April 12, 2024
10 am-12:30 pm
Hybrid Virtual and In-Person Meeting
| Time | Activity / Topic |
|---|---|
| 9:45 am | Webex Conference Line Opens |
| 10 am-10:20 am | Call to Order Shanta Devarajan, Chair Welcoming Remarks Alice Albright, CEO Overview of Meeting Arif Mamun, Acting Chief Economist |
| 10:20 am-12:15 pm | The Last Mile: Connecting MCC Investments to End Users Katerina Ntep, Deputy Vice President, Department of Compact Operations EAC discussant remarks |
| 12:15-12:20 pm | Administrative Next Steps Shanta Devarajan, Chair |
| 12:20-12:30 pm | Opportunity for Public Comment |
| 12:30 pm | Meeting Adjourns |
Welcoming Remarks, Overview of Meeting, and MCC Response to EAC Recommendations
Following the call to order, EAC Chair Shanta Devarajan opened with introductory remarks. Following the call to order, MCC Chief Executive Officer Alice Albright offered welcoming and introductory remarks, congratulated former MCC Chief Economist Mark Sundberg for his foundational EAC efforts, and underscored the importance of applying MCC’s economic rigor to questions of Last Mile connections. MCC’s Acting Chief Economist Arif Mamun presented the EAC an update on MCC’s uptake of EAC recommendations on urbanization, climate investments, regional compacts, and policy and institutional reform (PIR) via its Threshold Programs.
The Last Mile: Connecting MCC Investments to End Users
A Topic Note, circulated in advance, served as background for discussion. MCC’s Deputy Vice President for Compact Operations Katerina Ntep highlighted MCC’s experience tackling Last Mile challenges and summarized specific instances in Senegal, Zambia, Liberia, and Timor Leste. Ntep emphasized the importance of early consensus and resource allocation for Last Mile connections and the role of behavior change among consumers and utilities.
Discussant Emmanuelle Auriol highlighted the heterogeneity across sectors in the challenges and impacts of last mile interventions in the context of MCC partner countries. For instance, for electricity and water supply services, prioritizing the First Mile might be as important as the Last Mile since intermittent supply may limit the use and economic impacts of these services. Whereas rural roads and rural broadband connections, both of which often generate large payoffs, may more readily merit Last Mile considerations. Auriol stressed that public private partnerships (PPPs) comprise only 3 percent of total infrastructure spending globally and 10 percent in the developing world and likely cannot offer Last Mile solutions at the desired scale.
Discussant Mushtaq Khan spoke to the issue of subsidies to support last mile connection. Subsidies can be justified in welfare terms but should be coupled with productive activities which can ease fiscal pressures. Last Mile governance, furthermore, requires checks and balances that could be considered as “horizontal checks” which would integrate self-interested actors into the mix outside formal institutional principal-agent arrangements that offer "vertical checks”. Khan also touched on the importance of unintended consequences, and the importance of evaluating and understanding the unintended good and bad outcomes that can inform adaptative approaches, including stop-loss processes that can lead to adaptation or an early exit, highlighting an example of solar home system project in Bangladesh.
EAC Discussion
- Role of subsidies. EAC members discussed the role of subsidies in helping achieve Last Mile connections. Subsidies are costly, and certain subsidies (e.g. fuel) are inefficient and not pro-poor. In light of this, cash transfers to the poor may allow them to allocate funds to get connected to the service if they want. Meanwhile, subsidies for some services may be more valuable than cash transfers, e.g., public health clinics. And separately, if MCC introduces subsidies into its investment, it needs to consider how that expense becomes a fiscal responsibility for the country’s government in the long-term and how such fiscal burdens will be sustained.
EAC members also distinguished between subsidies applied to fixed or marginal costs, and the benefit incidence of subsidies between the owner or the renter. Subsidizing fixed costs and capital expenditures potentially simplify the discussion, insomuch as they don’t require long-run support schemes. Owners and renters face different incentives for adoption of services. Finally, MCC should consider the possibility that delivering household level infrastructure (e.g., building of toilets as done in India) through community channels often results in greater uptake than direct delivery to end users.
