[Federal Register Volume 84, Number 188 (Friday, September 27, 2019)]
[Notices]
[Pages 51182-51189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20978]


-----------------------------------------------------------------------

MILLENNIUM CHALLENGE CORPORATION

[MCC FR 19-07]


Report on the Criteria and Methodology for Determining the 
Eligibility of Candidate Countries for Millennium Challenge Account 
Assistance for Fiscal Year 2020

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: This report to Congress is provided in accordance with the 
Millennium Challenge Act of 2003, as amended (Act). The Millennium 
Challenge Act of 2003 requires the Millennium Challenge Corporation to 
publish a report that 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 2020. The 
report is set forth in full below.

    Dated: September 23, 2019.
Brian Finkelstein,
Acting General Counsel.

Report on the Criteria and Methodology for Determining the Eligibility 
of Candidate Countries for Millennium Challenge Account Assistance in 
Fiscal Year 2020

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 2020.
    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 (the Board) of 
the Millennium Challenge Corporation (MCC) will identify, evaluate, and 
select eligible countries for fiscal year (FY) 2020. Specifically, this 
document discusses the following:

I. Which countries MCC will evaluate?
II. How the Board evaluates these countries?
    A. Overall Evaluation
    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

    This report is provided in accordance with section 608(b) of the 
Millennium Challenge Act of 2003, as amended (the Act), as more fully 
described in Appendix A.

[[Page 51183]]

I. Which countries are evaluated?

    MCC evaluates the policy performance of all candidate countries and 
statutorily-prohibited countries by dividing them into two income 
categories for the 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. In FY 2020, those scorecard evaluation income categories 
\1\ are:
---------------------------------------------------------------------------

    \1\ These income groups correspond to the definitions of low 
income countries and lower middle countries using the historical 
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.
---------------------------------------------------------------------------

     Countries whose gross national income (GNI) per capita is 
$1,925 or less; and
     Countries whose GNI per capita is between $1,926 and 
$3,995.
    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 when it 
evaluates 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
    Appendix C describes all 20 indicators, their definitions, what is 
required to ``pass,'' their source, and their relationship to the 
legislative criteria. Because of the importance of evaluating a 
country's policy performance in a comparable, cross-country way, the 
Board relies to the maximum extent possible upon the best-available 
objective and quantifiable policy performance indicators. These 
indicators act as proxies for a country's commitment to just and 
democratic governance, economic freedom, and investing in its people, 
per MCC's founding legislation. Comprised of 20 third-party indicators 
in the categories of ruling justly, encouraging economic freedom, and 
investing in people, MCC scorecards are created for all candidate 
countries and statutorily-prohibited countries. To ``pass'' most 
indicators on its scorecard, a country's score on each indicator must 
be above the median score in its income group (as defined above for 
scorecard evaluation purposes). For the inflation, political rights, 
civil liberties, and immunization rates \2\ indicators, however, 
minimum or maximum scores for ``passing'' have been established. In 
particular, the Board considers whether a country
---------------------------------------------------------------------------

    \2\ A minimum score required to pass has been established for 
the immunization rates indicator only for countries in the scorecard 
income pool defined as countries whose GNI per capita is between 
$1,926 and $3,995 in FY 2020. Countries in the other scorecard 
income pool, defined as those whose GNI per capita is $1,925 or less 
in FY 2020, must score above the median score in their income pool 
on the immunization rates indicator.
---------------------------------------------------------------------------

     passed at least 10 of the 20 indicators, with at least one 
pass in each of the three categories,
     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 performs ``substantially worse'' in any one policy category 
than it does on the scorecard overall.
    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 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. The Board, however, also recognizes that 
even the best-available data has inherent challenges. Data gaps, real-
time events versus data lags, the absence of narratives and nuanced 
detail, and other similar weaknesses affect each of these indicators. 
As such, the Board uses its judgment to interpret policy performance as 
measured by the scorecards. The Board may also consult other sources of 
information to enhance its understanding of a country's policy 
performance beyond scorecard issues (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 
concerns). 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
    While the Board considers a range of other information sources 
depending on the country, specific areas of attention typically include 
better understanding issues and trends in, and trajectory of:
     The state of democratic and human rights (especially 
vulnerable groups \3\);
---------------------------------------------------------------------------

    \3\ For example: Women; children; LGBT individuals; people with 
disabilities; and workers.
---------------------------------------------------------------------------

     civil society's perspective 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;
     poverty levels within a country; and
     the country's institutional capacity.

