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The Millennium Challenge Corporation (MCC) and Global Health « » The Henry J. Kaiser Family Foundation

The Millennium Challenge Corporation (MCC) and Global Health

Overview

The Millennium Challenge Corporation (MCC) is an independent U.S. foreign assistance agency that has the goal of reducing poverty in developing countries through supporting economic growth. MCC has a unique approach among U.S. foreign assistance agencies in that it works only with countries that are deemed “eligible” after meeting certain benchmark measures for good governance, economic freedom, and investing in people, and it provides assistance through formal bilateral agreements negotiated and developed in a “country-led” process.1 Since its creation in 2004 MCC has supported development programs in almost 40 low- and lower-middle-income countries.

The MCC portfolio of projects spans many sectors of development, including global health. MCC recognizes health as important to its poverty reduction mission, and has supported a number of global health projects in a range of countries.2 Still, its financing for global health to date has been modest. A small proportion of MCC funding to date is directed to health projects, often as a component of a broader package of interventions. Even so, the proportion going to health has increased in recent years, and MCC has expanded its partnerships with other U.S. agencies working in global health to improve coordination and share best practices.3

Structure and Approach

Based in the Executive Branch, MCC is an independent U.S. foreign assistance agency, specifically a U.S. government (USG) corporation established in January 2004 by the Millennium Challenge Act of 2003.4,5  Its purpose is to reduce poverty by promoting economic growth in low- and lower-middle-income countries through the development of country assistance agreements, which are meant to be driven by country-identified priorities for U.S. government support.6 MCC’s approach is considered unique among U.S. development agencies for several reasons, including its use of quantitative benchmarks to determine eligibility, a heavy emphasis on country-led planning and implementation of assistance agreements, and a reliance on robust and transparent monitoring and evaluation of progress and impact of its assistance.7 The agency has also been seen as early champion of gender dimensions of development, having adopted its first gender policy in 2006 and long recognizing gender inequality as “a significant constraint” to achieving its mission.8,9

Board of Directors

MCC is led by a chief executive officer (CEO) – a Presidential appointee requiring Senate confirmation – and overseen by a Board of Directors consisting of five members from the USG and four members from the private sector. USG members include the Secretary of State, the Secretary of the Treasury, the U.S. Trade Representative, the Administrator of the U.S. Agency for International Development (USAID), and the CEO of MCC. Private sector members are nominated by the President and confirmed by the U.S. Senate.10

Country Selection Process

The MCC Board carries out a multi-tiered country selection process, by first identifying candidate countries and then assessing their eligibility to apply for assistance:11

  • Candidate countries are identified based on per capita income. Only low- and lower-middle-income countries, according to World Bank income classifications, are considered candidates.
  • Eligible countries are selected from these candidates based on their demonstrated commitment to policies related to MCC’s three key areas of “Ruling Justly”, which includes good governance and fighting corruption; “Economic Freedom”; and “Investing in People”, which incorporates several measures of population well-being including some related to health.

To determine eligibility and gauge country commitment to key principles, MCC relies on more than 20 quantitative indicators of policy and performance. Three of these eligibility indicators are health-focused: public expenditure on health; immunization rates; and “child health” (a composite indicator that includes child mortality rate, percent with access to water, and percent with access to sanitation).12 How a country performs against all indicators (known as a “country scorecard”) helps determine whether they are eligible for MCC assistance. The MCC Board can also consider two other factors in its decision: the opportunity to reduce poverty and generate economic growth within a country, and the availability of MCC funds.13

Types of Assistance

MCC assistance is provided through two types of agreements: compacts and thresholds.14,15

  • Compacts are larger agreements that can span multiple sectors and which typically last five years. To be eligible for compact funding, a candidate country must score above the median compared to other countries in its income group (e.g., other low-income countries) with regard to at least 10 of the eligibility indicators, including two required indicators: above median performance on “corruption” and meeting a minimum standard for either the “civil liberties” or “political rights” indicators (or both). Through March 2015, MCC has signed 29 compacts with 25 countries (some countries have signed a second compact after the first ended), for amounts ranging from $66 million to $698 million.16
  • Thresholds are smaller, targeted, shorter-term grants designed to help countries become compact-eligible. A candidate country not meeting the criteria for a compact but demonstrating commitment to improving its performance may be eligible for threshold funding. MCC has signed 25 threshold agreements with 23 countries (some countries signed a second threshold agreements after the first ended), for amounts ranging from $6.7 million to $55 million.17 Eight countries have successfully transitioned from receiving threshold funding to subsequently signing a compact.

