[Senate Hearing 116-227]
[From the U.S. Government Publishing Office]
S. Hrg. 116-227
OVERSIGHT OF THE MILLENNIUM
CHALLENGE CORPORATION
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HEARING
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 4, 2019
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Printed for the use of the Committee on Foreign Relations
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web:
http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
40-845 PDF WASHINGTON : 2020
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COMMITTEE ON FOREIGN RELATIONS
JAMES E. RISCH, Idaho, Chairman
MARCO RUBIO, Florida ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin BENJAMIN L. CARDIN, Maryland
CORY GARDNER, Colorado JEANNE SHAHEEN, New Hampshire
MITT ROMNEY, Utah CHRISTOPHER A. COONS, Delaware
LINDSEY GRAHAM, South Carolina TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming TIM KAINE, Virginia
ROB PORTMAN, Ohio EDWARD J. MARKEY, Massachusetts
RAND PAUL, Kentucky JEFF MERKLEY, Oregon
TODD, YOUNG, Indiana CORY A. BOOKER, New Jersey
TED CRUZ, Texas
Christopher M. Socha, Staff Director
Jessica Lewis, Democratic Staff Director
John Dutton, Chief Clerk
(ii)
C O N T E N T S
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Page
Risch, Hon. James E., U.S. Senator From Idaho.................... 1
Menendez, Hon. Robert, U.S. Senator From New Jersey.............. 2
Cairncross, Hon. Sean, Chief Executive Officer, Millennium
Challenge Corporation, Washington, DC.......................... 12
Prepared statement........................................... 14
Additional Material Submitted for the Record
Foreign Policy Report Submitted by Senator Robert Menendez....... 3
Material Submitted for the Record by Senator Robert Menendez..... 6
Material Submitted for the Record by Senator Robert Menendez..... 9
Material Submitted for the Record by Senator Robert Menendez..... 10
Responses of Hon. Sean Cairncross to Questions Submitted by
Senator Robert Menendez........................................ 33
Letter to Jonathan Nash From Senator Robert Menendez............. 36
(iii)
OVERSIGHT OF THE MILLENNIUM CHALLENGE CORPORATION
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WEDNESDAY, DECEMBER 4, 2019
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m. in
room SD-419, Dirksen Senate Office Building, Hon. James E.
Risch, chairman of the committee, presiding.
Present: Senators Risch, Gardner, Isakson, Young, Menendez,
Cardin, and Shaheen.
OPENING STATEMENT OF HON. JAMES E. RISCH,
U.S. SENATOR FROM IDAHO
The Chairman. The Foreign Relations Committee will come to
order.
Thank you so much for being here today, Mr. Cairncross.
Fifteen years ago, the administration and advocates for
effective foreign aid united behind a simple concept: It is in
the U.S.'s interests to help countries help themselves by
breaking down the constraints to market-based growth. And from
this concept, the Millennium Challenge Corporation was born.
The MCC, as it is known, recognizes that aid is only
effective in countries that demonstrate continuous commitment
to good governance, economic freedom, investing in their own
people, and, most importantly, a government free of economic
corruption and theft. Its competitive, data-driven selection
process creates an important incentive for countries to adopt
difficult but necessary reforms.
Its focus on accountability for results helps ensure that
the impact of MCC investments will endure long after the
compact has ended.
And its commitment to transparency, monitoring, evaluation,
and learning is helping the U.S. and others do more of what
works and less of what does not.
Mr. Cairncross, expectations for MCC are high. You have
taken the helm following an extended period of drift, during
which time the agency has not performed, and its commitment to
the principles that make it special have been challenged. The
American people deserve better. This moment, however, also
presents an important opportunity to innovate and reinvigorate.
I note the board's recent decision to hold Ghana
responsible for failing to uphold the terms of its second
compact. No doubt this was a difficult decision to reach.
Terminating aid for a trusted ally of many years could not have
been easy, but it was the right thing to do. I trust that you
will apply the same measure of accountability to other partners
should they fail to maintain eligibility or stray from binding
commitments.
Moreover, I expect to see you hold the agency itself
accountable. It is essential that MCC uphold its foundational
principles, particularly its commitment to transparent, data-
driven selection, design, monitoring, and evaluation processes,
without political interference.
This hearing presents an important opportunity for you to
set out your vision for MCC over the next 15 years. I am eager
to hear how you intend to restore effective leadership, harness
innovation, and accelerate regional economic integration
through the use of concurrent compacts, particularly in Africa
where opportunities for growth and U.S. partnership transcend
national boundaries.
We also want to learn more about MCC's efforts to work with
the newly established Development Finance Corporation to
accelerate private sector-led growth while providing a viable
alternative to China's malign development model.
The stakes are high and the challenges are many, but we
trust that you are up to the task or, of course, you would not
be sitting here today. Our expectations are high.
With that, I recognize the ranking member, Senator
Menendez, for his remarks.
STATEMENT OF HON. ROBERT MENENDEZ,
U.S. SENATOR FROM NEW JERSEY
Senator Menendez. Thank you, Mr. Chairman. Thank you for
holding today's Millennium Challenge Corporation's oversight
hearing.
And thank you, Mr. Cairncross, for testifying before the
committee.
Prior to Mr. Cairncross' confirmation, there were several
news reports about a growing toxic work culture at MCC: blatant
cultural insensitivity and offensive communications from one of
the acting CEOs; repeated near violations of the Hatch Act;
declines in the diversity of MCC's workforce; and concerns from
development professionals that the traditionally data- and
results-driven development organization was taking on a
distinctively unproductive political mission.
Unfortunately, it seems that the White House Presidential
Personnel Office's peculiar abuse of MCC's administratively-
determined hiring authorities to appoint a number of
questionably qualified but well-connected job seekers at MCC
was primarily responsible.
In addition to our own internal information, the Washington
Post diligently documented PPO's fraught hiring decisions and
MCC's changing working environment throughout 2018. And I ask
unanimous consent to enter into the record the Post's series of
investigative reports.
The Chairman. It will be entered.
[The information follows:]
Foreign Policy Report Submit by Senator Robert Menendez
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Material Submitted for the Record by Senator Robert Menendez
white house uses foreign aid agency to give jobs to trump loyalists
By Robert O'Harrow Jr.
Washington Post, July 28, 2018. The White House has assumed control
over hiring at a small federal agency that promotes economic growth in
poor countries, installing political allies and loyalists in appointed
jobs intended for development experts, according to documents and
interviews.
Until the Trump administration, only the chief executive and
several other top officials of the Millennium Challenge Corporation
(MCC) were selected by the White House, former agency officials said.
The chief executive, in turn, used authority granted to the agency by
Congress to appoint about two dozen other staffers, primarily for their
technical expertise.
But starting last year, the White House began naming political
appointees to the lower-level positions, according to internal rosters
obtained by The Washington Post and interviews with former employees
and other knowledgeable people. The employees were warned by an agency
leader they could lose their jobs to make way for the new political
appointees, the former employees said.
Fourteen allies and Trump loyalists have been placed at the agency
as political appointees so far--more than double the number of
political staff on the day the president took office, the rosters show.
Among them are a 2016 college graduate with a degree in English
literature whose grandmother is a senior personnel official in the
White House and a recent congressional intern who graduated in May with
a master's degree from the Johns Hopkins University School of Advanced
International Studies.
The White House's reach into MCC operations sheds new light on the
administration's appointment process and shows how even obscure parts
of the federal bureaucracy traditionally viewed as nonpartisan are
being drawn into partisan orbits.
In recent weeks, Sen. Robert Menendez (N.J.), the ranking Democrat
on the Foreign Relations Committee, put a hold on a water project in
Mongolia while congressional investigators examined the impact of the
Trump appointments at MCC. Two weeks ago, he lifted the hold as part of
a negotiation with Senate Republicans for limited access to MCC resumes
and other personnel documents.
In a statement to The Post, Menendez condemned the administration's
``practice of replacing seasoned professional and programmatic experts
with patronage hires.'' He said that ``blind loyalty seemingly trumps
qualifications, experience and career public servants.''
``Congress gave MCC special hiring authority so that it could
operate with efficiency and effectiveness, not so that it could become
a dumping ground for unqualified partisan loyalists and lackeys,''
Menendez wrote.
A Republican Foreign Relations Committee aide speaking on the
condition of anonymity offered a more upbeat assessment.
``We were happy to work with our Democratic counterparts in
resolving questions about hiring at MCC as we do regularly in
exercising the committee's oversight function,'' the aide said. ``Such
oversight is important for all agencies under the committee's
jurisdiction, and we will continue working in a bipartisan manner
moving forward.''
Menendez is continuing to examine the matter, according to
spokesman Juan Pachon.
The White House and MCC have not responded to repeated questions
and requests for interviews.
The Millennium Challenge Corporation dates to the early days of the
administration of George W. Bush, which sought to create a technocratic
alternative to sometimes wasteful, politically tinged foreign-
assistance programs. Bush said he wanted such programs to be keyed to
internal reforms and economic growth in client countries, and ``defined
by a new accountability'' and measurable outcomes.
White House officials have not made clear to Capitol Hill or agency
officials the exact reasons they are filling the appointed jobs. ``They
have just claimed those 30 jobs are [the White House's],'' said an
official familiar with the political operation at MCC who spoke on the
condition of anonymity for fear of retribution.
In September, the White House appointed a political liaison to the
agency--apparently the first in its history. Six employees have been
reassigned to make room for Trump appointees. Those reassigned include
the agency's chief risk officer and the leader of the team responsible
for coordinating efforts with the private sector.
Three others were forced to leave, according to interviews with
former employees and internal documents obtained under the federal
Freedom of Information Act. Among them was Lorelle Atkinson, acting
vice president of public affairs, a 6-year veteran and nonpolitical
appointee at MCC who previously had worked for 4 years at a global
development nonprofit that focused on improving the plight of poor
women.
Atkinson told The Post she attended a June 2017 staff meeting at
which employees were warned they might lose their jobs to make room for
new political appointees. She said she was forced to resign in
October--at a time when she was pregnant.
``I was proud of the work we did at MCC and was honored to have
worked with the best and brightest the civil service has to offer,''
Atkinson said.
Foreign aid veterans told The Post the appointments are subverting
the agency's technical-minded culture. They said the injection of
inexperienced political appointees represents the kind of establishment
machinations Trump has decried as ``the swamp.''
``This is deeply troubling,'' said Scott Morris, who worked closely
with MCC's board as a deputy assistant secretary at the Treasury
Department in the Obama administration. ``This will inevitably
undermine the ability of this technocratic agency to fulfill its
mission.''
familiar ties
Congress authorized MCC in 2003 as an independent agency, including
funding for 30 employees who could be appointed outside of the normal
civil service laws and regulations. Congress gave the agency's chief
executive authority for hiring the majority of those employees. The
appointment of about seven corporate officers is subject to approval by
a governing board composed of the secretary of state, treasury
secretary, the administrator of the United States Agency for
International Development and others with ``relevant international
experience.''
The MCC has about 300 employees and an $800 million annual budget.
It has supported programs in dozens of developing countries.
After Trump's inauguration, agency leaders did not initially hear
from the White House, according to MCC employees at the time. In the
spring of 2017, a senior official from the Presidential Personnel
Office (PPO) asked several members of the leadership team to send over
their resumes for review, people familiar with the matter said. Before
long, a PPO official began making claims on the 30 appointed positions
authorized by Congress.
