[Federal Register Volume 83, Number 185 (Monday, September 24, 2018)]
[Notices]
[Pages 48336-48342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20646]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 18-12]


Report on the Criteria and Methodology for Determining the 
Eligibility of Candidate Countries for Millennium Challenge Account 
Assistance for Fiscal Year 2019

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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SUMMARY: This report to Congress is provided in accordance with section 
608(b) of the Millennium Challenge Act of 2003, as amended (Act). 
Section 608(a) of the Millennium Challenge Act of 2003 requires the 
Millennium Challenge Corporation to publish a report that identifies 
countries that are ``candidate countries'' for Millennium Challenge 
Account assistance during FY 2018. The report is set forth in full 
below.

    Dated: September 13, 2018.
Jeanne M. Hauch,
Vice President/General Counsel and Corporate Secretary.

Report on the Criteria and Methodology for Determining the Eligibility 
of Candidate Countries for Millennium Challenge Account Assistance in 
Fiscal Year 2019

Summary

    In accordance with section 608(b)(2) of the Act (22 U.S.C. 
7707(b)(2)), the Millennium Challenge Corporation (MCC) is submitting 
the enclosed report. This report identifies the criteria and 
methodology that MCC intends to use to determine which candidate 
countries may be eligible to be considered for assistance under the Act 
for fiscal year 2019.
    Under section 608(c)(1) of the Act (22 U.S.C. 7707(c)(1)), MCC 
will, for a thirty-day period following publication, accept and 
consider public comment for purposes of determining eligible countries 
under section 607 of the Act (22 U.S.C. 7706).
    This document explains how the Board of Directors (Board) of the 
Millennium Challenge Corporation (MCC) will identify, evaluate, and 
select eligible countries for fiscal year (FY) 2019. The statutory 
basis for this report is set forth in Appendix A. Specifically, this 
document discusses the following:

I. Which countries MCC will evaluate
II. How the Board evaluates these countries
    A. Overall
    B. For selection of an eligible country for a first compact
    C. For selection of an eligible country for a second or 
subsequent compact
    D. For selection of an eligible country for a concurrent compact
    E. For threshold program assistance
    F. A note on potential transition to upper middle income country 
status after initial selection

I. Which countries are evaluated?

    For scorecard evaluation purposes for FY 2019, MCC evaluates all 
candidate countries and statutorily-prohibited countries according to 
the following income groups:\1\
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    \1\ These income groups correspond to the definitions of low 
income countries and lower middle countries using the historic 
International Development Association (IDA) threshold published by 
the World Bank. MCC has used these categories to evaluate country 
performance since FY 2004. Our amended statute no longer uses those 
definitions for funding purposes, but we will continue to use them 
for evaluation purposes.
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     Countries whose gross national income (GNI) per capita is 
$1,875 or less; and
     Countries whose GNI per capita is between $1,876 and 
$3,895.
    Appendix B lists all candidate countries and statutorily-prohibited 
countries for scorecard evaluation purposes.

II. How does the Board evaluate these countries?

A. Overall Evaluation

    The Board looks at three legislatively-mandated factors in its 
evaluation of any candidate country for compact eligibility: (1) Policy 
performance; (2) the opportunity to reduce poverty and generate 
economic growth; and (3) the availability of MCC funds.
1. Policy Performance
    Because of the importance of needing to evaluate a country's policy 
performance and needing to do so in a comparable, cross-country way, 
the Board relies to the maximum extent possible upon the best-available 
objective and quantifiable indicators of policy performance. These 
indicators act as proxies of the country's commitment to just and 
democratic governance, economic freedom, and investing in its people, 
as laid out in MCC's founding legislation. Comprised of 20 third-party 
indicators in the categories of ``encouraging economic freedom,'' 
``investing in people,'' and ``ruling justly,'' MCC ``scorecards'' are 
created for all candidate countries and statutorily-prohibited 
countries. To ``pass'' the indicators on the scorecard, the country 
must perform above the median among its income group (as defined above 
for scorecard evaluation purposes), except in the cases of inflation, 
political rights, civil liberties, and immunization rates (countries 
whose GNI per capita is between $1,876 and $3,895 only), where 
threshold scores have been established. In particular, the Board 
considers whether the country
     passed at least 10 of the 20 indicators, with at least one 
in each category,
     passed either the Political Rights or Civil Liberties 
indicator, and
     passed the Control of Corruption indicator.
    While satisfaction of all three aspects means a country is termed 
to have ``passed'' the scorecard, the Board also considers whether the 
country performed ``substantially worse'' in any one policy category 
than it does on the scorecard overall. Appendix C describes all 20 
indicators, their definitions, what is required to ``pass,'' their 
source, and their relationship to the legislative criteria.
    The mandatory passing of either the Political Rights or Civil 
Liberties indicators is called the Democratic Rights ``hard hurdle'' on 
the scorecard, while the mandatory passing of the Control of Corruption 
indicator is called the Control of Corruption ``hard hurdle.'' Not 
passing either ``hard hurdle'' results in not passing the scorecard 
overall, regardless of whether

