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Analysis: Promising aid program faces cuts

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by Megan Harris
Washington (UPI) Jan 22, 2008
The Millennium Challenge Account has been widely praised for its approach to foreign aid, but the program has been consistently underfunded and some fear it is vulnerable to shifting budgetary and political priorities.

Begun in 2004, the MCA represented a paradigm shift in development aid -- aiming to reward good governance over multiyear compacts and allowing aid recipients to determine their own homegrown projects.

The much-praised "MCC effect" has encouraged civic organizations to urge their governments to reform.

Sherri Kraham, managing director for development policy for the Millennium Challenge Corp., the agency that runs the MCA, pointed to several examples of this phenomenon while speaking on a panel about competition-based aid last week at the American Enterprise Institute in Washington.

Growing frustration with often uncoordinated and ineffective U.S. foreign-aid programs led Congress to establish a task force in 2004 to study the issue and make recommendations. The HELP Commission, or Helping Enhance the Livelihood of People around the Globe, released its report last December, advocating an overhaul of foreign aid based on eight core principles.

Among the recommendations is removing trade barriers, which Kraham told United Press International was a key component of MCC compacts.

"It's absolutely critical to improve access to markets and MCC is now one of the agencies in the U.S. government making one of the largest contributions to trade capacity building," she said.

MCC programs to improve trade include expanding infrastructure and reducing delays for exports and imports. In Benin, for example, MCC has a large-scale access-to-markets project focused on port operations and access to financial services, she said.

"Our programs are very comprehensive and get at many aspects of a country's constraints to economic growth," she said.

Kraham said MCC projects to improve trade involve transport interconnectivity to expand regional trade among developing countries.

Oxfam America, an international development aid agency that doesn't accept U.S. government funding, largely agrees with the HELP Commission's findings and says it believes the MCC is on the way to becoming a highly effective aid program. It is very concerned, however, that funding shortages may force the MCC to choose between providing more compacts for fewer countries or spreading them around among more countries, said Paul O'Brien, director of aid effectiveness for Oxfam.

An amendment sponsored by Sen. Richard Lugar, R-Ind., ranking member of the Senate Foreign Relations Committee, aims to "spread the MCC effect" to more countries by allocating only 50 percent of funding at the time of passing legislation. The amendment passed the Senate unanimously as an add-on to the fiscal year 2008 budget but didn't make it into the final version.

Shiela Herrling, who manages the MCC Monitor Initiative at the Center for Global Development in Washington, argues in an analysis of the budget on the CGD Web site that since the MCC aims to support long-term development and provide "predictability with performance" by appropriating total funding at the beginning, this would have removed a key innovation.

In a letter to The New York Times on Dec. 11, 2007, Lugar said the amendment sought to protect the long-term solvency of the MCC since the large amount of undispersed money would be an easy target for legislators.

Herrling and many others advocate concurrent compacts with the same country so results occur more quickly and the MCC can then offer more grants. She said in an e-mail message to UPI she hopes concurrent compacts may be incorporated next year, when funding is reauthorized.

Lugar would support concurrent compacts by revising the language of the MCC to allow for them, "if legislative language is requested by the administration," a staffer with the Senate Foreign Relations Committee told UPI.

Oxfam's O'Brien said he believes concurrent compacts might give the MCC the ability to leverage its impact in countries more strategically.

In a report being issued this week, Oxfam voices concerns about the MCC's long-term security. For one thing, development aid has been increasingly linked with national security as a foreign policy tool. "The danger is that aid will go to hot spots and not be focused on long-term development goals."

Further, O'Brien said there doesn't appear to be a champion for the MCC in the next electoral cycle.

"When there's so much concern for short-term results, a lack of resources, and a plethora of aid organizations, a program like the MCA loses out."

But James Mazzarella, managing director for congressional affairs for the MCC, says he believes the MCC has many champions -- bipartisan support in Congress as well as among the NGO and think-tank community.

"It's sort of conventional wisdom to say that MCC doesn't have any champions -- people who really want to do aid correctly." But, he explained, "the more people find out about us, the more supportive they are of what we're doing."

Kraham notes that bipartisan support catalyzed the MCC at the beginning and has been a mainstay since. She said the MCC's supporters believe it has incorporated the lessons from other aid donors and is applying them in a unique way.

"There's a lot of faith in the MCC program and a lot of hope," she said.

The MCC has signed multiyear compacts totaling $5.5 billion with 16 countries to support projects to fight poverty and improve economic growth. Another 18 countries that scored low on one of the MCC's indicators have Threshold programs.

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