The PPO is a White House organization responsible for selecting and
placing 4,000 political appointees who carry out the president's
policies and run federal agencies. It has been a source of controversy
over its vetting of nominees and the pace of appointments. PPO director
Sean Doocey and a senior official in the PPO office, Katja Bullock,
have been involved in lining up the political jobs at MCC, according to
documents and interviews with people with knowledge of the office.
In a previous interview, a White House official acknowledged that
Doocey and Bullock are former Bush administration colleagues and
longtime friends, who with others traveled to Germany on vacation last
year.
Several months after the trip to Germany, Doocey appointed
Bullock's grandson, Dillon Seamus Bullock, to MCC as a ``staff
assistant,'' the Dec. 5 memo shows. Dillon Seamus Bullock, who was
given a $50,000 salary, had no professional experience after graduating
with an English degree from Belmont Abbey College in December 2016,
according to his resume and the Doocey memo.
As The Post has previously reported, Dillon Seamus Bullock is one
of four of Katja Bullock's relatives who have received political
appointments in the Trump administration.
Doocey and Katja Bullock declined requests for interviews. During a
brief phone call, Dillon Seamus Bullock also declined to comment.
Doocey's office also arranged for the agency to hire Adrienne Spero
as White House liaison. Though she was paid by MCC, she reported to
Doocey, according to interviews with current and former employees.
After the publication of this report, Spero denied that she reported to
Doocey.
Spero is a 2013 graduate of Ohio Northern University's Pettit
College of Law who worked as a contractor as a law clerk at the Justice
Department and other agencies in 2015 and 2016. She and her husband,
Casin Spero, a political appointee at Veterans Affairs, are social
friends of Doocey's, according to current and former Trump
administration officials who spoke on the condition of anonymity for
fear of retribution.
Before the presidential election, Casin Spero and Doocey both
worked at Barbaricum, a federal contractor.
Adrienne Spero declined an interview request, and VA did not
respond to a request for an interview with Casin Spero.
Kirk Bell, a Trump campaign worker, told The Post that PPO
officials placed him in the agency's communications office last year,
even though he did not seek out the job. Bell resigned months ago amid
questions relating to his security clearance. He declined to discuss
the details.
``I was asked by the White House to go to MCC,'' Bell said, adding
that he felt duty-bound to follow White House instructions. ``I was
basically told, `This is what we have for you.' ''
Another appointee is Karen Sessions, a former Verizon
Communications executive and municipal official in Winter Park, Fla.,
who made an unsuccessful run for Congress as a Republican in 2010. In
2012, she married Rep. Pete Sessions (R-Tex.), a Trump supporter. She
is vice president of congressional and public affairs.
Yet another is Eric M. Ueland, who was recently placed at MCC after
his nomination to be undersecretary of state for management failed to
receive Senate support. Ueland is a veteran Republican Senate staffer
who has worked for former Senate majority leader Bill Frist (R-Tenn.)
and as the staff director for the Senate Budget Committee under former
Alabama U.S. senator and current Attorney General Jeff Sessions. In a
personal biography online,--Ueland describes himself as a ``senior
strategy officer'' at MCC.
The Post requested copies of emails between agency officials and
the White House under the Freedom of Information Act in March. In
response, MCC identified 59 emails that could be responsive. But none
of the emails--which were sent to the White House for review--have been
released.
``We're simply just waiting for the White House to reply,'' said
Tamiko Watkins, the agency's chief Freedom of Information Act officer.
``Our hands are a little bit tied.''
politicalization worries
The most controversial of the new appointees is Robert Blau, a
retired Foreign Service officer who served as a speechwriter on Trump's
campaign. He was named MCC's vice president of compact operations in
the spring of 2017.
Soon after arriving, he filled his office with Trump campaign
memorabilia, which he later removed after colleagues suggested it was
not appropriate for a federal office, according to officials at the
agency at the time who spoke on the condition of anonymity. During a
staff town hall meeting last year, Blau, who was then director of
operations, described himself as ``a partisan conservative Republican''
and complained that certain media were ``out to get Trump every day,''
according to a routine recording of the meeting made by the agency.
He assured them his political views would not influence his
management decisions, the recording shows. But he also urged agency
employees to watch Fox News and read Breitbart News.
``If you are only using CNN and The Washington Post, you're getting
a very biased view of the news,'' he said, according to a transcript of
the audio first made public by Foreign Policy magazine earlier this
year.
Blau also expressed skepticism about a speaker at the agency who
had recently promoted gay and lesbian pride.
``His talk was sort of `celebrate diversity,' '' Blau said, noting
that his wife is an immigrant from Africa and that his sons are mixed
race. ``I'm not someone who celebrates diversity, or engineers it. To
me, diversity just happens,'' he said.
Menendez condemned the remarks in a Feb. 23 letter to then-acting
chief executive Jon Nash: ``I write to seek a full accounting of this
behavior and MCC's response to it, as well as a commitment from MCC
leadership that individuals who engage in such behavior will be held
accountable.''
In a letter back, Nash wrote that the remarks ``do not reflect
MCC's values'' and said that the matter had been referred to the
agency's general counsel.
Through a spokeswoman, Blau declined requests for an interview.
On May 25, Blau was promoted to interim leader of MCC, effective 3
days later. The White House officials made the move after repeated
delays in Senate consideration of the nominee to be MCC's chief
executive, which has been pending since early January.
The nominee, Sean Cairncross, is a Washington insider who served as
chief operating officer of the Republican National Committee in the
2016 election cycle. In the Trump administration, he served as deputy
assistant to Trump and senior adviser to the chief of staff.
But he has no foreign development experience, according to his
testimony during his nomination hearing in February.
During that hearing, Sen. Jeff Merkley (D-Ore.) asked Cairncross
about White House politicization of MCC. Cairncross said he knew
nothing about it.
``If confirmed, I would strive to keep the MCC a performance-based
professional development organization,'' Cairncross testified. ``I am
not looking to politicize the MCC.''
Cairncross's nomination is still pending.
Andrew Ba Tran contributed to this report.
Material Submitted for the Record by Senator Robert Menendez
appointed leader resigns from foreign aid agency
used to give jobs to trump supporters
By Robert O'Harrow Jr.
Washington Post, August 15, 2018. A political appointee overseeing
a small foreign assistance agency that has been used by the White House
as a source of jobs for Trump administration supporters is resigning,
according to an email he sent to agency employees on Tuesday.
Robert Blau, a retired Foreign Service officer and speechwriter for
Trump's presidential campaign, was named vice president of operations
at the Millennium Challenge Corporation in May 2017. He assumed the
duties of the chief executive in May of this year, after the Senate
failed to move on Trump's nominee to lead the agency.
Blau's email said he told the White House early last week that he
would step down next Tuesday. The email was obtained by The Washington
Post.
In a brief telephone call, Blau declined to comment. The White
House also declined to comment, and the agency did not respond to
emails.
Two people speaking on condition of anonymity because they were not
authorized to speak on his behalf said Blau has said he wanted to
returned to Florida, where he and his wife lived before he joined the
campaign, and did not want to renew a lease in the Washington region.
Blau's announcement followed a July 28 Washington Post story that
detailed how the White House had assumed control over hiring at the
headquarters of Millennium Challenge Corporation, or MCC, a small
independent agency that promotes economic growth in poor countries.
In prior administrations, only the chief executive and several
other top officials at the agency had been selected by the White House.
The chief executive then used authority granted by Congress to appoint
about two dozen other staffers, primarily for their development
experience.
The Trump White House has filled 14 jobs with political appointees,
more than twice the number at MCC on the day the president took office,
The Post reported. Some veteran employees were placed in other jobs or
forced to leave the agency to make room for Trump appointees.
Administration officials have asserted that they control 30 appointed
jobs at MCC, The Post reported.
Among the new appointees are a former municipal worker in Florida
and the wife of a congressman. Another is a 2016 college graduate with
a degree in English literature whose grandmother is a senior personnel
official in the White House.
Blau was among the most controversial of the appointees. Soon after
arriving at MCC, he filled his office with Trump campaign memorabilia.
During a staff meeting last year, he urged employees to watch Fox News
and read Breitbart News and characterized The Washington Post and CNN
as ``very biased,'' according to a recording made for employees who
could not attend the meeting.
Blau also expressed skepticism about a recent speaker who had
promoted gay and lesbian pride.
``I'm not someone who celebrates diversity, or engineers it. To me,
diversity just happens,'' he said, according to a recording made public
by Foreign Policy magazine earlier this year.
In his email Tuesday, Blau said he has worked at MCC ``alongside
highly-dedicated, incredibly talented individuals employed overseas and
here in headquarters.''
``It has been an honor and a privilege to serve in the Trump
Administration,'' he wrote. ``I will be returning to Florida, where I
will continue to support the Trump Administration, and also cheer MCC
on as it takes on ever-greater development and foreign policy
challenges.''
Robert O'Harrow Jr. is an investigative and accountability reporter
at the The Washington Post.
Material Submitted for the Record by Senator Robert Menendez
acting leader removed from agency the white house
has used to provide jobs to trump supporters
By Robert O'Harrow Jr.
Washington Post, October 18, 2018. The White House has removed the
acting chief of a small foreign aid office less than 2 months after he
was put in place to quell controversy over the Trump administration's
use of the agency as a source of jobs for political supporters,
according to interviews and an internal email obtained by The
Washington Post.
Brock Bierman has served as part-time leader of the Millennium
Challenge Corporation since Aug. 21, while also juggling
responsibilities as an assistant administrator at the U.S. Agency for
International Development.
``This afternoon the White House directed that Brock Bierman no
longer serve as Acting CEO of MCC,'' said a brief email to agency staff
Wednesday evening. The email offered no explanation for his removal.
Bierman's departure is the latest upheaval at an agency that has
not had a permanent leader since the start of the Trump administration.
Bierman was the third person in 5 months to lead the MCC, which
promotes economic growth in poor countries. In January, Trump nominated
Sean Cairncross to be MCC's chief executive. The nomination has stalled
in the Senate, in part because Cairncross, the former chief operating
officer of the Republican National Committee, has no foreign assistance
experience.
Bierman succeeded another acting leader, Robert Blau, who resigned
amid controversy over the White House's placement of more than a dozen
Trump supporters into jobs previously reserved for development
specialists.
Shortly after arriving at MCC, Bierman imposed a hiring freeze on
political appointees and told senior staff and congressional aides that
he would work to restore MCC's reputation for independence from
political influence, according to an agency official and a
congressional aide.
Bierman's duties will be assumed by Jonathan Nash, the agency's
chief operating officer and a longtime career employee at the agency.
Nash also previously served as a temporary MCC chief under Trump.
Bierman did not respond to requests for comment.
He tweeted: ``It was an honor and privilege to serve as acting CEO
for the Millennium Challenge Corporation these past 2 months. I am
grateful to the President for the opportunity to have lead an
incredible group of dedicated professionals. Excited to get back to
work full time.''
The White House did not respond to questions about his departure.
Three people familiar with MCC operations, speaking on the
condition of anonymity because they are not authorized to speak
publicly on behalf of the agency, said the White House decision came
after Bierman clashed with senior staff, including Karen Sessions, a
political appointee serving as MCC's vice president for congressional
and public affairs. She is the wife of Rep. Pete Sessions (R-Texas).
