The Millennium Challenge Corporation’s (MCC) Board of Directors recently invited seven countries to apply for FY 2004 MCC Threshold Program assistance: Albania , East Timor, Kenya, Sao Tome and Principe, Tanzania, Uganda, and Yemen. The Threshold Program has been established to assist countries that have not yet qualified for Millennium Challenge Account (MCA) assistance but have demonstrated a significant commitment to improve their performance on the MCA eligibility criteria.

Objective of the Threshold Program

The Threshold Program is designed to assist countries that are on the “threshold,” meaning that they are committed to undertaking the reforms necessary to improve policy performance and eventually qualify for MCA assistance. Threshold Program assistance will be used to help such countries address the specific policy weaknesses indicated by the country’s scores on the sixteen policy indicators that are central to the MCA eligibility criteria and methodology.

Threshold Program Selection Methodology

The MCC Board of Directors selected the seven countries as eligible for FY 04 Threshold Program assistance based on their demonstrated commitment to meet the MCA eligibility criteria, including improvement of their scores on sixteen publicly available policy indicators in three general categories: ruling justly, investing in people, and encouraging economic freedom. Each candidate country’s scores against these sixteen indicators are listed on the MCC website under Country Rankings.

In considering countries for the FY04 Threshold Program, the Board favored countries that had to improve upon two or fewer indicators to qualify cleanly under the MCA eligibility criteria; i.e., by improving on two or fewer indicators the country would score above the median on half of the indicators in each policy category, would score above the median on the corruption indicator and would not score substantially below the median on any indicator. In addition, the Board reviewed whether countries that passed this screen also demonstrated a commitment to undertake policy reforms that would result in improvements in deficient MCC policy indicators.

Program Implementation

The U.S. Agency for International Development (USAID), in partnership with MCC, will take the lead in implementing the Threshold Program. Other U.S. agencies and departments may be involved in providing threshold assistance.

Countries that have been selected by the Board as eligible for FY04 Threshold Program assistance will be invited to submit proposals for policy and other reforms necessary to improve performance on the indicators. MCC and USAID will then evaluate proposals and determine which of these proposals merit MCC funding.

As with the core MCA program, being declared eligible for Threshold Program assistance does not guarantee a country will in fact receive such assistance. Only proposals demonstrating a meaningful reform commitment and a high likelihood of successful implementation will be selected for Threshold assistance. Further, participation in the Threshold Program does not guarantee future selection for the MCA. Qualifying for the MCA will continue to depend on a country’s performance on the MCA selection criteria. Change will not be easy and it may take time for improvements to be reflected in a country’s indicator scores. Improving performance on the MCA indicators will require strong political commitment and leadership over a sustained period of time.

Finally, it is not necessary for countries to participate in the Threshold Program to improve their performance on the MCA indicators and qualify for the MCA. All countries interested in applying for MCA assistance in the future can track their policy scores, based on public information, on the MCC website and should continue to work on addressing policy performance in each of these areas.