Millennium Challenge Account

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The Millennium Challenge Account (MCA), run by the Millennium Challenge Corporation, is a bilateral development fund announced by the Bush administration in 2002 and created in January, 2004.

Participants in the Program; United States as donor is in green, red countries have active compacts, blue countries have active threshold compacts, purple countries are in negotations for either, and pink countries have negotiated threshold agreements and are negotiating for full compacts
Participants in the Program; United States as donor is in green, red countries have active compacts, blue countries have active threshold compacts, purple countries are in negotations for either, and pink countries have negotiated threshold agreements and are negotiating for full compacts

Contents

[edit] Criteria for eligibility

All indicators used and the whole process of qualifying are publicly available at the homepage of the MCA. Other development programs like USAID (United States Agency for International Development) have been thought to have suffered from many different and sometimes conflicting goals, which often are a result of political pressures. On September 11, 2006, two new criteria were adopted for the Fiscal Year 2008 selection process, both of which relate to the environment. They will measure candidate countries ability to provide "clean drinking water, expand sanitation services, streamline the property registration process, and make land rights accessible and secure for poor and vulnerable populations."[1] The Corporation announced in December 2006 the creation of a gender policy to promote the role of women in the process of forming the compacts and in their impact.[2]

[edit] Criteria

  • Civil Liberties Ruling Justly Freedom House
  • Political Rights Ruling Justly Freedom House
  • Voice and Accountability Ruling Justly World Bank Institute
  • Government Effectiveness Ruling Justly World Bank Institute
  • Rule of Law Ruling Justly World Bank Institute
  • Control of Corruption Ruling Justly World Bank Institute
  • Immunization Rate Investing in People World Health Organization
  • Public Expenditure on Health Investing in People World Health Organization
  • Girls' Primary Education Completion Rate Investing in People UNESCO
  • Public Expenditure on Primary Education Investing in People UNESCO and national sources
  • Cost of Starting a Business Economic Freedom International Finance Corporation
  • Inflation Rate Economic Freedom IMF WEO
  • Days to Start a Business Economic Freedom International Finance Corporation
  • Trade Policy Economic Freedom Heritage Foundation
  • Regulatory Quality Economic Freedom World Bank Institute
  • Fiscal Policy Economic Freedom national sources, cross-checked with IMF WEO
  • Natural Resource Management index Supplemental Information CIESIN/Yale
  • Land Rights and Access index Supplemental Information IFAD / IFC

[edit] Eligible countries

In the first year (2004), 17 countries were made eligible for a MCA loan: Armenia, Benin, Bolivia, Cape Verde, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka, and Vanuatu. Madagascar and Honduras were the first countries to receive actual funding from the MCA. As of May 2005, Nicaragua, Cape Verde and Georgia are next in line to receive money. On June 16, 2006, The Gambia was suspended from eligibility, citing the deterioration of in 8 of the 16 criteria categories.[3] Mali was approved in October 2006 for a 461 million dollar program to develop modern irrigation systems and an industrial park.[4] Jordan was granted full compact eligibility, despite objections from Freedom House for its lack of full political and civil rights.[5] The country of Fiji is no longer eligible due to its military coup, which under US law precludes the country from receiving financial aid of this type.[6]

Several countries were chosen in 2004 for a new part of the program called Threshold Program Assistance, which are smaller compacts used to assist a country close to meeting account eligibility to become eligible for a full program.[7] Jordan received a Threshold program aimed at democracy and trade totaling 25 million US dollars.[8] Yemen was previously eligible for a threshold agreement, but was suspended after their indicators fell too low to qualify. But having successfully competed a democratic election and various economic reforms, the Millennium Challenge Corporation has once again made Yemen eligible for a threshold agreement.[9]

[edit] Proposals under consideration

Namibia submitted their proposal to the MCC in October, 2006 which involved improvements in education, livestock production and marketing, tourism, "Green Scheme" and indigenous natural products.[10]

[edit] Implementation and funding

Through this program, the United States federal government proposed to permanently increase United States foreign aid funding by $5 billion by 2005. Countries are selected on a competitive basis through a set of 16 indicators designed to measure a country’s effectiveness at ruling justly, investing in people, and fostering enterprise and entrepreneurship. The focus of the MCA is to promote economic growth in the recipient countries. The program emphasizes good economic policies in recipient countries. The Bush administration has stated their belief that development aid works better in countries with good economic policies, such as free markets and low corruption.

