The MCC at Four - U.S. Efforts in Combating Global Poverty

MODERATOR: Good morning. Today we have with us Ambassador John J. Danilovich, the Chief Executive Officer of the Millennium Challenge Corporation, and he's here to speak to you about the MCC at Four, U.S. efforts in Combating Global Poverty. He will make brief opening remarks and then we will take your questions.

Ambassador Danilovich, thank you for joining us.

AMBASSADOR DANILOVICH: Thank you, Jennifer and thank you all very much for coming this morning to allow me to speak to you about the MCC on its fourth anniversary.

I was just at Capitol Hill in a Senate caucus room earlier this morning for an event marking our fourth year of operation. We were created by an act of Congress in 2004 and this January now marks our fourth anniversary of operation. Turning four marks an important turning point in the evolution of the Millennium Challenge Corporation. The MCC is a different and demanding new form of development assistance with its focus on a very specific mandate: The reduction of poverty through sustainable economic growth.

As you may have seen President Bush mentioned the Millennium Challenge Corporation in a State of the Union address. I was fortunate enough to be there in the First Lady's box and it was a very impressive occasion to hear him once again support the Millennium Challenge Corporation before Congress and ask for full funding of our programs.

This program is a concrete symbol of the U.S. Government's commitment to building prosperity throughout the world and, therefore, stability. Prosperous neighbors can more easily remain democratic and stable.

I'm very happy to spend a few minutes with you this morning to talk about the MCC and to tell you the milestones and hallmarks that we've passed in the last four years. The MCC evolved from a great concept into a great reality in this period of time. This vision for innovative development assistance has been put into practice and MCC is producing tangible realistic results in all of our 16 partner countries.

MCC's model of development assistance is changing the global conversation about aid effectiveness. We are actually doing what many in the development community have been speaking about for years -- we are based on performance-based aid.

What I think of the impressive body of work that the MCC has achieved in just four short years, frankly I'm truly astonished. It is remarkable that what was a concept in 2004 is bringing positive tangible results in the lives of the poor in 2008. MCC compacts with partner countries symbolize America's continuing commitment to help the poor progress toward a future of promise and prosperity.

Our work is guided by three key principles that build on each other and from lessons learned in development over the last several decades. First, our aid encourages and rewards good policies. MCC provides aid to partner countries who adopt and maintain good policies that advance good governments, good governance and economic freedom and social development.

It is no accident that some of our most aggressive policy reformers, as measured by the World Bank's Doing Business report, are MCC countries. They cite their determination to meet our performance criteria as the very motivation behind their reforms.

Second, our aid requires full country ownership of the development process. While we partner with our country, we fully expect them to take the lead in creating, developing and implementing their own compacts. We expect them to provide their own solutions for their own problems, for their own poverty reduction which we will finance.

Third, our aid demand tangible results. Our partner countries must identify from the outset what impact our funding will achieve and have on their population. MCC's focus on measurable outcomes is central to how we operate. It is also the best way to sustain poverty reduction and economic development even after our funding ends.

Since our inception we have approved 16 compacts with countries throughout the world -- in Africa, Central America, Eurasia and the Pacific, totaling $5.5 billion. MCC has also approved 18 threshold programs totaling almost $400 million. These programs are preliminary programs that concentrate on indicator weakness, usually on good governance and corruption and other matters.

We in addition -- we're working with other countries and hope to sign at least two further agreements, if not three, throughout 2008. Implementation is underway in the compacts that we have signed. Results are emerging and the success of our programs is becoming evident. Early impressive results include issuing land titles, increasing farmer incomes through better agricultural techniques and programs, creating jobs, increasing market access, improving infrastructures such as seaports, roads, airports, storage facilities and irrigation canals, strengthening small-scale fisheries and artisan training, opening health clinics and containing the HIV/AIDS spread and other diseases, building and operating girl-friendly schools, expanding vocational training, strengthening financial services and access to credit and improving access to water and sanitation services. Through these efforts we are seeing and will continue to see sustainable measurable transformative change taking root in our partner countries.

I'd be very happy to answer any questions that you may have and I'm very happy to be with you today to celebrate the MCC's fourth anniversary.

Yes.

QUESTION: Thank you. I feel like singing. (Laughter.)

AMBASSADOR DANILOVICH: Good, me too. Thank you.

QUESTION: My name is Jennie Ilustre from Malaya, Philippines Daily. My question is -- I was reading this report -- the Philippines is still under a threshold program.

AMBASSADOR DANILOVICH: Yes.

QUESTION: Is there any good news when it will qualify?

