Millennium Challenge Corporation Board of Directors Meeting Open Session

(10:00 a.m. EDT)

SECRETARY POWELL: Good morning, everyone. It's my great pleasure to call the meeting to order and to welcome all of you to this regular meeting of the Board of Directors of the Millennium Challenge Corporation. I see that we have a quorum of directors present so we can begin our business.

Let me begin by welcoming our two newest members, and the first two outside members of the Millennium Challenge Corporation Board, Christine Todd Whitman and Kenneth Hackett. Both of them were nominated by the President in June and confirmed by the Senate just last week and sworn in by me seven and a half minutes ago. (Laughter.) So we are very pleased to have them both here. And as most of you know, Christie Whitman previously served as Administrator of the Environmental Protection Agency and as Governor of the State of New Jersey. Ken Hackett currently serves as President of Catholic Relief Services, where he oversees important relief and development operations around the world. And we are very fortunate to have two such respected and gifted individuals on the board and we certainly look forward to their contributions.

And so, on behalf of President Bush and all of the members of the Millennium Challenge Corporation team, I'd like to welcome them both to the Board of Directors.

Before we get started on Board business, I wanted to note that due to the limited time available for a public session today and to give interested members of the public an opportunity to ask some questions of the Millennium Challenge Corporation management, MCC will be holding a public outreach session at GSA on Tuesday, July 27th, next week, at 10:30 a.m.

At that session members of the MCC management team would like to update you on their trips to the 16 MCA-eligible countries and other recent developments and then take your questions. I understand, by the way, that the country trips were very positive and productive. The reports that I have received back from Paul and our embassies certainly give me reason for optimism, so I would encourage you to attend the outreach session next week.

Let's now move along to the first item of business, the approval of the minutes of the Open Session of the May 6th Board Meeting. All of us have had a chance to review the minutes of the Open Session of the May 6th Board Meeting, which are included in your Board books. At Tab 1 is a resolution to approve these minutes and certify that they accurately reflect the proceedings at that portion of the meeting.

If there are no questions or comments, do I have a motion to adopt the resolution at Tab 1?

A PARTICIPANT: So moved.

SECRETARY POWELL: A second, please?

A PARTICIPANT: Second.

SECRETARY POWELL: All in favor?

(Chorus of ayes.)

SECRETARY POWELL: The resolution is adopted. We will now move on to the next item of business, a report on MCC operations by Chief Executive Officer Paul Applegarth. Paul.

MR. APPLEGARTH: Thank you, Mr. Chairman. Good afternoon. I'm pleased to provide the Board an update on the work of the Corporation since our last Board meeting. Because of limited time today, my report will be a summary, with the idea that we will report in greater detail and answer questions at next week's public Board meeting.

For those of you who didn't write down all the details of where the meeting will be, they will be available on the MCC website shortly.

Also I want to, despite the best of planning efforts over a couple months to keep calendars free, both Secretary Snow and Administrator Natsios had to be out of town today unavoidably. Accordingly, I want to recognize, in addition to our two new board members, Deputy Secretary of the Treasury Bodman and Deputy Administrator of AID Fred Schieck, who are here today.

At its basic Board meeting, the Board did two significant things. One was to select the first 16 countries as eligible for MCC assistance and to improve the establishment of a threshold program. Implementing programs and policies related to those decisions has been the focus of much of MCC's operational activities for the last two and a half months.

Immediately after the Board meeting, eligible countries were informed of their status by each U.S. Ambassador to each -- in their country and we had a meeting for the ambassadors of the selected countries. In addition, President Bush held a ceremony in the East Room of the White House to recognize and congratulate the representatives of the MCC-eligible countries. This event was attended by members of the Board, Congress, senior White House officials and a number of NGOs and members of the public who have been instrumental in helping to create the MCA.

Following an intense period of preparation, MCC then sent five teams to visit all the 16 countries at the end of May and early June, departing within ten days of the last Board meeting. There were five purposes for these trips: first was to congratulate the countries for being selected; two, to invite the submission of a proposal; three, review the three core tests that MCC will use in evaluating proposals, i.e., will the countries' proposed program lead to poverty reduction, to sustained economic growth, were the countries' priorities determined through a consultative process, and what additional policy commitments will the selected countries make to continue the policy reform process; the fourth purpose of the trips was to communicate MCC's message broadly in the country through meetings with government officials, members of parliament, political leaders, NGOs, the private sector, other donors and civil society leaders; and finally, to conduct an aggressive grassroots communication and public diplomacy strategy, including press conferences and radio and TV interviews to alert the people in selected countries of the country's selection as an MCC country, highlight the United States involvement and encourage them to participate in the consultative process to develop their country's priorities.

