The Millennium Challenge Corporation (MCC) was established in 2004 to administer the Millennium Challenge Account (MCA), the Bush Administration’s “revolutionary” new bilateral development aid fund. The MCA was conceived in the wake of 9/11 as a means of combating terrorism through poverty alleviation - or, more accurately, through economic development in poor countries where instability could pose a threat to U.S. interests. The MCC is a government corporation, with a Board of Directors helmed by the Secretary of State and managed by key federal agencies (Treasury, Trade, USAID) in the US foreign policy diorama.
MCC aid is conditional. The agency makes selective grants to qualifying developing nations based on a set of 16 criteria in three areas: good governance/rule of law, “investment in people,” and economic freedom. Though differing from other U.S. aid ventures - primarily by program scale and an emphasis on “responsible” country behavior - the agency’s approach to development is a solid continuation of established neoliberal models. The MCC charter is “to achieve market driven economic growth,” and the agency applies a trickle-down aid approach: building business and financial sectors with the assumption that benefits will eventually come to the rest of society - that is, to the people most in need of development initiatives.
Although the Bush Administration planned to administer an annual $5 billion dollars through the agency by FY 2006, disbursement thus far has been slow, leaving the budget vulnerable to Congressional trimming. Critics fault the Administration for bad planning from the beginning, and the agency has become somewhat embattled with bipartisan pressures—although, due to its solid neoliberal ideology, it receives some rare support from right-wing factions that normally disdain foreign aid programs.
The Bush Administration’s response to the events of September 11, 2001, included a broad and comprehensive overhaul of relevant federal agencies and foreign policy. An outgrowth of Cold War strategy, development has always provided a means of fighting the country’s proxy wars and protecting its economic interests, and was a natural candidate for an “anti-terrorist” makeover. The apparent post-Cold War shift increased the focus on military and security in the developing world. But the formula is very much the same - based on neoliberal capitalist policies (induced economic liberalization, privatization of social services, and market deregulation aimed at attracting foreign direct investment).
The Millennium Challenge Account was announced by President Bush in a speech he made at the Inter-American Development Bank in 2000. Specifically, Bush called for “a new compact for global development, defined by new accountability for both rich and poor nations alike. Greater contributions from developed nations must be linked to greater responsibility from developing nations.”
To this end, Bush pledged a 50% increase in U.S. foreign development aid over the following three years - and a planned annual budget of $5 billion for the new agency that would manage the Account, the MCC, by FY 2006. And he outlined a shift in standard development practice - emphasizing an increased “responsibility” on the part of recipient nations that “govern justly, invest in their people and encourage economic freedom:”
Countries that live by these three broad standards - ruling justly, investing in their people, and encouraging economic freedom - will receive more aid from America. And, more importantly, over time, they will really no longer need it, because nations with sound laws and policies will attract more foreign investment. They will earn more trade revenues. And they will find that all these sources of capital will be invested more effectively and productively to create more jobs for their people...
Bush’s plan, in part, was designed to address a deteriorating perception of U.S. aid on all sides of the development debate, and secure the U.S. agenda for future bilateral and multilateral ventures by playing to the “other” beneficiaries: financial institutions, U.S. and foreign corporations.
I challenge other nations, and the development banks, to adopt this approach as well. America’s support for the World Bank will increase by almost 20% over the next three years. We expect the World Bank to insist on reform and results, measured in improvements in people’s lives. All the development banks should adopt a growth agenda, increasing their support for private sector enterprises and focusing more on education, as the Inter-American Development Bank has done…And I challenge the development banks to provide up to half of the funds devoted to poor nations in the form of grants, rather than loans. Grants instead of loans that may never be repaid.
According to analysis by Citizens’ Network on Essential Services, “The White House National Security Council and Council of Economic Advisors, in coordination with the Treasury Department, the State Department, and the U.S. Agency for International Development (USAID), exercised significant leadership in formulating the MCA. The Treasury Department chaired the committee that identified the criteria for eligibility; which will determine which countries qualify for MCA assistance. The State Department chaired the outreach planning committee, which solicits recommendations on eligibility criteria and priorities for long-term spending for growth and poverty reduction.”
