Millennium Challenge Corporation
Curt Tarnoff
Specialist in Foreign Affairs
June 26, 2009
Congressional Research Service
7-5700
www.crs.gov
RL32427
CRS Report for Congress
P
repared for Members and Committees of Congress

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Millennium Challenge Corporation

Summary
In a speech on March 14, 2002, President Bush outlined a proposal for a major new U.S. foreign
aid initiative. The Millennium Challenge Corporation (MCC) provides assistance through a
competitive selection process to developing nations that are pursuing political and economic
reforms in three areas: ruling justly, investing in people, and fostering economic freedom.
The MCC differs in several respects from past and current U.S. aid practices:
• the competitive process that rewards countries for past and current actions
measured by 17 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.
As announced by the President Bush in March 2002, the initial plan had been to fund the MCC
annually at $5 billion by FY2006, but this figure has never been reached. The Administration has
sought a combined $15.0 billion for the MCC program, FY2004-FY2009, while Congress
appropriated $8.3 billion, or little more than half of the total sought (55%). Under the FY2009
Omnibus appropriations (P.L. 111-8), Congress provided $875 million to the MCC. On May 7,
2009, the Administration issued its FY2010 budget request, providing $1.425 billion for the
MCC.
Congress authorized the MCC in P.L. 108-199 (January 23, 2004). Since that time, the MCC’s
Board of Directors has approved 18 Compacts: with Madagascar (April 2005), Honduras (June
2005), Cape Verde (July 2005), Nicaragua (July 2005), Georgia (September 2005), Benin
(February 2006), Vanuatu (March 2006), Armenia (March 2006), Ghana (August 2006), Mali
(November 2006), El Salvador (November 2006), Mozambique (July 2007), Lesotho (July 2007),
Morocco (August 2007), Mongolia (September 2007), Tanzania (September 2007), Burkina Faso
(June 2008), and Namibia (July 2008). In June 2009, the Madagascar Compact was terminated
early, as were uncontracted components of the Nicaragua Compact. A suspension of the roads
portion of the Armenia Compact has been continued.
MCC implementation matters continue to unfold, including the relationship of MCC and USAID,
sectors chosen, and the impact of rising costs on country programs. A growing question raised by
some Members of Congress concerns the level of funding to support MCC programs. Some fear
that insufficient funds might force the MCC to reduce the number of recipients or the size of the
grants. Others, however, support reductions in the MCC budget, disturbed by the slower-than-
anticipated pace of Compact agreements and lack of concrete results to date.
This report will be updated as events unfold.

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Contents
Most Recent Developments......................................................................................................... 1
Overview .................................................................................................................................... 1
MCC Background ....................................................................................................................... 2
MCC Implementation.................................................................................................................. 3
Selection of Candidate Countries........................................................................................... 4
Country Selection Criteria and Methodology......................................................................... 4
Selecting Eligible Countries .................................................................................................. 6
Country Selection—FY2009 ......................................................................................... 10
MCC Compacts and Program Proposals .............................................................................. 10
Compact Descriptions ................................................................................................... 12
“Threshold” Countries and Programs .................................................................................. 17
Select Issues.............................................................................................................................. 19
Funding .............................................................................................................................. 19
MCC Request and Congressional Action for FY2009 .................................................... 20
MCC Request and Congressional Action for FY2010 .................................................... 20
Authorizing Legislation and MCC Reform .......................................................................... 20
Compact Size...................................................................................................................... 21
Speed of Implementation..................................................................................................... 23
Compact Sectors ................................................................................................................. 23
Compact Impact.................................................................................................................. 24
Changing Costs................................................................................................................... 25
Role of USAID and the Future of Agency Programs in MCC Countries............................... 25

Tables
Table 1. Compact-Eligible Countries: FY2009 .......................................................................... 10
Table 2. MCC Appropriations: FY2004-FY2010 ....................................................................... 19
Table 3. MCC Compacts ........................................................................................................... 26
Table 4. MCC Low-Income Candidate Countries—FY2009 ...................................................... 28
Table 5. MCC Lower-Middle-Income Candidate Countries—FY2009 ....................................... 29
Table 6. MCC Performance Indicators for FY2009.................................................................... 30

Contacts
Author Contact Information ...................................................................................................... 31

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Most Recent Developments
On June 23, 2009, the House Appropriations Committee reported the FY2010 State, Foreign
Operations Appropriations, providing $1.400 billion for the MCC, $25 million less than the
request.
On June 10, 2009, the MCC Board of Directors partially terminated Nicaragua’s Compact, ending
assistance activities not already contracted, including a road and a property regularization project.
These efforts had been suspended in December because of actions taken by the Nicaraguan
government, contrary to the MCC requirement that countries promote political freedom and the
rule of law. At the same time and for the same reasons, the Board decided to continue the
suspension of funding of road construction and rehabilitation under the Compact with Armenia.
On May 19, 2009, the MCC Board of Directors authorized termination of the Madagascar
Compact, which had been suspended since March 2009 because of the undemocratic change of
government there.
On May 7, 2009, the Administration issued its FY2010 budget request, providing $1.425 billion
for the MCC, a 63% increase over the FY2009 level.
On March 11, 2009, the President signed the FY2009 Omnibus appropriations (P.L. 111-8, H.R.
1105), providing $875 million to the MCC (in Division H of the legislation), $1.4 billion less than
the Bush Administration request, and $611 million less than the FY2008 appropriation (after
rescission). The explanatory report accompanying the act urges the MCC to limit Compact size to
under $350 million and raises concerns regarding performance of threshold programs.
On December 11, 2008, the MCC Board of Directors announced countries eligible for Compacts
in FY2009. New entries are Colombia, Indonesia, and Zambia. Countries not re-selected from the
previous year are Bolivia, Ukraine, and Timor-Leste. Liberia was made eligible for a threshold
agreement.
Overview
In a speech on March 14, 2002, President Bush outlined a proposal for a new program that would
represent a fundamental change in the way the United States invests and delivers economic
assistance. The resulting Millennium Challenge Corporation (MCC) 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 concept differs in several fundamental respects from
past and current U.S. aid practices:
• the competitive process that rewards countries for past actions measured by 17
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;
• the requirement to solicit program proposals developed solely by qualifying
countries with broad-based civil society involvement; and
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• the responsibility of recipient countries to implement their own MCC-funded
programs.
The proposal also differed from previous aid efforts in the size of the original $5 billion
commitment, an aim never even approximately met.
Congress authorized the new initiative in January 2004 (the Millennium Challenge Act of 2003,
Division D of P.L. 108-199) and has closely followed its implementation.1 As the program
evolves, the 111th Congress will consider MCC funding issues and conduct oversight hearings on
operations of the Corporation.
MCC Background
The Millennium Challenge Corporation (MCC) provides assistance through a competitive
selection process to developing nations that are pursuing 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.
• Economic freedom—fostering enterprise and entrepreneurship and promoting
open markets and sustainable budgets.
Country selection is based largely, but not exclusively, on a nation’s record measured by 17
performance indicators related to the three categories, or “baskets.” 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 6 below for a
complete list of the 17 performance indicators.) Administration officials, since announcing the
MCC initiative in 2002, have 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 MCC assistance, however, does not necessarily result in an aid grant. Once
selected, countries are required to submit program proposals—referred to as MCC 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

1 When first proposed and in its early years, the initiative was known as the Millennium Challenge Account. Today,
both the program and the funding account in the foreign operations budget are more commonly known by the name of
the managing entity, the MCC. For a more in-depth discussion of the original MCC proposal and issues debated by
Congress in 2003, see CRS Report RL31687, The Millennium Challenge Account: Congressional Consideration of a
New Foreign Aid Initiative, by Larry Nowels.
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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. In most cases, this will likely result in a significant
increase of U.S. economic assistance to MCC participant countries. In perhaps the most dramatic
departure from previous U.S. assistance practices, MCC Compacts are implemented by the
recipient country government.
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 staff level is currently about 300. Until a new CEO is
nominated by the Obama Administration and confirmed by the Senate, former deputy Rodney
Bent is the acting CEO.2 A Board of Directors oversees operations of the MCC and makes the
country selections. It is chaired by the Secretary of State and composed of the Secretary of the
Treasury, the USAID Administrator, the U.S. Trade Representative, the Corporation’s CEO, and
four individuals from the private sector drawn from lists of proposed nominees submitted by
Congressional leaders.3
The decision to house the initiative in a new organization was one of the most debated issues
during early congressional deliberations. The Administration argued that because the initiative
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 initiative was 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
program, while others said that it 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.
The MCC’s status remained unchanged under Secretary Rice’s realignment of foreign aid
authorities, announced on January 19, 2006. While gaining policy and budget authority over
nearly all USAID and State Department foreign aid programs, the new Director of Foreign
Assistance in the State Department has played a more limited role in other agency activities, by
developing an overall U.S. government development strategy and providing “guidance” to
foreign aid programs delivered through other agencies like the MCC.
MCC Implementation
From the time the MCC Board of Directors held its initial meeting to establish the program and
agree to Corporation by-laws on February 2, 2004, procedures and policies have continued to
evolve. Program implementation moves chronologically through a number of steps: candidate