AMBASSADOR DANILOVICH: We have an excellent threshold program with the Philippines. As you know, it's a $20 million program. Frankly, it's all the more robust because the Philippine Government upon receiving the $20 million of our MCC threshold activity, pledged and participated with an equal amount of money -- $20 million -- to support this program. It's working well. It's been successful. It's going forward. We want to see further results. We're continuing to look at the Philippines as a positive example of cooperation with the MCC.

I had the pleasure of meeting with President Arroyo and her cabinet in New York in September to discuss the ongoing --

QUESTION: What year, sir?

AMBASSADOR DANILOVICH: This -- 2007.

QUESTION: Okay.

AMBASSADOR DANILOVICH: At the United Nations General Assembly when she was there for those meetings. We met for about half an hour and discussed the MCC threshold program and the continuing efforts of her government to perform well on the indicators. We will be meeting the delegation from the Philippine Government next week here in Washington. I believe it's Mr. Teves who is coming, who we're going to be meeting with. He and his team and the MCC team will meet together to discuss further continuation of the program. And we hope eventually that the compact eligibility will continue and that they will be rewarded a compact in due course.

QUESTION: Who will be on the U.S. side when you meet?

AMBASSADOR DANILOVICH: It will be our MCC team here in Washington.

Thank you. Yes.

QUESTION: My name is Ablorh Odjidja. I'm from Ghana.dot, an online publication for Ghanians.

AMBASSADOR DANILOVICH: Yes.

QUESTION: One of the criteria that you've set for, you know, helping countries' transparency - I notice that in the literature that I've read so far, there is no - nothing about the press in these areas - the areas that you're trying to help. And I'm wondering why since the press tends to be a process of transparency in development countries.

AMBASSADOR DANILOVICH: Absolutely.

QUESTION: And they tend to be very, very weak. What are you doing to --

AMBASSADOR DANILOVICH: In fact, we have programs that support the press in many of our countries and we are very actively engaged with the media and with freedom of the press. They are incorporated not only in that respect, but also with regards to our indicators. Freedom of the press, freedom of media, freedom of political parties is all very much part of our whole indicator process that we have. In a number of countries, we have programs that are specifically targeted at press corps, at training of press corps with regards to investigative journalism and in many instances, as you might well imagine, with the training of journalists in the specific area, it's resulted in a greater interest of reporting on matters where there has not been transparency. So in fact, we are very directly engaged with the media and the press through many of our MCC programs.

QUESTION: The next question is this. The MCA, as a concept, came after the (inaudible) 2000 (inaudible). Is there any compare - anything on a comparative scale in other countries, like in Europe, China?

AMBASSADOR DANILOVICH: That has utilized the MCC concept --

QUESTION: Yes.

AMBASSADOR DANILOVICH: -- of foreign aid, foreign aid with accountability, sometimes it's referred to as smart aid, growing up aid. It's all part of the U.S. overall commitment. We have many, many instruments, many tools in our toolbox that we use for development assistance. There is, of course, the MCC model which operates the very successful USAID process which we've had for many decades and a number of other instruments that the U.S. Government has with regards to development assistance.

We have engaged with a number of other - with a number of foreign governments with regards to partnering, with regards to cooperation with our programs in many countries. Half of our MCC countries, by the way, as you may know, are in Africa numerically and 70 percent of our funding is to African countries, sub-Saharan as well as Morocco in the north. And we look forward to further cooperation with other countries on the MCC model. We're, in fact, meeting with DFID in the next three weeks here and in London to discuss areas where we can cooperate. In fact, one of the areas where we're hoping to find joint possibilities for our cooperation is in Ghana.

So this U.S. model of foreign aid with accountability is one which is gathering increased interest from foreign governments. They want to know exactly what we're doing. And many of them have begun to give consideration to introducing MCC-like indicators in some of their programs.

Yes.

QUESTION: Thank you, Mr. Ambassador. My name is Arshad Mahmud and I represent the Daily Protho Alo in Bangladesh. As you are aware, perhaps, that Bangladesh has been trying to get into this program for the --

AMBASSADOR DANILOVICH: Yes.

QUESTION: -- last several years and we fully understand why it was not until 2007 when this terrible government was overthrown. Now a new caretaker government is in power and they have been - or rather, they have made significant progress in all the criteria that you have mentioned, which is ruling justly, investing in people, encouraging economic freedom. And I'm sure you are aware of this on the ground.

AMBASSADOR DANILOVICH: Yes.

QUESTION: Why it was not included in your program this year? What happened actually?

AMBASSADOR DANILOVICH: Sure, I'll tell you. We have an annual review process which usually occurs towards the end of the summer, whereby we collate all of the information that we receive from our indicator analyzers. And there are many. I mean, there's the World Bank, the IMF, as you know, Transparency International, Heritage.

