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2005

2004

Public Outreach Meeting Transcript

March 16 , 2005

Transcript

MACHOL: Good morning. I'm Margot Machol. I'm the new chief of staff of the Millennium Challenge Corporation.

I'd like to welcome you to the Millennium Challenge Corporation's third public outreach meeting of the year. This is the latest of many such meetings that MCC has held since we opened our doors a little over 14 months ago.

On behalf of MCC, I would like to express our appreciation for your continued interest and participation. Your advice has been invaluable, and we encourage you to continue to give us your opinions and to tell us about your experiences. We especially appreciate hearing from all of you who have lived or who have worked in the MCA-eligible countries.

I am delighted that our CEO, Paul Applegarth, will be able to update you on the outcome of the meeting of our board of directors that was held this Monday morning. He will brief you on various aspects of the board's discussions, including the Threshold Program, the overall objectives and main components of the Compact with Madagascar, an update on steps MCC has been taking to speed up the process, and some other developments with Compacts that are in the pipeline.

He will be able to take a couple of questions on what he tells you other than on the Madagascar program. The Madagascar transaction team will then answer all of your questions after Paul has spoken on the Madagascar Compact itself.

Now it's my pleasure to introduce our CEO, Paul Applegarth.

APPLEGARTH: Thank you, Margot.

Good morning. I see several familiar faces and some not-so-familiar faces.

Today is mostly about Madagascar, and I'd like really for you to hear about that from the people who did the work, the team themselves, some of whom are up here. Some are actually in Madagascar today.

But, before we do that, I do want to take the opportunity to talk about the board meeting on Monday. As you know, we were not able to have the public sessions. We try to use these sessions to bring you up to speed as to what's going on.

As you know, the board did meet Monday. The only action item was the approval of a four-year, almost $110 million Compact with Madagascar, our first one. The Compact is designed to increase incomes and create opportunities for rural Malagasy by unleashing domestic investment.

The Compact will create ways for the rural poor to generate wealth by giving them the opportunity to own land, improve their access to credit, by giving them technical assistance in agricultural products and practices, and identifying market opportunities.

Now the board has approved the Compact with Madagascar . We've notified Congress of our intention to sign an agreement. We do have a period of time we need to wait for that notice to take effect, and then we would expect to sign probably in early April. We're still trying to pin down the exact date.

Poverty in Madagascar is overwhelmingly rural. Eighty percent of Madagascar's poor live in rural areas, and, therefore, the government, in making its proposal to us, took a direct rural-focused approach to poverty reduction and economic growth. And, as you know, successful rural development is critical to meeting the millennium development goal of reducing poverty and hunger.

Funding in the Compact will go to support projects that will secure formal property rights to land and make land registration services more efficient; improve a weak banking system to make financial services available to rural areas; improve credit skills, training; and reduce delays in the time it takes a check to clear from 45 days to a target of three days -- I should say, in the property titling, to give you an example of the backlog there, at the current rate of titling property, it would take over a hundred years simply to process the current applications, and that presumably means a lot of people haven't even bothered to apply. So we do hope to be able to make some progress in reducing that hundred-year backlog to something that makes the system work much better -- and, finally, would establish a program to help rural Malagasy identify investment opportunities and to train farmers and entrepreneurs in production management and marketing techniques.

A side benefit is that Madagascar is one of the most beautiful and diverse ecosystems in the world, and, by concentrating on the proper management of farm development in rural areas, this Compact is not only going to increase agricultural productivity, but help protect this unique ecosystem.

Farmers right now have a practice of going into an area, not investing in it, just using the land up very quickly and using slash-and-burn agriculture and moving somewhere else. Madagascar truly has a unique ecosystem that's in some ways like Australia where you've got animals like lemurs who develop to fill ecological niches.

This whole ecosystem is threatened by current agricultural practices. By giving small farmers security of land and land title, we will help keep them on their land and from destroying forests in neighboring areas.

We're not waiting for the signing of the Compact to do work. It's already being done this week, to collect the baseline data needed to accelerate the Compact. As you know, MCC is built on the idea of having measurable improvements, measurable results and outcomes.

But to measure improvement, you have to know what you're improving over. So we're working with the Bureau of National Statistics in Madagascar to establish the baseline's data.

As I say, that work is starting this week, we're paying for it, and we see this as important to accelerate ultimate Compact implementation once the Compact itself is signed.

