Compact Assistance

(in millions of $)	FY 2020	FY 2021	FY 2022
(in millions of $)	Enacted	Enacted	Request
Total Appropriation/Request	905.0	912.0	912.0
Total Compact Assistance	634.5	651.0	647.5

MCC requests $647.5 million in support of compacts anticipated to be signed in FY 2022 or early FY 2023, including Kosovo, Malawi, and Timor-Leste along with two concurrent compact programs for regional integration: Benin - Niger Regional Transport Integration Program and Côte d’Ivoire - Burkina Faso Regional Energy Interconnection Program.

The below chart provides a breakdown of the request and includes all compacts under development and not yet signed:

Countries and Appropriations Used (in millions of $)	Prior Years	FY 2021	FY 2022	Total
Timor-Leste	291	-	90	381
Kosovo	50	74	76	200
Malawi	27	243	80	350
Benin - Niger Regional Transport	-	300	150	450
Côte d’Ivoire - Burkina Faso Regional Energy			252	252
Tunisia	465	34	-	499
Lesotho	310	-	-	310
Indonesia				TBD
Mozambique				TBD
Sierra Leone				TBD
Total	1,143	651	648	2,441
Implementing Compact Extensions/[[Per the Consolidated Appropriations Act, 2021 (P.L. 116-260), MCC has been authorized to extend any compact in implementation as of January 29, 2020, for up to one additional year to account for delays related to the COVID-19 pandemic. Prior year funds are planned to be utilized to cover program administration, supervision, and oversight costs for the period of extension in support of five compacts currently undergoing implementation.]]	57			57

Timor-Leste (Total Compact: $381 million)

MCC’s Board of Directors selected Timor-Leste for a compact in December 2017. The Government of Timor-Leste and MCC are currently designing two proposed projects to address the human capital challenges that severely constrain the country’s growth. The first project would reduce the country’s disease burden and improve the health of people in Timor-Leste by removing major sources of fecal pathogens from the environment and water sources. The proposed project would curtail the disease burden by building the country’s first piped sanitation system and rehabilitating the drainage system in the capital city of Dili. Improving the drainage system will also contribute to ongoing efforts to reduce flooding resulting from the increased intensity and frequency of heavy rains caused by climate change. In parallel with compact development, and in response to MCC’s recommendations, the Government has already taken significant steps to reform the water and sanitation sector, including the establishment of the country’s first water utility and regulator, which began operations early this year.

The second potential project would improve secondary education by training current and future secondary school teachers and school leaders in the country, thereby increasing opportunities for students to succeed in jobs and tertiary education. MCC and the Government are aiming to complete the necessary studies, finalize project design, and seek Board approval of the Compact by the end of 2021, subject to pandemic-related travel restrictions.

Kosovo (Total Compact: $200 million)

In December 2018, MCC’s Board of Directors selected Kosovo to develop a compact program while the country continued to implement an ongoing threshold program. MCC and the Government of Kosovo updated and reaffirmed access to reliable and affordable energy as a constraint to Kosovo’s economic growth. Over the past two years, MCC has worked with the Government and other stakeholders to develop a program focused on Kosovo’s energy sector. MCC and the Government completed prefeasibility studies in 2020 to assess three proposed projects: the development of Kosovo’s natural gas sector, creation of energy reserves for power system balancing, and improvement of electricity distribution. After review of the studies’ results, the Government requested to move forward with gas sector development and energy reserves creation with the intent to facilitate renewables integration, relieve Kosovo’s dependence on coal, and achieve decarbonization goals. MCC has been engaging the White House through the NSC team and will continue to evaluate the Kosovo compact program as it develops to identify the appropriate actions the agency can take to support the Biden Administration’s fossil fuel policy objectives in the near term. Following Kosovo’s parliamentary elections in February 2021, MCC is engaging with the new government to confirm Kosovo’s continued commitment to the two proposed projects and further technical progress in program design to enable compact finalization in late 2021.

Malawi (Total Compact: $350 million)

Since the December 2018 selection of Malawi for a second compact, MCC has been working with the Government of Malawi to develop two projects. The agriculture and transport project aims to increase profits of smallholder farmers, women, micro, small, and medium enterprises, and larger agribusinesses through a more diverse and inclusive commercial agriculture sector and a transport sector characterized by more competition. Design and feasibility studies are ongoing for activities to lower the cost of road transport, establish a blended finance facility to de-risk increased private sector agriculture investments, and improve the agricultural enabling environment.