[[Page 48337]]

at least 10 of the 20 other indicators are passed.
     Democratic Rights ``hard hurdle'': This hurdle sets a 
minimum bar for democratic rights below which the Board will not 
consider a country for eligibility. Requiring that a country pass 
either the Political Rights or Civil Liberties indicator creates a 
democratic incentive for countries, recognizes the importance democracy 
plays in driving poverty-reducing economic growth, and holds MCC 
accountable to working with the best governed, poorest countries. When 
a candidate country is only passing one of the two indicators 
comprising the hurdle (instead of both), the Board will also closely 
examine why it is not passing the other indicator to understand what 
the score implies for the broader democratic environment and trajectory 
of the country. This examination will include consultation with both 
local and international civil society experts, among others.
     Control of Corruption ``hard hurdle'': Corruption in any 
country is an unacceptable tax on economic growth and an obstacle to 
the private sector investment needed to reduce poverty. Accordingly, 
MCC seeks out partner countries that are committed to combatting 
corruption. It is for this reason that MCC also has the Control of 
Corruption ``hard hurdle,'' which helps ensure that MCC is working with 
countries where there is relatively strong performance in controlling 
corruption. Requiring the passage of the indicator provides an 
incentive for countries to demonstrate a clear commitment to 
controlling corruption, and allows MCC to better understand the issue 
by seeing how the country performs relative to its peers and over time.
    Together, the 20 policy performance indicators are the predominant 
basis for determining which eligible countries will be selected for MCC 
assistance, and the Board expects a country to be passing its scorecard 
at the point the Board decides to select the country for either a first 
or second/subsequent compact. However, the Board also recognizes that 
even the best-available data has inherent challenges. For example, data 
gaps, real-time events versus data lags, the absence of narratives and 
nuanced detail, and other similar weaknesses affect each of these 
indicators. In such instances, the Board uses its judgment to interpret 
policy performance as measured by the scorecards. The Board may also 
consult other sources of information to further enhance its 
understanding of a given country's policy performance beyond the issues 
on the scorecard (e.g., specific policy issues related to trade, the 
treatment of civil society, other U.S. aid programs, financial sector 
performance, and security/foreign policy issues). The Board uses its 
judgment on how best to weigh such information in assessing overall 
policy performance.
2. The Opportunity To Reduce Poverty and Generate Economic Growth
    The Board also consults other sources of qualitative and 
quantitative information to have a more detailed view of the 
opportunity to reduce poverty and generate economic growth in a 
country.
    While the Board considers a range of other information sources 
depending on the country, specific areas of attention typically include 
better understanding the issues on, trends in, and trajectory of
     the state of democratic and human rights (especially of 
vulnerable groups \2\);
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    \2\ For example, women; children; lesbian, gay, bisexual, and 
transgender individuals; people with disabilities; and workers.
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     the perspective of civil society on salient governance 
issues;
     the control of corruption and rule of law;
     the potential for the private sector (both local and 
foreign) to lead investment and growth;
     the levels of poverty within a country; and
     the country's institutional capacity.
    Where applicable, the Board also considers MCC's own experience and 
ability to reduce poverty and generate economic growth in a given 
country--such as considering MCC's core skills versus the country's 
needs, and capacity within MCC to work with a country.
    This information provides greater clarity on the likelihood that 
MCC programs will have an appreciable impact on reducing poverty and 
generating economic growth in a given country. The Board has used such 
information both to decline to select countries that are otherwise 
passing their scorecards, as well as to better understand when a 
country's performance on a particular indicator may not be up to date 
or is about to change. More details on this subject (sometimes referred 
to as ``supplemental information'') can be found on MCC's website.
3. The Availability of MCC Funds
    The final factor that the Board must consider when evaluating 
countries is the funding available. The agency's allocation of its 
budget is constrained, and often specifically limited, by provisions in 
the authorizing legislation and appropriations acts. MCC has a 
continuous pipeline of countries in compact development, compact 
implementation, and compact closure, as well as threshold programs. 
Consequently, the Board factors in the overall portfolio picture when 
making its selection decisions given the funding available for each of 
the agency's planned or existing programs.
* * * * *
    The following subsections describe how each of these three 
legislatively-mandated factors are applied with regard to the selection 
situations the Board encounters each December: Selection of countries 
for a compact, selection of countries for a second or subsequent 
compact, selection of countries for the threshold program, and 
selection of countries for a concurrent compact. Thereafter, a note is 
included on issues for consideration for countries that might 
transition to upper middle income country status after initial 
selection.

B. Evaluation for Selection of Eligible Countries for a First Compact

    When selecting eligible countries for a compact, the Board looks at 
all three legislatively-mandated aspects described in the previous 
section: (1) Policy performance, first and foremost as measured by the 
scorecards and bolstered through additional information (as described 
in the previous section); (2) the opportunity to reduce poverty and 
generate economic growth, examined through the use of other supporting 
information (as described in the previous section); and (3) the funding 
available.
    At a minimum, the Board considers whether the country passes its 
scorecard. It also examines supporting evidence that the country's 
commitment to just and democratic governance, economic freedom, and 
investing in its people is on a sound footing and performance is on a 
positive trajectory (especially on the ``hard hurdles'' of Democratic 
Rights and Control of Corruption, as described in the previous 
section), and that MCC has funding to support a meaningful compact with 
that country. Where applicable, previous threshold program information 
is also considered. The Board then weighs the information described 
above across each of the three dimensions.
    The approach described above is then applied in any additional 
years of selection of a country to continue to develop a first compact, 
with the added benefit of having cumulative scorecards, cumulative 
records of policy performance, and other accumulated

[[Page 48338]]

supporting information to determine the overall pattern of performance 
over the emerging multi-year trajectory.

