US-Africa deal will involve projects rather than debt

The Millennium Challenge Corporation CEO Sean Cairncross spoke to Aggrey Mutambo on the vetting of Mozambique and Kenya for the next multi-million dollar programmes.

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What does MCC do, and how different is it from USAid?

It is a development agency like USAid, but different. We do poverty reduction through economic growth. We select governments to work with in partner countries that have results in good governance, economic reform and investment in their people.

Our hope is to consolidate those gains and progress those governments have been making. We look for that political will of the government to expend their resources and become more responsive to their people.

Your organisation says it follows a different philosophy of foreign aid, yet the parameters are the same as those used by other US agencies. Why is that so?

Our selection formula is somewhat unique in that it is an objective look at progress a country is making on three broad metrics: Good governance, economic reforms and investment in the people. And so each government that qualifies on the income level, because we work on a need-merit model. We then look to see how it is making gains on policy reform. Upon a certain standard, our board of directors decide whether to partner or not.

You focus on good governance and related issues, but security is not listed as a factor. Please clarify?

Security in the overall chain, is a macro-level issue and it is indicated in many of the indicators we look at. You will find is that, around the world, where there are overarching security issues, it is less likely that we will look at the scorecard.

We are often engaged with countries facing security challenges, the design and hope is to improve the environment in a way that reduces that security concern.

Most of your Africa partners are still seen as corrupt, according to Transparency International. What progress have you made in the countries where your programmes have run?

One of the hardest hurdles on our scorecard is the corruption indicator. We recognise that corruption is a major constraint in creating a dynamic economy and a market to benefit citizens and reduce poverty through economic growth. In Kenya, that is one of the issues we are engaged in. We are initiating a programme and going to go through a process of diagnostics and design to determine.

There will undoubtedly be an institutional and policy reform focus that is going to target corruption.

Civil liberties is one of the issues on your criteria yet some of the beneficiaries have a poor record in civil rights

We don’t shy away from challenges and work in environments that are dynamic and facing a lot of challenges. Governments that have shown willingness to take those issues head-on. Being responsive to its people is a key component to making things sustainable to growing an economy.

Those indicators reflect freedom of the press, civil liberties, an open society and improved time-lines. We want to engage and consolidate those reforms, encourage those policies and, in many cases, help create the political space for those governments to deal with those issues directly.

You have stringent accountability requirements. Who in these governments is the actual recipient of the funds that you send for those programmes?

We do two types of projects; Large-scale projects called compacts that take about five years, and average about $350 million, for countries who pass our eligibility criteria. In those that don’t pass but are making gains, like Kenya, we gauge their eligibility for threshold programmes—smaller scale $20-$50 million programmes over the course of two or three years.

We use a Millennium Challenge Account (MCA), established solely for implementing the programme. The MCA is an autonomous entity governed by a board of directors from civil society, the private sector, and government.

Managing the MCA is a team of professionals openly and competitively recruited with close MCC oversight and guidance. Aside from a small percentage of funds reserved for local programme administration.

All payments using programme funds are kept at the US Treasury until they are approved for direct deposit into the bank accounts of independent contractors selected competitively to carry out the programme. Third-party fiscal and procurement agents ensure that the MCA maintains international standards in financial management and procurement of services and goods.

Some critics say lengthy eligibility criteria makes these governments go for easier, alternative source of funds from, say China.

We bring a very different model of development to partners such as transparency. We require a civil society buy-in and that the government is responsive to its people. We engage the governments to ensure that the design of our programmes is reflective of what will have maximum impact on the people.

We include into our projects design and economic analysis components such as the environment, gender and social inclusion to ensure high quality and benefits for generations.

We are not looking to drive debt. We are not looking to bring in state-owned enterprises and flood the market with workers from one state. We are here in partnership, to build sustainable projects.

What’s your success rate?
Each project is monitored and evaluated on the back end of our projects. At the front end, we look at the economic returns in the design phase to set our eyes on a real goal that we can meet. We look at what is going to have maximum impact, what is going to have the best rate of economic return or what will address the core constraints.