Millennium Challenge Corporation
The Millennium Challenge Corporation (MCC) is a bilateral United States foreign aid agency established by the U.S. Congress in 2004. It is an independent agency separate from the State Department and USAID. It provides grants to countries that have been determined to have good economic policies and potential for economic growth. The country qualification process is objective, involving scores provided by third parties in 17 different areas. An eligible country must apply for a grant with a specific project in mind.
Millennium Challenge Corporation


Agency overview
FormedJanuary 2004
HeadquartersWashington, D.C.
Employees~300 (2011)
Annual budget$800 million (FY 2018)[1]
Agency executive
Mahmoud Bah (acting)[2], Chief Executive Officer
Partner countries as of May 2011. Countries in green have active compacts; countries in orange have active threshold compacts.
At the Inter-American Development Bank meeting on March 14, 2002, President George W. Bush called for a new compact for development with accountability for both rich and poor countries. He pledged to increase development assistance by 50% by fiscal year 2006 (which, by the end of 2004, doubled and was to double again by 2010).[3] Other development programs like USAID have been thought to suffer from many different and sometimes conflicting goals, which often are a result of political pressures, and for not delivering long-term economic improvements.[citation needed]
MCC was authorized in 2004 with bipartisan support. Its guiding principles are:
The first CEO of the Millennium Challenge Corporation was Paul Applegarth, a private business person with experience managing emerging market investments. Applegarth was followed by John Danilovich, a private business person who had served as the U.S. Ambassador to Costa Rica from 2001 to 2004 and then U.S. Ambassador to Brazil.[4] On November 20, 2009, Daniel W. Yohannes, an Ethiopian-born American business person, was confirmed by the Senate as the newest CEO of the corporation.[5] The current Millennium Challenge Corporation CEO is Sean Cairncross.
The MCC Board is made up of representatives. These include the MCC's CEO, the U.S. Secretary of State who is the chair, the Secretary of Treasury who is the vice chair, the administrator of USAID, the U.S. Trade Representative and other private-sector or development-related officials.[6][7]
Selection indicators
A country is considered eligible for a compact (aid grant) if its score on 17 indicators exceeds the median score of its peer group. All 17 indicators are compiled by third parties with no connection to MCC. MCC grants are made without considering politics. This is perhaps the most innovative aspect of MCC, as previous foreign aid missions were plagued by political considerations. The focus of the MCC is to promote economic growth in the recipient countries. The program emphasizes good economic policies in recipient countries. The Bush administration has stated its belief that development aid works better in countries with good economic policies, such as free markets and low corruption.[citation needed]
Girls' primary education completion rates for countries in Africa. Source data: MCC Open Data Catalog, FY 2014. [8]
The indicators are:[9]
Civil liberties [10]Ruling justlyFreedom House
Political rights [11]Ruling justlyFreedom House
Voice and accountabilityRuling justlyWorld Bank Institute
Government effectiveness [12]Ruling justlyWorld Bank Institute
Rule of law [13]Ruling justlyWorld Bank Institute
Control of corruption [14]Ruling justlyWorld Bank Institute
Immunization rate [15]Investing in peopleWorld Health Organization
Public expenditure on health [16]Investing in peopleWorld Health Organization
Girls' primary education completion rate [17]Investing in peopleUNESCO
Public expenditure on primary education [18]Investing in peopleUNESCO and national sources
Natural resource management [19]Investing in peopleCIESIN/Yale
Inflation rate [20]Economic freedomInternational Monetary Fund WEO
Trade policy [21]Economic freedomHeritage Foundation
Land rights and access index [22]Economic freedomIFAD / IFC
Regulatory quality [23]Economic freedomWorld Bank Institute
Fiscal policy [24]Economic freedomnational sources, cross-checked with IMF WEO
Business start-up [25]Economic freedomIFC
These are only criteria for eligibility. An eligible country must apply for a grant with a specific project in mind. The criteria have been updated as of 2012.[26]
Countries and country tools
Compact countriesThreshold countries
 Burkina Faso
 Burkina Faso
 Cabo Verde Guatemala
 Côte d'Ivoire
 El Salvador Honduras
 Kyrgyz Republic
 Liberia Liberia
 Moldova Paraguay
 São Tomé and Príncipe
 Sierra Leone
 Nicaragua Solomon Islands
 Philippines Togo
 Timor Leste
 Sri Lanka
 Timor Leste
MCC compacts and thresholds programs in recipient countries
MCC signs either a compact or a threshold agreement with a partner country. A compact is awarded if the country scores highly on the selection criteria indicators. If the country scores poorly but has a positive, upward trend on the selection criteria, it can still be eligible for a smaller grant, called a threshold program.