C. Evaluation for Selection of Eligible Countries for a Second or 
Subsequent Compact

    Section 609(l) of the Millennium Challenge Act of 2003, as amended, 
specifically authorizes MCC to enter into ``one or more subsequent 
Compacts.'' MCC does not consider the eligibility of a country for a 
subsequent compact, however, before the country has completed its 
compact or is within 18 months of completion, (e.g., a second compact 
if it has completed or is within 18 months of completing its first 
compact). Selection for a subsequent compact is not automatic and is 
intended only for countries that (1) exhibit successful performance on 
their previous compact; (2) exhibit improved scorecard policy 
performance during the partnership; and (3) exhibit a continued 
commitment to further their sector reform efforts in any subsequent 
partnership. As a result, the Board has an even higher standard when 
selecting countries for subsequent compacts.
1. Successful Implementation of the Previous Compact
    To evaluate the degree of success of the previous compact, the 
Board examines whether there is clear evidence of success within the 
budget and time limits of the compact, in particular by looking at 
three aspects:
     The degree to which there is evidence of strong political 
will and management capacity: Is the partnership characterized by the 
country ensuring that both policy reforms and the compact program 
itself are both being implemented to the best ability that the country 
can deliver.
     The degree to which the country has exhibited commitment 
and capacity to achieve program results: Are the financial and project 
results being achieved; to what degree is the country committing its 
own resources to ensure the compact is a success; to what extent is the 
private sector engaged (if relevant); and other compact-specific 
issues.
     The degree to which the country has implemented the 
compact in accordance with MCC's core policies and standards: That is, 
is the country adhering to MCC's policies and procedures, including in 
critical areas such as remediating unresolved fraud and corruption and 
abuse or misuse of funds issues; procurement; and monitoring and 
evaluation?
    Details on the specific types of information examined (and sources 
used) in each of the three areas are provided in Appendix D. Overall, 
the Board is looking for evidence that the previous compact will be 
completed or has been completed successfully, on time and on budget, 
and that there is a commitment to continued, robust reform going 
forward.
2. Improved Scorecard Policy Performance
    Beyond successful implementation of the previous compact, the Board 
expects the country to have improved its overall scorecard policy 
performance during the partnership, and to pass the scorecard in the 
year of selection for the subsequent compact. The Board focuses on the 
following:
     The overall scorecard pass/fail rate over time, what this 
suggests about underlying policy performance, as well as an examination 
of the underlying reasons;
     The progress over time on policy areas measured by both 
hard-hurdle indicators--Democratic Rights and Control of Corruption--
including an examination of the underlying reasons; and
     Other indicator trajectories as deemed relevant by the 
Board.
    In all cases, while the Board expects the country to be passing its 
scorecard, other sources of information are examined to understand the 
nuance and reasons behind scorecard or indicator performance over time, 
including any real-time updates, methodological changes within the 
indicators themselves, shifts in the relevant candidate pool, or 
alternative policy performance perspectives (such as gleaned through 
consultations with civil society and related stakeholders). Other 
sources of information are also consulted to look at policy performance 
over time in areas not covered by the scorecard, but that are deemed 
important by the Board (such as trade, foreign policy concerns, etc.).
3. A Commitment to Further Sector Reform
    The Board expects that subsequent compacts will endeavor to tackle 
deeper policy reforms necessary to unlock an identified constraint to 
growth. Consequently, the Board considers its own experience during the 
previous compact in considering how committed the country is to 
reducing poverty and increasing economic growth, and therefore tries to 
gauge the country's commitment for further sector reform should it be 
selected for a subsequent compact. This includes the following:
     Assessing the country's delivery of policy reform during 
the previous compact (as described above);
     Assessing expectations of the country's ability and 
willingness to continue embarking on sector policy reform in a 
subsequent compact;
     Examining both other sources of information that describe 
the nature of the opportunity to reduce poverty and generate growth (as 
outlined in A.2 above), and the relative success of the previous 
compact overall, as already discussed; and
     Finally, considering how well funding can be leveraged for 
impact, given the country's experience in the previous compact.
* * * * *
    Through this overall approach to selection for a subsequent 
compact, the Board applies the three legislatively mandated evaluation 
criteria (policy performance, the opportunity to reduce poverty and 
generate economic growth, and the funding available) in a way that 
rests critically on deeply assessing the previous partnership from a 
compact success standpoint, a commitment to improved scorecard policy 
performance standpoint, and a commitment to continued sector policy 
reform standpoint. The Board then weighs all of the information 
described above in making its decision.
    The approach described above is then applied in any additional 
years of selection necessary as the country continues to develop the 
subsequent compact, with the added benefit of having further detail on 
previous compact implementation, cumulative scorecards, records of 
policy performance, and other accumulated supporting information to 
determine the overall pattern of performance over the resulting multi-
year trajectory.