Before going, we also spent a lot of time with our U.S. key partners at USAID, State and Treasury, and I want to thank the Board members for the administration for making their staffs available to assist with our trips. They did provide an enormous amount of assistance that was critical to our preparation, as did staff at the World Bank, the IMF and elsewhere in the U.S. Government.

You will hear more next week, but I will say there are a number of common experiences among the teams that visited countries. First, we were received at the highest levels in every country, the president and prime minister in virtually every case. Secondly, the countries were uniformly proud of being recognized for their achievements. Third, they were very enthusiastic about the concept of country ownership, particularly after they understood the flexibility being offered to them to set the strategic directions of their proposal.

I'll give you a couple of examples of the impact that we had. A senior official in Armenia stated that Armenia's inclusion in the program had made the country much more focused on matters of governing, governance, democracy, the rule of law and human rights. Another official said that because of the consultative process officials better understood the urgency of problems in rural areas and that their proposals had been affected by these consultations. That's exactly what we're aiming for through the consultative process. The State Secretary for the Ministry of Foreign Affairs in Mongolia said Mongolia's selection as an MCC-eligible country had paved the way for a new form of relations between Mongolia and the United States. And the Prime Minister of Cape Verde stated that the selection of Cape Verde for the MCA was the third most significant achievement for the country, behind its independence from Portugal in 1975 and the democratic transition in 1991. That’s fairly -- in terms of priority, what can I say? He said it all.

We are clearly now moving into a new phase of MCC operations. The timing of initial proposal submission for each country will be different because the specifics of proposal development are unique to each country. To predict a timeline going forward is difficult at this time in terms of when we'll complete the first compacts. It is clear as we've encouraged countries to take time to get their proposals right -- actually, there's no question that our visits probably slowed down the submission process, but for good reasons. First, I think these countries recognize their flexibility under the program. They wanted to stop, take stock and rethink about how they could really use this new resource. And secondly, the consultative process.

Other activities we've been quite involved in have been the compact evaluation process, preparing it and getting ready for receipt of the first compact proposals; secondly, detailed planning for the implementation of the threshold program, working together with AID; and then preparing for really the agenda of this Board meeting, which is the candidate -- beginning the candidate country selection process for 2005.

We've also spent a lot of time on outreach. In terms of outreach, we've spent a considerable amount of time on Capitol Hill meeting with the members and their staff in an effort to keep interested members up to date on MCC activities. I have testified before the HIRC and House Appropriations Foreign Operations Subcommittee in preparation for their deliberations. As you know, the House did pass an appropriation bill that included $1.25 billion for '05. We are working to get it back -- the amount up to the President's original request of $2.5 billion, but we do appreciate the leadership and support of Chairman Kolbe and the bipartisan support that MCC enjoys.

We continue actively to participate in a number of outreach efforts with NGOs and business groups and to seek opportunities for these discussions. Developing awareness of MCC with international donors has also been a priority. We should mention Andrew Natsios invited me to participate in a meeting of development ministers that he was hosting following the G-8. This meeting provided an excellent opportunity for us to meet with the leadership of the donor community and to introduce them to MCC and what MCC is trying to do. And I do appreciate Andrew's efforts to include MCC in this important meeting.

And as I mentioned previously, we are holding another public outreach meeting next week.

In the midst of all this, it's sometimes difficult to forget we're still a startup. If we can find the time, we will celebrate our six-month birthday at the end of this week. And from an administrative perspective, we continue to build the infrastructure to support the implementation of MCC, including things like phones, security systems, temporary office construction and ultimately finding a permanent headquarters.

In terms of staffing, we've gone from a team of roughly eight people at the end of January to a little over 40 today, and we continue to build out the team. We have also continued to put in place financial and administrative procedures. The administrative staff visited Denver to further develop financial management and budgeting systems with our vendor, the National Business Center at the Department of the Interior. And, actually, we were joined on this trip by a representative of the Inspector Generals Office.

