Millennium Challenge Corporation

1. Millennium Challenge Corporation Reducing Poverty Through Growth

2. Millennium Challenge Corporation Reducing Poverty Through Growth Millennium ChallengeCorporation • Fulfillment of Monterrey commitment to “provide greater resources to countries taking greater responsibility for their own development.” • Established in law January 2004. • Mandate is Poverty Reduction Through Economic Growth

3. Millennium Challenge Corporation Reducing Poverty Through Growth Based on Key Lessons of Aid • POLICIES MATTER • COUNTRY OWNERSHIP CRITICAL • RESULTS, NOT INPUTS COUNT “We want to make decisions ourselves. It is our country, and we have to take on leadership and responsibilities. If you take a look at the last two issues, our vision and country ownership, you will realize why the MCA is so important for us. Here we have a new approach which helps us to implement our vision. We have opportunities to design and implement our own programs.” --Marc Ravalomanana, The President of Madagascar School of Advanced International Studies, Johns Hopkins University, April 19, 2005

4. Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter • Good policies encourage inflows of private capital and increased trade, the real engines of growth. • Country eligibility based on sixteen independent indicators in three different criteria • Countries are measured against other countries of similar income level • Ruling Justly • Investing in People • Encouraging Economic Freedom

6. Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter 23 Countries Selected by MCC Board in Fiscal Years 2004 - 2006 Africa Benin Mali Burkina Faso Morocco Cape Verde Mozambique Gambia Namibia Ghana Senegal Lesotho Tanzania Madagascar Latin AmericaEurasia Bolivia Armenia El Salvador East Timor Honduras Georgia Nicaragua Mongolia Sri Lanka Vanuatu

7. Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter • MCC eligibility intended as an incentive to improve policies • Threshold Program reinforces this objective • Threshold Countries • Close on the indicators • Demonstrated commitment to reform • May propose funding to specifically improve on MCC indicators Burkina Faso’s Threshold Program: Increasing Girls’ Primary School Completion Through the construction of new schools in provinces that lack sufficient schools, more girls will be able to attend primary school in Burkina Faso. Their Threshold program with MCC aims to enroll 1,650 new female students within the first year.

8. Millennium Challenge Corporation Reducing Poverty Through Growth Threshold Countries* Latin America Guyana Paraguay Eurasia Albania Indonesia Kyrgyz Republic Jordan Moldova Philippines Ukraine Yemen** Africa Kenya Malawi Sấo Tomé and Principe Uganda Zambia * Burkina Faso, Tanzania, East Timor moved from Threshold Program to Eligible in FY2006 ** Yemen was suspended from the Threshold Program in FY2006

9. Millennium Challenge Corporation Reducing Poverty Through Growth Country Ownership Critical • Eligible countries submit proposal for MCC funding, after consulting with civil society and private sector. • MCC assesses proposals based on: • The contribution to poverty reduction and growth • The quality of the consultative process and breadth of support • The ability to measure results

10. Millennium Challenge Corporation Reducing Poverty Through Growth Results Based • Specific objectives and measures of success are agreed on from the beginning • A monitoring and evaluation plan is an integral part of each Compact • Continued funding is contingent on continued performance on the indicators and meeting agreed benchmarks for program implementation

11. Millennium Challenge Corporation Reducing Poverty Through Growth Example: The Madagascar Compact • Signed April 18, 2005 • $110 Million over 4 Years • Goal – Increase investment in rural Madagascar • Three Integrated Projects • Land Tenure • Financial Sector • Agricultural Business Investment

12. Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program

13. Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program Madagascar's central land titling office which stores entirely paper-based titles.

14. Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program

15. Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program A family selling produce and grains outside of their home in Mahitsy, Madagascar.

16. What Have Countries Asked For? • Every proposal unique • No predetermined allocation • Rural development, land titling, infrastructure (roads, ports, airports), improving business environment • Water and sanitation, but few proposals in health and education so far

17. Millennium Challenge Corporation Reducing Poverty Through Growth Contributing to Aid for Trade • First five Compacts include $640 million in trade related activities (including roads, ports, and agricultural goods for export markets). • Next three Compacts likely to be signed include at least $300 million more in such activities. • Nearly 63% of financing under these eight Compacts is aid for trade.

18. Millennium Challenge Corporation Reducing Poverty Through Growth Contributing to Aid for Trade • First five Compacts include $640 million in trade related activities (including roads, ports, and agricultural goods for export markets). • Next three Compacts likely to be signed include at least $300 million more in such activities. • Nearly 63% of financing under these eight Compacts is aid for trade.

19. Millennium Challenge Corporation Reducing Poverty Through Growth Implementation • The Compact defines responsibilities. The country is responsible for implementation. • Each Compact will also define the governance and accountability structure, which will cover processes and entities responsible for managing MCC funds, guidelines governing procurement and entities responsible for administering procurements. • MCC may have one or two representatives in an MCA country

20. Millennium Challenge Corporation Reducing Poverty Through Growth Principles of Fiscal Accountability • Every country is unique, no single solution • Find a solution that best serves Compact objectives • Build upon existing mechanisms when possible • Leave capacity in place wherever possible • Solution must have maximum transparency, integrity, and accountability

21. FISCAL ACCOUNTABILITY ELEMENTS Audit MILLENNIUM CHALLENGE CORPORATION MCC Disbursement $$ • Signatories to Compact GOVERNMENT • Submit disbursement • requests • Provide budget • Provide financial and • M&E reports • Creates, if • necessary, and assigns responsibilities FISCAL AGENT FINANC MGMT (Finance Ministry) (Donor) (Accounting Firm) • Exercises MCC rights under Compact • Allocate budgets • Approve re-disbursements • Instruct to issue payment ACCOUNTABLE ENTITY (Governing Council) (MCC Committee) (PM Office) MCC REP • Provide accounting records BANK ACCOUNT (Central Bank) (Commercial Bank) FISCAL AGENT PROCUREMENT (Finance Ministry) (Donor) (Accounting Firm) (1 or more Project Mgr) • Approve certain contract actions • Document obligations • Initiate re-disbursements • Initiate procurement PROJECT MANAGER 1 (Govt Ministry) (Donor PIU) (Private Co.) (NGO) PROJECT MANAGER 2 (Govt Ministry) (Donor PIU) (Private Co.) (NGO) • Administer/certify procurement process VENDOR VENDOR VENDOR VENDOR Re-disbursement $$

22. Millennium Challenge Corporation Reducing Poverty Through Growth Illustrative Models GovernmentNon-Government Accountable Entity– Prime Minister or Cabinet MCC Steering Committee Fiscal Agent-- Ministry of Finance Accounting Firm Procurement Agent- Ministry of Finance Private implementer Bank Account-- Central Bank Commercial Bank Project Managers-- Line Ministries NGOs

23. Millennium Challenge Corporation Reducing Poverty Through Growth Common Elements • Financial and procurement information available publicly through a local MCA Website and advertised in UN Business Development • Money will be disbursed in tranches • All MCC programs will be subject to external audit • Role of the MCC Inspector General

24. Millennium Challenge Corporation Compact Development Process

25. Millennium Challenge Corporation Reducing Poverty Through Growth Where is the MCC Today? • Five Compacts signed – Cape Verde, Georgia, Honduras, Madagascar, Nicaragua; nearly $1 billion committed. • Robust pipeline – Armenia, Benin, Vanuatu. • Threshold agreements with Burkina Faso and Malawi . • Congress has appropriated $4.27 billion to date.