[Federal Register Volume 76, Number 246 (Thursday, December 22, 2011)]
[Pages 79712-79714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32733]



[MCC FR 11-15]

Report on the Selection of Eligible Countries for Fiscal Year 

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.


SUMMARY: This report is provided in accordance with section 608(d)(1) 
of the Millennium Challenge Act of 2003, Public Law 108-199, Division 
D, (the ``Act''), 22 U.S.C. 7708(d)(1).

    Dated: December 16, 2011.
Melvin F. Williams, Jr.,
VP/General Counsel and Corporate Secretary, Millennium Challenge 

Report on the Selection of Eligible Countries for Fiscal Year 2012


    This report is provided in accordance with section 608(d)(1) of the 
Millennium Challenge Act of 2003, Public Law 108-199, Division D, (the 
``Act'') (22 U.S.C. 7707(d)(1)).
    The Act authorizes the provision of Millennium Challenge Account 
(``MCA'') assistance under section 605 of the Act (22 U.S.C. 7704) to 
countries that enter into compacts with the United States to support 
policies and programs that advance the progress of such countries in 
achieving lasting economic growth and poverty reduction, and are in 
furtherance of the Act. The Act requires the Millennium Challenge 
Corporation (``MCC'') to determine the countries that will be eligible 
to receive MCA assistance during the fiscal year, based on their 
demonstrated commitment to just and democratic governance, economic 
freedom, and investing in their people, as well as on the opportunity 
to reduce poverty and generate economic growth in the country. The Act 
also requires the submission of reports to appropriate congressional 
committees and the publication of notices in the Federal Register that 
identify, among other things:
    The countries that are ``candidate countries'' for MCA assistance 
during fiscal year 2012 (``FY12'') based on their per-capita income 
levels and their eligibility to receive assistance under U.S. law, and 
countries that would be candidate countries but for specified legal 
prohibitions on assistance (section 608(a) of the Act (22 U.S.C. 
    The criteria and methodology that the Board of Directors of MCC 
(the ``Board'') will use to measure and evaluate the policy performance 
of the ``candidate countries'' consistent with the requirements of 
section 607 of the Act in order to select ``MCA eligible countries'' 
from among the ``candidate countries'' (section 608(b) of the Act (22 
U.S.C. 7707(b))); and
    The list of countries determined by the Board to be ``MCA eligible 
countries'' for FY12, with justification for eligibility determination 
and selection for compact negotiation, including with which of the MCA 
eligible countries the Board will seek to enter into MCA compacts 
(section 608(d) of the Act (22 U.S.C. 7707(d))).
    This is the third of the above-described reports by MCC for FY12. 
It identifies countries determined by the Board to be eligible under 
section 607 of the Act (22 U.S.C. 7706) for FY12 and countries with 
which the Board will seek to enter into compacts under section 609 of 
the Act (22 U.S.C. 7708), as well as the justification for such 
decisions. This year, for the first time, the report also identifies 
countries determined by the Board to be eligible for MCC's Threshold 
Program under section 616 of the Act (22 U.S.C. 7715).

Eligible Countries

    The Board met on December 15, 2011, to select countries that will 
be eligible for MCA compact assistance under section 607 of the Act (22 
U.S.C. 7706) for FY12. The Board selected the following countries as 
eligible for such assistance for FY12: Benin, Cape Verde, El Salvador, 
Georgia, Ghana, and Zambia.