2 CEO Ambassador John Danilovich stepped down on January 20, 2009.
3 The private sector board members are Alan Patricof, co-founder of a venture capital corporation; Lorne Craner,
President of the International Republican Institute; former Senate Majority Leader William Frist; and Kenneth Hackett,
President and CEO of Catholic Relief Services. The latter is a reappointment, permitted a two-year term; the others are
serving their first three-year terms.
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countries are identified, criteria are formulated, Compact and threshold-eligible countries are
selected, programs are developed and proposed, and those approved are funded and carried out.
Elements in this process are discussed below.
Selection of Candidate Countries
The selection of initial candidate countries is fairly straightforward and based on the authorizing
statute. Countries must fall into specific economic categories determined by their per capita
income status (as defined and ranked by the World Bank). During the first year of the program, in
FY2004, MCC participation was limited to the poorest nations that were eligible to borrow from
the World Bank’s International Development Association; there were 74 of these. The list
expanded in FY2005 to include all low-income countries (adding another 13 nations). Beginning
in FY2006 and beyond, all low- and lower- middle-income countries (with per capita incomes
between $1,785 and $3,705 in FY2009) compete for MCC resources (a total of 93 countries in
FY2009). However, lower-middle-income countries may receive only a quarter of total MCC
assistance in any year.
In addition to the income ceiling, countries may be candidates only if they are not statutorily
prohibited from receiving U.S. economic assistance. In FY2009, 11 countries were excluded for
this reason. Most had been barred in prior years as well.4
One, Mauritania, excluded in FY2009 because of a military coup, had been selected as the one
new threshold program-eligible country in FY2008 and will thereby lose its eligibility.
In August 2008, the MCC transmitted to Congress its annual notification of candidate countries,
listing 64 low-income countries and 29 lower-middle-income countries (See Table 4 and Table
5). There was one new entry to the low-income candidates: Kosovo, now an independent state.
Bosnia and Herzegovina is a new entry in the lower-middle-income group, and Thailand returns
following democratic elections. Georgia and Vanuatu have moved from low-income to lower-
middle-income status. Three previously lower-middle-income countries are no longer candidates:
Jamaica, Belarus, and Suriname have graduated to middle-income status.
Country Selection Criteria and Methodology
The choice of criteria on which to base the eligibility of countries for threshold and Compact
programs is one of the most important elements in MCC operations (See Table 6 for Performance
Indicators). They are a key statement of MCC development priorities and ultimately determine
which countries will receive U.S. assistance. Perhaps of equal significance, the current indicators
themselves have become prominent objectives of some developing countries in what former
Board CEO Danilovich has called the “MCC effect.”5 Countries seeking eligibility are moving on

4 Various types of aid restrictions applied to these countries. For several—Mauritania, Sudan, Cote d’Ivoire,—U.S. aid
was blocked because an elected head of government had been deposed by a military coup. For Uzbekistan, legislation
banned assistance to the central government. Aid restrictions imposed on nations not cooperating in counter-narcotics
efforts (Burma), that are on the terrorist list (Sudan, Syria, North Korea, Iran), or in arrears on debt owed the United
States (Syria, Sudan, Zimbabwe) also applied. Notwithstanding these restrictions, each country remained eligible for
humanitarian assistance from the United States.
5 MCC Public Outreach Meeting, February 15, 2007.
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their own to enact reforms and take measures that would enable them to meet MCC criteria. The
criteria and the methodology for applying them have evolved over time.
Pursuant to reporting requirements set in the MCC legislation, each year the Corporation sends to
Congress an overview of the criteria and methodology that would be used to determine the
eligibility of the candidate countries in that fiscal year. The criteria have been altered and refined,
sometimes dramatically, over time.
While the MCC 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;
• respects worker rights;
• supports a sustainable management of natural resources; and
• makes social investments, especially in women and girls.
For each of these, the MCC has sought to use supplemental data and qualitative information to
inform its decisions on Compact eligibility. The latter two factors have led to the development of
new indicators.
With regard to the requirement added by Congress regarding social investments in women and
girls, at first the MCC reported it would draw on girls’ primary enrollment rates to supplement the
four social investment performance indicators. But in FY2005, an indicator measuring girls’
primary education completion rates replaced a broader measure used in FY2004 that did not
disaggregate primary education graduation by gender.
Beginning with the 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). For FY2006, the Corporation added a new indicator—the
Cost of Starting a Business—that replaced the Country Credit Rating, a measure that was used in
the FY2004 and FY2005 evaluation process. The Corporation believed that not only did the new
indicator have a strong correlation with economic growth, but that it was a measurement that
might encourage governments to take action in order to improve their scores. Since the initial use
of the indicator Days to Start a Business, MCC candidate countries had introduced many business
start-up reforms, the results of which were reflected in a lowered median for this category. MCC
officials hoped that adding an indicator for the Cost of Starting a Business would stimulate
additional policy improvements. They believed that the Country Credit Rating indicator was not
as well linked to policy reforms and that it had a greater income bias than other MCC indicators.
Efforts to develop a measurement to assess a country’s commitment to policies that promote
sustainable management of natural resources as required by Congress led to the adoption of two
new indicators, first used as supplemental information in determining FY2007 MCC eligibility
and then integrated with all the other indicators beginning with the FY2008 eligibility process.
The Natural Resources Management index is a composite of indicators: whether the country is
protecting at least 10% of its biomes, the percentage of population with access to sanitation and
clean water, and child mortality levels. It has been placed in the Investing in People basket,
raising the number of those indicators to five. The Land Rights and Access index looks at whether
land tenure is secure and access to land is equitable, and the number of days and cost of
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registering property. It has been placed in the Economic Freedom basket. That basket remains at
six indicators, because, beginning in FY2008, the MCC collapsed the Days to Start a Business
and Cost of Starting a Business indicators into one Business Start-Up indicator.
In addition to adding or refining indicators, the Corporation has also modified its principal that, in
selected cases, countries must score above the median in order to pass a hurdle, with a rule that
scores at the median will represent a passing grade. This comes into play especially for those
indicators (civil liberties, political rights, and trade policy) where performance is measured on a
relatively narrow scale of 1-5 or 1-7. A number of countries fall exactly on the median of these
indicators and the methodology change allowed the MCC to make a more refined determination
of whether a country passes or fails these hurdles.
In December 2006, the MCC began to apply gender analysis to all aspects of the MCC program,
including country selection and Compact development and implementation.
In the explanatory statement accompanying the FY2009 Omnibus appropriations ( ), Congress
urged the Board of Directors to consider establishment of an indicator that would take into
consideration the votes and positions of countries in international institutions with regard to
human rights issues.
Selecting Eligible Countries
Shortly after release of the performance criteria, the MCC publishes a scorecard, showing where
each candidate country’s performance falls in relation to the other candidate countries in its peer
group (i.e., lower income countries “compete” with other lower income countries and lower-
middle income countries with other lower-middle income countries). Some time later, the MCC
Board meets to select its list of countries eligible to apply for Compact assistance.
A review of the history of MCC selections suggests that the Board is guided by, but not entirely
bound to, the outcome of the performance indicator review process; board members can apply
discretion in their selection. Performance trends, missing or old data, and recent policy actions
might come into play during selection deliberations.
For example, in its first year, FY2004, the MCC selected 16 countries. The 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 10 countries also
passed these additional tests.
For 10 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
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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
As the candidate pool has expanded in succeeding years while funding levels failed to meet
expectations, the Board has become increasingly more selective. Many outside the MCC support
the approach of keeping the number of new participants to a few so that future Compacts can be
larger and emphasize “transformational” development opportunities as the MCC program
originally envisioned.
For FY2005, the Board did not select 10 countries that met the criteria, including Bhutan,
Vietnam, Guyana, Burkina Faso, China, Djibouti, Egypt, Nepal, the Philippines, and Swaziland.
The Corporation offered little explanation as to why these countries were not chosen.7 It
appeared, however, that scoring “substantially below”—perhaps in the lowest 25th percentile—on
an indicator had become a de-facto criteria for exclusion. For example, the Corporation’s then-
CEO Paul Applegarth commented that the Philippines, a country that passed 13 of the 16
indicators, did not qualify because it 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.8 Each of the other nine nations that met the minimum qualifications but

