As the President said in his historic
speech to the World Bank one year ago, "a world in which
a large portion of the people live on less than $1 a day is neither
just nor stable."
For those of us in the U.S. Government,
those were marching orders. Since that speech, we have worked
hard to find new ways of reducing poverty to create that more
just and stable world the President spoke of.
These efforts culminated in March,
when just before the Monterrey Conference on Financing for Development,
the President announced a new Compact for Development and the
creation of the Millennium Challenge Account. The announcement
reflected an extraordinary consensus in the U.S. Government on
the importance of fighting poverty in the most effective ways
These efforts also reflected a growing
international agreement to view poverty as a serious threat and
to commit to its reduction.
As the President said in his speech
announcing the MCA, "just as we forged a new consensus to
fight terrorism in the aftermath of September 11, we now have
an unprecedented opportunity to forge a new consensus to foster
The underpinnings of this consensus
are reflected in the results of the UN Financing for Development
An acknowledgement that developing
countries are primarily responsible for their own development.
At the same time, a recognition that
the achievement of development is a shared responsibility between
developing and developed countries.
The realization that good governance
is key to creating conditions that will allow countries to increase
and use effectively all sources of development finance, including
investment, trade, domestic resources.
ODA makes up but a fraction of these
resources, and has been found effective in promoting development
where efforts are well underway to establish sound institutions
and policies, to take part in the global economy, and to encourage
both a competent public sector and a vibrant private sector.
An awareness that should ODA be used
to build the technological and human capacity of a country to
attract and mobilize effectively all of development resources,
so that economic growth and development can become self-sustaining
The Millennium Challenge Account
gives life to the ideals of the Monterrey Consensus by focusing
on obtaining concrete development results by working with committed
Experience and empirical studies
confirm that when development assistance rewards reform and responsibility,
it lifts almost four times as many people out of poverty.
For that reason, the MCA will be
used only in countries that demonstrate, not just promise a strong
investing in their people;
and promoting economic freedom and
These categories are not random.
They are the result of fifty years of learning what works in development.
We know that HMG has concerns about
MCA selectivity. We know there is a fear that the MCA will penalize
those who might need additional help the most, ie, those in the
poorest countries, some of whom are badly off precisely due to
continuing conflicts or abysmal governmental policies.
Bear in mind the strong US record
of helping to meet humanitarian needs the world over, including
in Afghanistan under the Taliban, and in North Korea under a regime
that still contributes to the misery of its people. We are the
greatest source of humanitarian assistance, including well-targeted
The Millennium Challenge Account
will be in addition to our humanitarian programs, which will continue.
It will give us the resources to provide substantial new help
to those choosing on their own to walk the often hard road to
democracy and prosperity for all their people.
We understand the concerns, but would
ask you to consider the moral case for the MCA's selectivitywe
want to do the greatest good for the greatest number of people.
Our aim is to accelerate lasting poverty reduction. To do that,
our assistance should go to countries that are committed to improving
the lives of their citizens.
There are very poor countries that
we believe are making great strides. Good performance to us is
about commitment and effort, not just about current results.
If we were to provide the MCA's resources
to regimes where performance is poor, the opportunity cost would
be all the lives we would as a result fail to help lift up. We
will, of course, continue to help build the capacity and will
for improvements even in those countries that do not qualify for
the MCA initially.
In a practical sense, selectivity
will help lead to better program and project results and should
serve both to encourage reluctant developing countries to improve
policies and as a model among donors for future assistance efforts.
As the President directed, we are
reaching out to the world community and making rigorous efforts
to determine how best to assess commitment in each of the three
areas described by the President. We are surveying the work and
data of groups, individuals and organizations worldwide and taking
lots of input.
To give you a better sense of the
criteria we are considering to gauge a country's commitments,
let me cite a few examples under each of the President's categories:
criteria gauging whether a country
rules justly could be the accountability of its government institutions,
the strength of anti-corruption efforts, and its commitment to
measures of investing in people could
be literacy rates, school attainment rates, or the percentage
of its budget share for health;
examples of economic freedom could
be the market-orientation of a country's economic policies, the
availability of land titling and business licensing, and its regulatory
Selectivity should also apply to
the areas we invest in. Our development investments should help
recipients be their own agents of economic growth and change,
whether it is by expanding our fight against HIV/AIDS, improving
agricultural productivity, making education more accessible by
providing textbooks, or by cutting government red tape for African
In other words, MCA will be a hand
up, not a hand-out.
In designing these projects and programs,
we will build on a country's own development strategy if we believe
it a good guide to development investments with good poverty reduction
This is the critical difference from
"conditionality-based" approaches; we will not be responsible
for determining the benchmarks and performance criteria for our
development partners, but will base our decisions on support on
their own efforts. We will be looking for development investments
likely to have a high return in terms of poverty reduction and
True partnership is a two-way street.
As a donor, the U.S. also has an obligation to continue to improve
what WE do. We will measure and monitor the results of MCA projects
and programs to the best of our ability, and we will learn from
the outcomes so we don't make the same mistakes twice. We will
be committed, not complacent.
We believe the initial number of
countries that qualify for MCA funds will be modest. For countries
that do not immediately qualify, our existing development programs
such as DA and ESF will still be available. We also expect MCA
resources will be available every year over the coming years;
we hope that many countries ultimately take advantage of these
Of course, we will continue to help
halt catastrophes such as epidemics and famine. Our commitment
to the Global Health Fund is solid; we are still the largest donor.
We will have a strong focus on combating severe hunger and famine
at the World Food Summit in June. And as always, we will strive
to end conflicts that disrupt people's lives in so many ways.
We are also looking at innovative
activities and partnership approaches; we are interested most
in what works on the ground and what builds the capacity within
development countries. Clearly the private sector, both civil
and commercial, can play positive roles.
MCA INPUT NEEDED
MCA is still in the deliberative
stages. We need your input, particularly ideas on ensuring its
The Account will be based on performance,
not politics. As part of keeping the MCA focused on performance,
we need your help in working to maintain flexibility in the use
of these funds so we can take the necessary risks and innovations
needed to do things differently and better.
Our schedule is rather tight: policy
decisions will be made in time for start up during the FY 04 budget
cycle, probably around September of this year.
We are working intensively with other
agencies, developing countries, donors, NGOs, think tanks and
businesses to make the best MCA decisions possible. We would welcome
your thoughts and experiences.