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Fri. November 16, 2018
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MCC 2.0: A new approach to take America's premier global development agency through and beyond 2020
Comments (13)

By Mumukshu Patel

President Trump nominated Mr. Sean Cairncross to lead the Millennium Challenge Corporation.  All prior MCC CEO's have been relative new comers to global development and Mr Cairncross is no different.  His Congressional ties and association with the Trump White House may help the agency weather certain budgetary pressures.  But, his true challenge will be to take the agency through 2020 in a rapidly changing global environment.

On the day of his nomination hearing we lay out a vision of MCC 2.0 that represents an approach to practically reorient the agency toward greater relevance and effectiveness.  We list key themes and ask questions of the nominee and the Senate Foreign Relations Committee to inform discussion on the future of the MCC.

MCC is arguably the most effective US development agency, with a focused mission of reducing poverty through economic growth.  Yet if it wants to remain relevant going forward, it must get out of area or it will get out of business. 

What Senator Lugar observed about NATO after the Cold War ('NATO get out of area or out of business') rings true for MCC in 2018.  What does 'get out of area' mean for MCC?  It must work in middle income countries, expand its base of low income clients and/or develop regional compacts; it must also go beyond traditional compacts/grant-making to leverage private capital.

  • MCC must work in middle income countries to remain true to its mission: With most of the world's poor living in middle income countries, how can the MCC continue to focus on low income countries, while its mission dictates global poverty reduction?
  • MCC 2.0: A focus on impact investments in partnerships with philanthropy or businesses, or challenge funds, would be more suitable to middle income countries, perhaps blended with some grant-making elements.  One could envision a South Asian Enterprise Challenge Fund, with one component of the fund focused on women's empowerment, to help crowd in private capital to address issues of social concern for the most poor and vulnerable in India, Sri Lanka and Nepal - all three compact eligible countries, with two having compacts already -while simultaneously empowering women.   
  • Question/(s) for the nominee: what is your vision about MCC's role in middle income countries?  What instruments would the agency use in these countries?      
  • Question/(s) for the Senate: Would Congress authorize MCC to work more in Middle Income Countries?  Would Congress expand MCC's ability to use new financial tools?

MCC must broaden its low income country base otherwise it risks an absorptive capacity issue that will likely threaten its operations.  MCC has a very small pool of countries that are compact eligible, and where compacts can eventually be secured under the current model.  If it is unable to disburse cash appropriated by Congress, it runs the risk of losing its relatively low budget (which has never gone beyond a billion dollars, considerably less than what was envisioned in its creation).

  • MCC 2.0MCC and its Board, with Senate approval, should consider amending some country selection criteria, especially those that may not be as relevant to achieving its core mission, to broaden MCC's selection base of Low Income Countries.  MCC could also be the lead development agency in compact eligible countries, or at least in compact   countries, replacing or being a co-Mission Director with USAID.
  • Question/(s) for the nominee: Are you willing to adopt a more adaptive approach to country selection to help achieve American interests in global development?  How would you work with your Board to operationalize this approach?
  • Question/(s) for the Senate: Would Congress be willing to expand MCC's role as the lead development agency in compact eligible and compact countries to ensure a more effective MCC?

MCC must explore regional compacts to ensure that its investments, particularly those geared toward infrastructure, in compact countries get maximum bang for the buck

  • MCC 2.0MCC will develop a pilot regional compact or two to test its feasibility, particularly with regards to impact evaluation of the same and to balance the need for competitive country selection with that of sustained regional economic growth that benefits countries that have committed to increasing political and economic freedoms. A regional  transport infrastructure bet in East Africa would catalyze further the economies of these nations, many of whom are compact eligible and have existing (or had existing) compacts.
  • Question/(s) for the nominee: What is your position on regional compacts?
  • Question/(s) for the Senate: Would Congress be willing to grant MCC authority to develop a pilot regional compact or two as a learning exercise?

MCC must leverage private capital more directly, it must develop new instruments toward this end.  Private sector financial flows dwarf foreign aid flows today.  Blended finance is in vogue, yet not many public sector entities have been able to develop financial instruments that truly leverage and crowd in private capital, rather than simply subsidize it. 

  • MCC 2.0MCC can work with foundations and the private sector to create impact investments similar to the Program Related Investments (PRIs) in philanthropy or challenge funds to leverage private capital.Such instruments can be specifically geared toward catalyzing business in emerging markets, with a focus on sectoral themes like women's empowerment - a centerpiece of the Trump Administration's global development policy.  Why should such a fund be housed at a multilateral agency, when the MCC can do so more meaningfully?
  • Question/(s) for the nominee: What is your position on regional compacts?
  • Question/(s) for the Senate: Would Congress be willing to grant MCC authority to develop a pilot regional compact or two as a learning exercise?

 

Comments in Chronological order (13 total comments)

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Tue, February 27, 2018 09:57 PM (about 6284 hours ago)
Good vision for MCC. Don't know how much it can do with proposed cuts to all diplomacy and development budgets. Tough task for Cairncross.
 
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