MCC: Taking Stock and Moving Forward

First, a confession: when President Bush first proposed the creation of a Millennium Challenge Account in 2002, I thought it was a secret plot to undermine USAID.  When I first met staff of the newly-created Millennium Challenge Corporation, I saw them as egghead economists who didn’t have a clue about the real world of development.  And when I first visited one of the MCC’s projects, I was skeptical that it would bring any real benefits to poor people.

Now, an apology: I was wrong on all counts.  Or if I was ever right about any of it, MCC has grown up and moved on.

This week’s release of MCC’s new five-year strategic plan – following on the ten-year anniversary of MCC’s creation – demonstrates all the qualities that make the agency a pioneer in development.  Questioning of assumptions.  Honest self-appraisal.  Rigor in analysis.  Transparency in decision-making.  Meaningful consultation and response to feedback.  One doesn’t have to agree with all its conclusions to appreciate the quality of the thinking.

Six months ago, MCC staff previewed a draft strategy that didn’t live up to their usual standards of boldness and ambition.  It seemed more a celebration of prior accomplishments than a serious consideration of challenges and opportunities for the future.

Yet to MCC’s credit, they not only shared substantive information about content at an early stage in the process, but invited detailed comments – and then made changes in the final version to incorporate nearly every suggestion that was offered and address each objection that was raised.  The result is a strategy that merits broad support and a process that deserves widespread emulation.

Some of the best things about the new strategy are: (1) its use of data to validate the model and approach;  (2) its acknowledgment, at least in general terms, of some of the practices that didn’t work and what was learned from them;  (3) its identification of the trends and challenges that will confront it in the next five years; (4) its courage in requesting Congress to join in a reexamination of the best ways to measure poverty; and (5) its focus on reforms and systems that outlive the five-year compacts.  The strategy also contains a very concise and useful statement of how MCC’s contributions to poverty reduction and economic growth contribute to larger U.S. foreign policy and national security goals.

More specifically, I liked the increased focus on beneficiary feedback and beneficiary engagement in collecting, analyzing, and utilizing data to hold governments accountable, and the goal of helping partner countries build their own data-driven decision-making systems.   I applaud the strategy’s strong endorsement of pay-for-results and outcomes-based financing, and its clear definition of the types of innovation MCC intends to nurture and the level of risk it is prepared to accept.

This is not to say the strategy is perfect.  Although one of the priority actions of the strategy is to “strengthen the threshold program as a tool for promoting reform and accelerating the MCC Effect,” there is very little analysis of the successes and shortcomings of the current threshold program or the ways in which it might be strengthened.  To its credit, the plan lists “fighting corruption” among its 20 (!) new strategic directions, yet it never mentions illicit financial flows or contract transparency, which ought to be priority areas for exploration.  Finally, in its discussions of broadening partnerships and of finding better poverty measures (which could end up making countries with higher average incomes, but large pockets of poverty, candidates for assistance), it fails to consider the possibility that the MCC model and structure could be offered to countries – with the actual financial resources being raised domestically or leveraged privately.

MCC’s five-year strategy is a beginning point, not an end.  Its goals and strategic directions will need to be fleshed out through implementation plans and operational guidance, and funded through congressional appropriations.  But the plan provides a solid base for moving forward, and the process should give stakeholders confidence that the MCC remains true to its principles of transparency and accountability.

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This is a guest post from Diana Ohlbaum, Co-Chair of MFAN’s Accountability Working Group.

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