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The Millennium Challenge Corporation (MCC) and Global Health

The Millennium Challenge Corporation (MCC) is a U.S. government corporation, established in January 2004 by the Millennium Challenge Act of 2003.1,2  Its purpose is to promote economic growth and reduce poverty in low- and middle-income countries through the development of country agreements called “compacts” with the U.S. government, an approach considered novel for U.S. foreign assistance when first proposed.3 The MCC only provides support to countries that meet a set of pre-determined criteria in three areas: good governance; economic freedom; and investment in people.4 Compacts are meant to be driven by country-identified priorities.

The MCC recognizes health as integral to poverty reduction.5  However, health-focused projects have so far constituted only 3% of MCC’s funding; clean water and sanitation projects have accounted for an additional 9%.6 Most MCC funding has been directed at other development sectors, particularly transportation and agriculture, which may also affect health but less directly.

The Obama administration’s policy directive on development,7 Quadrennial Diplomacy and Development Review (QDDR)8  and its U.S. Global Health Initiative strategy9 all emphasize the importance of implementing a “whole-of-government” approach to health and development, leading to increased attention on how to coordinate and integrate MCC programs into broader global health efforts. In addition, the MCC’s model of country compacts, with its focus on country ownership and results, has been looked to as an approach to be emulated by other U.S. development assistance programs, including those in global health.10,11

MCC Governance Structure

Based in the Executive Branch, the MCC is led by a chief executive officer, a Presidential appointee requiring Senate confirmation, and overseen by a Board of Directors consisting of five ex-officio members and four public members. Ex officio members include the Secretary of State, Secretary of Treasury, U.S. Trade Representative, USAID Administrator, and the MCC CEO.  Public members are nominated by the President from names submitted by the majority and minority leaders of the House and Senate.12

Figure 1. Millennium Challenge Corporation (MCC) Compact Funding, by Sector, 2004-2013

Figure 1. Millennium Challenge Corporation (MCC) Compact Funding, by Sector, 2004-2013

MCC Authorization, Funding & Disbursements

The MCC was initially authorized by Congress for fiscal years 2004 and 2005, at “such sums as may be necessary”.13  Although it has not been reauthorized, the White House has requested and Congress has appropriated funds to the MCC each year since.  As originally envisioned in 2004 the MCC was to become a $5 billion annual commitment by FY2006, but White House budget requests have never exceeded $3 billion and Congress has typically appropriated less than requested by the White House each year.14

First funded at $994 million in FY2004, MCC appropriations reached a peak of $1.75 billion in both FY2006 and FY2007 and then declined to a low of $875 million in FY2009.  Funding then increased to $1.1 billion in FY 2010, fell to $900 million in FY2011, and then remained at $898 million from FY2012-FY2014. For FY 2015 the Administration requested a budget increase for the MCC to $1 billion; final appropriations for FY2015 have not yet been determined.15,16

Country Candidacy & Eligibility

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:17

  • 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 in the MCC’s three key areas: Ruling Justly (including good governance and fighting corruption), Economic Freedom, and Investing in people. Twenty indicators are used to gauge country performance, including three that 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). To be eligible for compact funding a country must score above the median compared to other countries in at least 10 of the indicators overall, including two required indicators: above median performance on “corruption” and meeting absolute threshold for either (or both) of the “civil liberties” or “political rights” indicators. Candidate countries not meeting these criteria but demonstrating commitment to improve their performance may be eligible for “threshold” funding.

Compacts & Thresholds18,19

Compacts are larger agreements that may span multiple sectors and typically last five years. As of March 2014, 25 countries have signed 27 compacts with MCC for amounts ranging from $66 million to $698 million, for a total of $9.3 billion overall.20 Eleven compacts are currently active: Burkina Faso, Cape Verde (its 2nd), Georgia (its 2nd), Indonesia, Jordan, Malawi, Moldova, Namibia, Philippines, Senegal, and Zambia. Compacts in Madagascar (2009) and Mali (2012) were terminated due to coups. Compacts with 14 countries have been completed: Armenia, Benin, Cape Verde [its 1st], El Salvador, Georgia (its 1st), Ghana, Honduras, Lesotho,  Mongolia, Morocco, Mozambique, Nicaragua, Tanzania, and Vanuatu. The MCC Board approved a second compact with El Salvador in 2013, but it has not yet been signed.

