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 November 12, 2004
Larry Nowels
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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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:
! the size of the $5 billion commitment;
! the competitive process that will reward 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, and a stated commitment for a $5 billion program in FY2006.
Congress reduced the FY2004 appropriation to $994 million and bills passed by the
House and Senate (H.R. 4818) would cut the FY2005 funding package by more than
half: to $1.25 billion and $1.12 billion, respectively.
The passage of legislation on January 23, 2004 authorizing the MCC for
FY2004 (Division D of P.L. 108-199) launched a period in which the new
Corporation formed, issued required reports, consulted with Congress and the public,
and selected on May 6 and November 8 eligible countries for FY2004 and FY2005,
respectively. Other MCA implementation matters have been unfolding throughout
2004, including a discussion of the relationship of MCA programs with those
operated by USAID, how the Corporation and USAID will support near-miss or
“threshold” countries, and the funding of programs, or “compacts,” for those
qualified under the FY2004 selection process.
A growing question raised by some Members of Congress is whether sufficient
funds will be available to support MCC programs in every country selected. 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 amounts). This suggests, that even if Congress fully funds the pending
proposal, the Corporation will not be able to support programs in all 16 countries
approved for FY2004 and those selected for FY2005.
This report will be updated as events unfold.

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Contents
MCC Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
MCC Implementation Steps and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Establishing the Millennium Challenge Corporation . . . . . . . . . . . . . . . . . . 4
Naming FY2004 Candidate Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Publishing the Selection Criteria and Methodology . . . . . . . . . . . . . . . . . . . 4
Country Selection — FY2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Naming Candidate Countries — FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Country Selection — FY2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Continuity in the FY2005 Selection Round . . . . . . . . . . . . . . . . . . . . . . 9
Excluding More Countries that Qualified . . . . . . . . . . . . . . . . . . . . . . 10
MCA Compacts and Program Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
“Threshold” Countries and U.S. Assistance . . . . . . . . . . . . . . . . . . . . . . . . 13
Role of USAID and the Future of Agency Programs in MCA Countries . . 14
Funding Issues and the FY2005 MCC Request . . . . . . . . . . . . . . . . . . . . . . 14
List of Tables
Table 1. MCA Candidate, Eligible, and Threshold Countries — FY2004 . . . . 16
Table 2. MCA Candidate, Eligible, and Threshold Countries — FY2005 . . . . 17
Table 3. MCA Potential Candidate Countries — FY2006 . . . . . . . . . . . . . . . . . 18
Table 4. MCC Performance Indicators for FY2005 . . . . . . . . . . . . . . . . . . . . . . 19
Table 5. Comparison of MCA Authorization Legislation . . . . . . . . . . . . . . . . . 20

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Millennium Challenge Account:
Implementation of a New U.S. Foreign Aid
Initiative
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:
! 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.
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:
! the size of the $5 billion commitment;
! the competitive process that will reward countries for past actions
measured by 16 objective performance indicators;
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.

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CRS-2
! 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 new initiative, which Congress authorized in January 2004 (Division D of
P.L. 108-199),2 would 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 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 —
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 will be 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
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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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
Representative, and the Corporation’s CEO, oversees operations of the MCC and
makes the country selections. Four additional Board members, yet to be confirmed
by the Senate, will be drawn from lists 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 proposes $2.5
billion, with a commitment for a $5 billion program in FY2006. Pending House- and
Senate-passed appropriation bills (H.R. 4818) recommend reducing the FY2005
funding level to $1.25 billion and $1.12 billion, respectively.
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 at least 90 days
during which the new Corporation would form, issue required reports, consult with
Congress and the public, and select 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. Continuing implementation matters that will unfold
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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in the months ahead will 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, congressional budget
decisions for FY2005, and the awarding of MCA grants — in the form of Compacts
— to MCA eligible countries.
Establishing the Millennium Challenge Corporation
On February 2, 2004, the Board of Directors met, agreed to Corporation by-
laws, and approved 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. Most recently, he 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,
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. 108-
199 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:
! 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.
The MCC also noted that it would use the most recent release (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 will be 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 will lower 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 will replace 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
is 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:
! 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.
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
Madagascar
Benin
Mali
Bolivia
Mongolia
Cape Verde
Mozambique
Georgia
Nicaragua
Ghana
Senegal
Honduras
Sri Lanka
Lesotho
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,
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 clusters and performing above the median on corruption. The

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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
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
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
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.”