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 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 MCC 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.
8 Comments by Paul Applegarth at a State Department Foreign Press Center Briefing, November 9, 2004.
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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 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. For
FY2004, 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 MCC status.
In FY2006, the Board did not choose eight countries in the low-income group that qualified and
did not use its discretionary powers to select any new nations that failed to meet the minimum
requirements.9 Bhutan, China, and Vietnam passed enough hurdles but did not qualify, as was the
case the previous two years, based on very low scores on political rights and civil liberties.
Kiribati, the Philippines, and India were not selected most likely because some of their scores
were substantially below the median. India also presents a challenging case for the Board in that,
despite qualifying, it is a country with a significantly large poor population which would require a
sizable MCC Compact in order to produce a reasonable degree of impact on poverty reduction. It
is also a nation with the means to attract capital and investment from other sources. Egypt, also
not selected, falls into a somewhat different category as the second largest recipient of annual
U.S. assistance based on a strategic rationale. The reason for not selecting Uganda, despite having
passed 12 of the 16 indicators and not falling significantly below the median on the other 4, is
less obvious.
In its first year of choosing among lower-middle-income countries, the Board’s approach was less
clear. A number of analysts had argued that especially given the less-than-anticipated budget
available to the MCC, the Board should refrain from selecting any lower-middle-income
countries (LMICs), at least in the FY2006 round.10 Of the eight LMICs (out of 32 total) that
passed sufficient performance hurdles, the Board chose two to participate in FY2006. In addition,
the Board also selected Cape Verde, a country that passed only two of the six economic
performance indicators and therefore, did not technically qualify.11 It appears, however, that the
Board could have decided to select none of the lower-middle-income nations by using criteria it
had applied consistently in the two previous rounds. Moreover, it was not clear why the Board
chose the two that did qualify and excluded others.
All eight LMICs that passed the performance indicator test fell significantly below the median on
at least one of the indicators. El Salvador and Namibia, the two that were selected, both had low
scores on fiscal policy. El Salvador also scored well below the median on the costs of starting a
business, while Namibia also did poorly on days to start a business and immunization rates. The

9 Georgia and Senegal were selected despite not passing the necessary hurdles, but both had been chosen in FY2004
and FY2005.
10 See, for example, Steve Radelet, Kaysie Brown, and Bilal Siddiqi, “Round Three of the MCA: Which Countries are
Most Likely to Qualify in FY 2006?” Center for Global Development, October 27, 2005.
11 Cape Verde had been classified as an eligible low-income country in FY2004 and signed a Compact in July 2005.
The Cape Verde case, however, also points out a limitation in using the system of 16 performance indicators. For two
of the economic categories, no data are available for Cape Verde, resulting in a failing score on those hurdles.
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other six that were not chosen—Brazil, Bulgaria, Jordan, Samoa, Thailand, and Tunisia—also
performed substantially below the median in at least one area, although Jordan was selected to
participate in the Threshold program. What separated these latter six from El Salvador and
Namibia, however, was not explained by the Board.
Although the Gambia was selected in FY2006, its eligibility for MCC assistance was suspended
by the MCC Board on June 16, 2006, because of “a disturbing pattern of deteriorating conditions”
in half of the 16 conditions that are used to determine candidate countries. Among the problems
cited in this case were human rights abuses, restrictions on civil liberties and press freedom, and
worsened anti-corruption efforts.
On November 8, 2006, the MCC Board added three new countries to the list of those eligible for
FY2007 MCC grants—Moldova, Jordan, and Ukraine. Even prior to the selection, the possible
choice of Jordan had come in for severe criticism. Freedom House, the organization whose annual
Index of Freedom is drawn upon for two of the “Ruling Justly” indicators, had urged the MCC
Board to bypass countries that had low scores on political rights and civil liberties. It argued that
countries like Jordan that fall below 4 out of a possible 7 on its index should be automatically
disqualified. Jordan, however, did well on three of the other indicators in this category. Several
development analysts further argued that Jordan should not be selected, because the MCC is not
an appropriate funding source. They assert that Jordan, already is one of the largest recipients of
U.S. aid, has access to private sector capital, and is not a democracy.12 In selecting Jordan, the
MCC Board appears not to have been swayed by these arguments.
Another concern expressed by observers regarding the FY2007 selection process was that four of
eleven current Compact countries—Ghana, Benin, Madagascar, and Cape Verde—would fail if
measured under FY2007 indicators. While it was not expected that existing Compact funding
would be withdrawn as it is based on eligibility in previous years, some had hoped the Board
would send a signal of disapproval of such lapses. However, the MCC Board did not address this
issue at the November 2006 candidate selection meeting.
For the 2008 selection process, the MCC Board added the Philippines and Malawi to the list of
countries eligible to apply for a Compact. Two countries that had appeared in the past were absent
in the 2008 list. Sri Lanka was left out because of the resurgent civil strife that would make a
Compact problematic, and Cape Verde for more complicated reasons. Due to changes in the
qualifying indicators, Cape Verde would not have been eligible for the third year in a row, and, as
a lower-middle income country, would be more strictly judged. Nonetheless, according to the
MCC, 12 of the 25 countries that made the cut did not meet the FY2008 criteria, five of them
failing the control of corruption indicator. One reason that the MCC re-selected these countries
was that they were viewed as maintaining or improving their performance rather than adopting
policies contrary to the criteria. This approach was taken because countries following reasonable
policies may fall behind the performance criteria when other countries are improving faster—
thereby raising the bar. They may also fail when new criteria are introduced which countries have
not had an opportunity to address and when institutions measuring performance refine or revise
their indicators.

12 Freedom House, “Millennium Challenge Corporation Should Hold Countries to Higher Standards of Democratic
Governance,” November 2, 2006, http://www.freedomhouse.org; Sheila Herrling, Steve Radelet, and Sarah Rose, “Will
Politics Encroach in the MCA FY2007 Selection Round? The Cases of Jordan and Indonesia,” Center for Global
Development, October 30, 2006, http://www.cgdev.org.
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Country Selection—FY2009
On December 11, 2008, the MCC Board added three new entries to the list of Compact-eligible
countries—Indonesia, Zambia, and Colombia. The first two met the indicator criteria for the first
time this year, both benefitting from threshold programs targeting corruption factors that had
prevented them from eligibility in the past. The most striking aspect of this year’s process was the
decision not to re-select several countries that had been eligible in the previous year—Bolivia,
Timor-Leste, and Ukraine. In FY2008 and FY2009, both Ukraine and Timor-Leste failed the
corruption indicator. Timor-Leste, in addition, failed the “investing in people” basket in those
years. Bolivia, however, has passed its indicator test in every year, including this one. The hold
put on MCC consideration of its Compact proposal during the past year and its current exclusion
from eligibility appears likely due to the political tensions currently existing between it and the
United States rather than its performance in development-related matters. Countries previously
selected that remain eligible in FY2009 and which continue to prepare Compact proposals are
Jordan, Malawi, Moldova, Philippines, and Senegal. The Board, however, has noted that a
Philippines Compact would not be signed until it passed the corruption indicator that it failed in
FY2009.
Table 1. Compact-Eligible Countries: FY2009
Low-Income Countries
Benin
Moldova
Burkina Faso
Mongolia
Ghana
Morocco
Honduras
Mozambique
Indonesiaa
Nicaragua
Lesotho
Philippines
Madagascar
Senegal
Malawi
Tanzania
Mali
Zambiaa
Lower-Middle-Income Countries
Armenia
Georgia
Cape Verde
Jordan
Colombiaa
Namibia
El Salvador
Vanuatu
a. New for FY2009.
MCC Compacts and Program Proposals
Once declared as eligible, countries may prepare and negotiate program proposals with the MCC.
Only those Compact proposals that demonstrate a strong relationship between the program
proposal and economic growth and poverty reduction will receive funding. Not all qualified MCC
countries may submit successful Compact proposals.
While acknowledging that Compact proposal 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 MCC aid will overcome the impediments, and the goals
expected to be achieved during implementation of the Compact;
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• 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 MCC 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. Proposals
are developed by a country with the guidance of and in consultation with the MCC. Sometime
during the proposal development process, the MCC may provide so-called pre-Compact
development grants to assist the country’s efforts. Among other things, grants may be used for
design studies, baseline surveys, technical and feasibility studies, environmental and social
assessments, ongoing consultations, fees for fiscal and/or procurement agents, and the like. For
example, in June 2009, the MCC provided Jordan with a pre-Compact development grant of
$13.34 million, not counted as part of the final Compact. It is being used for feasibility studies
and other assessments for water and wastewater projects.
Once a proposal is submitted, the MCC conducts an initial assessment, then, on the basis of that
assessment, launches a due diligence review that closely examines all aspects of the proposal,
including costs and impacts. At the same time, MCC staff work with the country to refine
program elements. Finally, the MCC negotiates a final Compact agreement prior to its approval
by the MCC Board. The Compact is signed but does not enter into force until supplemental
agreements on disbursements and procurement are reached.13
The MCC signed its first Compact, with Madagascar, on April 18, 2005, an event that was
followed by four other signings in 2005—with Honduras, Cape Verde, Nicaragua, and Georgia. In
2006, six more agreements were signed: Benin, Vanuatu, Armenia, Ghana, Mali and El Salvador.
In 2007, four Compacts were signed—with Mozambique, Lesotho, Morocco, Mongolia. In 2008,
three, with Tanzania, Burkina Faso, and Namibia were signed.
The case of Madagascar is a good example of how the Compact process is expected to take shape.
Elements of the design, negotiation, and completion of the Madagascar Compact met several of
the key criteria of the MCC process. Discussions regarding the scope and purpose of the MCC
grant occurred at the regional and national level in Madagascar that included broad representation
of civil society. Management and oversight of the Compact is handled by a new entity, MCA-
Madagascar, whose Steering Committee includes government and non-government officials. Both
of these steps underscore the “country-ownership” and broad participatory nature of MCC
programs. The Compact also includes fiscal accountability requirements concerning audits,
monitoring, and evaluation that support the transparency concept of the MCC. While the $110
million MCC grant was fully obligated when the Compact entered into force, resources were

