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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 to be a new model for U.S. foreign assistance when first proposed.3, 4  The MCC competitively selects countries to develop compacts based on their demonstrated commitment in three areas: good governance; economic freedom; and investment in people. Compacts are meant to be driven by country-identified priorities.

Figure 1. Millennium Challenge Corporation (MCC) Compact Funding, by Sector, as of March 31, 2012

Figure 1. Millennium Challenge Corporation (MCC) Compact Funding, by Sector, as of March 31, 2012

The MCC recognizes health as integral to poverty reduction.5 However, health-focused projects have so far constituted just 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 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.1, 2

Funding for the MCC & MCC Disbursements

The MCC was initially authorized by Congress for fiscal years 2004 and 2005, at “such sums as may be necessary”. Although it has not been reauthorized, Congress has appropriated funds to the MCC each year since.

  • As originally envisioned the MCC was to become a $5 billion annual commitment by FY2006, although White House budget requests have never exceeded $3 billion and Congress has consistently appropriated less than requested each year.3
  • 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 and fell again to $900 million in FY2011 and $898 million in FY2012. For FY 2013, the Administration has requested the same amount as was appropriated in FY2012 ($898 million).3, 12, 13, 14  
  • There have been concerns raised in the past that MCC disburses compact funds at a relatively slow pace, but organizational changes since 2007 have led to speedier implementation.15  As of September 2011, 42% of all obligated compact funding had been disbursed by the MCC.

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:2, 3

  • 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 & Thresholds

  • Compacts are larger agreements that may span multiple sectors and typically last five years. As of May 2012, 25 countries have signed compacts with MCC for amounts ranging from $66 million to $698 million, for a total of $9.3 billion overall.16  17 compacts are currently active: Burkina Faso, Cape Verde (its 2nd), El Salvador, Indonesia, Jordan, Lesotho, Malawi, Moldova, Mongolia, Morocco, Mozambique, Namibia, Philippines, Senegal, Tanzania, Vanuatu, and Zambia. Compacts in Madagascar (2009) and Mali (2012) were terminated due to coups. Compacts with seven countries have been completed: Armenia, Benin, Cape Verde (its 1st), Georgia, Ghana, Honduras, and Nicaragua.2
  • Thresholds are smaller, shorter-term grants designed to help countries become compact-eligible. MCC has signed 23 threshold agreements with 21 countries for amounts ranging from $5 million to $50 million, for a total of $495 million.2 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.3

MCC’s Health, Water and Sanitation Portfolios

From its creation through May 2012, 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.2, 5, 6  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. Examples of MCC-supported health and water/sanitation projects include:

  • Lesotho’s compact supports 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 are expected to benefit TB services, and have been coordinated with PEPFAR programs in country.17 Lesotho’s compact also focuses on improving maternal and child health clinics.
  • Namibia’s compact includes support for targeted HIV/AIDS education programs.
  • Mongolia’s compact includes investments in prevention, early diagnosis, and management of non-communicable diseases.
  • Threshold programs in Peru, and Timor L’Este include efforts to increase childhood immunization.
  • Multiple country projects 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 includes investments in rehabilitation and expansion of water supply systems in urban areas, part of Tanzania’s compact aims to increase the quantity and reliability of potable water in two cities, and new compacts with Cape Verde and Zambia focus on improving water and sanitation.
TABLE 1.  Current and Completed MCC Compacts & Thresholds with Health and Water/Sanitation Project Components (through March 2012)
Country Compact/ Threshold Date Signed Project Focus Funding (in millions)
Project $/Total $ % of Total
HEALTH
Indonesia Threshold Oct-06 Child Health (immunization) $20.0 / 55.0 36.4%
Kenya Threshold Mar-07 Health Care Procurement and Delivery $4.0 / $12.7 31.5%
Lesotho Compact Jul-07 HIV/AIDS; Maternal & Child Health; TB $122.4 / $362.6 33.8%
Mongolia Compact Oct-07 Non-Communicable Diseases $17.0 / $285.0 6.0%
Namibia Compact Jul-08 HIV/AIDS Education $1.3 / $304.5 0.4%
Peru Threshold Jun-08 Child Health (immunization) $11.5 / $35.6 32.3%
Timor L’Este Threshold Jan-11 Child Health (immunization) $2.6 / $10.5 24.8%
Indonesia Compact Nov-11 Child Health (nutrition) $131.5 / $600.0 21.9%
Sub-total $310.3 million  
WATER/SANITATION
El Salvador Compact Nov-06 Basic drinking water supply/sanitation; policy $19.0 / $461.0 5.1%
Georgia Compact Sep-05 Large systems $53.0 / $395.3 13.4%
Ghana Compact Aug-06 Basic drinking water supply/sanitation $13.0 / $547.0 2.4%
Jordan Compact Oct-10 Large systems; basic drinking water supply $253.8 / 275.1 92.2%
Lesotho Compact Jul-07 Large systems; water resources protection; policy $164.0 / $362.6 45.2%
Mozambique Compact Jun-07 Large systems; basic drinking water supply $203.6 / $506.9 40.2%
Tanzania Compact Feb-08 Large systems $66.3 / $698.0 9.5%
Cape Verde Compact Feb-12 Water, Sanitation and Hygiene $41.1 / $66.2 62.1%
Zambia Compact May-12 Water supply, sanitation and drainage $354.8 / $354.8 100%
Sub-total $  1.169 billion  
TOTAL $ 1.479 billion  

MCC and Gender

In March 2011, MCC, which has had a gender policy since 2006, released new guidelines that provide operational guidance to countries on gender integration in the development and implementation of compacts.18 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

The MCC has been seen as a new model for U.S. foreign assistance, and has documented results in several countries. Still, the MCC faces continuing challenges and issues moving forward, including:

  • The general lack of emphasis placed on health investments in MCC compacts and thresholds, particularly in 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, particularly USAID, and how it integrates with other key initiatives and principles, including the Global Health Initiative;
  • Whether the MCC will be reauthorized and if so, what changes will be enacted;
  • Future funding for the MCC, and how funding levels will affect the size of country compacts and potential for impact, and whether the MCC will be able to continue to improve its rate of disbursement over time.
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. CRS. Millennium Challenge Corporation. RL32427; April 12, 2012.

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

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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 website.

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  7. White House. Fact Sheet: U.S. Global Development Policy.

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

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  9. GHI Strategy Document 2010. See: 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.

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  12. State Department. Foreign Operations Congressional Budget Justification 2012.

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  13. State Department. Foreign Operations Congressional Budget Justification 2013

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  14. MCC. Semiannual Report to Congress for period ending March 31,2012http://www.mcc.gov/documents/reports/report-fy2012-q1and2-semiannualtocongress.pdf.

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  15. GAO. MCC Has Addressed a Number of Implementation Challenges, but Needs to Improve Financial Controls and Infrastructure Planning, GAO-10-52.

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  16. MCC. MCC At A Glance. June 2012.

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

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  18. MCC. Gender Integration Guidelines. March 2011.

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