The Millennium Challenge Corporation is Moving Forward
By Jim Kolbe | AUGUST 6, 2014
This week, leaders from almost 50 countries across Africa are in Washington, D.C., for a summit that seeks to strengthen ties between their countries and the United States. It is also a chance to take stock of a small government agency that, for ten years now, has played a key role in connecting the United States to Africans and African markets.
It has been a decade since I worked in Congress to pass the legislation creating the Millennium Challenge Corporation. MCC represented a new approach to foreign assistance, and not everyone was confident of its success. It was designed with the singular mission, to reducing poverty by creating economic growth, and the model of assistance included selectivity, a business-like approach to choosing investments, a willingness to put partner countries in the driver's seat of development choices and a rigorous commitment to transparency and accountability. The approach sounded good in concept– but would it work?
MCC has now invested nearly $10 billion in partner countries and improved the lives of millions of people across the world. At the same time, by partnering with countries that demonstrate a commitment to governing fairly, respecting the rule of law and fighting corruption, MCC has helped to spread core American values and build important alliances. Countries throughout the world are reforming institutions, changing laws and improving how they operate in order to try to qualify for MCC assistance. One academic study ranked MCC’s scorecard for evaluating potential partner countries as the most influential tool around for encouraging policy reform.
At a time when Congress is more divided than ever, MCC has won bipartisan support on Capitol Hill. And while it was created during the George W. Bush administration, it has been embraced by the Obama administration as an example of smart, effective assistance.
MCC has worked around the globe, much of that work has been in Africa. Early on, some wondered whether African countries would meet MCC’s qualification requirements. In fact, the agency now has roughly two-thirds of its portfolio in Africa. MCC has spent nearly $6 billion on the continent to build roads, expand power grids, train farmers and help secure land rights. All of this money is tracked and invested in projects that will foster the kind of growth needed for the continent to realize its true potential as a trading partner and investment opportunity for U.S. companies.
Of course, not every investment has worked out as planned. In Mali, for example, an investment had to be terminated early because of a coup. To its credit, however, MCC has been forthcoming about challenges and transparent in releasing results and sharing lessons learned.
MCC got to share in the summit spotlight Tuesday, when it signed a $498 million investment with Ghana that signals a potential new direction for the agency. While some previous investments have covered different sectors, the Ghana Power Compact, as it is called, will focus on a single sector, energy, and its goal is ambitious.
The five-year grant—the largest U.S. Government-funded transaction under Power Africa—will take a system-wide approach to transforming the country’s power sector to make it financially viable and capable of attracting private investments. It also funds initiatives supporting greater energy efficiency and cleaner renewable energy to protect the environment.
Critical to the project’s, and Ghana’s success, the Ghanaians are making critical reforms to the sector—reforms that are giving American and global businesses greater confidence to invest. By frontloading those reforms, MCC has helped incentivize the sound economic policies that the country needs to attract the private sector and ensure lasting economic growth. That means opportunities for U.S. companies. MCC expects its investment to catalyze more than $4 billion in additional investments in Ghana’s energy sector from American firms over the coming years.
MCC still has many unanswered questions to deal with. Will it continue to focus on its pool of high-performing countries or will it seek new partners? Will it seek new approaches, such as regional investments or programs with sub-national entities? And will the Ghana investment succeed? Those of us who care about smart development will be paying close attention this week and in the years ahead as MCC tries to answer those questions, but the bold moves in Ghana show the agency has an interesting future ahead.
Kolbe represented Arizona congressional districts from 1985 to 2007, and is a senior Transatlantic fellow at the German Marshall Fund of the United States and senior adviser at McLarty Associates. As chairman of the House Appropriations Subcommittee on Foreign Operations, Kolbe was instrumental in the passage of the legislation creating the Millennium Challenge Corporation.