The Country Selection Process
The selection of countries as eligible for MCC assistance is determined by MCC's Board of Directors . Transparency regarding the process and criteria that govern selection of country partners and that inform the Board’s eventual decisions is a hallmark of the MCC model.
For a country to be selected as eligible for an MCC assistance program, it must demonstrate a commitment to policies that promote political and economic freedom, investments in education and health, the sustainable use of natural resources, control of corruption, and respect for civil liberties and the rule of law, as measured by 17 different policy indicators.
MCC has a four-step process to select countries as eligible for assistance.
Four-Step Selection Process
The MCC established a four-step process to select countries for aid:
Maintaining Compact Eligibility
Selection for eligibility initiates a multi-year partnership dedicated to pursuing economic growth and poverty reduction through the development and implementation of a compact. MCC monitors the policy performance of Compact eligible countries throughout the year. Once a country is selected as eligible, MCC expects it to:
- Continue its reform process;
- Seek to maintain and improve its overall policy performance on the indicators.
The Millennium Challenge Act does not require MCC to determine a country as eligible annually for countries with Compacts, but Compact eligible countries that have not yet signed a Compact are reselected each fiscal year during the time it takes to develop their Compact.
A country remains eligible for MCC funds from the fiscal year in which it was chosen unless:
- Funds from that fiscal year are exhausted
- The Board suspends the country from eligibility
Not Meeting the Criteria
MCC recognizes that a compact-eligible country can generally maintain and improve policy performance, but not meet the formal eligibility criteria in a given year due to any one or combination of the following factors:
- Graduation from the Low Income competition to the Lower Middle Income competition;
- Introduction of new indicators or new methodologies;
- Improvements in the availability or quality of data;
- Rising income-group medians;
- Slight declines in performance.
- None of these factors are likely to be serious enough to warrant a suspension of eligibility.
If an eligible country does not meet the criteria in a given year, MCC will ask it to demonstrate efforts toward improvement by developing and implementing a policy improvement plan to address the concern(s) and to demonstrate its commitment to meeting the eligibility criteria.
Graduating from the Low Income to the Lower Middle Income Category
Each year some countries’ per capita income level increases to the point where they are reclassified from the Low Income Category (LIC) to the Lower Middle Income Category (LMIC). Because LMIC median scores tend to be higher, some LIC countries that graduate into the LMIC group may not meet the eligibility criteria initially, even though their performance may not have declined in absolute terms. This does not mean that graduating countries automatically lose their eligibility for MCC funding. Funding from previous fiscal years (when the country qualified as an LIC) may be used, if available.
Policy Improvement Process for Compact Eligible Countries
MCC asks Compact partner countries that no longer meet the eligibility criteria to develop and implement a plan of action that can be expected to result in improved policy performance. There are three primary objectives:
- to develop an operational tool to assess, monitor, and improve performance on the eligibility criteria;
- to provide a basis for policy dialogue with MCC about reform efforts; and
- to demonstrate progress towards meeting the eligibility criteria on a regular basis
MCC asks its Compact partners to submit periodic reports that track progress under the plan.
Suspension from Compact Eligibility
MCC evaluates its partner countries’ policy performance throughout implementation of the Compact, and maintains a policy dialogue with them, in coordination with the State Department, USAID, and the U.S. Embassies. According to MCC’s Policy on Suspension and Termination, a country can be warned, or its eligibility may be suspended or terminated for:
- A significant policy decline or policy reversal
- A pattern of actions inconsistent with the eligibility criteria.
Given the lag time between when policy decisions are implemented and when such decisions are reflected in the data, a policy reversal or pattern of actions inconsistent with the eligibility criteria need not be reflected in the indicators for a country to be warned, suspended or terminated. At the same time, if a Compact eligible country does not meet the formal criteria in a given year, this does not necessarily indicate a significant policy reversal or pattern of actions inconsistent with the eligibility criteria. For more information on why this is the case, see Not Meeting the Criteria.