13 Details on each of the negotiated Compacts can be found at the MCC website: http://www.mcc.gov.
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transferred periodically following a determination that performance continued satisfactorily. This
funding plan emphasizes the MCC principles of accountability and results.
Madagascar is also a case of how things can go wrong. In June 2009, with little more than a year
remaining in the Compact’s five-year span and $88 million of the $110 project committed, the
Compact was terminated because of the undemocratic change in government.
Compact Descriptions
The 18 Compacts agreed up to this point are described below (also see Table 3). In addition to
individual Compact components noted in each description, Compact totals include administrative
and monitoring costs.
Madagascar
The Madagascar Compact was a five-year, $110 million program, focusing on rural agriculture
development and poverty reduction. Specifically, the project had 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 MCC, the Compact was 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.
After restoring 149,000 land rights documents, digitizing another 128,000, and formalizing land
rights for 12,800 families, constructing two new bank branches, and providing agriculture
technical assistance to 34,450 farmers and 290 small businesses and farmers associations, the
Madagascar Compact was terminated in June 2009 due to an undemocratic change in
government.
Honduras
The five-year, $215 million MCC 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 the MCC, 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
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• upgrade about 1,500 kilometers of rural roads
Cape Verde
The MCC and Cape Verde have a five-year, $110 million Compact focused largely on improving
the country’s investment climate, transportation networks, and agriculture productivity. The
program’s goal is to increase the annual income in Cape Verde by at least $10 million. The
Compact evolves around three projects:
• Private Sector Development—with $7.2 million and additional participation with
the International Finance Corporation, the project aims to remove constraints to
private sector investment.
• Infrastructure—the project will invest $78.7 million in road and bridge
construction to help link the nine inhabited islands and improve transportation
links to social services, employment opportunities, local markets, and ports and
airports.
• Watershed Management and Agriculture Support—by investing $10.8 million to
increase the collection, storage, and distribution of rainfall water, the project
hopes to increase agricultural production and double the household income of
farmers.
In June 2009, the first road funded under the Cape Verde Compact was completed. The
MCC expects that an estimated 12,500 farmers and families will benefit from use of the
10-kilometer road.
Nicaragua
The five-year, $175 million Compact with Nicaragua focuses on promoting economic growth
primarily in the northwestern region of the country where potential opportunities exist due to the
area’s fertile land and nearby markets in Honduras and El Salvador. The Compact has three
components: (1) to strengthen property registration ($26.5 million); (2) to upgrade primary and
secondary roads between Managua and Leon and to provide technical assistance to the Ministry
of Transportation ($92.8 million); and (3) to promote higher-profit agriculture activities,
especially for poor farmers, and to improve water supply in support of higher-value sustainable
agriculture.
On June 10, 2009, the MCC Board voted to terminate assistance for activities not yet contracted
under the Nicaragua Compact. These activities had been suspended since December 2008 because
of the actions of the Nicaraguan government inconsistent with the MCC eligibility criteria,
specifically in the area of good governance. In 2008, the credibility of Nicaragua’s municipal
elections was seriously questioned, and a fair resolution of the electoral issue has not been
reached since that time. The termination, reducing about $62 million from the Compact total,
affects a property regularization project and a major road.
Georgia
The $295 million, five-year agreement with Georgia focuses on reducing poverty and promoting
economic growth in areas outside of the capital where over half the population lives in poverty.
The Compact is divided into two projects. The first and the largest component ($211.7 million)
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concentrates on infrastructure rehabilitation, including roads, the north-south gas pipeline, water
supply networks, and solid waste facilities. The Enterprise Development Project ($47.5 million)
will finance an investment fund aimed at providing risk capital and technical assistance to small
and medium-sized businesses, and support farmers and agribusinesses that produce commodities
for the domestic market. The program expects to:
• reduce in the incidence of poverty by 12% in the Samtskhi-Javakheti region;
• provide direct benefits to 500,000 people and indirectly benefit over 25% of
Georgia’s population;
• reduce the travel time by 43% to Tbilisi, the capital, from regional areas, thereby
cutting transportation costs for farmers, businesses, and individuals needing
health and other social services; and
• lower the risk of a major gas pipeline accident and improve the reliability of heat
and electricity to over one million Georgians.
On September 4, 2008, the Bush Administration proposed a $1 billion aid initiative for Georgia,
of which one component was adding $100 million to the existing $295 million MCC Compact.
An amendment to the Compact was signed on November 20, 2008. The additional $100 million,
complementing or completing projects begun in the original Compact, is directed at road projects,
water and sanitation facilities, and a natural gas storage facility.
Armenia
The five-year, $236 million Compact concentrates on the agricultural sector, investing in the
rehabilitation of rural roads ($67 million) and improving irrigation ($146 million). The program
anticipates that it will benefit about 750,000 people, 75% of Armenia’s rural population, by
improving 943 kilometers of rural roads and increasing the amount of land under irrigation by
40%.
Misgivings have been raised both prior to and during implementation of the Armenia Compact. In
September 2005, the MCC expressed concerns with Armenian officials regarding slippage on two
of the governance indicators and matters raised by international groups concerning political rights
and freedoms in the country. Moreover, the MCC Board delayed final approval of the Compact
following the November 27, 2005, constitutional referendum, after allegations of fraud,
mismanagement, limited access by the press, and abuse of individuals were raised. In signing the
Compact on March 27, 2006, the MCC issued a cautionary note, signaling that Armenia must
maintain its commitment to the performance indicators or risk suspension or termination of the
Compact. On March 11, 2008, the MCC issued a warning that assistance might be suspended or
terminated in response to the government’s actions, including the imposition of a state of
emergency and restrictions on press freedoms.14 In the autumn of 2008, the Armenian government
used $17 million of its own funds to begin a road segment when there was some question of
whether the MCC would continue its support. In December 2008, then-MCC CEO Danilovich
noted that Armenia had since moved forward on a number of reforms addressing MCC concerns
and he expected MCC support to resume in the spring of 2009.15 However, on March 11, 2009,

14 See letters of John Danilovich to Armenia President Robert Kocharyan on December 16, 2005 and March 11, 2008
on MCC website.
15 MCC, Public Outreach Meeting Transcript, December 12, 2008, p. 12.
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the MCC Board of Directors decided to continue the suspension of assistance for the rural roads
component of the Armenia Compact until an interim review session could be held prior to its
normal June 2009 meeting in order to assess the status of democratic governance in Armenia. On
June 10, 2009, the MCC Board decided to continue its hold on financial support for the roads
project. At least one board member noted that the suspension was, in effect, a termination, as the
work, if reapproved, could not be completed within the Compact lifespan.16
Vanuatu
The $65.7 million, five-year Compact targets improvements broadly in multiple types of
infrastructure, including roads, wharfs, an airstrip, and warehouses. The objective is to increase
the average per capita income by 15%, by helping rural agricultural producers and providers of
tourism-related goods and services. The Compact further aims to help strengthen Vanuatu’s
Public Works Department in order to enhance capacity to maintain the country’s entire transport
network.
Ghana
The five-year $547 million Compact focuses on agriculture and rural development. Poverty rates
in the three targeted geographic areas are above 40%. The agriculture component ($241 million)
will provide training for farmer-based organizations, improve irrigation, provide greater access to
credit, and rehabilitate local roads. The transport component ($143 million) will seek to reduce
transport costs to farmers by improving key roads, such as the one between the capital and the
airport, and an important ferry service. Rural development programs ($101 million) will construct
and rehabilitate education, water, and electric facilities, among other activities.
Benin
Benin, one of the world’s poorest countries with the lowest Human Development Index ranking
of any MCC Compact nation, has been approved for a $307 million, five year program focused
on four sectors:
• Land rights, reducing the time and cost of obtaining property title;
• Financial services, helping micro, small, and medium-sized businesses;
• Justice reform, assisting the judicial systems capacity to resolve business and
investment claims; and
• Market access, improving the Port of Cotonou.
The Compact’s goal is to benefit five million people, bringing 250,000 of the population out of
poverty by 2015.