D. Evaluation for Concurrent Compacts

    Section 609(k) of the Millennium Challenge Act of 2003, as amended, 
authorizes MCC to enter into one additional concurrent compact with a 
country if one or both of the compacts with the country is for the 
purpose of regional economic integration, increased regional trade, or 
cross-border collaborations.
    The fundamental criteria and process for the selection of countries 
for such compacts will remain the same as those for the selection of 
countries for non-concurrent compacts: Countries will continue to be 
evaluated and selected individually, as described in sections II.A, 
II.B, II.C, and II.F.
    Section 609(k) also requires as a precondition for a concurrent 
compact that the Board determine that the

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country is making ``considerable and demonstrable progress in 
implementing the terms of the existing Compact and supplementary 
agreements thereto.'' This new statutory requirement is fully 
consistent with prior Board practice regarding the selection of a 
country for a non-concurrent compact. For a country where a concurrent 
compact is contemplated, the Board will take into account whether there 
is clear evidence of success, as relevant to the phase of the current 
compact. Among other information, the Board will examine the evaluation 
criteria described in Section II.C.1 above, notably:
     The degree to which there is evidence of strong political 
will and management capacity;
     The degree to which the country has exhibited 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.
    In addition to providing information to the Board so it can make 
its determination regarding the country's progress in implementing its 
current compact, MCC will provide the Board with additional information 
relating to the potential for regional economic integration, increased 
regional trade, or cross-border collaborations for any country being 
considered for a concurrent compact. This information may include items 
such as the following:
     The current state of a country's regional integration, 
such as common financial and political dialogue frameworks, integration 
of productive value chains, and cross-border flows of people, goods, 
and services.
     The current and potential level of trade between a country 
and its neighbors, including analysis of trade flows and unexploited 
potential for trade, and an assessment of the extent and significance 
of tariff and non-tariff barriers, including information regarding the 
patterns of trade.
     The potential gains from cross-border cooperation between 
a country and its neighbors to alleviate bilateral and regional 
bottlenecks to economic growth and poverty reduction, such as through 
physical infrastructure or coordinated policy and institutional 
reforms.
    The Board can then weigh the information as a whole--the 
fundamental selection factors described in sections II.A, II.B, II.C, 
and II.F, the information regarding implementation of the current 
compact, and any additional relevant information regarding potential 
regional integration--to determine whether or not to direct MCC to seek 
to enter into a concurrent compact with the country.

E. Evaluation for Threshold Program Assistance

    The Board may also evaluate countries for participation in the 
threshold program. The threshold program provides assistance to 
candidate countries that exhibit a significant commitment to meeting 
the criteria described in the previous subsections, but fail to meet 
such requirements. Specifically, in examining the policy performance, 
the opportunity to reduce poverty and generate economic growth, and the 
funding available, the Board will consider whether a country that 
potentially qualifies for threshold program assistance appears to be on 
a trajectory to becoming viable for compact eligibility in the medium 
term.

F. A Note on Potential Transition to Upper Middle Income Country (UMIC) 
Status After Initial Selection

    Some candidate countries may have a high per capita income or a 
high growth rate that implies there is a chance they could transition 
to UMIC status during the life of an MCC partnership. In such cases, it 
is not possible to accurately predict when such a country may or may 
not transition to UMIC status.
    Nonetheless, such countries may have more resources at their 
disposal for funding their own growth and poverty reduction strategies. 
As a result, in addition to using the regular selection criteria 
described in the previous sections, the Board will also use its 
discretion to assess both the need and the opportunity presented by 
partnering with such a country, in order to ensure that there is a 
higher bar for possible selection.
    Specifically, if a candidate country with a high probability of 
transitioning to UMIC status is under consideration for selection, the 
Board will examine additional data and information related to the 
following:
     Whether the country faces significant challenges accessing 
other sources of development financing (such as international capital, 
domestic resources, and other donor assistance) and, if so, whether MCC 
grant financing would be an appropriate tool;
     Whether the nature of poverty in the country (for example, 
high inequality or poverty headcount ratios relative to peer countries) 
presents a clear and strategic opportunity for MCC to assist the 
country in reducing such poverty through projects that spur economic 
growth;
     Whether the country demonstrates particularly strong 
policy performance, including policies and actions that demonstrate a 
clear priority on poverty reduction; and
     Whether MCC can reasonably expect that the country would 
contribute a significant amount of funding to the compact.
    These additional criteria would then be applied in any additional 
years of selection as the country continues to develop its compact. 
Should the country eventually transition to UMIC status during compact 
development, the country would no longer be a candidate country for 
that fiscal year. Consequently, continuing compact development beyond 
that point would then be at the Board's discretion, and the compact 
would rely on funding from previous fiscal years from when the country 
was a candidate country.