    In accordance with the Act and with the ``Report on the Criteria 
and Methodology for Determining the Eligibility of Candidate Countries 
for Millennium Challenge Account Assistance in Fiscal Year 2012'' 
formally submitted to the Congress on September 29, 2011, selection was 
based primarily on a country's overall performance in three broad 
policy categories: Ruling Justly, Encouraging Economic Freedom, and 
Investing in People. The Board relied, to the maximum extent possible, 
upon transparent and independent indicators to assess countries' policy 
performance and demonstrated commitment in these three broad policy 
areas. The Board compared countries' performance on the indicators 
relative to their income-level peers, evaluating them in comparison to 
either the group of low income countries (``LIC'') or the group of 
lower-middle income countries (``LMIC'').
    As outlined in the ``Report on the Criteria and Methodology for 
Determining the Eligibility of Candidate Countries for Millennium 
Challenge Account Assistance in Fiscal Year 2012'', a number of changes 
were adopted to update the criteria and methodology for FY12. MCC 
published and the Board considered both the traditional and updated 
scorecards this year. MCC plans to transition to exclusive use of the 
updated scorecard in the future, and there was deeper consideration of 
performance on the new scorecard for FY12. When performance differed 
across the scorecards, MCC outlined the reasons for the Board. 
Scorecards reflecting each country's performance on the indicators are 
available on MCC's Web site at http://www.mcc.gov/scorecards.
    The Board also considered whether any adjustments should be made 
for data gaps, data lags, or recent events since the indicators were 
published, as well as strengths or weaknesses in particular indicators. 
Where appropriate, the Board took into account additional quantitative 
and qualitative information, such as evidence of a country's commitment 
to fighting corruption, investments in human development outcomes, or 
poverty rates. In keeping with legislative directives, the Board also 
considered the opportunity to reduce poverty and promote economic 
growth in a country, in light of the overall information available, as 
well as the availability of appropriated funds.
    This was the third year the Board considered the eligibility of 
countries for subsequent compacts, as permitted under section 609(k) of 
the Act (22 U.S.C. 7708(k)). MCC has no explicit preference for either 
new or subsequent compacts, and sees the Board's selection decision as 
an annual opportunity to determine where MCC funds can be most 
effectively invested to support poverty reduction through economic 
growth in relatively well-governed, poor countries. However, in light 
of the fact that a large share of the best-governed low and lower-
middle income countries are already MCC partners, subsequent compacts 
are likely to be a consistent part of MCC's compact portfolio.

[[Page 79713]]

    In determining subsequent compact eligibility, the Board 
considered--in addition to the criteria outlined above--the country's 
performance implementing its first compact, including the nature of the 
country partnership with MCC, the degree to which the country has 
demonstrated a commitment and capacity to achieve program results, and 
the degree to which the country has implemented the compact in 
accordance with MCC's core policies and standards. To the greatest 
extent possible, this was assessed using pre-existing monitoring and 
evaluation targets and regular quarterly reporting. This information 
was supplemented with direct surveys and consultation with MCC staff 
responsible for compact implementation, monitoring, and evaluation.
    As with previous years, a number of countries that performed well 
on the quantitative elements of the selection criteria (i.e., on the 
policy indicators) were not chosen as eligible countries for FY12. MCC 
is aware that some stakeholders expressed concern that using the 
updated scorecard criteria might make the Board less selective in its 
eligibility decisions. This was not the case. The selection of two new 
compact countries and two new threshold countries is consistent with 
the highly selective standard the Board has previously established.

Countries Newly Selected for Compact Eligibility

    Using the criteria described above, Benin and El Salvador were 
selected as eligible for MCA assistance for a second compact under 
section 607 of the Act (22 U.S.C. 7706).
    As a candidate country under section 606(a) of the Act (22 U.S.C. 
7705(a)), Benin is one of the poorest countries in the world, but 
maintains relatively strong policy performance. It is particularly 
strong in the Ruling Justly category, where it passes all six 
indicators, and is recognized as a stable, democratic country in West 
Africa. In FY12, Benin passed the new indicator criteria, but it did 
not pass the old indicator criteria, due to performance in the 
Investing in People category. Both scorecards for Benin can be found 
here: http://www.mcc.gov/scorecards. By compact conclusion, Benin 
delivered all core construction targets and undertook an ambitious and 
complex series of policy reforms. This included letting a major port 
concession, undertaking changes to customs and port procedures designed 
to reduce corruption and improve port efficiency, and making 
improvements in the microfinance regulatory system. These activities 
allowed the Government of Benin to address some of their greatest 
development challenges and create new opportunities for economic 
growth. Over the next 20 years, MCC's port investment in Benin is 
expected to affect a regional import-export facility that not only 
serves the entire population of Benin, but also provides meaningful 
trade capacity for Mali, Niger, Burkina Faso, and Nigeria. Increased 
imports and exports could also open up the potential for new market and 
trade opportunities for U.S. businesses.
    This port project serves as an example of MCC and the Government of 
Benin working together to address a complex project that combined 
ambitious infrastructure investments and policy reform. While projects 
with this level of complexity are difficult, they embody MCC's mandate 
of reducing poverty through economic growth in poor, well-governed 
    As a candidate country under section 606(b) of the Act (22 U.S.C. 
7705(b)), El Salvador is a reform oriented country with a strong 
democracy and favorable investment policies. In FY12, El Salvador 
passed the new indicator criteria, but it did not pass the old 
indicator criteria, due to performance in the Investing in People 
category. Both scorecards for El Salvador can be found here: http://www.mcc.gov/scorecards. El Salvador's current compact is on track to 
achieving re-scoped objectives, and the investment is managed by a 
strong country-led MCA unit. At the compact mid-point, MCA-El Salvador 
was able to assume procurement responsibilities directly, which was a 
key step in resolving early delays in the procurement process, and 
setting the compact on track to achieve key targets. Throughout compact 
development and implementation, El Salvador has consistently 
demonstrated a commitment to take positive actions in pursuit of 
poverty reduction and economic growth. El Salvador is one of only four 
countries to be included as a pilot country for the Partnership for 
Growth (PFG) initiative. El Salvador's role as a pilot PFG country 
makes it uniquely situated to utilize compact resources effectively. In 
2011, El Salvador completed an economic constraints analysis, an 
exercise that forms the basis of MCC's compact development process. 
There is a high-capacity and experienced MCA team already in operation, 
and the Government of El Salvador and U.S. Government have, through the 
PFG, both committed to focusing energy and resources towards combating 
specific constraints to growth.