Thresholds are smaller, shorter-term grants designed to help countries become compact-eligible. MCC has signed 24 threshold agreements with 22 countries for amounts ranging from $5 million to $50 million, for a total of over $500 million. There are 5 active threshold programs: Liberia, Paraguay (its 2nd), Peru, Rwanda, and Timor L’Este.  Sixteen countries have successfully completed thresholds: Albania, Burkina Faso, Guyana, Indonesia, Jordan, Kenya, Kyrgyz Republic, Liberia, Malawi, Moldova, Paraguay, Philippines, Tanzania, Uganda, Ukraine, and Zambia. Niger’s threshold was suspended in 2009 for government behavior contrary to MCC criteria, but re-instated in 2011. Eight countries have gone on from threshold funding to receive compacts.

MCC’s Health, Water and Sanitation Portfolios

From its creation through March 2014, the MCC has committed $310.3 million (approximately 3% of all MCC funding) to health projects, as part of four compacts and four thresholds, in proportions ranging from 0.4% of Namibia’s compact funding, to 36% of Indonesia’s threshold funding. An additional $1.169 billion has been committed to water and sanitation projects, as part of nine compacts ranging from 2% of Ghana’s funding to 100% of Zambia’s.21Examples of MCC-supported health and water/sanitation projects include:

  • Lesotho’s compact (completed in September 2013) supported the renovation and expansion of HIV/AIDS treatment clinics and construction of a new central laboratory and blood processing facility to strengthen HIV services. These investments were expected to benefit TB services, and have been coordinated with PEPFAR programs in country.22 Lesotho’s compact also focused on improving maternal and child health clinics.
  • Namibia’s compact includes support for targeted HIV/AIDS education programs.
  •  Mongolia’s compact (completed in September 2013) included investments in prevention, early diagnosis, and management of non-communicable diseases.
  • Threshold programs in Peru, and Timor L’Este have included efforts to improve childhood immunization.
  • Multiplecountryprojects focus on improving water supply infrastructure and access. Most of Jordan’s compact seeks to improve access to water and wastewater services. Mozambique’s compact (completed September 2013) included investments in rehabilitation and expansion of water supply systems in urban areas, part of Tanzania’s compact (completed September 2013) aimed to increase the quantity and reliability of potable water in two cities. More recent compacts with Cape Verde and Zambia focus on improving water and sanitation.
Table l. Current and Completed Compacts and Thresholds with Health and Water/Sanitation Components (through March 2014)
Country Compact or Threshold Year Signed Project Focus Project $/ Total MCC Assistance (in millions) % Health/Water/ Sanitation of Total Assistance
HEALTH
Indonesia Threshold 2006 Child health (immunization) $20.0 / $55.0 36.4%
Kenya Threshold 2007 Health care procurement and delivery $4.0 / $12.7 31.5%
Lesotho Compact 2007 HIV/AIDS; Maternal & Child Health, TB $122.4 / $362.6 33.8%
Mongolia Compact 2007 Non-communicable diseases $17.0 / $285.0 6.0%
Namibia Compact 2008 HIV/AIDS education $1.3 / $304.5 0.4%
Peru Threshold 2008 Child health (immunization) $11.5 / $35.6 32.3%
Timor L’Este Threshold 2011 Child health (immunization) $2.6 / $10.5 24.8%
Indonesia Compact 2011 Child health (immunization) $131.5 / $600.0 21.9%
WATER/SANITATION
Georgia Compact 2005 Large systems $53.0 / $395.3 13.4%
Ghana Compact 2006 Basic drinking water supply and sanitation $13.0 / $547.0 2.4%
El Salvador Compact 2006 Basic drinking water supply and sanitation $19.0 / $461.0 5.1%
Mozambique Compact 2007 Large systems; basic drinking water supply $203.6 / $506.9 40.2%
Lesotho Compact 2007 Water resources protection, policy $164.0 / $362.6 45.2%
Tanzania Compact 2008 Large systems $63.3 / $698.0 9.5%
Jordan Compact 2010 Large systems; basic drinking water supply $253.8 / $275.1 92.2%
Cape Verde Compact 2012 Water, sanitation and hygiene $41.1 / $66.2 62.1%
Zambia Compact 2012 Water supply, sanitation, and drainage $354.8 / $354.8 100%