As I mention the Inspector General, I should say in terms of oversight, we have had extensive discussions with Hill staff, the GAO and the Inspector General staff. We recognize the need for this transparency and see as important strategically in terms of building confidence of what we are about. As a startup particularly and without demonstrable results in terms of results of our compacts for a couple years, it's very important that everyone have full confidence in what we are doing and how we are doing it.

In short, I would like to say it's been a quite busy two and a half months since our last meeting. We've made considerable progress and still have a lot to do. We look forward to receiving the proposals from MCC countries, working to the selection of the '05 countries and ultimately moving closer to our goal of reducing poverty through growth in some of the poorest countries of the world.

Thank you, Mr. Secretary.

SECRETARY POWELL: Thank you very much, Paul, and my congratulations to you and the members of the MCC staff for the great work that you have been doing in recent months. I always have to remind audiences that I speak to about the Millennium Challenge Corporation and the Account, that this has gone from a line in the President's State of the Union Address in January of last year in less than 18 months -- quite a few weeks less than 18 months -- to a complete program, the chartering of a corporation, the development of a board, the creation of a staff, pushing the appropriation through the Congress, all that is required to set up a new and rather unique organization that is out of government but also connected to the government and enjoying one of the President's highest priorities. And by governmental standards, this is a pretty rapid rate of progress and reflects a lot of hard work on the part of Paul, Al Larson before Paul, and so many others, and I appreciate that work.

I might just add one other word about the Millennium Challenge Corporation. The 16 nations that were selected have all been very, very pleased with their selection and I received all kinds of nice letters and phone calls and visitors. And they come in and they give me all their promises of what they're going to do, and I said that's fine because we're entering into a compact, a contract, and if you want this funding and if you want it to continue, and you want it to be multiyear, if you want us to stick with you, you've got to get better every year with respect to these basic tests of democracy and openness and economic freedom and end of corruption and the rule of law. You've got to get better.

Of greater interest, however, are the delegations and letters and phone calls I received from the countries that were not selected but who are potential candidates. And those calls are of a slightly different nature, or when they sit in my office and they look across at me and they say, "What did we do wrong or what is it we have to do right to get into this game?" And it's very simple and we lay it out for them. And they say if you do these things, then you will enhance your prospects of being selected. And we're going to get more money in '05 and we're going to get even more money in '06. So this is the most significant development program since the Marshall Plan, and you can be a recipient, you can work out a compact with us, but you've got to do the right things.

The other point I would make is that this is all being done not at the expense of our normal development assistance programs; in fact, if you look at the record of the Administration over the last three and a half years, there has been growth in AID spending and other kinds of development assistance spending, and on top of that you have this unique Millennium Challenge approach to development assistance. And not development assistance for the purpose of keeping people on the dole forever, but for the purpose of creating conditions in those countries so they will start to attract investment and trade -- non-aid. It's not for the purpose of giving them aid forever. This is the purpose of putting them on a solid footing so that they will attract investment and trade and get off aid, and we can use the Millennium Challenge Account money in future years for other countries that have met the test.

We will be talking about threshold funding. There are a number of countries that were getting closer and they may need a little walking around -- no, I won't call it that. (Laughter.) They need a little help. And that's what the threshold program is for, to give them a little help and bring them along, make sure they understand what's going to be required of them, make sure they understand the demanding nature of the tests that they will be asked to take and pass.

So I must say that, at least from my personal perspective as Chairman of this Corporation, as well as Secretary of State, I can say that I'm very pleased and I know the President is very pleased at the progress that we have seen so far, but it is nothing compared to the progress that we hope to see in the future.

With that, I would now like to move to close the open portion of the meeting, not to cut off dialogue and debate because you'll have that opportunity with Paul and the staff next week, but we have to discuss a few matters such as the '05 country selection process, which has to be closed because of the confidential nature of discussions and use of classified information, and we also have to discuss some internal personnel matters.

Members of the Board, in your Board books at Tab 2 is a resolution to approve the closing of the meeting at this time. If there are no questions or comments about the resolution, do I have a motion to adopt the resolution at Tab 2?

A PARTICIPANT: So moved.

SECRETARY POWELL: Second, please?

A PARTICIPANT: Second.

SECRETARY POWELL: All in favor?

(Chorus of ayes.)

SECRETARY POWELL: Thank you very much. The resolution is adopted and the open session of the meeting is adjourned. Please join me all upstairs, members of the Board, for the closed session.
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