16 Lorne Craner at Public Outreach Meeting, June 11, 2009.
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Mali
The five-year $461 million Compact emphasizes an increase in agricultural production and
expansion of trade. About half the funds ($234.6 million) will support a major irrigation project,
including modernization of infrastructure and improvements in land tenure. Improvements in the
airport ($89.6 million) will target both passenger and freight operations. An industrial park
project located at the airport ($94.6 million) will assist agro-processing and other industry.
El Salvador
The five-year $461 million Compact addresses economic growth and poverty reduction concerns
in El Salvador’s northern region where more than half the population lives below the poverty line.
Education as well as water and sanitation, and electricity supply ($95.1 million); support for poor
farmers and small and medium-sized business ($87.5 million); and transportation, including roads
($233.6 million) are the chief elements of program.
Mozambique
The five-year $506.9 million Compact, like most other Compacts, targets specific districts, in this
case the less prosperous North of the country. The Compact has four components. Water and
sanitation services will be improved ($203.6 million), a major road will be rehabilitated ($176.3
million), land tenure services will be made more efficient ($39.1 million), and steps will be taken
to protect existing coconut trees, improve coconut productivity, and support diversification to
other cash crops ($17.4 million). The long-term objective is to reduce the projected poverty rate
by more than 7%.
Lesotho
The five-year $362.6 million Compact has three elements. A water sector project ($164 million)
will focus on both industrial, supporting garment and textile operations, and domestic needs. It
will also support a national watershed management and wetlands conservation plan. A health
project ($122.4 million) will seek to strengthen the health care infrastructure, including
renovation of up to 150 health centers, improved management of up to 14 hospital out-patient
departments, construction and equipping of a central laboratory, and improved housing for
medical staff and training for nurses. A private sector development project ($36.1 million) will
address a wide range of legal and administrative obstacles to increased private sector activity,
including development of land policy and administration authority, implementation of a new
payments and settlement system, and improvement of case management of commercial courts.
Morocco
The five-year, $697.5 million Compact has multiple components, all aimed at increasing private
sector growth. These include efforts to increase fruit tree productivity ($300.9 million),
modernize the small-scale fisheries industry ($116.2 million), and support artisan crafts ($111.9
million). In addition, the Compact will fund financial services to micro-enterprises ($46.2
million) and will provide business training and technical assistance aimed at young, unemployed
graduates ($33.9 million).
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Mongolia
The most significant part of the five-year $285 million Compact intends to stimulate economic
growth by refurbishing the rail system, including infrastructure and management ($188.38
million). In addition, the Compact will support improvements in the property registration and
titling system ($23.06 million) and the vocational education system ($25.51 million). The
Compact will also attempt to reform the health system to better address non-communicable
diseases and injuries, which are rapidly increasing in the country ($17.03 million).
Tanzania
The five-year, $698 million Compact focuses on three key economic infrastructure issues. A
transport sector project ($373 million) will improve major trunk roads, select rural roads, general
road maintenance capabilities, and upgrade an airport. An energy sector project ($206 million)
will lay an electric transmission cable from the mainland to Zanzibar, will construct a small
hydro-electric plant at Igamba Falls, and will rehabilitate the existing distribution system to
unserved areas. A water sector project ($66 million) will expand a clean water treatment facility
serving the capital, reduce water loss in the capital region, and improve the water supply in
Morogoro, a growing city.
Burkina Faso
The five-year, $480.9 million Compact has four elements. A rural land governance project ($59.9
million) will focus on improving legal and institutional approaches to rural land issues, including
registration and land use management. An agriculture project ($141.9 million) will target water
management and irrigation, diversified agriculture, and access to rural finance in specific regions
of the country. A roads project ($194.1 million) will improve rural roads. The education effort
($28.8 million) will build on the country’s MCC threshold program and construct additional
classrooms and provide daily meals to children. The education project will be administered by
USAID.
Namibia
The five-year, $304.5 million Compact will focus on education, tourism, and agriculture. The
education project ($145 million) will improve school infrastructure and training, vocational and
skills training, and textbook acquisition. The tourism project ($67 million) will target
management and infrastructure in Etosha National Park, the premier wildlife park in Namibia,
and build ecotourism capacity in the country. The agriculture project ($47 million) will focus on
land management, livestock support, and production of indigenous natural products.
“Threshold” Countries and Programs
In order to encourage non-qualifying countries to improve in weak areas, the MCC will help
governments that are committed to reform to strengthen performance so that they would be more
competitive for MCC funding in future years. Congress provided in authorizing legislation that
not more than 10% of MCC appropriations could be used for such purposes, stating that the
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funding could be made available through USAID. Subsequent foreign operations appropriations
have made 10% of new MCC appropriations available for this Threshold assistance.17
According to the Threshold Program Policy guidance issued by the Corporation,18 the program
will assist countries make policy reforms and institutional changes in areas where they failed to
meet the MCC performance criteria. Those countries deemed eligible for the program must
submit 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 has been 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 MCC Compacts, funding
is not guaranteed for each country selected for the Threshold Program, but will be based on the
quality of the Country Plan.
To date threshold programs worth a total of about $482 million have been awarded to 19
countries. Currently 13 countries are eligible for threshold assistance: Kenya, Liberia, Niger,
Rwanda, Sao Tome and Principe, Uganda, Albania, Kyrgyz Republic, Timor-Leste, Ukraine,
Guyana, Paraguay, and Peru. Of these, only Liberia, newly selected in the FY2009 round, and
Timor-Leste have not yet been awarded threshold program support. Five other countries—
Moldova, Philippines, Zambia, Jordan, and Indonesia—have ongoing threshold programs, but are
also now Compact-eligible and in the process of developing their Compact programs. Three other
countries—Burkina Faso, Malawi, and Tanzania—have completed threshold programs and either
have Compacts or are Compact-eligible. Another, Yemen, had developed a program approved by
the Board, but implementation was postponed on October 27, 2007, pending a review. It is no
longer eligible for threshold assistance. Mauritania was made eligible in 2007, but could not be
offered a program due to aid prohibitions on governments deposed by a coup.
In December 2007, the MCC Board invited three countries—Albania, Paraguay, and Zambia—to
submit proposals for follow-on threshold programs (stage II) as their initial threshold programs
were going to expire in 2008. In September 2008, the MCC Board approved a $16.4 million stage
II program for Albania. In January 2009, the Board approved a $30.3 million stage II program for
Paraguay, aimed at improving anti-corruption and rule of law indicators. Zambia will not require
the stage II program as it now passes the corruption indicator the program was meant to address
and was approved for Compact eligibility in December 2009.

17 Initially, assistance for Threshold countries was authorized only for FY2004.
18 Found at http://www.MCC.gov.
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Funding levels for threshold programs differ, most recently ranging from $8.7 million for Sao
Tome and Principe to $35.6 million for Peru. Of the programs ongoing or completed, most have
sought to improve country scores on the corruption indicator. Several countries have multiple
objectives. Indonesia and Peru, for example, target both corruption and immunization indicators.
Albania’s first program focused on corruption and improvements in its business environment. The
Burkina Faso program was designed to improve girls’ primary education, targeting areas of the
country with the lowest primary completion rates.
Although eight of the 19 threshold country programs have been followed by Compact eligibility,
Congress has raised concerns regarding the efficacy of threshold programs. In the explanatory
statement accompanying the FY2009 Omnibus appropriations, appropriators suggested that an
assessment of the programs be undertaken before more are approved. One analyst suggests that
threshold programs should focus on better preparing countries to implement Compacts rather than
on enabling them to qualify for eligibility. She argues that, by funding reform to improve an
indicator, the threshold program undermines the principle that countries should themselves be
responsible for reform and MCC eligibility.19
Select Issues
Funding
In each year since the MCC was established, the MCC proposal was the largest increase sought
by the Administration in the Foreign Operations appropriations bill and viewed by many
observers as one of the most vulnerable items in an increasingly difficult budget environment. In
each year as well, its enacted appropriation has been well below the President’s request.
Supporters of the MCC are disturbed by this trend, reflected again in the congressional funding
level for FY2009, well below the Bush Administration request. They argue that if fewer
Compacts are offered annually, the incentive for countries to go through the whole process of
seeking eligibility and designing and refining a proposal is diminished and the so-called MCC
effect, which encourages countries to reform on their own in order to meet eligibility
requirements, is likely to be lost.
Table 2. MCC Appropriations: FY2004-FY2010
(in $ billions)

FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010
Request
1.300 2.500 3.000 3.000 3.000 2.225 1.425
Appropriation 0.994 1.488 1.752 1.752 1.486a
.875

a. Original appropriation was $1.544 million; $58 million was rescinded in P.L. 110-252.

