The Launching of the Millennium Challenge Account

Real Audio of Briefing

MR. DENIG:Good afternoon, ladies and gentlemen, and welcome to the Washington Foreign Press Center.

We are very pleased to be able to welcome back the Under Secretary of State for Economic, Business and Agricultural Affairs, Alan Larson.

Under Secretary Larson will brief us today on the subject of the launching of the Millennium Challenge Account, a very important initiative of the Bush Administration. He'll have an opening statement to make and, after that, he will be very happy to take your questions.

Secretary Larson

UNDER SECRETARY LARSON: Good afternoon. I actually stand here today in a different capacity than Under Secretary of State because, as of yesterday, I became the interim Chief Executive Officer of the Millennium Challenge Corporation.

As you all know, President Bush went to the United Nations Summit on the Financing of Development and made a proposal for a new kind of partnership between developed countries and developing countries. He put the stress on his determination to come forward with a new program that would be focused on those developing countries that had the strongest demonstrated commitment to the policies that make development possible. And he promised that he would come forward, after working with the U.S. Congress, to get additional money to support the development of those countries.

We have secured the support of the Congress. There was $1 billion of additional resources that was provided in the '04 budget that was approved by the Congress in the last week or so. And along with that budget came the authorization of the Congress to set up a new corporation that would do the job of working with committed, developing countries in a totally new way.

This is a corporation that is independent. It has, as its Board of Directors, the Secretary of State as the Chairman of the Board; the Secretary of the Treasury as the Vice Chairman; the United States Trade Representative, Bob Zoellick, as a Member of the Board; Andrew Natsios, the Administrator of USAID, as a Member of the Board, and it will in the future include the permanent CEO, someone that will be nominated soon by the President and confirmed by the Senate, as well as some representatives of the private sector who can bring their expertise to this important task.

Yesterday, we had the first Board meeting of the Millennium Challenge Corporation. It was held in public in the State Department, with quite a number of visitors from outside the government at that meeting. The Board proposed and approved the selection of me as the interim CEO. They approved their bylaws. They had a discussion of their future meeting schedule, and they had a demonstration of the MCC website, which will be operating within the next 24 hours or so. And you will be able to find more information about the Millennium Challenge Account at www.mca.gov.

We are very excited about this opportunity to move forward with something entirely new in the field of development assistance, something that believes that growth matters, and we will be striving to achieve long-lasting, sustainable growth; a project that believes that policies matter, and we'll be working with countries that are committed to the best policies possible; that results matter, and we are determined to work with our partner countries to measure the results that we're getting so that we can be sure that when we invest money that it is getting a return in the same sort of way that you would expect a return if you are making a business investment.

Now in some cases, the return may not be financial -- it may be students educated, health care delivered -- but we want to know that we're getting return on our investment.

The Millennium Challenge Account -- Millennium Challenge Corporation -- is provisionally located in Rosslyn, in the USA Today Building. We had our first staff meeting this morning. There's a very small and dedicated team that's working to put this together, and we'll be expanding the size of the team, as we are able.

We are complying with some requests from the Congress to provide some more information about how we will implement the selection criteria. We expect to be in a position to begin selecting the partners, the countries with whom we would be prepared to do development compacts, in about 90 days, probably some time in the beginning of the month of May.

With those comments, I'd be happy to try to answer any questions that you might have.

MR. DENIG: Let me remind you to please use the microphone and identify yourself and your news organization. Let's start right over there with Africa.

QUESTION: Thank you, sir. My name is Ben Bangoura. I'm Washington correspondent for Guinea News. I would like to know what would be the selection criteria you just mentioned here.

UNDER SECRETARY LARSON: Sure. Absolutely. First of all, one of the first actions taken by the Board of Directors was to approve for transmission to the Congress and for publication in the Federal Register a list of countries that are potentially candidates to participate in the MCA. So that list will be available to all of you very, very shortly.

The basic criteria for even being able to be a candidate are to be poor, to have an annual per capita income level below $1,445 and be eligible for participation in all of the programs of the International Development Association. So there's roughly 75 countries that could meet those basic income-related criteria.

