Compacts in Development

(in millions of $)	FY 2017 Enacted	FY 2018 CR Rate Annualized	FY 2019 Request
Total Appropriation/Request	905.0	898.9	800.0
Compact Assistance	671.0	666.4	557.5
Section 605			535.2
Section 609(g) Compact Development Funding (CDF)			22.3

*CDF amounts are estimated using MCC’s recent historical average of approximately 4 percent of total compact assistance.

In order to support U.S. global development efforts and maximize investments in the candidate pool of lower income but relatively well-governed countries, MCC is requesting $558 million to support the Burkina Faso and Tunisia compacts currently in development, along with a portion of the Sri Lanka compact.

Burkina Faso

Estimated $304 Million Compact

In December 2016, MCC’s Board selected Burkina Faso to develop a second compact. In February 2017, a high-level MCC delegation officially launched the compact development process. The Government of Burkina Faso has fully staffed the new compact development team and MCC has been actively engaging with this team. MCC has conducted several technical missions over the past months and, together with Burkina Faso’s team, has successfully completed the constraints analysis process, which identified two binding constraints: (1) the high cost and poor quality of energy and low access to it, and (2) a low-skilled workforce. The Government of Burkina Faso approved these binding constraints through a validation workshop and with the Council of Ministers in September 2017. MCC management also officially approved the constraints in September. MCC and Burkina Faso’s development team are proceeding with root cause analysis and the development of concept notes for both sectors. MCC is projecting to have a compact signed with Burkina Faso by June 2019.

Results of Burkina Faso’s 2009 Compact

MCC’s $480 million compact, which ended in July 2014, was characterized by Burkina Faso’s commitment and high-level engagement. All major conditions to compact funding were met; notably, many of them required significant institutional reforms and others required adoption of major new laws by the National Assembly and issuance of 52 implementing decrees and regulations The compact consisted of projects in land reform, agriculture, transportation, and education. The compact successfully trained 8,700 local officials in lands rights and more than 13,000 land possession certificates were in process by the end of the compact—well over the original target of 6,000. The multifaceted agriculture project constructed 2,240 hectares of irrigated farmland and rehabilitated a dam, protecting investments from catastrophic flooding. MCC funded the paving, upgrade or periodic maintenance of 525 kilometers of roads and supported the development of a new road maintenance planning tool to facilitate future planning and continued management of the country’s road network. The BRIGHT II Schools project built on the education component in the earlier MCC threshold program by assisting in the construction of 396 classrooms and increasing access to girls’ participation in primary school.

Tunisia

Estimated $292 Million Compact

MCC’s Board of Directors selected Tunisia as eligible to develop a compact in December 2016. In August 2017, MCC and the Government of Tunisia’s compact development team completed a joint analysis of the binding constraints to economic growth, which resulted in the identification of three constraints: (1) excessive market controls of goods and services; (2) excessive labor market regulations; and (3) water scarcity, which is constraining development in the interior regions of Tunisia and in the agriculture sector. Following guidance from MCC management and a series of workshops held in Tunis in late September, the MCC and Tunisian compact development teams have completed the root cause analyses for these constraints and are presenting concept notes in early 2018 that will serve as the basis for eventual compact projects. MCC expects to present the compact to MCC’s Board in June 2019.

Sri Lanka

Estimated $450 Million Compact

Sri Lanka was selected for a threshold program in December 2015 and was selected for eligibility to develop a compact in December 2016 after continued improvements in performance as measured by the MCC scorecard. The constraints analysis identified insufficient transport infrastructure and access to land for commercial development as binding constraints to private sector investment and economic growth. MCC and the Government of Sri Lanka are exploring interventions to (1) reduce transport bottlenecks and congestion in the Western Province and between the Western Province and other regions, and (2) optimize the use of state lands for commercial purposes. The Sri Lanka country team is recommending a dual sector compact focused on addressing the transport and land binding constraints through five interventions: an advanced traffic management system; bus sector modernization; logistics facilities; national land information system; and mapping, surveying, and titling of land. MCC completed initial due diligence missions on potential projects in September and October 2017. In early December, MCC’s Sri Lanka team requested management approval to advance to in-depth due diligence of project proposals. MCC aims to sign a compact in early FY 2019.

The chart below and the subsequent pages provide updates for the remaining compacts currently in development, including estimated timing of consideration by MCC's Board and compact sizes. Program and sector data for countries already in implementation can be found online on our public website at www.MCC.gov.

