Order Code RL32427
CRS Report for Congress
.Received through the CRS Web
Millennium Challenge Account:
Implementation of a New
U.S. Foreign Aid Initiative
Updated May 25July 1, 2005
Larry Nowels
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress
Millennium Challenge Account: Implementation of a
New U.S. Foreign Aid Initiative
Summary
In a speech on March 14, 2002, President Bush outlined a proposal for a major
new U.S. foreign aid initiative. The program, referred to as the Millennium
Challenge Account (MCA), is managed by a new Millennium Challenge Corporation
(MCC) and provides assistance, through a competitive selection process, to
developing nations that are pursing political and economic reforms in three areas:
ruling justly, investing in people, and fostering economic freedom. If fully
implemented, the initiative would represent one of the largest increases in foreign aid
spending in half a century, outpaced only by the Marshall Plan following World War
II and the Latin America-focused Alliance for Progress in the early 1960s.
The MCC differs in several respects from past and current U.S. aid practices:
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the size of the $5 billion commitment;
the competitive process that rewards countries for past and current
actions measured by 16 objective performance indicators;
the pledge to segregate the funds from U.S. strategic foreign policy
objectives that often strongly influence where U.S. aid is spent; and
the requirement to solicit program proposals developed solely by
qualifying countries with broad-based civil society involvement.
The Administration sought $1.3 billion for the MCA’s first year (FY2004), $2.5
billion for FY2005, amounts reduced by Congress to a combined $2.48 billion, about
one-third less requested. The President seeks $3 billion for FY2006, double the
FY2005 level but less than the original $5 billion commitment for the third year.
The passage of legislation on January 23, 2004, establishing the MCC (P.L. 108199) launched a period in which Following the establishment of the MCC in P.L. 108-199 (January 23, 2004),
the new Corporation formed, issued required
reports, consulted with Congress and
the public, and selected on May 6 and
November 8, 2004, eligible countries for
FY2004 and FY2005, respectively. Other
MCA implementation matters unfolded throughout 2004, including a discussion of
the relationship of MCA programs with those operated by USAID, how the
Corporation and USAID will support MCA implementation matters have been
unfolding since, including the relationship of MCA and USAID, how to support
“threshold” countries, and the funding of
programs, or “compacts,” for those qualified
under the FY2004 selection process.
The Corporation signed the first Compact with
Madagascar on April 18, 2005, and
announced in mid-May agreement with Honduras for a second Compact a second with Honduras on June 13.
A growing question raised by some Members of Congress concerns the level of
funding to support MCC programs. Some, noting that proposals received by the
Corporation in 2004 totaled more than $4.2 billion, fear that insufficient funds might
force the MCC to reduce the number of recipients or the size of the grants. Others,
however, believe that the slower-than-anticipated pace of Compact agreements
means that the Corporation has or will have enough resources, and may propose
reductions support reductions
to the $3 billion FY2006 request.
This report will be updated as events unfold.
Contents The Foreign Operations Appropriations, as passed
the House (H.R. 3057), recommends $1.75 billion for MCC programs next year,
while the Senate Appropriations Committee proposes $1.8 billion (also H.R. 3057).
This report will be updated as events unfold.
Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MCC Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MCC Implementation Steps and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Establishing the Millennium Challenge Corporation . . . . . . . . . . . . . . . . . . 45
Naming FY2004 Candidate Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Publishing the Selection Criteria and Methodology . . . . . . . . . . . . . . . . . . . 5
Country Selection — FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Naming Candidate Countries — FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 910
Country Selection — FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Continuity in the FY2005 Selection Round . . . . . . . . . . . . . . . . . . . . . 1011
Excluding More Countries that Qualified . . . . . . . . . . . . . . . . . . . . . . 1112
MCA Compacts and Program Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . 1213
Madagascar and Honduras — the First MCA Compacts . . . . . . . . . . . 1314
“Threshold” Countries and U.S. Assistance . . . . . . . . . . . . . . . . . . . . . . . . 1518
Role of USAID and the Future of Agency Programs in MCA Countries . . 1619
Funding Issues — Previous and in the 109th Congress . . . . . . . . . . . . . . . . 1719
MCA Request for FY2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1921
List of Tables
Table 1.
Table 2.
Table 3.
Table 4.
Table 5.
Table 6.
Status of MCA Compacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MCA Candidate, Eligible, and Threshold Countries — FY2004 . . . . 21. 23
MCA Candidate, Eligible, and Threshold Countries — FY2005 . . . . 22. 24
MCA Potential Candidate Countries — FY2006 . . . . . . . . . . . . . . . . . 2325
MCC Performance Indicators for FY2005 . . . . . . . . . . . . . . . . . . . . . . 2426
Comparison of MCA Authorization Legislation . . . . . . . . . . . . . . . . . 2527
Millennium Challenge Account:
Implementation of a
New U.S. Foreign Aid
Initiative Initiative
Most Recent Developments
On June 30, 2005, the Senate Appropriations Committee recommended (H.R.
3057; S.Rept. 109-96) $1.8 billion for the Millennium Challenge Account in
FY2006, $312 million higher than in FY2005 but $1.2 billion less than the President
requested.
On the previous day (June 28), the House passed the FY2006 Foreign
Operations Appropriations measure (H.R. 3057) providing $1.75 billion to fund the
MCA, slightly less than the Senate recommendation.
On June 15, Paul Applegarth, CEO of the Millennium Challenge Corporation,
announced his resignation. No reason has been given for his departure, nor has the
precise date on which he will leave been announced.
On June 13, President Bush met with the leaders of five African nations who
raised concerns about the delays in implementing MCA country programs. President
Bush pledged that the United States would work “harder and faster to certify
countries.”
On June 13, Honduras became the second country to sign an MCA Compact
with the United States, a five year, $215 million program focused on rural agriculture
development and road construction. Earlier, Madagascar signed the first MCA
Compact on April 18, a four-year, $110 million program supporting land titling,
financial sector support, and rural development projects. Also on June 13, the MCC
Board of directors approved two other Compacts for Cape Verde and Nicaragua.
Overview
In a speech on March 14, 2002, President Bush outlined a proposal for the
United States to increase foreign economic assistance beginning in FY2004 so that
by FY2006 American aid would be $5 billion higher than three years earlier. The
funds, referred to as the Millennium Challenge Account (MCA), is managed by a
new Millennium Challenge Corporation (MCC) providing assistance, through a
competitive selection process, to developing nations that are pursing political and
economic reforms in three areas:
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Ruling justly — promoting good governance, fighting corruption,
respecting human rights, and adhering to the rule of law.
Investing in people — providing adequate health care, education,
and other opportunities promoting an educated and healthy
population.
Fostering enterprise and entrepreneurship — promoting open
markets and sustainable budgets.
If fully implemented, the initiative would represent one of the largest increases in
foreign aid spending in half a century, outpaced only by the Marshall Plan following
World War II and the Latin America-focused Alliance for Progress in the early
1960s. It would also represent a fundamental change in the way the United States
invests and delivers economic assistance.
While the program was established and initially funded during the 108th
Congress, the 109th Congress will debateis debating a major appropriation increase — to $3
billion — proposed for the MCA. Committees of jurisdiction have held several
oversight hearings, and could consider changes to the authorizing legislation
concerning such matters as selection criteria and methodology, operation and funding
of the “threshold” programs for those countries that just missed qualifying for MCA
grants, and program monitoring and oversight. Authorization for MCC operations
in FY2006 are included in S. 600, as reported by the Senate Foreign Relations
Committee.
CRS-2 For funding matters, the House recommends a cut to the President’s $3
billion request to $1.75 billion (H.R. 3057), while the Senate Appropriations
Committee proposes $1.8 billion (also H.R. 3057).
MCC Background1
The concept is based on the premise that economic development succeeds best
where it is linked to free market economic and democratic principles and policies,
and where governments are committed to implementing reform measures in order to
achieve such goals. The MCC differs in several fundamental respects from past and
current U.S. aid practices:
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1
the size of the $5 billion commitment;
the competitive process that will reward countries for past actions
measured by 16 objective performance indicators;
the pledge to segregate the funds from U.S. strategic foreign policy
objectives that often strongly influence where U.S. aid is spent; and
the requirement to solicit program proposals developed solely by
qualifying countries with broad-based civil society involvement.
For a more in-depth discussion of the original MCA proposal and issues debated by
Congress in 2003, see CRS Report RL31687, The Millennium Challenge Account:
Congressional Consideration of a New Foreign Aid Initiative.
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The new initiative, which Congress authorized in January 2004 (Division D of
P.L. 108-199),2 is scheduled to phase in over a three-year period, beginning in
FY2004. During the first year, MCC participation was limited to the 74 poorest
nations with per capita incomes below $1,415 and that are eligible to borrow from
the World Bank’s International Development Association. The list expanded in
FY2005 to include all countries with a per capita income below $1,465 (adding
another 13 nations). Beginning in FY2006 and beyond, all lower-middle income
countries with per capita incomes below roughly $3,035 may compete for MCC
resources.
Country selection is based largely, but not exclusively, on the nation’s record
measured by 16 performance indicators related to the three categories, or “baskets,”
of good governance, economic freedom, and investing in people. Countries that
score above the median on half of the indicators in each of the three areas qualify.
Emphasizing the importance of fighting corruption, the indicator for corruption is a
“pass/fail” test: should a country fall below the median on the corruption indicator,
it will be disqualified from consideration unless other, more recent trends suggest
otherwise. (See Table 1 below for a complete list of the 16 performance indicators.)
Administration officials, since announcing the MCC initiative in 2002, said that the
selection process would be guided by, but not necessarily bound to the outcomes of
the performance indicators. Missing or old data, general trends, and recent steps
taken by governments might also be taken into account when annual decisions are
made.