The Congress also said that countries that are ineligible to receive U.S. assistance because, for example, they're supporters of terrorism, should be deleted from that list. And so we've had to go through that process.

Having gotten the list of countries that are potential candidates, then what the Corporation is going to need to do is to apply the instructions of President Bush, to concentrate our assistance and our efforts in those countries that have demonstrated the strongest commitment to governing justly, to investing what resources that they have in their own people, and to creating a climate of economic freedom and opportunity.

In order to do that rigorously, we have developed some 16 publicly available indicators: Six relating to governance; four relating to investing in people; six relating to economic freedom and opportunity, and we will be proposing that those indicators be used to help inform the judgments of the Board of Directors as to which candidate countries to select.

At the same time, the U.S. Congress asked us to also take into account some other factors, and we will need to be reporting to the Congress and to the public about how we would propose to take into account those factors.

They wanted us to be sure that we were looking at whether countries have policies that are fair to disabled persons, whether there is an adequate focus on gender opportunity, including in education, whether there are policies with respect to the use of resources that are wise, that it reflects good stewardship, and that there's a policy of respecting the rights of workers.

So those are things that we will find a way to incorporate into the criteria and indicators that we use to make these selections.

MR. DENIG: Okay, let's go with Africa again, front row here, right behind you.

QUESTION: Adu-Asare, AfricaNewscast.com.

Are there any designated projects that this fund is set up for? And if that is the case, would that include health? And would that have any relevance to the account for, set up for the fund for HIV, malaria fight?

UNDER SECRETARY LARSON: One of the things that the President felt very strongly about was that there should be a high degree of flexibility about the sorts of activities that the Corporation invests in. He put the emphasis on those types of activities that encourage long-run sustained economic growth because we believe that economic growth is indispensable for achieving lasting poverty reduction.

When he talked about the Millennium Challenge Corporation, he gave examples of the things he could imagine that would be important. Health was one of them, education was another, agriculture and agriculture productivity was a third. He also talked about things like helping countries to use information technology to strengthen their ability to participate in the world economy. He talked about helping countries that so wish to participate more effectively in the global trading system.

The starting point for us is that this will be a true partnership with the developing countries. So the first thing that we would do, once a country was selected as a potential partner, would be to sit down and talk with the leaders of that country and sort of say, "Look, we are prepared to enter into a compact with you. You would have responsibilities; we would have responsibilities. We would want to do together those things that you believe would be most in keeping with your development strategy; that would give you the most powerful push possible to get to the next level of development." And so we would try to base our activities on the priorities of the country and we would wish that those priorities would be ones that would be developed with lots of inputs from their own citizens and from civil society.

MR. DENIG: Okay. You've got a follow-up question? Okay.

QUESTION: I believe the second part of my question had to do with the relations between the Millennium Account and the Global Health Fund.

UNDER SECRETARY LARSON: Well, there could be. I think we will have to see how that works out in practice. The focus of the two programs is different. The focus of the Millennium Challenge Account is economic development, growth and the expansion of living standards for the people in these countries that we're working with. And we are focusing on those countries that have the best possible development policies, even though they are poor.

The focus of the President's AIDS initiative is on working with those countries that face the most devastating challenge from HIV/AIDS. Some of these countries may be the same. Some of them may be different. There may be instances where the MCA, or the Millennium Challenge Corporation, can work alongside the effort on HIV/AIDS to achieve even better results in a particular country.

But it is important to understand that they do have a different point of emphasis. We recognize that there are some countries that are afflicted by HIV/AIDS that may not have the best economic development practices, but we're going to be there anyway because this program is about stopping a disease and helping the people who are threatened by it, whereas the MCC is going to focus much more sharply on working with countries that are doing the best possible job of setting a good environment for achieving economic development and growth.

QUESTION: A quick follow-up.

MR. DENIG: Okay.

QUESTION: My real concern is are these two programs going to come from the same basket, the same till of money? That's what I'm --

UNDER SECRETARY LARSON: No. No. It's different programs, different funding.

QUESTION: Okay.

MR. DENIG: Let's go back there to Ben just for a minute.

QUESTION: Any idea how much the funding for MCA would be? Any idea? Any figure?