At the same time, we've been doing this in a way that U.S. taxpayer money is protected because I know you're worried about that, and so we've had to put in place the financial and fiduciary rules to make sure the money gets from us to the right place.

Throughout the process starting from when Madagascar first submitted its proposal in October of last year up until board approval on Monday, we've engaged and worked with Malagasy as they refine their proposal and set their own development priorities and determine measurable objectives to improve the standard of living for the rural poor.

We've done some work, but credit for the milestone really goes to the government of Madagascar and its people for having the courage and commitment to create an environment to allow private domestic investment to spur economic growth.

As you know, ultimately, country responsibility and country ownership means that countries drive our timing, and it is a testament to the commitment of the government of Madagascar they took a very pro-reform, pro-free market and people friendly approach to the MCC process.

They realized that reducing poverty and creating economic growth was a national priority, and they had a vision. They consulted with their people, and they put a great team in place to make this vision happen, and, with the support of MCC, they have the opportunity to make their vision come true.

Madagascar's success is an important illustration of how countries themselves drive the time line for Compact development, but, while we're letting the countries take the lead, we're not sitting passively by waiting for them to do things. We're spending extensive time on the ground with the countries helping them to develop their proposals.

We don't want to in any way interfere with country ownership or with the priority-setting process or simply have our priorities become their priorities. It's antithetical to the whole concept of MCC, but, in the process of a country's doing this, we recognize they have limited implementation capacity, limited absorption capacity, limited staffing. So the more we can do to accelerate the process, we're trying to do that while preserving country ownership.

As a result, we're spending time on the ground in virtually every country. We've had one or more teams in, I think, every country within the last month trying to assist the process.

We're using something called 609G funding, which is a special capability in our legislation that is not subject to all the standards of a Compact to help accelerate the funding. That's what we're using in Madagascar to begin baseline data collection. We're getting ready to inform the Hill, we're getting ready to do another country, and we're examining ways in other countries that we can use money now and staffing and other help to try to accelerate the process.

We're using our U.S. ambassadors in the countries to work with us, in addition to our own team visits. In addition, we've enlisted the help of the countries' ambassadors here in the U.S. and we've had frequent meetings with them here in Rosslyn to talk about the lessons learned from the early stages of the other countries.

Now that we have Madagascar under our belt and a couple other countries coming along, we already have some lessons learned that we can pass on to the other countries, and we're trying to do that to help them accelerate the process.

We're continuing to build our own staffing. We're somewhere between 110 and 120 now, which is certainly up from seven, as it was at the end of January a year ago when we were established, and we're on plan or even probably slightly ahead of plan to get to our target of 200 by the end of the year.

I'll talk just a minute on these sort of commitment levels because I know that will be a question you won't have time to address later. Our current Compact proposed requests total more than $2-1/2 billion, which is all the money we have right now by the end of two years, and we don't have proposals from every country yet.

Obviously, some pieces of that will drop out. We expect to be able to commit the vast majority of that funding over the calendar year, perhaps all of it, although, again, until we get to the end, you don't know what pieces will survive the review process, what we'll have to do in a country allocation.

I know people have asked about disbursements. We'll know at the end of the day how much we get, we're able to disburse, but you assume we're able to commit roughly the $2-1/2 billion that we have available and realize some of that's reserved for the Threshold Program and a small portion of it's for administrative expenses.

But you divide that $2-1/2 billion or $2.2 billion or $2.3 billion by-- remember our Compact are for three to five years-- so you'd take it and divided by five, roughly the disbursements we'd expect over the first 12 months from a Compact signing.

It will depend a bit on when the Compact signing is, but that's very rough parameters. We'll be able to find out more for you as the picture becomes clearer.

In terms of the future pipeline, I'd like to say all of us appreciate your interest and support. We have notified Congress that we're into negotiations with three countries, as you know, Honduras, Georgia, and Nicaragua . We expect to notify them next week about another country, and I hope and expect we'll be giving you details on more Compacts, which we can really only talk about once they're approved, as we go forward.

I will spend just a minute on other things we did at the board. We updated the board on the status of the Threshold Program. As you know, we picked the first seven threshold countries in September. We had a January 31 deadline for receiving their initial proposals. All seven met that deadline.

Four of the proposals are in excellent shape, and we've suggested to the countries they now go ahead and work on the detailed implementation plan and determining the quantifiable results they want out of the program, and that work is starting.

