Daniel Yohannes: ‘We must continue to be innovative’

Daniel Yohannes plans to focus on innovation, partnerships and results during his tenure as Millennium Challenge Corp. chief executive. Photo by: MCC

Daniel Yohannes is not your typical U.S. government official. Then again, the agency he leads is similarly unique – in its vision as well as its blend of public and private-sector approaches to international development.

Born in Ethiopia, Yohannes immigrated to California at the age of 17, with $150 in his pocket. He has held top-level positions in banking and until last year served as president and CEO of M&R Investments, a firm specializing in real estate, financial institutions and the green energy sector.

On Dec. 2, Yohannes was sworn in as the third CEO of the Millennium Challenge Corp., a “government corporation” created by President George W. Bush to promote good governance and spur economic growth in the developing world.

Devex spoke with Yohannes about his vision for the agency as well as his focus on innovation, measurable results and public-private partnerships. In the first part of our two-part interview, Yohannes also discussed MCC’s increasing focus on green technology and the challenge of ensuring the effectiveness of programs that are spearheaded not by MCC itself, but by its partner countries.

You came to the U.S. as a 17-year-old from Ethiopia. How has that shaped your philosophy on aid? What does it mean to you to lead MCC?

Well, you know, I was born to one of the poorest countries in the world. So, I probably understand poverty better than most people. I understand the dehumanizing nature of poverty, I have seen it, I have experienced it. And I also understand that unless you make some major structural changes, countries that have adapted to the same policies for many, many years are still dependent on foreign aid. So at MCC, this is a forward-looking company, and we work with countries that are committed to their growth and development, countries that have good social and economic policies, countries that are investing in their people, in education and health, countries that have allowed good economic freedoms. Those are the countries that are making a significant difference in terms of creating wealth and reducing poverty.

So, I am excited to lead this wonderful organization. It is very innovative, and I come from the private sector in which I had to be innovative almost on a daily basis. We cannot be just comfortable based on what happened in the past. We must continue to be very innovative at MCC, looking forward, and we have to have the products and services as required by many of our constituencies. And we want to make sure that we continue to work with countries to reduce poverty and create wealth.

I come from a banking background in which the industry as a whole played a major role in creating wealth in this country by making capital accessible to many Americans and American businesses. And hopefully, as we look ahead, we’d like to make sure that those countries also have access to capital and we work with them, in terms of creating some other opportunities as we develop some of the compacts.

So I’m excited that I’m here. I love MCC, it’s a great program. It’s a very unique approach to development, but yet, we must continue to be innovative.

You’ve had a flying start. What has surprised you most in the two months you’ve been with MCC?

Well. The talent that exists in this agency is phenomenal. People are committed and we have a highly educated workforce. They’re committed to the mission and, you know, many of those people could have made a lot of money had they gone to the private sector. But they like what they do, they like helping people, they like seeing transformation of countries from poor countries to, you know, to lower-middle income countries. …

One of your goals is to better involve the private sector, to push public-private partnerships, to boost investment in the developing world. Could you give us specific examples or steps you’d like MCC to take to achieve this?

To give an example, today, we’re investing $7.5 billion in many of these partner countries, right? Well, the public sector alone cannot bring about economic prosperity. We’re building many of the infrastructures for many of those countries. We’re building the roads, bridges, ports and schools and health care centers and so forth. But we want to make sure that we bring in the private sector, which is the engine of growth and innovation.

We want to make sure that, for example, we have a great investment in Ghana in the agricultural sector. But, we want to make sure that others can come in and buy Ghanaian products and sell it outside for export. So, we want to make sure these are countries that are extremely attractive for private-sector investment because they are very stable, they have good governance, they have good economic freedom, and they have governments that are accountable for their own citizens so, by definition, they become extremely attractive for the private sector. We want to make sure that in addition to what we’re investing in these countries, that the private sector comes in behind us to make investments to really create economic prosperity going forward. When we talk about private sector, we’re also talking about, not only from outside, we’re also talking about within those countries that we need to flourish and the confidence of those private-sector companies to make sure that there’s a good business environment in those countries and really create wealth.

You have a background in green technology. How can MCC convince partners to integrate environmental work into their compacts?