Karen Sessions did not respond to requests for comment.
After being told about Bierman's resignation, Sen. Robert Menendez
(N.J.), the senior Democrat on the Foreign Relations Committee, said he
intends to examine what happened.
``Mr. Bierman appeared to approach the position of Acting CEO at
MCC with a clear vision of how to run an independent, professional
agency that the Trump Administration had politicized and turned into a
revolving door for campaign aides,'' Menendez said in a statement. ``I
have questions about his abrupt dismissal, and I intend to find out
what happened.''
Until Trump, MCC was primarily known for its technocratic staff and
innovative efforts to provide economic assistance to poor countries.
In a July 28 story, The Post showed how the Trump administration
was using the agency to reward supporters and allies with jobs. In
early 2017, the White House Presidential Personnel Office claimed
control over 30 MCC jobs.
Over the next year, the PPO filled 14 jobs with Trump supporters
and allies. Among them was Blau, a former campaign speechwriter who
drew criticism for urging MCC employees to watch Fox News and read
Breitbart News.
Another appointee was the grandson of a senior PPO official, a
young man who graduated from college in 2016 with an English degree.
Senator Menendez. MCC experienced several inauspicious
leadership changes while the committee was vetting your
nomination. While a good number of inappropriate leaders have
departed MCC, including Robert Blau, the acting CEO who
infamously gave a rambling and offensive all-hands speech that
sent a chilling effect through MCC's ranks, so that their
departure has actually helped restore credibility to MCC, the
question remains: why were these people given leadership roles
and what lasting impact will their presence have on MCC's
effectiveness?
Mr. Cairncross, you received a number of questions for the
record on these issues during your confirmation. In your
answers, you committed to restoring MCC's professional culture.
I appreciate that you took these concerns seriously, and I look
forward to your testimony on how you will strategically work to
right the ship.
Through it all and with steady support from Congress, MCC
continues to explore and execute compacts in developing
countries. For 25 years, MCC has followed an innovative
approach to international development by providing limited but
ambitious investments in economically transformative projects
in poor countries that demonstrate a willingness and capacity
to meaningfully commit to specific standards of improved
governance, transparency, and fair competition.
MCC's data-driven approach assesses countries' constraints
to economic growth and their needs to ensure a maximization on
investments returns each country receives. Americans benefit
from these investments as strategic partner countries
experience improved regional security through improved economic
security, growing trade opportunities, and the ability to
resist malign external influence. MCC is an important tool in
the U.S. foreign policy toolbox that requires congressional
support, including robust oversight to ensure the independent
agency sustains its success.
In addition to discussing your efforts to restore a sound
and productive work environment at MCC, I also have a number of
questions about some of MCC's active and pending compacts. My
concerns about specific compacts are rooted in wanting to
ensure MCC is dutifully executing its mission. The committee
and the American people need assurances from you that MCC is
adapting strategies to manage and resolve these concerns.
For example, as the chairman mentioned, in Ghana, MCC
recently--and for good reasons--terminated $190 million of
MCC's $498 million compact with Ghana. I believe that was the
right decision based on the findings of an independent audit of
fraud allegations lodged by the Ghanaian Government. However, I
have questions around the budget implications of these funds
returning to MCC, as well as the lessons or precautions MCC may
be taking with the rest of the Ghana compact.
Regarding Mongolia's water compact, Mongolia's dubious plan
to service the outstanding $75 million debt its water authority
has accrued by simply moving the debt to another division of
the government hardly seems like a fiscally responsible plan
that MCC should accept. I also have concerns about the
Mongolia-Millennium Challenge Account's lack of progress on
developing a credible and sustainable revenue mechanism to pay
for the long-term maintenance and operation of the project MCC
is helping to build.
In Sri Lanka, MCC has a $480 million compact pending the
approval of the Sri Lankan Government. Sri Lanka, however, has
just elected a suspected war criminal, Gotabaya Rajapaksa, as
president. How will this affect the compact?
I also have questions about Kosovo, El Salvador, and
Georgia.
I believe MCC can continue to be a positive tool of
American economic leadership, and I appreciate the chairman's
interest in conducting oversight of this important development
agency. And we look forward to your testimony.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Menendez.
Now we will hear from the Honorable Sean Cairncross. He is
the Chief Executive Officer of the Millennium Challenge
Corporation. Prior to joining MCC, Mr. Cairncross held a number
of positions in the public and private sectors, including
Deputy Assistant to the President and Senior Advisor to the
White House Chief of Staff. He holds a J.D. from NYU School of
Law and M.Phil from Cambridge University and B.A. from American
University.
Mr. Cairncross, you have heard both the ranking member and
me talk about some of the issues of the past. We really want to
look forward. I think the ranking member and I share, as do
other members of this committee, a real concern for how
important this agency is. We obviously are challenged
internationally in many different respects. This particular
agency is one that projects American values, projects American
ability to help people better themselves, and as the ranking
member said, there are challenges here. We really are trusting
you to stand this agency up to do good and move forward well.
So with that, the floor is yours.
STATEMENT OF HON. SEAN CAIRNCROSS, CHIEF EXECUTIVE OFFICER,
MILLENNIUM CHALLENGE CORPORATION, WASHINGTON, DC
Mr. Cairncross. Thank you, Chairman Risch, Ranking Member
Menendez, and members of the committee.
I would also like to recognize and thank Senator Isakson
for your long-term support for the agency. Everyone is very
appreciative. Thank you.
I am delighted to be here today and talk about my first
100-plus days as MCC's CEO and also my priorities for MCC in
the months ahead. It is a privilege to lead an agency with such
a diverse, talented, and dedicated staff. I am grateful to
President Trump for entrusting me to do so, and I am thankful
and grateful for this committee's support.
I also want to thank your staff members. The bipartisan
support that MCC enjoys is a real testament to this body, and I
would like to thank them for their consistent engagement with
MCC's work.
Over the course of my first 5 and a half months at MCC, it
has become clear to me that what really is the agency's
strength are its core principles: transparency, data, and,
frankly most importantly, accountability both for ourselves and
for our partner countries.
MCC's work to reduce poverty through economic growth and
consolidate democratic and free market reforms in the world's
best governed, poorest nations is critical to U.S. foreign
development. Our partner countries are actively working to set
their nations on a path towards self-reliance.
There is no better way to learn this than to go see it.
Each trip I take into the field better equips me to share the
agency's work and to help guide the agency's mission. And since
being confirmed, I visited six partner countries--Malawi, Cote
d'Ivoire, El Salvador, Georgia, Niger, and Morocco--and visited
nearly 20 project sites. I have spent time with hundreds of
beneficiaries, and that is unquestionably the best part of each
trip.
In Malawi, I met with President Mutharika to push for
continued performance on MCC's scorecard and sustainability of
their power compact. I also met with Grace Ghambi, an
electrical engineering student who is earning her degree
through an MCC-sponsored scholarship. After finishing school,
Grace wants to return to support the implementation of MCC's
compact by working at ESCOM, an electric company that is
helping with the private sector enterprise in Malawi.
Following that visit, I headed to Abidjan to attend the
AGOA forum. I joined President Ouattara to mark the start of
our $525 million compact with investments in education and
transportation.
I also signed a memorandum of understanding between the
Government of Cote d'Ivoire and The Bechtel Corporation to
develop a national master infrastructure plan. I think this is
a significant step in developing a sustainable infrastructure
investment plan for Cote d'Ivoire in the years to come.
In El Salvador, I met with President Bukele and had a great
discussion on the importance of the private sector in creating
a sustainable economy. We launched the bid for the country's
first large-scale, public-private partnership, and I also
attended the opening of the first of 45 MCC-renovated schools.
Just last month, I traveled to Niger and Morocco. In Niger,
I met with President Issoufou and launched an investment in the
agricultural sector in Konni.
I then joined Advisor to the President, Ivanka Trump, in
Morocco where we saw firsthand our joint efforts to increase
women's economic empowerment through MCC and the Women's Global
Development and Prosperity Initiative. While in Rabat, we
signed an implementation letter with the government to ensure
that regulations for a new law advancing secure land rights for
women is adopted by December 31 of this year.
Advisor Trump and I also met with women in the Gharb region
who now have more secure ownership in inheritance rights for
the collective lands on which they farm.
W-GDP is enabling the U.S. Government to target investments
in women across the developing world in a coordinated way. MCC
is grateful to Ivanka and to the administration for their
support of our work in this regard.
Each of these missions is invaluable, and I look forward to
continuing to visit the field.
MCC's work reflects a model built on lessons of development
experience, but I also seek to find new ways to build on that
model and achieve greater impact. So we will focus on four
areas: one, empowering MCC's staff; two, encouraging smart
risk; three, crowding in and enabling private development and
dollars; four, holding ourselves and our partner countries
accountable.
First, it is a priority for me to empower the incredible
people who work at MCC. Through listening sessions, roundtable
discussions, and daily conversations--I walk around the
building quite a bit--I learn daily and directly from staff
about what the agency does well and what we can improve, and I
continue to learn more about this every single day.
Second, we will further establish a culture of creativity
that encourages smart risk, including operationalizing MCC's
concurrent compact authority. Markets do not stop at borders
and nor should MCC's investments. We must increase our risk
tolerance if we want greater successes across the board. This
is at the root and the core of the design of MCC.
Third, crowding in and enabling private investment
throughout the lifecycle of our programs is vital. We know that
government-to-government dollars are not enough. We need
private investment and job creation to develop healthy market
economies. This is the primary driver of truly sustainable
economic growth.
And finally, accountability. Without it, we cannot do our
best work with our partner countries or for the American
taxpayer. MCC will not throw good money after bad. We will
adhere to our principles and follow our model.
Two recent examples emphasize this. MCC's board of
directors unanimously agreed to terminate a portion of the
Ghana power compact when a key condition was not met. In Sri
Lanka, MCC is continuing to monitor as the new government takes
shape. As with all MCC partners, we expect Sri Lanka to remain
committed to MCC's eligibility criteria, including with respect
to the rule of law, political rights, and civil liberties.
All this is to say by investing in staff, innovating and
taking smart risks, crowding in private dollars, and holding
ourselves and our partners accountable, I am confident that MCC
will continue to deliver on our mission.
Thank you for today, and I look forward to your questions.
[The prepared statement of Mr. Cairncross follows:]
Prepared Statement of Hon. Sean Cairncross
Thank you, Chairman Risch, Ranking Member Menendez, and members of
the Committee. I am delighted to be here today, and I look forward to
discussing my first 100-plus days as MCC's Chief Executive Officer with
you, as well as my priorities for MCC in the months ahead.
As I've said before, it is a true honor and privilege to lead an
agency with such a talented, diverse, and dedicated staff of experts in
their fields of practice. I am grateful to President Trump for trusting
in me to do so, and sincerely thankful for the support and confidence
of this committee, and the United States Senate.
I also want to thank each of your staffs for our important and
ongoing conversations. The bipartisan support that MCC enjoys is a
testament to this body and to the work and collaboration between MCC
and your teams. The value of these relationships--and the key guidance
that you each provide to me and the agency--cannot be overstated. Thank
you for making yourselves available and for your consistent engagement
in MCC's work around the world. I am truly grateful.
Over the course of my first 5 1/2 months at MCC, it has become
abundantly clear to me that MCC's strength continues to lie in the core
principles the agency was founded on 15 years ago: transparency, data-
driven decision making, and certainly--and arguably most importantly--
accountability.
