Millennium Challenge Corporation

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Reducing Poverty Through Growth
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Millennium Challenge Corporation Reducing Poverty
Through Growth
Millennium Challenge Corporation

• 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

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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

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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

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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 Le
sotho Tanzania Madagascar
Latin America Eurasia Bolivia Armenia El
Salvador East Timor Honduras Georgia Nicaragua
Mongolia Sri Lanka Vanuatu


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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 Fasos 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.

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Threshold Countries
Millennium Challenge Corporation Reducing Poverty
Through Growth
Latin America Guyana Paraguay Eurasia Albania Indo
nesia Kyrgyz Republic Jordan Moldova
Philippines Ukraine Yemen
Africa Kenya Malawi S?o 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
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Country Ownership Critical
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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

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Results Based
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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

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Example The Madagascar Compact
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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

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Objectives and Indicators for the Madagascar
Program
Millennium Challenge Corporation Reducing Poverty
Through Growth
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Objectives and Indicators for the Madagascar
Program
Millennium Challenge Corporation Reducing Poverty
Through Growth
Madagascar's central land titling office which
stores entirely paper-based titles.
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Objectives and Indicators for the Madagascar
Program
Millennium Challenge Corporation Reducing Poverty
Through Growth
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Objectives and Indicators for the Madagascar
Program
Millennium Challenge Corporation Reducing Poverty
Through Growth
A family selling produce and grains outside of
their home in Mahitsy, Madagascar.
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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

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Contributing to Aid for Trade
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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.

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Contributing to Aid for Trade
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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.

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Implementation
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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

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Principles of Fiscal Accountability
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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

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FISCAL ACCOUNTABILITY ELEMENTS
Audit
MILLENNIUM CHALLENGE CORPORATION
MCC Disbursement

• Signatories to Compact

GOVERNMENT

• Submit disbursement
• requests
• Provide budget
• Provide financial and
• ME 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
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Millennium Challenge Corporation Reducing Poverty
Through Growth
Illustrative Models
Government
Non-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
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Common Elements
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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

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Millennium Challenge Corporation
Compact Development Process
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Where is the MCC Today?
Millennium Challenge Corporation Reducing Poverty
Through Growth

• 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.