Select Committee on International Development Minutes of Evidence



    —  As the President said in his historic speech to the World Bank one year ago, "a world in which a large portion of the people live on less than $1 a day is neither just nor stable."

    —  For those of us in the U.S. Government, those were marching orders. Since that speech, we have worked hard to find new ways of reducing poverty to create that more just and stable world the President spoke of.

    —  These efforts culminated in March, when just before the Monterrey Conference on Financing for Development, the President announced a new Compact for Development and the creation of the Millennium Challenge Account. The announcement reflected an extraordinary consensus in the U.S. Government on the importance of fighting poverty in the most effective ways possible.

    —  These efforts also reflected a growing international agreement to view poverty as a serious threat and to commit to its reduction.

    —  As the President said in his speech announcing the MCA, "just as we forged a new consensus to fight terrorism in the aftermath of September 11, we now have an unprecedented opportunity to forge a new consensus to foster development."


    —  The underpinnings of this consensus are reflected in the results of the UN Financing for Development Conference, namely:

    —  An acknowledgement that developing countries are primarily responsible for their own development.

    —  At the same time, a recognition that the achievement of development is a shared responsibility between developing and developed countries.

    —  The realization that good governance is key to creating conditions that will allow countries to increase and use effectively all sources of development finance, including investment, trade, domestic resources.

    —  ODA makes up but a fraction of these resources, and has been found effective in promoting development where efforts are well underway to establish sound institutions and policies, to take part in the global economy, and to encourage both a competent public sector and a vibrant private sector.

    —  An awareness that should ODA be used to build the technological and human capacity of a country to attract and mobilize effectively all of development resources, so that economic growth and development can become self-sustaining and inclusive.


    —  The Millennium Challenge Account gives life to the ideals of the Monterrey Consensus by focusing on obtaining concrete development results by working with committed partners.

    —  Experience and empirical studies confirm that when development assistance rewards reform and responsibility, it lifts almost four times as many people out of poverty.

    —  For that reason, the MCA will be used only in countries that demonstrate, not just promise a strong commitment to:

    —  governing justly;

    —  investing in their people;

    —  and promoting economic freedom and enterprise.

    —  These categories are not random. They are the result of fifty years of learning what works in development.

    —  We know that HMG has concerns about MCA selectivity. We know there is a fear that the MCA will penalize those who might need additional help the most, ie, those in the poorest countries, some of whom are badly off precisely due to continuing conflicts or abysmal governmental policies.

    —  Bear in mind the strong US record of helping to meet humanitarian needs the world over, including in Afghanistan under the Taliban, and in North Korea under a regime that still contributes to the misery of its people. We are the greatest source of humanitarian assistance, including well-targeted food aid.

    —  The Millennium Challenge Account will be in addition to our humanitarian programs, which will continue. It will give us the resources to provide substantial new help to those choosing on their own to walk the often hard road to democracy and prosperity for all their people.

    —  We understand the concerns, but would ask you to consider the moral case for the MCA's selectivity—we want to do the greatest good for the greatest number of people. Our aim is to accelerate lasting poverty reduction. To do that, our assistance should go to countries that are committed to improving the lives of their citizens.

    —  There are very poor countries that we believe are making great strides. Good performance to us is about commitment and effort, not just about current results.

    —  If we were to provide the MCA's resources to regimes where performance is poor, the opportunity cost would be all the lives we would as a result fail to help lift up. We will, of course, continue to help build the capacity and will for improvements even in those countries that do not qualify for the MCA initially.

    —  In a practical sense, selectivity will help lead to better program and project results and should serve both to encourage reluctant developing countries to improve policies and as a model among donors for future assistance efforts.

    —  As the President directed, we are reaching out to the world community and making rigorous efforts to determine how best to assess commitment in each of the three areas described by the President. We are surveying the work and data of groups, individuals and organizations worldwide and taking lots of input.

    —  To give you a better sense of the criteria we are considering to gauge a country's commitments, let me cite a few examples under each of the President's categories:

    —  criteria gauging whether a country rules justly could be the accountability of its government institutions, the strength of anti-corruption efforts, and its commitment to human rights;

    —  measures of investing in people could be literacy rates, school attainment rates, or the percentage of its budget share for health;

    —  examples of economic freedom could be the market-orientation of a country's economic policies, the availability of land titling and business licensing, and its regulatory regime.

    —  Selectivity should also apply to the areas we invest in. Our development investments should help recipients be their own agents of economic growth and change, whether it is by expanding our fight against HIV/AIDS, improving agricultural productivity, making education more accessible by providing textbooks, or by cutting government red tape for African entrepreneurs.

    —  In other words, MCA will be a hand up, not a hand-out.

    —  In designing these projects and programs, we will build on a country's own development strategy if we believe it a good guide to development investments with good poverty reduction results.

    —  This is the critical difference from "conditionality-based" approaches; we will not be responsible for determining the benchmarks and performance criteria for our development partners, but will base our decisions on support on their own efforts. We will be looking for development investments likely to have a high return in terms of poverty reduction and growth.

    —  True partnership is a two-way street. As a donor, the U.S. also has an obligation to continue to improve what WE do. We will measure and monitor the results of MCA projects and programs to the best of our ability, and we will learn from the outcomes so we don't make the same mistakes twice. We will be committed, not complacent.

    —  We believe the initial number of countries that qualify for MCA funds will be modest. For countries that do not immediately qualify, our existing development programs such as DA and ESF will still be available. We also expect MCA resources will be available every year over the coming years; we hope that many countries ultimately take advantage of these opportunities.

    —  Of course, we will continue to help halt catastrophes such as epidemics and famine. Our commitment to the Global Health Fund is solid; we are still the largest donor. We will have a strong focus on combating severe hunger and famine at the World Food Summit in June. And as always, we will strive to end conflicts that disrupt people's lives in so many ways.

    —  We are also looking at innovative activities and partnership approaches; we are interested most in what works on the ground and what builds the capacity within development countries. Clearly the private sector, both civil and commercial, can play positive roles.


    —  MCA is still in the deliberative stages. We need your input, particularly ideas on ensuring its effectiveness.

    —  The Account will be based on performance, not politics. As part of keeping the MCA focused on performance, we need your help in working to maintain flexibility in the use of these funds so we can take the necessary risks and innovations needed to do things differently and better.

    —  Our schedule is rather tight: policy decisions will be made in time for start up during the FY 04 budget cycle, probably around September of this year.

    —  We are working intensively with other agencies, developing countries, donors, NGOs, think tanks and businesses to make the best MCA decisions possible. We would welcome your thoughts and experiences.

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