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

December 13, 2007

Welcome

Thank you, Matt.

It’s a pleasure to welcome all of you to the headquarters of the Millennium Challenge Corporation.

Thank you for your ongoing interest in MCC’s work of reducing poverty through economic growth in partner countries around the world

practicing sound policies,

taking lead of their own development, and

delivering measurable results with the aid they receive.

I’d like to update you

on MCC’s progress since our last public outreach meeting in September and

on the decisions our Board of Directors made at yesterday’s meeting.

Review of MCC Progress since September

We’ve been busy in five main areas since our September meeting.

First, REORGANIZATION

When I came onboard two years ago, MCC was under tremendous pressure to develop a portfolio of quality compacts.

Well, we accomplished that.

Today, we can speak of 16 approved compacts with countries totaling $5.5 billion.

With that body of work in place, it is now time to turn to the business of implementing these compacts.

So, we opened this fiscal year by launching a major organizational restructuring to shift MCC’s focus to compact implementation.

We have adopted key reforms to transition from a compact development agency to a compact implementation agency moving forward.
This means reorganizing our first-class professional team to fully utilize their expertise and experience for program implementation.

It means moving more responsibility and authority to resident country directors in all partner countries to give them the latitude to make decisions that will improve the speed and quality of compact implementation.

It means combining and restructuring two existing departments, Operations and Accountability, to form two new departments—one focused on compact development and the other focused on compact implementation.

Darius Mans is our newest Vice President, heading up the Department of Compact Implementation.

John Hewko is serving as Vice President for our Department of Compact Development.
Chuck Sethness is now serving as our Senior Investment Counselor to advise on maintaining the integrity, consistency of standards, and technical quality of our investments.

As Matt McLean, who has been serving as my Chief of Staff, now heads up our Department of Congressional and Public Affairs, I’m thrilled that Matt Bohn, who has been serving as a Resident County Director in Nicaragua, is returning to Washington to serve as my Chief of Staff. Matt’s valuable insights from the field will serve us all well as he takes on this new assignment, and his on-the-ground experience will prove a valuable asset as we proceed now with compact implementation.

MCC’s future depends on compact implementation, and we are realigning

priorities,
functions, and
staff

to meet that future and better achieve our mission, without compromising our ongoing commitment

to accountability,
to our gender policy,
to effective monitoring and evaluation, and
to social and environment assessments.

Second, a FULL BOARD

We now have a full nine member Board.

This is a first in MCC’s history.

In late October, the Senate confirmed former U.S. Senate Majority Leader Bill Frist and reconfirmed Catholic Relief Services President Ken Hackett to serve on MCC’s Board.

Both gentlemen attended yesterday’s Board meeting and bring valuable expertise and knowledge to the Board.

I appreciate their service.

Third, COMPACTS/THRESHOLD PROGRAMS

We have added to the MCC family of compacts and threshold programs.

In terms of compacts…

Our compact with Mongolia was signed at the White House by President Bush and Mongolian President Enkhbayar for $285 million.
This is MCC’s 15th signed compact, and the first to be signed at the White House.

The compact will reduce poverty through economic growth by

investing in the capacity of Mongolia’s rail system,
improving the ability of Mongolians to register and obtain clear title to their land,
improving core technical skills of Mongolian workers, and
extending the productive years of the Mongolian workforce by reducing non-communicable diseases and injuries.

We anticipate signing our 16th compact with Tanzania in the new year.

In terms of threshold programs,

We signed a threshold program with São Tomé and Principe in early November.

This nearly $9 million program will increase revenue collection through improved tax and customs administration and reduce the days and costs required to start a business.

And, our Board approved a $35 million threshold program with Peru.

This program will bolster immunization and fight corruption.

Fourth, our DEMOCRACY PAPER

We unveiled a major research paper on MCC’s role in deepening democracy.

MCC deepens democracy by creating incentives for policy reforms and by engaging democratic actors and processes already in place in partner countries worldwide.

These themes are explained in detail in MCC’s democracy policy paper, which is posted to our website at www.mcc.gov and which I invite you to read if you have not already done so.