Eligibility to receive MCA assistance, however, does not necessarily result in
an aid grant. Once selected, countries are required to submit program proposals —
1
For a more in-depth discussion of the original MCA proposal and issues debated by
Congress in 2003, see CRS Report RL31687, The Millennium Challenge Account:
Congressional Consideration of a New Foreign Aid Initiative.
2
Table 2, found at the end of this report, provides a summary of major MCA issues and
compares positions approved by the House, Senate, and Conference Committee during the
2003 debate.
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referred to as MCA Compacts — that have been developed through a broad-based,
national discussion that includes input from civil society. The focus of program
submissions may vary among countries in size, purpose, and degree of specificity,
and are evaluated by the Corporation for, among other things, how well the Compact
supports a nation’s economic growth and poverty reduction goals. Only those
Compacts that meet the MCC criteria will be funded. It is expected that successful
Compacts will support programs lasting three to five years, providing a level of
resources roughly equivalent to the largest providers of assistance in the country.
This will most likely result in a significant increase of U.S. economic assistance to
MCA participant countries.
To manage the new initiative, the Administration proposed and Congress
authorized the creation of a Millennium Challenge Corporation (MCC), an
independent government entity separate from the Departments of State and the
Treasury and from the U.S. Agency for International Development (USAID). The
MCC plans for an eventual staff of about 200, drawn from various government
agencies, non-governmental organizations, and the private sector, and led by a CEO
confirmed by the Senate. A Board of Directors, chaired by the Secretary of State and
composed of the Secretary of the Treasury, the USAID Administrator, the U.S. Trade
2
Table 2, found at the end of this report, provides a summary of major MCA issues and
compares positions approved by the House, Senate, and Conference Committee during the
2003 debate.
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Representative, and the Corporation’s CEO, oversees operations of the MCC and
makes the country selections. Four additional Board members, two of which have
yet to be confirmed by the Senate, are individuals from the private sector drawn from
lists of proposed nominees submitted by Congressional leaders.3
The decision to house the MCA in a new organization was one of the most
debated issues during early congressional deliberations of the President’s foreign aid
initiative. The Administration argued that because the MCA represents a new
concept in aid delivery, it should have a “fresh” organizational structure,
unencumbered by bureaucratic authorities and regulations that would interfere in
effective management. Critics, however, contended that if the MCA is placed
outside the formal U.S. government foreign aid structure, it would lead to further
fragmentation of policy development and consistency. Some believed that USAID,
the principal U.S. aid agency, should manage the MCA, while others said that the
MCA should reside in the State Department where more U.S. foreign policy entities
have been integrated in recent years. At least, some argued, the USAID
Administrator should be a member of the MCC Board, which had not been proposed
in the initial Administration request.
For FY2004, the Administration sought $1.3 billion for the MCA’s first year,
a level reduced by Congress to $994 million. The FY2005 budget proposed $2.5
billion while Congress approved $1.488 billion. The combined FY2004/2005
funding level of $2.48 billion is about one-third less than requested. The President
initially planned a $5 billion MCA program by FY2006, but is proposing $3 billion
for next year. Administration officials say that given congressional reductions the
3
On July 13, 2004, the Senate confirmed two of the four new Board members: Kenneth
Hackett, President and CEO of Catholic Relief Services, and Christine Todd Whitman,
former Governor of New Jersey and former head of the Environmental Protection Agency,
2001-2003. No further nominees have been submitted by the White House.
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past two years and competing demands elsewhere, a $3 billion request is more
realistic for FY2006.
MCC Implementation Steps and Issues
The passage of legislation on January 23, 2004 authorizing and funding the
MCC for FY2004 (Division D of P.L. 108-199) launched a period of 90 days during
which the new Corporation formed, issued required reports, consulted with Congress
and the public, and selected first year participant countries. Within 10 days of
enactment, the Board of Directors held its initial meeting to establish the program,
and over the following weeks the Corporation identified “candidate” countries for
FY2004, published the criteria and methodology to be used for country selection,
solicited public comments, issued guidelines for Compact proposals, and, on May 6,
2004, selected 16 countries to participate in the MCA’s first year of operations. This
was followed on November 10 with the selection of FY2005 eligible MCA countries,
an action that added one new participant to the FY2004 list. An additional 13
countries have also been named as threshold nations — those that just missed
qualifying as eligible countries.
3
On July 13, 2004, the Senate confirmed two of the four new Board members: Kenneth
Hackett, President and CEO of Catholic Relief Services, and Christine Todd Whitman,
former Governor of New Jersey and former head of the Environmental Protection Agency,
2001-2003. No further nominees have been submitted by the White House.
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Implementation matters that continue to unfold in 2005 include the relationship
of MCC programs with those operated by USAID, how the Corporation and USAID
will support threshold countries to better prepare for future performance reviews, the
awarding of MCA grants — in the form of Compacts — to MCA eligible countries,
and the funding request for FY2006.
Establishing the Millennium Challenge Corporation
On February 2, 2004, the Board of Directors met, agreed to Corporation bylaws, and approved then-Under Secretary of State Larson as the interim CEO.
Subsequently, the President nominated Paul Applegarth to be the permanent MCC
CEO, an individual confirmed by the Senate on May 5. CEO Applegarth has held
various international and development positions over the past 30 years, primarily in
the private sector. His most recent position prior to the MCC was the Managing
Director of Emerging Markets Partnership, serving as the COO of Emerging Africa
Infrastructure Fund in 2002.
Naming FY2004 Candidate Countries
Also on February 2, the MCC Board issued a list of 63 “candidate” countries
that would be reviewed for possible selection as MCA participants in FY2004. These
countries, according to authorizing legislation, must be eligible for assistance from
the World Bank’s International Development Association, have a per capita income
of $1,415 or less, and not be otherwise ineligible to receive U.S. assistance. The
latter condition eliminated twelve countries — Burma, Burundi, Cambodia, Central
African Republic, Cote d’Ivoire, Guinea-Bissau, Liberia, Serbia, Somalia, Sudan,
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Uzbekistan, and Zimbabwe — that were statutorily barred from receiving American
aid.4
Publishing the Selection Criteria and Methodology
Pursuant to reporting requirements set in the MCC legislation, the Corporation
on March 5, 2004 sent to Congress an overview of the criteria and methodology that
would be used to determine the eligibility of the 63 candidate countries in FY2004.
The report suggested that there would be relatively few and only minor changes to
the criteria and methodology that had been outlined 15 months earlier. The same 16
performance indicators, as listed in Table 1 below, would be utilized. In a few cases,
4
Various types of aid restrictions applied to these countries. For several — Burundi,
Central African Republic, Cote d’Ivoire, Guinea-Bissau, and Sudan — U.S. aid was blocked
because an elected head of government had been deposed by a military coup. For Cambodia
and Uzbekistan, legislation banned FY2004 assistance to the central governments of these
countries. Aid restrictions imposed on nations not cooperating in counter-narcotics efforts
(Burma), that are on the terrorist list (Sudan), or in arrears on debt owed the United States
(Liberia, Somalia, and Zimbabwe) also applied. Serbia could not receive aid in FY2004
unless the President issued a determination stating, among other things, that the government
was cooperating with the International Criminal Tribunal. Notwithstanding these
restrictions, each country remained eligible for humanitarian assistance from the United
States.
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data sources shifted from international institutions to national governments. This
was especially true in cases where existing data for an indicator were old or
incomplete.
Although the Corporation did not alter any of the original 16 performance
indicators, it attempted to address additional criteria added by Congress in P.L. 108199 through the use of supplemental data and qualitative information. While the
legislative authorities broadly match criteria proposed by the Administration,
lawmakers included four additional matters on which to evaluate a country’s
performance. These relate to the degree to which a country:
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recognizes the rights of people with disabilities;
supports a sustainable management of natural resources;
respects worker rights; and
makes social investments, especially in women and girls.
For an evaluation of the rights of people with disabilities, the MCC reported that it
would draw on information in the State Department’s annual Human Rights Report,
which includes a discussion of discrimination based on disability. Regarding natural
resource management, the Corporation would also use the Human Rights Report as
supplemental information on such issues as access to sanitation, deforestation,
conservation of land and marine resources, land tenure institutions, and protection
of threatened and endangered species. The State Department’s Human Rights Report
would also be used for additional information regarding worker rights, while
statistics on girl’s primary enrollment rates would supplement the four social
investment performance indicators.
4
Various types of aid restrictions applied to these countries. For several — Burundi,
Central African Republic, Cote d’Ivoire, Guinea-Bissau, and Sudan — U.S. aid was blocked
because an elected head of government had been deposed by a military coup. For Cambodia
and Uzbekistan, legislation banned FY2004 assistance to the central governments of these
countries. Aid restrictions imposed on nations not cooperating in counter-narcotics efforts
(Burma), that are on the terrorist list (Sudan), or in arrears on debt owed the United States
(Liberia, Somalia, and Zimbabwe) also applied. Serbia could not receive aid in FY2004
unless the President issued a determination stating, among other things, that the government
was cooperating with the International Criminal Tribunal. Notwithstanding these
restrictions, each country remained eligible for humanitarian assistance from the United
States.
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The MCC also noted that it would use the most recent release (then October
2003) of Transparency International’s Corruption Perception Index to update and
supplement the World Bank’s survey data on which corruption performance indicator
is based. This was necessary because the World Bank information was last published
in March 2003. Since the corruption indicator is a “pass/fail” measure, the quality
and timeliness of the data are especially important.