Countries and Appropriations Used (in millions of $)		Prior Years	FY 2018	FY 2019	Total
Board Consideration in FY 2018:	Mongolia	350			350
	Senegal	302	178		480
	Sri Lanka		343	107	450
Board Consideration in Future Fiscal years:	Burkina Faso		4	300	304
	Tunisia		142	151	292
	Lesotho				TBD
	Timor-Leste				TBD
Total		652	666	558

*Amounts may not add up due to rounding.

Mongolia

Estimated $350 Million Compact

MCC’s Board selected Mongolia for a second compact in December 2014. MCC and the Government of Mongolia are working to develop a compact that seeks to address the imminent water shortage in the capital city and economic center of Ulaanbaatar, which is home to nearly half of the country’s population of 3 million people. MCC is evaluating project options that can increase the bulk water supply for the capital city, particularly in the areas of groundwater wells and wastewater recycling, and support long-term sustainability measures in the water sector. Concurrently, the Government of Mongolia is seeking a complementary wastewater treatment solution that would enable an MCC investment in bulk water supply. The compact is on track for consideration by the Board in late spring or early summer of 2018.

Results of Mongolia’s 2008 Compact

Mongolia completed a $285 million compact program in September 2013, which included projects and activities in land tenure, health, vocational education, transportation, and energy. The results included improving property rights for small herders by formalizing over 19,000 land titles, establishing the country’s first state-of-the-art medical facility for stroke and heart attack patients, modernizing the vocational education system, constructing a paved 176 km all-weather road to access key trading markets, and the sale of over 100,000 fuel-efficient stoves to reduce air pollution in Ulaanbaatar.

Senegal

Estimated $480 Million Compact

MCC’s Board selected Senegal as eligible to develop a second compact in December 2015. MCC and the Government of Senegal identified the high cost of, and poor access to, energy as a binding constraint to growth, along with a challenging business enabling environment. After narrowing the program’s focus to the energy sector, the Government of Senegal submitted draft final project proposals to MCC in mid-October. MCC is also working to advance infrastructure feasibility studies, a gas-to-power assessment, data collection and verification, and an energy sector road map that will form the technical basis for reforms and investments under a compact. MCC continues to coordinate with other stakeholders, including USAID, Power Africa, and other donors in the sector, including the World Bank, the International Finance Corporation (IFC), and the private sector. MCC expects to present the compact to MCC’s Board in September 2018.

Results of Senegal’s 2009 Compact

Senegal's completed $540 million compact worked to boost economic growth by unlocking the country’s agricultural productivity and expanding access to markets and services through the two primary compact projects. These projects -- roads rehabilitation and irrigation and water resource management -- were geographically focused in the Senegal River Valley in the north and the Casamance region in the south. The compact priorities were identified to align with the country’s long-term objectives of enhancing economic growth and food security. Senegal successfully completed the irrigation project and the vast majority of the roads rehabilitation project. The Government of Senegal committed funds to finish a portion of the highway that was not completed by the end of the compact due to construction delays.

Lesotho

Compact size to be determined

MCC’s Board re-selected Lesotho as eligible to develop a second compact in December 2017 after a two-year hiatus in recognition of Lesotho’s concrete steps over the past year to address MCC’s ongoing rule of law concerns. A senior MCC team is expected to visit Maseru in February 2018 to relaunch compact development, which will begin with a new constraints to growth analysis that should be completed in late FY 2018.

Results of Lesotho’s 2008 Compact

The completed $362.5 million compact with Lesotho comprised projects in water, health and private sector development. The compact funded one of the largest infrastructure improvement projects in Lesotho’s history, the Metolong Dam, as well as work with PEPFAR (the President’s Emergency Plan for AIDS Relief) to mitigate the negative economic impacts of poor maternal health, HIV/AIDS, tuberculosis and other diseases. Approximately 1 million people are expected to benefit from the MCC compact. Further details of the compact results and impacts will be shared in forthcoming impact and performance evaluations, expected to be available beginning in 2017.

Timor-Leste

Compact size to be determined

MCC’s Board selected Timor-Leste as eligible to develop a compact in December 2017, after previously having selected Timor-Leste as eligible to develop a threshold program in December 2016. The Board’s decision this year reflects MCC’s recognition of the Government of Timor-Leste’s clear commitment to good governance, investing in its people and economic freedom, as evidenced by Timor-Leste’s 2018 MCC scorecard. Timor-Leste completed a constraints to growth analysis as part of its threshold program in October 2017. A senior MCC team is expected to visit Dili in February 2018.