19 Sheila Herrling, “Precedent-Setting Board Meeting for Team Obama,” MCA Monitor Blog, June 9, 2009, Center for
Global Development website http://blogs.cgdev.org/mca-monitor.
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MCC Request and Congressional Action for FY2009
On February 4, 2008, the Administration requested $2.225 billion for the MCC in its FY2009
budget, a 44% increase over the FY2008 appropriation.
On July 16, 2008, the House State/Foreign Operations Subcommittee approved its version of the
FY2009 appropriations, providing $1.5 billion for the MCC, a 33% cut from the Administration
request and the same level as in FY2008.
On July 17, 2008, the Senate Appropriations Committee reported its version of the FY2009
State/Foreign Operations appropriations (S.Rept. 110-425), providing $254 million to the MCC, a
cut of 86% from the Administration request, and $1.3 billion less than FY2008. The committee
explained the cut as a “temporary pause” in signing of new Compacts to allow for an evaluation
of MCC programs. It noted the small Compact disbursement rate (4% of total Compact funding at
the time) and the lack of tangible results to date as factors in support of this step. The committee
stated its intention to support future Compacts “if current country compacts are shown to be cost
effective and achieving results.” Its proposed funding level would allow for two threshold stage 2
agreements, continued due diligence and pre-compact support, and administrative costs to
maintain the MCC. The MCC argued that the proposed cut would undermine Compact country
faith in the MCC process and warned that several countries in the pipeline, including the
Philippines, Jordan, Senegal, Malawi, Timor-Leste (since de-selected), and Moldova, would be
negatively affected.
On September 18, 2008, 38 Members of Congress signed a letter addressed to House
Appropriations Committee leadership supporting an FY2009 MCC funding level at least at the
subcommittee-passed level of $1.54 billion.
On March 11, 2009, the President signed into law the FY2009 Omnibus appropriations (P.L. 111-
8, H.R. 1105, providing $875 million to the MCC (Division H of the legislation), $1.4 billion less
than the Bush Administration request, and $611 million less than the FY2008 appropriation (after
rescission). The MCC had earlier calculated that, of the projected six Compacts in the pipeline—
Jordan, Moldova, Senegal, Malawi, Philippines, and Timor-Leste (since de-selected)—three
could be funded with a $1.5 billion appropriation. It is not clear how many can be funded with the
FY2009 amount available. The explanatory report accompanying the act urges the MCC to limit
Compact size to under $350 million.
MCC Request and Congressional Action for FY2010
On May 7, 2009, the Administration issued its FY2010 budget request, providing $1.425 billion
for the MCC, a 63% increase over the FY2009 level. On June 23, 2009, the House Appropriations
Committee reported the FY2010 State, Foreign Operations Appropriations, providing $1.400
billion for the MCC, $25 million less than the request.
Authorizing Legislation and MCC Reform
Observers anticipate that an MCC reauthorization measure will be considered in the 111th
Congress. A previous effort, in the 109th Congress (2006), was reported by the House
International Relations Committee (H.R. 4014, H.Rept. 109-563), but received no further
consideration. It would have made a number of policy modifications to the original legislation
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and would have authorized MCC appropriations (“such sums as may be necessary”) for fiscal
years 2007 through 2009. The requirement of an authorization of foreign aid programs has been
routinely waived in annual Foreign Operations appropriations bills, as the FY2009 Omnibus
appropriations measure did in the case of currently unauthorized foreign aid programs, including
the MCC (section 7023).
A measure introduced in the 110th Congress, H.R. 7165 (Payne), addressed several existing
restrictions in the authorizing statute. The bill would allow a Compact to exceed 5 years in length,
but no more than 10, if the Board determines it cannot be completed in 5. It would allow
concurrent Compacts (more than one at the same time), and permits follow-on (subsequent)
Compacts, if the Board determines that a prior Compact has met its objectives. The bill would
also allow regional Compacts, involving two or more countries.
The explanatory statement accompanying the FY2009 Omnibus appropriations (P.L. 111-8)
suggested that the MCC notify the Appropriations Committee regarding Compacts not likely to
be completed when their five-year term is over. It indicated that Congress might then consider an
extension of the time limit.
Compact Size
A closely examined characteristic of the early Compacts was the dollar size of the grants; or,
more specifically, the lower-than-anticipated funding level for the first several Compacts. While
Administration officials said repeatedly that Compacts would be funded at various levels
depending on the nature and potential impact of the proposal, the presumption in its first years
was that the MCC 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 said that the size
of its grants must place MCC assistance among the top aid donors in a country.20 Some had
estimated that once the Corporation’s budget reached $5 billion, each Compact would be
supported with annual resources in the $150-$200 million range.21 These levels could vary up or
down depending on many factors, such as the number of people living in poverty, the size of the
economy, and the scope of the proposed projects.
Most of the first several Compacts, however, did not meet the anticipated financial allocation
thresholds. Madagascar’s four-year, $110 million Compact roughly doubled U.S. assistance to the
country, but did not place MCC assistance among the top donors. France was the largest bilateral
donor, disbursing on average $189 million per year, 2001-2004. The European Commission’s aid
program, 2001-2004, averaged $82 million per year, while the World Bank’s International
Development Association was Madagascar’s largest source of concessional assistance of about
$209 million lent in each of 2001 through 2004.22 The $110 million Compact for Madagascar is
also not very large relative to the country’s population. Of the 16 qualified countries for FY2004,

20 See, for example, Millennium Challenge Corporation FY2005 Budget Justification, p. 7. Found at
http://www.mcc.gov/about/reports/congressional/budgetjustifications/budget_justification_fy05.pdf.
21 Prepared statement of Steve Radelet, Senior Fellow at the Center for Global Development, before a hearing of the
House International Relations Committee, April 27, 2005.
22 Organization for Economic Cooperation and Development (OECD), Geographical Distribution of Financial Flows to
Aid Recipients, 2000/2004: 2006 edition.
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Madagascar had the fourth largest population (16.4 million), and might have been expected to
receive one of the larger MCC grants given its population size and its per capita income.
For Honduras (a $215 million MCC program over five years), Georgia ($295 million over five
years), and Armenia ($236 million over five years), the United States was the top bilateral donor
without the MCC program, and will likely remain in that position as MCC grants are disbursed.
But the MCC Compact for Honduras called for only a slightly higher annual amount ($43
million) than U.S. economic assistance provided ($34 million) at the time, while Georgia’s
Compact will average only about three-fourths and the Armenia Compact only about two-thirds
of the annual level of recent American aid. While these are not insignificant amounts of new
resources, they are far less than Administration officials had suggested previously.23
In contrast, the early five-year Compacts with Cape Verde ($110 million), Benin ($307 million),
and Vanuatu ($66 million) represented a substantial investment by the United States, relative to
the size of recent American aid and the size of their economies. USAID, which last provided
direct bilateral assistance to Cape Verde in the mid-1990s, does not maintain a mission presence,
allocating small amounts of aid through regional programs. The Compact’s $22 million annual
average placed the United States second to Portugal, Cape Verde’s former colonial power, as the
leading donor, and represented more than a quarter of total bilateral development aid grants from
all sources compared with figures for 2003 and 2004. Likewise, the United States does not
maintain a bilateral program with Vanuatu, limiting direct aid through the Peace Corps. The $13
million annual average of the Vanuatu program places the United States as the country’s top aid
donor, along with Australia. In Benin, USAID manages an annual bilateral economic aid program
of about $15 million, compared with the $61 million annual size of the MCC Compact. The
Benin Compact likely places the MCC as the top aid donor, together with France.24
This issue of Compact size was a priority of Ambassador Danilovich since his September 2005
confirmation hearing to be the MCC’s new CEO. He noted that the MCC was “meant to create
transformative programs,” and to do so he said that “future Compacts will generally need to be
larger than those signed thus far.” Ambassador Danilovich cautioned, however, that with limited
resources but larger Compacts, fewer countries would receive funding if MCC was to achieve its
transformational goal.25 After assuming the CEO position, he moved the MCC towards larger
Compacts and placing the MCC as the largest donor in recipient countries. In 2005, the average
amount of Compacts signed in that year was $181 million, in 2006, $364 million, in 2007, $463
million, and in 2008, $495 million.
Apparently, in the view of some in Congress, the move to larger Compacts went too far. In the
explanatory statement accompanying the FY2009 Omnibus appropriations (P.L. 111-8), the MCC
is urged to limit Compact size to under $350 million in order to “ensure that the MCC does not
become overextended, that existing compacts are meeting their goals, and future compacts are of
a manageable size.”