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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 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
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 security-
related factors from MCA decision-making as one of the most attractive features of
the initiative. For the most past, the Board appears 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
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.
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.
8 See Steve Radelet, A Note on the MCC Selection Process for 2005, September 23, 2004,
found at [http://www.cgdev.org].

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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 are added to the list: China, Egypt, Equatorial Guinea,
Iraq, Morocco, Paraguay, Philippines, Swaziland, Turkmenistan, Tuvalu, and
Ukraine. Four countries fall 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 are ineligible for other U.S. economic assistance.10
Country Selection — FY2005
Meeting on November 8, the MCC Board of Directors made its selection of
FY2005 eligible countries:
Armenia
Mali
Benin
Mongolia
Bolivia
Morocco
Georgia
Mozambique
Ghana
Nicaragua
Honduras
Senegal
Lesotho
Sri Lanka
Madagascar
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
ceiling. Cape Verde, however, remains eligible for MCA support using FY2004
funds. Board selections represent 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
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, exceeds the per capita income limit for FY2005 so is not under
consideration. Syria and Cuba, which became potential candidate countries beginning in
FY2005, are excluded because of a ban on direct aid to the country. See Footnote 4, above,
for a complete list of countries and aid restrictions.

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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
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
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
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-11
observers may raise 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 minmium standards but were
not selected. Thus far, the Corporation has offered little explanation as to why these
countries were not chosen.12 It appears, however, that scoring “substantially below”
— perhaps 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 anticipated funding reductions. The Administration
had requested combined FY2004/FY2005 appropriations of $3.8 billion, but may
have available 25%-30% 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.
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
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-12
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
growth and poverty reduction will receive funding. It is anticipated that not all
qualified MCA countries will 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.
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 November 8, the MCC had received proposals and
“concept papers” from 14 of the 16 FY2004 eligible countries, and begun the next
phase — negotiating formal Compacts — with four countries: Georgia, Honduras,
Madagascar, and Nicaragua. The Corporation anticipates signing one or two
Compacts by the end of 2004.14
14 Ibid.

---

CRS-13
“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 will
announce an amount for FY2005 following enactment of new appropriations.15
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,16 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 submit 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.
15 Initially, assistance for Threshold countries was authorized only for FY2004. Section 119
of P.L. 108-309, the Continuing Resolution for FY2005 signed on September 28, extends
such authority through November 20, 2004, the day on which the resolution expires.
16 Found at [http://www.MCC.gov].

---

CRS-14
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 is likely that USAID
spending will 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.
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.
Funding Issues and the FY2005 MCC Request
As mentioned above, Congress appropriated $994 million for FY2004 MCC
programs and is considering a $2.5 billion request for FY2005. This is 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 reduce the level to $2 billion.
Foreign Operations appropriation bills passed in both the House and Senate
(H.R. 4818) make substantial reductions to the President’s MCC request for FY2005.
The bill, as approved by the House, reduces 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

---

CRS-15
executive branch, in its Statement of Administration Policy on H.R. 4818, expressed
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 requires the MCC to only sign Compacts for which complete
funding is 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, proposes 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.
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 also makes exceptions in the FY2005 selection
process and qualifies more countries than meet the strict criteria. Representative
Kolbe, chairman of the House Foreign Operations Subcommittee, speculated at a
May 9 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.
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 amounts). This suggests, that even if Congress fully funds the pending
proposal, the Corporation will not be able to support programs in all 17 countries
approved for FY2004 and FY2005. If Congress reduces the $2.5 billion request, 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 congressional examination of the Board’s selection
process and consideration of ways to limit the number of countries selected in the
future.

