22 September 2003
The Millennium Challenge Account
A New Vision for Development
The following fact sheet was released by the State Department September 22 outlining the President's plan for the Millennium Challenge Account:
(begin fact sheet)
"The goal is to provide people in developing nations the tools they need to seize the opportunities of the global economy."
-- President George W. Bush
Inter-American Development Bank, March 14, 2002
In February 2003, President Bush submitted to Congress his plan for the Millennium Challenge Account (MCA), a historic new vision for development based on the shared interests of developed and developing nations alike. The goal of the MCA is to reduce poverty by significantly increasing economic growth in recipient countries through a variety of targeted investments.
Because sound policies are essential for development, the President has announced the MCA will be "devoted to projects in nations that govern justly, invest in their people, and encourage economic freedom." The MCA will increase U.S. core official development assistance by 50% over three years, to a total of $15 billion by FY2006.
Despite development successes, challenges remain daunting: roughly 1.2 billion people live on less than $1 per day, more than 800 million are malnourished, and the earth's population will grow by another 2 billion people by 2030. Economic growth is essential to meet these challenges, but experience has shown that such growth only comes when local policies and conditions support the private sector. The MCA will challenge countries to create the right conditions for economic growth through good governance and consistent policies, and to increase productivity through investment in education, healthcare, and training in management skills.
Drawing on lessons learned over 50 years of development efforts, the United States will focus on:
Growth: Unlike current programs with numerous objectives, MCA will aim specifically at economic growth through prudent investments in agriculture, private sector development, good governance, education, healthcare, and the mentoring of local officials and business people in management skills.
Selectivity: The United States will provide aid only to countries that have proven their willingness to govern justly, invest in their people, and encourage economic freedom. To qualify, countries must score above the median on half the indicators in each of three areas, including good governance, human investment, and economic freedom. They also must score above the median on an anti-corruption indicator. United States derived these criteria from independent, objective sources, such as the World Bank, UN, International Monetary Fund, Institutional Investor, Freedom House, and the Heritage Foundation. Only those countries that qualify for International Development Association loans, with per capita incomes below $1,435, will be eligible in FY2004. In FY2006, all countries with incomes below $2,975 will be eligible. The United States expects to target some of its existing assistance to those countries that almost qualify for the MCA to help them improve their performance in areas where they fall short.
Genuine Partnership: Working closely with the MCA, countries will be responsible for identifying critical barriers to their own development, ensuring civil society participation, and developing a tailored MCA program for their specific needs.
Business Approach: MCA participation will require a high level of commitment and a public contract that will identify a limited number of measurable goals and include a timeframe, benchmarks, baseline information, a financial oversight plan, evaluation system, and plan to sustain goals when a contract ends.
Accountability: Programs will continue to receive funding, subject to congressional appropriation, under the terms of a country's MCA contract unless they fail to meet the conditions for performance that are specified in the contract. Funding for all or part of the MCA contract can be scaled back or ended if a country fails to meet financial standards or to attain benchmarks.
The Senate Foreign Relations Committee and the House International Relations Committee have each passed versions of MCA legislation with broad bipartisan support. The intention is to obtain congressional authorization and funding, if possible, in time for the MCA to be up and running in October 2003.
(end fact sheet)
(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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