Fifth, ENGAGEMENT

We continue to carry MCC messages to audiences throughout the world.

I had the privilege of attending the Community of Democracies fourth ministerial in Bamako, Mali to discuss democracy and its link to economic growth and development.

The vast majority of MCC countries are also participants in the Community of Democracies.

I then traveled to Mozambique and Lesotho—two countries with which we signed compacts in July—and saw firsthand how they are ramping up to begin the implementation of their compacts.

Meanwhile, MCC sent a delegation to the US-Africa Business Summit in South Africa.

MCC has 9 compacts in Africa and another 7 threshold programs throughout the continent.
MCC’s new Private Sector Initiatives team is exploring ways to

integrate private sector activities into MCC compacts,
leverage MCC compacts with the private sector, and
stimulate follow-on investments in MCC countries.

We continue our engagement with Congress, and are still awaiting word on our appropriations.

MCC has gathered considerable momentum in recent months with a very full list of compacts now signed and results now starting to come in.

We are urging Congress to fund MCC at the House-approved level of $1.8 billion, which allows us to fund our current pipeline of countries taking on the hard work of making reforms and developing compacts.

We have had a very exciting and busy fall…

Outcome of Board Meeting

…capped by our Board’s decisions yesterday on the selection of new compact-eligible and threshold-eligible countries.

I am pleased to announce that

Malawi is now eligible to submit a compact proposal, and

Mauritania is now eligible for our threshold program.

Let me say a few words about some other countries that were considered, but not selected eligible for funding.

First, Colombia. MCC acknowledges Colombia’s significant reform efforts to promote stability and an environment conducive to economic progress. We encourage them to continue forward with these efforts. However, because of budgetary limitations, the Board decided not to select any new countries in the lower middle income category at this time.
Second, Liberia: MCC recognizes the impressive results President Johnson-Sirleaf’s government has achieved. We look to USAID to continue its engagement with Liberia to support that country’s great strides to become eligible to participate in the MCC program.

When our panel convenes, Sherri Kraham will go into more detail on the countries selected and considered, but I wish to highlight three key points about our selection process.

First, MCC’s selection process will continue to be based on the rigorous evaluation of a country’s performance on our eligibility indicators, including a commitment to democratic governance. Providing aid through an objective, indicator-based selection process that measures sound policy performance remains MCC’s defining hallmark.

This applies not only to newly selected countries but also to our current compact countries, which must maintain and improve performance.

Maintaining good policy performance supports our reorganization efforts to fully and successfully implement our current compacts and achieve sustainable results among the countries with which we are now working.

Similarly, we are better defining the factors we take into account to determine which countries are eligible for MCC’s threshold program, including

the number of policy indicators or areas that must be improved,
the range of policy reforms or actions necessary to address those indicators, and
the country’s overall commitment to reform.

Second, MCC’s selection process has become more competitive. Our selection process is a competition, and this year’s selection process has reached a heightened and increased level of competition based on higher standards for eligibility. This is due to a number of factors:

the addition of two new indicators that measure natural resource management and land rights and access,
rising medians on several indicators, and
significant improvements in data quality.

Third, MCC holds our compact partners accountable for maintaining and improving performance. Should a compact country not meet the eligibility criteria, MCC evaluates its policy performance to determine whether there has been a significant policy reversal.

We distinguish between countries that have a significant policy reversal or a pattern of actions inconsistent with MCC’s eligibility criteria, and those countries that do not meet the criteria due to technical reasons or slight changes in performance.
If a country does not meet the criteria—but is generally maintaining performance—we are willing to allow our current partner countries some time to address the indicator issues.

However, we believe that there should be consequences for failing performance and significant policy reversals and remain willing to suspend a country for a significant policy reversal.

Again, Sherri, will go into more details about MCC’s selection process when the panel convenes.

Conclusion

With this overview, I’ll stop here and would be happy to take your questions before turning the podium back to Matt to introduce the panel.

Thank you! Any questions?