Regional and Sub-National Compact Considerations for the Millennium Challenge Corporation

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From the Introduction 

With MCC entering its second decade, there are active questions about what it can do to expand its impact. One question is to ask how MCC might expand the set of partners with which it works. MCC was established to work only with relatively well-governed poor countries, and experience shows that the set of countries that meet these criteria does not change very much over time. MCC is already working in most of the countries that meet its criteria for good governance and there are few strong new contenders emerging. Because of this, many of the best prospects for future MCC partnerships will be subsequent compacts with countries that have a good track record of compact implementation.
There are other options worth considering, including regional compacts and subnational compacts. From a development perspective, there are a number of reasons these two approaches make sense. However, there are a number of practical challenges to implementing each of them in accordance with MCC’s model and guiding principles. While these are not necessarily insurmountable barriers, they a re significant enough to make neither regional nor sub-national compacts clear, straightforward choices for MCC to expand its partnerships. MCC should be given the green light to explore these approaches but, as a first step, MCC should articulate how it would address these uncertainties. This note outlines the case for each approach, the practical challenges associated with each, and the policy options for pursuing them, including Congressional actions.