In March 2002, President George W. Bush announced the establishment of the Millennium Challenge Corporation (MCC) and the Millennium Challenge Account (MCA). The MCC is a government body charged with overseeing the MCA, a new performance-based approach to U.S. development assistance. The MCA is intended to significantly increase overall U.S. foreign aid to poor nations who perform well in the key policy areas of ruling justly, investing in people and economic openness. The MCC can ensure that development assistance is directed to those who will use it most effectively, and create an incentive for other countries to improve their policies on governance, social investment and economic management.
In early 2007, OSPC developed a set of proposed amendments to the MCA in response to feedback from its network of local foundations around the world. [As of September 2007, the Open Society Institute is present in 24 of the MCA's 41 threshold and compact-eligible countries.] While OSPC supports the innovativeness of the MCA approach to foreign aid, in particular the "country ownership" principle, it believes there are a few specific ways in which the initiative can be improved.
The critique from the local level centers around a few issues: lack of public awareness of the MCA program; inadequate consultation with local civil society; the need to take into account health and education in country compact proposals; and inconsistencies in the application of democracy as a requirement for MCA funding.
As a result, OSPC's suggested amendments to the MCA contain the following specific proposals:
1. Before an agreement is signed, an analysis should be conduct to determine the extent to which each project in the compact will contribute to reducing poverty in the country
2. An extension of the length of compacts to 10 years should be permitted, concurrent and subsequent compacts should also be allowed
3. Measurable commitment to democracy should serve as a "hard hurdle" for eligibility; furthermore, country with compacts or threshold programs must continue to perform well on in this area in order to receive future funding
4. To ensure broader and more thorough participation, a grant should be made to a local organization tasked with raising public awareness, functioning as a clearinghouse for other local organizations, and issuing reports on the program. This proposal would not substitute for the MCC's own required consultation process.
5. Congressional report language highlighting
a) Concerns over the reduction of USAID budgets and the complementarity of the USAID and MCA programs
b) Suggested supplemental data for the MCC Board to use in funding decisions - the Open Budget Index and the Extractive Industries Transparency Initiative
c) The need for close consultation and collaboration between MCC and USAID in order for the threshold program to be effective.
