Those in Washington who work in global development speak in hushed tones nowadays, worried that after 10 years of bipartisan support for U.S. foreign assistance, foreign aid is about to be front and center on the debt commission’s chopping block. Nowhere are the concerns greater than at the Millennium Challenge Corp. (MCC), an innovative creation of the George W. Bush administration that is in an unusual position for a government agency: It has not spent its money fast enough.
The government “corporation” was established in 2004 on the premise that U.S. foreign assistance would have the greatest impact if offered on a non-political basis to developing countries that adopt sound economic and social policies. As such, it grants money for specific pro-growth, anti-poverty projects, but only after countries meet key indicators in areas such as control of corruption, rule of law and investment in health and education. Essentially, it fosters merit-based competition for U.S. foreign aid.
Congress has appropriated about $10 billion to the MCC over the past seven years, but the prudent agency has disbursed just a few billion, in part because it makes multiyear agreements with its partner countries and demands proof that they are keeping up their side of the bargain before giving them all the agreed-upon funding. Its flush account in the U.S. Treasury, with about $6 billion yet to be disbursed, is one reason appropriations bills in the past two years have allocated around $1 billion per year to the MCC, a big downgrade for an agency that, when it was created, was slated to get $5 billion per year by 2006.
Although the MCC model of delivering U.S. aid abroad has been a success in a field sometimes marked by roads to nowhere, the agency is now a takeover target. Some analysts have predicted it will eventually become part of a restructured U.S. Agency for International Development. The MCC has 300 employees; it was created to be lean and mean, but today it’s looking more like a morsel that could get eaten as part of a broader reform of foreign aid or simply be badly sliced during looming budget cuts. Those who work with the MCC say they worry about losing their start-up, private-sector culture and fear being pressured to spend money too quickly and before it makes sense to do so.
So here’s a way to give the MCC concept a long-term lease on life: Take the agency out of the U.S. government and transform it into a multilateral agency, an international organization with multiple countries as shareholders.
While we’re cutting government spending, Britain and Australia are increasing their foreign aid budgets (even as the former has sharply cut its own government spending) and are looking for effective, multilateral programs to fund. Other allies, too, might be interested in supporting one of the world’s more innovative, results-oriented foreign aid programs. Why not invite Australia, Britain, Canada, Germany and others to put their money into the MCC and take a seat on the board? After all, the MCC picks countries and projects based on objective indicators that are maintained by non-governmental third-party entities; day-to-day U.S. foreign policy interests do not figure into the country selection and grant-making process.
Consider the benefits: As a multilateral agency, the MCC could rise above politics. The “MCC effect” — leaders behaving better and implementing sound policies to get funds — would be even greater if other major donors were involved. Plus, MCC aid programs are not tied to U.S. contractors — German and Japanese firms are among those that implement MCC programs — so no change would be needed in procurement policies.
Over the past few years, nearly every think tank inside the Beltway has published well-reasoned reports arguing for restructuring our antiquated foreign aid apparatus. But momentum for a legislative overhaul has fizzled, and we’re in a season of cutting, not reforming. Transforming the MCC into a global agency helps solve issues for this country and beyond by offering a small way to reduce our deficit while preserving an innovative and effective government program that is making a difference in the world.
Raj Kumar is president of Devex, the online community for global development professionals, and a member of the Council on Foreign Relations. John Hewko, the general secretary and chief executive of Rotary International, was vice president for operations at the Millennium Challenge Corp. from 2004 to 2009. The views expressed here are their own.