At the Inter-American Development Bank on March 14, 2002, American President George W. Bush calling for a new compact for development with accountability for both rich and poor countries. he also pledged to increase development assistance by 50% by Fiscal Year 2006.[11]

Early evaluations noted that environmental safeguards would be needed to prevent widespread environmental damage that comes with economic growth.[12] Before the creation of the Threshold program, there was also arguments to allow countries that narrowly failed the criteria to be allowed to compete for funding.[13]

For Fiscal Year 2007, 2 billion dollars were provided, a 14% increase over the previous year but still under the 3 billion target.[14]

The funding of Tanzanias compact has been pushed foreword from May 2007 to an earlier date to accelerate the process of reform.[15] Implementation has been difficult in Armenia, with concern about effectiveness is currently being discussed.[16] Mongolia has had a long negotiation period for MCA funding due to its inexperience with such large monetary grants as the MCA gives.[17]

[edit] Reception and impact

Studies by groups such as the Heritage Foundation have shown that many developing countries that have received foreign aid have seen their per capita income fall or stagnate, and the Heritage Foundation has consistently supported the MCA's approach, which has also utilized their trade measure from the Index of Economic Freedom.[18] In April 2005, the United States Government Accountability Office issued a favorable report about the work of the MCA and its work up till that point.[19] The Program Assessment Rating Tool, or PART, which reviews the efficiency and results produced by US government programs, will be reviewed in 2007.[20]

Some critics have charged that the program uses indicators by conservative groups such as the Heritage foundation and are therefore biased toward free market economics.[21] Congress has consistently provided less funding for the program than the president requested. In Fiscal Year 2004, 650 million USD were provided for the program, with an increase up to 1.5 billion the next year.[22] Opposition MP's in Ugandan MP's from the opposition party hailed their countries rejection from full compact status, demanding instead a stronger effort in stopping the corruption that disqualified their country.[23] Congress declined to re-authorize the program, which technically was not needed since the program had been already, but also since there was argument over the authorization language.[24]

Harvard University conducted a study in 2006 that, controlled for time factors, concluded that potential recipient countries improved 25% more on MCA's criteria than other countries.[25]

The World Policy Council (WPC) of Alpha Phi Alpha Fraternity recognizes the MCA as the most recent and most promising program in its area. The WPC recommended in 2006 that the Bush administration and the Congressional Black Caucus focus on full funding and an accelerated pace of spending.[26]

Doing Business 2007 cited the Millennium Challenge Accounts as a catalyst for reforms underway in 13 countries.[27] Also, Freedom House, an organization that monitors the level of freedom in the world, released subcategories for the first time since it was being used as part of the MCC's measurements to allow for finer distinctions in their ratings.[28] Also, the number of days it takes to start a business in both low and low-middle income countries has decreased significantly since 2002, which is one of the factors the accounts measure since rapid business registration is thought to increase economic activity.[29]