23 For example, USAID Administrator Natsios remarked in an October 22, 2002 speech at the American Embassy in
London that “we estimate in most countries the MCA will provide funding 5 to 10 times higher than existing levels” of
U.S. assistance.
24 Geographical Distribution of Financial Flows to Aid Recipients, 2000/2004: 2006 edition.
25 Prepared statement of John J. Danilovich, before the Senate Committee on Foreign Relations, September 27, 2005.
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Speed of Implementation
A recurrent criticism of the MCC, especially in Congress, is the slow speed of implementation,
reflected largely by the limited amount of disbursements made to date. As perhaps the leading
cause of cuts in MCC funding from the Administration request and of threatened rescissions from
amounts already appropriated during the past few years, this view has had severe consequences
for the MCC (see below). As of the end of March 2009, of the $8.3 billion appropriated for the
MCC, only $1.2 billion, or 14%, had been disbursed. About $6.6 billion, however, had been
obligated by end-March 2009.
There are some good reasons for this spending rate. The MCC is a new experiment, and it has
taken considerable time to develop methods of operation, including settling on the rules of
eligibility and the requirements of Compact proposals. Further, the countries themselves are
responsible for developing proposals, and they have problems common to most developing
countries in managing complex programs to meet donor requirements of accountability. The GAO
found that for five signed Compacts in Africa—with Madagascar, Cape Verde, Benin, Ghana, and
Mali—the process of going from eligibility to compact signature took between 12 and 31 months.
Four of these compacts entered into force about five months after compact signature.26
Once launched, Compacts may be slow to get underway. For example, Honduras and Cape Verde,
both in their fourth year had disbursed only 29% and 40%, respectively, of their total grants by
end of March 2009. Among the causes for these low rates are delays by Compact countries in
filling managerial positions. The nature of many of the Compacts is also responsible for the
delays. Typically, infrastructure projects are slow to disburse funds, the majority of activity in the
first few years being the design and planning of projects rather than actual construction.
Whatever the causes, the MCC responded to the criticisms by shifting its organizational focus
from the early emphasis on Compact development to Compact implementation. In October 2007,
it announced a reorganization aimed at facilitating implementation. The MCC expects annual
Compact disbursements to top $1 billion by 2010.
Compact Sectors
One feature of the first series of Compacts drew particular attention. Most of the early Compacts
included a similar sector concentration, focusing on agriculture and transportation infrastructure
projects. While these activities are well justified, the similarity across Compacts surprised some
observers. Given the wide diversity of conditions in each of the countries, plus the Corporation’s
willingness to support all types of programs, many had expected to see a greater degree of
variation among the Compacts. Some believe that social sectors, including those in health and
education, should be receiving greater attention in Compact design. Others had expected greater
variety in aid delivery mechanisms, and are concerned that the MCC is reluctant to approve sector
grants and other types of budget support assistance. While there can be greater accountability
risks associated with budget support aid, countries that qualify for MCC support are selected

26 Government Accountability Office, Millennium Challenge Corporation: Progress and Challenges with Compact in
Africa, Testimony, June 28, 2007, GAO-07-1049T.
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because they have already demonstrated stronger performance in managing resources and
fighting corruption.27
As more Compacts are signed, some diversity in programs is creeping in—three of the more
recent ones, in Lesotho, Mozambique, and Tanzania, feature a water and sanitation component.
The Morocco Compact includes micro-credit and artisan crafts support among its projects.
Burkina Faso and Namibia have education components.
Compact Impact
The purpose of the MCC is to reduce poverty by supporting economic growth, but some
observers have complained about the lack of measurable results to date. There are some possible
reasons for this, most prominently the slow speed of Compact implementation noted above. As a
result, it will likely be some time before a serious analysis of actual impacts can be undertaken. In
the meantime, some reporting on outcomes has emerged. For instance, according to the MCC, the
number of new registered businesses in Albania has grown by 20,000, and the time and cost of
starting a business in Paraguay has fallen by nearly half. In March 2009, the MCC issued an
independent impact analysis of the Burkina Faso Threshold Program, which constructed 132
primary schools and provided other assistance to increase girls’ enrollment rates. It found that
enrollment increased for both genders, by about 20%, and for girls over boys, by 5%.28
A 2007 GAO report highlighted a concern, that, in the case of Vanuatu, projected impacts had
been overstated. The GAO noted that the MCC estimated a rise from 2005 per capita income in
Vanuatu of about 15% ($200) by 2015 when, in fact, the data suggest it would rise by 4.6%.
Although the MCC states that the Compact would benefit 65,000 poor, rural inhabitants, the data,
according to the GAO, do not establish the extent of benefit to the rural poor. Further, the MCC
projections assume continued maintenance of projects following completion, whereas the
experience of previous donors is that such maintenance has been poor.29 The MCC response was
that, although there may be varying views on the degree of benefit, both agencies agree that the
underlying data show that the Compact will help Vanuatu address poverty reduction.30
In lieu of results from the Compacts, MCC officials have pointed to the impact made by the MCC
process itself. Under the so-called MCC effect, many countries are said to be establishing reforms
in an effort to qualify under the 17 indicators. Yemen has been cited in this regard, because,
following its suspension from the threshold program in 2005, it approved a number of reforms to
address indicators where its performance had lapsed (and subsequently was reinstated and then
later suspended for different reasons). Both the House and Senate approved resolutions in 2007
(H.Res. 294 and S.Res. 103) noting the role the MCC played in encouraging Lesotho to adopt
legislation improving the rights of married women.

27 James Fox and Lex Rieffel, The Millennium Challenge Account: Moving Toward Smarter Aid. The Brookings
Institution, July 14, 2005, p. 24.
28 MCC Public Board Meeting, June 11, 2009. Mathematica Policy Research, Inc., Impact Evaluation of Burkina
Faso’s BRIGHT Program, March 2009.
29 Government Accountability Office, Millennium Challenge Corporation: Vanuatu Compact Overstates Projected
Program Impact, July 2007, GAO-07-909.
30 Testimony of Rodney Bent before the House Committee on Foreign Affairs, Subcommittee on Asia, the Pacific, and
the Global Environment, July 26, 2007.
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Changing Costs
The majority of Compact projects support construction of economic infrastructure, primarily
roads and water and sanitation systems. In 2007 and early 2008, costs for the machines and
material necessary for these activities rose worldwide. At the same time, the U.S. dollar
depreciated significantly. As a result, MCC projects were faced with having less funding than
envisioned to meet the agreed-on objectives. The MCC reported that at least six projects were to
be scaled-back from the original plans or supplemented by financing from other sources. It is not
yet clear how the current worldwide economic crisis is affecting MCC program costs, but it is
likely that projects planned for a five-year life span will continually require review and revision.
Role of USAID and the Future of Agency Programs in MCC
Countries
How USAID would participate in the MCC initiative has been a concern of Congress and various
policy analysts. Legislation authorizing the MCC requires the Corporation’s CEO to coordinate
and consult with USAID and directs the Agency to ensure that its programs play a primary role in
helping candidate countries prepare for MCC consideration. USAID maintains missions in most
of the eligible countries and might be expected to support MCC programs, through contracting,
procurement, and monitoring tasks. Although USAID is the chief implementor on behalf of the
MCC of threshold programs, its role in other aspects of MCC activities is not clear.
Although by way of criticism of the MCC, some in Congress recently have questioned USAID’s
threshold program role. The explanatory statement accompanying the FY2009 Omnibus
expresses the concern that these programs are not meeting their objectives and suggests a review
of their efficacy before any new ones are launched.
Another question is how USAID will adjust its own programs in MCC countries. Then-USAID
Administrator Natsios told the House Appropriations Committee on May 13, 2004, that the
Agency would not withdraw from or cut programs in MCC 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 MCC-funded activities. Nonetheless, some critics continue to express
concern that MCC funding is not always additive, as had been the pledge, but will substitute for
portions of previous USAID bilateral development aid programs. The FY2008 budget request
offered a look at how funding levels might be affected by MCC Compacts. With the exceptions of
new entries Lesotho, Mozambique, and Morocco, in Compact countries where there had been a
bilateral economic assistance program, that assistance would be reduced under the FY2008
budget plan from FY2006 levels. In its FY2008 report on the State/Foreign Operations bill
(H.Rept. 110-197), the House Appropriations Committee made note of this trend and expressed
the view that MCC aid should be “a complement,” not a substitute, to the current aid program.