[[Page 51184]]

    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 a country's 
needs, and MCC's capacity to work with a country.
    This information provides greater clarity on the likelihood that 
MCC programs will have an appreciable impact on reducing poverty by 
generating economic growth in a given country. The Board has used such 
information to better understand when a country's performance on a 
particular indicator may not be up to date or is about to change. It 
has also used it to decline to select countries that are otherwise 
passing their scorecards. More details on this subject (sometimes 
referred to as ``supplemental information'') can be found on MCC's 
website: https://www.mcc.gov/.
(3) The Availability of MCC Funds
    The final factor that the Board must consider when evaluating 
countries is the available funds. The agency's budget allocation is 
constrained, and often specifically limited, by provisions in our 
authorizing legislation and appropriations acts. MCC has a continuous 
pipeline of countries in compact development, compact implementation, 
threshold programs, and compact closure. Consequently, the Board 
factors in MCC's overall portfolio when making its selection decisions 
given the funding available for each planned or existing program.
    * * *
    The following subsections describe how each of these three 
legislatively-mandated factors are applied by the Board at the December 
Board meeting: 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. A note follows on considerations 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) available 
funding.
    At a minimum, the Board considers whether a country passes its 
scorecard. It also examines supporting evidence that a 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), and that MCC has the funds 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.
    During the compact development period following initial selection, 
the Board reevaluates a selected country based on this same approach.

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

    Section 609(l) of the Act 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 compact 
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 previous compact's success, the Board examines 
whether the compact succeeded within its budget and time limits, 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 of that country's 
ability?
     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: Is the 
country adhering to MCC's policies and procedures, including in 
critical areas such as: Remediating unresolved claims of fraud, 
corruption, or abuse of funds; procurement; and monitoring and 
evaluation?
    Details on the specific information types 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 or has 
been completed on time and on budget, and that there is a commitment to 
continued, robust reform going forward.
(2) Improved Scorecard Policy Performance
    The Board also 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, and 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 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 
information sources 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.).

[[Page 51185]]

(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 tries to gauge the 
country's commitment to further sector reform should it be selected for 
a subsequent compact. This includes:
     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 information sources describing the 
opportunity to reduce poverty by generating growth (as outlined in A.2 
above), and the first compact's relative success 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 available funds) in a way that assesses 
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 a decision.
    During the compact development period following initial selection, 
the Board reevaluates a selected country based on this same approach.

D. Evaluation for Concurrent Compacts

    Section 609(k) of the Act 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 remains the same as those for the selection of 
countries for non-concurrent compacts: Countries 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 country is making 
``considerable and demonstrable progress in implementing the terms of 
the existing Compact and supplementary agreements thereto.'' This 
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 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 all 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 a country.

E. Evaluation for Threshold Program Assistance

    The Board may also evaluate countries for participation in the 
threshold program. Threshold programs provide assistance to candidate 
countries exhibiting a significant commitment to meeting the criteria 
described in the previous subsections, but failing to meet such 
requirements. Specifically, in examining a candidate country's policy 
performance, the opportunity to reduce poverty and generate economic 
growth, and available funds, the Board will consider whether a country 
appears to be on a trajectory to becoming viable for compact 
eligibility in the medium or short 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 if or when such country may 
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

[[Page 51186]]

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 a country eventually transition to UMIC status during compact 
development, a country would no longer be a candidate for selection for 
that fiscal year. Continuing compact development beyond that point 
would then be at the Board's discretion.

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 2020 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 2020 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 2020, 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.

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 
2020 scorecard comparisons:
     Countries with GNI per capita equal to or less than IDA's 
historical ceiling for eligibility (i.e., $1,925 for FY 2020); 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., $1,926 and $3,995 for FY 2020).
    The list of countries for FY 2020 scorecard assessments is set 
forth below:

Countries With GNI Per Capita of $1,925 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. Guinea
19. Guinea-Bissau
20. Haiti
21. Kenya
22. Kyrgyzstan
23. Lesotho
24. Liberia
25. Madagascar
26. Malawi
27. Mali
28. Mauritania
29. Mozambique
30. Nepal
31. Niger
32. North Korea
33. Pakistan
34. Rwanda
35. S[atilde]o Tom[eacute] and Pr[iacute]ncipe
36. Senegal
37. Sierra Leone
38. Somalia
39. South Sudan
40. Sudan
41. Syria
42. Tajikistan
43. Tanzania
44. Timor-Leste
45. Togo
46. Uganda
47. Yemen
48. Zambia
49. Zimbabwe

Countries With GNI Per Capita Between $1,926 and $3,995

1. Angola
2. Bhutan
3. Bolivia
4. Cabo Verde
5. Djibouti
6. Egypt
7. El Salvador
8. Eswatini
9. Ghana
10. Honduras
11. India
12. Indonesia
13. Kiribati
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. Tunisia
25. Ukraine
26. Uzbekistan
27. Vanuatu
28. Vietnam

Statutorily-Prohibited Countries

1. Bolivia
2. Burma
3. Burundi
4. Cambodia
5. Comoros
6. Democratic Republic of Congo

[[Page 51187]]

