
MCC expects to conclude program development and submit the concurrent compact to MCC’s Board of Directors in FY 2023.
The proposed Tunisia Compact features two projects focused on addressing Tunisia’s constraints to growth. The Transport and Trade Project, which will make it easier and less expensive for businesses to engage in trade in Tunisia, includes investments to improve management and expand infrastructure at the Port of Rades, Tunisia’s principal port. It will also simplify and digitalize procedures and regulations in the transport and trade sectors. The Water Project aims to improve the sustainable use of scarce groundwater resources while moving the country toward increased water sustainability. The compact features new partnerships using the new American Catalyst Facility for Development mechanism, an MCC–DFC collaboration to catalyze greater private sector investment, as well as collaboration with the SBA to introduce new water-efficient technologies to farmers in Tunisia. The compact program also integrates gender and social inclusion by improving market access for women-owned enterprises.
MCC’s board unanimously approved the Tunisia Compact in June 2021, but MCC put signature of the compact on hold following the president of Tunisia’s dismissal of the prime minister and freezing of parliamentary activities on July 25, 2021. MCC continues to consult with its board and stakeholders on the political situation in the country.
MCC’s Board of Directors selected Timor-Leste for a compact in December 2017. Based on subsequent analysis, the Government of Timor-Leste and MCC have decided to pursue investments addressing Timor-Leste’s human-capital binding constraint to economic growth through two projects focused on improving the health and skills of the Timorese population.
The Water, Sanitation and Drainage Project aims to improve the health of people in Timor-Leste by reducing the presence of disease-causing pathogens in piped and stored drinking water and groundwater sources. The project seeks to reduce the disease burden through the construction of the country’s first central wastewater system, related drainage network improvements, and a plant to produce the disinfectant needed to treat the water supply across the capital city of Dili and four municipalities. In parallel with compact development, and in response to MCC’s recommendations, the government has already taken significant steps to reform the sector, including through the establishment of the country’s first water utility and regulator, which began operations in 2021.
The Teaching and Leading the Next Generation of Timorese (TALENT) Project seeks to advance student learning outcomes in numeracy, literacy and soft skills by improving the training of secondary school teachers and school leadership, thereby increasing opportunities for students to succeed in the workforce and tertiary education. The TALENT Project will establish a Center of Excellence as the first formal pre-service teacher training and certification institution in Timor-Leste, provide upskilling for all existing teachers, and seek to increase the number of women in secondary school teaching and leadership positions through a specific Women’s Economic Empowerment component.
MCC expects to conclude compact development and submit a compact for MCC Board of Directors approval in FY 2022.
In December 2017, MCC’s Board of Directors selected Lesotho to continue the development of a compact following a two-year hiatus in which the Board of Directors monitored the country’s response to a series of governance and political stability concerns. MCC’s $362.5 million initial compact in Lesotho, which closed in September 2013, improved the country’s water supply, increased access to essential health services and removed barriers to private sector investment. For additional information, the Lesotho Compact Closed Compact Report is linked here.
For the subsequent compact, the MCC team and its local counterparts identified that ineffective policy planning, coordination, and execution is preventing the Government of Lesotho from delivering public goods and services that are essential for private sector growth. MCC is developing a compact that will address this binding constraint to growth through three projects: in health, irrigated horticulture and business environment strengthening. The compact also includes an investment through the new American Catalyst Facility for Development mechanism, an MCC–DFC collaboration.
The Health Project aims to strengthen the delivery of primary health care services, improve the efficiency of government expenditures, and address the unique needs of gender-based violence treatment and referral services. The Irrigated Horticulture Project aims to catalyze private sector investment in horticulture through investments in irrigation infrastructure and regulatory reform while creating transparent and sustainable access to land and water. The Business Environment Project aims to develop a sustainable and inclusive business ecosystem and pipeline that includes creating a participatory decision-making process for the provision of critical services by the government to the private sector. To ensure inclusive growth, the projects include targeted strategies to empower women and youth.
MCC plans to submit the compact to MCC’s Board of Directors for approval in FY 2022.
In December 2018, MCC’s Board of Directors selected Kosovo to develop a compact while the country continued to implement an ongoing threshold program. MCC and the Government of Kosovo updated the constraints analysis initially conducted during the development of the country’s threshold program and identified two additional binding constraints to Kosovo’s economic growth: unpredictable energy supply due to the country’s old and unreliable generation infrastructure, and excess demand for electricity due to inefficient building stock and a lack of alternatives to grid electricity.
Following high-level engagements between MCC and the new Government of Kosovo in 2021, and in consultation with other donors and stakeholders, MCC and the government agreed to develop a program focused on electricity network stability, energy storage and gender-sensitive workforce development to accelerate Kosovo’s transition toward a more sustainable, reliable and affordable energy future.