Three of the countries' proposals needed more work, and we've given those three an additional 60 days to see if they can get their proposals in shape to qualify for threshold funding.

We had a second deadline because we had our second group of threshold countries we chose in November. That deadline was March 15. I am pleased to say -- and the board doesn't even know this yet. You guys are getting it first, so keep it a secret for a day -- that all six of those countries have submitted their proposals on time.

So we are now, together with the AID, beginning to review those proposals, and, hopefully, we'll be able to give them some fairly immediate feedback on what work needs to be done.

We talked with the board at length about not only, obviously, the Madagascar Compact, but the status of the Compact pipeline more generally, and, in particular, what's happened in Sri Lanka . As you know, Sri Lanka is the only one of the tsunami-affected countries that's eligible for MCC funding.

You're going to say, "Wait a minute. MCC is not disaster relief." That's right. We're not. We're not in humanitarian relief. That's also right. And that's basically what a lot of the tsunami relief has gone for, and this is handled very well by other donors, particularly in USAID and the State Department.

That's not what we're talking about, but we did have discussions with the government, given that they gave us a proposal at the end of November and then the tsunami came along, would you all like to rethink some of your proposal in light of tsunami developments? Again, still being consistent with what MCC is all about, and they've indicated they would.

Secretary Powell had a discussion with the president of Sri Lanka in his visit early January. I also had an exchange of letters with the government, and we've received the confirmation back, they do want to do that.

We're talking about it in coordination with other donors, focused on the longer-term poverty reduction and growth elements because it's clear that the tsunami, in addition to the short-term tragedy, has had some real impact on their longer-term capabilities to grow the economy, and they have come back to us in its early days and said, yes, they would like to revise their proposal.

We are examining at this stage exactly how that would be. It would be basically taking the same priorities they identified in their earlier consultative process for other areas, also extending it to tsunami-affected areas, so that we're still building on the principles of it being a country priority, still building on the principles of being a product of the consultative process.

We still will apply the same MCC discipline to focus on quantifiable results, detailed implementation plans and country ownership. At the same time, there is a need and we're trying to find a way to work with them.

The ADB- JSP, which is Japanese bilateral, and World Bank identified a $1.5 billion intermediate long-term funding need as a result of the tsunami in Sri Lanka . The Asian Development Bank is talking about providing about $300 million. It still leaves a big gap, and we're looking to see what, if anything, MCC can do to do that.

We have a managing director in Manila today actually meeting with other donor representatives to talk specifically about what's going on Sri Lanka, but I wanted to let you all know that and let you know that this is going on, and, again, is not us doing the short-term stuff, which is not really our mission and other people do well, but it is the way that I think the United States and the Millennium Challenge can help respond to a longer-term need.

I am actually going to be going to Sri Lanka myself at the end of the month to meet with the leaders of the government, including the president, and discuss this further. I think, as this goes forward, we'll have a better sense of exactly what our role is, if there is one, and how it would work, and we'll keep you informed.

With that, I'd like to turn it over to my colleague, John Hewko, to introduce the transaction team to talk about Madagascar, and, actually, I will allow one or two quick questions now, but today is really supposed to be about Madagascar and the Compact. I don't want to get in the way of that. If somebody has a quick question, I'll try to respond.

All right. We'll take two, one here and one here.

JIM CARLSON, USAID: Hi. You mentioned...

APPLEGARTH: Excuse me. Could you introduce -- identify...

CARLSON: Oh, Jim Carlson. I'm at USAID. You mentioned something about lessons learned that you're sharing with the other embassies. Other countries have been invited to make Compacts, and I wondered if you could share any of those with us, particularly in terms of collaboration with MCC and other agencies like AID and State.

APPLEGARTH: Sure. On that one, the second part's easy. We've been working very closely with other donors and notably with AID at the country level in terms of trying to make sure that what we're doing complements what other donors are doing. In fact, as I've said to you all before, a country proposal to us has to explain how what they're asking us to do fits in with what other donors are doing.

In the case of AID, they've been very helpful to us in our own country visits. Obviously, Andrew Natsios, the head of AID, is on our board with me. We see each other virtually every day that we're both in town. We've had excellent support from headquarters here in this building, actually, for our efforts and then in the field, and I think it's an active, ongoing effort.

