Summary
This report is provided in accordance with section 608(d)(1) of the Millennium Challenge Act of 2003, as amended (the Act) (22 U.S.C. 7707(d)(1)).The Act authorizes the provision of assistance under section 605 of the Act (22 U.S.C. 7704) to countries that enter into compacts with the United States to support policies and programs that advance the progress of such countries in achieving lasting poverty reduction through economic growth, and are in furtherance of the Act. The Act requires the Millennium Challenge Corporation (MCC) to determine the countries that will be eligible to receive assistance for the fiscal year, based on their demonstrated commitment to just and democratic governance, economic freedom, and investing in their people, as well as on the opportunity to reduce poverty through economic growth in the country. The Act also requires the submission of reports to appropriate congressional committees and the publication of notices in the Federal Register that identify, among other things:
- The countries that are “candidate countries” for assistance for fiscal year (FY) 2021 based on their per-capita income levels and their eligibility to receive assistance under U.S. law, and countries that would be candidate countries, but for specified legal prohibitions on assistance (section 608(a) of the Act (22 U.S.C. 7707(a)));
- The criteria and methodology that the Board of Directors of MCC (the Board) used to measure and evaluate the policy performance of the “candidate countries” consistent with the requirements of section 607 of the Act in order to determine “eligible countries” from among the “candidate countries” (section 608(b) of the Act (22 U.S.C. 7707(b))); and
- The list of countries determined by the Board to be “eligible countries” for FY 2021, with justification for eligibility determination and selection for compact negotiation, including with which of the eligible countries the Board will seek to enter into compacts (section 608(d) of the Act (22 U.S.C. 7707(d))).
Eligible Countries
The Board met on December 15, 2020 to select those eligible countries with which the United States, through MCC, will seek to enter into a Millennium Challenge Compact pursuant to section 607 of the Act (22 U.S.C. 7706). The Board selected the following eligible country for such assistance for FY 2021: Sierra Leone. The Board also selected the following previously selected countries for compact assistance for FY 2021: Benin, Burkina Faso, Côte d’Ivoire, Malawi, Mozambique, Niger, Timor-Leste, and Tunisia.Criteria
In accordance with the Act and with the “Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance in Fiscal Year 2021” formally submitted to Congress on September 15, 2020, selection was based primarily on a country’s overall performance in three broad policy categories: Ruling Justly, Encouraging Economic Freedom, and Investing in People. The Board relied, to the fullest extent possible, upon transparent and independent indicators to assess countries’ policy performance and demonstrated commitment in these three broad policy areas. The Board compared countries’ performance on the indicators relative to their income-level peers, evaluating them in comparison to either the group of countries with a GNI per capita equal to or less than $1,945, or the group with a GNI per capita between $1,946 and $4,045.The criteria and methodology used to assess countries on the annual scorecards are outlined in the “Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance for Fiscal Year 2021[[Available at https://www.mcc.gov/resources/doc/report-selection-criteria-methodology-fy21]].” Scorecards reflecting each country’s performance on the indicators are available on MCC’s website at https://www.mcc.gov/who-we-select/scorecards.
The Board also considered whether any adjustments should be made for data gaps, data lags, or recent events since the indicators were published, as well as strengths or weaknesses in particular indicators. Where appropriate, the Board took into account additional quantitative and qualitative information, such as evidence of a country’s commitment to fighting corruption, investments in human development outcomes, or poverty rates. In keeping with legislative directives, the Board also considered the opportunity to reduce poverty and promote economic growth in a country, in light of the overall information available, as well as the availability of appropriated funds.
The Board sees the selection decision as an annual opportunity to determine where MCC funds can be most effectively used to support poverty reduction through economic growth in relatively well-governed, poor countries. The Board carefully considers the appropriate nature of each country partnership—on a case-by-case basis—based on factors related to poverty reduction through economic growth, the sustainability of MCC’s investments, and the country’s ability to attract and leverage public and private resources in support of development.