MCC requires that each partner government creates a special purpose legal entity that will be accountable for implementing the compact program.
Eligible countries
In the first year (2004), 17 countries were made eligible for an MCC grant: Armenia, Benin, Bolivia, Cape Verde, El Salvador, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka, and Vanuatu. Madagascar and Honduras were the first countries to receive actual funding from the MCA. On June 16, 2006, the Gambia was suspended, citing deterioration in 8 of the 16 criteria categories.[27] Mali was approved in October 2006 for a $461 million program to develop modern irrigation systems and an industrial park.[28] Jordan was granted full compact eligibility, despite objections from Freedom House for its lack of full political and civil rights.[29] MPs in Uganda from the opposition party hailed their country's rejection from full compact status, demanding instead a stronger effort in stopping the corruption that disqualified their country.[30] In June 2007, MCA-eligible countries in Africa held a meeting in Accra, Ghana, to discuss their experiences.[31] Malawi qualified for a full compact in 2007, while Mauritania became threshold eligible.[32]
Threshold eligible
Several countries were chosen in 2004 for a new part of the program called Threshold Program Assistance, which are smaller compacts used to assist a country close to meeting account eligibility to become eligible for a full program.[33]Jordan received a Threshold program aimed at democracy and trade totaling $25 million.[34]Yemen was previously eligible for a threshold agreement, but was suspended after their indicators fell too low to qualify. But having successfully competed a democratic election and various economic reforms, the MCC made Yemen eligible again for a threshold agreement.[35] On December 12, 2007, the MCC Board selected Malawi for a compact and Mauritania for a threshold agreement, as well as allowing Albania, Paraguay, and Zambia to submit a first ever second stage threshold agreement.[36] In 2007 the U.S. Ambassador to Swaziland highlighted the progress on the MCC indicators over the last few years and encouraged the country to work toward eligibility.[37]
A full listing of MCC partner countries can be found at https://web.archive.org/web/20130101234121/http://www.mcc.gov/pages/countries​. MCC's portfolio focuses mostly on African nations.
Congress has consistently provided less funding for the program than the president has requested. In fiscal year 2004, $650 million were provided for the program, with an increase up to $1.5 billion the next year.[38] For fiscal year 2007, $2 billion were provided, a 14% increase over the previous year but still under the $3 billion target.[39] Again for fiscal year 2008, less funding will be provided than was hoped for, and only $1.2 billion was budgeted; the CEO of the MCC commented that it would undercut the program's efforts. Congress declined to re-authorize the program, which technically was not needed since the program had been authorized already, but also since there was argument over the authorization language.[40] In discussions of the FY 2009 budget, the United States Senate proposed that only half of the money needed for a compact be provided up front, as opposed to full funding for each one provident in advance, which officials at the corporation insist would be a "large step backward" causing too little aid to make an impact on recipient countries.[41] Senator Richard Lugar, the author of the amendment, responded that more "realistic" funding levels allowed for more compacts, thus spreading the "MCC effect".[42] The amendment did not make it into the final bill.[43] President Bush's FY 2008 budget requested $2.225 billion, the first time since the program's inception that the amount was not $3 billion, and enough money for five compacts, several threshold agreements and administrative funding.[44]
Reception and impact
Studies by groups such as the conservative Heritage Foundation in the United States have shown that many developing countries that have received foreign aid have seen their per capita income fall or stagnate over the last 40 years. The Heritage Foundation has consistently supported the MCC's approach, which has used their trade measure from the Index of Economic Freedom.[45] In April 2005, the United States Government Accountability Office issued a favorable report about the work of the MCC and its work thus far.[46] The Program Assessment Rating Tool (PART), which reviews the efficiency and results produced by U.S. government programs, was scheduled to be reviewed in 2007.[47] A study in 2006 looking at the "MCC effect" estimated that potential recipient countries improved 25% more on MCA's criteria than other countries, after controlling for time-trends.