UNDER SECRETARY LARSON: The Congress appropriated $1 billion for the current budget year, and so that will keep us very busy. That's a lot of money. The President has asked for $2.5 billion in the next budget year, the 2005 fiscal year. The President has said that in the third year, he wants to see $5 billion for this program. So it's a program that's starting at a very substantial level, but would ramp up to even larger levels in the second and the third years.

QUESTION: How long do you expect the program to last?

UNDER SECRETARY LARSON: We believe that this should be an enduring commitment on the part of the United States, so the President has conceived it as a permanent increase in our development assistance and our development tools. Obviously, for those of us who are working in the Corporation, it's our firm intention to come up with very, very good results that would justify that and would give confidence on the part of the Congress and the American people that this was an important investment and should be continued.

MR. DENIG: Okay. Let's go to Japan.

QUESTION: Hi, and thanks so much. My name is Tetsuji Ida from Kyodo News. I'm still wondering. It seems to me that it's very difficult to evaluate good governance and invest in their people. And could you talk a little bit more about how you evaluate? And as for the result, it will take for long, long time to get a result, and I just want to know, also, how do you evaluate the results?

UNDER SECRETARY LARSON: Sure. My experience is that if something is important and if decisions are going to be based on it, then very serious attention will be paid to how to measure it. And so to some extent, our interest in trying to gauge good governance and investing in people is helping to build up a supply of indicators and measurements.

But what we did in practice after the President announced his initiative was we surveyed all of the literature, and all of the work that was going on at the World Bank and by associations like the Heritage Association and Freedom House and others. And we examined indicators that were available. In the area of governance, for example, the World Bank Institute has done a great deal of publicly available work that essentially rates countries with respect to the quality of their regulation, the degree of corruption or integrity within their government services. There are various different indicators of human rights, human rights standards.

Similarly, in the area of investing in people there are such things as primary school completion rates and the amount of money that countries invest as a percent of GNP, recognizing that poor countries have less, but of what they have, how much do they give to education, and how much they give to the military, for example.

So we have these indicators, and we tested them; we stress tested them to see if we believe they were really correlated with the sorts of policies that we all believe are important, and we think that we have a pretty good set of indicators. We don't believe they're perfect. We think that it will be important for the Board of Directors to have the possibility to exercise some judgment in cases where they think that a country may be moving very positively in the right direction, even though they don't have the sort of long track record that has scored well on these indicators.

What I think is important about this, more than the detail of any particular indicator, is that it's an indication of how determined we are that a rigorous evaluation of countries' commitment to governing justly and investing their people and economic freedom will be the basis in making our decisions.

This is going to be new and different. It is going to be unprecedented, and frankly, it's going to be difficult because this is not the typical way that our government or other governments have made foreign assistance allocations in the past. So it's a challenge in every sense of the word.

MR. DENIG: All right. Let's go back to Africa, to Ben Bangoura.

QUESTION: Thank you, sir. So what's your assessment about Guinea as far as the commitment to democracy and human rights go? And what's your overall view about the recent election there? Is Guinea in any way electable for this kind of program you're putting together?

UNDER SECRETARY LARSON: I understand the spirit of the question, but if I go down this road, I'm going to have the same question about a number of different countries. And so I said on the way over that I wasn't going to go down this path. But let me comment on your question in a way that I hope will be helpful.

We have found that by virtue of taking this report, countries are assessing themselves. And so we have had the interesting experience during the AGOA forum that we held in December, where there were a number of ministers. I was able to co-host a reception at the State Department with Under Secretary Taylor, and we had a number of the ministers there. And one of the Ministers, an Ambassador, and a Senior Civil Servant grabbed me and took me out to a different part of the reception room and said, "We need to sit down and talk." He said, "Look, we've looked at your indicators. We know that we have some weaknesses here in some of these areas. We have examined ourselves and we see it. But let us tell you what we're doing to try to correct those weaknesses. And we are very determined, in spite of those weaknesses, to get ourselves into a position that we would be able to successfully compete, to participate in the Millennium Challenge Corporation."

