Remarks by MCC CEO Ambassador John Danilovich at the Los Angeles Area Chamber of Commerce

Los Angeles, California
Thursday, May 1, 2008

As prepared.

Introduction

Thank you, Carlos, for that kind introduction and for your interest in the Millennium Challenge Corporation, an innovative, different, and demanding U.S. program for development assistance.

As a native Californian, it’s always wonderful to return home. And, I especially love the diversity and vitality that is Los Angeles. I know the tremendous innovation that diversity brings to the world of business. Managing a multi-billion portfolio of MCC grants to more than two dozen countries worldwide on five continents, I have a strong sense of what this remarkable Chamber is built upon. The diversity of your business members—large and small, services and products, domestic and international operations—reflects that of this great city and this extraordinary state.

So, I welcome this unique occasion to speak to the Los Angeles Area Chamber of Commerce. California. as the eighth largest economy in the world, means that businesses like yours are the drivers of such prosperity and growth. The trade and commerce you facilitate at home and abroad create jobs, push the envelope of innovation and technology, advance best business practices, and provide more and more world citizens with the opportunity to participate in and benefit from the economic life of their communities. And, the Millennium Challenge Corporation needs you in the pursuit of our mission: to reduce poverty through sustainable economic growth.

Poverty anywhere is a threat to prosperity everywhere, and together with partner countries worldwide, the Millennium Challenge Corporation is countering this threat by fulfilling the mission Congress tasked us with when they created us in 2004. We recognize, however, that MCC aid alone—or any government aid, for that matter—will not end global poverty. Real growth is the single most important factor in poverty reduction, and the private sector is the key driver of such growth.

MCC delivers what many call “smart aid” by partnering with countries committed to

good governance,
investments in the health and education of their citizens,
and economic freedom.

Through our approach, we work to empower countries to build their capacity and lead their own development. While this creates an excellent foundation, more is needed. MCC’s approach to development assistance can only be sustained over the long term if it is coupled with the

creativity,
innovation,
and entrepreneurship

of the private sector. What leverages our aid and creates a sustainable development impact in the lives of the poor is combining our investments with those of the private sector, through early and continuing private sector engagement. That’s why MCC’s mission of reducing poverty through economic growth is linked inextricably to private enterprise.

I’d like to explain this link between MCC and private enterprise by

updating you on MCC’s progress to date in the pursuit of our mission
and, more important, highlighting the critical role the private sector—many of you here in this room—can play in this pursuit.

I look to you for your insights, ideas, and involvement.

MCC 101

Since Congress created us in 2004, MCC has partnered with 16 countries in Africa, Central America, Eurasia, and the Pacific to invest in their priorities for development and, as a result, impact the lives of the poor in meaningful and lasting ways. MCC rewards countries

willing to undertake the often difficult work of political, economic, and social policy reforms,

willing to build their capacity to lead their own sustainable development,
and willing to deliver results where they matter most—in the lives of the poor.

Our approach is predicated on three key principles.

First, we believe policies matter, so MCC funding is performance based. We don’t think it’s too much to ask of countries receiving American taxpayer dollars that they practice good policies, fight corruption, and demonstrate the political will to use our aid effectively.

Second, countries invited to join the MCC program because of good performance are empowered—and expected—to lead their own development. MCC places the responsibility with the recipient country itself to examine its own constraints to poverty reduction and economic growth and to design its own solutions—country-driven solutions to country-determined challenges.

Third, once their proposals are approved by MCC, we ask countries to take charge of implementing their programs to deliver tangible results. We believe it is essential for countries to take the responsibility for—to buy into—the creation and implementation of their own program. We say to countries: You can do it for yourself; we’ll give you the money, but you take the responsibility for the success of your own development. This is not easy. Capacity is often lacking. But, MCC is not a handout; rather it is an opportunity.

Employing our model, we have provided $5.5 billion in grants—what we call compacts—to partners worldwide and have signed threshold programs with additional countries to help them move closer to compact-eligibility. Around the world, MCC partner countries are using these investments to:

issue land titles,
increase farmer incomes,
create jobs,
increase market access,
improve infrastructure,
strengthen small-scale fisheries,
expand artisan training,
open health clinics to contain the spread of HIV/AIDS and other diseases,
build girl-friendly schools,
expand vocational training,
strengthen access to credit,
and
improve access to water and sanitation services.