The U.S.’s Millennium Challenge Account: New Paradigm For Development Assistance? (News & Notices for IMF and World Bank Watchers, Global Institutions and Politics)
According to a 2007 Congressional Research Service (CRS) Report, the MCC project differs from other U.S. Development initiatives - and established policy - in several ways:
- 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.
Also setting the MCC apart is its budget. In 2002 President Bush announced an initial plan to fund the agency at $5 billion annually by FY 2006 - a large tag for ambitious programs, which has yet to be reached. Congress appropriated only $6 billion for FY 2004- 2007. FY 2007 funding is provided under terms of a continuing resolution that provides $1.7 billion, while the Administration requested another $3 billion for FY 2008.
Structure
Congress authorized the creation of MCC as “an independent government entity separate from the Departments of State and the Treasury and from the U.S. Agency for International Development (USAID)” to manage the initiative. Separate - but with a Board of Directors 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.” The Board oversees the agencies operations - and importantly, makes the country selections. MCA programs are authorized by the Senate Foreign Relations and House International Relations Committees, and the Senate and House Foreign Operations subcommittees appropriate funds for the agency each year.
Country Selection
In considering candidate countries, the MCC “assesses the degree to which the political, social and economic conditions in a country promote broad-based sustainable economic growth,” with the Board of Directors focusing on three factors: performance on the policy criteria, the opportunity to reduce poverty and generate economic growth in the country, and the funds available to MCC. In order to qualify for MCA support, countries must demonstrate - through “policy performance,” commitment to 16 criteria in three categories, which are measured by third-party indicators, from the World Bank and the IFC (International Finance Corporation), Transparency International, Freedom House and UNESCO, International Fund for Agricultural Development - and The Heritage Foundation, among others.
For FY 2008, candidate countries must have either a per-capita GDP below $1,735 (low-income category) or between $1,735 and $3,595 (middle-income category) and cannot be statutorily prohibited from receiving U.S. economic assistance.
Category 1: Ruling Justly
This includes civil liberties, “voice and accountability,” political rights, government effectiveness, rule of law and clamping down on corruption. Specifically, MCC explains the six indicators in this category as measuring as “just and democratic governance by assessing, inter alia, a country’s demonstrated commitment to promote political pluralism, equality, and the rule of law; respect human and civil rights, including the rights of people with disabilities; protect private property rights; encourage transparency and accountability of government; and combat corruption.”
Although the concept of “human rights” is explicit in this category, it is interesting to note that only “civil and political rights” are listed - and the accompanying “social, cultural and economic rights” as outlined in all major international human rights agreements and established in UN policy and the Universal Declaration of Human Rights, are overtly omitted. (Neoliberal policy and practice invariably favors civil and political freedoms at the expense of social, cultural and economic rights).
Category 2: Investing in People
This category includes immunization rates, public expenditure on health and primary education, girls’ primary education completion rates and natural resource management.
Category 3: Economic Freedom, or policies that foster enterprise and entrepreneurship, more open markets, sustainable budget policies, and strong support for development
“The six indicators in this category measure the extent to which a government encourages economic freedom by assessing, inter alia, demonstrated commitment to economic policies that encourage individuals and firms to participate in global trade and international capital markets, promote private sector growth and the sustainable management of natural resources, protect private property rights, strengthen market forces in the economy and the respect for worker rights, including the right to form labor unions.”
Rationalization of the Criteria
All indicators are tied to a central assumption that their presence will decrease poverty and have a positive effect on economic growth - and that the former will result from the latter. In the agency’s “2008 Guide to Indicators and the Selection Process,” each indicator is explained in terms of its “relationship to poverty and growth.” Most indicators are rationalized in the context of conventional development theory and neoliberal logic, emphasizing economic growth as an end in itself - which will eventually lead to decreased poverty. (In fact, this causal assumption has been disproved by years of failed economic development that has often resulted in higher poverty rates, greater dependency and a greater divide between rich and poor). For example, “Government Effectiveness:”
“Countries with more effective governments tend to achieve higher levels of economic growth by obtaining better credit ratings and attracting more investment, offering higher quality public services and encouraging higher levels of human capital accumulation, putting foreign aid resources to better use, accelerating technological innovation, and increasing the productivity of government spending. Efficiency in the delivery of public services also has a direct impact on poverty. On average, countries with more effective governments have better educational systems and more efficient health care. There is evidence that countries with independent, meritocratic bureaucracies do a better job of vaccinating children, protecting the most vulnerable members of society, reducing child mortality, and curbing environmental degradation. Countries with a meritocratic civil service also tend to have lower levels of corruption.”
