Ambassador John J. Danilovich Delivers Remarks, At The Center for Global Development

April 27, 2006

AS DELIVERED

Thank you, Steve, for that thoughtful introduction. Steve and I have been talking about doing an event like this for some time, and I am delighted that, thanks to all of you at CGD, we are able to be together today to share some thoughts and experiences that I hope will provide a good backdrop for the panel discussion that will follow.

I would also like to thank:

Ambassador Zongo (of Burkina Faso ),
Roger Bate (American Enterprise Institute)
Mark Lippert (Sen. Obama's office)
Steve (Radelet, CGD)
Janet Ballantyne (Moderator, from Abt Associates)
And our own MCC Vice President for Operations, John Hewko, for participating in the panel.

I don't know how many of you are aware of this, but Steve Radelet is not shy when it comes to asking tough questions.

Steve, Nancy, Sheila, and others at CGD, have over time expressed challenging questions about MCC's mission and operation. I must truthfully tell you that I am grateful to them and their colleagues at CGD for their constructive observations and perspectives. Informed and timely input from the outside is important to help us refine our work, and we welcome your engagement with MCC as your reports are being prepared and before they are released so that they are as accurate and constructive as possible to our mission and expedite any actions that need to be taken.

I am grateful for the work of CGD because they care about the MCC – they care deeply about its success – and so do I and so do all of us at the Millennium Challenge Corporation. So I look at this as a co-operative process, a synergy, with all participants seeking the best possible result.

Today, I'd like to respond to two specific questions that Steve and others have posed that I think are critical to understanding the role and mission of MCC.

These are:

How is MCC innovative?
And how does the MCC build capacity in our partner countries?

To a certain extent, these two questions need to be answered together.

MCC sought to draw upon the lessons learned from over a half century of development, which led us to three primary innovations for the MCC model:

First, the use of objective indicators to base funding on demonstrated policy performance;
Second, an approach that centers on country ownership and responsibility for program effectiveness;
Third, the upfront measurement of results and benchmarks for progress.

I have often spoken about MCC's selection process, which focuses on the adoption of and adherence to policies that lay the groundwork for poverty reduction and growth -- the policies we measure using 16 political, social and economic indicators.

Even at this early stage we are able to talk about what is being called the “MCC Effect” on policy performance, where countries initiate reforms – on their own – so that they can improve their scores on our indicators and better their chances of being selected into the program.

We are seeing many countries taking practical and concrete steps to improve their governance, invest in their people, and open their economies so they might be counted within the MCC family -- as well as those striving to maintain their eligibility .

Countries can and do respond to clear and actionable incentives, if the political will is there. A study released earlier this month by two Harvard economists concludes that MCC's selection criteria are, in fact, accelerating policy reform. This is a very desireable impact, and a good example of the “MCC Effect”.

T his aspect of MCC's approach -- the use of quantitative, transparent third party indicators -- is innovative. It helps to depoliticize the process, and to highlight and motivate the adoption and adherence to policies and reforms that we believe are essential to the sustainable reduction of poverty and long-term economic growth.

Let's explore how country ownership and our focus on results have worked in practice.

These two principles, country ownership and a focus on results, are critical innovations that MCC brings to development assistance. Their effectiveness will be determined by the degree to which we are building capacity in our partner countries—in the form of learning by doing —to design and implement their own development programs with a focus on consultation and results and lasting impact, not just inputs.

This capacity development is not just an increase in skill level, but a step change in the ability of those with skills to put them to effective use.

Simply put, we have changed the way our partner countries think about their own development, and we are changing the way development is done.

Implementing this approach may be complex … and it may take time. Our partner countries have not been expected to take on this level of responsibility before … but it is absolutely essential if they are to shoulder their partnership responsibilities. We have seen, in fact, that their willingness to take on the job usually transforms into their capability to do it.

We believe in the ability of the people in these countries to change their own societies – with the MCC as a supporting partner, offering tools and advice. The MCC approach is a partnership not paternalism, it looks for outcomes not inputs, and it transforms how countries commit themselves and organize themselves for the sustainable reduction of poverty through economic growth.

The MCC approach is building in-country capacity in several ways:

Through program design,
Through the consultative process,
Through our focus on results,
And through implementation.

Let me say a few words about how this has worked in practice.

First, as you know, MCC looks to the countries themselves to formulate their program priorities. MCC's requirements are unique in that each country must not only identify barriers to growth, but each also must identify beneficiaries (by income group, region and gender, based on our explicit guidance), and look carefully at investment priorities in the context of other donor's investments and their own development strategies.

When I visited Benin in January, for example, people told me that this had been the first time they had ever had such direct input on development investments. When referring to the MCC program, people call it “their program,” not someone else's, and not a program imposed upon them by the US or any other donor.

Our partners in Cape Verde say that they have never before had such a shoulder-to-shoulder partnership of co-equals with another donor. They are proud of the Compact that they have developed, and feel a deep responsibility for its practical results and ultimate success.

