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2 January 2009

[Federal Register: January 2, 2009 (Volume 74, Number 1)]
[Page 121-123]
From the Federal Register Online via GPO Access []



[MCC FR 09-04]

Report on the Selection of Eligible Countries for Fiscal Year 

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.


SUMMARY: This report is provided in accordance with section 608(d)(1) 
of the Millennium Challenge Act of 2003, Public Law 108-199, Division 
D, (the ``Act''), 22 U.S.C. 7708(d)(1).
    The Act authorizes the provision of Millennium Challenge Account 
(``MCA'') assistance under section 605 of the Act to countries that 
enter into compacts with the United States to support policies and 
programs that advance the progress of such countries in achieving 
lasting economic growth and poverty reduction, and are in furtherance 
of the Act. The Act requires the Millennium Challenge Corporation 
(``MCC'') to take steps to determine the countries that, based on their 
demonstrated commitment to just and democratic governance, economic 
freedom, and investing in their people, as well as the opportunity to 
reduce poverty and generate economic growth in the country, will be 
eligible to receive MCA assistance during the fiscal year. These steps 
include the submission of reports to appropriate congressional 
committees and the publication of notices in the Federal Register that 
identify, among other things:
    1. The countries that are ``candidate countries'' for MCA 
assistance during FY09 based on their per-capita income levels and 
their eligibility to receive assistance under U.S. law, and countries 
that would be candidate countries but for specified legal prohibitions 
on assistance (section 608(a) of the Act; 22 U.S.C. 7708(a));
    2. The criteria and methodology that the Board of Directors of MCC 
(the Board) will use to measure and evaluate the relative policy 
performance of the candidate countries consistent with the requirements 
of section 607 of the Act in order to select ``MCA eligible countries'' 
from among the ``candidate countries'' (section 608(b) of the Act, 22 
U.S.C. 7708(b)); and
    3. The list of countries determined by the Board to be ``MCA 
eligible countries'' for FY09, with justification for eligibility 
determination and selection for compact negotiation, including which of 
the MCA eligible countries the Board will seek to enter into MCA 
compacts (section 608(d) of the Act, 22 U.S.C. 7708(d)).
    This is the third of the above-described reports by MCC for fiscal 
year 2009 (FY09). It identifies countries determined by the Board to be 
eligible under section 607 of the Act for FY09 (22 U.S.C. 7706) and 
countries with which the Board will seek to enter into compacts under 
section 609 of the Act, as well as the justification for such 

Eligible Countries

    The Board met on December 11, 2008 to select countries that will be 
eligible for MCA compact assistance under section 607 of the Act for 
FY09. The Board selected the following countries as eligible for such 
assistance for FY09: Colombia, Indonesia, Jordan, Malawi, Moldova, the 
Philippines, Senegal, and Zambia.
    In accordance with the Act and with the ``Report on the Criteria 
and Methodology for Determining the

[[Page 122]]