This was the third year the Board considered the eligibility of countries for concurrent compacts. In addition to the considerations for compact eligibility detailed above, the Board considered whether a country being considered for a concurrent compact is making considerable and demonstrable progress in implementing the terms of its existing compact.
This was the twelfth year the Board considered the eligibility of countries for subsequent compacts, as permitted under section 609(l) of the Act. MCC’s engagement with partner countries is not open-ended, and the Board is deliberate when selecting countries for follow-on partnerships, particularly regarding the higher bar applicable to subsequent compact countries. In making these selection decisions, the Board considered—in addition to the criteria outlined above—the country’s performance implementing its first compact, including the nature of the country’s partnership with MCC, the degree to which the country has demonstrated a commitment and capacity to achieve program results, and the degree to which the country has implemented the compact in accordance with MCC’s core policies and standards. To the greatest extent possible, these factors were assessed using pre-existing monitoring and evaluation targets and regular quarterly reporting. This information was supplemented with direct surveys and consultation with MCC staff responsible for compact implementation, monitoring, and evaluation. MCC published a Guide to Supplemental Information[[Available at https://www.mcc.gov/resources/doc/guide-to-supplemental-information]] and a related webpage[[Available at https://www.mcc.gov/who-we-select/indicators/doing-business-indicators-fy21]] regarding how MCC assesses performance on the Access to Credit, Business Start-Up, and Land Rights and Access indicators on the scorecard, in order to increase transparency about the type of supplemental information the Board uses to assess a country’s policy performance. The Board also considered a country’s commitment to further sector reform, as well as evidence of improved scorecard policy performance.
In addition, this is the fifth year where the Board considered an explicit higher bar for those countries close to the upper end of the candidate pool, looking closely in such cases at a country’s access to development financing, the nature of poverty in the country, and its policy performance.
Countries newly selected for compact assistance
Using the criteria described above, one candidate country under section 606(a) of the Act (22 U.S.C. 7705(a) was newly selected for assistance under section 607 of the Act (22 U.S.C. 7706): Sierra Leone. In accordance with section 609(k) of the Act, no candidate countries were newly selected to explore development of a concurrent compact program under section 607 of the Act (22 U.S.C. 7706).Sierra Leone: Sierra Leone has been an engaged and committed partner in the threshold program, consistently demonstrating a willingness to adopt challenging reforms. It is also a remarkable example of the “MCC Effect”, having strengthened its scorecard performance substantially through sustained reform efforts spanning two administrations. Sierra Leone passes the scorecard for the second year in a row in FY 2021, passing 13 indicators overall with strong performance on both the Democratic Rights and Control of Corruption “hard hurdles.” The country also took steps to strengthen its investment climate this year, including acceding to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. By selecting Sierra Leone for a compact, MCC will support the government’s efforts to strengthen economic growth to reduce poverty.
Countries selected to continue compact development
Eight of the countries selected for compact assistance for FY 2021 were previously selected for FY 2020. Malawi, Mozambique, Timor-Leste, and Tunisia were selected to continue developing bilateral compacts. Benin, Burkina Faso, Côte d’Ivoire, and Niger were selected to continue developing concurrent compacts for the purpose of regional integration. Selection of these countries for FY 2021 was based on their continued or improved policy performance since their prior selection.Countries selected to receive threshold program assistance
The Board selected Kiribati to receive threshold program assistance.Kiribati: Kiribati offers MCC the opportunity to engage with a country that faces significant challenges to economic growth. Kiribati is a strong scorecard performer, having consistently met the scorecard criteria, and passes 13 of 20 indicators in FY 2021. It passes the Control of Corruption hard hurdle and demonstrates some of the highest democratic rights scores of any MCC candidate country. Kiribati has been an important United States partner in the central Pacific since a treaty of friendship was signed in 1979, and this threshold program will build upon that relationship.