Given the range and diversity of suggestions offered throughout the public and
congressional debate of the MCC, many observers were surprised that the
Corporation did not propose more substantive changes to the criteria and
methodology. Some questioned how seriously the Administration considered
alternative approaches and whether the Corporation would be open to future
revisions.5 During the public comment period and at congressional oversight
hearings, some suggested that existing data sources needed to be refined or new
surveys created in order to specifically measure a country’s commitment on the four
criteria added by Congress.
After further study of the criteria and methodology, the Corporation announced
on August 26, 2004, a revised set of performance indicators that were used for the
5
See, for example, Steve Radelet, et al., A Comment on the Millennium Challenge Account
Selection Process, Center for Global Development, March 9, 2004.
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FY2005 selection process. The MCC lowered the inflation rate threshold from 20%
to 15%, making it somewhat more difficult to pass this test (only 6 of the 63
candidate countries failed this test for FY2004). An indicator measuring girls’
primary education completion rates replaced a broader measure used in FY2004 that
did not disaggregate primary education graduation by gender. As noted above,
including the means to measure country performance on key women and girls issues
was one of the requirements added by Congress during deliberation on MCC
authorizing legislation.
The Corporation further indicated that it will explore additional criteria and
methodology changes for FY2006. Under consideration are options to:
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lower the inflation level to 10%.
identify a measurement related to natural resource management; the
MCC has created a working group to study possibilities.
review other possible indicators that would better measure trade
barriers that are linked with economic growth.
develop a more comprehensive indicator than the current Days to
Start a Business to gauge a government’s commitment to
entrepreneurship and private-sector ownership.
consider additional gender-relation indicators.
Future criteria and methodology is also likely to be affected by an amendment
to MCC authorizing legislation approved by Congress in P.L. 108-477. Lawmakers
added a more specific definition of the performance criteria related to “investing in
people.” In the future, this category will extend to government policies promoting
health and education, as the current performance indicators attempt to measure, plus
5
See, for example, Steve Radelet, et al., A Comment on the Millennium Challenge Account
Selection Process, Center for Global Development, March 9, 2004.
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other factors contributing to the well-being and productivity of its citizens, including
access to affordable housing.
Country Selection — FY2004
On May 6, the MCC Board of Directors determined that 16 countries would be
eligible for FY2004 MCA funding and invited each to submit program proposals:
Armenia
Benin
Bolivia
Cape Verde
Georgia
Ghana
Honduras
Lesotho
Madagascar
Mali
Mongolia
Mozambique
Nicaragua
Senegal
Sri Lanka
Vanuatu
As expected, the selection process raised a number of questions and concerns. The
Administration had previously said that the Board would be guided by, but not
entirely bound to, the outcome of the performance indicator review process; that
Board members could apply discretion in their selection. Performance trends,
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missing or old data, and recent policy actions might come into play during selection
deliberations, officials noted.
The final selection reflected decisions that both strictly followed the
performance indicator outcomes and applied Board discretion to take into account
other factors. Ten of the countries complied with the stated criteria: performing
above the median in relation to their peers on at least half of the indicators in each
of the three policy “baskets” and performing above the median on corruption. The
Board also examined whether a country performed substantially below average on
any single indicator and whether their selection was supported by supplemental
information. Each of the ten countries also passed these additional tests.
For ten other countries, however, some discretion was applied by the Board. In
three cases, countries which met the criteria but fell significantly below average on
one indicator were still selected by the Board due to recent policy changes or positive
trend lines. Cape Verde, for example, scored poorly on the Trade Policy indicator,
but the Board took into account the country’s progress towards joining the World
Trade Organization and implementing a value added tax that will reduce reliance on
import tariffs. Lesotho did not score well on the measurement for Days to Start a
Business. The MCC Board, however, took note of Lesotho’s creation of a central
office to facilitate new business formation and saw positive performance on other
factors related to business start-ups. Sri Lanka scored far below the median on Fiscal
Policy, but the most recent trends suggested that the government was making
progress in reducing its budget deficit.
For three other countries — Bolivia, Georgia, and Mozambique — the Board
deviated from a strict application of the selection criteria because of evidence that the
governments were taking corrective actions in the deficient areas. Bolivia fell at the
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median (as opposed to above the median) on the corruption indicator, something that
would eliminate it from consideration. The Board, however, noted that President
Mesa, who took office in October 2003, had created a cabinet position to coordinate
anti-corruption activities and an office to investigate police corruption. Georgia, with
a newly elected government that had created an anti-corruption bureau and taken
other steps to fight corruption, was also selected despite scoring below the median
on corruption and three other “ruling justly” indicators. Mozambique, which failed
on corruption and each of the four “investing in people” indicators, was chosen based
on supplemental data that was more current than information available from the
primary data sources. This evidence, the Board felt, demonstrated Mozambique’s
commitment to fighting corruption and improving its performance on health and
education.
On the other hand, the MCC Board chose not to select four countries that
technically met the performance criteria but fell substantially below the median on
one or more indicator. In each of these cases, the Board did not believe that the
government was taking any action to improve its performance. Although Bhutan,
Mauritania, and Vietnam passed the corruption hurdle and half of the “ruling justly”
indicators, they scored very low on the measurements for Political Rights and Civil
Liberties, and in Vietnam’s case, on the Voice and Accountability indicator. A fourth
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country — Guyana — was also not selected despite passing the necessary hurdles.
It scored particularly low on the Fiscal Policy measurement.6
It has been long assumed by MCC officials and close observers of the MCA
initiative that when the country selections were announced, there would be
disagreements and possible surprises in the final list, especially if the Board exercised
its discretionary authority as it did for FY2004 participants. Representative Lowey,
for example, expressed her view at a May 13, 2004 House Appropriations Committee
hearing that East Timor, which failed to pass the “economic freedom” hurdle in part
due to missing data on two of the indicators, should have been selected. CEO
Applegarth responded that East Timor is a new nation and that it was premature to
conclude that it was a “high-performing” country. He acknowledged, however, that
East Timor should be given close consideration in the future if the current trend lines
continue.
Besides East Timor, some suggested that Kenya should have been included
because of its new government’s commitment to education and anti-corruption
efforts. USAID Administrator Natsios acknowledged at the May 13 hearing that
Albania was a “close call,” failing because it scored slightly below the median on
corruption. Like Albania, Malawi and Moldova would have qualified on the basis
of performance if not for slightly failing scores on corruption. Several small island
states, including Kiribati, Sao Tome, and Tonga, were not selected even though the
absence of data for several categories may have played a role.7
6
For a complete statement regarding the Board’s rationale, see Report on the Selection of
MCA Eligible Countries for FY2004, found at [http://www.mcc.gov], “Congressional
Reports.”
7
As noted below, East Timor, Albania, and Sao Tome were subsequently selected as three
(continued...)
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Despite these questions over specific country eligibility, the selection process
appeared to have satisfied two major concerns that have been consistently expressed
over the past year. Based on earlier analysis, some argued that Africa would be
under-represented in the final selection process, with perhaps as few as three regional
states participating. In fact, eight, or half of the first year qualifying nations are from
Africa.
Selection of countries that would give the appearance of geostrategic
considerations was an additional concern of many who view the absence of securityrelated factors from MCA decision-making as one of the most attractive features of
the initiative. For the most past, the Board appeared to have avoided this concern.
Had the Board used its discretionary powers to select Indonesia, for example, some
critics would have likely charged that the decision stemmed more from Jakarta’s role
in the war on terrorism than on strict policy performance. Indonesia passed all
necessary hurdles except for corruption. Some, nevertheless, have questioned
whether Georgia’s selection was driven by broad U.S. foreign policy objectives of
assisting a smooth political transition in the country rather than a choice based on
6
For a complete statement regarding the Board’s rationale, see Report on the Selection of
MCA Eligible Countries for FY2004, found at [http://www.mcc.gov], “Congressional
Reports.”
7
As noted below, East Timor, Albania, and Sao Tome were subsequently selected as three
of the seven “threshold” countries that will receive assistance to help the country meet the
MCA requirements.
CRS-10
performance.8 Likewise, Bolivia, a country in which the United States maintains
strong counter-narcotics goals, had been experiencing a period of instability despite
strong performance prior to October 2003. Both Georgia and Bolivia were selected
despite not strictly meeting the MCA performance criteria.
Naming Candidate Countries — FY2005
On July 20, 2004, the MCC Board of Directors launched the initial step in the
FY2005 selection process by naming 70 candidate countries, 7 more than were
reviewed for FY2004. After adjusting the per capita income upward to $1,4659 and
dropping the requirement that a country must be an IDA-eligible borrower from the
World Bank, 11 new countries were added to the list: China, Egypt, Equatorial
Guinea, Iraq, Morocco, Paraguay, Philippines, Swaziland, Turkmenistan, Tuvalu, and
Ukraine. Four countries fell off the FY2005 list that had qualified in FY2004 —
Albania, Bosnia and Herzegovina, Cape Verde, and Tonga — because their per
capita income grew beyond the $1,465 cutoff. Thirteen other nations were excluded
because they were ineligible for other U.S. economic assistance.10
7
(...continued)
of the seven “threshold” countries that will receive assistance to help the country meet the
MCA requirements.Country Selection — FY2005
Meeting on November 8, the MCC Board of Directors made its selection of
FY2005 eligible countries:
Armenia
Benin
Bolivia
Georgia
Ghana
Honduras
Lesotho
Madagascar
Mali
Mongolia
Morocco
Mozambique
Nicaragua
Senegal
Sri Lanka
Vanuatu
The Board chose one new country for FY2005 — Morocco — while 15 of the 16
nations included for FY2004 were determined eligible again for FY2005. Cape
Verde was not selected due to the fact that its per capita GNI exceeded the $1,465
8
See Steve Radelet, A Note on the MCC Selection Process for 2005, September 23, 2004,
found at [http://www.cgdev.org].
