Millennium Challenge Looks Like Texas

0 Comments | Environmental Insider News, July 31, 2005

Remember back when Texans gathered together in small groups in 16 separate regions to begin conversations about putting together their own regional water plans? Only after that job was done (for the most part) did these regional councils gather with state officials and other interested parties to work to write the Texas Water Plan - which is itself a living document that will require updates every five years or so.

The Texas Water Development Board also doles out hundreds of millions of dollars every year in loans and grants through such programs as the clean water and drinking water state revolving funds, the economically distressed areas program, and other pass-through funds. Every applicant for these loans and grants has to demonstrate a high level of accountability for how the monies will be spent (with ongoing oversight a foregone conclusion) and, for loans, how they will be repaid.

Now consider how foreign aid to developing (read, poor) nations has been managed over the past fifty years or so. We could wax eloquent about the Swiss bank accounts, the chateaus in France for extended families of dictators, the military hardware, the kickbacks, and other ways that money has been squandered, or even all of the unfair trade conditions and perverse requirements for how loan monies were to be spent. But all we really need to know is that many of the so-called beneficiaries of foreign aid have been unable to repay hundreds of billions of dollars borrowed in their name. Sadly, in many cases, it is hard even to identify any real benefits of such "aid."

The United States has taken a long look at this record of failure and devised a new paradigm for foreign aid: the Millennium Challenge Account (MCA) program. Perhaps because of President Bush's experience as Governor of Texas, the design of this program is reminiscent of how we do business in the Lone Star State. [This is not to say that we are the only ones to utilize the stakeholder process or to hold recipients of state funds accountable for how they manage those monies - but we Texans have become masters of these methods.]

President Bush first introduced the MCA program in Monterey, Mexico, in March 2002, but it took until last year for Congress to authorize funding and until April 2005 for the Millennium Challenge Corporation to finalize its first compact with an eligible nation. Unlike prior aid programs, MCA compacts can only be signed with nations that meet standards of accountability and also conduct stakeholder meetings to solicit input from ordinary citizens of all stripes. Some aid is also reserved for "threshold" countries to help them meet program criteria.

To date, only 16 low-income nations have qualified for MCA funding, though others are scrambling to become eligible. The MCA program has set standards for governing justly, encouraging economic freedom, and investing in people that include meeting measurable goals for civil liberties and political rights, the rule of law and control of corruption, public health and education, and empowering women.

The very first MCA compact - which will send $110 million to Madagascar - will help that nation formalize its land tenure system, modernize its land registry, expand land title services to rural citizens, improve the national banking system, and set up a body that identifies investment opportunities for rural citizens to reach markets. Other grant monies will train farmers and other entrepreneurs in production, management, and marketing techniques. But the first $1 million will be spent on baseline surveys of households, farms, and enterprises to set up a mechanism for tracking increases in household income, agricultural productivity, and investment as the program unfolds.

To verify whether the program is working, the U.S. and Madagascar identified several interim indicators - securing property rights for about 250,000 hectares of land, benefitting about 62,000 households, increasing lending in target areas by about $30 million, and significantly increasing the number of rural producers who adopt new technologies or engage in higher value production. There is also a rigorous budget and control system to ensure fiscal accountability in which a separate fiscal agent identified via a competitive process will manage funds control and Madagascar's newly written procurement law will be the basis for governing procurement.

To qualify for the grant, the Malagasy government held a national workshop, attended by over 350 people, to explain the MCA process and discuss obstacles to economic growth and poverty reduction. The government then organized regional consultative workshops to exchange ideas, ran radio and TV broadcasts about the MCA and solicited on-air input, published newspaper advertisements that announced meetings, and called for submission of proposal ideas from ordinary citizens. In this way, the design for the grant application was built from the bottom up as well as from the top down - and the whole nation has ownership, not just an elite few.