MCC should undertake detailed “user journey analysis” at the beginning of program design to assess uptake of services from its infrastructure investments. This would allow MCC to develop clear understanding of whether MCC is best suited to address the Last Mile challenges in specific context, especially considering its five-year compact implementation period. The analysis might also help determine how MCC would address the Last Mile problem—through additional funding to subsidize Last Mile costs or through behavioral nudging—as well as to consider the time needed for gathering evidence on the effectiveness of potential solutions relative to MCC’s program implementation timeline.
- Productive Use. EAC members highlighted the importance of accounting for the productive use of Last Mile connections. For instance, connections used to power machinery in workshops and businesses directly raise productivity and incomes, and they often displace costly and polluting diesel generators. MCC should consider these benefits against activities undertaken in households, where productive activity may not always take place.
To the extent household use generates positive externalities, studies suggest that those from WASH are sizable while electricity’s are small. That said, some externalities are detectable not at the individual or household level, but at the community level. For example, greater externalities may materialize from connections to schools and clinics. More broadly, MCC must decide whether less productive household connections nonetheless achieve the separate goal of inclusion.
- Governance, capacity, and behavior. Members observed that utilities and regulators should receive clear responsibilities to ensure reliable and accountable service delivery, in contrast to reliance on smaller delivery units. The ability for participants, both within government and across private actors, to monitor each other’s work also incentivizes compliance and good behavior. Pairing new or struggling utilities with more established, successful utilities can facilitate the exchange of best practices and capacity building. Meanwhile, the risk of political capture of service delivery also looms, as favored groups may benefit from prioritized connections.
Similarly, MCC may consider how gender norms among potential consumers also matter. Time use surveys from the International Labor Organization and the World Bank reveal gender differences, particularly within households, in terms of access to services, with implications for equity and household productivity.
- MCC’s role in Last Mile. MCC should explore whether transitional solutions to service delivery—for example, neighborhood water kiosks in place of household level connections—are more feasible and sustainable. Community-level solutions for services often involve much lower up-front and maintenance costs while offering high level of access across the community Meanwhile, since MCC’s statutory five-year clock constrains its ability to remain involved as a long-term partner, MCC should more intentionally explore opportunities to partner with other actors (e.g., other donors, NGOs, and the civil society) to build on each other’s work and ensure consistent, high-quality service delivery once MCC completes its program.
Conversely, MCC should consider more explicitly defining off-ramps or stop-losses to accommodate changes in circumstances and/or integrate real-time learning into its project. For smaller-scale endeavors, this may even take the form of defining projects in, say, two-year increments with the option of renewing the project when performance standards, e.g., number of household connections, are reached. That said, MCC should understand that risks are inevitable, and some cannot be mitigated, only recognized.
Public Comment
A public participant urged MCC to ensure that its climate-related investments account for country ownership. MCC should not allow outside political motives, including climate goals determined outside of partner countries, to creep into its investments.
Members Present (virtually and in-person)
- Ehtisham Ahmad
- Emmanuelle Auriol
- Asli Demirguc-Kunt
- Stefan Dercon
- Shanta Devarajan
- Shahrokh Fardoust
- Louise Fox
- Alan Gelb
- Caren Grown
- Ravi Kanbur
- Mushtaq Khan
- Homi Kharas
- Akhtar Mahmoud
- Will Martin
- Will Masters
- Tauhid Rahman
- Paul Smoke
- Michael Woolcock
Members Not Present
- Raquel Fernandez
- Maitreesh Ghatak
- Celestin Monga
- Lant Pritchett
MCC Staff Participating
- Alice Albright, Chief Executive Office, MCC
- Arif Mamun, Acting Chief Economist, EA-DPE
- Katerina Ntep, Deputy Vice President, SecOps-DCO
- Mesbah Motamed, Designated Federal Officer