Sec10 Interaction Foreign Assistance Briefing Book

POLICY BRIEF

November 2008

Millennium Challenge Corporation PROBLEM The Millennium Challenge Corporation’s (MCC) multi-year funding makes it vulnerable to Congressional cuts. For FY09 the President requested $2.225 billion, but the Senate Appropriations Committee allocated $254 million. Without continuity of funding the United States will lose credibility with potential Compact countries, which are improving policies and establishing programs in anticipation of signing a Compact.

RECOMMENDATIONS Congress should approve the House Appropriations Committee FY09 funding level for the MCC of $1.54 billion. The new Administration should set the FY10 level at $2 billion in its budget request. If Congress does not appropriate for FY09 a level of funding similar to last year ($1.55 billion), the MCC will not be able to sign any new Compacts until FY 2010.

ACTIONS • After a development agency director is named, in consultation with that person, appoint a dynamic individual to lead the MCC who meets the following criteria: strong background in poverty-focused development; experience managing field programs; track record on gender integration and participatory approaches; strong management and communications abilities; and experience working with Congress; • Work with Congress to maintain support for the MCC through the budget and appropriations processes; • Support the program and maintain its integrity in terms of key principles: country ownership, civil society participation, non-political decisions, poverty reduction through economic growth, rewarding best performers, gender integration, multiyear funding, no tied or earmarked funds, transparency and accountability; • Ensure the MCC’s principles are maintained and that it has the structures and capacity to implement programs according to those principles in any major reform or restructuring of foreign aid; and • Fully fund the MCC budget request level.

RESULTS

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The MCC model has been a catalyst of policy reforms around the world that improve transparency, fight corruption and promote women’s rights. Maintaining one of the more innovative U.S. foreign aid programs will encourage a continuation of policy changes in governments interested in a relationship with MCC and the United States government.

BACKGROUND ESTABLISHED BY CONGRESS IN 2004, THE MILLENNIUM Challenge Corporation (MCC) has developed into a highly innovative foreign aid program with a focus on reducing poverty through economic growth. The MCC has institutionalized a number of operating principles the development community has long advocated: country ownership, consultation with all elements of civil society, sustainability, multi-year funding, and transparent selection based on performance. To be eligible to participate in the program, low and moderate income countries are required to meet and pass a majority of 17 independent and publically available performance criteria in the MCC-defined areas of ruling justly, investing in people, and economic freedom. This requirement has created an “MCC effect” through which countries change polices in the three areas in order to be eligible to apply to the MCC. The MCC has signed 18 five-year Compacts for a total of $6.3 billion. To ensure the funding is available for each Compact the MCC sets aside the total Compact funding at the time of signing. However, Congress has not accepted the principle of legally committing, and therefore setting aside, funding for each signed compact.