MCC actively engages with the private sector throughout the development and implementation of its threshold programs and compacts to spur economic growth in partner countries. By holding its partner countries accountable to high standards of good governance and by capitalizing on private investment and expertise, MCC is delivering development results and creating new opportunities for U.S. firms in frontier markets.
Driving Reforms
MCC’s strict standards for countries to receive aid have created an incentive for countries to make reforms before even a dollar of MCC assistance is expended, a phenomenon called the “MCC Effect.” A country understands that becoming eligible for an MCC compact means more than just grant funding – it is a signal to the world that the country is on a positive track. It also inspires a sense of pride, sending a message that the United States believes it has the political, social and economic potential for long-term progress. MCC’s selection criteria encourage countries to reform policies, strengthen institutions, and improve data quality in order to boost their performance in the areas of economic freedom, ruling justly, and investing in their people, as measured by the MCC scorecard.MCC programs seek to address barriers to growth and sustain significantly increased levels of income for beneficiaries long after compact programs end. To achieve this goal, a compact is implemented in tandem with a broader development strategy. During the compact development process, MCC and the partner country examine conditions surrounding the proposed compact and develop a plan for policy reform that will maximize the compact’s impact and sustainability. The partner government must succeed in making crucial policy changes before funding is released and continue with others to improve the operating and policy environment during implementation. These policy reforms ultimately support the conditions necessary for continued growth and investments.
Creating New Opportunities for Economic Growth
Women’s Economic Empowerment
Strengthening economic opportunities for women is fundamental to MCC’s mission to reduce poverty through economic growth. As part of its data-driven model, MCC consistently works with partner countries to unlock the economic potential of women and overcome financial, legal, and cultural barriers that prevent women from fully engaging in their countries’ economies.Since its inception, MCC has mandated the integration of gender into its country programs. Gender analysis and a rigorous evidence base inform all aspects of MCC’s work, from selecting country partners to identifying gender-responsive economic growth constraints, to supporting partner governments to enact legal and policy changes. Each MCC compact and threshold program requires a Social and Gender Integration Plan, which provides a comprehensive roadmap for social inclusion and gender integration throughout program implementation. MCC supports activities to expand income-generating activities and employment opportunities for women, to increase women’s access to land, education, and skills development, and to enable women-owned businesses to take advantage of new market opportunities. Through its compact and threshold programs, which include significant assistance for policy and institutional reform as well as infrastructure, MCC lifts up the U.S. government’s ability to change the landscape of women’s economic empowerment around the world.
MCC’s work aligns with the Trump Administration’s Women’s Global Development and Prosperity (W-GDP) initiative, launched in February 2019. MCC’s programs reinforce the three pillars of the W-GDP initiative, which focus on (1) Women Prospering in the Workforce; (2) Women Succeeding as Entrepreneurs; and (3) Women Enabled in the Economy. MCC supports the W-GDP initiative’s ambitious, integrated framework to align the experience, commitment, and expertise of the U.S. government’s international development agencies to advance women’s economic progress around the world.
Prosper Africa
Prosper Africa is a U.S. government initiative that unlocks opportunities to do business in Africa – benefiting companies, investors, and workers in Africa and the United States. Prosper Africa brings together the resources of more than 15 U.S. government agencies to connect U.S. and African businesses with new buyers, suppliers and investment opportunities, making it easier for companies to access U.S. government trade and investment support services.Catalyzing private investment for development has been fundamental to MCC’s work since its founding, and MCC’s support of economic growth in Africa delivers mutual benefits to the United States and our partners on the continent. Each U.S. government agency provides a unique contribution to Prosper Africa, and MCC’s compacts are effective in promoting long-term growth through infrastructure investments and a focus on improving the business climate.
Blended Finance
MCC has continued to develop and hone an approach in blended finance that allows for expanded participation of the private sector, leveraging additional investments in and around MCC programs.Blended finance pools public and private sector funding into structured investments to advance the Sustainable Development Goals. MCC has developed a suite of blended finance tools, including leveraged grant facilities, public-private partnerships (PPPs), financial guarantees, and impact investing.
MCC catalyzes private investment by partnering with countries so they undertake reforms and measures to partner more effectively with the private sector in order to provide key public services that will increase productivity and investment. For example, programs in El Salvador and Guatemala helped to bring up to eight PPP projects to market, and the threshold program in Honduras helped with managing four signed PPP projects. MCC also provided internationally recognized Certified PPP Professional (CP3P) training to representatives of the public and private sectors in these three countries. The El Salvador Investment Challenge facility also is funding $75 million of public goods (e.g., roads, water treatment plants, and workforce development) needed to support $150 million of private investment in El Salvador.
Building on collaboration that began in fiscal year 2018, MCC again commissioned the Economist Intelligence Unit to develop Infrascope assessments of the enabling environments and the readiness for PPPs in six additional countries in Africa (Côte d’Ivoire, Ghana, Lesotho, Liberia, Niger, and Zambia), one additional country in the Middle East/North Africa region (Tunisia) and one additional country in Asia (Nepal). Infrascope is a global public good that has several uses for various audiences. For project sponsors, it can assist in and lower the cost of market entry by providing helpful country research. For donors and governments, it can assist in the policy dialogue about PPPs. For MCC, it can assist in due diligence, while also serving as a source of indicators as part of monitoring and evaluation plans.
MCC leveraged grant facilities have attracted co-funding from private sector partners in renewable energy projects in Indonesia and Benin, and industrial zone developments in Morocco. In Côte d’Ivoire, MCC supports advisory services to develop a logistics center PPP between trucking companies and the government. In Benin, MCC is supporting a PPP to increase private sector involvement in new solar energy plants. MCC also supports two major programs to catalyze co-financing with local private sector and governmental entities: in Kosovo, to enhance commercial banks’ project-based lending, and in El Salvador, to catalyze a pipeline of private investment. MCC is also examining ways to leverage lending instruments offered through other U.S. government agencies like the U.S. International Development Finance Corporation to decrease risks of investing in partner countries.
Since August 2009, MCC has made annual grants to the Public-Private Infrastructure Advisory Facility (PPIAF) to support PPIAF’s work program. PPIAF, a trust fund managed by World Bank on behalf of 11 donors, is the leading donor in global PPP facilitation. PPIAF’s mandate is to help increase private sector participation in infrastructure and thereby achieve sustainable development by focusing on the so-called critical upstream enabling environment. As such, it is the only global facility focused on strengthening the institutional requirements for engaging the private sector in infrastructure development and finance. PPIAF provides technical assistance grants to governments to support the creation of a sound enabling environment for the provision of basic infrastructure services by the private sector and to facilitate PPP transactions and pioneering deal structures. PPIAF’s grants help governments frame infrastructure strategies; develop consensus around them; design specific policy, institutional, and regulatory reforms; and build government capacity to design, execute, supervise, and regulate PPP arrangements. Through its subnational technical assistance window, PPIAF also assists local governments and entities such as utilities or financial intermediaries to access private capital markets without sovereign guarantees.
Through these efforts, MCC aims to attract private sector participation, multiplying the impact of each dollar spent, as well enhancing the long-term sustainability of programs.