A number of different internationally recognized, non-American institutions do the analysis of these countries and it is enormously complicated. It's not really a superficial thumbnail sketch; is this a good government, has it just become a good government, is there a newly elected government three months ago. It's a process which starts out with a simple category like ruling justly, but then below that, there are four subsequent categories and then eight and then 16 and then 32, a number of indicators that all feed into the one, let's call it a good government category.

So it is a very complex process and we usually get these results in the late summer and at the end of which we're able to put together a report as to how a country has performed. We, of course, look very closely at Bangladesh. We're very interested in the progress that Bangladesh is making, that all the trends are in the right direction politically, economically and socially. And on our report card, our scorecard of these 17 indicators, unfortunately, Bangladesh still does not pass. There will, however, be another review process this summer coming up now in 2008. As you know, they must pass 50 percent of the indicators in each category and they must, in addition, pass the corruption - anti-corruption category.

And at the moment, unfortunately, Bangladesh does not pass, although as you've stated, the trend is in the right direction. We need to see these trends continue and for them to actually evidence themselves on our report card.

QUESTION: And a follow-up. Who are the agencies that you rely on to assist this progress on the ground? And how long would it take to get a full picture on your part so that you can give a concrete --

AMBASSADOR DANILOVICH: Sure.

QUESTION: -- answer to that? Thank you.

AMBASSADOR DANILOVICH: We rely upon the agencies, some of which I have mentioned to you. You can see the others on our website which feed into this whole indicator process. The indicators aren't perfect and they do take time to show results. There is often - in some of the indicators, it varies; some of them are easier to assess than others, some of them are more complicated in terms of timing. So there can be a time variation of sometimes 12 to 18 months with regards to performance, but usually within that 12 to 18 month period it will become clear that a country's performance has improved or has, in fact, degraded.

QUESTION: So we have to wait another six months or --

AMBASSADOR DANILOVICH: Well, you have to wait now until the summer. And those results that come this summer will be the results from 2007, so there is that time lag. And there again, not all results are accurate within a 365-day period. Some things like education and immunization take longer to get those results because of the type of entity that you're assessing.

Yes.

QUESTION: Good morning, my name is Julio Marenco from La Prensa Grafica in El Salvador.

AMBASSADOR DANILOVICH: Great. I was just in El Salvador last week.

QUESTION: Yeah, I know. Last time you met with President Saca here in Washington last November, you asked for a remediation plan since the government has performed poorly in 9 of 17 indicators measured by the MCC. Have you heard of anything from this plan (inaudible)?

AMBASSADOR DANILOVICH: Yes. I was in El Salvador last week. I met with President Saca last week as well as in Washington, as you've referenced, a few months ago when he came to Washington and met with President Bush. Last week, we distributed a number of outstanding scholarships to students up in the north and we did a number of other things to move the El Salvador program along while I was there. I also had a presentation from our accountable entity, from the El Salvador accountable entity, as to their very precise and aggressive program for the implementation of their compact.

The indicators that come out on an annual basis, what you have discussed, were - there was a weakening of the performance by El Salvador, is one in which and El Salvador have entered into a very aggressive program for remediation, for what we're actually referring to as policy improvement, to make sure that in those areas of indicator weakness El Salvador improves.

As you know, we have a median and countries must perform relative to their peers against that median. It means that other countries can do better, which will push a country which is doing well below the median, even though they are doing well and have improved and reforms are going forward. They will nevertheless be knocked down because other countries might be improving more rapidly. So it is a certain degree of understanding and subjectivity that's required with regards to these performance. The situation in El Salvador is not serious or critical. We want to see it improve. We want reforms to continue. If there ever is a situation, whether a serious policy reversal, we will take the necessary action to be good shepherds of our investments in those particular countries. That is not the case with El Salvador. El Salvador continues along the path of reform. They are doing well. They are taking the necessary steps, legislative and otherwise, to make the reforms that are necessary to, at the next assessment period, come back out to the median and hopefully above it.

There is - this is a program of five years in El Salvador. It's just entered into force and there will be a progression over that five-year period where we will assess a country's performance on an annual basis, make them very much aware of what the results of that assessment are. And in the hoped for progression of this compact, we hope that at the end of the five years that the reforms will have continued to extent that El Salvador and other countries will continue to perform well and will become eligible for a second compact.

QUESTION: Do you have any idea of when this company's going to be disbursed this coming year?

AMBASSADOR DANILOVICH: The disbursement schedule?

QUESTION: Mm-hmm.

AMBASSADOR DANILOVICH: Not off the top of my head. But I know, particularly with regard to the case of El Salvador, we are expecting disbursements certainly by the summer and to continue strongly throughout the rest of 2008.

