On his first trip to Africa as Secretary of State, Secretary Mike Pompeo announced a new partnership earlier this week between American company, Weldy Lamont, and Senegal’s national electric company — stating that the partnership will build on the Millennium Challenge Corporation (MCC)’s $550 million Senegal Power Compact to “provide energy to rural areas … generating electricity throughout the country.” Secretary Pompeo, who also chairs the MCC’s Board of Directors that oversees MCC programs, congratulated African leaders’ efforts to combat corruption and stimulate private sector growth. Senegalese Foreign Minister, Amadou Ba, also reaffirmed his country’s commitment to upholding MCC’s high standards for open and transparent government.
MCC Model and Effect
MCC combats poverty by promoting economic growth only in countries that demonstrate a powerful commitment to democratic governance, economic freedom, and investments in their people. This unique model has led to a strong track record of incentivizing countries to enact economic and policy reforms to qualify for U.S. assistance, known as “the MCC effect.” An independent review of MCC programs between 2004 and 2010 found evidence of the MCC effect in 45 out of 118 low- and lower-middle income countries.
Recently, the prospect of a threshold program motivated the Kenyan government to move a long-stalled agreement with the U.S Agency for International Development (USAID) forward, agreeing to pay the United States arrears. Furthermore, President Uhuru Kenyatta recently addressed business leaders at U.S. Chamber that Kenya would become “an example of an African country that has strong governance” and promised to eliminate corruption, one of the key eligibility indicators that Kenya needs to meet to qualify for an MCC compact.
Cote d’Ivoire also exemplifies MCC’s ability to drive reform. After failing to achieve 15 of 20 MCC indicators in 2013, Cote d’Ivoire created a dedicated team in the prime minister’s office to reform its legal and economic policies, and launched a public awareness campaign to combat corruption to qualify for MCC assistance. In just few years, Cote d’Ivoire became eligible for MCC assistance and signed a $524 million compact in 2017. More importantly, these reform efforts contributed to the country’s rise in the World Bank’s Ease of Doing Business ranking from 177 to 122 as well as the Transparency International’s Corruption Perception Index from 136 to 106 between 2013 and 2019, helping Cote d’Ivoire become one of the fastest growing countries in the world.
The Administration’s Budget Request for MCC
Despite the agency’s recognition as a critical U.S. foreign policy tool in the 2017 National Security Strategy, the administration has proposed a 12% cut to MCC funding in FY2021 compared with last year’s Congressional Appropriation. For the fourth year in a row, the administration has requested just $800 million to fund the agency at a time when MCC’s CEO Sean Cairncross has called for promoting a culture of smart risk and aligning compacts with other U.S. development tools, like the newly-created U.S. Development Finance Corporation.
Proposed cuts aside, MCC has reason to hope its appropriation will be closer to the $900 million appropriated last year, as it has long enjoyed strong bipartisan support on Capitol Hill. As Senator Jim Risch (R-ID), chairman of the Senate Foreign Relations Committee, said in December, [MCC]’s “commitment to transparency, monitoring, evaluation and learning, is helping the U.S. and others, do more of what works and less of what doesn’t.” In that same hearing, Senator Bob Menendez (D-NJ) expressed his support, stating that “MCC is an important tool in the U.S. foreign-policy toolbox that requires congressional support.”
Strong congressional support for MCC will help countries develop the capacity to help themselves and support their journey to self-reliance, while advancing America’s interests and ability to compete globally.