Economies do not work in isolation and so regional integration is important for growth. MCC’s own learning demonstrates that in a number of cases, a binding constraint to growth is a country’s inability to attract the infrastructure investments needed to connect it to other markets and become a viable participant in the global economy. Regionally focused engagement with eligible countries would facilitate regional trade and help countries benefit from economies of scale or synergies in sectors such as energy and road infrastructure.
Over the past 10 years, MCC has initiated new investments with countries as they met MCC’s eligibility criteria. These investments are implemented on a five-year timeframe. Because MCC is statutorily prohibited from entering into more than one compact at a time with a country, the agency is unable to capitalize on opportunities to invest regionally with countries that may become eligible at different times and maximize its impact on growth and poverty reduction.
Using Concurrent MCC Compacts to Advance Regional Economic Integration
MCC is seeking to change the Millennium Challenge Act of 2003, as amended, to allow for concurrent compact authority to maximize the economic impact of its work. Concurrent authority would allow MCC to supplement its proven country-focused model with the ability to develop regionally-oriented compacts. This authority would allow MCC to simultaneously research and work with multiple countries in a region to identify, negotiate, and eventually fund investments that would have positive economic effects both for the region and countries individually.
Concurrent compact authority would allow key steps—such as economic analysis, project identification, due diligence, negotiation, agreement, and implementation—with each individual country involved to occur on a simultaneous timeline, which is critical to effecting successful regional investments.
For example, MCC could consider regional investments in power infrastructure to help develop the West Africa Power Pool (WAPP). The lack of coordinated planning and agreement on regulatory mechanisms across WAPP member countries has hampered progress on this effort, but a regional approach would leverage necessary policy reforms and provide the integration needed to help reduce costs and improve reliability for countries in a region such as Benin, Sierra Leone, Liberia, and Ghana.
The FY 2016 budget submission does not assume passage of this provision. If MCC cannot pursue regional compacts as projected in the Five Year Budget Plan, an additional bilateral compact per year, consistent with the historical average, is programmed.
Text of change is as follows:
SEC. X. MILLENNIUM CHALLENGE COMPACT
- CONCURRENT COMPACTS.—Section 609 of the Millennium Challenge Act of 2003 (22 U.S.C. 7708) is amended—
- by striking the first sentence of subsection (k); and
- by inserting after subsection (k) the following new subsection:
“(l) CONCURRENT COMPACTS.—In accordance with the requirements of this title, an eligible country and the United States may enter into and have in effect more than one Compact at any given time, including a concurrent Compact for purposes of regional economic integration or cross-border collaborations, only if the Board determines that the country is making considerable and demonstrable progress in implementing the terms of existing Compacts and supplementary agreements thereto.
- CONFORMING AMENDMENTS.—
- Section 609(b)(1) of such Act (22 U.S.C. 7708(b)(1)) is amended by striking “the eligible country” and inserting “each eligible country or regional development strategy in the case of regional investments”; and by striking “the” and inserting “each” before “country” in subsections 609(b)(1)(A), (B), (E) and (J);
- Section 609(b)(3) of such Act (22 U.S.C. 7708(b)(3)) is amended by inserting after “national development strategy” “or regional development strategy” and by inserting after “government of the country” “or governments of the countries in the case of regional investments”;
- Section 613(b)(2)(A) of such Act (22 U.S.C. 7712(b)(2)(A)) is amended by striking “the” before “Compact” and inserting “any”.
Changes to the FY 2015 Appropriations Language
The Consolidated and Further Continuing Appropriations Act, 2015 included two provisos which should be adjusted or stricken.
- Provided further, That up to 5 percent of the funds appropriated under this heading may be made available to carry out the purposes of section 616 of the MCA for fiscal year 2014
The Millennium Challenge Act of 2003, as amended, allows for up to 10 percent of appropriated funds to be used for threshold program assistance under section 616. Restoring the 10 percent cap allows the agency more flexibility in selecting countries for such assistance and developing robust threshold programs.
- Provided further, That no country should be eligible for a threshold program after such country has completed a country compact:
In cases where there has been significant political or governance changes since MCC’s previous compact, threshold program assistance may be more appropriate than either a subsequent compact or no engagement. Removing this restriction would allow more flexibility to select countries at the appropriate level of assistance and “test the waters” before a subsequent compact.