We could not do, certainly with the people we have now or even when we have our full 200, our full mission without actively reaching out to everybody else we can in terms of resources and help, and we've been pleased with the help we've gotten from AID, from Jim Willis and the World Bank, IMF, IDB, elsewhere.

So, on the lessons learned, I think some of the earlier ones are focus within the countries, and making sure early on they actually get a full-time team that's devoted to it, keep making sure that they have an MCC coordinator on their side who is really looking after it and thinking about it, and then they have somebody very senior in the government -- typically, it's been the president or prime minister themselves -- who provides sort of -- I guess the word's -- the air cover within the government to make sure things get done and keeps the focus.

Those would be some early things that I think everybody could relate to. There's a lot of more nitty-gritty things that our countries are learning, we're learning. We know they're talking to each other. One of the MCC coordinators in one of our countries called up, found names of a lot of the other coordinators, called them up on the phone and said, "Hey, what are you guys doing on the consultative process? Tell us about it. And what are you trying to do?"

That's the kind of dialogue we would love to encourage because that's part of our mission, helping the countries do this themselves. We're not going to do it. We're helping them do it themselves. If they can take these lessons, figure out what works for them within their societies, within their cultures, then that's a lot of the sustainable capacity that we're about.

One last question.

UNIDENTIFIED MALE: (OFF-MIKE)

APPLEGARTH: OK. Then one over here, and then we'll go.

UNIDENTIFIED MALE: Just this week, Canada announced that rather than sprinkling its aid money around 155 countries, they're going to pick 20 or 30 and target those.

The level of cooperation that you're talking about here implies that the countries themselves have the ability to coordinate a lot of this aid stuff. It appears that there's going to be bigger prizes for a fewer number of countries.

Are you seeing that as a trend internationally?

APPLEGARTH: Well, I think there's an effort coming out of, certainly, the Monterey conference in 2002, but even before that. There was a great recognition that development and poverty reduction really only works if the governments themselves take responsibility for it and the countries take the leadership for it and put a good policy environment in place.

The agreement at Monterey was that, for those developing countries that did that, the developed countries would put additional aid on the table to help them, and that's what Millennium Challenge is all about. We are the way the United States is delivering on the promise it made at Monterey, and so that's our core way we're set up.

In other words, countries compete for our assistance. We rank them against a group of indicators that are shown on our Web site. We don't do the rankings, but we basically pick out of the poorest countries in the world, and I think 82 were potentially candidate countries last year. We picked 16, less than the top quartile.

We pick those as potential core partners. They get to give us a proposal as to what their priorities are, tell us how it's going to lead to poverty reduction, how it's going to lead to growth, and, if we see it happening and they pick the priority through a consultative process, then we'll help them, and that's exactly what Madagascar did.

They knew most of their poor people were in the rural areas, those people live on an average of 41 cents a day, and, if you're really going to have an impact on poverty in Madagascar, those are the areas you have to target.

They were smart. Madagascar was smart focusing early on what are the real obstacles to getting a kick-start in this area. The security title on the land is important. Fundamentals of a financial system were important. That's what they targeted on early with the idea there's a Phase 2 that builds on this and really has significant boosts in agricultural productivity.

With that, let me turn it over to John who will introduce the team, and you'll get a sense of the kind of people we've had working on this, working on your behalf and on Madagascar's behalf.

HEWKO: Thank you very much, Paul.

My name is John Hewko. I'm the vice president for country programs at MCC.

All of us at MCC are very proud of the fact that we've now been able to get the Madagascar Compact through our board. Madagascar came to us in October with their proposal, and, again, for us, it's a great source of pride and achievement that in five months we've been able to take this proposal from start to board approval.

I'd like to introduce some of the terrific people at MCC that have formed part of the team that worked on the Madagascar proposal.

One of the team members, Michael Grossman, unfortunately, is out of town. He is the senior country director for Francophone, Africa . He was an integral part of the team and won't, unfortunately, be able to join us.

But we do have with us Kyeh Kim. Kyeh is an associate country director in Francophone, Africa, and was very active on the ground in the negotiations with the Malagasy.

Jolyne Sanjak is a director for property rights and land policy and will explain to you the land tenure component of the proposal.

Carol Kramer LeBlanc is our agricultural specialist and will deal with the agricultural component of the Madagascar Compact.

David Nummy, managing director for fiscal accountability.

And Chuck Sethness, our vice president for monitoring and evaluation.