We think this is one of the most constructive features of this approach -- that we're being very open and transparent on how these decisions are being made so that I don't need to tell you how a particular country sizes up. The country is going to have a very good idea for itself how it sizes up. And if it feels that there are some shortcomings here and there, we will have a program administered by the United States Agency for International Development to help upgrade countries' performance and capabilities in any areas that they feel are weak; for example, anti-corruption policies or governance policies or the regulatory approach for business.

You know, one of the indicators is the number of days to start a business. If it takes 180 days to start a business in a country, that's an indication that this may not be a very friendly place to get economic activity going, and a certain amount of technical help may help a country figure out how to reduce that to a much smaller number.

MR. DENIG: All right. Let's go to another gentleman here from Africa.

QUESTION: Adu-Asare. I have two questions. One of -- the first one is, would you be working, would MCA be working through governments or NGOs at a local level? The second part of my question is do I see a parallel between the MCA's, MCC's approach and USAID?

UNDER SECRETARY LARSON: In terms of our implementing partners, we believe that we should preserve maximum flexibility to implement programs in whatever way makes sense.

In some cases it may be nongovernmental organizations that are on the ground and have the capability to deliver on the services and activities that need to be undertaken. In some cases, it may be a government agency. In some cases, it may be a foundation – such as The Gates Foundation. In some cases it may be private sector. The one thing, though, is that because we are choosing countries based on the commitment of the country and the government, whatever implementing agency we work with would be a decision that we would make in conjunction with the government.

In other words, it wouldn't be a situation where we are doing this behind the back of the government. There are some countries where the United States has to work with NGOs because we can't possibly work with the government. When the Taliban were running Afghanistan, we had a large assistance program to help hungry people, but we didn't operate it through the Taliban, we operated it through NGOs.

In this case, we would be partnering with a government because it would be a government that we have confidence in. But together, the government and we might say, "For this agricultural project, this NGO on the ground is just doing wonderful work. Let's find a way to support that and they can be the implementing agency."

Maybe the UN, in some cases, might be the implementing agency. It might be the ministry of education of the country. We feel we need to have the flexibility to have the implementation done in the most efficient way possible.

MR. DENIG: All right, let's go to the gentleman in the middle, there. Thanks.

QUESTION: Russ Totten, Yomiuri Shimbun.

When do you expect the appointment of the permanent CEO and the other Board members? Where might they come from, within government?

UNDER SECRETARY LARSON: I'm hoping, and expecting, that the nomination of the permanent CEO would come very, very quickly. We want to have a full time leader for this Corporation that would bring energy, perspective to it, and I think that will come quite quickly, and obviously, we'll want to work with the Congress to get the earliest possible approval by the Senate of that nomination.

We will be staffing up other positions of the Corporation quickly. We already have a small team that has been detailed informally. One of the papers I hope to sign in the next day or so would be the Memoranda of Understanding between agencies that would let the MCC accept detailees from other agencies.

We would like to get in this Corporation a rich blend of people, of the best people we have in government who have been working on these issues and have been striving to find a better way to carry out the task of providing development assistance, along with people from the outside: people with business experience in developing countries, possibly people with experience from foundations that are active operationally in the field, and create a really creative blend of experience so that this Corporation will do things in a better and more efficient way.

We've already got that in the small band that is working on the MCC now. We've got people whose experience is predominantly private sector, but have been in government for a short time, and we've got people who've been in government for much or most of their careers, but who have had a real focus on development and a real desire to find new and better ways to get things done.

MR. DENIG: Japan again.

QUESTION: You talked about the importance of NGO, and do you have NGO people in your Board of Directors? And I want to know how can NGO people participate in the decision making process of MCC.

UNDER SECRETARY LARSON: Right. Well, the board isn't fully, fully named yet. Under the law passed by the Congress, there are five government members. I mentioned those already. But just to repeat, it would be the Secretary of State, Secretary of the Treasury, U.S. Trade Representative, USAID Director, and the Chief Executive Officer of the MCC itself. Those are the five government members.

Congress said there should be four members from the private sector, who will have to be named in consultation with the Congress. And those people haven't been nominated yet. I mean it's wide open. They could be university presidents, heads of NGOs, distinguished thinkers on the issue of development, distinguished business leaders -- the field is open.

