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THE FOREIGN SERVICE JOURNAL
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JANUARY 2013
37
THE FOREIGN SERVICE JOURNAL
|
JANUARY 2013
37
rivaling the USAID budget, which was about $7 billion at the time.
But Congress balked at the request. Heavily lobbied by the giant
nongovernmental organizations accustomed to getting paid to
operate much of USAID’s humanitarian and development agenda,
Capitol Hill has never given the MCCmore than a billion dollars a
year—about 20 percent of what the administration initially sought.
Total outlays over the past eight years come to about nine billion
dollars.
Daniel Yohannes, current chief executive ofcer of the Millen-
niumChallenge Corporation, has about $900 million in foreign
aid to distribute among 24 countries. His agency looks for recipi-
ents that maintain high standards in strengthening governance,
safeguarding a free press, immunizing children, educating girls,
supporting free markets andmeeting similar objectives.
Governments that pass vetting in 20 categories (originally
16) are eligible to enter into fve-year aid agreements known as
“compacts.”Te frst of these agreements are just wrapping up, and
reports on howwell they have functioned are now being done.
From Rivalry to Cooperation
AndrewNatsios, who was USAID administrator from 2001
to 2006, noted in an interview that the MCC discovered early on
that infrastructure projects were vital to its goal of life-changing
development. “Without roads and bridges you can’t do economic
growth,” says Natsios, who recently completed a professorship at
Georgetown University and is now teaching at the Bush School of
Government and Public Service at Texas A&MUniversity.
“Since the Nixon administration we have followed the human
needs school of development and never got away from it,” he adds.
“But in the time of Kennedy and Johnson, USAIDwas very much
into infrastructure.”
Natsios concedes that there was a degree of rivalry initially
between the two aid agencies: “At frst, MCC leaders said not to do
anything that came fromUSAID.” But now, he says, a lot of MCC
stafmembers are retired USAID ofcers. “It has become what
USAIDwas in its early years,” he said.
Te MCC runs its operation with only 300 people, rather than
trying to replicate the extensive string of overseas missions with
American and foreign staf in nearly 100 countries that USAID
operates. In fact, it has only two people in the feld in each of the
24 recipient countries. Local boards composed of government
ofcials, business leaders and civil society representatives meet to
decide how to spend the MCCmoney.
Natsios sees this focus on having local input and control over
projects as a positive shift in aid policy. When local institutions and
people are invested in decision-making, he believes, the projects
are more likely to prove useful and survive the end of U.S. assis-
tance.
Measuring Success
Still, it is too soon to say whether the MCC’s approach is efec-
tive. CEODaniel Yohannes noted during a recent interview in
his ofce inWashington that only a few compacts have run their
fve-year course. But TimRieser, longtime chief clerk of the Senate
Appropriations Subcommittee on State and Foreign Operations,
said in an interview that MCC has had only mixed success to date.
“Although the countries selected were not the basket cases of
the world, they did have corruption, lack of capacity and other
major obstacles,” Rieser observes. “It was naïve to think that a com-
pact would be a game changer,” he adds.
“You can’t change a country with $500 million,” he adds. “You
can build a road, reform a banking systemor change agricultural
policies. But you cannot achieve the transformative, starry-eyed
vision of the Bush administration. You can give a country a boost,
but there are somany challenges they face that it will only improve
things incrementally.”
One prominent researcher with a Washington think-tank,
speaking on condition of anonymity, says: “We thought MCC was a
brilliant idea, but the Bush administrationmangled the idea at the
outset.”
He notes that the frst head of the MCC, Paul Applegarth,
quickly alienated the critical constituency for foreign assistance:
the NGO community, Interaction, the Center for Global Develop-
ment, Save the Children and all the other outfts. “Uninterested
in the lessons learned by leading development economists and
practitioners of the day, Applegarth hired a bunch of private-sector
guys who thought they had all the answers and were not going to
listen to the bleeding-heart liberal foreign aid guys.”
Although later chief executive ofcers were more successful, the
damage was done. Congress has kept MCC’s budget at around $1
billion a year, even as USAID funding tripled to $24 billion, includ-
ing funds for Afghanistan, Iraq and Pakistan.
A Pro-Business Approach
During our interview, Yohannes explained the MCC’s method-
ology. Each recipient country must show a return on investment
of at least 10 percent of the value of the grant over fve years. So for
every $100 million invested in a road, for example, MCC wants the
country to show it generated $110 million over fve years through
increased trafc, agriculture, trade and construction.
Some MCC projects have been canceled due to backsliding
by the recipient country. Madagascar’s compact was terminated