Candidate country reports:
Programs - the agency groups its activities into two types of programs:
- Millennium Challenge Compacts
A Compact is a multi-year agreement between the Millennium Challenge Corporation and an eligible country to fund specific programs targeted at reducing poverty and stimulating economic growth.
- Millennium Challenge Threshold Programs
The Threshold Program is designed to assist countries that are on the “threshold,” meaning they have not yet qualified for MCA Compact funding, but have demonstrated a significant commitment to improve their performance on the
Progress so far, 2008
According to press reports, the agency has only dispersed about $150 million so far - a far cry from its annual $5 billion blueprint. About twenty-three countries have been selected, and “compacts” signed with sixteen countries, nine of which are in Africa - to which MCC has committed $3.8 billion over the next five years. Most of these funds are reportedly focused on infrastructure and agriculture.
Reports from the Field
(MCA Monitor)
Agency Contractors
According to FedSpending.org, a project of OMB Watch, the top ten MCC contractors for FY 2006 were as follows:
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Camp Dresser & McKee, Inc.
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$4,947,568
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Dyonyx Limited Partnership
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$4,517,577
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Booz Allen Hamilton Inc.
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$4,296,391
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Mybizoffice, Inc.
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$4,288,348
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1401 H Owner Limited Liability Company
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$4,260,510
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Parsons Brinckerhoff Inc.
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$2,700,529
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Ard, Inc.
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$2,279,736
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Berger Louis Group Inc.
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$2,165,646
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Chemonics International Incorporated
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$1,768,219
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Chadbourne and Parke, LLP
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$1,661,260
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2008 Candidate Countries (Low-Income Category)
1. Afghanistan
2. Bangladesh
3. Benin
4. Bhutan
5. Bolivia
6. Burkina Faso
7. Burundi
8. Cambodia
9. Cameroon
10. Central African Republic
11. Chad
12. Comoros
13. Congo, Democratic Republic of the
14. Congo, Republic of the
15. Djibouti
16. Egypt
17. Eritrea
18. Ethiopia
19. Gambia, The
20. Georgia
21. Ghana
22. Guinea
23. Guinea-Bissau
24. Guyana
25. Haiti
26. Honduras
27. India
28. Indonesia
29. Iraq
30. Kenya
31. Kiribati
32. Kyrgyzstan
33. Laos
34. Lesotho
35. Liberia
36. Madagascar
37. Malawi
38. Mali
39. Mauritania
40. Moldova
41. Mongolia
42. Mozambique
43. Nepal
44. Nicaragua
45. Niger
46. Nigeria
47. Pakistan
48. Papua New Guinea
49. Paraguay
50. Philippines
51. Rwanda
52. Sao Tome and Principe
53. Senegal
54. Sierra Leone
55. Solomon Islands
56. Somalia
57. Sri Lanka
58. Tajikistan
59. Tanzania
60. Timor-Leste
61. Togo
62. Turkmenistan
63. Uganda
64. Vanuatu
65. Vietnam
66. Yemen
67. Zambia
2008 Lower-Middle Income Candidate Countries
1. Albania
2. Algeria
3. Angola
4. Armenia
5. Azerbaijan
6. Belarus
7. Cape Verde
8. Colombia
9. Dominican Republic
10. Ecuador
11. El Salvador
12. Guatemala
13. Jamaica
14. Jordan
15. Macedonia
16. Maldives
17. Marshall Islands
18. Micronesia, Federated States of
19. Morocco
20. Namibia
21. Peru
22. Samoa
23. Suriname
24. Swaziland
25. Tonga
26. Tunisia
27. Tuvalu
28. Ukraine
Prohibited Countries
For FY 2008, several countries that would be eligible for MCC assistance are prohibited by legal restrictions. Lower-income prohibited countries include: Burma, for human rights, democracy and drug violations; The Cote d’Ivoire, because its elected head of government was deposed by a military coup; Cuba, North Korea, Sudan and Syria are subject to numerous provisions under the Foreign Assistance Act, which prohibits assistance to governments supporting “international terrorism”; Uzbekistan is subject to a U.S. progress report before it can receive funds - and Zimbabwe owes the U.S. money. For the lower-middle income category, the Republika Srpska, a part of Bosnia and Herzegovina, is prohibited on account of its failure to implement legal obligations from the International Criminal Tribunal for the Former Yugoslavia; China is not eligible on account of its human rights record; Iran is prohibited by similar restrictions as North Korea, Sudan and Syria (terrorism); and Fiji and Thailand are subject to FOAA rules that prohibit a country whose head of state has been deposed by a military coup/decree.