Role of Private Sector in Development

While the emerging results on the ground confirm the effectiveness of our development assistance, poverty will not be defeated through aid alone. Private enterprise is the true engine of economic growth, and the only way countries can combat poverty is not to depend exclusively on development assistance but, rather, to use it to promote a growing private sector, in which the poor can fully participate. MCC grants to developing countries are designed to be that gateway to private investment.

MCC’s goal is to have our aid augmented and eventually replaced by the self-sustaining economic activity driven and spurred from the private sector itself within a partner country. Because we demand performance on indicators evaluating fiscal, monetary, regulatory, and trade factors, including the costs and days required to start a business, we foster conditions to expand trade and commerce, promote local entrepreneurship, attract investment capital, and ignite private enterprise—the true engines of long-term growth.

MCC eligibility and selection send a powerful signal to the private sector that a favorable business environment is being created—one that is conducive for investing and doing business.

The MCC resident country director in Morocco, where we have a $698 million compact, recently conveyed an interesting story to me that illustrates this. She was chatting with a senior Moroccan government official who thinks that the compact has already accomplished a great deal, though it has yet to officially start its implementation. Why such success so soon? In the words of the Moroccan official, it’s because various private sector representatives are already visiting his office to explore Morocco as a good place in which to invest, drawn to the country by the fact that it passes MCC’s selection criteria.

That’s the power of MCC. And, such power is amplified by partnering with the private sector. We continue to explore a number of ways at MCC to more closely partner with the private sector.

First, we have created a Private Sector Initiatives team at MCC to look closely at the intersection between poverty reduction, development, and the private sector. Many corporations are moving away from pure philanthropy toward more socially responsible investments that not only serve their corporate interests but also meet overall development objectives. MCC offers the private sector such options, and our Private Sector Initiatives team is pursuing ways to encourage private sector activity in development.

Earlier this month, I was in New York City to sign a memorandum of understanding with the General Electric Company, for example, to advance common development goals. This memorandum provides a framework for future collaboration between MCC partner countries and GE that will help them take advantage of GE technology, expertise, and best practices in many of the sectors where MCC is active.

Second, to further our partnership with the private sector, we are looking at ways to weave the private sector into the fabric of MCC compacts from the very beginning of our process. During compact development, we encourage MCC partner governments and the international and domestic private sector to work together to address constraints and opportunities for growth, trade, and investment. This early conversation is key to accelerating the jobs, technology, and know-how the private sector can bring. It also helps MCC make “smarter investments” that address private sector constraints, while encouraging the private sector to make investments that fill in behind our projects to help them succeed and be sustained long after MCC leaves.

And, third, we are creating a comprehensive roadmap of private sector opportunities that are expected to surface because of MCC’s investments. We want the private sector to be aware of upcoming procurement opportunities as well as opportunities to partner with MCC countries in MCC or MCC-related investments. To do this, we are cooperating with other agencies of the U.S. government to proactively market potential ways for the private sector to work with MCC.

Call to Action

I invite and encourage members of the business community to look closely at MCC investments in our partner countries and explore complementary or parallel investments of their own. We want the private sector to examine what MCC is doing and take notice of what is happening in our partner countries. MCC’s significant investments to

build infrastructure,
increase agricultural productivity,
strengthen human skills of interest to the private sector,
and improve the business climate

create tangible ways for the private sector to grow.

I also invite foundations and companies with strategic corporate social responsibility initiatives to consider building on MCC programs in countries in which they have an interest. In conversations we have had with the Bill and Melinda Gates Foundation and the Rockefeller Foundation, for example, we have identified a number of mutual synergies in the fight against poverty.

To fully employ the role of the private sector in global economic growth and development, the Millennium Challenge Corporation will continue to be a bridge between the resources of the private sector and the needs of developing communities. We all want our efforts

to be more effective,
to produce lasting results,
to have a sustainable impact,

and there is no question that we can achieve the goal of

reducing poverty,
stimulating economic growth,
and making a tangible, meaningful difference in the lives of the poor

when we work together rather than when we work separately.

I ask you to join with us in this great effort.

Thank you very much for your interest in the Millennium Challenge Corporation, and the private sector’s critical role in the fulfillment of our mission. I would be happy to take your questions.