And there's one other member of the team who played a key part. That's Clay Lowery, who is our vice president for market sector assessments, who's sitting in the back there.

So perhaps we can start with Kyeh, and you can give us a few minute overview of the Madagascar Compact.

KIM: Hi. Good morning. My name is Kyeh Kim.

Following up on Paul's introduction of the Madagascar Compact, the three major components of the program include financial sector reform, land tenure reform and agribusiness investment.

I'm going to begin with a brief overview of the financial sector component, and then we want to turn it over to the rest of my team members, and then, hopefully, the last 20 minutes or so of this meeting, we can open up for more Q&A and more specific technical questions.

During the consultative process, the Madagascar government went out and talked to the rural farmers, small entrepreneurs, larger investors and asked, "What are the obstacles to increasing income, increasing revenue?" and what they heard repeatedly was this issue of access to credit and a dysfunctional financial system.

Then, during the consultative process, we talked to a number of financial institutions from small credit unions to commercial banks, and their response to what the farmers and the small entrepreneurs had said was that they are unable to find enough creditworthy borrowers, and the quality of demand for credit is just not there in Madagascar. So the Malagasy, in their proposal to MCC, wanted to address these two concerns: improving the supply of credit and the demand.

Some of the specific components that are involved in this is launching an interbank payment system that will reduce check clearance from 45 to three days, increasing the availability of financial instruments, such as smaller-denomination Treasury bills and warehouse receipts so that entrepreneurs and small farmers have a place to put their money instead of cash in their mattresses, and then also building the capacity of microfinance institutions through technical assistance and training.

On the demand side, to increase the creditworthiness, this project will train professionals to improve the financial management of businesses, mainly accountants, and train directly the entrepreneurs that are in need of some business skills, so improve the environment for business development services.

I will turn it over to my colleague, Jolyne Sanjak, who will talk about land tenure and how that will add to the creditworthiness of the borrowers.

Thank you.

SANJAK: Thank you.

The land tenure project basically will take rural families in Madagascar from a situation in which the vast majority currently have no public record of the lands that their families have lived on and farmed for generations.

This situation makes it harder for them to defend their rights in disputes, which are increasingly common, both within the communities and with people from outside the communities. It makes it harder for them to enjoy the full benefits of property rights, such as making decisions to build equity by investing in improvements to the land and better land use practices and environmental conservation.

As Kyeh said, it also contributes to an environment where they're less likely to get credit and financial products that they need to build their agricultural enterprises and do other kind of transactions that they might want to do as well, such as bequeathing land in a full and formal way, selling or renting land, as they decide to migrate and move on to other activities.

The project will take them to a day when they have a formal and useful public record of their land rights, they have good services both available locally in the communities and nationally from the National Land Agency and, therefore, have a better environment for finance and investment and have the right incentive to take the long view in sustainable land use practices.

The people in Madagascar have asked their government over the last couple of years to address these problems, and, today, the government of Madagascar has made a commitment and has the political will to address them, and they've asked the MCC for support in helping them get that job done.

The land tenure project will help them by supporting five activity areas.

The first one is to support the development of the Malagasy National Land Policy Framework. This is a policy framework that is almost complete, has been developed with a lot of consultation, and the project will help consolidate that effort and take it to fruition, giving coherence and a clear legal grounding to key aspects of the program that will be implemented.

The second component will be to improve the ability of the National Land Service administration to provide accessible and affordable services by, for example, inventorying the documents they already have, installing an automated records management system.

The third and fourth components are very critical. They basically involve decentralizing land services and installing offices in the community managed by the community and creating the document trail for the records with participation from the community that will lead to land titles eventually.

 

The final component is also quite important for the sustainability of the whole effort, and that is basically supporting information gathering, further analysis and dissemination. This component will allow the Malagasy to get the help they need, problem solve as they go along, implementing from their own resources in country as well as internationally, to continue to inform and listen to the beneficiaries of the project, and also to do some further analysis of some complementary legal reforms or policy issues that they need still to figure out how best to address.

I'm going to turn now to Carol Kramer LeBlanc to talk about the agricultural business project.

LEBLANC: Good morning.

The agricultural business investment program is conceived to build on the accomplishments of the first two components and to take advantage of an improved business environment.

The objectives of this program are to reduce poverty by increasing rural household income in selected zones and to make agriculture and agricultural land more productive and profitable.