The land project aims to increase land efficiency as a critical production input for increased economic growth in Malawi. Project activities undergoing design and feasibility include strengthening estate sector management by renewing estate leaseholds or reallocating them for higher value use, achieving more productive use of land through better funded land administration in both rural and urban environments, and increasing productivity and opportunities for investment and development in lands held as customary estates. MCC plans to conclude the development of the program in summer 2022.

Results from Malawi’s 2011 Compact

MCC’s initial compact with Malawi closed in September 2018. The $350.7 million compact set the foundation for major improvements in the performance of the country’s power sector and raised the potential for private sector participation. Through the compact, the Government of Malawi worked with 11 non-governmental organizations to pilot activities that will improve natural resource management along the Shire River, which supplies the country’s hydropower plants. The Government also increased the generation capacity of its primary hydropower plant; installed its first high-voltage power line; and refurbished, upgraded, and modernized other portions of its power grid. With support from General Electric, the Government also introduced an automated management system that allows Malawi to monitor its grid in real-time. With substantial technical assistance provided through the compact, the Government adjusted electricity tariffs and amended power sector legislation to allow private investment and undertook its first-ever competitive solicitation for independent power producers. The Malawi Compact Star Report is linked here.

Benin - Niger Regional Transport Integration (Total: $450 million)

In 2019, MCC identified and reviewed three potentially viable concurrent compact programs. The most developed of these, an energy transmission line linking Ghana and Burkina Faso, was dropped from consideration in October 2019 after the Government of Ghana failed to meet a critical condition of the Ghana Power Compact and was not reselected as eligible to develop a concurrent regional compact in December 2020. As a result, MCC shifted its regional compact development focus to the Benin and Niger Regional Transport Program.

This potential program would involve rehabilitating road segments of the existing transport corridor between Cotonou in Benin and Niamey in Niger, one the most heavily traveled corridors in West Africa, while addressing institutional and market constraints that raise transportation costs. This potential investment would have a clear link to the MCC investment at the Port of Cotonou through Benin’s first compact, as well as the current MCC compact program in Niger, which is focused on agriculture and roads. The Governments of Benin and Niger have pledged to commit staffing resources to work with MCC in further developing this potential investment.

MCC is focused on three potential road segments—Bohicon-Dassa and Parakou-Gberouboue in Benin, and Dosso-Niamey in Niger—and the border crossing bridge. In addition, MCC is assessing critical institutional reforms. Key design elements under consideration include expanding road segments within Benin, improvements to traffic junctions, truck parking/rest areas, and toll stations, as well as improvements to protect pedestrians. In Niger, proposed work includes improvements to existing lanes to meet minimum technical requirements. At the border crossing, potential work may involve rehabilitation and widening of border bridges to improve safety and traffic. MCC is also exploring better coordination along the corridor through the institution of a governing highway authority between the two countries.

Côte d’Ivoire - Burkina Faso Regional Energy Interconnection (Total: $252 million)

MCC also is currently assessing a regional investment in a proposed electricity transmission line linking Ferkessédougou in northern Côte d’Ivoire with Bobo-Dioulasso in southern Burkina Faso and continuing to Burkina Faso’s capital, Ouagadougou.

The proposed project is expected to include a new 330kv double circuit transmission line between Ferkessédougou and Bobo-Dioulasso per the West African Power Pool Master Plan. The proposed project also includes equipment on either end that will allow for more power trade between Burkina Faso and Côte d’Ivoire, as well as greater control and stability of the interconnected network. In addition, a detailed study of associated transmission lines between Bobo-Dioulasso and Ouagadougou and Bobo-Dioulasso and Sikasso will enable the team to assess whether these lines are in fact required for the interconnection’s viability.

Due to the alignment of this proposed project with (1) the objectives of the current Burkina Faso compact, (2) the Government of Côte d’Ivoire’s aim to become a net exporter of power in the region, and (3) a request by the Government of Burkina Faso for MCC to consider further study of this project, MCC included funding for a design feasibility study in the Burkina Faso Power Compact, signed on August 13, 2020. The results of this study would give MCC enough information to determine its suitability for further program development.

Tunisia (Total Project: $499 million)

In December 2016, MCC’s Board selected Tunisia as eligible to develop a compact. Tunisia is a strategic ally for the U.S. in the Middle East and North Africa region and the only country to emerge from the Arab Spring with a successful democratic transition. Following its democratic gains, the Government of Tunisia is working to introduce a series of economic reforms to create an enabling environment for economic growth and job creation.