I believe that MCC's work to reduce poverty through economic growth
and consolidate democratic and free-market reforms in the world's best-
governed, poorest countries is crucial to the success of U.S. foreign
development. Our partner countries are actively working to fight
corruption, and to set their nations and their economies on better and
stronger paths toward self-reliance. They are making the hard choices,
and America is standing with them.
There is no better way to learn this than to go see it. I promised
this committee I would, and I have.
The opportunity to see MCC's work firsthand has been
transformational. Each trip I take to the field better equips me to
share the agency's work, and to support and guide MCC's mission.
Since being confirmed at the end of June, I have traveled to six
MCC partner countries--Malawi, Cote d'Ivoire, El Salvador, Georgia,
Niger, and Morocco, have met with 11 Heads of State, have visited
nearly 20 project sites, and have spent time with hundreds of
beneficiaries, which is unquestionably the best part of each trip.
In Malawi, I met with President Mutharika to push for continued
performance on MCC's scorecard and sustainability of their power
compact. I also met with Grace Ghambi a fourth-year electrical
engineering student at the University of Malawi who is earning her
degree through an MCC-sponsored scholarship. While visiting Nkula power
plant outside of Blantyre, Grace explained to me that without this MCC
investment, her education would not have been possible; and now, after
she finishes her schooling, Grace wants to come back and assist with
implementing the MCC compact by working at ESCOM--an electric company
in Malawi helping to privatize the energy sector. She has also started
a girls' mentoring group, sharing information and encouraging young
women to reach their dreams. Inside of 2 years, she has reached
thousands of young girls in Malawi. If that's not a good demonstration
of America's power to inspire, I don't know what is.
Following this visit, I headed to Abidjan, Cote d' Ivoire, where I
attended the AGOA forum and joined President Ouattara in marking the
entry-into-force of our $525 million compact supporting investments in
the education and transportation sectors. I toured the Port of Abidjan
and traveled the primary traffic-congested areas that we are aiming to
relieve over the next 5 years--the Government of Cote d'Ivoire is a
committed and strong partner. I also joined the signing of a Memorandum
of Understanding between MCC, Cote d'Ivoire, and The Bechtel Company to
develop a national infrastructure plan--a significant step in directing
the sustainability of the Ivorian's infrastructure investments for many
years to come.
In September, I traveled to the Republic of Georgia to support
MCC's $140 million investment in the Georgian education sector,
particularly in the fields of science, technology, engineering, and
math. I joined San Diego State University in welcoming their 5th cohort
of students to the MCC-supported SDSU-Georgia STEM program, and also
opened one of the 91 newly MCC-renovated schools.
In El Salvador, I met with newly elected President Bukele and had a
good discussion on the importance of the private sector in creating a
sustainable economy. We launched the bid for the country's first large-
scale public-private partnership. I also attended the opening of the
first of 45 MCC-renovated schools--and like in Georgia, addressed a
community of enthusiastic and inspired students, families, and
teachers.
And, just last month, I traveled to Niger and Morocco. In Niger, I
met with President Issoufou and launched an investment in agricultural
irrigation in Konni.
I then traveled to Rabat, Morocco, to join Advisor to the
President, Ivanka Trump, where we saw firsthand our joint efforts to
increase economic opportunity and prosperity for women through MCC and
the Women's Global Development and Prosperity Initiative, or W-GDP.
I am a firm believer that a country's economy cannot reach its full
potential if half the population is left out. Women must have the
freedom to make their own economic decisions. This matters. And, for
MCC, this is one of the best dollar-for-dollar investments we can make
to reduce poverty through economic growth. We remain committed to
prioritizing women's economic empowerment within our programs and
upholding the pillars of W-GDP within our country partnerships.
During our time in Morocco, MCC signed an implementation letter
with the Government to ensure that regulations for a new law advancing
secure land rights for women are adopted by December 31. Advisor Trump
and I also met with women in the Gharb region who now have more secure
ownership and inheritance rights to the collective lands that they
farm.
MCC has been working, since our agency's founding, to address
gender issues and directly invest in women. In fact, last year we
significantly expanded our Gender in the Economy indicator to cover 40
issue areas--up from just 10.
W-GDP is enabling the U.S. Government to target investments in
women across the developing world in a coordinated and focused way--
this is key to eliminating barriers to women's economic growth across
the globe. There is no question that women must be able to fully
participate in their economies. We are grateful to Ivanka and the
administration for their continued support of MCC's work in
spearheading efforts to economically empower women around the world.
I also had the opportunity to promote MCC's work while in New York
for the United Nations General Assembly, and I traveled to London to
meet with potential private investors and partners, participating in
several events that gave me the chance to speak about MCC's role in
U.S. development and blended finance. MCC is a great story for America
and our important work abroad, and I intend to tell it to as many
audiences as I can.
These missions have been invaluable, and I look forward to
continuing to visit the field to experience--and help leverage--MCC's
work on the ground.
Our work reflects a model built on lessons of development
experience, and as CEO, I am committed to maintaining the agency's role
as a leader in U.S. foreign assistance. Indeed, for the fourth year in
a row, Results for America ranked MCC number one in using evidence,
results, and learning to drive positive outcomes--but I will also seek
to build on our model to find new, innovative ways to achieve a greater
impact across our portfolio.
We will do this by focusing in four key areas:
One, empowering the staff at MCC;
two, establishing a culture of creativity that encourages smart
risk;
three, crowding-in and enabling private investment; and
four, holding ourselves and our partners accountable for results.
First, it is a priority for me, as CEO, to connect with, and
empower, the incredible people at MCC. I have held multiple all-staff
listening sessions, surveys, roundtable discussions, meetings, and
daily conversations to ensure I hear directly from staff about what the
agency is doing well, and where we can improve. Their input has been
invaluable and has helped to shape our strategic vision for the agency
moving forward. I continue to learn more about the important work each
of our teams are doing every day; communication with staff is a
priority and I will keep these channels open. Empowering MCC's staff
for optimal performance is, and will continue to be, a primary focus
area for me.
Second, we will work to build upon and further establish a culture
of creativity that encourages taking smart, entrepreneurial risk--
including operationalizing MCC's new concurrent compact authority to
work on regional integration and trade. We all know that markets do not
stop at borders, so neither should MCC's investments. If we can help
connect our partner countries to regional markets, we can create more
economic opportunity, and reduce poverty exponentially. Working cross-
border is risky--however, the potential payoff is huge, and we will
tackle these investments using the same data and analysis that supports
our informed decision making across the globe. We must increase our
risk appetite by taking calculated risks if we want greater successes
across the board. This is at the root of MCC's design as a creative and
unique aid agency.
Third, crowding-in and further enabling private investment across
our portfolio, and throughout the lifecycle of our compacts, is vital.
We each know that government-to-government development dollars are not
enough. We need private investment and job creation to develop healthy
market economies--this is the primary driver of sustainable growth.
Areas of opportunity for MCC include creating enabling environments,
assertively employing blended finance tools, and building partnerships.
We certainly look forward to working closely with the new DFC in this
area as well.
And finally, accountability. Without it, we cannot do our best work
with our partner countries or for the American taxpayer. MCC will not
throw good money after bad. Others say this, but MCC has a 15-year
track record of following through. We will do what we say we are going
to do. Making difficult decisions based on available evidence is what
MCC is all about, and our model works because we stick to our
principles. This is key to our success as an agency.
Two recent examples emphasize this. MCC's Board of Directors
unanimously agreed to terminate a portion of the Ghana Power Compact
when a key condition was not met. In Sri Lanka, MCC is continuing to
monitor as the new government takes shape. As with all MCC partners, we
expect Sri Lanka to remain committed to MCC's eligibility criteria,
including respect for the rule of law, political rights, and civil
liberties.
By investing in the staff at MCC, continuing to innovate and take
smart risks across our portfolio, finding new ways to crowd-in private
dollars, and continuously holding ourselves and our partner countries
accountable as responsible stewards of American taxpayer dollars, MCC
will build upon its remarkable history of bi-partisan support, and be
stronger and more resilient as an agency. I am confident that MCC will
continue to deliver on our mission of reducing poverty through economic
growth and representing American values around the world.
Thank you for your time and I look forward to your questions.
The Chairman. Thank you much. We appreciate your
leadership.
And with that, Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Thank you for your statement.
Congress created MCC to operate differently than most
federal agencies. One of the qualities Congress gave the MCC
was a unique set of hiring mechanisms to allow the agency to
act nimbly to bring in issue or sector experts according to the
needs of a compact. For practical purposes, the
administratively-determined, or AD, personnel slots at MCC are
political hires.
Prior to your confirmation, it became evident that the
White House Presidential Personnel Office was using MCC's
generous allotment of AD slots to provide political patronage
jobs to Trump loyalists with questionable qualifications. Brock
Bierman, during his brief stint as acting CEO, took this issue
seriously, though he was fired before he could work to resolve
these issues.
So in concern about those issues, is PPO still calling the
shots at how MCC AD slots are allocated and to whom?
Mr. Cairncross. Senator, with respect to how things were
handled before I got there, I was not a part of that.
What I can tell you is the only way I know how to run an
effective agency or entity is that form has to follow function.
The needs of the agency and of the mission are what drive
hiring decisions at MCC. Those decisions are based on the
qualifications of the individuals and the needs of the roles
that they will fill. And MCC's hiring decisions, since I have
been there, have been MCC's decisions.
Senator Menendez. Okay. So PPO is not calling the shots at
this time.
Mr. Cairncross. MCC's hiring decisions are MCC's, sir.
Senator Menendez. Okay.
So at this point--let me just make sure--the PPO has no
role in MCC hiring decisions?
Mr. Cairncross. PPO--when we go through our process of
finding an administratively-determined position and I believe
and the agency believes that they are qualified, I share that
information with the White House to make sure that they agree
that they are qualified. We have had no disagreements to date.
I expect none. And I will continue to follow my process.
Senator Menendez. Now, do you share Mr. Bierman's concerns
with how PPO was using MCC's AD hiring authority?
Mr. Cairncross. Senator, all I can really say is with
respect to how I am going to operate and how I have been
operating since I have been there. Like I said, the needs of
the agency and the mission are what drive our decisions.
Senator Menendez. So in that regard, are MCC's unique
hiring authorities being used to hire issue specialists and
experts needed to work on specific compacts and projects?
Mr. Cairncross. Yes. The the requirements of the job and
the roles are what govern the decisions, and they are matched
with qualified individuals.
Senator Menendez. Mr. Bierman, before he left, briefed my
staff on the memo and draft plan for investigating
misappropriation of personnel slots. Are you aware of this
plan?
Mr. Cairncross. During my confirmation process, I discussed
it with your staff, yes.
Senator Menendez. But other than discussing with them, have
you read the plan?
Mr. Cairncross. No. I do not know the details of the plan.
Senator Menendez. Okay.
Let me ask you this. I will not rehash Mr. Blau's
transgressions other than to say he made statements to MCC
personnel that were culturally offensive, highly inappropriate
in any work environment, let alone a federal agency. His
message had a chilling effect on personnel, some of whom were
so alarmed that they felt compelled to inform this committee of
his conduct. He is gone, thankfully. So that is a good thing.
But his words still raise concerns about MCC's commitment
to workforce diversity. Have any of MCC's policies towards
maintaining workforce diversity changed under your
administration?