An overview of activities includes the following: building on the identification of zones, the government of Madagascar in a consultative process will announce five priority zones around the country. One has already been formulated, but the others are in process.

Within those zones, we will establish agricultural business centers, one in each zone, and a national coordinating center located in the capital at the national level. The national coordinating center will liaise with government ministries, private sector and relevant actors at that level and will also link with each of the ag business centers.

In each of the zones, technical assistance will be provided initially to work with the Malagasy to formulate zonal investment strategies for these priority zones. In a sense, this is a diagnostic exercise. Opportunities will be identified, constraints will be identified, and out of that will come a list of priority investments that might be there for the future either from the public or the private sector.

Expected results are to assist entrepreneurs and producer groups with business plans, to identify broad strategies that can be employed in these zones and basically to build capacity throughout the agricultural sector.

In general, we are taking a demand-driven value-chain systems approach to this. We believe that product demand coming from international markets, regional markets or urban markets within the country should be identified, and then the value chain supplying those demands needs to be looked at, the constraints identified, interventions sought, and that's the way we're going.

As you know, Madagascar is primarily a rice-based economy. Its subsistence or semi-subsistence, in large part, rice yields have not kept up with the Vietnams, the Indonesias of the world. They are still pre-green revolution and simple technologies, known techniques can make a big difference there.

So that's a summary of the agricultural business investment project.

NUMMY: I want to say the MCC understands that, among many of it obligations granted to it under our governing statute, we ultimately have to serve as good stewards of U.S. taxpayer dollars. In our very earliest discussions with the Malagasy, to give them credit, they understood that from the beginning as well, that they had an accountability to the American people for the funds that are going to be made available to them under the Compact.

So, from the very beginning of our discussions, we worked with the Malagasy to identify what sort of structures and mechanisms and procedures should be in place to govern the overall program, to govern funds management and to govern procurements.

In the case of Madagascar, the Compact envisions that the government, while remaining ultimately accountable for every aspect of the commitments they're making under the Compact, will appoint or will establish, I should say, a special MCC board that will provide oversight of the MCC program. In the case of Madagascar, they call it the MCC Steering Committee, and that board will exercise the rights and responsibilities of the government of Madagascar as envisioned in the Compact.

In terms of funds management, the Malagasy came to the conclusion that they wanted to engage a professional organization to serve the functions or to perform the functions of funds management, funds control, disbursements, accounting, et cetera.

Shortly after the board has established, one of the first acts of the board will be to make a selection as to the firm to do that. They also came to the conclusion that they wanted a professional experienced firm to administer procurements as well, and all the procurements under the MCC program will be governed by a set of guidelines that adhere to international best practices in the area of procurement.

All of this will be made available on an MCC Web site, which we think will be particularly useful in advancing the cause of transparency.

Now, based upon some of the questions we got before we stood up here, I think some of you will want to know a little bit about opportunities to participate in the activities in Madagascar, and I'll just sort of make some brief comments, that, one, all the procurements will be the responsibility of the MCC Steering Committee.

Part of our agreement with Madagascar is that all the significant procurements will be notified and made available in English on their Web site. So probably if you're interested, you want to follow that Web site. But, ultimately, you want to read the Compact, understand what opportunities might exist and get to know a little bit more about what Madagascar's trying to achieve.

SETHNESS: I should hasten to add that I am here in place of Delia Welsh, the monitoring and evaluation staff member who really put the energy into pulling our piece of this together. She would be here except that she's in Madagascar working on the baseline surveys that Paul mentioned earlier.

The beginning purpose, the premise, at the start of all of these activities that people have been describing was a desire on the part of the government of Madagascar to find a way to increase household income and land productivity at least in a few areas that we were going to be able to have active intervention in, where we can target our three-pronged approach in this program.

Monitoring and evaluation efforts are going to be aimed at measuring the increases in household income, increases in land productivity, which we believe are going to arise from increases in investment in the intervention zones, which are going to come about because of improved land tenure and security and credit and the technology to take advantage of those, too.

We will also be looking at least one major indicator for each of the three components. The percent of the land in each of these zones that is, in fact, titled or the owners have a certificate for. On the financial side, we're going to be looking at the volume and the number of new loans and the volume and number of new bank accounts. And, on the technology side, we were going to be trying to keep track of the number of adoptions of new agricultural technologies and higher-value crops.