---

CRS-16
Table 1. 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)
Latin
Africa
Income*
East Asia/Pacific
Income*
America
Income*
Angola
$660
East Timor (TC)
$430
Bolivia
$940
Benin
$390
Indonesia
$680
Guyana
$840
Burkina Faso
$220
Kiribati
$810
Haiti
$440
Cameroon
$560
Laos
$310
Honduras
$920
Cape Verde
$1,290
Mongolia
$440
Nicaragua
**
Chad
$220
Papua New Guinea
$580
Comoros
$390
Solomon Islands
$570
Congo, Dem Rep of
$90
Tonga
$1,410
Congo, Rep of
$700
Vanuatu
$1,080
Eritrea
$160
Vietnam
$430
Ethiopia
$100
Gambia
$280
South Asia
Income*
Mid-East
Income*
Ghana
$270
Afghanistan
**
Djibouti
$900
Guinea
$410
Bangladesh
$360
Yemen (TC)
$490
Kenya (TC)
$360
Bhutan
$590
Lesotho
$470
India
$460
Madagascar
$240
Nepal
$230
Malawi
$160
Pakistan
$420
Mali
$240
Sri Lanka
$840
Mauritania
$340
Mozambique
$210
Eurasia
Income*
Europe
Income*
Niger
$170
Armenia
$790
Albania(TC)
$1,380
Nigeria
$290
Azerbaijan
$650
Bosnia
$1,270
Rwanda
$230
Georgia
$720
Sao Tome &
$290
Kyrgyz Rep.
$290
Principe (TC)
Senegal
$470
Moldova
$460
Sierra Leone
$140
Tajikistan
$180
Tanzania (TC)
$280
Togo
$270
Uganda (TC)
$240
Zambia
$330
* Gross National Income, dollars per capita, 2002. World Bank Annual Report, 2003.
** Precise data unavailable.

---

CRS-17
Table 2. 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)
Latin
Africa
Income*
East Asia/Pacific
Income*
America
Income*
Angola
$740
China
$1,100
Bolivia
$890
Benin
$440
East Timor (TC)
$430
Guyana(TC)
$900
Burkina Faso (TC)
$300
Indonesia
$810
Haiti
$380
Cameroon
$640
Kiribati
$880
Honduras
$970
Chad
$250
Laos
$320
Nicaragua
$730
Comoros
$450
Mongolia
$480
Paraguay(TC
$1,100
Congo, Dem Rep
$100
Papua New Guinea
$510
Congo, Rep of
$640
Philippines (TC)
$1,080
Equatorial Guinea
**
Solomon Islands
$600
Eritrea
$190
Tuvalu
**
Ethiopia
$90
Vanuatu
$1,180
Gambia
$310
Vietnam
$480
Ghana
$320
Guinea
$430
South Asia
Income*
Mid-East
Income*
Kenya (TC)
$390
Afghanistan
**
Djibouti
$910
Lesotho
$590
Bangladesh
$400
Egypt
$1,390
Madagascar
$290
Bhutan
$660
Iraq
**
Malawi (TC)
$170
India
$530
Morocco
$1,320
Mali
$290
Nepal
$240
Yemen (TC)
$520
Mauritania
$430
Pakistan
$470
Mozambique
$210
Sri Lanka
$930
Niger
$200
Nigeria
$320
Eurasia
Income*
Europe
Income*
Rwanda
$220
Armenia
$950
Sao Tome &
$320
Azerbaijan
$810
Principe (TC)
Senegal
$550
Georgia
$830
Sierra Leone
$150
Kyrgyz Rep.
$330
Swaziland
$1,350
Moldova
$590
Tanzania (TC)
$290
Tajikistan
$190
Togo
$310
Turkmenistan
$1,120
Uganda (TC)
$240
Ukraine
$970
Zambia (TC)
$380
* Gross National Income, dollars per capita, 2003. World Bank Annual Report, 2004.
** Precise data unavailable.