Mr. Cairncross. Senator, as I said in my confirmation
hearing, I take diversity very seriously. I believe it is
something that ought to be celebrated. It is something that
improves the decision-making of any organization, particularly
one such as MCC involved in international development work. I
have made my position on this abundantly clear to staff, and I
am very hopeful that that position from the top has resonated
throughout.
Senator Menendez. You said something very similar in
response to my question for the record regarding promotion of
diversity among MCC's workforce by saying, ``If confirmed, I
will set a tone from the top of the agency that diversity is
critical to effective work and highly valued. I will
participate in diversity and inclusion refresher training
sessions and require that all senior leadership participate
along with me. I will seek to hire from as broad a pool of
potential applicants as possible, including internal and
external MCC candidates, in order to increase both female and
minority staff members at MCC.''
What steps have you taken to realize that commitment to
workforce diversity that you made to the committee?
Mr. Cairncross. I have done exactly that, Senator. One of
the first things that I did as CEO was introduce a diversity
workshop at the agency that was being featured that week. I
have continued to participate on all levels with staff, whether
it is with our women's group, and shown direct involvement and
engagement with that. We have drawn from a broad pool of
candidates for hiring decisions since my time there. We have
promoted a number of, in particular, women among the senior
team, and I look forward to continuing that commitment and also
working closely with your staff. I know they have been very
engaged on this issue, and we have had, I think, very good
dialogue on it and I expect it to continue.
Senator Menendez. I appreciate that. I hope that
diversity--and I am all for greater diversity certainly on
gender, but I hope that diversity is also included across other
lines as well so that we reflect to the world what America is
all about, and the work that MCC does should be a reflection of
that.
Mr. Cairncross. If I was not clear, sir, I agree with you,
and I am committed to that as well.
Senator Menendez. Finally, Mr. Blau left MCC before your
confirmation. You, nevertheless, committed in responses to
questions for the record that you would review any staff
complaints made against him. Did you complete this review, and
if so, what were your findings?
Mr. Cairncross. I addressed those issues with staff in an
all-hands in the second day of my time there, making clear my
position, among other things, on the importance of diversity
for the agency. I believe that that issue is thankfully in the
rear view mirror. And I take staff morale very, very seriously,
and I make an effort every day to reinforce that.
Senator Menendez. I appreciate hearing you say those
things, and I look forward to seeing them.
I have a series of compact questions that I will get to in
a second round.
Mr. Chairman, with your indulgence, I do not know how long
Senator Isakson is going to stay for the hearing, but I am
thrilled that in the final days of his time in the Senate, he
is still here with us at the committee on an issue that he
cares so much about. And I deeply respect the work that he has
done in the Senate but certainly on this committee. He has been
an enormous bridge builder, and we could use more bridge
builders in this institution. So thank you, Johnny, for your
incredible service.
Senator Isakson. Mr. Chairman, thank you for saying that
and it is an honor to be back. One of the reasons I am back is
you. This guy is the best Cuban-Irish tenor you have ever heard
in your life. I was in the back of an airplane with him in
Afghanistan with my wife sitting to my side, and Harry Reid and
Bob, and he started singing from this little manual. And it was
really good. I am terrible at that. So I really appreciated it.
And my wife just fell in love with him. But, Bob, we had a
great time. Went to Afghanistan, had a lot of the good times.
And with Ben Cardin--I have just done so much with you and
Myrna. When I saw both of them were going to be here, I said I
want to be with that group. Sorry to leave you out, Mr.
Chairman.
I am here to tell you that I love this committee. I got on
this committee in an interesting way. They called me up and
said will you serve on the Foreign Relations Committee, and I
said, no, I do not know if I am interested in that. They said,
well, we are missing person. We got to have one more. I said
okay. I was way down the list back then. So I said I will do it
and had no idea I wanted to do it.
And then they asked me to chair the Africa Subcommittee
because they did not have anybody who wanted to do that. So I
said, well, I better at least take the first job. So I did
that. And I said I better go to Africa and figure out what I am
doing. This is one of the places I went, and I fell in love
with the continent, fell in love with the people.
When we were talking about Swaziland, I said I remember
something about that. And I took away the Swaziland's money. I
did not take it away, but I blocked them from getting money
they were going to get from the United States to try and bring
about compliance in human rights and generally accepted
principles of labor law. Labor law in Africa is a whole lot
different than it is in the United States. I mean, you cannot
mistreat anybody in the United States. In Africa, it is all you
can do to catch them.
So I just want to say that what you are talking about is
important.
The other thing that you said that is very important in
terms of the contractors and who you are hiring and making sure
you are getting the right type of laws. If we all stay on top
of them, we will never get it as much as we would like to have
it. But with Millennium Challenge, you have the opportunity to
use a benefit as a lever of compliance. And I have seen
Millennium Challenge work in that way in Africa more than any
other government's program in the world.
I am the one that got telling you. I said, listen, guys,
the money is stopping. If you cannot find a way to have open
zoning meetings, whatever they were, and no child labor, and
just very basics, we are not going to invest the American
taxpayers' money no matter how you say you are trying to do it.
And being able to do that and having a director at the time who
was willing to put it behind that and others and the President
is what we did.
So I think focusing on the hiring issue, as something that
has been raised, is important because if we lose Millennium
Challenge, it is bad for them. It is worse for us because we
then get a lot more corruption because people do corrupt things
to hire folks over there.
So I just want to thank you for mentioning me, that I am
leaving. I am not leaving because I do not like foreign
relations. I love foreign relations. I love you, Mr. Chairman,
and my dear friend on the Ethics Committee who served so much
time with me from Idaho. And I appreciate you all very much and
I am enjoying it. I am going to stay here a little while
longer. So thank you for having me.
The Chairman. Johnny, we are going to miss you.
Senator Isakson. I will miss you all. Let us do not make
this sad.
The Chairman. All right.
So how about Mr. Cairncross? You want to chew him a little?
Senator Isakson. I got here early to do that.
[Laughter.]
Senator Isakson. It does not look like I did a very good
job of preparing, but I will try as best I can.
I just want to go back to what I was saying. Using the
lever of the ability to help them do something they cannot do
themselves is absolutely the best thing we did. One of the
things government always does worse is kill something for being
bad. It makes it worse. And by that, I mean if you take a
developing country or a developing small area, rural place and
give them an incentive to do something, they will do it, but
there will also be somebody in town saying that is some money
we can get. Let us get some of that money. Let us do
something--they do not say let us do something corrupt, but
they figure out something that nobody is doing which probably
means it is corrupt. And they do it. And what you do, you
invest the money. You help them get some money they could not
get any other way. And once the seed you planted starts to
grow, whatever it might be, then it permeates the area.
In Ghana, we built the largest refrigerator in the world I
call it. It is a chilling five plantations--five or six
plantations that were put together. They were independent. They
now shift pineapples, have 3 months longer shelf life, it gets
a lot better return. And that country's pineapple business is
just going crazy now because we helped through Millennium
Challenge to build a way to get those pineapples across the
Atlantic Ocean to America and our market. And we did it by
building a big refrigerator out in the middle of five
plantations in the middle of Ghana. They could not have done
that. The idea of working together to build one refrigerator
for five plantations was unheard of. They did and now they are
competing in the world market. So those are the kind of things
you can do.
But also the Port of Cotonou, which is next door in Benin,
was closed. You tell me when I am right on this. We gave them a
Millennium Challenge contract. It was awarded to them. And the
first review period--and they have to comply with all the
things. We caught them. They were below 50 percent on
compliance. So we cut their money off in the middle of the
project, and they lost the project and they lost the money.
Then they came around in the next cycle. They reapplied to
Millennium Challenge, and Benin had one of the best compliance
records they could have. So getting the money, having to make a
good decision. Losing the money killed us. And then getting the
money got us finally to finish our product and changing the
laws in Ghana with regard to employment.
In business, in New Jersey business, I know how you do
business in New Jersey. I have been up there a few times. There
is a price to pay if you do not do it right. There ought to be
a price to pay in every business if you do not do things right.
And when you are taking the taxpayers' money and investing it
and it works, it is a good thing to do. So I commend the
ranking member on his focus on that part and commend Millennium
Challenge as a way to two ends, further economic development in
foreign countries, but even more than that, compliance with the
labor practices.
And that is enough.
The Chairman. Did you have a question, Senator Isakson?
Senator Isakson. I like to make speeches.
[Laughter.]
The Chairman. They have been good.
Senator Cardin.
Senator Cardin. For the benefit of those that are here,
yesterday we had an opportunity as a Senate family to express
our appreciation to Johnny Isakson for his long service in both
the State legislature, the House, and now here in the Senate.
He truly believes that bipartisanship works, and he is an
example of so many things getting done.
The Millennium Challenge Corporation is an example of
bipartisan work here of getting something done. It was there to
make consequential change. I sort of think it was modeled after
PEPFAR as for health care what MCC can do for economic growth
for countries that are relatively poor, that have the desire to
be democratic states in which our participation can help them
with their economic power, but to preserve and strengthen the
democratic principles. And that is what the principles of MCC
have been about. So I am a strong supporter of it.
I want to talk a little bit about the resources and how the
resources are being used. I know the standards that you use to
judge the different requests for funding. But when I look at
our own hemisphere and see that we only have one compact in our
hemisphere, to me I know that there are other countries who
could benefit from a compact here in our own hemisphere.
I know that we have moved towards regional compacts, and I
would like you to give your view because I think particularly
in our hemisphere, regional compacts make sense. Central
America would make sense. Other parts would make sense. And
just to get your view as to why--is it a matter of resources or
is it a matter of lack of interest? Why do we not have more
compacts in our own hemisphere? And are you pursuing regional
compacts in order to deal with what Congress has desired?
Mr. Cairncross. Sure. With respect to Central America, we
do have a compact with a year to go in El Salvador. We are in
Guatemala on a threshold program.
Senator Cardin. One compact. I think you only have one.
Mr. Cairncross. That is right. That is right. But we do
have a threshold program in Guatemala, and we just wrapped up a
threshold program with Honduras as well. That is governed,
Senator, by our selection criteria. So it is a scorecard and
income--the need/merit model that we base the selection on. And
so that is the reason we are where we are in Central America
with respect to the countries that we are in.
And like I say, we had a great trip to El Salvador, and
that administration, the Bukele administration, has taken great
strides to turn around a compact that was not performing as
well as we wanted it to, and in the first 100 days of that
administration, the disbursement rates have gone up. We have
launched that public-private partnership, which had been
stalled under the previous administration. So it is a good
story, and I am happy to be talking about it.
With respect to regional compacts, as you know--and thank
you to the committee for the support for the concurrent compact
authority. That is new authority, and the way that the board
went about selecting the first round of regional compacts last
year was to select a pool of countries. And so that was West
Africa. There are five countries in West Africa, and the
criteria were we wanted contiguous borders. We wanted to be
engaged in at least a first compact when they were selected for
a regional.
And so MCC has gone about scouting projects and
prioritizing projects within that pool. And given that it is a
new authority and it is somewhat more complex than doing just a
single state compact, we want to make sure getting out of the
gate that that first compact is successful. There are a host of
administrative challenges and others that we are dealing with
and working through, and we expect that we are making excellent
progress on it. But we would be happy to entertain in the
future regional compacts elsewhere other than Africa.