One of the beauties about MCC is the fact that it’s “country-owned”: We don’t tell them what to do; we don’t tell them where to invest or how to invest. However, I think that we should make many of these [green technology] products available in case they need it. And today, about 7 percent of our investment is in the green sector – in solar and in some cases hydro. Yet, then I see many of those countries spending significant amounts of dollars buying expensive fuels from the Middle East and other places, and I question that. Yet, they have the sun, the wind and the water to make them self-sufficient in energy.

So, we don’t tell them what to do and how to invest it, but nevertheless we could suggest and maybe work in partnership to make sure that we have those products and services available which could help those countries. We’ve got some success stories in El Salvador – we have a solar program. And the most recent compact we signed last year, Mongolia, also has to do with energy. And we’re looking for another [initiative] in Tanzania in this particular area as well. But as we look at other countries in the future, we want to make sure that we’re there with them at the table in making sure that they have the options of investing their, you know, their projects in many of these areas.

You’ve said that you want to focus on short-term results especially with the Congress, which of course holds the government’s purse. How do you intend to find a balance between showing results on the one hand, and upholding MCC’s principle of country ownership?

We have approximately five countries that are coming to an end of the first compact, the first five-year compact that is. And definitely, we do have an excellent opportunity to show what has been done and the investment impact on many of the poor citizens in those countries. And also, we have 18 countries under the threshold program and we also want to see the results of the threshold programs – the impact it’s having in creating policies as well as opportunities for those countries, as well.

We know what has been done. We do a very good job of publishing in terms of roads built and ports completed or schools completed. But we’d like to be able to show the real impact the program is having on people that are benefiting from these investments.

Would that involve a whole new type of opportunity, maybe, for contractors to evaluate how many people walk down a particular road or how many people are fetching water at a new well? It seems that you’re talking about something that has not been done in that detail.

Many of our investments assume some kind of economic rate of return, and usually, will go to high economic rate of return over the life of the investment. And today, our $7.5 billion investment in many of partner countries at some point is expected to increase the income level of the partner countries by about $9 billion, affecting approximately 45 million people. That’s in a given time, for the life of the investment.

But as projects are completed we want to make sure that those projects, for example, if it’s roads, that people, especially the investment community, understand that now they have roads that farmers could take their products and services to market, whether within those countries as well as outside. So, we need to show what are the impacts of having a road that connects, for example, one port to one city. We’d just like to be able to show the real impact in those circumstances.

Speaking of funding: President Obama is pushing for a government-wide funding freeze. MCC has consistently exhausted its budget, and implementation often lags behind schedule. How do you intend to negotiate MCC’s funding?

We always understand that there’s always a constraint. I mean, I wish we could [work with] every single country, but we understand that there are some constraints. But, for example, this year our budget is about $1.1 billion. And that’s why it’s so critical today than any other time to work in partnership with other agencies – whether development agencies at home here in America, or other NGOs. But we have to be able to leverage what we have. If we work with other partners, we would make sure that that $1 billion is $2 billion at some point. So, that’s the only way we could leverage the investments in many of these countries.

I wish we could do more, but we can’t. We just simply do not have the money. However, in 2010, our budgets went up by 26 percent. The president is committed to foreign development. And, again, it was a significant increase from last year. We don’t know what’s going to happen next year. But we just need to be very smart in terms of our approach to development. And we have to be accountable [to] American taxpayers. And that’s why we must show results and are continuing to show results to make sure that American taxpayers understand that their monies are invested very well.

Read part two of our interview with Daniel Yohannes, in which he discusses concrete reforms that are currently being considered at the Millennium Challenge Corp.

Jemila Abdulai contributed to this report.

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    Rolf Rosenkranz

    Rolf Rosenkranz oversees a talented team of in-house journalists, correspondents and guest contributors located around the globe. Since joining Devex in early 2008, Rolf has been instrumental in growing its fledgling news operation into the leading online source for global development news and analysis. Previously, Rolf was managing editor at Inside Health Policy, a subscription-based news service in Washington. He has reported from Africa for the Johannesburg-based Star and its publisher, Independent News & Media, as well as the Westdeutsche Allgemeine Zeitung, a German daily.