Millennium Challenge Corporation Reducing Poverty Through Growth Millennium

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 Millennium Challenge Corporation Reducing Poverty Through Growth

Millennium Challenge Corporation Reducing Poverty Through Growth

Millennium Challenge Corporation Reducing Poverty Through Growth Millennium Challenge Corporation Ø Fulfillment of Monterrey

Millennium Challenge Corporation Reducing Poverty Through Growth Millennium Challenge Corporation Ø Fulfillment of Monterrey commitment to “provide greater resources to countries taking greater responsibility for their own development. ” Ø Established in law January 2004. Ø Mandate is Poverty Reduction Through Economic Growth

Millennium Challenge Corporation Reducing Poverty Through Growth Based on Key Lessons of Aid v

Millennium Challenge Corporation Reducing Poverty Through Growth Based on Key Lessons of Aid v POLICIES MATTER COUNTRY OWNERSHIP CRITICAL v v RESULTS, NOT INPUTS COUNT “We want to make decisions ourselves. It is our country, and we have to take on leadership and responsibilities. If you take a look at the last two issues, our vision and country ownership, you will realize why the MCA is so important for us. Here we have a new approach which helps us to implement our vision. We have opportunities to design and implement our own programs. ” --Marc Ravalomanana, The President of Madagascar School of Advanced International Studies, Johns Hopkins University, April 19,

Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter Ø Ø Ø Good policies

Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter Ø Ø Ø Good policies encourage inflows of private capital and increased trade, the real engines of growth. Country eligibility based on sixteen independent indicators in three different criteria Countries are measured against other countries of similar income level v Ruling Justly v Investing in People v Encouraging Economic Freedom

Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter 23 Countries Selected by MCC

Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter 23 Countries Selected by MCC Board in Fiscal Years 2004 2006 Africa Latin America Eurasia Benin Mali Bolivia Armenia Burkina Faso Morocco El Salvador East Timor Cape Verde Mozambique Honduras Gambia Namibia Nicaragua Ghana Senegal Sri Lanka Lesotho Tanzania Vanuatu Madagascar Georgia Mongolia

Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter Ø MCC eligibility intended as

Millennium Challenge Corporation Reducing Poverty Through Growth Policies Matter Ø MCC eligibility intended as an incentive to improve policies Ø Ø Ø Threshold Program reinforces this objective Threshold Countries • Close on the indicators • Demonstrated commitment to reform May propose funding to specifically improve on MCC indicators Burkina Faso’s Threshold Program: Increasing Girls’ Primary School Completion Through the construction of new schools in provinces that lack sufficient schools, more girls will be able to attend primary school in Burkina Faso. Their Threshold program with MCC aims to enroll 1, 650 new female students within the first year.

Millennium Challenge Corporation Reducing Poverty Through Growth Threshold Countries* Africa Latin America Kenya Guyana

Millennium Challenge Corporation Reducing Poverty Through Growth Threshold Countries* Africa Latin America Kenya Guyana Malawi Paraguay Sấo Tomé and Principe Eurasia Uganda Indonesia Zambia Kyrgyz Republic * Burkina Faso, Tanzania, East Timor moved from Threshold Program to Eligible in FY 2006 ** Yemen was suspended from the Threshold Program in FY 2006 Albania Jordan Moldova Philippines Ukraine Yemen**

Millennium Challenge Corporation Reducing Poverty Through Growth Country Ownership Critical Ø Ø Eligible countries

Millennium Challenge Corporation Reducing Poverty Through Growth Country Ownership Critical Ø Ø Eligible countries submit proposal for MCC funding, after consulting with civil society and private sector. MCC assesses proposals based on: • The contribution to poverty reduction and growth • The quality of the consultative process and breadth of support • The ability to measure results

Millennium Challenge Corporation Reducing Poverty Through Growth Results Based Ø Specific objectives and measures

Millennium Challenge Corporation Reducing Poverty Through Growth Results Based Ø Specific objectives and measures of success are agreed on from the beginning Ø A monitoring and evaluation plan is an integral part of each Compact Ø Continued funding is contingent on continued performance on the indicators and meeting agreed benchmarks for program implementation

Millennium Challenge Corporation Reducing Poverty Through Growth Example: The Madagascar Compact Ø Signed April

Millennium Challenge Corporation Reducing Poverty Through Growth Example: The Madagascar Compact Ø Signed April 18, 2005 Ø $110 Million over 4 Years Ø Goal – Increase investment in rural Madagascar Ø Three Integrated Projects 1) 2) 3) Land Tenure Financial Sector Agricultural Business Investment

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program Objectives Compact Program Poverty reduction and economic growth in targeted rural Investment Zones Increase investment in targeted Zones Indicators Household income in targeted Zones Land productivity in targeted Zones Total amount invested by farms and businesses in targeted Zones

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program Objectives Land Tenure Project Improved land tenure and land security Percentage of targeted hectares with a land title or certificate Submission, passage, and implementation of new land law • Percentage of land documents restored and/or digitized Key • Percent of targeted land that is benchmarks demarcated and ready for registration • Average time and cost required to carry out property transactions • Madagascar's central land titling office which stores entirely paper-based titles. Indicators

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program Objectives Finance Project Increased competition in the financial sector • • Key benchmarks • • • Indicators Number and value of new loans and bank accounts Submission, passage, and implementation of new laws Number of holders of new treasury bills Volume of treasury bill holds Number of treasury bills held outside of Antananarivo Check clearing delay Volume of funds in the payment system Volume of microfinance institution (MFI) lending in the targeted zones MFI portfolio-at-risk delinquency rate Reporting of credit and payment information to central database