Governance
According to a CRS report, the decision to house MCA in a new organization was heavily debated during early Congressional deliberations over the new initiative. The Administration advocated a new structure and fresh start to circumvent some of the bureaucracy inherent in conventional development organization - while critics argued it would further divide policy and complicate delivery. Suggestions were made to house the agency in the State Department or link it to USAID administration.
Praise
Some experts think the MCC is off to a good start, and beginning to live up to its promise of innovation. Steve Radelet, a Senior Fellow at the Center for Global Development and an expert in its MCA Monitor division, expressed reserved optimism when assessing the agency in a recent interview (February 2008):
“The Millennium Challenge Corporation (MCC) has evolved into what I think is an imaginative and creative new way to think about foreign assistance. It has done many things well, in terms of how it is thinking about foreign assistance, but it has also been quite slow in getting off the ground and dispersing money. What it has done well is recognizing that not all countries are the same and that we should deliver assistance differently to different countries. It separates out those that are better governed, countries that have made choices toward democracy, toward better governance, and toward better health and education policies. It gives those countries the responsibility to set their priorities and design the programs. This is a huge change and a huge step forward in how we think about foreign assistance, to actually give the recipient countries much more responsibility.”
Criticism from the Left
Much criticism has been leveled at the MCC, from within and outside the development field. Critics take issue with the underlying concept, arguing that making aid conditional upon a set of criteria crafted by the U.S. - no matter how complex, third-party regulated or transparent - is just a continuation of the “one-size-fits-all” model of development long supported by the U.S. government in its rule over the World Bank and other international aid institutions. The new-and-improved model trumpeted by the MCA and MCC is the same policy, albeit with a shiny new package - and runs the risk of continuing to ignore the need for a varied, relative and organic approach to development and democracy across a diverse range of communities and countries in need.
According to a 2006 Rolling Stone article, the real beneficiaries of the Bush Administration’s “fake aid” are the foreign banks it subsidizes. The investigative report also exposes a lack of transparency in the MCC’s operations, and a conditionality based less on the good governance indicators and how many young girls are enrolled in primary school—and more on how much profit countries are able to generate. Rolling Stone reports that the agency was staffed from the beginning with “MCC conservative ideologues,” not aid experts, that the agency refused to partner with other countries, and responded to criticism with a “bunker mentality, refusing to talk to detractors and learn from its mistakes.”
Support from the Right
From the usually tight-fisted libertarians, an urging to Congress to fund the MCA and it’s “new approach to development assistance:”
And Criticism from the Right
Other Criticism: MCC’s Slow Pace
Many have expressed concern over a slow start for the agency. Relative to most U.S. foreign aid, which often consists of small, centrally planned and contracted projects, the ambitious MCC approach allows grantee countries to undertake large projects on their own - making funding levels a crucial issue. According to press reports in December 2007, MCC had spent only $155 million of the $4.8 billion it has approved for spending on projects. The unspent billions made it vulnerable at a time when both the House and Senate had slashed the 2008 budget request. The Senate also proposed a rule that critics claim would be counterproductive to the agency’s “innovative approach” - wherein Congress would provide no more than half of the money up front for future 5-year projects (typically $250-$700 million). Under the current system, such projects are fully funded up front to ensure completion.
