Overview Remarks by MCC CEO Ambassador John Danilovich at the Post-Board Public Outreach Meeting

September 14, 2007

As prepared

Introduction

Thank you, Fran.

And, thank you all for coming. It’s always a pleasure to welcome you to the Millennium Challenge Corporation, and we appreciate your ongoing interest in our work to reduce poverty through growth in partner countries around the world.

I’d like to take this opportunity to update you on

where we stand,
where we are heading, and
what decisions our Board of Directors made on Wednesday.

Where we stand

Since our last Public Outreach Meeting in June, we have had an extremely busy summer.

Earlier this week, the President nominated Former Senate Majority Leader Bill Frist and Catholic Relief Services President Ken Hackett to fill out the private sector member positions on our board. Upon Senate confirmation, this will make our board complete for the first time with 9 members. Ken Hackett was previously an MCC board member and has been re-nominated for another two year term. Bill Frist brings a wealth of international experience from his tenure in the Senate. Both nominations are now before the Senate, and we await confirmation.

We signed three more compacts:

one with Mozambique for $507 million,
one with Lesotho for $363 million, and
one with Morocco for nearly $698 million, which we signed at the very end of August in Tetouan.

As we sign each compact, we continue to hold events to explain the component programs and have begun to host specific investment seminars to discuss with the business community opportunities to invest and do business in each country—opportunities that MCC investments help to leverage and expand.

Our Deputy CEO Rodney Bent traveled to Guyana in August to sign their $6.7 million threshold program. Guyana’s program improves fiscal management and decreases the number of days and costs required to start a business.

In early August, the Board approved a $16 million threshold program with the Kyrgyz Republic to fight corruption and improve the rule of law. We hope to sign this threshold program with the Kyrgyz Republic later this month.
We also held events in June and in August to provide an overview for how to do business with MCC and with MCC partner countries. Both events were well-attended, and information for the business community remains available on our web site at www.mcc.gov.

Where we are heading

So, what’s on the horizon? We see two priorities.

The first priority is implementation.

We continue to improve our model and streamline processes in order to facilitate implementation that will increase the rate of disbursement and deliver results.

This means helping partner countries build the capacity to do more for themselves on their own. We are providing better guidance and capacity-building support up front, prior to compact approval, and working with our partners to develop detailed work plans and implementation schedules to be better able to move promptly, once the compact is approved.

This means shifting more responsibility, decision-making, and authority to our Resident Country Directors in the field. Later this month, we are holding a Resident Country Directors Conference here at MCC headquarters to assess perspectives from the field, to discuss what is working, to discuss where improvements can be made, and to exchange best practices.

Through implementation, our assistance continues to impact the lives of the poor. And, there’s nothing more gratifying for me than to see what our funding is making possible around the world:

I’ve visited with farmers in the fields of Madagascar and Honduras, who are learning new techniques and accessing new markets to make a successful transition to higher-profit crops, which means more income for their families.

I’ve participated in ceremonies in Nicaragua and Madagascar, where land titles were awarded, many to women. With clear title to their land, the poor are able to use their property as collateral for credit to expand their farming operations.

I’ve toured infrastructure projects in Georgia and Benin, which are enabling the flow of energy to homes and businesses and the flow of goods to markets.

I’ve attended classes, believe it or not, at one of the 132 “girl-friendly” schools MCC funding is making possible in Burkina Faso, a country where more than half of the girls do not attend school. And, we know there is a strong correlation between the education of girls and the sustainable development of a country.

The leads to our second pressing priority: funding.

These early results that MCC is achieving around the world demonstrate that we are fulfilling the mandate given to us by the U.S. Congress when they created MCC in 2004—to reduce poverty through growth. And, only with Congress’s support for sufficient funding will MCC be able to continue to fulfill that mission.

The House-passed Foreign Operations Appropriations Bill allocated $1.8 billion for MCC, falling far short of the President’s request of $3 billion. The Senate allocated a shockingly low $1.2 billion. Yet, we know there is strong support for MCC’s mission; and we remain optimistic that during conference, this support will translate into maximum funding for MCC.

Under-funding MCC constrains our work and seriously damages relationships with countries making significant reforms to partner with us. We urge Congress to fund MCC fully so as not to undermine our ability to respond to proposals, to leverage our funding as an incentive for reform, and to continue building on our successes.