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program

Millennium Challenge Corporation Reducing Poverty Through Growth Objectives and Indicators for the Madagascar Program Objectives Agriculture Business Investment Project Improve production technology and market capacity in the targeted Zones A family selling produce and grains outside of their home in Mahitsy, Madagascar. Number of farmers and firms that adopt new technologies or engage in higher value production Zones identified • Number of farmers and firms employing technical assistance • Number of farmers and firms receiving or soliciting information on business opportunities identified • Key benchmarks Indicators

What Have Countries Asked For? n Every proposal unique n No predetermined allocation n

What Have Countries Asked For? n Every proposal unique n No predetermined allocation n n Rural development, land titling, infrastructure (roads, ports, airports), improving business environment Water and sanitation, but few proposals in health and education so far

Millennium Challenge Corporation Reducing Poverty Through Growth Contributing to Aid for Trade Ø Ø

Millennium Challenge Corporation Reducing Poverty Through Growth Contributing to Aid for Trade Ø Ø Ø First five Compacts include $640 million in trade related activities (including roads, ports, and agricultural goods for export markets). Next three Compacts likely to be signed include at least $300 million more in such activities. Nearly 63% of financing under these eight Compacts is aid for trade.

Millennium Challenge Corporation Reducing Poverty Through Growth Contributing to Aid for Trade Ø Ø

Millennium Challenge Corporation Reducing Poverty Through Growth Contributing to Aid for Trade Ø Ø Ø First five Compacts include $640 million in trade related activities (including roads, ports, and agricultural goods for export markets). Next three Compacts likely to be signed include at least $300 million more in such activities. Nearly 63% of financing under these eight Compacts is aid for trade.

Millennium Challenge Corporation Reducing Poverty Through Growth Implementation Ø Ø Ø The Compact defines

Millennium Challenge Corporation Reducing Poverty Through Growth Implementation Ø Ø Ø The Compact defines responsibilities. The country is responsible for implementation. Each Compact will also define the governance and accountability structure, which will cover processes and entities responsible for managing MCC funds, guidelines governing procurement and entities responsible for administering procurements. MCC may have one or two representatives in an MCA country

Millennium Challenge Corporation Reducing Poverty Through Growth Principles of Fiscal Accountability Ø Every country

Millennium Challenge Corporation Reducing Poverty Through Growth Principles of Fiscal Accountability Ø Every country is unique, no single solution Ø Find a solution that best serves Compact objectives Ø Build upon existing mechanisms when possible Ø Leave capacity in place wherever possible Ø Solution must have maximum transparency, integrity, and accountability

FISCAL ACCOUNTABILITY ELEMENTS Audit MILLENNIUM CHALLENGE CORPORATION MCC Disbursement $$ • Signatories to Compact

FISCAL ACCOUNTABILITY ELEMENTS Audit MILLENNIUM CHALLENGE CORPORATION MCC Disbursement $$ • Signatories to Compact GOVERNMENT • Exercises MCC rights under Compact • Creates, if necessary, and assigns responsibilities • Submit disbursement requests • Provide budget • Provide financial and M&E reports • Allocate budgets • Approve re-disbursements ACCOUNTABLE ENTITY MCC REP (Governing Council) (MCC Committee) (PM Office) • Provide accounting records • Approve certain contract actions • Document obligations • Initiate re-disbursements • Initiate procurement PROJECT MANAGER 2 (Govt Ministry) (Donor PIU) (Private Co. ) (NGO) VENDOR (Finance Ministry) (Donor) (Accounting Firm) FISCAL AGENT PROCUREMENT (Finance Ministry) (Donor) (Accounting Firm) (1 or more Project Mgr) PROJECT MANAGER 1 VENDOR FISCAL AGENT FINANC MGMT • Instruct to issue payment BANK ACCOUNT (Central Bank) (Commercial Bank) • Administer/certify procurement process VENDOR Re-disbursement $$

Millennium Challenge Corporation Reducing Poverty Through Growth Illustrative Models Government Non-Government Accountable Entity– Prime

Millennium Challenge Corporation Reducing Poverty Through Growth Illustrative Models Government Non-Government Accountable Entity– Prime Minister or Cabinet MCC Steering Committee Fiscal Agent-- Ministry of Finance Accounting Firm Procurement Agent- Ministry of Finance Private implementer Bank Account-- Central Bank Commercial Bank Project Managers-- Line Ministries NGOs

Millennium Challenge Corporation Reducing Poverty Through Growth Common Elements Ø Financial and procurement information

Millennium Challenge Corporation Reducing Poverty Through Growth Common Elements Ø Financial and procurement information available publicly through a local MCA Website and advertised in UN Business Development Ø Money will be disbursed in tranches Ø All MCC programs will be subject to external audit Ø Role of the MCC Inspector General

Millennium Challenge Corporation Compact Development Process

Millennium Challenge Corporation Compact Development Process

Millennium Challenge Corporation Reducing Poverty Through Growth Where is the MCC Today? Ø Five

Millennium Challenge Corporation Reducing Poverty Through Growth Where is the MCC Today? Ø Five Compacts signed – Cape Verde, Georgia, Honduras, Madagascar, Nicaragua; nearly $1 billion committed. Ø Robust pipeline – Armenia, Benin, Vanuatu. Ø Threshold agreements with Burkina Faso and Malawi. Ø Congress has appropriated $4. 27 billion to date.