[edit] References

  1. ^ Millennium Challenge Corporation Adopts Environmental and Land Access Criteria for Selection of Eligible Countries. Millennium Challenge Corporation (September 11, 2006). Retrieved on September 13, 2006.
  2. ^ Millennium Challenge Corporation Adopts Gender Policy. Millennium Challenge Corporation (December 11, 2006). Retrieved on December 16, 2006.
  3. ^ The Gambia Suspended from Participation in MCC Compact Program. Millennium Challenge Corporation (June 16, 2006). Retrieved on September 13, 2006.
  4. ^ Charles W. Corey (October 26, 2006). Millennium Challenge Corporation approves $461 million for Mali. Relief Web. Retrieved on October 30, 2006.
  5. ^ Millennium Challenge Corporation Should Hold Countries to Higher Standards of Democratic Governance. Freedom House (November 2, 2006). Retrieved on November 13, 2006.
  6. ^ US suspends $3m in military aid. Fiji Times (December 21, 2006). Retrieved on December 23, 2006.
  7. ^ Millennium Challenge Corporation Names Seven Countries Eligible for Threshold Program. Millennium Challenge Corporation (September 30, 2004). Retrieved on September 14, 2006.
  8. ^ US grants Jordan 25 million dollars to finance reforms. dpa German Press Agency (October 17, 2006). Retrieved on October 17, 2006.
  9. ^ Yemen’s Eligibility for Assistance Reinstated by Millennium Challenge Corporation Board. United States Embassy in Yemen (February 15th, 2007). Retrieved on March 29, 2007.
  10. ^ Namibia's Millenium Challenge Submitted in Washington. Namibian Broadcasting Corporation (October 6, 2006). Retrieved on October 6, 2006.
  11. ^ The Millennium Challenge Account. The White House (March 22nd, 2002). Retrieved on September 13, 2006.
  12. ^ Nigel Purvis (June, 2003). Greening U.S. Foreign Aid through the Millennium Challenge Account. The Brookings Institute. Retrieved on November 14, 2006.
  13. ^ Lael Brainard and Allison Driscoll (September 2003). Making the Millennium Challenge Account Work for Africa. The Brookings Institute. Retrieved on November 14, 2006.
  14. ^ Millennium Challenge Corporation Statement on Fiscal Year 2007 House Appropriation. Millennium Challenge Corporation (June 9th, 2006). Retrieved on September 14, 2006.
  15. ^ Muhidin Michuzi (October 3, 2006). US to speed up funds release to Dar. Daily News TSN. Retrieved on October 6, 2006.
  16. ^ SOLUTION TO PROBLEM OF UNEQUAL DEVELOPMENT OF YEREVAN AND RURAL AREAS MOST IMPORTANT TASK. ARKA News Agency (September 18, 2006). Retrieved on October 16, 2006.
  17. ^ Onoodor (October 22, 2006). 2007 budget focused on human development. UB Post. Retrieved on October 21, 2006.
  18. ^ Paolo Pasicolan and Sara J. Fitzgerald (October 18th, 2002). The Millennium Challenge Account: Linking Aid with Economic Freedom. The Heritage Foundation. Retrieved on October 29, 2006.
  19. ^ Progress Made on Key Challenges in First Year. Government Accountability Office (April 27th, 2005). Retrieved on October 29, 2006.
  20. ^ Assessing Program Performance Using the Part. Office of Management and Budget (March 20th, 2007). Retrieved on March 28, 2007.
  21. ^ Mark Engler (October 30th, 2006). Calling Bad Business Good. TomPaine.com. Retrieved on October 30, 2006.
  22. ^ Nuts and Bolts of Bill. The Washington Post (December 7th, 2006). Retrieved on November 13, 2006.
  23. ^ Kevin J. Kelley (November 14, 2006). East Africa: Graft Costs Uganda And Kenya Millions in U.S. Aid. The East African. Retrieved on November 20, 2006.
  24. ^ Sheila Herrling (December 11th, 2006). MCA Reauthorization Bill Killed. MCA Monitor Blog. Retrieved on December 17, 2006.
  25. ^ Doug Johnson, Tristan Zajonc (April 11, 2006). Can Foreign Aid Create an Incentive for Good Governance? Evidence from the Millennium Challenge Corporation. John F. Kennedy School of Government. Retrieved on November 20, 2006.
  26. ^ The Centenary Report Of The Alpha Phi Alpha World Policy Council (PDF) pp. 14-18 (July 2006). Retrieved on March 6, 2007.
  27. ^ Annual Report of International Finance Corporation Highlights Reform Incentives Created by Millennium Challenge Corporation. Millennium Challenge Corporation (September 6, 2006). Retrieved on September 13, 2006.
  28. ^ Freedom House Releases Subcategory and Aggregate Scores for Freedom in the World. Freedom House (September 28, 2006). Retrieved on October 16, 2006.
  29. ^ Millennium Challenge Corporation Releases 2007 Country Data Measuring Performance on 16 Benchmark Indicators; MCA Eligibility Creating Incentives for Policy Reform in Countries. Millennium Challenge Corporation (October 16, 2006). Retrieved on October 21, 2006.

[edit] External links

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