The sum of all of this, though, is meant to come up the logic chain to enhancing household income.

I guess, at this point, we turn it back over to Mr. Hewko to try to field your questions.

HEWKO: Thank you very much to the members of the team.

The team and I would be happy to take any questions that you might have. Again, if you could please identify yourself when you come to the microphone.

UNIDENTIFIED MALE: I'm Adam Rinehart (ph) from USAID. I have a general question and a specific question.

The general question is: Would you provide as much specific detail as you can on the exact process of review that you went over with Madagascar with the proposal?

And, secondly, in the agriculture program in particular, I think what you were trying to say is that a lot of the efforts are going to be towards agribusiness for export, and, if that is the case, then who is going to be providing the technical assistance also that you also said was going to be provided locally to the region?

Thank you.

HEWKO: Perhaps, Kyeh, you can answer the first question and Carol the second.

KIM: As far as the process, the MCC staff was involved in providing due diligence on the proposed projects that the Malagasy included. Their objectives that were stated, we came just to ensure that the program was coherent, that the objectives of their program would have a direct link to economic growth, that they were feasible.

And then, through a series of discussions, we went through detailed activity plans and budgets just to ensure that all the information was found and that there was backup information, and, throughout this process, we worked very closely with them to ensure that the money would be spent correctly and that, again, all these project activities would be completed during the time that they said and that the sequencing of events made sense and that, again, all these three components would work together synergistically to lead to this ultimate objective of increasing income.

HEWKO: Carol?

LEBLANC: On the question of who will be providing technical assistance, as David had said, there will be anticipated some sort of an RFP that will appear on the Web site of MCA Madagascar when the time comes. So, if you're interested in that, you should be monitoring that.

I might say, too, that there has been consultation and collaboration with USAID in country. You may be familiar with the BAMEX project that's gotten started there early this year, and we view this effort as complementary to that. So we are taking, you know, into counsel things that they tell us and other donors as well.

And I might say, too, just one last comment. You are right, we are looking at exports, but we have not ruled out domestic markets either. So I think our portfolio will include all of the above.

Thank you.

UNIDENTIFIED FEMALE: (OFF-MIKE)

HEWKO: If you could step to the microphone, please.

UNIDENTIFIED FEMALE: (inaudible). I'm with the European Commission.

My question is very simple. Who is going to be receiving the money? Are you going to do budget support? Will the government receive this money? Are you going to work at the same time with the government and NGOs and other ministers, other than the minister of finance?

Thank you.

HEWKO: David?

NUMMY: As I said in my opening remarks, the government of Madagascar has decided to establish a special board, which they call MCC Madagascar Steering Committee. They will be the technical recipients of the money, and they'll be responsible for administering the money, administering the procurements and, ultimately, responsible for all the procurements.

I believe that part of their vision of how some of these projects will be executed will involve different parts of government in terms of implementation. We've had lots and lots of discussions with the ministry of finance.

One of the commitments that they've made to us is that they'll reflect the activity of the MCC program in all of their overall budget documents, and we've also agreed with the government of Madagascar to, over the course of the four-year Compact, look at the various alternatives in terms of funds administration and see if there might be some point at which the ministry of finance might play a bigger role than what they're envisioned to play right now.

I want to make one quick point. I don't want anybody to infer that there's a problem with the ministry of finance, but the government of Madagascar has made a huge significant commitment to improving the capacities both in funds management and in procurement administration, and I think they've made a significant beginning, and they have shown a huge commitment to do that.

But I think they would agree that they're in the very, very early stages of that, and the full benefits of that reform need some time to make itself operable. So they believe -- and I think we agree with them -- that utilizing the ministry of finance in the beginning was not the best option they had available, but it's certainly not an option that's precluded in any means as the Compact unfolds.

HEWKO: Just one thing, if I could add to what, David just mentioned, that, on the Steering Committee, there will be voting members that are representatives of civil society and the private sector, and there also will be an advisory committee created which will contain representatives of private-sector NGOs, civil society that will act as the voice of the beneficiaries of the program with respect to the Steering Committee.

Kyeh, you wanted to add something?

KIM: I just wanted to reinforce this idea that on the advisory council that will sit alongside the Steering Committee, there will be actually four members that participate in meetings of the Steering Committee which will serve as the board of directors for this program. Two of those members from the advisory committee will be voting members, and two will be observers, and it will rotate in and out so that they'll have a direct say in the management of this program.