Appendix A: Statutory Basis for This Report

    This report to Congress is provided in accordance with section 
608(b) of the Millennium Challenge Act of 2003, as amended (the 
Act), 22 U.S.C. 7707(b).
    Section 605 of the Act authorizes the provision of assistance to 
countries that enter into a Millennium Challenge Compact with the 
United States to support policies and programs that advance the 
progress of such countries in achieving lasting economic growth and 
poverty reduction. The Act requires MCC to take a number of steps in 
selecting countries for compact assistance for FY 2019 based on the 
countries' demonstrated commitment to just and democratic 
governance, economic freedom, and investing in their people, MCC's 
opportunity to reduce poverty and generate economic growth in the 
country, and the availability of funds. These steps include the 
submission of reports to the congressional committees specified in 
the Act and publication of information in the Federal Register that 
identify:
    1. The countries that are ``candidate countries'' for assistance 
for FY 2019 based on per capita income levels and eligibility to 
receive assistance under U.S. law (section 608(a) of the Act; 22 
U.S.C. 7707(a));
    2. The criteria and methodology that MCC's Board of Directors 
(Board) will use to measure and evaluate policy performance of the 
candidate countries consistent with the requirements of section 607 
of the Act (22 U.S.C. 7706) in order to determine ``eligible 
countries'' from among the ``candidate countries'' (section 608(b) 
of the Act; 22 U.S.C. 7707(b)); and
    3. The list of countries determined by the Board to be 
``eligible countries'' for FY 2019, with justification for 
eligibility determination and selection for compact negotiation, 
including those eligible countries with which MCC will seek to enter 
into compacts (section 608(d) of the Act; 22 U.S.C. 7707(d)).
    This report satisfies item 2 above.

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Appendix B: Lists of All Candidate Countries and Statutorily-Prohibited 
Countries for Evaluation Purposes

Income Groups for Scorecards

    Since MCC was created, it has relied on the World Bank's gross 
national income (GNI) per capita income data (Atlas method) and the 
historical ceiling for eligibility as set by the World Bank's 
International Development Association (IDA) to divide countries into 
two income categories for purposes of creating scorecards. These 
categories are used to account for the income bias that occurs when 
countries with more per capita resources perform better than 
countries with fewer. Using the historical IDA eligibility ceiling 
for the scorecard evaluation groups ensures that the poorest 
countries compete with their income level peers and are not compared 
against countries with more resources to mobilize.
    MCC will continue to use the historical IDA classifications for 
eligibility to categorize countries in two groups for purposes of FY 
2019 scorecard comparisons:
     Countries with GNI per capita equal to or less than 
IDA's historical ceiling for eligibility (i.e., $1,875 for FY 2019); 
and
     Countries with GNI per capita above IDA's historical 
ceiling for eligibility but below the World Bank's upper middle 
income country threshold (i.e., $1,876 and $3,895 for FY 2019).
    The list of countries for FY 2019 scorecard assessments is set 
forth below:

Countries With GNI per Capita of $1,875 or Less

1. Afghanistan
2. Bangladesh
3. Benin
4. Burkina Faso
5. Burma
6. Burundi
7. Cambodia
8. Cameroon
9. Central African Republic
10. Chad
11. Comoros
12. Congo, Democratic Republic of the
13. Congo, Republic of the
14. C[ocirc]te d'Ivoire
15. Eritrea
16. Ethiopia
17. Gambia, The
18. Ghana
19. Guinea
20. Guinea-Bissau
21. Haiti
22. India
23. Kenya
24. Kyrgyzstan
25. Lesotho
26. Liberia
27. Madagascar
28. Malawi
29. Mali
30. Mauritania
31. Mozambique
32. Nepal
33. Niger
34. North Korea
35. Pakistan
36. Rwanda
37. S[atilde]o Tom[eacute] and Principe
38. Senegal
39. Sierra Leone
40. Somalia
41. South Sudan
42. Syria
43. Tajikistan
44. Tanzania
45. Timor-Leste
46. Togo
47. Uganda
48. Yemen
49. Zambia
50. Zimbabwe

Countries With GNI per Capita Between $1,876 and $3,895

1. Angola
2. Bolivia
3. Bhutan
4. Cabo Verde
5. Djibouti
6. Egypt
7. El Salvador
8. Eswatini (formerly Swaziland)
9. Georgia
10. Honduras
11. Indonesia
12. Kiribati
13. Kosovo
14. Laos
15. Micronesia, Federated States of
16. Moldova
17. Mongolia
18. Morocco
19. Nicaragua
20. Nigeria
21. Papua New Guinea
22. Philippines
23. Solomon Islands
24. Sri Lanka
25. Sudan
26. Tunisia
27. Ukraine
28. Uzbekistan
29. Vanuatu
30. Vietnam