Ironically, the fact that MCC practices accountability and responsibility is part of the apparent reason for Congress’s cuts. Whenever MCC awards a grant, we set aside the entire, multiyear amount, but we dispense the cash only as the country reaches specific performance goals. Rather than recognizing the value of this approach, Congress inaccurately and disingenuously looked at the balance as “excess cash in the bank” and determined that additional funding for MCC is unnecessary. Through the aggressive signing of compacts now in the pipeline, including the one we anticipate signing with Tanzania should the Board approve it, MCC will have no more unobligated balances.

Pushing money out the door for the sake of doing so is clearly not the right thing to do. True to country ownership, the right thing to do is to make sure our countries can maximize our assistance—no easy feat given that we are working with some of the poorest countries, which are challenged by the responsibility and capacity required to develop and manage such large projects.

We have a fiduciary responsibility to American taxpayers to allocate MCC funding only as partner countries are capable of using our investments for development goals that ensure measurable outcomes in the lives of the poor.

Decisions by the Board of Directors

When members of our Board met on Wednesday, they made several decisions that allow us to continue adding to our track record of success.

The Board approved another compact and two threshold agreements.

A nearly $285 million compact with Mongolia has been approved to reduce poverty through economic growth by

investing in the efficiency and capacity of the country’s rail system,
improving the ability of Mongolians to register and obtain clear title to their land,
expanding vocational education in core technical skills, and
extending the productive years of the labor force by reducing non-communicable diseases and injuries.

Pending congressional notification, we anticipate signing the compact with Mongolia next month and invite you to visit our website at www.mcc.gov for information on public events surrounding the signing.
With the Board’s approval of Mongolia’s compact, MCC now has compacts with 15 partner countries in

Africa,
Central America,
Eurasia, and
the Pacific,

totaling nearly $4.9 billion. We are very proud of this progress.

The Board also held a robust discussion about a $698 million compact with Tanzania that will make investments in transportation, water, and energy. Their deliberations continue, and we expect their decision by written consent shortly on whether they approve the compact.

In addition, the Board approved two new threshold programs. One is with São Tomé and Principe for over $7 million to increase revenue collection through improved tax and customs administration and to reduce the days and costs required to start a business. The other is with Yemen for nearly $21 million to improve its performance on the rule of law and fiscal policy indicators.

With these two latest additions, MCC now has approved threshold programs totaling about $360 million with 17 countries worldwide.

Maureen Harrington will talk about MCC’s newest threshold programs during the panel discussion.

The Board also made decisions regarding the country selection process.

First, the Board formally adopted the use of two new performance indicators—the Natural Resource Management index and the Land Rights and Access index. These indicators measure government efforts to provide clean drinking water, expand sanitation services, streamline the property registration process, and make land rights accessible and secure for poor and vulnerable populations. The new Natural Resource Management index will be placed in the investing in people category; and the Land Rights and Access index will be incorporated into the economic freedom category. Later this morning, Sherri Kraham will provide more details about these two new natural resources management indicators.
The use of these new indicators has been phased in. During our last selection cycle, the Board considered the Natural Resource Management index and the Land Rights and Access index as supplemental information when it made eligibility determinations. The rationale for this gradual integration was to give countries notice about the indicators and an opportunity to review their performance and make improvements before the indicators fully came into effect. We believe that being transparent and providing countries notice create the greatest incentives and keep countries engaged in the reform process.

This year, when the Board meets again in December to select our partner countries, performance on these natural resources management indicators will be formally incorporated in our scorecard.

Next, the Board decided to consolidate into one index the two indicators we use from the International Finance Corporation to assess the number of days and the amount of money required to start a business. This new Business Start-Up index will remain in the economic freedom category.

These changes mean that MCC now has 17 selection indicators, spread across our three categories of

ruling justly,
investing in people, and
supporting economic freedom.

The Board also decided to defer the adoption of an additional education indicator at this time. Despite extensive research and consultations, we were unable to identify an education indicator that we believe significantly strengthens our system and enjoys the support of our stakeholders. While efforts are currently underway to develop measures of educational quality and outcomes, none of these indicators are ready for MCC’s use at this time, and the Board has opted to wait and consider options in the future rather than implement a temporary indicator. We will, however, monitor and support the ongoing efforts to assess cross-country measures of learning.

Conclusion

The fall is always an exciting time for MCC—as we select partner countries to work with us in the new fiscal year. I invite you to visit our web site regularly for updates throughout this process, culminating with the Board’s decision on eligible countries at its December meeting. When Sherri Kraham talks about the new indicators, she will also have insights about this year’s selection process.

With that overview, I’ll stop here and open the floor to your comments, and I’d be happy to take your questions. Thank you so much, and any questions?