[48] The World Policy Council, headed by AmbassadorHorace Dawson and Senator Edward Brooke, recognizes the MCC as the most recent and most promising program in its area, and recommended that the Bush administration and the Congressional Black Caucus focus on full funding and an accelerated pace of spending.[49] Doing Business 2007 cited the Millennium Challenge Accounts as a catalyst for reforms underway in 13 countries.[50] Also, Freedom House released subcategories for the first time since it was being used as part of the MCC's measurements to allow for more granular distinctions.[51] Also, the number of days it takes to start a business in low and low-middle income countries has decreased significantly since 2002, which is one of the factors the accounts measure since rapid business registration is thought to increase economic activity.[52]
Some critics have charged that the program uses indicators by conservative groups such as the Heritage Foundation and is therefore biased toward free market economics and reimposing American imperialism on the Global South.[53][54][55][56] The program is said to have resulted in countries receiving less funding from other U.S. government development organizations and not more. Some development agencies have felt frozen out of the process since the compact programs are designed primarily by the country involved.[57] Implementation has been difficult in Armenia, and concern about its effectiveness has been expressed.[58]
In February 2020, the Cabinet of Sri Lanka said it would not sign the proposed MCC agreement in its present form. A committee of experts had determined that it contained clauses incompatible with the Constitution of Sri Lanka and was "detrimental" to the country's sovereignty.[59] After a board meeting on 15 December 2020, the MCC announced the withdrawal of its proposal for a compact with Sri Lanka.[60]
See also
Title 22 of the Code of Federal Regulations
  1. ^ "FY 2019 Congressional Budget Justification - Department of State, Foreign Operations, and Related Programs" (PDF). U.S. Department of State. February 12, 2018. Archived from the original (PDF) on February 12, 2018. Retrieved February 24, 2018.
  2. ^ https://www.mcc.gov/about/leadership
  3. ^ a b "About MCC". Millennium Challenge Corporation. Retrieved September 4, 2016.
  4. ^ "About Millennium Challenge Corporation". MCC. Retrieved 2007-09-26.
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  6. ^ "Archived copy". Archived from the original on 2015-03-19. Retrieved 2013-01-04.
  7. ^ "Archived copy". Archived from the original on 2016-12-28. Retrieved 2011-05-05.
  8. ^ "MCC Open Data Catalog". FY2014_timeseries. Retrieved 11 Nov 2014.
  9. ^ "MCC Selection indicators". Retrieved 6 May 2011.
  10. ^ https://www.mcc.gov/who-we-fund/indicator/civil-liberties-indicator
  11. ^ https://www.mcc.gov/who-we-fund/indicator/political-rights-indicator
  12. ^ "Government Effectiveness Indicator".
  13. ^ "Rule of Law Indicator".
  14. ^ "Control of Corruption Indicator".
  15. ^ "Immunization Rates Indicator".
  16. ^ "Health Expenditures Indicator".
  17. ^ "Girls' Primary Education Completion Rate Indicator".
  18. ^ "Primary Education Expenditures Indicator".
  19. ^ "Natural Resource Protection".
  20. ^ "Inflation Indicator".
  21. ^ "Trade Policy Indicator".
  22. ^ "Land Rights and Access Indicator".
  23. ^ "Regulatory Quality Indicator".
  24. ^ "Fiscal Policy Indicator".
  25. ^ "Business Start-Up Indicator".
  26. ^ "Archived copy" (PDF). Archived from the original (PDF) on 2012-09-21. Retrieved 2012-04-18.
  27. ^ "The Gambia Suspended from Participation in MCC Compact Program". Millennium Challenge Corporation. June 16, 2006. Archived from the original on 2006-09-02. Retrieved 2006-09-13.
  28. ^ Charles W. Corey (October 26, 2006). "Millennium Challenge Corporation approves $461 million for Mali". Relief Web. Retrieved 2006-10-30.
  29. ^ "Millennium Challenge Corporation Should Hold Countries to Higher Standards of Democratic Governance". Freedom House. November 2, 2006. Retrieved 2006-11-13.
  30. ^ Kevin J. Kelley (November 14, 2006). "East Africa: Graft Costs Uganda And Kenya Millions in U.S. Aid". The East African. Retrieved 2006-11-20.
  31. ^ "Meeting of MCA Eligible Countries in Africa". Business Ghana. June 11, 2007. Retrieved 2007-07-15.
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  35. ^ "Yemen's Eligibility for Assistance Reinstated by Millennium Challenge Corporation Board". United States Embassy in Yemen. February 15, 2007. Archived from the original on 2007-08-15. Retrieved 2007-03-29.
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  37. ^ Timothy Simelane (December 14, 2007). "Parker sees hope for Swazi economy". The Swazi Observer. Archived from the original on 2008-01-07. Retrieved 2007-12-14.