7. Eritrea
8. Mauritania
9. Nicaragua
10. North Korea
11. South Sudan
12. Sudan
13. Syria
14. 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. 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).
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/Reporters 
Without Borders/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: 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: Women, Business, and the Law (World Bank)
    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 World 
Bank
    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: World Bank
    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: World Bank
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

[[Page 51188]]

    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 $1,925 or 
less and 90 percent or higher for countries with a GNI/capita between 
$1,926 and $3,995. 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 $1,925 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 $1,926 and $3,995 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
    (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.
    For completed compacts, additional information is used to assess 
compact performance and is found in a country's Star Report. The Star 
Report and its associated quarterly business process capture key 
information to provide a framework for results and improve the ability 
to disseminate learning and evidence throughout the lifecycle of an MCC 
investment from selection to final evaluation. For each compact and 
threshold program, evidence is collected on performance indicators, 
evaluation results, partnerships, sustainability efforts, and learning, 
among other elements.

[[Page 51189]]



------------------------------------------------------------------------
                                  MCC reporting/
             Topic                 data source      Published documents
------------------------------------------------------------------------
COUNTRY PARTNERSHIP...........              Quarterly
Political Will................   Quarterly          results published as
 Status of major         implementation     ``Table of Key
 conditions precedent..          reporting.         Performance
 Program oversight/                 Indicators''
 implementation..                Quarterly          (available by
[cir] project restructures....   results            country): https://
[cir] partner response to        reporting.         www.mcc.gov/our-
 accountable entity capacity     Survey     impact/m-and-e.
 issues..                        of MCC staff..     Star Reports
 Political               MCC Star   (available by
 independence of the             Reports..          country): https://
 accountable entity..                               www.mcc.gov/
Management Capacity...........                      resources?fwp_resour
 Project management                         ce_type=star-report.
 capacity..                                         Survey
 Project performance..                      questions: https://
 Level of MCC                               www.mcc.gov/
 intervention/oversight..                           resources/doc/guide-
 Relative level of                          to-the-compact-
 resources required..                               survey-summary-fy20.
------------------------------------------------------------------------
PROGRAM RESULTS...............              Monitoring
Financial Results.............   Indicator          and Evaluation Plans
 Commitments--           tracking tables.   (available by
 including contributions to                 country): https://
 compact funding..               Quarterly          www.mcc.gov/our-
 Disbursements........   financial          impact/m-and-e.
Project Results...............   reporting.         Quarterly
 Output, outcome,                   results published as
 objective targets..             Quarterly          ``Table of Key
 Accountable entity      implementation     Performance
 commitment to `focus on         reporting.         Indicators''
 results'..                                 (available by
 Accountable entity      Quarterly          country): https://
 cooperation on impact           results            www.mcc.gov/our-
 evaluation..                    reporting.         impact/m-and-e.
 Percent complete for    Survey     Star Reports
 process/outputs..               of MCC staff..     (available by
 Relevant outcome        Impact     country): https://
 data..                          evaluations..      www.mcc.gov/
 Details behind target   MCC Star   resources?fwp_resour
 delays..                        Reports..          ce_type=star-report.
Target Achievements...........                      Survey
                                                    questions: https://www.mcc.gov/resources/doc/guide-to-the-compact-survey-summary-fy20.
------------------------------------------------------------------------
ADHERENCE TO STANDARDS........   Audits     Published
 Procurement..........   (GAO and OIG).     OIG and GAO audits.
 Environmental and                  Star Reports
 social..                        Quarterly          (available by
 Fraud and corruption.   implementation     country): https://
 Program closure......   reporting.         www.mcc.gov/
 Monitoring and          Survey     resources?fwp_resour
 evaluation..                    of MCC staff..     ce_type=star-report.
 All other legal         MCC Star   Survey
 provisions..                    Reports..          questions: https://www.mcc.gov/resources/doc/guide-to-the-compact-survey-summary-fy20.
------------------------------------------------------------------------
COUNTRY SPECIFIC..............              Quarterly
Sustainability................   Quarterly          results published as
 Implementation          implementation     ``Table of Key
 entity..                        reporting.         Performance
 MCC investments......              Indicators''
Role of private sector or        Quarterly          (available by
 other donors..                  results            country): https://
 Other relevant          reporting.         www.mcc.gov/our-
 investors/investments..         Survey     impact/m-and-e.
 Other donors/           of MCC staff..     Star Reports
 programming..                   MCC Star   (available by
 Status of related       Reports..          country): https://
 reforms..                                          www.mcc.gov/
 Trajectory of private                      resources?fwp_resour
 sector involvement going                           ce_type=star-report.
 forward..                                          Survey
                                                    questions: https://www.mcc.gov/resources/doc/guide-to-the-compact-survey-summary-fy20.
------------------------------------------------------------------------

[FR Doc. 2019-20978 Filed 9-26-19; 8:45 am]
 BILLING CODE 9211-03-P