Winning an MCC compact: How Côte d'Ivoire went from rejection to approval

ABIDJAN — Five years after rejecting its initial bid, the Millennium Challenge Corporation last month approved a $525 million compact to Côte d’Ivoire. The compact aims to promote economic development by investing in the country’s secondary education system and transportation networks. With an additional government investment of $22 million, the compact is expected to benefit more than 11 million Ivorians, part of an effort by the country’s leadership to diversify the economy and build human capital. Economic growth rates, despite being among the highest on the continent — an average of 9 percent gross domestic product growth annually over recent years — have been stifled by a continued reliance on raw commodities. The turnaround from rejection to approval follows a major reform effort aimed at meeting the MCC’s stringent investment criteria. Côte d’Ivoire has been climbing an upward path toward development since 2012, attracting varied foreign direct investments alongside its strong economic growth. Political tensions also remain relatively calm, although high unemployment rates mean that internal frustrations persist. As part of the country’s 2016-2020 National Development Plan, President Alassane Ouattara outlined ways to diversify the economy, improve the quality of institutions, increase local population capacity, and adjust production and consumption patterns to forge an emergent economy. David Weld, the MCC country team leader who oversaw the development of the Ivorian MCC compact, said the country’s long-term vision — including developing environmentally sound strategic infrastructure and inserting itself into the region’s global trade network — were some of the key factors in getting the investment approval. “One of the things that is very exciting for us is that there has been a sense that the Ivorians are focused on long-term sustainable growth by putting in place policies that will help diversify their economy, help reform it, help attract investors, [and] help establish foundations for inclusive growth,” he told Devex. Winning an MCC compact The MCC is a U.S. bilateral foreign aid agency set up in 2004 to benefit low- to middle-income countries with financing that works to reduce poverty through economic development. “MCC was originally designed to invest very heavily in a small number of core but well-governed countries and to use a rigorous analytical system to select those countries that we do invest in,” Weld explained. A country’s performance based on a selection of 20 criteria, ranging from land rights to freedom of information, determines its eligibility for MCC investment. Countries must achieve passing scores in at least half the listed categories — a benchmark that Côte d’Ivoire fell well short of five years ago — along with passing marks in “control of corruption” and “democratic rights” categories. Compacts have a five-year implementation period aimed at easing the constraints of partner countries and encouraging private investment. Africa is the largest recipient of MCC development funds. Investments focus on underfunded areas of development that spur sustainable economic growth, such as bridges and other transportation projects, electricity and renewable energy, or water and sanitation. To date, 20 of the 33 signed MCC compacts are with African country partners, totaling $7.9 billion in investments on the continent and benefiting an estimated 55 million people. Having an existing, forward-looking development plan is vital to gaining the MCC’s confidence in a prospective partner country, Weld said. “MCC is unlike other aid agencies. We have a very focused mission, so we are focused on data-driven analysis and evidence on what does the data say about what [economic] growth will achieve and how that [economic growth] will achieve poverty reduction,” he explained. The objective, he said, is to assist partner countries to establish a common approach to solving long-term growth issues. Another basic principle of the MCC is ownership by each country in the process of identifying problems and solutions as a more effective approach to responding to their needs. Based on a joint economic analysis by the MCC and the Government of Côte d’Ivoire, two “pillars for diversification” were identified to address the country’s greatest weaknesses: a lack of skilled workers and challenges moving people and goods. The country’s national development plan acknowledged gaps in the education system preventing it from “feeding the labor market with graduates endowed with the entrepreneurial and technical skills needed for innovation and business creativity.” It added that “enterprises are short on the managerial skills needed to come up with enough fundable projects.” In response, a skills development project will support the construction of up to 84 new secondary schools, formalize a national gender policy to improve outcomes for girls in school, and inaugurate a new technical and vocational education system. Concurrently, an urban transportation project will reduce transport costs, rehabilitate roads in and around the port area, and improve road networks and maintenance. Programs will take place in the economic capital of Abidjan and in other important regions within the country, such as Bouake and San Pedro, to contribute to inclusion and social stability in Côte d’Ivoire, Weld told Devex. The ‘MCC effect’ Going from rejection to approval was a tedious five-year process that required major in-country transformations for the West African nation of 23 million people. With the country coming out of political turmoil and a brief civil war following the 2011 presidential election, many infrastructures and governance systems were left in shambles. Of the 20 MCC eligibility indicators, Côte d’Ivoire passed five at the time. Discouraged by this outcome, the government created an interministerial committee dedicated to improving that score. “One most important reforms was that the country reduced the time and cost to start a business, which had been a major complaint of the private sector,” Weld said. Along with creating a centralized business registration agency and reducing the processes, time, and cost of starting a business, the government took steps to improve its corruption indicator score by establishing a “good governance commission” and by mounting public awareness billboards about corruption. The government also adopted a law on marriage to comply with international standards, which improved its “women in the economy” score. All of these changes before any MCC funds have been spent are examples of what Weld called the “MCC effect”, which he described as “the ability of MCC’s vetting system to drive reform and real change in countries before any U.S. taxpayer dollar is spent.” The MCC Board of Directors finally approved its half-billion-dollar investment last month after the Ivorian state successfully passed 14 out of 20 indicators. The contract will be signed at a ceremony later this fall, although it may take up to two years to solidify the foundations of the compact and implementation plans. Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you free every business day.