Senator Cardin. When MCC was created under the Bush
administration, it was anticipated that the budget support
would be greater than it is today, much more funds than it is
today. My question to you is as a matter of resources. If you
had more resources, do you have the opportunities around the
world to use that consistent with the mission of MCC, and
should we be looking at areas of development that we could be
engaged in but we are prevented because of resources?
Mr. Cairncross. So the answer to the overall question is
yes, Senator. And specifically I think what we could do, given
our model in particular on selection and the criteria that we
use, which I think is the core of the agency and what has made
it very successful--with more, we could do more. The leveraging
power that we have with the grant funds that we operate with
now is remarkable in my opinion, and it allows us to target the
sort of institutional and policy reforms that other development
dollars or private capital is not really able to get at
specifically. And with greater incentive, we could do more.
For example, we are in Cote d'Ivoire. Cote d'Ivoire has
been an excellent partner. Part of President Outtara's cabinet
is incorporated to address MCC's criteria specifically. We are
developing the Aqaba roundabout and the Abidjan infrastructure
piece so that traffic can flow more freely. But if we could
also work on that transportation corridor between, for example,
Rakina, it would increase our impact. It would increase the
economic impact and would increase the incentive that we have
not only for our partner countries that we are working with but
for those who want to engage with MCC.
Senator Cardin. That is helpful.
Mr. Chairman, it would be helpful if you could get us
information as to where additional resources would be used, if
made available, for those of us that are trying to get you more
support in regards to congressional appropriations.
Mr. Cairncross. I appreciate it, Senator, and we are very
happy to follow up.
Senator Cardin. Thank you.
The Chairman. Thank you, Senator Cardin.
Senator Young.
Senator Young. Thank you, Chairman.
Mr. Cairncross, great to see you. Good visiting with you
the other day, and I enjoyed our conversation there.
I am going to pick up on a couple of topics we were not
able to discuss, one being your really important work
partnering with Ivanka Trump and the White House and USAID on
global empowerment of women. I just think that is essential.
The more and more that I hear from development experts
increasingly, I look to this as a key component of ensuring
there is sustainable development in these developing countries.
So is it your intention--perhaps there are ongoing
efforts--to institutionalize this emphasis on women's economic
empowerment?
Mr. Cairncross. Absolutely, Senator. First, I think it is
just basic. You cannot have a successful economy if 50 percent
of your population is locked out of it. And the data backs that
up to boot.
MCC has always taken this issue seriously. We had a gender
inclusion unit in 2006. In 2019, we expanded our gender in the
economy indicator not only to take in more data. So rather than
10 different data points in an economy for gender inclusion, we
are now at 40. And this is something that, yes, absolutely we
will be pressing ahead on, and we are looking to design on the
economic analysis of our projects--take that gender lens and
make sure that that is part of it because it touches so many
pieces of what we do.
Senator Young. And you mentioned data. Really MCC is known
for not only collecting data but really sort of rigorously
evaluating what you have, holding people accountable to
results, measuring success. And I think that has had some
positive spillover effects throughout the Federal Government.
So I want to commend all of those working at MCC for that point
of emphasis.
You know, one of the threshold questions, building on the
line of inquiry from Senator Cardin about resources, is we now
have a Development Finance Corporation created through the
BUILD Act. I am proud of that piece of legislation and DFC. I
see high promise for its future. But it is unclear to me
whether DFC is regarded perhaps incorrectly, and I will give
you an opportunity to disabuse us of that. Is DFC regarded as a
competitor to MCC in some respects, or are they complementary?
I want you to speak to that issue.
Mr. Cairncross. Sure. First, we are very excited and thank
you to the committee for the support of the BUILD Act. I think
it is a great thing that the DFC is coming online. Absolutely
do not view it as a competitor. I view it----
Senator Young. I thought you would say that.
Mr. Cairncross. I view it as--on the development arc, MCC
occupies the space prior to private capital coming in and
making those investments. And we concentrate on the enabling
environment. So what is important for DFC, and frankly what
OPIC does now, is identifying what are the risks, what are the
things that are holding back that investment in an economy, and
how can MCC work to target those reforms and decrease those
risks and make sure that the government of our partner
countries are focused on that sort of reform as well.
Senator Young. That is really helpful. So I mean maybe we
can think of this almost like a startup business. It is
analogous. Right? You require venture capital early on and then
private equity comes in and so forth. So they are
complementary, as you described. We need to keep that in mind
as we think about resource allocation in the areas like you
mentioned. There are still some opportunities to invest in MCC.
China. Their global influence is broadly understood to be
on the rise. They have a different development model, one that
is predatory in nature oftentimes through their Belt and Road
Initiative. This is a different model. This is one that does
not aim to breed dependency, but instead self-reliance. How can
we better leverage through our development and our diplomacy
efforts, through our global public relations efforts, the good
efforts of MCC to demonstrate that we are a better partner for
developing countries?
Mr. Cairncross. Well, Senator, I think that is absolutely
right. We are not designed to compete on scale in any way with
Belt and Road, but MCC is a tremendous face for an alternative
model and it is one of self-determination. It is one of
openness and transparency. It includes the civil society of a
government, makes a government more responsive to its people.
So that is something that we try to leverage, and it is a great
story--this agency. And I think that story needs to be told to
more and more people.
And so one of the things that I have tried to do is meet
internationally and domestically with members of the private
sector in particular to make clear what we are doing. And the
response to that, and also the response of the partner country
governments that I have dealt with, is overwhelmingly positive.
And one in particular was very direct and said before MCC came
to our country, we did not know how to bid these projects out
in the right way. We were talking a different language to the
private sector. We want U.S. company engagement. We want
private sector engagement. The state-owned enterprise model has
not been positive for us. We want further engagement. Help us
more. And I think that is very important.
And I would welcome the committee's ideas and support on
ways to communicate that more broadly.
Senator Young. Well, I think each Member of Congress,
particularly members of this committee, have an opportunity and
a responsibility to tout the successes of MCC, to talk about
how this is a model, as I indicated, designed to ensure that
countries are self-reliant in the future.
Through my line of questioning, I did not want to suggest
in the slightest that word is not getting out. In fact, the
best evidence, as you and I discussed the other day, that word
is getting out about the efficacy and attractiveness of this
model is the fact that the non-compact neighboring countries
and regional countries and even some countries further afield
are making efforts to become compact-eligible. So the mere
possibility of receiving the funding and the technical
assistance associated with MCC is enticing. And I just commend
you and your entire team for your leadership.
Mr. Cairncross. Thank you, Senator. And I think it is
important. Oftentimes the focus is on what MCC does and the
hard infrastructure projects, but just as important is how we
do it. That, frankly, is even more lasting and powerful in
terms of open procurement, merit-based hiring, the sort of
personnel standards that the MCAs in country have to follow,
the stakeholder buy-in and the community work that needs to be
done.
I have sat with beneficiaries, in particular in El
Salvador, who began by telling me they were very skeptical of--
it was a water treatment project that we were doing. They were
skeptical of the effects on that particular village, but they
appreciated the government's effort, their own government's
effort, to engage with them and walk them through what the
benefits of this would be. And they are now supportive of it.
And that sort of relationship between civil society and our
partner countries, the government, I think is a great story for
what we are doing in country.
Senator Young. I agree. Thank you.
The Chairman. Thank you.
Senator Shaheen.
Senator Shaheen. Thank you.
And thank you, Mr. Cairncross, for being here today and for
your service at the Millennium Challenge Corporation.
I want to follow up a little bit on Senator Young's
questions about women's empowerment and support for that
through MCC.
I understand that last month you traveled to Morocco with
Ivanka Trump. I was very happy to see that MCC signed an
agreement with the Government of Morocco to promote female land
ownership within the framework of the Women's Global
Development and Prosperity initiative, the W-GDP.
So can you talk a little bit more about how MCC works with
the Office of Global Women's Issues at the State Department to
prioritize women's economic empowerment?
Mr. Cairncross. Sure. Senator, our interagency
communications with all our board members are very strong, and
women's economic empowerment--it is called WEE internally--is
something that I put at the top of the priority list. And in
fact, it now is being baked into every aspect of what we are
doing on our project-by-project basis. But we have had
tremendous interagency support from the State Department, from
USAID, from the White House on this effort.
Senator Shaheen. So if Kelley Currie is confirmed as
Ambassador at Large for Global Women's Issues, how would you
see things changing, or would you see--I am assuming that with
leadership in that position, that that is helpful as we think
about how we implement W-GDP. But do you see any changes that
will occur in the working relationship and how you continue to
foster women's empowerment?
Mr. Cairncross. Senator, I think the only change that I
would see would be in a positive direction. The more
engagement, the better. I am sure we will, upon her
confirmation, meet very quickly. I would be happy to do travel
but make sure that we are focused on these issues
collaboratively. I know it is one of the best dollar-for-dollar
investments that we make as an agency.
And I just have to say it is tremendously rewarding to be
in country and talk to the beneficiaries, and it is remarkable
what a missed opportunity this is in so many places and it has
been for so long. So it feels great to be part of a team that
is working on it.
Senator Shaheen. Good. Thank you.
I now want to switch to the Western Balkans because that
continues to be a part of Europe that faces challenges, many of
them economic, and their economic success is critical to their
Western integration and integration into the transatlantic
community. I know that is a place where China is increasingly
investing in the region.
So I was pleased to see that in September of 2017, MCC and
the Government of Kosovo signed a $49 million threshold program
to implement policy and institutional reforms in the areas of
energy and rule of law. So can you update us on how that is
going in Kosovo, whether there are other things that we should
be thinking about in Congress as we try and support what is
happening there?
Mr. Cairncross. Sure. We do have the ongoing threshold
program in energy efficiency and rule of law. But we also are
in development on a compact that will be in the energy sector
as well. And so that will be the larger infrastructure project,
the 5-year project. And like I say, that is in development, but
we expect to continue to work closely with the committee and
its staff so there is full eyes on what we are doing in Kosovo.
But the threshold program is proceeding well. We are pleased
with it, and that is frankly the reason why we are proceeding
on a compact.
Senator Shaheen. So what does that mean for next steps? You
said you are looking at a 5-year horizon on the compact.
Mr. Cairncross. So the way that goes, Senator, is it is in
the same sector. It will be an energy sector compact. And we
have gone through the initial constraints analysis and root
cause analysis. So we are now looking at the various projects
that would address those core constraints on economic growth.
Once we have identified those, it will go through the
investment management committee internally, but we will be in
close contact with the committee and we will keep you updated
as we are updated.
Senator Shaheen. And are there other neighboring countries
in the Balkans that you think are potential candidates for
working with MCC?
Mr. Cairncross. Well, the nearest, Senator, in the region
would be Georgia where we just wrapped up a second very
successful compact. They have now graduated out of our income
pool. And I am happy to follow up with more information, but I
do not believe that there is a candidate country that is on the
cusp in the region.
Senator Shaheen. What about Bosnia? Is that a place where
you have done any work and have had any discussions with folks?
Mr. Cairncross. We have not, Senator. Again, this comes
back to our selection criteria, and I do not know, sitting
here, where they stand on our scorecard, but I am happy to
follow up with your office on that.
Senator Shaheen. That would be great. I appreciate that. I
think Bosnia is one of the other countries in the Western
Balkans that has significant economic challenges, and if there
are ways that we can encourage them to continue to look West,
it is really important to do that.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Shaheen.
Senator Gardner.