  38. ^ "Nuts and Bolts of Bill". The Washington Post. December 7, 2006. Retrieved 2006-11-13.
  39. ^ "Millennium Challenge Corporation Statement on Fiscal Year 2007 House Appropriation". Millennium Challenge Corporation. June 9, 2006. Archived from the original on 2006-09-02. Retrieved 2006-09-14.
  40. ^ Sheila Herrling (December 11, 2006). "MCA Reauthorization Bill Killed". MCA Monitor Blog. Archived from the original on 2006-12-15. Retrieved 2006-12-17.
  41. ^ Celia W. Dugger (December 7, 2007). "U.S. Agency's Slow Pace Endangers Foreign Aid". The New York Times. Retrieved 2007-12-11.
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  43. ^ Megan Harris (January 22, 2008). "Analysis: Promising aid program faces cuts". UPI. Archived from the original on 2008-02-09. Retrieved 2008-02-02.
  44. ^ "MCC FY 2009 Budget Request Supports Continued U.S. Commitment to Reduce Poverty" (PDF). Millennium Challenge Corporation. February 4, 2008. Archived from the original (PDF) on 2008-04-09. Retrieved 2008-02-14.
  45. ^ Paolo Pasicolan and Sara J. Fitzgerald (October 18, 2002). "The Millennium Challenge Account: Linking Aid with Economic Freedom". The Heritage Foundation. Archived from the original on 2006-10-27. Retrieved 2006-10-29.
  46. ^ "Progress Made on Key Challenges in First Year" (PDF). Government Accountability Office. April 27, 2005. Retrieved 2006-10-29.
  47. ^ "Assessing Program Performance Using the Part". Office of Management and Budget. March 20, 2007. Archived from the original on 2007-03-14. Retrieved 2007-03-28.
  48. ^ Doug Johnson, Tristan Zajonc (April 11, 2006). "Can Foreign Aid Create an Incentive for Good Governance? Evidence from the Millennium Challenge Corporation". John F. Kennedy School of Government. SSRN 896293.
  49. ^ Dawson, Horace; Edward Brooke; Henry Ponder; Vinton R. Anderson; Bobby William Austin; Ron Dellums; Kenton Keith; Huel D. Perkins; Charles Rangel; Clathan McClain Ross; Cornel West (July 2006). "The Centenary Report Of The Alpha Phi Alpha World Policy Council"(PDF). Alpha Phi Alpha Fraternity. Archived from the original (PDF) on 25 February 2009. Retrieved 27 January 2010.
  50. ^ "Annual Report of International Finance Corporation Highlights Reform Incentives Created by Millennium Challenge Corporation". Millennium Challenge Corporation. September 6, 2006. Archived from the original on 2006-09-29. Retrieved 2006-09-13.
  51. ^ "Freedom House Releases Subcategory and Aggregate Scores for Freedom in the World". Freedom House. September 28, 2006. Retrieved 2006-10-16.
  52. ^ "Millennium Challenge Corporation Releases 2007 Country Data Measuring Performance on 16 Benchmark Indicators; MCA Eligibility Creating Incentives for Policy Reform in Countries". Millennium Challenge Corporation. October 16, 2006. Retrieved 2006-10-21.[dead link]
  53. ^ Mark Engler (October 30, 2006). "Calling Bad Business Good". TomPaine.com. Retrieved 2006-10-30.
  54. ^ Mawdsley, Emma, 2007, "The Millennium Challenge Account: Neo-liberalism, poverty and security", Review of International Political Economy, 14(3), pp.487-509
  55. ^ Carbone, M., 2004, “The Millennium Challenge Account: A Marginal Revolution in US Foreign Aid Policy”, Review of African Political Economy, 31(101), pp.536-542
  56. ^ Soederberg, Susanne, 2004, “American empire and ‘excluded states’: the Millennium Challenge Account and the Shift to pre-emptive development”, Third World Quarterly, 35(2), pp.279-302
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  58. ^ "SOLUTION TO PROBLEM OF UNEQUAL DEVELOPMENT OF YEREVAN AND RURAL AREAS MOST IMPORTANT TASK". ARKA News Agency. September 18, 2006. Retrieved 2006-10-16.[dead link]
  59. ^ "Cabinet decides not to sign proposed MCC agreement". Ada Derana. 28 February 2020.
  60. ^ "MCC discontinues $480 million Compact deal with Sri Lanka". 16 December 2020. Retrieved 17 December 2020.
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