U.S. Government Funding

First funded by Congress at $994 million in FY 2004, MCC appropriations reached a peak of $1.75 billion in FY 2006 and FY 2007. Since then, appropriated funding for MCC has fluctuated somewhat (see Figure 1). In FY 2015 Congress appropriated $900 million for MCC. The administration requested an increase for MCC in the President’s FY 2016 budget request, to $1.25 billion, though Congress has typically appropriated less than the President’s request each year.18

Since 2004, MCC has committed $10.4 billion in assistance through its compact and threshold agreements. Most MCC funding has been provided through compacts (95%), with a smaller proportion provided through thresholds (5%).

Figure 1: Millennium Challenge Corporation (MCC) Budget Appropriations, FY 2006-FY 2016 Request

Figure 1: Millennium Challenge Corporation (MCC) Budget Appropriations, FY 2006-FY 2016 Request

Support for Global Health

Global health activities (defined as those that support health and/or water and sanitation investments), have been a part of 12 compacts and four threshold agreements, spanning 15 countries. From FY 2004 through FY 2014, MCC has committed almost $1.5 billion to projects focused on health and/or water and sanitation combined, which equals almost 14% of total committed funding. Around $310 million of this amount has been for health-specific projects, while $1.169 billion has been directed to water and sanitation.19,20 MCC disbursements for global health have grown over time. For example, support for health comprised 2% of MCC disbursements in FY2009 and 18% in FY2013 (see Figure 2); much of the increase over time has been due to water and sanitation spending.21

Figure 2: MCC Disbursements for Health and All Other Sectors, FY2008-FY2014

Figure 2: MCC Disbursements for Health and All Other Sectors, FY2008-FY2014

Health Projects

Health projects (other than water and sanitation) have been included in four compacts and four threshold agreements with seven countries. Funding for these projects made up varying proportions of each agreement’s total funding, ranging from 0.4% of Namibia’s compact funding to 36% of Indonesia’s threshold funding (see Table 1).22 Some examples of health projects supported by MCC are below:

  • Lesotho’s compact (completed 2013) supported the renovation and expansion of HIV/AIDS treatment clinics, a new central laboratory facility, and improvements to tuberculosis control and maternal and child health.23
  • Mongolia’s compact (completed 2013) included investments in prevention and management of non-communicable diseases.
  • Namibia’s compact (completed 2014) included support for targeted HIV/AIDS education programs.
  • Threshold programs in Peru (completed 2010) and Timor Leste (ongoing) have included efforts to improve childhood immunization, while Indonesia’s compact (ongoing) includes funding for childhood nutrition.

Water & Sanitation Projects

Water and sanitation projects have been included in nine compacts with nine countries. As a proportion of total country compact funding, support for these projects ranged from 2% of Ghana’s compact funding to 100% of Zambia’s compact funding (see Table 1). Some examples water and sanitation projects supported by MCC are below:

  • Jordan’s compact (ongoing) has sought to rehabilitate the water supply and distribution network, improve sewage systems, and expand wastewater treatment.
  • Mozambique’s compact (completed 2013) focused, in part, on investments in rehabilitation of urban water supply systems.
  • Tanzania’s compact (completed 2013) aimed to supported improving potable water supply in two urban areas.
  • Cape Verde’s compact (ongoing) is largely focused on water infrastructure and regulation of the country’s water sector, while Zambia’s compact (ongoing) focuses on improving water and sanitation infrastructure, management, and policy.

Coordination with Other U.S. Global Health Efforts

MCC has made efforts to coordinate with other U.S. foreign assistance agencies on health. For instance, through its compact with Lesotho focused on HIV/AIDS and other health issues, MCC coordinated with President’s Emergency Plan for AIDS Relief (PEPFAR, the U.S. government’s response to global HIV/AIDS) programs in-country.24 In turn, MCC has served as a resource for other agencies seeking to learn from its approach. For example, MCC has partnered with the State Department’s Office of the Global AIDS Coordinator (OGAC), which administers PEPFAR, to promote mutual learning on country ownership and sustainability of foreign assistance. The two agencies signed a memorandum of agreement in March 2014, with MCC agreeing to provide technical assistance and other support to PEPFAR programs over the next three years.25 This partnership is expected to help PEPFAR programs strengthen efforts to promote country ownership and sustainability through PEPFAR Country Health Partnerships. Further, in December 2014 MCC and OGAC announced they would work together to establish “data hubs” in PEPFAR partner countries.26

Looking Ahead

MCC, once considered a novel approach to U.S. foreign assistance, is now embarking on its second decade. Going forward the agency faces a number of opportunities and challenges. Sustainability of funding for MCC remains a concern, especially in light of tight federal foreign assistance budgets. While the agency has recognized the value of health for development, most MCC funds in this area have focused on water and sanitation infrastructure projects, with only a small portion going to health projects. Still, the agency’s more recent efforts to coordinate MCC activities with those of other USG agencies, including PEPFAR, demonstrate a commitment to taking advantage of more opportunities to become engaged in global health.