Senator Gardner. Thank you, Mr. Chairman.
Thank you, Mr. Cairncross, for your service and testimony
today.
When I came into the committee hearing, you were talking to
Senator Young about the BUILD Act and some of the work that we
have done in this committee regarding that legislation.
We have also passed legislation, the Asia Reassurance
Initiative Act. A number of members of this committee helped
provide $1 billion over 5 years to the State Department's human
rights defenders fund. That is just one of the things that ARIA
would do.
We recently passed the Taiwan Allies International
Protection and Enhancement Initiative, the TAIPEI Act, which
talks about how we can help improve Taiwan's standing around
the world. And it comes in response to increased Chinese
pressures, quite frankly bullying tactics, intended to restrict
Taiwan's international space and global diplomatic recognition.
MCC obviously plays an important role in our foreign policy
and the efforts to build economies, to engage countries with
good governance. You talked about contractual opportunities to
improve the rule of law.
In December of last year--I believe it was--MCC entered
into an agreement, or entered into an opportunity, with the
Solomon Islands to fund a program. But in September, the
Solomon Islands switched their diplomatic relations to Beijing.
So MCC did this in December of last year, and Beijing convinced
them to switch their recognition in September of this year.
So could you talk about maybe some of the strategic
thinking that MCC had back in December and what implications
the switch in September means and whether or not we should
change our course with Solomon Islands going forward?
Mr. Cairncross. Sure. Senator, we are with a threshold
program in the Solomon Islands. The MCC board selected the
Solomons as a partner country. MCC's focus on poverty reduction
through economic growth and that singular laser focus is what I
believe has kept the agency successful, and adherence to that
model has maintained a strong bipartisan support for a long
period of time.
And so we look at--when we are making board selections, the
agency looks at the arc of a country and the trajectory that
they are on. Is this a country that is trying to do the right
thing and worthy of our support and stamp of approval? And so
when something happens in the interim, we of course have to
assess what the impact of that is, and if it is still in
alignment with our eligibility criteria and they are adhering
to what they said they were going to do.
I understand and I appreciate the concern that you have on
that particular issue, and that is something that we are
monitoring and talking about as an agency and a board.
Senator Gardner. And if you look out in other countries
that perhaps are under the same or similar pressure from
Beijing, does that enter into the conversations you have with
those countries?
Mr. Cairncross. It does, Senator. And the difficult thing
is, like I say, we really are not designed to compete on scale.
So what we are is an alternative model. And I believe that what
we bring with that model is very powerful. It is a signal not
only to the stamp of approval for the government and a
knowledge transfer on a process of how to execute a sustainable
project that will be long-lasting and has your own people's
buy-in. But it is also a signal to the investment world and
capital looking to come into a market that this is some place
worthy of a further look. And so that is something that is a
powerful leverage tool for us.
Like in Cote d'Ivoire, when I was talking about with the
Bechtel MOU, so that is a great example of--that will produce a
prioritized list of national infrastructure planning that the
government of Cote d'Ivoire has signed off on. We have signed
off on as signatories to it. And it has been produced by an
American, but highly specialized, competent firm. And so were
projects to be engaged that are not on that list, it would
raise questions as to who was making those decisions, how they
were being made, and then it would be publicly known for the
people of Cote d'Ivoire that that was not on the list. And so
that is the sort of thing that I think we can bring to the
table and serve as a great point of leverage for the United
States.
Senator Gardner. Great. Thanks, Mr. Cairncross.
Thanks, Mr. Chairman.
The Chairman. Thank you.
The ranking member has, I think, some more questions for
you. Before we do that, I just want to briefly touch on a
couple of points, and that is, can you give me a general
thought about your thinking on your relationship with the new
International Development Finance Corporation, realizing that
is a work in progress and it is getting stood up? You know, it
is not exactly what you do, but it is related and it seems to
me needs to dovetail. What are your thoughts on that?
Mr. Cairncross. I have had a great several meetings with
Adam Boehler, the recently confirmed head of the agency. We are
looking forward to the agency coming fully online. And we have
had a great relationship with OPIC in the past as well and
continue that.
We talked about ways to work together so that there are
full eyes on our pipeline, what we are doing in country, and
then what their pipeline looks like, and in particular, what
their investors, as I said, are worried about in these markets.
What are the risk factors? What are the concrete things that
hold back investment in a market? There is a lot of talk about
corruption or rule of law conceptually, but I think I am a fan
of targeting concrete things that can be changed and measured.
And that is what we are seeking collaboratively to identify.
The Chairman. I appreciate that.
On a more parochial note, my State has a number of
connections with Mozambique. And I was there this summer, and
obviously there are some reasons to be concerned there. I
wonder if you could give me your thoughts on that and if you
think that Mozambique is still eligible under your checklist.
Could you give me your thoughts on that, please?
Mr. Cairncross. Sure. I understand and appreciate the
concerns. You are talking about the recent elections, Senator?
The Chairman. Yes, amongst other things, but certainly that
is one of them.
Mr. Cairncross. Mozambique passes the scorecard this year.
They have been a strong scorecard performer historically. And
this is a place where we have engaged in a compact in the past.
That compact was largely successful moving forward. There are
some implementation issues that I know are being focused on an
addressed currently. But it is a country that qualifies and I
believe in every environment where we work, we face hard
challenges. We do not work in easy places, and Mozambique is no
different. So any engagement with any partner country is
reliant on an expression and a commitment by the partner
country government to engage in the sorts of reforms that we
are trying to achieve.
The Chairman. I understand that, and obviously if it was an
easy place, there would be no need for you to be there. So I
understand the challenges in that regard.
One of the things that always strikes me about developing
countries is how quickly they can go south on you. And that is
something that is always of concern. So I would underscore the
need for you, for your agency, when you start seeing symptoms
or you start seeing evidence, that you act quickly to try to
turn the thing around because we have seen lots and lots of
examples about how quickly these countries can slip off the
edge.
Mr. Cairncross. Senator, I think, as I said in my
statement, I think accountability and the agency's credibility
is what has made it as successful as it has been. I also
believe in open and frank communication with our stakeholders,
our board members, this committee, and making sure people have
an understanding of the situation in country and what we are
doing. So I would expect that that relationship would continue.
The Chairman. I appreciate that.
Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
I just have some compact-specific questions.
MCC recently initiated the termination of the $190 million
compact with Ghana because of irreconcilable differences
surrounding the host government's disputed allegations of
fraud. And I think you were all acting appropriately. But I
want to get a few assurances on a few matters here.
What impact will these returned funds have on MCC's budget?
For example, will it affect your fiscal year 2021 budget
request? Will you advocate for maintaining MCC's annual budget
request despite these funds returning to the MCC budget?
Mr. Cairncross. Yes, Senator. I will advocate for that. I
do not view the de-obligation of those funds as tied to a
budget request. I think that making it a zero sum game would be
bad for at least two reasons. The first is just the precedent
of a lower request or a lower number would be hard to then
change. And just as importantly, I think that it would skew
compact agency decision-making on the accountability side. And
so, like I say, I think that is an existential matter for the
agency. I think without that credibility, we would be unable to
function.
Senator Menendez. I agree with you. Will you commit to
dutifully applying these funds appropriately to MCC operations
and programs?
Mr. Cairncross. Absolutely.
Senator Menendez. What lessons from the experience are you
applying to the rest of the Ghana compact?
Mr. Cairncross. Sure. Senator, well, one of the lessons is
that having a measurable points of conditions precedent and
tranching out the money in a measured way is of vital
importance. And we are engaged in Ghana with $308 million in
the remainder of that energy compact. We are working diligently
with them to make sure that that is as successful as possible,
and our team is looking at ensuring that that remaining compact
is as impactful as possible. And the Government of Ghana has
committed to infusing its own capital into our compact as well.
And so I think that that is a good partnership.
Like you say, there were irreconcilable differences for the
disbursement of that $190 million. The key component of that
was the privatization of the state power utility and that
concession moving forward. These are sovereign nations,
Senator. Sometimes they make a different decision. All we can
do is be clear about what the consequence is with respect to
the grant money that we are engaged in that contract or that
compact with them before it goes out.
Senator Menendez. Let me turn to Sri Lanka. They just
elected Gotabaya Rajapaksa, who is implicated in war crimes and
human rights violations during the civil war, as its president.
He named his brother Mahinda, also suspected of war crimes and
human rights abuses, as prime minister and minister of several
other ministries, including finance and economic affairs. And
another brother has been placed in charge of multiple
ministries. There must be a dearth of human talent in the
country.
The new foreign minister has said that the government will
review and revisit the 2015 U.N. Human Rights Council
resolution promoting accountability and reconciliation
following wartime abuses. That word ``review'' to me signals a
backsliding on these commitments, not progress.
So I state all those facts to get a sense from you. Will
this change in government affect MCC's compact? What discussion
has MCC had with the new government regarding its eligibility
to proceed with the compact? And if the election is not
disqualifying on its face and instead you see the compact as
leverage for gaining a commitment to reform or a public embrace
of them protecting human rights, what form of proof of that
commitment will MCC need the new government to deliver in order
to proceed with the compact?
Mr. Cairncross. Sure. Well, Senator, just to back up and
add a little bit of context, the Sri Lankan cabinet did approve
the compact immediately prior to the election. MCC deliberately
did not sign that compact in order to see the outcome of that
election and then to make an assessment about what the new
government would look like and whether or not this is a
government that is responsive to the people of Sri Lanka.
And so moving forward, at a bare minimum what MCC would
need to see is an expression of support and embracing the sort
of reforms that we are targeting in that compact, that this is
something that is beneficial to the Sri Lankan people. But we
have had a very, I believe, good and open dialogue with your
staff and the committee staff on this question. We are
continuing to monitor this very closely, and I expect that we
will be in close communication moving forward, certainly before
we make any decision.
Senator Menendez. Do you envision any conditions that may
constitute a violation of this compact based on Rajapaksa's
history?
Mr. Cairncross. Senator, I am not sure I have a great
answer for that question because I do not know what this will
look like moving forward. But I do know that we will be
requiring, like I say, at a bare minimum, a strong expression
of support by the new government for the reforms that we are
pushing for the Sri Lankan people.
Senator Menendez. We will be looking forward to see what
those expressions are.
Let me turn to Mongolia for a moment. They are pursuing a
$350 million compact to improve capacity and access to safe
drinking water supplies. That is good stuff, as well as funding
responsible industrial uses for reclaimed wastewater.
But I have concerns about how the Mongolians plan to meet
two specific conditions of the compact I mentioned in my
opening statement. One is to address, rather than service, the
water authority's $73 million debt with a shell game that would
move the debt off the utility books and put it on the books of
another department within the government.
Additionally, the Mongolian Government has yet to develop a
sustainable financing policy to cover long-term maintenance and
operation of the new water system. They view raising revenues
as a political problem and, in my mind, seem rather cavalier
about developing an appropriate revenue mechanism.
Would MCC approve of a country moving debt around on its
books as an adequate solution for addressing complying with the
compact's outstanding debt service requirements?
Mr. Cairncross. Two parts to that answer, Senator. The
first is with respect to the tariff regime. That is something
that we are engaged in working with the Mongolians on. It is
vital to the sustainability of the project. There have been
increases in that tariff since we began working with them. Of
course, tariffs related to water are tricky issues, but this
something that the government has committed to us as part of a
condition to move forward on.