Countries Re-Selected To Continue Compact Development

    Four of the countries selected as eligible for MCA compact 
assistance in FY12 were previously selected as eligible. Reselection 
allows them to continue compact development and receive funding from FY 
2012. Two of these countries are in the LIC category: Ghana and Zambia. 
Two countries, Georgia and Cape Verde, are in the LMIC category.
    The Board reselected these countries based on their continued good 
performance since their prior selection. The Board determined that 
since their initial selection, there has been no material change in 
their performance on the indicator criteria that indicates a serious 
decline in policy performance. All four countries pass both sets of 

Countries Newly Selected for Threshold Program Eligibility

    For FY12, the Board selected Nepal and Honduras as eligible for 
threshold assistance. Nepal has not only been a consistently strong 
scorecard performer for multiple years (in FY12, it passed both 
scorecards), but it has also achieved a recent breakthrough in the 
implementation of its peace process, which is expected to help move 
forward the process of drafting a constitution and normalizing the 
political process. Honduras passes 16 of 20 indicators on the scorecard 
and performs just below the median on Control of Corruption. Honduras 
was a good partner and successfully completed a compact in 2010. Since 
suffering a serious setback--the political crisis of 2009--the 
government has taken a number of significant steps to restore the 
country's positive trajectory, in particular, taking steps to improve 
control of corruption through improved fiscal transparency.
    These selections are consistent with the recently re-designed 
threshold program. In FY 2010, MCC completed a review of its Threshold 
Program and developed a body of lessons learned. Under the re-designed 
concept, the new threshold country programs will no longer focus 
explicitly on trying to move indicator scores. Rather, the program will 
allow countries to diagnose binding constraints to economic growth and 
demonstrate the capacity and political will to make difficult policy 
reforms in partnership with MCC. This will contribute directly to the 
Board's understanding of a country's capacity to undertake the type of 
policy reforms typically required to enable a compact investment to 
have maximum sustainable impact.

[[Page 79714]]

Ongoing Review of Partner Countries' Policy Performance

    The Board also reviewed the policy performance of countries that 
are implementing compacts. These countries do not need to be reselected 
each year in order to continue implementation. Once MCC makes a 
commitment to a country through a compact agreement, MCC does not 
consider the country for reselection on an annual basis during the term 
of its compact. The Board emphasized the need for all partner countries 
to continue to improve their environment. If it is determined that a 
country has demonstrated a significant policy reversal, MCC can hold it 
accountable by applying MCC's Suspension and Termination Policy.

Selection To Initiate the Compact Process

    The Board also authorized MCC to invite Benin and El Salvador to 
submit a proposal for a second compact, as described in section 609 of 
the Act (22 U.S.C. 7708).
    Submission of a proposal is not a guarantee that MCC will finalize 
a compact with an eligible country. Any MCA assistance provided under 
section 605 of the Act (22 U.S.C. 7704) will be contingent on the 
successful negotiation of a mutually agreeable compact between the 
eligible country and MCC, approval of the compact by the Board, and the 
availability of funds.

[FR Doc. 2011-32733 Filed 12-21-11; 8:45 am]