‘How MCC offers a Smart Power approach to America’s global engagement’

Remarks by MCC CEO Ambassador John Danilovich

Center for Strategic and International Studies, Smart Power Series
February 4, 2008, as prepared

Introduction

Thank you, John, for that kind introduction and for organizing this exciting “Smart Power” series. I’ve read the Commission’s thoughtful and insightful paper, and I welcome the opportunity to add to the discussion by sharing a few thoughts on how the Millennium Challenge Corporation offers a strategic, smart power approach to expanding America’s global engagement.

The Success Stories

At a time when America’s leadership is being challenged around the world, the Millennium Challenge Corporation provides a great opportunity to showcase the best of America’s values, and the generosity of the American people.

Indeed, America’s engagement worldwide through the work of the Millennium Challenge Corporation is positive and powerful.   I have seen it with my own eyes.

In these ways, MCC is inspiring hope and optimism for a better life in some of the poorest and most challenging places in the world. We are making investments to help citizens replace poverty with prosperity, impossibilities with possibilities.  And, our American efforts—made by MCC—are acknowledged and much appreciated.

MCC 101

The President and Congress—with strong bipartisan support—partnered in 2004 to establish the Millennium Challenge Corporation, a new tool in the generous toolbox of American development assistance. 

MCC’s mission is to reduce poverty through sustainable economic growth.  And, we do this among the world’s poorest countries that are

MCC partner countries are committed

We have compacts with 16 countries in

totaling $5.5 billion. Our 16th compact with Tanzania will be signed later this month by President Bush and President Kikwete for $698 million.  We also have approved smaller threshold programs with countries worldwide to improve their performance on our eligibility criteria to eventually qualify for full compact funding.

How MCC is part of a smart power strategy

The manner in which MCC delivers development assistance is an effective tactic in our country’s overall smart power strategy for global engagement. And, I was pleased to read several MCC mentions recognizing this reality in the Commission’s report.  Let me highlight three key ways MCC contributes to “smart power” by being “smart aid.”
First, MCC contributes to smart power by changing the expectations for development assistance.     

MCC assistance is a reward for countries that are already practicing sound policies. With the data supplied by such international organizations as

we assess each country’s performance on 17 political, economic, and social indicators.

MCC approaches development more like an investor than a traditional donor: We partner with countries that want to leverage MCC assistance to further their own commitment to reduce poverty and stimulate growth, not act as a substitute for it.  And, as an investor, we demand results from our investment.

We see countries take on the incredible work of policy reforms to qualify for our assistance and, then, to maintain their eligibility.  Our model has become a powerful incentive for reform, what is often referred to as the “MCC effect.”  

We see MCC promote democracy and economic development by

And, free people—governed by the rule of law, with access to opportunity—make good, stable neighbors.  While a number of factors contribute to this, the MCC effect is an undeniable part of the equation.

MCC’s approach reinforces ties with nations committed to sound policy performance. One way we do this is by inviting representatives from our compact-eligible countries to Washington and hosting them for a week of

in what we call MCC University.  This  creates a stronger camaraderie among countries that value stability and security and that are working to mitigate threats to international peace, including the menace of extremism. 

Second, MCC contributes to smart power by empowering capacity building within partner countries.

We partner with countries not only practicing sound policies but also leading their development.  Nearly 60 years of development experience has taught us that a partnership of equals—built on an equal will to make progress—is far stronger than a donor-recipient relationship of dependence.

Co-chairs Richard Armitage and Joseph Nye understand this reality and state in the Commission’s smart power report that, “Helping other nations and individuals achieve their aspirations is the best way to strengthen America’s reputation abroad.” 

We agree.  MCC cannot help a country to succeed more than the country itself wants to succeed.  Our approach is grounded in countries, not MCC, driving development.

By raising expectations and by placing responsibility and accountability on the shoulders of our partners, MCC is helping countries help themselves.  

A Gallup survey of MCC partner countries found that 86 percent of respondents feel MCC fits in well with their country’s overall development strategy. Eighty-one percent believe MCC's approach to country ownership will help achieve their country’s specific development objectives. Moreover, compared to other donors, partner countries report

These findings are further proof of how MCC’s approach generates a positive impression in the national psyche of our partners and cements friendships around the world.   

Third, MCC contributes to smart power by paving the way for increased private enterprise.
Insisting on good policies and insisting that countries build their capacity to do more for themselves create conditions where, ultimately, the private sector can flourish.

Private enterprise is the true engine of economic growth, and the only way countries can effectively combat poverty is not to depend on development assistance but to use it to promote a thriving private sector. MCC grants to developing countries are designed to be transitional and to pave the way to private investment.  

We help create stronger economies so that entrepreneurs and businesses of all sizes can have new markets to

The Indonesian Finance Minister describes MCC support as a “good housekeeping seal of approval,” which sends a powerful signal to the private sector that conditions in MCC countries are improving—and are better for investing and doing business—than in other countries within the same income category.

are not only MCC-eligible but also partners in trade through CAFTA-DR.  They are leveraging their compacts to

Conclusion

In these three ways, the Millennium Challenge Corporation delivers “smart aid” to poor countries determined to use it wisely.  Using MCC investments to

is smart…and is working. 

We see this as countries work to make difficult policy reforms, not only to qualify for MCC assistance, but also because such reforms are the right thing to do and the surest way to promote economic development and private enterprise.  Partner countries are fully leveraging MCC assistance to improve the lives of their poorest citizens—through their own solutions and their own determination. 

The Commission’s report concludes that, “It is against our economic and security interests to contribute to or ignore poverty and desperation around the world.” It is, rather, in our interests to reduce poverty, often seen as a breeding ground for

that could endanger our country and require the defense of our democratic ideals. 

Countering poverty where it exists counters the perils of poverty from reaching our shores.

MCC will continue to fight poverty through sustained economic growth; and I thank you, again, for your interest in the Millennium Challenge Corporation’s contribution to America’s smart power strategy for effective global engagement, for our own country’s sake and for the sake of a more peaceful, prosperous world.

Thank you very much, and I look forward to your questions and our conversation this afternoon!

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