Press Room
 

FROM THE OFFICE OF PUBLIC AFFAIRS

March 10, 2004
JS-1231

Remarks on the Millennium Challenge Corporation Selection Criteria, John B. Taylor, Under Secretary of the Treasury for International Affairs

Introduction

It is a pleasure to begin this meeting discussing the progress of the Millennium Challenge Corporation (MCC) and the criteria/methodology in selecting eligible countries.  

I’m glad that Interim CEO Al Larson can join us here at Treasury, and we are all moving as quickly as possible to make the MCC a success story.  Just last week, the Board approved the criteria/methodology for country eligibility, which Al will explain.  The criteria have been sent to Congress and published in the Federal Register for a thirty-day comment period.  I know that the folks at MCC look forward to your comments and today’s event should be a good beginning.

We should also view today’s event as a celebration, as our efforts are coming together to reshape development finance.  The MCC will reward countries that are demonstrating performance in policies that promote economic growth, transparency, and accountability for results. The MCC is a remarkable achievement that owes its thanks to President Bush’s vision, the hard work of many people within the U.S. Government, the U.S. Congress, as well as many people within this room and elsewhere from the NGO and private sector communities. 

Development Strategy: Grants and Trip to Africa

The MCC fits well within the Administration’s overall development strategy of increasing grants, measuring results and focusing assistance efforts on achieving higher productivity growth.  All one has to do is look at the makeup of the MCC board to see how it fits into our overall development strategy:  it consists of USAID Administrator Natsios, USTR Zoellick, Secretary Powell, and Secretary Snow.

On behalf of Secretary Snow, I can say that he is proud to serve as the Vice Chairman of the Board.  He will be working with Secretary Powell and the other Board members to provide coordination and oversight to all our development activities.   Secretary Snow brings to the Board expertise in policies that promote economic growth and enhance productivity.  Furthermore, as the U.S. Governor in the international financial institutions, he is in a unique position to ensure coordination of MCA programs with the World Bank, the regional development banks and other international financial institutions

In fact, I want to take this opportunity to highlight a trip I’ll be taking to Africa on Friday.  I’ll be spending a week examining progress on grant funded projects financed by IDA and the African Development Fund.  I will be visiting projects in Rwanda, Niger, Senegal and Kenya so I can see first hand the progress that is being made to increase living standards in these countries and whether they are meeting our expectations.

This will be a particularly opportune time for me to undertake this trip.  I believe that this trip will provide me information on what is working and what is not working that can be of high value to the MCC, and it will also provide essential information as we head into replenishment discussions in the various development banks.  This will be particularly important on the issue of grants.

As many of you know, due to U.S. leadership during IDA-13 negotiations, IDA adopted a bolder, more aggressive stance on the use of grants for the poorest countries – the agreement calls for 18-21 percent of IDA’s total resources to be allocated as grants.  Prior to the IDA-13 negotiations, grants accounted for less than 1% of all allocated IDA resources.  Priority for grants is given to the poorest countries, those that are post-conflict and/or highly debt-vulnerable, and for HIV/AIDS or natural disaster reconstruction projects.

Likewise, in the 9th African Development Fund (AfDF) Replenishment Agreement (October 2002), donors agreed to increase the percentage of resources that are allocated as grants to 18-21 percent of the AfDF’s total envelope.  Previously, the AfDF had provided 7.5 percent of its total envelope as technical assistance grants. 

We intend to carry this momentum forward into IDA-14 and the replenishments of the African and Asian Development Funds and press for even higher levels of grants.  Why does the Administration think this is so important?  

  • Loans to low-income countries, which generally have a low repayment capacity, can lead to unsustainable debt levels.  Grants reduce the probability of poor countries experiencing debt distress.
  • Many development loans (e.g., for education) that have important long-term economic benefits will take years to generate the resources necessary to cover the resulting debt service. 
  • Grants free up scarce public resources, which would have been used to pay off outstanding loan commitments.  These resources can be used to fund productive investments, such as infrastructure improvements or agricultural programs, which contribute to economic growth and poverty reduction.
  • Grants can help countries address certain global issues, such as HIV/AIDS, which require significant financial resources to combat.

In closing, I believe this is an historic time for all of us.  Through its focus on promoting economic freedom, ruling justly, and investing in people, and doing so in a way that does not add to debt burdens, the MCA demonstrates the Administration’s firm commitment to combating poverty and increasing living standards throughout the world.  We look forward to working with all of you and with the MCC on this mission.