Two years ago in Monterrey, Mexico, President Bush called for a "new compact for global development", which links greater contributions from developed nations to greater responsibility from developing nations. The President proposed a concrete mechanism to implement this compact -- the Millennium Challenge Account (MCA) - in which development assistance would be provided to those countries that rule justly, invest in their people, and encourage economic freedom. With strong bipartisan support, Congress authorized the Millennium Challenge Corporation (MCC) to administer the MCA and provided $1 billion in initial funding for FY04. President Bush has pledged to increase funding for the MCA to $5 billion a year starting in FY06, roughly a 50% increase over then current U.S. core development assistance.

The MCA draws on lessons learned about development over the past 50 years:

1. Aid is most effective when it reinforces sound political, economic and social policies - which are key to encouraging the inflows of private capital and increased trade - the real engines of economic growth;
2. Development plans supported by a broad range of stakeholders, and for which countries have primary responsibility, engender country ownership and are more likely to succeed;
3. Integrating monitoring and evaluation into the design of activities boosts effectiveness, accountability, and the transparency with which taxpayer resources are used.

Key MCA Principles

• Reduce Poverty through Economic Growth: The MCC will focus specifically on promoting sustainable economic growth that reduces poverty through investments in areas such as agriculture, education, private sector development, and capacity building.
  

• Reward Good Policy: Using objective indicators, countries will be selected to receive assistance based on their performance in governing justly, investing their citizens, and encouraging economic freedom.

• Operate in Partnership: Working closely with the MCC, countries that receive MCA assistance will be responsible for identifying the greatest barriers to their own development, ensuring civil society participation, and developing an MCA program. MCA participation will require a high-level commitment from the host government. Each MCA country will enter into a public Compact with the MCC that includes a multi-year plan for achieving shared development objectives and identifies the responsibilities of each partner in achieving those objectives.

• Focus on Results: MCA assistance will go to those countries that have developed well- designed programs with clear objectives, benchmarks to measure progress, procedures to ensure fiscal accountability for the use of MCA assistance, and a plan for effective monitoring and objective evaluation of results. Programs will be designed to enable progress to be sustained after the funding under the MCA Compact has ended.

Administration

The MCA is administered by the MCC, a new government corporation designed to support innovative strategies and to ensure accountability for measurable results.

• The MCC is managed by a Chief Executive Officer appointed by the President and confirmed by the Senate and overseen by a Board of Directors composed of the Secretary of State, the Secretary of Treasury, the U.S. Trade Representative, the Administrator of USAID, the CEO of the MCC and four public members, appointed by the President with the advice and consent of the Senate. The Secretary of State is the Chairman of the Board.
• The Corporation is designed to make maximum use of flexible authorities to optimize efficiency in contracting, program implementation, and personnel.

Recent Events

• January 23, 2004: President Bush signed the law creating the MCC, authorizing it to administer the MCA and providing $1 billion in initial funding for FY04.
• February 2, 2004: The Board of the MCC, acting quickly to get the MCC operational, met for the first time and appointed an interim CEO, reviewed the proposed MCC bylaws, and approved a list of candidate countries for participation in the MCA in FY04.
• March 5, 2004: The MCC sent to Congress a report describing the criteria and the methodology by which eligible countries will be selected from the list of candidate countries. A 30 day public comment period followed the publication of the report.
• May 6, 2004: The MCC Board selected 16 eligible countries which were invited to develop a proposal for MCA assistance.
• May 20-June 25: MCC delegations traveled to each MCA eligible country to explain the MCA to a broad range of citizens and organizations and to initiate discussions with governments.
• July 20, 2004: MCC Board named 70 countries as candidates to compete for FY 2005 MCA assistance.