MCC expects to complete compact development and achieve compact signature by the end of FY 2022.
In December 2018, the MCC Board of Directors selected Malawi for a subsequent compact, following the closure of the initial compact in September 2018. The $350.7 million initial compact laid the foundation for major improvements in the performance of the country’s power sector and raised the potential for private sector participation. For additional information, the Malawi Compact Star Report is linked here.
For the subsequent compact, MCC and its Malawian counterparts are developing a program aimed at increasing land efficiency as a critical production input for economic growth and increasing competitiveness in the agriculture and transport sectors. The Land Project activities under consideration include strengthening estate sector management by renewing estate leaseholds or reallocating them for higher-value use and achieving more productive use of land through better-funded land administration in rural and urban environments. The Inclusive Agriculture and Transport Projects aim to increase the profits of smallholder farmers, women, MSMEs and larger agribusinesses through a more diverse and inclusive commercial agriculture sector and a more competitive transport sector.
The compact will integrate climate resiliency in its investments by supporting sustainability in the agriculture and transport sectors and considering climate in geographic selection. MCC is also exploring the use of blended finance tools to catalyze private investment and de-risk inclusive agribusinesses. Compact investments will be designed to foster inclusivity by incorporating input from women and smallholders into reforms and potential financing.
MCC plans to submit the compact to MCC’s Board of Directors for approval in FY 2022.
Benin-Niger Regional Transport Program
MCC is developing a potential program that would rehabilitate road segments along the existing transport corridor between Cotonou in Benin and Niamey in Niger, one of the most heavily traveled corridors in West Africa, while addressing institutional and market constraints that raise transportation costs. This potential investment would have a clear link to the MCC investment at the Port of Cotonou through Benin’s initial compact, as well as the current MCC compact in Niger, which is focused on agriculture and roads. The governments of Benin and Niger have pledged to commit staffing resources to work with MCC in further developing this potential investment.
MCC is focused on two potential road segments—Bohicon-Dassa in Benin, and Dosso-Niamey in Niger. In addition, MCC is assessing critical institutional reforms. Key design elements under consideration include the expansion of road segments within Benin, improvements to traffic junctions, truck parking/rest areas, toll stations and improvements to protect pedestrians. In both Benin and Niger, proposed work includes improvements to existing lanes to meet minimum technical requirements. MCC is also exploring the possibility of improving coordination along the corridor through the institution of a governing highway authority between the two countries. MCC is analyzing the gender and social inclusion opportunities along the road segments, including expanding economic opportunities for women and youth.
MCC is targeting completing development in FY 2022.
MCC’s Board of Directors selected Sierra Leone as eligible for compact development in December 2020. The Government of Sierra Leone has been an engaged partner in the development of a compact, working closely with MCC to develop projects in the power sector, including prioritizing opportunities for power investments that will improve food security. MCC and its counterparts in Sierra Leone are now developing projects in four strategic areas: infrastructure investments to improve equitable power access and reliability; strengthening institutional governance and capacity in the power sector; supporting increased supply of lower-cost and lower-carbon electricity; and promoting the productive use of electricity, including in the agricultural economy. Ongoing analysis indicates significant potential opportunities to address the power constraint with climate-sensitive and gender-inclusive investments, as well as to partner directly with other U.S. Government agencies (DFC, U.S. Trade and Development Agency) and donors (World Bank; U.K. Foreign, Commonwealth & Development Office; European Union; Japan International Cooperation Agency) active in Sierra Leone to catalyze private sector investment.
MCC aims to submit a compact to MCC’s Board of Directors for approval at the end of FY 2023.
In December 2021, the MCC Board of Directors selected Zambia as eligible to develop a subsequent compact, following the closure of the initial $354.8 million compact in November 2018. The initial compact invested in major urban water infrastructure improvements in the capitol city of Lusaka, as well as in the institutional strengthening of the Lusaka City Council and the Lusaka Water and Sewage Company. For additional information, the Zambia Compact Star Report is linked here. MCC is investigating the binding constraints to Zambia’s inclusive economic growth and their root causes in FY 2022 as a basis for a compact program.
In December 2021, MCC’s Board of Directors selected Belize as newly eligible to develop a compact. The board’s decision reflects MCC’s recognition of the Government of Belize’s clear commitment to good governance, investing in its people and economic freedom, as evidenced by Belize’s FY 2022 MCC scorecard. In partnership with the Government of Belize, MCC has begun the process of assessing the constraints to Belize’s economic growth; this assessment will be followed by an analysis of the root causes of the identified constraints.