MCC, PEPFAR, and Country Ownership

In March 2014, MCC and the President’s Emergency Plan for AIDS Relief (PEPFAR) signed a new memorandum of agreement focused on promoting greater country ownership and sustainability of U.S. assistance programs.23 MCC agreed to partner with PEPFAR, providing technical assistance and other support to the global AIDS program over the next three years and drawing upon MCC’s unique approach and its lessons learned in “country-owned” assistance programs.24 The partnership is expected to help PEPFAR build upon its Country Health Partnerships efforts and other work promoting country ownership and sustainability.

MCC and Gender

In 2011, MCC, which has had a gender policy since 2006, released guidelines that provide operational guidance to countries on gender integration in the development and implementation of compacts.25 As part of this guidance, MCC now requires its partner countries to designate and fill “key” staff positions with persons who have social and gender expertise, to work in conjunction with the MCC’s own dedicated Social and Gender Assessment (SGA) staff.

Looking Ahead

MCC has been described as a new and unique approach to U.S. foreign assistance, and the organization has reported significant results from the work it has completed to date.26 Still, the MCC faces continuing challenges and issues moving forward, especially in regard to its involvement in US global health efforts. There is a lack of emphasis placed on health investments in MCC compacts and thresholds, particularly in light of organization’s own recognition of the integral role of health in poverty reduction and the desire for diversification of the MCC portfolio.  The extent to which the MCC coordinates with other U.S. agencies and how it integrates its work with other key global initiatives and principles in global health is an ongoing concern. It remains to be seen if the newly announced partnership with PEPFAR on country ownership will translate to meaningful changes in practice. It is also unknown whether MCC will be reauthorized and if so, what changes may be enacted, and whether future funding limitations will affect the size and effectiveness of country compacts.

Endnotes
  1. Millennium Challenge Corporation Act of 2003. P.L. 108-199.

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  2. Millennium Challenge Corporation website: www.mcc.gov

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

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

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

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  6. Kaiser Family Foundation analysis of data from MCC.

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  7. White House Press Release, Fact Sheet: U.S. Global Development Policy. http://www.whitehouse.gov/the-press-office/2010/09/22/fact-sheet-us-global-development-policy.

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  8. US State Department. QDDR website: http://www.state.gov/s/dmr/qddr/

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  9. U.S. Global Health Initiative website: www.ghi.gov

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  10. PEPFAR. Partnership Frameworks: www.pepfar.gov/frameworks/index.htm

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  11. Secretary Clinton. Remarks at the Millennium Challenge Corporation Signing Ceremony With Senegal; September 16, 2009. http://www.state.gov/secretary/20092013clinton/rm/2009a/09/129268.htm.

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  12. MCC Website. www.mcc.gov.

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  13. Millennium Challenge Corporation Act of 2003. P.L. 108-199.

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

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  15. Department of State. Foreign Operations Congressional Budget Justifications for 2012, 2013, 2014, and 2015. http://www.state.gov/f/releases/iab/.

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  16. Kaiser Family Foundation Budget Tracker. http://kff.org/global-health-policy/fact-sheet/budget-tracker-status-of-u-s-funding-for-key-global-health-accounts/.

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

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

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  19. MCC. Programs and Activities. http://www.mcc.gov/pages/activities.

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  20. MCC. MCC At A Glance. January 2013. http://www.mcc.gov/documents/press/factsheet-2010002014712-mccataglance.pdf.

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  21. MCC. MCC’s Commitment to Clean, Water, Sanitation, and Improved Water Infrastructure; March 2010. http://www.mcc.gov/pages/activities/activity/water-and-sanitation

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  22. MCC. MCC and PEPFAR: Working in Partnership with Lesotho to Improve Healthcare

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  23. Von Zinkernagel D. Country Ownership for an AIDS Free Generation [blog post]. March 2014. https://www.mcc.gov/pages/povertyreductionblog/entry/blog-032114-country-ownership-for.

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  24. 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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  25. MCC. Gender Integration Guidelines. March 2011.

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  26. MCC. Continuum of Results. http://www.mcc.gov/pages/results.

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