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Last week, President Obama announced his intent to nominate the MCC’s CEO, Daniel Yohannes, to be the next US ambassador to the OECD. That sounds like a pretty sweet gig. Who wouldn’t want to spend some time working in Paris, right? As with any passing of the guard, this will be a natural opportunity for reflection at the MCC and perhaps even a few new ideas. In fact, it’s much more than that. The MCC will be celebrating its 10th birthday next January along with developing a new multi-year strategy. That presents both an opportunity to chart an ambitious course for the duration of the Obama Administration, but also to lay the groundwork for whoever comes after.
We’ll be talking more about the MCC soon, but here are six quick off the cuff thoughts for whoever takes over the helm:
Continue Making the Case for Greater Resources: Ordinarily, I wouldn’t make this point in a highly constrained budgetary environment. But, the MCC remains an under-resourced and under-utilized development tool. By illustration, Pakistan has received more U.S. funding than the MCC’s entire global budget for several years running. That’s just plain shocking, even if there are fewer MCC-eligible countries these days. Turning this around will mean spending a ton of time on the Hill. Especially since over half of congressional members weren’t around when the MCC was created a decade ago.
Explore Ways to Better Crowd in Private Capital: The MCC has been thinking about this for some time now. But, fresh blood should come with fresh ideas. Especially if the new CEO has a deep business background. There’s no question that MCC compacts could be structured to better unlock private co-financing – particularly for large infrastructure projects. I’m hearing that this will be coming in several Power Africa countries, perhaps even in conjunction with OPIC activities. That’d be a welcome development, and one worth scaling across every MCC compact.
End the Second Compact Debate Entirely: It’s time for a final, conclusive break with the thinking that a single MCC compact can catalyze economic growth so large that future U.S. assistance won’t be necessary. I only wish that were true. Granted, this is more a demon from the early MCC days that simply hasn’t been fully exorcised. But, the debate needs to conclusively move beyond unrealistic expectations (with Congress) towards a serious discussion of what true MCC success could or should look like. One option is to unveil a graduation policy that extends beyond GNI per capita to also include things like creditworthiness considerations (see #5 below).
Bring Clarity to the MCC’s Role (or lack thereof) in Middle-Income Countries: It’s been challenging, to say the least, to justify why the MCC should provide grants to countries like Morocco or the Philippines. Both have enjoyed investment grade credit ratings since before their MCC compacts. Plus, excluding MICs will reduce political pressures for the MCC to give generous handouts to better off allies. I understand that the US needs to make friends in the world. But there are different tools for different needs. If the MCC is bent on keeping its MIC operations, then it should introduce differentiated financing terms.
This week, Congress passed the African Growth and Opportunity Act and Millennium Challenge Act Modernization Act (H.R. 3445). Once signed, it will give MCC the long-awaited authority needed to pursue regional programming more effectively.
One of the biggest questions donors grapple with is how to balance implementing specific projects with building local capacity to execute similar programming in the future. Indeed, this question is central to the conversation—now active at USAID—about how donors can “work themselves out of a job.” One good example of how this can look comes from the Millennium Challenge Corporation’s (MCC) 2005-2010 partnership with Honduras. In this story, a key part of MCC’s legacy is not about what the agency funded but how it funded it.
This week, MCC edged one step closer to securing new authorities that would better position the agency to undertake regional programming. Similar provisions were included in fully five bills in the 114th Congress, but none made it over the finish line. Hopefully 2018 will be the year.
Every December, MCC’s board of directors meets to select the set of countries eligible for MCC’s compact or threshold programs. And each year, before the board meeting, CGD’s US Development Policy Initiative publishes a discussion of the overarching issues expected to impact the decisions alongside its predictions for which countries will be selected. Here’s what to watch for at the upcoming MCC board meeting on December 19.