Endnotes
  1. MCC, About MCC, webpage, http://www.mcc.gov/pages/about; CGD, An Overview of the Millennium Challenge Corporation, January 2015.

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  2. MCC. MCC Supports Global Health Initiatives; July 2009.

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  3. MCC. MCC and PEPFAR Partner to Transform Country Assistance Programs, press release, March 2014.

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  4. Millennium Challenge Act of 2003. P.L. 108-199.

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  5. MCC, About MCC, webpage, http://www.mcc.gov/pages/about.

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  6. State Department. The U.S. Commitment to Development; July 2009.

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  7. CGD. Overview Millennium Challenge Corporation, Jan 2015. http://www.cgdev.org/publication/ft/overview-millennium-challenge-corporation.

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  8. MCC, Principles into Practice: Gender Equality and Poverty Reduction through Growth, September 2012.

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  9. Per MCC guidelines that provide operational guidance to countries in this area: MCC. Gender Integration Guidelines. March 2011.

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  10. MCC, “About MCC: Board of Directors,” webpage, www.mcc.gov/about/boardofdirectors.

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  11. CRS. Millennium Challenge Corporation. RL32427; April 8, 2014.

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  12. MCC, Selection Indicators, webpage, http://www.mcc.gov//pages/selection/indicators.

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  13. MCC, Selection Criteria, webpage, http://www.mcc.gov/pages/selection.

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  14. MCC. Country and Country Tools. http://www.mcc.gov/pages/countries.

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  15. MCC. Programs and Activities. webpage, http://www.mcc.gov/pages/activities.

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  16. Eleven compacts are currently active: Cape Verde (its 2nd), El Salvador (2nd), Georgia (2nd), Ghana (2nd), Indonesia, Jordan, Malawi, Moldova, Philippines, Senegal, and Zambia. Compacts in Madagascar (2009) and Mali (2012) were terminated due to coups. Compacts with 16 other countries have been fully completed: Armenia, Benin, Burkina Faso, Cape Verde (its 1st), El Salvador, Georgia (its 1st), Ghana (1st), Honduras, Lesotho, Mongolia, Morocco, Mozambique, Namibia, Nicaragua, Tanzania, and Vanuatu. MCC. Programs and Activities. http://www.mcc.gov/pages/activities; MCC, FY 2014 Annual Performance Report and Plan, Appendix A of the MCC FY 2016 Congressional Budget Justification, 2015.

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  17. There are two currently active threshold programs, in Guatemala and Honduras. Two countries (Mauritania and Yemen) have had their eligibility terminated before their programs were implemented. Niger’s threshold was suspended in 2009 for government behavior contrary to MCC criteria, but re-instated in 2011. The eight countries that have completed thresholds and moved on to compacts are: Indonesia, Moldova, Burkina Faso, Jordan, Malawi, the Philippines, Tanzania, and Zambia. CRS, Millennium Challenge Corporation. RL32427; March 11, 2015.

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  18. Kaiser Family Foundation (KFF) analysis of data from the Office of Management and Budget, Agency Congressional Budget Justifications, Congressional Appropriations Bills, and U.S. Foreign Assistance Dashboard website, ForeignAssistance.gov.

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  19. KFF analysis of data from MCC, FY 2014 Annual Performance Report and Plan, Appendix A, MCC FY 2016 Congressional Budget Justification, 2015.

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  20. Sectors receiving the greatest proportions of MCC assistance include transportation infrastructure (31% of compact funding) and agriculture (19%).

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  21. Kaiser Family Foundation (KFF) analysis of data from the Office of Management and Budget, Agency Congressional Budget Justifications, Congressional Appropriations Bills, and U.S. Foreign Assistance Dashboard website, ForeignAssistance.gov.

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  22. KFF analysis of data from MCC, Programs and Activities. webpage, http://www.mcc.gov/pages/activities.

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  23. MCC. MCC and PEPFAR: Working in Partnership with Lesotho to Improve Healthcare, February 2009.

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  24. MCC. MCC and PEPFAR: Working in Partnership with Lesotho to Improve Healthcare, February 2009.

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  25. MCC. MCC and PEPFAR Partner to Transform Country Assistance Programs. March 2014 http://www.mcc.gov/pages/press/release/release-0321140-mcc-and-pepfar/.

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  26. MCC. MCC and PEPFAR Partner to Create Local Data Hubs. December 2014. http://www.mcc.gov/pages/docs/doc/fact-sheet-mcc-and-pepfar-partner-to-create-local-data-hubs.

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