Unanswered Questions
According to observers, the MCC leaves many unanswered questions, including its relationship to USAID, and the issue of “tied aid.” According to the Citizens Network on Essential Services (CNES), it was unclear at the start whether or to what extent MCA services will be attached to the purchase of goods and services (as in USAID operations): “At a May 22, 2002 public meeting on the MCA, an InterAction spokesperson claimed that some 71% of U.S. assistance represents ‘tied aid’ – that is, aid for the purchase by recipient countries of U.S. goods and services. The spokesperson asked whether the MCA would continue to tie aid or whether greater resources flows would directly benefit recipient countries without strings attached. Alan Larson, U.S. Under Secretary of State for Economic Business and Agricultural Affairs, responded that the just-concluded OECD negotiations on tied aid had been “tortuous” and that the goal of untying aid would not represent the “sharp end of the spear” of the MCA initiative. Indeed, Larson said that he would not make this objective the centerpiece of any initiative, since it’s good policy to buy the time of talented consultants who are able to contribute to a country’s development.
“In February 2003 a U.S. official responsible for implementing MCA could not answer questions about whether the Millennium Challenge Corporation would favor proposals from qualifying governments that involve partnerships with U.S. corporations and NGOs. (Personal communication with CNES staff.) The official would not confirm whether, when considering a government proposal for contracting out services, the MCC was likely to favor those involving U.S. partnerships (over say, partnerships with French or German or Japanese corporations).”
The U.S.’s Millennium Challenge Account: New Paradigm For Development Assistance?
(News & Notices for IMF and World Bank Watchers, Global Institutions and Politics)
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Founded: 2004
Annual Budget: $2.225 billion
Employees: 300
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Millennium Challenge Corporation
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Yohannes, Daniel
Chief Executive Officer
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An Ethiopian immigrant who came to the United States at the age of seventeen with $150 in his pocket, Daniel W. Yohannes worked his way through school, became a wealthy bank executive. and was sworn in as the CEO of the Millennium Challenge Corporation (MCC) December 8, 2009.
Born in Ethiopia in September 1952, Daniel W. Yohannes emigrated to the U.S. as an exchange student circa 1970. Working to support himself while in school, Yohannes earned a B.S. in Economics from Claremont McKenna College in 1976 and an M.B.A. from Pepperdine University in 1980. In subsequent years, he put each of his seven siblings through college in the United States.
Yohannes began his banking career in 1977 as a teller at Security Pacific National Bank, where he eventually held a number of leadership roles. In 1992, when Bank of America took over Security Pacific, Yohannes relocated to Denver to work for First Bank System, which named him President of Colorado National Bank (CNB), which First Bank had recently acquired. Early on, he oversaw the integration of CNB with two other recently acquired banks, an operation opposed by community activists critical of what they considered a lack of minority lending. Yohannes improved the bank’s record in that area, and under his tenure CNB became an active supporter of foundations and nonprofits. Yohannes was President of CNB from 1992 to 1999, and grew the bank from $2 billion to $9 billion in assets. In 1998, when U.S. Bancorp acquired First Bank, CNB became known as U.S. Bank and Yohannes became CEO of U.S. Bank’s Colorado Division. Eventually he also worked as Vice Chairman of U.S. Bank for the Commercial Banking Group, Consumer Banking Group and as Head of Integration for Community and Public Affairs. In February 2003, Yohannes resigned from U.S. Bank, explaining that, having recently turned 50, it was “time to do something different.”
Yohannes soon became President and CEO of M&R Investments, LLC, a privately-held investment firm specializing in real estate, financial institutions and the green energy sector. In September 2006, he co-founded and became chairman of the board of the New Resource Bank in San Francisco, which finances options for green businesses in addition to traditional banking.
Yohannes is married to Saron Yohannes, with whom he has three children. On November 16, 2004, Yohannes, a Catholic, reported to his parish priest that he had seen the image of Jesus on a banner hanging in his Denver church, St. Mary’s Anglican Catholic Church.
A Democrat, Yohannes co-chaired the transition team of incoming Colorado Democratic Governor Bill Ritter in 2006. Since 1995, Yohannes has made political donations totaling $72,550; $67,750 to Democratic candidates and organizations, and $4,800 to Republican candidates.
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