With respect to the debt, it is a sovereign debt for the
Government of Mongolia, and our engagement with this has
identified that debt and it is now a public issue. People are
aware of it, and the government is forced to deal with that
debt. And we are engaged in trying to find ways to help them do
so. But this is typically, in many cases, debt that is hidden
off the books. The people of the country are not aware of it.
The government does not discuss it. It is now in the open, and
it, per your question, in a hearing needs to be addressed.
Senator Menendez. I understand and appreciate it is a
sovereign debt. But like every sovereign decision, to the
extent that we are going to engage and commit money, we have an
opportunity to raise the question. I would hate to see a
precedent where just moving debt around on a ledger sheet
somehow is the way in which we meet with financing obligations
at the end of the day. And so I just commend that to your
attention as a concern.
And then finally, I have one or two others, but I am not
going to belabor it. I will submit them for the record.
But on Morocco, its last MCC compact wrapped up in 2013
after spending about $650 million on projects that included
improving fruit tree productivity, supporting local artisans,
improving production for small scale fisheries.
Yet between 2016 and 2017, Morocco saw widespread protests
through the northern countryside against poor governance,
corruption, unemployment, among other things. There remains
widespread frustration at the lack of economic opportunity. It
has pushed many young Moroccans to ultimately migrate to
Europe, which has become one of the most significant, largest
routes into Europe from Africa.
So why was a second compact granted to Morocco so soon
after the first?
Mr. Cairncross. Senator, that was, of course, before I
arrived at the agency, and I would be happy to follow up with
you on the specific reasons, the board direction in that
regard.
What I can tell you is the part of the project that we are
engaged in now is focused on human capital, in particular TVET
training and even more specifically focused on women in the
economy. And we have engaged one of the first cash-on-delivery
programs in that regard, which is in order for MCC funds to go
to the NGOs who are doing that job training, there has to be
evidence that the trained individual has been gainfully
employed for 6 months. And so that is seeing results. We toured
an aviation facility, repair facility, and it was a fascinating
look and frankly very inspiring to talk to the beneficiaries of
the program. And so that sort of focus on human capital we hope
has a good result for Morocco.
Senator Menendez. Well, hopefully it has a deterring effect
on human capital fleeing the country at the end of the day.
Mr. Cairncross. That is right.
Senator Menendez. The chairman could probably attest to the
fact that I am sparing in my compliments. Unfortunately, these
days I have not had a lot of reasons to do so from my
perspective. But I must say you have acquitted yourself well
here. If you follow through on the things that you said both in
your answers to questions during your confirmation and what you
have made here, I think we have a pretty good future ahead for
the MCC.
Mr. Cairncross. I appreciate it. Thank you, Senator.
The Chairman. Thank you, Senator Menendez. Well said I
think.
And we are looking forward to your continued leadership
there, Mr. Cairncross. Thank you for attending here today and
briefing us.
For the information of the members, the record will remain
open until the close of business on Thursday. If there are such
questions, we would appreciate that you get to them as quickly
as possible so that we can conclude the hearing transcript.
So with that, this hearing is adjourned.
[Whereupon, at 11:18 a.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Responses of Hon. Sean Cairncross to Questions
Submitted by Senator Robert Menendez
Question. Prior to your confirmation, it became evident that the
White House Presidential Personnel Office (PPO) was using MCC's
generous allotment of AD slots to provide political patronage jobs to
Trump loyalists with questionable qualifications. Brock Bierman, during
his brief stint as acting CEO, took this issue seriously though was
fired before he could act to resolve these issues. Do you intend to
pick up where he left off or execute a similar plan to evaluate the
appropriate use of MCC's hiring authorities?
Answer. The needs of the agency and the mission drive hiring
decisions at MCC. Those decisions are based on the qualifications of
the individuals and the needs of the roles that they will fill. MCC's
hiring decisions, since I have been at the agency, have been MCC's
decisions.
Question. I will not rehash Robert Blau's transgressions, other
than to say that he made statements to MCC personnel that were
culturally offensive and highly inappropriate in any work environment,
let alone a federal agency. Thankfully, Mr. Blau is gone. His words
still raise concerns about MCC's commitment to workforce diversity.
This committee must understand that his legacy is not having a lasting
impact on MCC. How do you feel a diverse workforce at MCC enhances the
Agency's effectiveness?
Answer. One of my top priorities is human capital and ensuring
MCC's talented, diverse and dedicated staff are fully empowered to do
their best work. I feel strongly that diversity improves the decision
making of any organization, particularly an international development
agency like MCC. I have made my position on this very clear to staff--
starting my second day on the job during an agency all-hands meeting--
and believe it has resonated throughout the agency.
Question. Morale was reportedly very low among MCC staff throughout
2017 and 2018. What steps have you taken to restore morale among MCC's
workforce?
Answer. I take staff morale very seriously and I make an effort,
every day, to continuously improve staff engagement. For example, I've
taken steps to improve transparency and communication around key agency
decision points. These steps include holding structured listening
sessions with staff, hosting a senior leadership retreat to set common
goals and objectives, and then providing all staff an opportunity to
weigh in and ask questions. I also opened up MCC's annual budget
planning to all staff so that the team understands how and where
resources are being spent. Additionally, I've met with many of MCC
internal groups including the Women's Leadership Group, the MCC Family
Group, the Women's Economic Empowerment Working Group and nearly every
country team for each of MCC's country programs to open lines of
communication and show my support for their work. I routinely walk the
halls of MCC to ensure that I am plugged into staff morale throughout
the agency and that I hear directly from them on their ideas, thoughts,
and concerns.
Question. MCC recently initiated the termination of $190 million of
its compact with Ghana because of irreconcilable differences
surrounding the host government's disputed allegations of fraud. I need
assurances on a few matters. What impact will these returned funds have
on MCC's budget? Will it affect MCC' FY21 budget request?
Answer. The Ghana Compact partial termination and pending de-
obligation is not tied to MCC's budget request. MCC's budget request
would not influence country eligibility decisions; rather, these
decisions are based in our core principles of accountability. While MCC
is still assessing exactly how the de-obligated funds will be spent,
they will be dutifully applied to MCC's compacts and threshold programs
currently under development.
Question. MCC is pursuing a $350 million compact to improve system
capacity and citizen access to safe drinking water supplies as well as
funding responsible industrial uses for reclaimed wastewater. The
Mongolian government has yet to develop a sustainable financing policy
to cover long-term maintenance and operation of the new water system.
What is MCC doing to promote or pressure Mongolia to be more
responsible with its approach to project finance?
Answer. MCC's $350 million compact with Mongolia aims to sustain
private sector-led growth in the country's capital city of Ulaanbaatar
by increasing its available supply of water through the introduction of
new wellfields, plants for water purification and wastewater recycling,
and capacity building initiatives. Central to the compact is the
Mongolian government's commitment to the long-term sustainability of
Ulaanbaatar's water sector, including the financial sustainability of
its utility. The compact contains several conditions precedent to
enable long-term sustainability in the sector, including a requirement
that--prior to any disbursement of funds or commencement of civil
works--the Mongolian government address the utility's existing long-
term debt. Further, the Mongolian government is required to adopt a
plan that achieves full recovery of the costs of its operations,
maintenance, and depreciation, through practical and sustainable
increases in water and wastewater tariffs and fees. MCC will then
support the Mongolian government's implementation of the plan during
the 5-year compact program through a variety of sustainability measures
and policy reforms, such as: studies to inform equitable changes to its
tariff structure; improvements in data sharing, planning, and
coordination among municipal agencies; and interventions to strengthen
operational capacities of Ulaanbaatar's water utility.
Question. Secretary of State Pompeo, at the direction of the
President, has suspended nearly all foreign assistance to El Salvador,
Honduras and Guatemala administered by both the State Department and
USAID. Fortunately, MCC's programs in El Salvador and Guatemala have
avoided the draconian and misguided budget axe OMB is wielding over
State and USAID. A serious approach to addressing the migrant crisis
from these countries must include efforts to address the root causes of
migration, which for many is the absence of economic opportunity. How
is MCC measuring the impact its compact in El Salvador and threshold
program in Guatemala are improving economic opportunities for
vulnerable populations that are likely to attempt migrating North?
Answer. MCC's mission to reduce poverty through economic growth--
and as such, our programs aim to consolidate democratic and free-market
reforms to improve the existing economic conditions in part to activate
sustainable job creation for a country's citizens.
MCC's compact in El Salvador seeks to improve economic
opportunities for its youth primarily through its investments in
education and technical and vocational training, complemented by
additional investments to promote economic growth and private
investment in the country. MCC is supporting interventions such as
increased classroom time and teacher training in approximately 349
schools in the coastal zone of El Salvador where dropout rates are the
highest, with a focus on grades 7-12. Additionally, MCC's assistance to
reform the country's technical and vocational training aims to reduce
the gap between the skills demanded by the labor market and those
supplied by the educational system and training providers. These
complement the compact's investments to reform El Salvador's business
environment and increase the productivity of firms engaged in the
international trade of goods and services.
The impact evaluation for MCC's compact in El Salvador will
determine whether students attending a school within an integrated
system are better off than they would have been without the
intervention, using estimates to measure education outcomes such as
graduation, promotion, dropout rates, and academic performance of the
students. The study will also assess long-term impacts of the
intervention on post-secondary education enrollment, employment, and
income.
In Guatemala, MCC is providing a $28 million grant to support the
Government of Guatemala to improve domestic revenue mobilization and to
improve the quality of education to provide Guatemalan youth with the
skills they need in the job market. MCC is monitoring tax revenue as a
share of GDP, customs revenue as a share of GDP, as well as time to
import. MCC is also monitoring lower level outcomes related to audit
quality and how well the risk model identifies non-compliant customs
declarations. On the Education Project, MCC is working with the
Ministry of Education to monitor learning outcomes of students and
teachers and the enrollment rates of students. MCC is also funding a
randomized controlled trial to assess the impact of the teacher
training program on student learning outcomes.
Question. There remains widespread frustration at the lack of
economic opportunity that has pushed many young Moroccans to emigrate
to Europe, which has combined with shifting migration patterns across
Africa to make Morocco and the Western Mediterranean in general the
largest route into Europe from Africa. What lessons were learned from
both the earlier compact and the protests of 2016 and 2017 and how are
those lessons being implemented in the current compact? How is this
Morocco compact addressing increased migrant flows, of both Moroccans
and transiting migrants, to Europe?
Answer. The first compact in Morocco was successful, while the
widespread geographical distribution of projects (in particular the
Fruit Tree Productivity Project) was a management challenge. The second
compact impacts many regions of the country, while it has for several
activities (such as the Secondary Education Activity) been more
concentrated geographically to facilitate improved management. In
addition, the second compact with Morocco includes a significant focus
on integrating policy and institutional reform as well as technical
assistance into projects to help ensure long-term sustainability and
impact.
Addressing migration is not an explicit objective of the compact,
but the compact seeks to improve the employment outcomes and job
placement of Moroccan youth by improving basic and technical skills
through the Education Project.
Question. It is my understanding that a third compact for Georgia
was under contemplation. I realize this idea may have only been in
circulation prior to your arrival in the building but I need some
assurances on the record that MCC is no longer contemplating this
unprecedented idea. Is MCC considering a third Compact for Georgia?
Answer. No
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Letter to Jonathan Nash From Senator Robert Menendez
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