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Table 3. MCC Compacts
Population
Human
FY06 US
GNI
Living Below
Development
Econ. Aid
Compact Size
Country Compact
Signed
per capita
$2 p/day (%)
Index Rankinga
(millions)b
(millions) Compact
Focus
Armenia
Mar. 27, 2006
$2,640
31.1%
83
$58.0
$236
-Agriculture/irrigation
5 years
-Rural roads
-Land and property
Benin
Feb. 22, 2006
$570
73.7%
163
$14.2
$307
-Financial services
5 years
-Judicial improvement
-Port rehabilitation
- Rural land governance
Burkina Faso
July 14, 2008
$430
71.8%
176
$0.0
$481
- Agriculture
5 years
- Roads
- Education
- Agriculture
Cape Verde
July 4, 2005
$2,430
NA
102
$0.0
$110
5 years
- Transport/roads
- Private sector
-Education
El Salvador
November 29, 2006
$2,850
40.5%
103
$24.0
$461
5 years
-Transport/roads
-Small business/farm development
$58.0 ($0.7)
- Infrastructure/gas
Georgia
Sept. 12, 2005
$2,120
25.3%
96
$295
5 years
- Transport/roads
- Agriculture/business
$41.1 ($0.3)
-Agriculture
Ghana
August 1, 2006
$590
78.5%
135
$547
5 years
-Transport
-Rural Development
44.0% 115
$27.7
($0.8)
$215
Honduras
June 13, 2005
$1,600
-Agriculture
5 years
-Transport/roads
56.1% 138
$3.0
($6.4)
-Water sector
Lesotho
July 23, 2007
$1,000
$362.6
5 years
-Health sector
-Private sector
Madagascar April
18,
2005 $320 85.1% 143 $26.0 $110
- Land titling/Agriculture
4 years
- Financial sector
Mali
November 13, 2006
$500
90.6% 173 $38.1
$460.8
-Irrigation
5 years
-Transport/airport
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Population
Human
FY06 US
GNI
Living Below
Development
Econ. Aid
Compact Size
Country Compact
Signed
per capita
$2 p/day (%)
Index Rankinga
(millions)b
(millions) Compact
Focus
-Industrial park
74.9% 114 $6.6
-Transport/rail
Mongolia October
22,
2007
$1,290
$285
-Property Rights
5 years
-Voc Ed
-Health
14.3% 126 $18.9
-Agriculture/Fisheries
Morocco
August 31, 2007
$2,250
$697.5
5 years
-Artisan Crafts
-Financial Serv/ Enterprise Support
78.4% 172
$44.9
($148.4)
-Water and Sanitation
Mozambique
July 13, 2007
$320
$506.9
5 years
-Transportation
-Land Tenure/Agriculture
55.8% 125
$7.1
($51.5)
- Education
Namibia
July 28, 2008
$3,360
$305
5 years
- Tourism
- Agriculture
Nicaragua
July 14, 2005
$980
79.9% 110
$24.1
($0.1)
$175
- Land titling/Agriculture
5 years
- Transport/roads
89.9% 159
$57.3
($176.5)
-Transport/roads and airport
Tanzania
February 17, 2008
$400
$698
5 years
-Energy
-Water
Vanuatu March
2,
2006
$1,840 NA 120 $0.0 $66
-Transport rehab
5 years
-Public Works Dept.
Sources: Population Living Below $2 Per Day—data from the World Bank, World Development Report, 2007; Gross National Income per capita—2007 data from the
World Bank, World Development Indicators 2008. Human Development Index Rank—from UNDP, Human Development Report, 2007/08. MCC Information: Millennium
Challenge Corporation.
a. 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) U.S. dollars. The most recent report (2007/08) evaluates 177 countries,
with number 1 having the best HDI and number 177 scoring the worst in the Index.
b. U.S. Economic Aid is defined here as Child Survival/Health, Development Assistance, Economic Support Fund, and FREEDOM Support Act. Figure in parenthesis is
HIV/AIDS Initiative.

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Table 4. MCC Low-Income Candidate Countries—FY2009
Criteria: Per capita income $1,785 and below, and not prohibited from receiving other U.S. economic
assistance.
Compact Eligible Countries (FY2009) are in Bold
Compact Countries are followed with (C)
Threshold Eligible Countries (FY2009) are in Italics
Threshold Program Countries are followed with (TC)
Africa
East
Asia/Pacific
Benin (C)
Tanzania (C) (TC)
Cambodia
Burkina Faso (TC) (C)
Togo
Timor-Leste
Burundi
Uganda (TC)
Indonesia (TC)
Cameroon
Zambia (TC)
Kiribati
Central African Rep

Laos
Chad
Mongolia (C)
Comoros

Papua New Guinea
Congo, Dem Rep of

Philippines (TC)
Congo, Rep of

Solomon Islands
Djibouti
Vietnam
Eritrea

Ethiopia

Gambia

Ghana (C)
Latin America
Guinea
Bolivia
Guinea-Bissau
South Asia
Guyana (TC)
Kenya (TC)
Afghanistan
Haiti
Lesotho (C)
Bangladesh
Honduras (C)
Liberia
Bhutan
Nicaragua (C)
Madagascar (C) India
Paraguay (TC)
Malawi (TC)
Nepal

Mali (C)
Pakistan
Mid-East
Mozambique (C) Sri
Lanka
Egypt
Niger (TC)

Yemen
Nigeria

Morocco (C)
Rwanda
Eurasia

Sao Tome & Principe (TC)
Kyrgyz Rep. (TC)

Senegal Moldova
(TC)
Europe
Sierra Leone
Tajikistan
Kosovo
Somalia Turkmenistan

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Table 5. MCC Lower-Middle-Income Candidate Countries—FY2009
Criteria: Per capita income between $1,786 and $3,705, and not prohibited from receiving other U.S.
economic assistance.
Compact Eligible Countries (FY2009) are in Bold
Compact Countries are followed with (C)
Threshold Eligible Countries (FY2009) are in Italics
Threshold Program Countries are followed with (TC)
Africa
East Asia/Pacific
Latin America
Angola Marshall
Islands
Colombia
Cape Verde (C)
Micronesia
Dominican Rep
Namibia (C) Samoa
Ecuador
Swaziland Thailand
El Salvador(C)
Tonga
Guatemala
Tuvalu
Peru (TC)

Vanuatu (C)




South Asia
Mid-East
Maldives
Algeria


Jordan (TC)
Tunisia




Eurasia


Armenia (C)
Europe
Azerbaijan
Albania (TC)

Georgia (C)
Bosnia/Herzegovina

Ukraine (TC)
Macedonia

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Table 6. MCC Performance Indicators for FY2009
Ruling Justly
Investing in People
Economic Freedom
Control of Corruption
Public Primary Education Spending as % of GDP
Inflation
Source: World Bank Institute
Sources: UNESCO and National governments
Source: IMF World Economic Outlook
http://www.worldbank.org/wbi/governance
Voice and Accountability
Primary Girls’ Education Completion Rate
Fiscal Policy
Source: World Bank Institute
Source: UNESCO
Source: National governments and IMF World
http://www.worldbank.org/wbi/governance
Economic Outlook
Government Effectiveness
Public Expenditure on Health as % of GDP
Trade Policy
Source: World Bank Institute
Source: World Health Organization (WHO)
Source: The Heritage Foundation, Index of Economic
http://www.worldbank.org/wbi/governance
Freedom
http://www.heritage.org/research/features/index/
Rule of Law
Immunization Rates: DPT and Measles
Regulatory Policy
Source: World Bank Institute
Source: World Health Organization (WHO)
Source: World Bank Institute
http://www.worldbank.org/wbi/governance
http://www.worldbank.org/wbi/governance
Civil Liberties
Natural Resource Management: Eco-Region Protection,
Business Start-Up: Days and Cost of Starting a
Source: Freedom House
Access to Clean Water and Sanitation, Child Mortality
Business
http://www.freedomhouse.org/
Sources: Columbia Center for Int’l Earth Science Info Network
Source: World Bank
template.cfm?page=15&year=2006
(CIESIN) and Yale Center for Env. Law and Policy (YCLEP)
http://www.doingbusiness.org
Political Rights

Land Rights and Access
Source: Freedom House
Source: Int’l Fund for Agricultural Development
http://www.freedomhouse.org/
(IFAD) and Int’l Finance Corporation
template.cfm?page=15&year=2006

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Author Contact Information

Curt Tarnoff

Specialist in Foreign Affairs
ctarnoff@crs.loc.gov, 7-7656




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