Statutorily-Prohibited Countries

1. Bolivia
2. Burma
3. Cambodia
4. Eritrea
5. Nicaragua
6. North Korea
7. South Sudan
8. Sudan
9. Syria
10. Zimbabwe

Appendix C: Indicator Definitions

    The following indicators will be used to measure candidate 
countries' demonstrated commitment to the criteria found in section 
607(b) of the Act. The indicators are intended to assess the degree 
to which the political and economic conditions in a country serve to 
promote broad-based sustainable economic growth and reduction of 
poverty and thus provide a sound environment for the use of MCC 
funds. The indicators are not goals in themselves; rather, they are 
proxy measures of policies that are linked to broad-based 
sustainable economic growth. The indicators were selected based on 
(i) their relationship to economic growth and poverty reduction; 
(ii) the number of countries they cover; (iii) transparency and 
availability; and (iv) relative soundness and objectivity. Where 
possible, the indicators are developed by independent sources.\3\ 
Listed below is a brief summary of the indicators (a detailed 
rationale for the adoption of these indicators can be found in the 
Public Guide to the Indicators on MCC's public website at 
www.mcc.gov).
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    \3\ Special note on Kosovo: Since UN agencies do not currently 
publish data for Kosovo due to its non-recognition status, MCC is 
unable to source data directly from the UN for the six indicators 
that are constructed in all or in part from this data: Land Rights 
and Access, Health Expenditures, Primary Education Expenditures, 
Immunization Rates, Girls' Secondary Education Enrollment Rate, and 
Child Health. As result, MCC publishes data from UNKT (the UN Kosovo 
Team) in cases where UNKT uses comparable methodologies to their UN 
sister organizations. See http://www.unkt.org/ for more information.
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Ruling Justly

    1. Political Rights: Independent experts rate countries on the 
prevalence of free and fair electoral processes; political pluralism 
and participation of all stakeholders; government accountability and 
transparency; freedom from domination by the military, foreign 
powers, totalitarian parties, religious hierarchies and economic 
oligarchies; and the political rights of minority groups, among 
other things. Pass: Score must be above the minimum score of 17 out 
of 40. Source: Freedom House.
    2. Civil Liberties: Independent experts rate countries on 
freedom of expression and belief; association and organizational 
rights; rule of law and human rights; and personal autonomy and 
economic rights, among other things. Pass: Score must be above the 
minimum score of 25 out of 60. Source: Freedom House.
    3. Freedom of Information: Measures the legal and practical 
steps taken by a government to enable or allow information to move 
freely through society; this includes measures of press freedom, 
national freedom of information laws, and the extent to which a 
county is filtering internet content or tools. Pass: Score must be 
above the median score for the income group. Source: Freedom House/
Centre for Law and Democracy.
    4. Government Effectiveness: An index of surveys and expert 
assessments that rate countries on the quality of public service 
provision; civil servants' competency and independence from 
political pressures; and the government's ability to plan and 
implement sound policies, among other things. Pass: Score must be 
above the median score for the income group. Source: Worldwide 
Governance Indicators (World Bank/Brookings).
    5. Rule of Law: An index of surveys and expert assessments that 
rate countries on the extent to which the public has confidence in 
and abides by the rules of society; the incidence and impact of 
violent and nonviolent crime; the effectiveness, independence, and 
predictability of the judiciary; the protection of property rights; 
and the enforceability of contracts, among other things. Pass: Score 
must be above the median score for the income group. Source:

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Worldwide Governance Indicators (World Bank/Brookings).
    6. Control of Corruption: An index of surveys and expert 
assessments that rate countries on: ``grand corruption'' in the 
political arena; the frequency of petty corruption; the effects of 
corruption on the business environment; and the tendency of elites 
to engage in ``state capture,'' among other things. Pass: Score must 
be above the median score for the income group. Source: Worldwide 
Governance Indicators (World Bank/Brookings).

Encouraging Economic Freedom

    1. Fiscal Policy: General government net lending/borrowing as a 
percent of gross domestic product (GDP), averaged over a three year 
period. Net lending/borrowing is calculated as revenue minus total 
expenditure. The data for this measure comes from the IMF's World 
Economic Outlook. Pass: Score must be above the median score for the 
income group. Source: The International Monetary Fund's World 
Economic Outlook Database.
    2. Inflation: The most recent average annual change in consumer 
prices. Pass: Score must be 15 percent or less. Source: The 
International Monetary Fund's World Economic Outlook Database.
    3. Regulatory Quality: An index of surveys and expert 
assessments that rate countries on the burden of regulations on 
business; price controls; the government's role in the economy; and 
foreign investment regulation, among other areas. Pass: Score must 
be above the median score for the income group. Source: Worldwide 
Governance Indicators (World Bank/Brookings).
    4. Trade Policy: A measure of a country's openness to 
international trade based on weighted average tariff rates and non-
tariff barriers to trade. Pass: Score must be above the median score 
for the income group. Source: The Heritage Foundation.
    5. Gender in the Economy: An index that measures the extent to 
which laws provide men and women equal capacity to generate income 
or participate in the economy, including factors such as the 
capacity to access institutions, get a job, register a business, 
sign a contract, open a bank account, choose where to live, to 
travel freely, property rights protections, protections against 
domestic violence, and child marriage (among others). Pass: Score 
must be above the median score for the income group. Source: 
International Finance Corporation.
    6. Land Rights and Access: An index that rates countries on the 
extent to which the institutional, legal, and market framework 
provide secure land tenure and equitable access to land in rural 
areas and the time and cost of property registration in urban and 
peri-urban areas. Pass: Score must be above the median score for the 
income group. Source: The International Fund for Agricultural 
Development and the International Finance Corporation.
    7. Access to Credit: An index that rates countries on rules and 
practices affecting the coverage, scope, and accessibility of credit 
information available through either a public credit registry or a 
private credit bureau; as well as legal rights in collateral laws 
and bankruptcy laws. Pass: Score must be above the median score for 
the income group. Source: International Finance Corporation.
    8. Business Start-Up: An index that rates countries on the time 
and cost of complying with all procedures officially required for an 
entrepreneur to start up and formally operate an industrial or 
commercial business. Pass: Score must be above the median score for 
the income group. Source: International Finance Corporation.