---

CRS-18
Table 3. MCA Potential Candidate Countries — FY2006
Criteria: Per capita income $3,035 and below, and not prohibited from receiving
other U.S. economic assistance.17
Africa
Income*
East Asia/Pacific
Income*
Latin America
Income*
Angola
$740
East Timor
$430
Belize
**
Benin
$440
Fiji
$2,360
Bolivia
$890
Burkina Faso
$300
Indonesia
$810
Brazil
$2,710
Cameroon
$640
Kiribati
$880
Colombia
$1,810
Cape Verde
$1,490
Laos
$320
Dominican Rep
$2,070
Chad
$250
Marshall Islands
$2,710
Ecuador
$1,790
Comoros
$450
Micronesia
$2,090
El Salvador
$2,200
Congo, Dem Rep of
$100
Mongolia
$480
Guatemala
$1,910
Congo, Rep of
$640
Papua New Guinea
$510
Guyana
$900
Equatorial Guinea
**
Philippines
$1,080
Haiti
$380
Eritrea
$190
Samoa
$1,600
Honduras
$970
Ethiopia
$90
Solomon Islands
$600
Jamaica
$2,760
Gambia
$310
Thailand
$2,190
Nicaragua
$730
Ghana
$320
Tonga
$1,460
Paraguay
$1,100
Guinea
$430
Tuvalu
**
Peru
$2,150
Kenya
$390
Vanuatu
$1,180
Suriname
**
Lesotho
$590
Vietnam
$480
Madagascar
$290
Malawi
$170
South Asia
Income*
Mid-East
Income*
Mali
$290
Afghanistan
**
Algeria
$1,890
Mauritania
$430
Bangladesh
$400
Djibouti
$910
Mozambique
$210
Bhutan
$660
Egypt
$1,390
Namibia
$1,870
India
$530
Iraq
**
Niger
$200
Nepal
$240
Jordan
$1,850
Nigeria
$320
Pakistan
$470
Morocco
$1,320
Rwanda
$220
Sri Lanka
$930
Tunisia
$2,240
Sao Tome&Principe
$320
Yemen
$520
Senegal
$550
Eurasia
Income*
Sierra Leone
$150
Armenia
$950
Europe
Income*
South Africa
$2,780
Azerbaijan
$810
Albania
$1,740
Swaziland
$1,350
Belarus
$1,590
Bulgaria
$2,130
Tanzania
$290
Georgia
$830
Bosnia
$1,540
Togo
$310
Kazakhstan
$1,780
Macedonia
$1,980
Uganda
$240
Kyrgyz Rep.
$330
Romania
$2,310
Zambia
$380
Moldova
$590
Turkey
$2,790
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.
17 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 lower-
middle 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-19
Table 4. MCC Performance Indicators for FY2005
Ruling Justly
Investing in People
Economic Freedom
Control of Corruption
Public Primary Education Spending as % of GDP
Country Credit Rating
Source: World Bank Institute
Sources: National governments
Source: Institutional Investor Magazine, September
[http://www.worldbank.org/wbi/governance/govdat
2004.
a2002/index.html]
Voice and Accountability
Primary Girls’ Education Completion Rate
Inflation (must be below 15%)
Source: World Bank Institute
Sources: World Bank and UNESCO
Source: Multiple
[http://www.worldbank.org/wbi/governance/govdat
a2002/index.html]
Government Effectiveness
Public Expenditure on Health as % of GDP
Fiscal Policy
Source: World Bank Institute
Sources: National governments
Source: National governments and IMF World
[http://www.worldbank.org/wbi/governance/govdat
Economic Outlook
a2002/index.html]
Rule of Law
Immunization Rates: DPT and Measles
Trade Policy
Source: World Bank Institute
Sources: World Health Organization
Source: The Heritage Foundation, Index of
[http://www.worldbank.org/wbi/governance/govdat
Economic Freedom
a2002/index.html]
[http://www.heritage.org/research/features/index/]
Civil Liberties
Regulatory Policy
Source: Freedom House
Source: World Bank Institute
[http://www.freedomhouse.org/research/freeworld/
[http://www.worldbank.org/wbi/governance/govdat
2004/table2004.pdf]
a2002/index.html]
Political Freedom
Days to Start a Business
Source: Freedom House
Source: World Bank
[http://www.freedomhouse.org/research/freeworld/
[http://rru.worldbank.org/DoingBusiness/ExploreT
2004/table2004.pdf]
opics/StartingBusiness/CompareAll.aspx]

---

CRS-20
Table 5. 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
Board of Directors, chaired by
Board of Directors, chaired by
Board of Directors, chaired by
Sec. of State, with Treasury
the Sec. of State, with
Sec. of State, with Treasury,
Sec. of State, with Treasury,
and OMB
Treasury, USAID, USTR, and
USTR, USAID, MCC CEO, and
USTR, USAID, MCC CEO,
the MCA’s Chief Executive
4 others nominated by the
and 4 others nominated by the
Officer (CEO)
President from a Congressional
President that may come from
list. Non-voting members
list submitted by Congressional
include OPIC, OMB, Peace
leaders.
Corps, and TDA.
MCA organization
Independent Millennium
Independent Millennium
Independent Millennium
Independent Millennium
Challenge Corporation
Challenge Corporation whose
Challenge Corporation
Challenge Corporation
CEO reports to and be under
the direct authority and foreign
policy guidance of the Sec. of
State
MCA coordinator
CEO of Corporation
CEO “manages” the
CEO “heads” the Corporation,
CEO “manages” the
Corporation, reporting to and
reporting to the President
Corporation, reporting to and
under the direct authority and
under the direct authority and
foreign policy guidance of the
foreign policy guidance of the
Sec. of State
Board of Directors.
Interim CEO
—
—
—
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
Board of Directors
Board of Directors
CEO of Corporation
Board of Directors
countries

