MCC to limit engagement with underperformers on corruption

The Millennium Challenge Corp.'s board of directors meet with U.S. Secretary of State John Kerry at the State Department in Washington, D.C in March 2013. The MCC's board held its annual "selection meeting, where they chose not to re-select Benin and Sierra Leone for compacts for failure to meet the agency's benchmark on corruption control. Photo by: State Department

The Millennium Challenge Corp. held on Tuesday its annual “selection meeting,” where the board chooses which countries can develop compacts and reaffirms — or reconsiders — past years’ picks.

This year the board chose to pursue a second compact with the tiny African mountain kingdom of Lesotho, which suffers one of the highest HIV/AIDS prevalence rates in the world and had closed out its compact in September.

The board also defied some expectations and decided not to re-select Benin and Sierra Leone — two countries that had been chosen to develop compacts, but failed this year to meet the MCC’s benchmark on corruption control.

In an exclusive interview, Alicia Phillips Mandaville, MCC managing director for development policy, explained the board’s decisions and clarified how the MCC continues to engage with countries that fail to meet its rigorous policy benchmarks.

Here’s an excerpt of our conversation with Mandaville:

Leading up to the “selection meeting” there had been some speculation that Sierra Leone and Benin might be re-selected even though they didn’t meet the control of corruption benchmark. Was there any discussion of building more flexibility into that “hard hurdle?”

This year’s meeting and the preparations for it and the outcome of the meeting really show how the actual evidence-based decision making process works when it comes to MCC’s selection and reselection decisions.

The board starts with the scorecard and then looks to supplemental information … that’s in our methodology and that’s always a part of the board decision making. In years where the scorecard doesn’t cause everyone to ask a question right away, I think externally people don’t think as much about the supplemental information. In years where countries that are in compact development and they do not meet the scorecard criteria, then the external demand to know more about supplemental information I think is a lot higher, and that’s part of what you’re seeing … in peoples’ questions about, specifically, Benin and Sierra Leone.

The outcome from [Tuesday] really makes clear that the board takes the control of corruption hurdle extremely seriously. The board directed MCC to continue its engagement with these countries, recognizing that when you look at the supplemental research … that supplemental information suggests that there has not been a material policy decline. The efforts to combat corruption continue in these countries, and so recognizing that, the board directed MCC to remain engaged.

But they also wanted to make very clear that meeting the corruption “hard hurdle” matters and it matters dramatically for a country’s ability to conclude a compact. The expectation is these countries would pass the control of corruption hurdle before their compacts could be approved, and I think the outcome of the meeting helps make that really evident and tangible.

With that strict attention to the control of corruption benchmark, how does MCC ensure the countries have actually regressed on this indicator and that the regression was not simply due to variations or noise in measurement?

These are exactly the kinds of questions the board is asking us. To be clear, when a country that MCC has partnered with in some way stops passing the scorecard, that’s the first question that we ask — what can the data tell us about the situation in that country?

On the control of corruption indicator in particular, it’s a fairly complicated statistical combination of other sources and so we do spend a lot of time unpacking. In both of these instances, we think the primary change in the score … we cannot connect it to policy. We are not able to draw a link between something the government did and the score. So that leads us to believe that there is more of the statistical noise side.

That said the board expects countries to be committed in their efforts to combat corruption. That’s why I think … the outcome from [Tuesday] makes really clear that this really matters. MCC does use an evidence-based process for decision making, and the board does look at what’s happening in the country, and makes very clear the expectation that part of an MCC partnership is remaining committed and continuing to put in place the steps necessary to fight corruption … The continued engagement with the country is on the basis of the fact that looking at the evidence on the ground, we can’t find evidence of decline. But essentially the board is warning countries that you need to continue to improve, because a compact depends on that.

You mentioned there would be ongoing engagement between MCC and these two countries in particular. What will that engagement look like?

The board directed us to maintain a limited engagement with the countries with regard to the countries continuing to move their compact proposals forward. Of course, I think the obvious outcome is for MCC to stay engaged with the countries in terms of making clear that actual, tangible policy reform in the control of corruption area is not only expected but necessary.

In the past that has looked like asking countries to identify reform steps that they believe they can take and that they believe will address the issue at hand. So I foresee that same type of engagement over the coming year.

MCC is always happy to unpack what drives an indicator with a country. We can walk through and explain how the data works and what types of policies caused the data to move in different directions, but at the end of the day the burden of improving the situation and actually taking the difficult steps that cause a score to change, that burden rests on a country. When people say, “what will MCC do to ensure these countries pass,” well, MCC can’t do anything to ensure that they pass. We can ensure that they understand what drives the data. We can ensure they understand what kinds of reforms are important. But it’s their burden essentially to take those difficult steps, and that is part of the MCC partnership, and there’s nothing different about that this year than there has been in the past.

What are the MCC’s criteria for selecting countries that have completed a first compact to develop follow-up compacts?

The starting point is [that] looking at the scorecard … In cases where a country has done a compact before, we also have a set of questions and supplemental research on what we learned through the experience of looking at that first compact.

There’s quite a bit of detailed analysis of … what it has been like to work with the country. [In Lesotho] the things that went slower than people expected were primarily due to a contractor going bankrupt, which is not something that either the government of Lesotho or MCC is involved in their own personal management decisions … Lesotho is an outstanding scorecard performer. They do very well every year on the governance side, on the social investment side, on the economic freedom side, and their partnership throughout the compact … they were reliably invested in implementing that compact well, and their reselection really shows the board appreciating that.

Were there any discussions of MCC’s role in President Barack Obama’s Power Africa initiative? Did Power Africa priorities play into any of the selection/reselection decisions?

Any time the board’s talking about a country that’s involved in Power Africa that typically comes up, because it’s a relevant point of fact since a lot of MCC’s investments … are in the power sector as well. Of the countries that wind up in our press release that you see, Ghana, Tanzania, Liberia are all considered Power Africa countries, so consistent with that discussion of what is happening in this country and how does this relate to MCC’s work, it certainly comes up there.

READ:Power Africa: 7 unanswered questions  

What about other U.S. government development initiatives — global health or food security or climate change — do the priorities of those initiatives play into the selection process?

The board certainly asks questions about the context that an MCC investment could happen in. Particularly for countries that have been previously selected … Ghana is a good example [for] building a proposal. we know it is in the power sector. There are often questions about how is that coordinated … but they are asked as context questions. The board’s decision every year is essentially us asking the board: in what places would MCC’s investment likely have the most impact on poverty reduction through growth, and the context of what the rest of the U.S. government is doing is certainly relevant for that decision, but it’s not the driving factor.

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  • Igoe michael 1

    Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.