9
The MCC plans to adjust the per capita income threshold each year to correspond to the
per capita income cutoff of the “historic ceiling” of IDA lending, a calculation made by the
World Bank. In future years when all lower-middle income countries will be eligible to
compete, the MCC also will adjust that threshold — which grew from $2,975 in 2003 to
$3,035 in 2004 — in the consideration of determining candidate countries.
10
Eleven of these countries were also excluded in FY2004. Serbia, which was barred from
consideration for FY2004, exceeded the per capita income limit for FY2005 so was not
(continued...)
CRS-10
Country Selection — FY2005
Meeting on November 8, the MCC Board of Directors made its selection of
FY2005 eligible countries:
Armenia
Benin
Bolivia
Georgia
Ghana
Honduras
Lesotho
Madagascar
Mali
Mongolia
Morocco
Mozambique
Nicaragua
Senegal
Sri Lanka
Vanuatu
The Board chose one new country for FY2005 — Morocco — while 15 of the 16
nations included for FY2004 were determined eligible again for FY2005. Cape
Verde was not selected due to the fact that its per capita GNI exceeded the $1,465under consideration. Syria and Cuba, which became potential candidate countries beginning
in FY2005, were excluded because of a ban on direct aid to the countries. See Footnote 4,
above, for a complete list of countries and aid restrictions.
CRS-11
ceiling. Cape Verde, however, remains eligible for MCA support using FY2004
funds. Board selections represented both a high degree of continuity between
FY2004 decisions as well as a sharp difference in the degree to which it applied its
discretionary authority for qualifying or denying countries for FY2005.
Continuity in the FY2005 Selection Round. The fact that each country
(except Cape Verde) selected for FY2004 MCA participation was also declared
eligible for FY2005 should not be surprising, given the nature of the MCA concept.
The Board identified in May 2004 what it determined to be the 16 “best performers”
based on the assumption that these countries had, and would continue to express, a
strong commitment to the types of economic, governance, and social policy reforms
measured by the MCC. Absent a substantial negative development since May, there
was a presumed expectation that these same countries would score well in a
subsequent performance comparison with their income peers. Moreover, except in
some extreme situations, evidence of a slide in policy performance as measured
through the various data sources would likely lag behind the actual policy shift and
not be reflected in the immediate data updates.
In addition, two other factors that may not apply in future years seem to have
affected the outcome for FY2005. First, with the selection dates for FY2004 and
FY2005 coming only six months apart — rather than one year, as should be the case
in the future — it was likely that the data would indicate less change than might be
the case if the comparisons occurred over a longer period. Between May and
November, several of the data sources upon which the 16 performance indicators are
10
(...continued)
under consideration. Syria and Cuba, which became potential candidate countries beginning
in FY2005, were excluded because of a ban on direct aid to the countries. See Footnote 4,
above, for a complete list of countries and aid restrictions.
CRS-11
based did not update or revise their figures.11 As a result, the review of countries for
FY2005 was based on much of the same data and rankings as had been the case for
the FY2004 selection.
Moreover, the addition of 13 new countries for consideration in the FY2005
round had the effect for at least six of the indicators of lowering the median against
which countries were compared. Because of this, if a country scored well — above
the median — in the FY2004 selection decision, it was likely that it would score the
same or better in the review for FY2005 where medians declined. For example, in
May Bolivia fell exactly at the median on the corruption indicator. But in November,
when the median for corruption dropped somewhat after new countries were added,
Bolivia scored above the median even though Bolivia’s score on corruption did not
change. This phenomena is unlikely to be repeated again to the same extent since
countries in the low-income group will be added or subtracted only if their economy
grows beyond the per capita income ceiling or U.S. foreign aid sanctions are applied
or lifted since the last review. The net effect is that the core set of low-income
countries competing for MCA selection is unlikely to change as much as it did in
11
This is not true for the performance indicators of Inflation and Primary Girls Graduation
Rate, which were modified for the FY2005 selection, or for the indicators measuring Days
to Start a Business, Civil Liberties, and Political Freedom which were updated in 2004. For
some of the other economic and social investment indicators where data were drawn from
national sources, revised figures were used in the FY2005 selection, but only where
available. World Bank data for six governance-related indicators and the Trade Policy
measurement, however, were not revised between May and November 2004.
CRS-12
FY2005, thereby reducing the extent to which the median will be altered simply
because of the addition of new countries.
Excluding More Countries that Qualified. Despite the degree of
continuity between FY2004 and FY2005 in the selection of eligible countries, the
MCC Board departed somewhat from the previous round by not selecting a large
number of countries that technically met the MCA performance criteria. Many
observers raised questions over the FY2005 selections regarding the countries that
were not selected rather than those that were.
As noted above, in May 2004, the Board chose not to select four countries —
Bhutan, Guyana, Mauritania, and Vietnam — although each passed the minimum
number of indicators. The Board decided to exclude these four because they scored
“substantially below” the median on one or more measurements, although without
defining precisely what represented a mark “substantially below”the median.
For FY2005, the Board did not select 10 countries that met the criteria,
including three of the four left out of the FY2004 round (Mauritania did not meet the
minimum qualifications). In addition, for FY2005 Burkina Faso, China, Djibouti,
Egypt, Nepal, the Philippines, and Swaziland met the minimum standards but were
not selected. The Corporation offered little explanation as to why these countries
were not chosen.12 It appears, however, that scoring “substantially below” — perhaps
11
This is not true for the performance indicators of Inflation and Primary Girls Graduation
Rate, which were modified for the FY2005 selection, or for the indicators measuring Days
to Start a Business, Civil Liberties, and Political Freedom which were updated in 2004. For
some of the other economic and social investment indicators where data were drawn from
national sources, revised figures were used in the FY2005 selection, but only where
available. World Bank data for six governance-related indicators and the Trade Policy
measurement, however, were not revised between May and November 2004.
12
The MCC’s authorizing legislation (section 608(d)) requires the Corporation’s CEO to
(continued...)
CRS-12
in the lowest 25th percentile — has become a de-facto criteria for exclusion. For
example, the Corporation’s CEO Paul Applegarth commented that the Philippines,
a country that passed 13 of the 16 indicators, did not qualify because Manilla scored
“substantially below” the median on tests for health expenditures and fiscal policy,
and that more recent trends indicated the fiscal policy situation was deteriorating
further.13 Each of the other nine nations that met the minimum qualifications but
were not selected also had one score in the 25th percentile, although the Corporation
has not commented on whether this was the reason for not choosing them.
Another possible reason for limiting the number of qualifying countries in the
FY2005 round might be due to funding reductions that were anticipated in early
November. The Administration had requested combined FY2004/FY2005
appropriations of $3.8 billion, but was more likely, at the time of selection, to have
available 25%-35% less, depending on the outcome of congressional debate on the
FY2005 budget. Corporation officials have said that reduced funding would lead to
fewer countries assisted and/or smaller grants per country, a situation that would be
complicated further by qualifying additional nations.
12
The MCC’s authorizing legislation (section 608(d)) requires the Corporation’s CEO to
provide justification to Congress regarding only those countries declared as eligible for
MCA assistance and for those selected for Compact negotiation. Otherwise, there is no
statutory requirement for the MCC to comment on its decision-making process, including
the rationale for not selecting specific countries.
13
Comments by Paul Applegarth at a State Department Foreign Press Center Briefing,
November 9, 2004.
CRS-13
Instead, the Board of Directors invited three of these 10 countries to participate
in the Threshold Program, intended to help “near-miss” nations take steps to
strengthen areas that would help them qualify for full MCA assistance in the future.
Burkina Faso, Guyana, and the Philippines may now apply for Threshold Program
assistance.
Another Board departure in the FY2005 selection process was to avoid using its
discretionary authority to qualify countries that did not meet the minimum
performance indicators. In May, the Board chose three nations — Bolivia, Georgia,
and Mozambique — that did not pass the so-called “hard-hurdle” of corruption. The
latter two again qualified despite falling below the median on corruption, while
Bolivia did not require an exemption after the median dropped below its score with
the addition of new countries. For FY2005, five nations — Malawi, Moldova,
Paraguay, Tanzania, and Ukraine — passed the required number of performance
indicators, except corruption. Although Malawi, Paraguay, and Tanzania are
Threshold Countries, none of the five were chosen for full MCA status.
MCA Compacts and Program Proposals
The next step for qualified countries is the preparation and negotiation with the
MCC of program proposals, referred to as MCA Compacts. Only those Compacts
that demonstrate a strong relationship between the program proposal and economic
12
(...continued)
provide justification to Congress regarding only those countries declared as eligible for
MCA assistance and for those selected for Compact negotiation. Otherwise, there is no
statutory requirement for the MCC to comment on its decision-making process, including
the rationale for not selecting specific countries.
13
Comments by Paul Applegarth at a State Department Foreign Press Center Briefing,
November 9, 2004.
CRS-13
growth and poverty reduction will receive funding. Not all qualified MCA countries
may submit successful Compacts.
While acknowledging that Compact contents likely will vary, the Corporation
expects each to discuss certain matters:
!
!
!
!
!
!
!
a country’s strategy for economic growth and poverty reduction,
impediments to the strategy, how MCA aid will overcome the
impediments, and the goals expected to be achieved during
implementation of the Compact.;
why the proposed program is a high priority for economic
development and poverty reduction and why it will succeed; the
process through which a public/private dialogue took place in
developing the proposal;
how the program will be managed, monitored, and sustained after
the Compact expires;
the relationship of other donor activities in the priority area;
examples of projects, where appropriate;
a multi-year financial plan; and
a country’s commitment to future progress on MCA performance
indicators.