---

CRS-21
Issue
Administration
Senate (S. 925)a
House (H.R. 1950)a
Conference (H.R. 2673)
MCC Advisory
None
None
Nine members named by the
None
Council
CEO to advise on MCA policy,
review eligibility criteria,
evaluate the MCC, assess MCC
capabilities, and make
recommendations to the CEO.
Country income
FY2004 - IDA eligible & per
FY2004 - IDA eligible
FY2004 - IDA eligible & per
FY2004 - IDA eligible & per
eligibility
capita GNI less than historical
capita GNI less than historical
capita GNI less than historical
IDA level for the year ($1,415
IDA level for the year ($1,415
IDA level for the year ($1,415
in FY2004)
in FY2004)
in FY2004)
FY2005 - per capita GNI less
FY2005 - per capita GNI less
FY2005 - per capita GNI less
FY2005 - per capita GNI less
than historical IDA level for
than historical IDA cutoff for
than historical IDA level for the
than historical IDA level for
the year ($1,465 in FY2005)
the year ($1,465 in FY2005)
year ($1,465 in FY2005)
the year ($1,465 in FY2005)
FY2006 - per capita GNI less
FY2006 - per capita GNI less
FY2006 - per capita GNI less
FY2006 - per capita GNI less
than historical IDA level for
than historical IDA cutoff for
than historical IDA level for the
than historical IDA level for
the year ($1,465 in FY2005),
the year ($1,465 in FY2005),
year ($1,465 in FY2005), plus
the year ($1,465 in FY2005),
plus low-middle income
plus, if appropriation exceeds
low-middle income countries as
plus low-middle income
countries as defined in the
$5 billion, low-middle income
defined in the World Bank
countries as defined in the
World Bank Development
countries as defined in the
Development Report ($3,035 in
World Bank Development
Report ($3,035 in FY2005)
World Bank Development
FY2005); low-middle income
Report ($3,035 in FY2005);
Report ($3,035 in FY2005);
countries capped at 20%
low-middle income countries
low-middle income countries
capped at 25%
capped at 20%
Eligible entity
None stated
A government, including a
A national government, regional
A national government,
local or regional government,
or local government, an NGO,
regional or local government,
or an NGO or private entity.
an international organization
or an NGO or private entity.
and trust funds.

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CRS-22
Issue
Administration
Senate (S. 925)a
House (H.R. 1950)a
Conference (H.R. 2673)
Aid to “threshold”
General support
10% of MCA funds available
15% of MCA funds available
10% of MCA funds available
countries
for countries failing to qualify
for countries demonstrating a
for countries showing a
because of inadequate data or
development commitment but
commitment to MCA criteria
missing one indicator
fail to meet a sufficient number
but fail to qualify
of performance indicators
Oversight and
MCA contracts and
Disclosure in Federal Register
CEO consultation with Congress
Establishes a period of at least
reports
performance posted on the
and on the Internet of eligible
on eligibility criteria;
95 days during which Congress
Internet.
countries, programs supported,
notification 15 days in advance
will receive the list of
and performance; proposed
on grants exceeding $5 million;
“candidate countries,” the
performance indicators open to
“Compacts” with countries
eligibility criteria and
public comment; annual report
published in Federal Register
methodology for making a final
to Congress
and on the Internet; advance
selection, and the list of
notification of aid termination;
“eligible” countries (those that
annual reports to Congress from
will receive MCA assistance).
the CEO and Advisory Council
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.
Annual report by March 31.
Funding
FY2004 - $1.3 billion
FY2004 - $1 billion
FY2004 - $1.3 billion
Such sums as may be necessary
FY2005 - no decision
FY2005 - $2.3 billion
FY2005 - $3 billion
for FY2004 and FY2005.
FY2006 - $5 billion
FY2006 - $5 billion
FY2006 - $5 billion
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.

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