HEWKO: Yes, sir?

UNIDENTIFIED MALE: (inaudible) from the Inter-American Foundation.

I'm curious about your disbursement schedule. It's $110 million over four years. Is that a timed disbursement depending on reaching benchmarks? How will you decide when and why to disburse the money?

HEWKO: Chuck?

SETHNESS: It's going to be driven largely by the activity budgets, and we expect to be disbursing quarterly in advance for projections for the coming quarter adjusted for any unspent funds from before. There are a number of conditions precedent that will have to be accomplished to stay on the disbursement track, and there will be some performance milestones.

But, as you listen to the description of the project, an awful lot of the spending is going to be relatively front-loaded and the results are not going to emerge until the third year into this. So the early disbursements are probably not going to be possible to condition very much on performance benchmarks.

ANDY KECK, INTERNATIONAL RESOURCES GROUP: Hi. Thanks for your presentation.

Andy Keck from International Resources Group.

In listening to the three topic areas being presented, I see a combination of action to improve investment, work with farmers and civil society, and then policy, and then you have this entity set up on the side that's a steering committee that I presume doesn't provide policy leadership.

Could you comment in the three areas how you think the policy leadership is actually going to occur? If you're going to have land tenure policy reform, I presume it's not the Steering Committee that's going to actually make that happen, for example.

And a little quick question on the ag bus centers. Are they supposed to be profit-driven centers?

HEWKO: Jolyne, if you could answer the first question, and, Carol, the second part.

SANJAK: Sure.

First, to comment that MCA Madagascar will have technical area specialists, so there will be some capacity in that sort of hub of the whole project that will cover these areas and work with the right respective people in different parts of the government and the society that have been working on the national land policy framework.

Some of these mechanisms and ways eventually will be refined, but, right now, for example, on the national land policy and the legislative reform proposals behind that, there's basically two kinds of advisory committees. They're not the official steering committee for MCC. This was in the pipeline, as I said, before.

There's an advisory committee that has people from the government and various stakeholder groups, including the rural communities, that have been discussing the substantive content and sort of leading the consultative process, which, actually, started, as I understand, back in the PRC process. These ideas came from that.

There's also a consultative group that is already in dialogue with people in the legislature in the higher levels of the government to continue to gain the political understanding needed to pass the reform.

KIM: Can I just add something to the policy reform issue?

One of the reasons for the success of Madagascar and moving this process so quickly to Compact signing is the political will that has been expressed from the president and a lot of the top leadership in the government. Some of our direct interlocutors have been the ministers themselves, secretary generals of the various ministries involved, and that has been a strong sign that there is political will behind the policy reform.

Some of the policy reform will be embedded in the disbursement schedule to trigger disbursement. So we want to make sure that for an activity to fully succeed that there is the requisite policy of regulatory reform to support this activity.

HEWKO: Carol?

LEBLANC: The agricultural business centers certainly do have one theme based on profitability, i.e. we are trying to look at what is potentially profitable that could be undertaken.

However, in my view, the ag business centers also have a component that identifies and works with the public and private sector to identify constraints that need to be addressed to make the environment better for entrepreneurial activity in the zones.

And, thirdly, in a subsistence economy, if the productivity of that crop can be increased, that has the effect of increasing real incomes in the households. So all three of those may be fair game, I think.

DAVID GIBSON, KEMONICS: Thank you very much for your presentation.

David Gibson with Kemonics.

I'm wondering, given the inextricable linkages between Madagascar's economic destiny and its very fragile environment, if you all wouldn't mind describing what types of screening instrumentation you might be looking at to ensure particularly on the ag side that the investments made are socially, economically as well as environmentally sustainable.

Thank you.

HEWKO: Carol?

LEBLANC: We have an environmental expert on our staff at MCC who has been out to Madagascar and has been a part of the process from the very beginning.

In addition, we have a consultative process that has included International Conservation Union and others of this type who can scrutinize proposed investments and comment on their environmental friendliness or not.

If you were to read the documentation of the Compact, the term "agricultural sustainability," "environmental sustainability" appears frequently, so I think it is through the advisory committees and through the consultative process that we will deal with those issues.

HEWKO: Well, I guess there are no further questions. Thank you all very much. Again, we at MCC are very, very excited about the new challenges ahead of us with Madagascar and the other countries.

And, again, thank you very much for coming.