The proposed two-sector compact is designed to address the identified binding constraints to growth of both excessive market controls of goods and services and water scarcity in the interior regions of Tunisia. The Transport and Trade Project aims to reduce the time and cost for businesses to engage in trade in Tunisia, and particularly in Tunisia’s principal Port of Rades to support Tunisia’s nationally determined contribution (NDC) priority of redeveloping coastal industrial zones. This includes investments to improve management and expand infrastructure at Rades, as well as support the reduction, simplification, and digitalization of trade procedures and regulations in the transport sector. The proposed project would also support improved access to markets for women-owned enterprises. The Water Demand Management and Productivity project aims to achieve efficient and sustainable use of scarce groundwater resources while increasing the incomes of its users. This compact also includes key reforms to improve groundwater management and irrigation, in support of Tunisia’s NDC priority sectors of water resources and agriculture. This proposed project would focus on policy and institutional reforms as well as the rehabilitation and modernization of public irrigated perimeters in four interior governorates of Tunisia.

Finally, the proposed compact also features the ACFD in Tunisia, a project that will catalyze and enable investment from the DFC and the private sector that supports or complements compact project objectives. MCC plans to complete compact negotiations with the Government of Tunisia in May 2021 and present the compact for MCC Board approval in June 2021.

Lesotho (Total Compact: $310 million)

In December 2017, MCC’s Board of Directors selected Lesotho to continue the development of a compact, following a two-year hiatus in which the Board of Directors monitored the country’s response to a series of governance and political stability concerns. The MCC team and its local counterparts identified the binding constraint to growth is ineffective policy planning, coordination, and execution, which prevents the Government of Lesotho from delivering public goods and services essential for private sector growth. MCC is developing a potential project with the Government designed to improve capital investment through policy and institutional reforms, a catalytic investment in irrigation infrastructure, and technical assistance to support small- and medium-sized enterprises; and a proposed project to strengthen the financial sustainability and accountability of the Ministry of Health through improved evidence-based decision-making and delivery of primary health care.

In June 2020, Lesotho was downgraded to Tier 3 on the State Department’s annual Trafficking in Persons report. In response, MCC informed the Government that MCC will continue to explore potential projects as part of compact development, but that MCC will not present any proposed compact to its Board of Directors until Lesotho is removed from Tier 3. MCC expects to conclude development of the compact program in late 2021.

Results from Lesotho’s 2007 Compact

MCC’s initial compact in Lesotho closed in September 2013. The $362.5 million compact constructed or renovated 138 clinics and 14 outpatient facilities that supported the work of the President’s Emergency Plan for AIDS Relief to mitigate the impacts of poor maternal health, HIV/AIDS, tuberculosis and other diseases; and funded the construction of a water treatment plant as part of the Metolong Dam project, which provides clean water to the capital city, Maseru. Through the compact, the Government of Lesotho constructed over 29,000 latrines and 175 water systems, and after the end of the compact it completed another 75 water systems with its own funds. MCC expects approximately one million people to benefit from the compact investments. The Lesotho Compact Closed Compact Report is linked here.

Indonesia

In December 2018, MCC’s Board of Directors selected Indonesia to develop a second compact. The Government of Indonesia convened a panel of experts to work closely with MCC on a constraints analysis, which revealed three primary constraints to Indonesia’s economic growth: (1) barriers to export-oriented competitiveness, (2) barriers to the productivity and innovation of non-tradable sector firms, and (3) costly and underdeveloped financial intermediation.

Following an examination of the root causes of these constraints, the Government and MCC will consider opportunities to improve financial intermediation for sustainable infrastructure and for micro, small, and medium-sized enterprises (MSMEs), particularly those owned by women, as potential areas of focus for a compact. Projects target core problems on low supply of finance for transport and logistics infrastructure investments, as well as the inability of the infrastructure sector to absorb what finance is available; and the low supply of finance available to MSMEs, as well as the inability of MSME borrowers to access financial products.

In January 2021, the Government established a Steering Committee to help guide Indonesia’s compact development efforts. This committee—which includes representatives from across government, civil society, academia, and the private sector—will provide critical input into the project proposals that the Government plans to present to MCC in May 2021. To help the Government prepare for this submission and to further define the proposed activities, MCC and the Government executed an $8 million Compact Development Funding Agreement in February 2021 that will support key studies and preparatory works. MCC expects to conclude compact development in FY 2023.