Second, insisting that countries be responsible for their own development also means that leaders and policymakers must reach out and include local governments, civil society, the private sector, potential beneficiary groups, and others in a broadly based consultative process to formulate priorities and to play a vital role in compact conception, development, and implementation.

In many countries this consultative process has led to an unprecedented degree of involvement from people and groups that have never been asked to be part of the solution, but who bring enormous value and insights into the process.

This new approach is creating common ground and is proving the value of inclusion, and this improves the prospects for successful long-term implementation in each of our Compact countries.

For example, our MCC counterparts in Georgia conducted a consultative process which enabled people nationwide to voice their opinions. Using the radio, television, the internet and town hall meetings, they received over 500 concrete and varied suggestions about the program's substance and implementation. These suggestions contributed to a final, coherent program that reaches ethnic minorities previously isolated from decisions made in Tblisi. The MCC process has helped to bridge groups and lingering differences and build a sense of common purpose.

In Nicaragua , the inclusive Compact development process created an unprecedented bridge between previously non-cooperating groups. A divided Nicaraguan parliament overwhelmingly ratified the MCC Compact earlier this month. And for the first time ever, and prior to ratification, the parliament unanimously agreed to provide resources to maintain road investments -- roads which MCC will fund to cut transportation costs and link small farmers and entrepreneurs to new markets. The Compact development process itself was so innovative that our Resident Country Director and the country's own MCA Coordinator were given awards by local development councils in appreciation for an unprecedented level of inclusion in the country's development efforts.

Third, MCC insists that each Compact lay out specific program objectives and how they will be measured to show real results for real people.

As a new program offering the promise of substantial grants to its selected partners, MCC asks that expected effects and results are quantified upfront while a program is being designed. Every MCC project, for example, has a publicly available monitoring and evaluation plan with agreed upon results indicators. Identifying targets and objectives at the onset will further contribute to good decision-making about program priorities when they are being developed.

Partner MCA teams in Benin, Georgia, Armenia and other of our countries are actively engaging with us at MCC, as well as external evaluators, to make sure that program design allows for sound assessments of the impact on beneficiaries. In some cases, meeting targets in the economic growth and poverty reduction assessments are necessary to trigger continued disbursements.

In support of developing more accurate measurement of MCC and other development programs, MCC is funding national household data collection in Benin and Madagascar so that MCC, local government agencies, NGOs, and other donors are all looking at common data and can better analyze poverty reduction initiatives.

Other donors have told us as well that these carefully crafted performance-based disbursement plans are of great interest to them. They have also told us that encouraging our partners to look in detail at the analysis and investments of other donors when developing Compact proposals is unprecedented.

Finally, countries that complete a Compact with MCC build capacity by determining for themselves how they will implement and monitor the programs that they design with MCC's help.

In this area, MCC has invested a great deal of effort to try to approach every country as unique with its own strengths and weaknesses, to build on those strengths and overcome those weaknesses. In countries where strong implementation institutions exist, they are being incorporated. Where such strengths don't exist, we help the country get professionals in place working for them , not for the MCC.

When countries make a proposal to use MCC funding to build their implementation capacity as a development goal in itself, we applaud that because we believe that a small increase in the efficiency of managing development resources can have a tremendous impact on people's lives as services are delivered more efficiently and cost-effectively.

An example of such a case is Cape Verde , where MCC funding will help the country establish a completely electronic public procurement system, resulting in one of the most efficient and transparent in the world.

Many of our partner countries are using their own MCA organizations ( MCA-Georgia , Ghana 's Millennium Development Authority, etc.) to work across the bureaucratic and ministerial stovepipes, public-private divides, and different donor relationships that face all developing countries. Certainly these efforts will make MCC support more effective, and we also think that these efforts will ultimately ensure that aid provided to these countries is demonstrably better used.

In short, we believe we are helping our partner countries to build the capacity to reach out for the best ideas and approaches, to set goals, to test assumptions, to assess performance, to course-correct, to create a broad base of support for needed change, to maintain the information needed to learn from doing, and – ultimately – to take pride and ownership in solving real problems for real people on a long-term basis.

None of this is easy.

Reducing poverty is not easy.

Creating economic growth is not easy.

Improving through change is not easy.

But none of us are doing what we are doing because it is easy.

We believe that our innovative model at the MCC will work and that we will succeed. We aim to do so in ways that will endure.

What I have described has taken place even before large sums of money have been disbursed. And, perhaps our most challenging – yet most rewarding innovation – will be letting our partner countries take the lead on implementation . There too we will stand with them, and I believe there will soon be examples of what this deeper ownership may mean for lasting development results.

I do hope that my comments on MCC's innovative approach and our capacity building efforts have been helpful.

Our MCC Vice-President for Operations, John Hewko, will tell you more about the changes we have made at MCC to achieve our goal to be faster, bolder and more transformative.

Steve, our friends at the Center for Global Development, I want to thank your for the opportunity to be with you today.

# # #