QUESTION: Some MCC officials in El Salvador have expressed some concern about the judiciary sector. They said that they --

AMBASSADOR DANILOVICH: Yes.

QUESTION: Do you have -- did you discuss this with other MCC officials?

AMBASSADOR DANILOVICH: There is concern over the judicial reforms in El Salvador and we want them to continue. It's an important sector for improvement. It's critical that for the economic and political advancement of the country for the reduction of poverty that the court system, the access to justice and that the reforms continue and we look forward to El Salvador's ongoing commitment to that process.

QUESTION: Good morning, Mr. Danilovich. My name Armando Morales from La Razon, Bolivian newspaper. Can you speak about Bolivia? Where is Bolivia right now in this process?

AMBASSADOR DANILOVICH: I met with President Morales. Is he relation? No, no, all right. (Laughter.) I met with President Morales in New York at the United Nations General Assembly when he was there in September of 2007. We had a very good meeting, a very honest, very sincere, very nice meeting together. I explained to him, and I explained in detail, that our budget for this particular year, 2008, the money that Congress gives the MCC, in fact, would not be sufficient to enter into an agreement with Bolivia. And because I explained the process to him very clearly, and we only have enough money this year to do three countries, by coincidence, they happen to be African countries, the first will be Tanzania in February, where we'll sign an agreement and we hope by mid-summer to sign two further agreements with Burkina Faso and Namibia. We don't have enough money to do any other compacts for 2008. We have received a good proposal from Bolivia. We have engaged with the Bolivian team. We have, as you might well imagine, some concerns about the economic trends in Bolivia and about the good government constitutional trends in Bolivia. And we remain open to communication and a dialogue with the Bolivian team. And we are keeping our door open to Bolivia. But for the moment, we've paused in our aggressive engagement to see exactly which way Bolivia is moving with regards to their reform efforts, with regards to government and economics.

Yes.

QUESTION: Good morning, Mr. Ambassador. Bing Branigan from Manila Mail newspaper. When exactly next week Philippine Finance Secretary Teves is coming?

AMBASSADOR DANILOVICH: Secretary Teves -- I think the meeting is scheduled for Tuesday.

QUESTION: Tuesday.

AMBASSADOR DANILOVICH: Yeah. I'm not sure about that but I think it's Tuesday.

QUESTION: What's keeping the Philippines from getting the - into the full MCC -- what's the requirements they have not passed yet.

AMBASSADOR DANILOVICH: Sure. We discussed this with President Arroyo and with her ministers when we were together in New York in September. And although the Philippines technically is eligible for a compact, there has been in the last assessment, indicator assessment some serious declines with regards to corruption and some other matters with their performance on the indicators. This causes us some concern because the drop in performance in fact was very dramatic. And we want to understand more clearly why that dramatic drop has occurred, understand what circumstances caused that to happen, so we can have some clarity as to whether or not this precipitous drop is going to continue or if there was some indicator irregularity or if there are further strong reforms which the Philippine Government needs to take in this regard to make sure that at the next period of assessment this summer, the indicator shows an upward trend. The drop was from the 70^th percentile down to the 50^th percentile. I think the figure - don't hold me on this, but it was something like a drop from 76 down to 54 or something of that nature. So it was fairly significant. Even though they were still above the median. So that is, in fact, the very reason for the meetings next week. We're going to discuss this and see. We are going forward. We're continuing our dialogue. We're open to discussion with the Philippines.

QUESTION: Mr. Ambassador, (inaudible) corruption (inaudible) is this part of it?

AMBASSADOR DANILOVICH: Well, part of it to the extent that, yes, it's part of the democratic and - political and democratic assessments that we do in our country - do with our countries.

QUESTION: Thank you.

AMBASSADOR DANILOVICH: Yeah. Thank you.

MODERATOR: I think we have time for one last question in the back.

QUESTION: I'm Yuni Wilcox from VOA Indonesian Service. I just wanted - would you elaborate more on the program with Indonesia, especially on the corruption program?

AMBASSADOR DANILOVICH: The threshold program, the preliminary program that we have, the targets indicator weakness that we have with Indonesia is, in fact, a very good program. It is targeting good government, corruption, good governance within Indonesia. But it also has a very attractive and very strong component of healthcare - distribution of medicines to the various islands. So this is progressing well. We are very happy with our engagement with Indonesia. We are looking forward to forward progress with Indonesia and hopefully to their eventual compact eligibility. Indonesia is getting close to being compact eligible and we are looking at the indicators very closely and hope that we will have the opportunity to present our positive reaction to Indonesia in due course.

MODERATOR: Okay. Thank you, Ambassador Danilovich --

AMBASSADOR DANILOVICH: Great. Thank you very much.

MODERATOR: -- and thank you all for being with us today.