CRS-14
Madagascar and Honduras — the First MCA Compacts.14 The
Corporation did not set hard deadlines for Compact submissions in order to allow
countries adequate time to conduct a national dialogue over the contents of the
program proposal. As of December 1, 2004, the MCC had received proposals and
“concept papers” from 15 of the 16 FY2004 eligible countries, and began the next
phase — negotiating formal Compacts — with several countries. Meeting on March
14, 2005, the MCC Board of Directors announced the first Compact with
Madagascar, an agreement that was signed on April 18. At the Board’s meeting on
May 20, a Compact with Honduras was approved, with signing expected in June.
The Corporation has also notified Congress that Compact negotiations are underway
with Georgia, Nicaragua, and Cape Verde, and that final agreements for at least one
could be announced at the Board’s next meeting in Junefollowed by its signing on June
13. MCC Board also approved two additional Compacts with Cape Verde and
Nicaragua, and has notified Congress that Compact negotiations are underway with
Georgia.
Madagascar Compact. The Madagascar Compact is a four year, $110
million program, focusing on rural agriculture development and poverty reduction.
Specifically, the project has three objectives: 1) to increase land titling and land
security ($36 million); 2) to expand the financial sector and increase competition
($36 million); and 3) to improve agricultural production technologies and market
capacity in rural areas ($17 million). According to the Corporation’s CEO, the
Compact is designed to assist Madagascar’s rural poor, which account for 80% of the
nation’s impoverished population, and generate income by expanding opportunities
to own land, to access credit, and to gain technical training in agriculture and market
identification.
14
Details of the Madagascar and Honduras Compacts can be found at the MCA website:
[http://www.mcc.gov]. Specific information on Madagascar is available at
[http://www.mcc.gov/compacts/madagascar.shtml].
CRS-14
Elements of the design, negotiation, and completion of the Madagascar Compact
met several of the key criteria of the MCA process. For example, discussions
regarding the scope and purpose of the MCA grant occurred at the regional and
national level in Madagascar that included broad representation of civil society.
Management and oversight of the Compact will be handled by a new entity, MCAMadagascar, whose Steering Committee will include government and nongovernment officials. Both of these steps underscore the “country-ownership” and
broad participatory nature of MCA programs. The Compact also includes fiscal
accountability requirements concerning audits, monitoring, and evaluation that
support the transparency concept of the MCA. While the $110 million MCA grant
will be fully obligated when the Compact enters into force, resources will be
transferred periodically following a determination that performance continues
satisfactorily. This funding plan emphasizes the MCA principles of accountability
and results. Other issues related to major MCA concepts and principles and how they
are highlighted in the Madagascar program agreement will be examined once the
complete text of the Compact is available following entry into force.
One matter, however, which has drawn the close attention of Congress and
development policy analysts concerns the size of Madagascar’s MCA grant. While
Administration officials have said repeatedly that Compacts will be funded at various
levels depending on the nature and potential impact of the proposal, the presumption
14
Details of the Madagascar and Honduras Compacts can be found at the MCA website:
[http://www.mcc.gov]. Specific information on Madagascar is available at
[http://www.mcc.gov/compacts/madagascar.shtml].
CRS-15
has been that the MCA grant would represent a sizable increase in U.S. assistance to
the eligible country. In order to realize its potential as a “transformational” aid
program and to provide sufficient incentives to countries requesting “breakthrough”
projects, the MCC says that the size of its grants must place MCA assistance among
the top aid donors in a country.15
The four-year, $110 million Compact for Madagascar, however, does not appear
to meet this criteria. USAID “core” economic aid programs in Madagascar have
averaged about $20 million in recent years, with an additional supplement of $6 to
$12 million in annual food aid. The $28 million per-year average of the MCA
Compact will approximately double the level of U.S. assistance to Madagascar,
assuming USAID maintains its program at current levels. But the MCA grant, it
appears, will not be among the largest aid activities in Madagascar. France is the
largest bilateral donor, providing on average $60 million, 2000-2002, a level that
climbed substantially in 2003 to $142 million. The European Commission’s aid
program, 2001-2003, has averaged $63 million per year, while the World Bank’s
International Development Association is Madagascar’s largest source of
concessional assistance of about $170 million lent in each of 2002 and 2003.16 The
$110 million Compact for Madagascar is also not very large relative to the country’s
population. Of the 16 qualified countries for FY2004, Madagascar has the fourth
largest population (16.4 million), and might have been expected to receive one of the
larger MCA grants given its population size and its per capita income ($230, second
lowest among the 16 MCA countries).
15
See, for example, Millennium Challenge Corporation FY2005 Budget Justification, p. 7.
Found at [http://www.mcc.gov/about_us/key_documents/index.shtml].
16
Organization for Economic Cooperation and Development, Geographical Distribution of
Financial Flows to Aid Recipients, 1999/2003: 2005 edition. p. 172.
CRS-15
Honduras Compact. The five-year, $215 million MCA Compact with
Honduras focuses on two objectives — rural development and transportation. The
rural development project, representing $72.2 million of the Compact, will assist
small and medium-size farmers enhance their business skills and to transition from
the production of basic grains to horticultural crops, such as cucumbers, peppers, and
tomatoes. According to CEO Applegarth, these vegetable crops will generate about
$2,000 to $4,000 in annual income per hectare, compared with roughly $500 for
basic grains. The project intends to provide farmers with the appropriate
infrastructure and necessary training for producing and marketing these different
crops. The transportation project, totaling $125.7 million of the Compact, will
improve the major highway linking Honduran Atlantic and Pacific ports, and major
production centers in Honduras, El Salvador, and Nicaragua. Rural roads will also
be upgraded, helping farmers transport their goods to markets at a lower cost.
Specific results sought in the Compact are:
!
!
!
!
double productivity in 15,000 hectares in rural areas
expand access to credit for farmers by over 20%
upgrade the major road that links Honduras with commercial centers
upgrade about 1,500 kilometers of rural roads
15
See, for example, Millennium Challenge Corporation FY2005 Budget Justification, p. 7.
Found at [http://www.mcc.gov/about_us/key_documents/index.shtml].
16
Organization for Economic Cooperation and Development, Geographical Distribution of
Financial Flows to Aid Recipients, 1999/2003: 2005 edition. p. 172.
CRS-16
At nearly twice the size of the Madagascar Compact, the $215 million Honduras
Compact will provide on average $43 million additional U.S. assistance over the five
years of the program. By comparison, USAID development activities have averaged
about $35 million the past two years, with $29 million requested for FY2006. U.S.
disbursements of development assistance to Honduras, according to OECD sources,
averaged over $100 million annually, 2000-2003. These higher levels reflect
substantial assistance provided following the devastation of Hurricane Mitch in 1999.
The United States has been Honduras’ top aid donor in recent years, followed by
Japan, the World Bank, and the Inter-American Development Bank.17
17
OECD. Geographical Distribution of Financial Flows to Aid Recipients, 1999-2003, p.
152.
CRS-17
Table 1. Status of MCA Compacts
Country
Compact
Signed
GNI
per capita
Population
Living Below
$2 p/day (%)
Human
Development
Index Ranking1
FY05 US
Econ. Aid
(millions)
Compact
Size
(millions)
Compact Focus
Cape Verde
Pending
$1,440
NA
105
$1.7
$110
5 years
- Agriculture
- Transportation/roads
- Private sector
Honduras
June 13, 2005
$970
44.0%
115
$22.6
$215
5 years
-Agriculture
-Transportation/roads
Madagascar
April 18, 2005
$290
85.9%
150
$39.1
$110
four years
- Land titling
- Financial sector
- Agriculture
Nicaragua
Pending
$740
79.9%
118
$40.7
$175
five years
- Land titling
- Transportation/roads
- Agriculture
Sources:
Population Living Below $2 Per Day — data from the World Bank, World Development Indicators, 2005; Gross National Income per capita — 2003 data
from the World Bank, World Development Indicators, 2005. Human Development Index Rank — from UNDP, Human Development Report, 2004.
U.S. Economic Aid — Department of State. MCA Compact information — Millennium Challenge Corporation.
1. The Human Development Index (HDI) is compiled by the U.N. Development Program and is published annually in the UNDP Human Development
Report. It is a composite index that measures the average achievements in a country in three basic dimensions of human development: a long and healthy
life, as measured by life expectancy at birth; knowledge, as measured by the adult literacy rate and the combined gross enrolment ratio for primary, secondary
and tertiary schools; and a decent standard of living, as measured by GDP per capita in purchasing power parity (PPP) US dollars. The most recent report
(2004) evaluates 171 countries, with number 1 having the best HDI and number 171 scoring the worst in the Index.
CRS-18
“Threshold” Countries and U.S. Assistance
In order to encourage non-qualifying countries to improve in weak areas, the
United States will help governments that are committed to reform to strengthen
performance so that they would be more competitive for MCA funding in future
years. Congress provided in authorizing legislation that not more than 10% of MCA
appropriations ($99.4 million in FY2004) could be used for such purposes, stating
that the funding could be made available through USAID. The MCC set aside up to
$40 million for countries that just missed qualifying for FY2004 funding and projects
an additional $90 million for FY2005, subject to the quality of submitted proposals.18
17
OECD. Geographical Distribution of Financial Flows to Aid Recipients, 1999-2003, p.
152.
18
Initially, assistance for Threshold countries was authorized only for FY2004. The
FY2005 Foreign Operations Appropriations (Division D of P.L. 108-447, the Consolidated
Appropriations Act for FY2005, makes 10%, or $149 million of the new appropriation
available Threshold assistance.
CRS-16
The Corporation has made two announcements regarding the selection of
Threshold Countries. On September 30, the Corporation named seven participants:
Albania, East Timor, Kenya, Sao Tome and Principe, Tanzania, Uganda, and Yemen.