But in addition to the Board itself, the Corporation has the flexibility to get outside input in several different ways. One is through the Board meetings. We had an open meeting yesterday. The second is through the webpage of the MCC where we will have an interactive webpage where we can receive and respond to suggestions.

We have the flexibility, if we decide to exercise it, to set up some informal advisory boards. There was discussion with the Congress about whether to do that. We have the flexibility to do that. It is something that we aren't necessarily going to try to do in the next week. We've got some sort of very urgent tasks to take care of, but the Secretary of State as Chairman of the Board was perhaps the most vocal in our deliberations about his desire, as Chairman of the Board, to be getting outside input.

He didn't want a closed Board of Directors that was composed of only government people, as good as those government people might be. He wanted to have some input from outside so that there was more of a sense of an open Board of Directors that would be able to bring some of the best thinking on development into the deliberations of the Board.

MR. DENIG: Okay. Last question from Japan again.

QUESTION: I'm Hiro Aida with Kyodo News. My question might be little bit in a broader sense, but how does this relate to the President Bush's agenda of democratization of the Middle East with, you know, the developing world and on all those criterias you mentioned for good governance. It's basically a conditioned aid to the developing countries with, you know, condition of good governance, and which may mean, you know, from a point of view of democratic -- view of democratic way of governing the country. And so, well, how these two things are related, first?

And the conditions may differ from country to country, and how are you coordinating with other large aid, international aid donors such as Japan, you know, in terms of those conditions? Because if Japan may have a different kind of agenda, you know, this is hypothetical, but, you know, or despite the U.S. may saying, saying that you don't give aid to certain country because of lack of, you know, the conditions or criteria are not fulfilled, or the other donors may do something else. And what's your coordinating -- international coordinating process for achieving your goals in terms of, well, so-called good governance?

UNDER SECRETARY LARSON: Okay. Important questions and there was more than one of them in there, so I'm going to try (laughter), no, but thank you for the questions.

I'm going to try to sort of break it out into a couple of distinct issues. You asked about how this relates to some of the President's other initiatives, including on the Middle East. For me the best way to explain it is that the President's approach and the Administration's approach to various of the problems and challenges that we see in the world is founded in some very basic principles that animate and guide everything we do.

And one of them is that freedom matters. One of them is that we believe that people who have an opportunity at freedom will make the best choices and have the best chance of developing their own lives and creating better opportunities for their children. And so when we look at the Middle East, we are very, very cognizant of the fact that the Arab Human Development Report identified in a very candid way, deficits -- freedom deficits, education deficits and economic deficits.

And we believe that fundamental to every effort to overcome those deficits is expanding the scope of freedom in the political world, in the economic world and in the social world. So the MCA and the President's Middle East initiatives have a common foundation in our belief in freedom and opportunity.

Now we, you know, there will be countries from the Middle East, certainly the greater Middle East, that would be able to compete for participation in the Millennium Challenge Account, but they are in separate programs. It's just that they share the same source, which is our belief in freedom and opportunity.

The second point, on coordination, I think needs to be examined --or answered, at least -- in a slightly broader context. I have been able in recent months in my position, not as interim CEO, but in my position as Under Secretary of State, to conduct with my counterpart in Japan, Deputy Minister Fujisaki, a strategic review of our respective priorities on development assistance.

It was an extraordinarily productive meeting, and we've agreed to do that again on a very informal basis because it helps us -- and we think it sounds as if it helps Japan -- to have an opportunity to sit back and talk about our strategic goals for our assistance globally and how we are implementing those activities in particular parts of the world. So this is something that, as the two governments are working within any particular country, the Millennium Challenge Corporation will certainly want to have very strong coordination with other countries that are providing assistance in that country, and we're committed to making sure that we are a good collaborator. In many cases, we may be able to partner with countries.

So my point is that I think this coordination takes place at two levels: One, on the ground in a particular country where the MCC will be a good partner and collaborator; but it also takes place at a more strategic level in the dialogue that we enjoy with our counterparts in the Government of Japan.

MR. DENIG: Okay. Thank you very much, Mr. Secretary. Thank you, ladies and gentlemen.

UNDER SECRETARY LARSON: Thank you very much.