Results from Indonesia’s 2011 Compact

MCC’s initial compact in Indonesia closed in April 2018. During the five-year term of the compact program, the Government disbursed $474 million to support modernization of public procurement functions, improvements in health and nutrition, and sustainable energy and resource management. The nutrition project trained over 17,500 providers on prenatal health services; distributed medical supplies; and conducted over 4,200 community sanitation behavior change meetings across 64 districts to combat low birth weight, childhood stunting, and childhood malnourishment. The procurement modernization project trained over 1,000 procurement professionals (24 percent of whom are women) to apply modern procurement and management skills in the national and local governments in ways that will increase procurement quality and achieve substantial savings. The energy project established a market-responsive grants financing facility that supported 66 projects for renewable energy, peatland restoration, sustainable agriculture, and improved natural resource management. The project also trained over 127,000 farmers (including over 43,000 women) in climate-smart agriculture, natural resource management, social forestry, and renewable energy. The implementation of the compact program reinforced community ownership and innovation through flexible, scalable approaches that allowed for emerging opportunities. The Indonesia Compact Star Report is linked here.

Mozambique

In December 2019, MCC’s Board of Directors selected Mozambique to develop a second compact. In January 2020, the Government of Mozambique nominated the former Minister of Agriculture as National Coordinator for compact development. MCC signed an initial engagement agreement with the Government in July to provide funding to support the formation of a counterpart team. After completing the constraints to economic growth analysis and narrowing the binding constraints to the agriculture and transport sectors, MCC is now in the problem diagnosis phase of compact development and expects to complete compact development in 2023.

Results from Mozambique’s 2008 Compact

MCC’s first compact in Mozambique closed in September 2013. The $506.9 million compact aimed to increase the country’s economic growth and reduce poverty by investing in four project areas: water and sanitation, roads, land tenure, and agriculture. Under the compact, project teams constructed more than 614 rural water points, upgraded and expanded two municipal drainage systems, and upgraded and expanded two urban water supply systems. The compact also funded the construction of 253 kilometers of improved road, the mapping of nearly 8.8 million rural hectares of land, and the formalization of nearly 150,000 urban land titles. Furthermore, the compact supported the training of 15,000 farmers in pest and disease surveillance and control and planted 780,000 disease-resistant seedlings. MCC anticipates the compact to benefit over 2,600,000 Mozambicans over 20 years. The Mozambique Compact Closed Compact Report is linked here.

Sierra Leone

Since MCC’s Board selected Sierra Leone as eligible to develop a compact at the December 2020 Board meeting, the Government of Sierra Leone has moved proactively to launch compact development. In January 2021, Vice President Mohamed Jalloh led a delegation to Senegal to learn best practices from its experience developing two MCC compacts. The Government set up its compact development team and is working with MCC to update the constraints to growth analysis completed in 2013. In April 2021, MCC and the Government signed an Initial Engagement Grant Agreement to support the Government’s compact development team.

Compact Development Process Overview

Compact Portfolio Status Report

Compact Development Stage	Description
Eligibility Notification	Initial notification of eligibilty, made annually at December MCC Board Meeting.
Preliminary Analysis	Country selects a core team, analyzes constraints to growth, completes a social and gender assessment as well as an investment opportunities assessment; conducts social and gender assessment and initiates broad public consultations.
Project Definition	Country prepares concept notes and subsequently more detailed concept papers for each proposed investment. MCC conducts initial project assessment.
Project Development	Country and MCC conduct feasibility and design studies as well as environmental and social impact assessments to contribute to the final scope, cost and conditions of the compact.
Negotiation	After completion of Investment Memo, the country and MCC engage in compact negotiations and the country team makes its presentation to the MCC board. This stage culminates with the signing of the compact.
Implementation Prep	Country stands up the MCA; establishes procurement and fiscal agents, IT systems and agreements; provides capacity building; and continues detailed design and planning.
Implementation	Five year period following the compact's date of entry into force, during which the compact is implemented.
CED	CED, or Compact End Date, is the last date of the compact term, representing the date the compact expires (five years after the date of entry into force) or the date the compact is terminated in accordance with its terms.
Close Out	120 day period following the Compact End Date, during which the program is closed, final invoices from contractors are submitted, final contract deliverables are reviewed and the Accountable Entity finalizes its accounting records and Final Financial Report.