Five weeks later, on November 8, the MCC added six more nations for FY2005:
Burkina Faso, Guyana, Malawi, Paraguay, the Philippines, and Zambia. According
to the Threshold Program Policy guidance issued by the Corporation,19 the program
will assist countries make policy reforms and institutional changes in areas where
they failed to meet the MCA performance criteria. In order to qualify for Threshold
Program FY2004 assistance, countries must have submitted by January 31, 2005,
concept papers identifying:
!
where and why the country failed to pass specific indicators;
!
proposals for policy, regulatory, or institutional reforms that would
improve the country’s performance on these indicators; and
!
types of assistance, over a two-year maximum period, required to
implement these reforms.
If the Corporation, in consultation with USAID, determines that the concept paper
shows sufficient commitment to reform and a promise of success, the country will
prepare a Threshold Country Plan that specifically establishes a program schedule,
the means to measure progress, and financing requirements, among other
considerations. USAID is charged with overseeing the implementation of Threshold
Country Plans, including working with countries to identify appropriate
implementing partners such as local, U.S., and international firms; NGOs; U.S.
government agencies; and international organizations. Like regular MCA Compacts,
funding is not guaranteed for each country selected for the Threshold Program, but
will be based on the quality of the Country Plan.
18
Initially, assistance for Threshold countries was authorized only for FY2004. The
FY2005 Foreign Operations Appropriations (Division D of P.L. 108-447, the Consolidated
Appropriations Act for FY2005, makes 10%, or $149 million of the new appropriation
available Threshold assistance.
19
Found at [http://www.MCC.gov].
CRS-19
Role of USAID and the Future of Agency Programs in MCA
Countries
As noted above, how USAID would participate in the MCA initiative has been
a continuing concern of Congress and various policy analysts. Legislation
authorizing the MCC requires the Corporation’s CEO to coordinate with USAID and
directs the Agency to ensure that its programs play a primary role in helping
candidate countries prepare for MCA consideration. Corporation and USAID
officials have said there will be close collaboration between the two entities, although
the precise nature of the relationship has yet to be made public. USAID maintains
missions in 14 of the 17 eligible countries and might be expected to support MCC
programs, through contracting, procurement, and monitoring tasks.
Another question is how USAID will adjust its own programs in MCA
countries, especially where the Agency maintains relatively small activities in
relation to other donors. Since the goal is to provide resources that will make MCA
programs among the largest aid operations in a country, it was anticipated that
19
Found at [http://www.MCC.gov].
CRS-17
USAID spending would fall well below amounts provided through MCC Compacts.
For example, in Mongolia, where U.S. aid programs have totaled $10-$12 million
annually in recent years, the United States was the fourth largest bilateral donor in
2002, representing less than a quarter of the size of Japan’s economic aid
disbursements. In Ghana, Senegal, and Sri Lanka, USAID maintains larger programs
but spends far less than other countries and multilateral agencies. But in the case of
the first Compacts for Madagascar and Honduras, the MCA grants are only
somewhat higher on a per-year average ($28 million for Madagascar and $43 million
for Honduras) than USAID’s “core” economic aid programs (about $20 million for
Madagascar and $34 million for Honduras).
Like other issues involving USAID, this question remains under review.
USAID Administrator Natsios told the House Appropriations Committee on May 9,
2004 that the Agency would not withdraw from or cut programs in MCA countries,
but would not increase spending either. He said, however, that USAID would work
to ensure that its programs operate in an integrated way with MCA-funded activities.
The first test will come in Madagascar where the MCA Compact focuses on
rural agriculture, land tenure, and the financial sector, with an anticipated outcome
of protecting the country’s fragile ecosystem. USAID’s current program is largely
targeted on preventing sexually transmitted infections and HIV/AIDS, strengthening
health services, improving the nation’s governance capacity, conserving
Madagascar’s biologically diverse forest ecosystems, and promoting agriculture
market development and trade. The latter two objectives appear to be consistent with
the MCA Compact. Adjustments to USAID’s program could be made in the future,
however, as the Agency undertakes a review of its strategic goals now that
Madagascar entered into an MCA program.
Funding Issues — Previous and in the 109th Congress
As mentioned above, Congress appropriated $994 million for FY2004 MCC
programs and an additional $1.488 billion for FY2005. The enacted appropriation
CRS-20
for FY2005 is 40% below the President’s $2.5 billion request. The MCC
recommendation was by far the largest increase sought by the Administration in the
Foreign Operations appropriations proposal and viewed by many observers as one of
the most vulnerable items in an increasingly difficult budget environment. In earlier
congressional action, House and Senate Budget Committees (H.Con.Res. 393 and
S.Con.Res. 95) recommended reductions in international affairs spending,
suggesting that much of the proposed cuts could be achieved by trimming back the
MCC request. Legislation authorizing appropriations for the MCC reported by the
Senate Foreign Relations Committee (S. 2144) would have reduced the level to $2
billion.
Foreign Operations appropriation bills passed in both the House and Senate
(H.R. 4818) made substantial reductions to the President’s MCC request for FY2005.
The bill, as approved by the House, reduced by half the President’s $2.5 billion
proposal. In cutting the MCC proposal, the House Appropriations Committee noted
that its decision resulted solely from the constrained budget environment in FY2005
and the need to address other Administration and Congressional priorities. The
executive branch, in its Statement of Administration Policy on H.R. 4818, expressed
CRS-18
its “disappointment” over the level of MCC funding and urged Congress to increase
resources. During floor debate on July 15, the House defeated (41-379) an
amendment by Representative Paul to eliminate all MCC appropriations.
The House Committee, in its report on H.R. 4818, also expressed concern over
Corporation plans to enter into multi-year Compacts without committing total
funding for these programs in the year the Compact is signed. This, the Committee
believed, would obligate future Congresses to fund prior year contracts.
Consequently, the bill required the MCC to only sign Compacts for which complete
funding was available from existing appropriations. The House Committee also
recommended that Compacts be limited to a 3-4 year period rather than a 3-5 year
duration envisioned by the MCC.
The Senate measure — also H.R. 4818, as amended to incorporate the text of
S. 2812, proposed a more significant cut to the President’s MCC request — to $1.12
billion. Despite the reduction, the Senate Appropriations Committee noted its strong
support for the program.
Following strong pressure from the White House to increase MCC funding
above House and Senate-passed levels, conferees settled on $1.5 billion for the MCC
in FY2005, adjusted downward to $1.488 billion by an across-the-board rescission
requirement. Like the House bill, the conference agreement requires that the MCC
fully fund multi-year compacts selected in FY2004 and FY2005.
For some time, some Members of Congress have raised questions regarding
whether sufficient funds will be available to support MCC programs in every country
selected, especially if the Board continues its practice of selecting more countries
than meet the strict criteria. Representative Kolbe, chairman of the House Foreign
Operations Subcommittee, speculated at a May 9, 2004, hearing that based on recent
Board decisions, by 2006, as many as 40 countries might have qualified. This, he
believed, could not be fully supported with likely funding levels, and might raise
country expectations that could not be met and undermine program incentives.
CRS-21
MCC officials point out that qualification for the program does not mean that
a government will receive funding. That decision will be based on the quality of the
Compact proposals and it is possible that the Corporation will not finalize
agreements with all eligible countries. Nevertheless, the Corporation’s CEO Paul
Applegarth acknowledged the funding dilemma for future MCC operations at a
Senate Foreign Relations Committee hearing on October 5, noting that the sum of
proposals received thus far totaled $4.2 billion.
A March 2004 GAO report estimated that the MCC could adequately fund 8-13
Compacts with an appropriation of $3.5 billion (the combined FY2004 enacted and
FY2005 requested amounts). This suggests, that even if Congress had fully funded
the FY2005 proposal, the Corporation would not be able to support programs in all
17 countries approved for FY2004 and FY2005. With $1 billion less than the
assumption used by GAO in its assessment, the MCC may face increasing difficulties
funding Compacts of a sufficient size that will have a meaningful impact on a
country’s economic growth and poverty reduction goals. This may lead to further
CRS-19
congressional examination of the Board’s selection process and consideration of
ways to limit the number of countries selected in the future.
MCA Request for FY2006. The Administration seeks a $3 billion
appropriation for FY2006, a level that has been criticized for being both too small
and too large. Some argue that given the heightened budget pressures and proposed
reductions for many domestic programs, coupled with the fact that the MCC has
spent only $4 million of the nearly $2.5 billion in existing appropriations, a request
for roughly double the amount provided in FY2005 is not warranted. Others,
however, note that President Bush pledged an MCA funding level of $5 billion by
FY2006 when he announced the initiative in March 2002, and believe the
Administration should stick with its promise regardless of congressional reductions
the past two years. The MCC calls its $3 billion budget proposal a realistic level
given prior congressional actions and competing resource demands.
Countering the argument that the Corporation has spent only a fraction of its
resources, MCC officials say that program proposals received thus far total more than
$3 billion, not including Morocco (the largest eligible country), and will exhaust
available resources by early 2006. The Corporation, in its FY2006 budget
justification to Congress, estimates that it will sign 18 Compacts with low-income
countries using FY2004-FY2006 funds, totaling just over $4 billion, or an average
Compact size of nearly $225 million. The MCC budget assumptions also include
four new Compacts in FY2006 with low-middle income countries which become
eligible in FY2006 to compete for MCA grants. These costs would add $680 million
or an average of $170 million per Compact. The remaining $800 million would be
divided among amendments to earlier Compacts ($300 million), Threshold country
programs ($270 million), and administrative and related expenses (over $200
million).