Investing in People

    1. Public Expenditure on Health: Total current expenditures on 
health by government (excluding funding sourced from external 
donors) at all levels divided by GDP. Pass: Score must be above the 
median score for the income group. Source: The World Health 
Organization.
    2. Total Public Expenditure on Primary Education: Total 
expenditures on primary education by government at all levels 
divided by GDP. Pass: Score must be above the median score for the 
income group. Source: The United Nations Educational, Scientific and 
Cultural Organization and National Governments.
    3. Natural Resource Protection: Assesses whether countries are 
protecting up to 17 percent of all their biomes (e.g., deserts, 
tropical rainforests, grasslands, savannas and tundra). Pass: Score 
must be above the median score for the income group. Source: The 
Center for International Earth Science Information Network and the 
Yale Center for Environmental Law and Policy.
    4. Immunization Rates: The average of DPT3 and measles 
immunization coverage rates for the most recent year available. 
Pass: Score must be above the median score for countries with a GNI/
capita of $1,875 or less and 90 percent or higher for countries with 
a GNI/capita between $1,876 and $3,895. Source: The World Health 
Organization and the United Nations Children's Fund.
    5. Girls Education:
    a. Girls' Primary Completion Rate: The number of female students 
enrolled in the last grade of primary education minus repeaters 
divided by the population in the relevant age cohort (gross intake 
ratio in the last grade of primary). Countries with a GNI/capita of 
$1,875 or less are assessed on this indicator. Pass: Score must be 
above the median score for the income group. Source: United Nations 
Educational, Scientific and Cultural Organization.
    b. Girls Secondary Enrollment Education: The number of female 
pupils enrolled in lower secondary school, regardless of age, 
expressed as a percentage of the population of females in the 
theoretical age group for lower secondary education. Countries with 
a GNI/capita between $1,876 and $3,895 are assessed on this 
indicator instead of Girls Primary Completion Rates. Pass: Score 
must be above the median score for the income group. Source: United 
Nations Educational, Scientific and Cultural Organization.
    6. Child Health: An index made up of three indicators: (i) 
Access to improved water, (ii) access to improved sanitation, and 
(iii) child (ages 1-4) mortality. Pass: Score must be above the 
median score for the income group. Source: The Center for 
International Earth Science Information Network and the Yale Center 
for Environmental Law and Policy.

Relationship to Legislative Criteria

    Within each policy category, the Act sets out a number of 
specific selection criteria. A set of objective and quantifiable 
policy indicators is used to inform eligibility decisions for 
assistance and to measure the relative performance by candidate 
countries against these criteria. The Board's approach to 
determining eligibility ensures that performance against each of 
these criteria is assessed by at least one of the objective 
indicators. Most are addressed by multiple indicators. The specific 
indicators appear in parentheses next to the corresponding criterion 
set out in the Act.
    Section 607(b)(1): Just and democratic governance, including a 
demonstrated commitment to--
    (A) promote political pluralism, equality and the rule of law 
(Political Rights, Civil Liberties, Rule of Law, and Gender in the 
Economy);
    (B) respect human and civil rights, including the rights of 
people with disabilities (Political Rights, Civil Liberties, and 
Freedom of Information);
    (C) protect private property rights (Civil Liberties, Regulatory 
Quality, Rule of Law, and Land Rights and Access);
    (D) encourage transparency and accountability of government 
(Political Rights, Civil Liberties, Freedom of Information, Control 
of Corruption, Rule of Law, and Government Effectiveness);
    (E) combat corruption (Political Rights, Civil Liberties, Rule 
of Law, Freedom of Information, and Control of Corruption); and
    (F) the quality of the civil society enabling environment (Civil 
Liberties, Freedom of Information, and Rule of Law).
    Section 607(b)(2): Economic freedom, including a demonstrated 
commitment to economic policies that-- 
    (A) encourage citizens and firms to participate in global trade 
and international capital markets (Fiscal Policy, Inflation, Trade 
Policy, and Regulatory Quality);
    (B) promote private sector growth (Inflation, Business Start-Up, 
Fiscal Policy, Land Rights and Access, Access to Credit, Gender in 
the Economy, and Regulatory Quality);
    (C) strengthen market forces in the economy (Fiscal Policy, 
Inflation, Trade Policy, Business Start-Up, Land Rights and Access, 
Access to Credit, and Regulatory Quality); and
    (D) respect worker rights, including the right to form labor 
unions (Civil Liberties and Gender in the Economy).
    Section 607(b)(3): Investments in the people of such country, 
particularly women and children, including programs that--
    (A) promote broad-based primary education (Girls' Primary 
Completion Rate, Girls' Secondary Education Enrollment Rate, and 
Total Public Expenditure on Primary Education);
    (B) strengthen and build capacity to provide quality public 
health and reduce child mortality (Immunization Rates, Public 
Expenditure on Health, and Child Health); and

[[Page 48342]]

    (C) promote the protection of biodiversity and the transparent 
and sustainable management and use of natural resources (Natural 
Resource Protection).

