Columbia International Affairs Online: Working Papers

CIAO DATE: 06/2010

Millennium Challenge Corporation: Can the Experiment Survive?

John Hewko

March 2010

Carnegie Endowment for International Peace


The Millennium Challenge Corporation (MCC) was established in 2004 to provide grants to a select group of developing countries that demonstrate a commitment to good governance by investing in the health and education of their people and adopting sound economic policies. The MCC has performed admirably in the face of a number of challenges and unrealistic expectations, but its future success depends on its ability to address important philosophical and operational issues, and on Congress reforming the mechanisms by which it funds and judges foreign aid programs. Congress must get serious about foreign assistance. It should signifi cantly increase funding for long-term development programs that focus on economic growth, adopt a long-term perspective when evaluating such programs (and not judge them on the speed and quantity of disbursements), and embrace innovation and greater risk in the design and implementation of programs. With respect to the MCC, Congress should undertake the following measures: establish a commonly agreed vision for the agency; refrain from earmarking MCC funds or requiring that they be used to buy U.S. goods and services; permit MCC to take full advantage of its “no year” authority; remove the 25 percent funding restriction on low-middle income countries; permit MCC to sign up to four concurrent, full-term assistance agreements per country; increase the maximum permitted program duration from fi ve to ten years; and maintain MCC’s current independence. Similarly, MCC should learn from past experience and missteps and maximize its impact by defi ning its governing principles clearly, and aggressively defending its view to Congress, the administration, and the development community. It should review and adjust its indicators for aid eligibility; adopt riskier and more innovative investment models; modify the mechanism by which it engages the private sector; simplify the approvals, reporting, and auditing requirements during program implementation; provide earlier, more robust training for country counterparts; and eliminate its threshold program (which is designed to improve indicator performance for countries that are close to meeting the MCC eligibility criteria) and reallocate these funds to health and education programs.