These MCA budget projections appear to assume that all, or nearly all eligible
low-income countries will sign Compacts, and that four of the roughly 30 new lowmiddle income nations will reach an MCA agreement by the end of FY2006. If so,
MCA financed programs could absorb the total $4.7 billion budgeted for Compacts,
FY2004-2006, but only if subsequent Compacts are of the size of the Honduras
CRS-22
Compact and significantly larger in dollar terms than the Madagascar program.
Another outcome that could place fiscal constraints on the MCC is if a substantial
number of new low income countries are selected for FY2006. Based on previous
experience and assumptions set out in the Corporation’s FY2006 budget justification,
this scenario is unlikely.
Implications for the FY2007 budget are also unclear. Because a country must
complete one MCA program before applying for a second, none of the 22 potential
Compact countries assumed in the MCC budget documents would be eligible for a
subsequent grant until FY2008. Given that only one new country was added to the
eligible list in FY2005, and that the MCC projects another five in FY2006, a possible
FY2007 funding level of between $3 and $5 billion would suggest several possible
scenarios: a surge (unlike FY2005 and FY2006) in the number of newly eligible
countries, possibly including the elevation of Threshold countries to full MCA
eligible status; significant amendments to existing Compacts increasing their size;
CRS-20
or the creation of a large funding reserve that could be utilized in subsequent years
as current MCA countries complete programs and apply for new grants.
Congressional Action. In the first legislative action on the FY2006 MCA
request, the Senate Foreign
Relations Committee, in S. 600, authorizes $3 billion, as
proposed, and such sums
as may be necessary for FY2007. Appropriations Committees will take up the
funding issue beginning in June.
CRS-21
Table 1
The House, however, voted on June 28 to reduce the FY2006 MCA funding
level to $1.75 billion (H.R. 3057). The Appropriation Committee’s report on the
legislation said that the reduction stemmed solely from the constrained budget
environment and the need to allocate resources to other Presidential and
congressional priorities. In order to operate in FY2006 with reduced resources, the
Committee recommended that the Corporation not use funds for amending and
increasing existing Compacts, but to maximize the number of new compacts with
available appropriations.
The Senate Appropriations Committee recommended on June 30 (also H.R.
3057) a slightly higher MCA appropriation, providing $1.8 billion. The Committee,
in its report (H.Rept. 109-96), also said that the constrained budget allocation was
one reason for the reduced appropriation. The Senate panel, however, further noted
that the MCC had obligated less than $34 million of the nearly $2.5 billion in
existing funds, and that the average value to the two signed Compacts was about onehalf of what the Corporation stated in its budget justification. The Committee further
expressed concern about coordination and consistency with other U.S. aid programs
in MCA countries, and directed the Secretary of State to report on these issues,
including an assessment of whether MCA programs were duplicative of USAID or
other aid activities in Compact countries.
CRS-23
Table 2. MCA Candidate, Eligible, and Threshold Countries —
FY2004
Criteria: IDA-eligible, per capita income $1,415 and below, and not prohibited from
receiving other U.S. economic assistance.
Eligible Countries are in Bold.
Threshold Countries are followed with (TC)
Africa
Income*
East Asia/Pacific
Income*
Angola
Benin
Burkina Faso
Cameroon
Cape Verde
Chad
Comoros
Congo, Dem Rep of
Congo, Rep of
Eritrea
Ethiopia
Gambia
Ghana
Guinea
Kenya (TC)
Lesotho
Madagascar
Malawi
Mali
Mauritania
Mozambique
Niger
Nigeria
Rwanda
Sao Tome &
Principe (TC)
Senegal
Sierra Leone
Tanzania (TC)
Togo
Uganda (TC)
Zambia
Latin
America
Bolivia
Guyana
Haiti
Honduras
Nicaragua
Income*
$940
$840
$440
$920
**
Income*
**
$360
$590
$460
$230
$420
$840
Mid-East
Djibouti
Yemen (TC)
Income*
$900
$490
Eurasia
Armenia
Azerbaijan
Georgia
Income*
$790
$650
$720
Europe
Albania(TC)
Bosnia
Income*
$1,380
$1,270
$290
Kyrgyz Rep.
$290
$470
$140
$280
$270
$240
$330
Moldova
Tajikistan
$460
$180
Income*
$660
$390
$220
$560
$1,290
$220
$390
$90
$700
$160
$100
$280
$270
$410
$360
$470
$240
$160
$240
$340
$210
$170
$290
$230
East Asia/Pacific
East Timor (TC)
Indonesia
Kiribati
Laos
Mongolia
Papua New Guinea
Solomon Islands
Tonga
Vanuatu
Vietnam
Income*
$430
$680
$810
$310
$440
$580
$570
$1,410
$1,080
$430
South Asia
Afghanistan
Bangladesh
Bhutan
India
Nepal
Pakistan
Sri LankaLatin
America
Bolivia
Guyana
Haiti
Honduras
Nicaragua
Income*
$940
$840
$440
$920
**
South Asia
Afghanistan
Bangladesh
Bhutan
India
Nepal
Pakistan
Sri Lanka
Income*
**
$360
$590
$460
$230
$420
$840
Mid-East
Djibouti
Yemen (TC)
Income*
$900
$490
Eurasia
Armenia
Azerbaijan
Georgia
Income*
$790
$650
$720
Europe
Albania(TC)
Bosnia
Income*
$1,380
$1,270
$290
Kyrgyz Rep.
$290
$470
$140
$280
$270
$240
$330
Moldova
Tajikistan
$460
$180
* Gross National Income, dollars per capita, 2002. World Bank Annual Report, 2003.
** Precise data unavailable.
CRS-2224
Table 23. MCA Candidate, Eligible, and Threshold Countries —
FY2005
Criteria: Per capita income $1,465 and below, and not prohibited from receiving
other U.S. economic assistance.
Eligible Countries are in Bold.
Threshold Countries are followed with (TC)
Africa
Income*
East Asia/Pacific
Income*
Angola
Benin
Burkina Faso (TC)
Cameroon
Chad
Comoros
Congo, Dem Rep
Congo, Rep of
Equatorial Guinea
Eritrea
Ethiopia
Gambia
Ghana
Guinea
Kenya (TC)
Lesotho
Madagascar
Malawi (TC)
Mali
Mauritania
Mozambique
Niger
Nigeria
Rwanda
Sao Tome &
Principe (TC)
Senegal
Sierra Leone
Swaziland
Tanzania (TC)
Togo
Uganda (TC)
Zambia (TC)
Income*
$740
$440
$300
$640
$250
$450
$100
$640
**
$190
$90
$310
$320
$430
$390
$590
$290
$170
$290
$430
$210
$200
$320
$220
$320
China
East Timor (TC)
Indonesia
Kiribati
Laos
Mongolia
Papua New Guinea
Philippines (TC)
Solomon Islands
Tuvalu
Vanuatu
Vietnam
$1,100
$430
$810
$880
$320
$480
$510
$1,080
$600
**
$1,180
$480
$320
Azerbaijan
$550
$150
$1,350
$290
$310
$240
$380
Latin
America
Bolivia
Guyana(TC)
Haiti
Honduras
Nicaragua
Paraguay(TC
Income*
$890
$900
$380
$970
$730
$1,100
South Asia
Afghanistan
Bangladesh
Bhutan
India
Nepal
Pakistan
Sri Lanka
Income*
**
$400
$660
$530
$240
$470
$930
Mid-East
Djibouti
Egypt
Iraq
Morocco
Yemen (TC)
Income*
$910
$1,390
**
$1,320
$520
Eurasia
Armenia
Income*
$950
Europe
Income*
Income*
$950
Europe
Income*
East Asia/Pacific
China
East Timor (TC)
Indonesia
Kiribati
Laos
Mongolia
Papua New Guinea
Philippines (TC)
Solomon Islands
Tuvalu
Vanuatu
Vietnam
Income*
$1,100
$430
$810
$880
$320
$480
$510
$1,080
$600
**
$1,180
$480
South Asia
Afghanistan
Bangladesh
Bhutan
India
Nepal
Pakistan
Sri Lanka
Eurasia
Armenia
Azerbaijan
Georgia
Kyrgyz Rep.
Moldova
Tajikistan
Turkmenistan
Ukraine
$810
$830
$330
$590
$190
$1,120
$970
* Gross National Income, dollars per capita, 2003. World Bank Annual Report, 2004.
** Precise data unavailable.
CRS-2325
Table 34. MCA Potential Candidate Countries — FY2006
Criteria: Per capita income $3,035 and below, and not prohibited from receiving
other U.S. economic assistance.20
Africa
Angola
Benin
Burkina Faso
Cameroon
Cape Verde
Chad
Comoros
Congo, Dem Rep of
Congo, Rep of
Equatorial Guinea
Eritrea
Ethiopia
Gambia
Ghana
Guinea
Kenya
Lesotho
Madagascar
Malawi
Mali
Mauritania
Mozambique
Namibia
Niger
Nigeria
Rwanda
Sao Tome&Principe
Senegal
Sierra Leone
South Africa
Swaziland
Tanzania
Togo
Uganda
Zambia
Income*
$740
$440
$300
$640
$1,490
$250
$450
$100
$640
**
$190
$90
$310
$320
$430
$390
$590
$290
$170
$290
$430
$210
$1,870
$200
$320
$220
$320
$550
$150
$2,780
$1,350
$290
$310
$240
$380
East Asia/Pacific
East Timor
Fiji
Indonesia
Kiribati
Laos
Marshall Islands
Micronesia
Mongolia
Papua New Guinea
Philippines
Samoa
Solomon Islands
Thailand
Tonga
Tuvalu
Vanuatu
Vietnam
Income*
$430
$2,360
$810
$880
$320
$2,710
$2,090
$480
$510
$1,080
$1,600
$600
$2,190
$1,460
**
$1,180
$480
Latin America
Belize
Bolivia
Brazil
Colombia
Dominican Rep
Ecuador
El Salvador
Guatemala
Guyana
Haiti
Honduras
Jamaica
Nicaragua
Paraguay
Peru
Suriname
Income*
**
$890
$2,710
$1,810
$2,070
$1,790
$2,200
$1,910
$900
$380
$970
$2,760
$730
$1,100
$2,150
**
South Asia
Afghanistan
Bangladesh
Bhutan
India
Nepal
Pakistan
Sri Lanka
Income*
**
$400
$660
$530
$240
$470
$930
Mid-East
Algeria
Djibouti
Egypt
Iraq
Jordan
Morocco
Tunisia
Yemen
Income*
$1,890
$910
$1,390
**
$1,850
$1,320
$2,240
$520
Eurasia
Income*
Armenia
$950
Europe
Azerbaijan
$810
Albania
Belarus
$1,590
Bulgaria
Georgia
$830
Bosnia
Kazakhstan
$1,780
Macedonia
Kyrgyz Rep.