Appendix D: Subsequent and Concurrent Compact Considerations

    MCC reporting and data in the following chart are used to assess 
compact performance of MCC compact countries nearing the end of 
compact implementation (i.e., within 18 months of compact end date), 
or for current MCC compact countries under consideration for a 
concurrent compact, where appropriate. Some reporting used for 
assessment may contain sensitive information and adversely affect 
implementation or MCC-partner country relations. This information is 
for MCC's internal use and is not made public.
    However, key implementation information is summarized in compact 
status and results reports that are published quarterly on MCC's 
website under MCC country programs (https://www.mcc.gov/where-we-work) or monitoring and evaluation (https://www.mcc.gov/our-impact/m-and-e) web pages.

----------------------------------------------------------------------------------------------------------------
                     Topic                        MCC reporting/data source           Published documents
----------------------------------------------------------------------------------------------------------------
                                               COUNTRY PARTNERSHIP
----------------------------------------------------------------------------------------------------------------
Political Will:                                  Quarterly              Quarterly results
 Status of major conditions precedent.   implementation reporting.      published as ``Table of Key
 Program oversight/implementation.       Quarterly results      Performance Indicators''
[cir] project restructures.                      reporting.                     (available by country): https://
[cir] partner response to accountable entity     Survey of MCC staff.   www.mcc.gov/our-impact/m-and-e.
 capacity issues.                                                               Survey questions to be
 Political independence of the                                          posted: https://www.mcc.gov/
 accountable entity.                                                            resources/doc/summary-compact-
                                                                                survey-summary-fy19.
Management Capacity:
     Project management capacity.
     Project performance.
     Level of MCC intervention/
     oversight.
     Relative level of resources
     required.
----------------------------------------------------------------------------------------------------------------
                                                 PROGRAM RESULTS
----------------------------------------------------------------------------------------------------------------
Financial Results:                               Indicator tracking     Monitoring and
 Commitments--including contributions    tables.                        Evaluation Plans (available by
 to compact funding.                             Quarterly financial    country): https://www.mcc.gov/
 Disbursements.                          reporting.                     our-impact/m-and-e.
Project Results:                                 Quarterly              Quarterly Status Reports
 Output, outcome, objective targets.     implementation reporting.      (available by country): https://
 Accountable entity commitment to        Quarterly results      www.mcc.gov/our-impact/m-and-e.
 `focus on results'.                             reporting.                     Quarterly results
 Accountable entity cooperation on       Survey of MCC staff.   published as ``Table of Key
 impact evaluation.                              Impact evaluations.    Performance Indicators''
 Percent complete for process/outputs.                                  (available by country): https://
 Relevant outcome data.                                                 www.mcc.gov/our-impact/m-and-e.
 Details behind target delays.                                          Survey questions to be
Target Achievements:                                                            posted: https://www.mcc.gov/resources/doc/summary-compact-survey-summary-fy19.
----------------------------------------------------------------------------------------------------------------
                                             ADHERENCE TO STANDARDS
----------------------------------------------------------------------------------------------------------------
 Procurement.                            Audits (GAO and        Published OIG and GAO
 Environmental and social.               OIG).                          audits.
 Fraud and corruption.                   Quarterly              Survey questions to be
 Program closure.                        implementation reporting.      posted: https://www.mcc.gov/
 Monitoring and evaluation.              Survey of MCC staff.   resources/doc/summary-compact-
                                                                                survey-summary-fy19.
 All other legal provisions.
----------------------------------------------------------------------------------------------------------------
                                                COUNTRY SPECIFIC
----------------------------------------------------------------------------------------------------------------
Sustainability:                                  Quarterly              Quarterly results
 Implementation entity.                  implementation reporting.      published as ``Table of Key
 MCC investments.                        Quarterly results      Performance Indicators''
Role of private sector or other donors:          reporting.                     (available by country): https://
 Other relevant investors/investments.   Survey of MCC staff.   www.mcc.gov/our-impact/m-and-e.
 Other donors/programming.                                              Survey questions to be
 Status of related reforms.                                             posted: https://www.mcc.gov/
 Trajectory of private sector                                           resources/doc/summary-compact-
 involvement going forward.                                                     survey-summary-fy19.
----------------------------------------------------------------------------------------------------------------


[FR Doc. 2018-20646 Filed 9-19-18; 4:15 pm]
 BILLING CODE 9211-03-P