Eligibility of Candidate Countries for Millennium Challenge Account 
Assistance in Fiscal Year 2009'' submitted to the Congress on October 
9, 2008, selection was based primarily on a country's overall 
performance in relation to three broad policy categories: (1) ``Ruling 
Justly''; (2) ``Encouraging Economic Freedom''; and (3) ``Investing in 
People.'' The Board relied upon 17 transparent and independent 
indicators to assess to the maximum extent possible policy performance 
and demonstrated commitment in these three areas as a basis for 
determining which countries would be eligible for MCA compact 
assistance. In determining eligibility, the Board considered if a 
country performed above the median in relation to its peers on at least 
half of the indicators in the Ruling Justly and Economic Freedom policy 
categories, above the median on at least three of five indicators in 
the Investing in People policy category, and above the median on the 
``Control of Corruption'' indicator. The Board also took into account 
whether the country performed substantially below the median on any 
indictor and if so, whether it is taking appropriate action to address 
the shortcomings. Scorecards reflecting each country's performance on 
the indicators are available on MCC's Web site at
    The Board also considered whether any adjustments should be made 
for data gaps, lags, trends, or recent events since the indicators were 
published, as well as strengths or weaknesses in particular indicators. 
Where appropriate, the Board took into account additional quantitative 
and qualitative information, such as evidence of a country's commitment 
to fighting corruption and promoting democratic governance, and its 
effective protection of human rights. In addition, the Board considered 
the opportunity to reduce poverty and promote economic growth and 
poverty reduction in a country, in light of the overall context of the 
information available, as well as the availability of appropriated 
    Three countries were selected as eligible for the first time in 
FY09. Indonesia and Zambia, both low income candidates, were selected 
under section 606(a) of the Act (22 U.S.C. 7705(a)). Colombia, a lower 
middle income candidate, was selected under section 606(b) (22 U.S.C. 
7705(b)) of the Act. All three of these countries: (1) Performed above 
the median in relation to their peers on at least half of the 
indicators in each of the three policy categories; (2) performed above 
the median on corruption; and (3) in cases where they performed 
substantially below the median on an indicator, demonstrated that 
actions to address the problem are being taken or had data that did not 
accurately reflect their policy performance.
    Indonesia meets MCC's indicator criteria for the first time in 
FY09, after having made steady progress improving its Control of 
Corruption score over the past several years. The Government of 
Indonesia has demonstrated a strong commitment to fighting corruption: 
anti-corruption institutions have been strengthened and high-level 
anti-corruption investigations and prosecutions have become 
increasingly common. In addition to anti-corruption reforms, the 
Government has initiated a series of reforms to improve the investment 
climate. Indonesia is in its second year of a successful Threshold 
program that has focused on reducing corruption and improving 
immunization rates.
    Zambia meets MCC's indicator criteria for the first time this year, 
performing above the median on 16 of 17 indicators. Anti-corruption 
efforts are a high priority for the Government of Zambia, and 
performance on the Control of Corruption indicator has improved in 
recent years. Zambia is also nearing the end of a successful anti-
corruption Threshold Program. In recent years, Zambia has moved to a 
relatively open environment for investment and has demonstrated prudent 
macroeconomic management.
    Colombia meets the indicator criteria for the second year in row. 
The Government of Colombia has pursued a significant reform agenda, 
including major tax, civil service, and justice sector reforms. 
Colombia has also been cited as a top reformer by the World Bank's 
Doing Business report for two years in a row. In addition, President 
Uribe's strategy to expand the professional armed forces and promote a 
strong state presence throughout the country has yielded significant 
results in terms of improving security. While the U.S. Government 
provides a substantial amount of assistance to Colombia through other 
accounts, the majority has gone toward counternarcotics aid.
    Five countries selected as eligible for MCA assistance in FY09 were 
previously selected as eligible in at least one prior fiscal year; 
however, because they have not yet signed a compact agreement, they 
needed to be reselected as eligible for FY09 funds. Four of these 
countries were in the low income category: Malawi, Moldova, the 
Philippines, and Senegal. One country, Jordan, was in the lower middle 
income category.
    The Board reselected these countries based on their continued 
performance since their prior selection. The Board determined that no 
material change has occurred in the performance of these countries on 
the indicator criteria since the FY08 selection that would justify not 
including them in the FY09 eligible country list. Only one of the 
countries--the Philippines--did not meet the indicator criteria, 
performing just below the median on the Control of Corruption 
indicator; however, MCC does not believe that the Philippines has 
demonstrated a pattern of action inconsistent with the selection 
criteria (i.e., a serious policy reversal) since it was last selected 
as eligible. The Board also stressed that the Philippines must meet the 
selection criteria, particularly the Control of Corruption indicator, 
before it would approve a compact.
    Country partners which are implementing compacts must show a 
commitment to maintain and improve their policy performance. Once we 
sign a compact with these countries, they will not need to be 
reselected annually. MCC's Board closely evaluates a country's policy 
performance throughout the life of the compact. While MCC's indicators 
work well as a transparent way of identifying those countries that are 
most committed to sound development policies and for discerning trends 
over the medium-term, they are not as well-suited for tracking 
incremental progress from year-to-year. Countries may be generally 
maintaining performance but not meet the criteria in a given year due 
to factors such as:
     Graduation from the low income country category to the 
lower middle income country category,
     Data improvements and revisions,
     Last year's introduction of two new indicators and the 
requirement that countries pass three of the five indicators in the 
Investing in People category,
     Increases in peer-group medians,
     Slight declines in performance.
    Once MCC has made a commitment to a country through a signed 
compact, MCC continues to work with that country--even if it doesn't 
meet the indicator criteria each year--as long as it has not 
demonstrated a pattern of actions inconsistent with the eligibility 
criteria. If it is determined that a country has demonstrated a 
significant policy reversal, the Board can hold it accountable by 
applying the Suspension and Termination Policy.
    For those countries that have not demonstrated a significant policy 
reversal but do not meet the indicator criteria, MCC will invite these 

[[Page 123]]

to participate or continue their participation in MCC's policy 
improvement process. Countries participating in the policy improvement 
process are asked to develop and implement a forward-looking action 
plan that outlines the steps they plan to take to improve performance 
on certain policy criteria. They then periodically report on progress 
made on the plan.
    Finally, a number of countries that performed well on the 
quantitative elements of the selection criteria (i.e., on the policy 
indicators) were not chosen as eligible countries for FY09. As 
discussed above, the Board considered a variety of factors in addition 
to the country's performance on the policy indicators in determining 
whether they were appropriate candidates for assistance (e.g., the 
country's commitment to fighting corruption and promoting democratic 
governance; the availability of appropriated funds; and the countries 
in which MCC would likely have the best opportunity to reduce poverty 
and generate economic growth).

Selection for Compact Negotiation

    The Board also authorized MCC to invite Indonesia, Zambia, and 
Colombia to submit a proposal for a compact, as described in section 
609 of the Act (22 U.S.C. 7708) (previously eligible countries that 
were reselected will not be asked to submit another proposal for FY09 
assistance). MCC has posted guidance on the MCC Web site (http:// regarding the development and submission of MCA program 
proposals. Submission of a proposal is not a guarantee that MCC will 
finalize a compact with an eligible country. Any MCA assistance 
provided under section 605 of the Act will be contingent on the 
successful negotiation of a mutually agreeable compact between the 
eligible country and MCC, approval of the compact by the Board, and 
availability of funds.

    Dated: December 22, 2008.
John C. Mantini,
Acting General Counsel, Millennium Challenge Corporation.
 [FR Doc. E8-30965 Filed 12-31-08; 8:45 am]