$330
Romania
Moldova
$590
Turkey
Russia
$2,610
Tajikistan
$190
Turkmenistan
$1,120
Ukraine
$970
* Gross National Income, dollars per capita, 2003. World Bank Annual Report, 2004.
** Precise data unavailable.
20
Income*
$1,740
$2,130
$1,540
$1,980
$2,310
$2,790
The $3,035 per capita GNI figure would be the ceiling for FY2005 but will be adjusted
in July 2005 when the World Bank releases a new World Development Report. It is likely
that the per capita GNI ceiling for lower-middle income countries will rise somewhat, but
at this time, it is impossible to say what that level might be or precisely identify which
countries will fall under the ceiling. This list is an estimate based on the current lowermiddle income ceiling and those countries that are currently defined by the World Bank as
lower-middle income and are not prohibited from receiving U.S. economic assistance.
CRS-2426
Table 45. MCC Performance Indicators for FY2005
Ruling Justly
Investing in People
Economic Freedom
Control of Corruption
Source: World Bank Institute
[http://www.worldbank.org/wbi/governance/govdat
a2002/index.html]
Public Primary Education Spending as % of GDP
Sources: National governments
Country Credit Rating
Source: Institutional Investor Magazine, September
2004.
Voice and Accountability
Source: World Bank Institute
[http://www.worldbank.org/wbi/governance/govdat
a2002/index.html]
Primary Girls’ Education Completion Rate
Sources: World Bank and UNESCO
Inflation (must be below 15%)
Source: Multiple
Government Effectiveness
Source: World Bank Institute
[http://www.worldbank.org/wbi/governance/govdat
a2002/index.html]
Public Expenditure on Health as % of GDP
Sources: National governments
Fiscal Policy
Source: National governments and IMF World
Economic Outlook
Rule of Law
Source: World Bank Institute
[http://www.worldbank.org/wbi/governance/govdat
a2002/index.html]
Immunization Rates: DPT and Measles
Sources: World Health Organization
Trade Policy
Source: The Heritage Foundation, Index of
Economic Freedom
[http://www.heritage.org/research/features/index/]
Civil Liberties
Source: Freedom House
[http://www.freedomhouse.org/research/freeworld/
2004/table2004.pdf]
Regulatory Policy
Source: World Bank Institute
[http://www.worldbank.org/wbi/governance/govdat
a2002/index.html]
Political Freedom
Source: Freedom House
[http://www.freedomhouse.org/research/freeworld/
2004/table2004.pdf]
Days to Start a Business
Source: World Bank
[http://rru.worldbank.org/DoingBusiness/ExploreT
opics/StartingBusiness/CompareAll.aspx]
CRS-2527
Table 56. Comparison of MCA Authorization Legislation
Issue
Administration
Senate (S. 925)a
House (H.R. 1950)a
Conference (H.R. 2673)
MCA oversight
Board of Directors, chaired by
Sec. of State, with Treasury
and OMB
Board of Directors, chaired by
the Sec. of State, with
Treasury, USAID, USTR, and
the MCA’s Chief Executive
Officer (CEO)
Board of Directors, chaired by
Sec. of State, with Treasury,
USTR, USAID, MCC CEO, and
4 others nominated by the
President from a Congressional
list. Non-voting members
include OPIC, OMB, Peace
Corps, and TDA.
Board of Directors, chaired by
Sec. of State, with Treasury,
USTR, USAID, MCC CEO,
and 4 others nominated by the
President that may come from
list submitted by Congressional
leaders.
MCA organization
Independent Millennium
Challenge Corporation
Independent Millennium
Challenge Corporation whose
CEO reports to and be under
the direct authority and foreign
policy guidance of the Sec. of
State
Independent Millennium
Challenge Corporation
Independent Millennium
Challenge Corporation
MCA coordinator
CEO of Corporation
CEO “manages” the
Corporation, reporting to and
under the direct authority and
foreign policy guidance of the
Sec. of State
CEO “heads” the Corporation,
reporting to the President
CEO “manages” the
Corporation, reporting to and
under the direct authority and
foreign policy guidance of the
Board of Directors.
CRS-2628
Issue
Interim CEO
Administration
Senate (S. 925)a
House (H.R. 1950)a
Conference (H.R. 2673)
—
—
—
Board of Directors may appoint
a confirmed U.S. Government
official to serve as interim
CEO until a CEO has been
confirmed by the Senate.
Selection of
countries
Board of Directors
Board of Directors
CEO of Corporation
Board of Directors
MCC Advisory
Council
None
None
Nine members named by the
CEO to advise on MCA policy,
review eligibility criteria,
evaluate the MCC, assess MCC
capabilities, and make
recommendations to the CEO.
None
CRS-2729
Issue
Country income
eligibility
Eligible entity
Administration
Senate (S. 925)a
House (H.R. 1950)a
Conference (H.R. 2673)
FY2004 - IDA eligible & per
capita GNI less than historical
IDA level for the year ($1,415
in FY2004)
FY2004 - IDA eligible
FY2004 - IDA eligible & per
capita GNI less than historical
IDA level for the year ($1,415
in FY2004)
FY2004 - IDA eligible & per
capita GNI less than historical
IDA level for the year ($1,415
in FY2004)
FY2005 - per capita GNI less
than historical IDA level for
the year ($1,465 in FY2005)
FY2005 - per capita GNI less
than historical IDA cutoff for
the year ($1,465 in FY2005)
FY2005 - per capita GNI less
than historical IDA level for the
year ($1,465 in FY2005)
FY2005 - per capita GNI less
than historical IDA level for
the year ($1,465 in FY2005)
FY2006 - per capita GNI less
than historical IDA level for
the year ($1,465 in FY2005),
plus low-middle income
countries as defined in the
World Bank Development
Report ($3,035 in FY2005)
FY2006 - per capita GNI less
than historical IDA cutoff for
the year ($1,465 in FY2005),
plus, if appropriation exceeds
$5 billion, low-middle income
countries as defined in the
World Bank Development
Report ($3,035 in FY2005);
low-middle income countries
capped at 20%
FY2006 - per capita GNI less
than historical IDA level for the
year ($1,465 in FY2005), plus
low-middle income countries as
defined in the World Bank
Development Report ($3,035 in
FY2005); low-middle income
countries capped at 20%
FY2006 - per capita GNI less
than historical IDA level for
the year ($1,465 in FY2005),
plus low-middle income
countries as defined in the
World Bank Development
Report ($3,035 in FY2005);
low-middle income countries
capped at 25%
None stated
A government, including a
local or regional government,
or an NGO or private entity.
A national government, regional
or local government, an NGO,
an international organization
and trust funds.
A national government,
regional or local government,
or an NGO or private entity.
CRS-2830
Issue
Administration
Senate (S. 925)a
House (H.R. 1950)a
Conference (H.R. 2673)
Aid to “threshold”
countries
General support
10% of MCA funds available
for countries failing to qualify
because of inadequate data or
missing one indicator
15% of MCA funds available
for countries demonstrating a
development commitment but
fail to meet a sufficient number
of performance indicators
10% of MCA funds available
for countries showing a
commitment to MCA criteria
but fail to qualify
Oversight and
reports
MCA contracts and
performance posted on the
Internet.
Disclosure in Federal Register
and on the Internet of eligible
countries, programs supported,
and performance; proposed
performance indicators open to
public comment; annual report
to Congress
CEO consultation with Congress
on eligibility criteria;
notification 15 days in advance
on grants exceeding $5 million;
“Compacts” with countries
published in Federal Register
and on the Internet; advance
notification of aid termination;
annual reports to Congress from
the CEO and Advisory Council
Establishes a period of at least
95 days during which Congress
will receive the list of
“candidate countries,” the
eligibility criteria and
methodology for making a final
selection, and the list of
“eligible” countries (those that
will receive MCA assistance).
Consultation with
congressional committees will
occur during this period and
the information will be
published in the Federal
Register.
“Compacts” with countries
will be reported to Congress
and published in Federal
Register.
CRS-2931
Issue
Administration
Senate (S. 925)a
House (H.R. 1950)a
Conference (H.R. 2673)
Annual report by March 31.
Funding
FY2004 - $1.3 billion
FY2005 - no decision
FY2006 - $5 billion
FY2004 - $1 billion
FY2005 - $2.3 billion
FY2006 - $5 billion
FY2004 - $1.3 billion
FY2005 - $3 billion
FY2006 - $5 billion
Such sums as may be necessary
for FY2004 and FY2005.
a. The Senate position is based on S. 925, the Foreign Affairs Act, Fiscal Year 2004, as amended, but not passed during debate on July 9 and 10, 2003. The House position is taken
from H.R. 1950, an omnibus foreign policy authorization measure which passed the House on July 16, 2003.