1:30 P.M. EST
Real Audio of Briefing
MR. DENIG: Good afternoon, ladies and gentlemen, and welcome to the Washington Foreign Press Center. We are pleased, six months after our first briefing on the Millennium Challenge Corporation, that we can present another briefing on the same subject. And we're very pleased today for this briefing to have with us the Chief Executive Officer, Mr. Paul Applegarth, who will bring us up to date on the activities of the corporation and announce, as well, the eligible countries for the year 2005.
Mr. Applegarth will have a brief opening statement and after that will be very glad to take your questions.
Paul.
MR. APPLEGARTH: Thank you, Paul. It's nice to see at least a couple of familiar faces out there, nice to see you again.
I'm going to actually extend beyond my opening remarks beyond just what happened yesterday and spend a couple of minutes on the background of the Millennium Challenge Corporation (MCC), which many of you know. The Millennium Challenge originates with an international summit that was held in Monterrey two years ago, two and half years ago. Now, whether it was a basic, if you like, consensus, among the developing countries and the developed countries and building on the lessons of many years of development assistance, there was a recognition that country ownership in the emerging countries and countries taking responsibility for their development was most important; and secondly, that results matter.
And accordingly, the deal that was struck at Monterrey was that for those emerging countries that took greater responsibility for their own growth and their own poverty reduction, and who put good policies in place, who made the hard decisions to try to improve governance within their countries, reduce corruption, who made decisions to invest in human capital, whether health or education, or to promote economic freedom to create a macro environment with good economic policies, but also a microenvironment with good policies that promoted opportunities for small farmers, rural housewives, business people to create new products and services and, more importantly, create jobs and to build wealth, that if those countries do put those things in place, the developed countries would provide additional foreign assistance to help those countries do that.
And that's what Millennium Challenge is on behalf of the United States. It's the delivery by the United States on the promise that it made at Monterrey two years ago. And it's been quite a delivery. When it reaches the requested goal -- President Bush has said he would like Millennium Challenge's funding to reach $5 billion a year by FY06 -- it will be the largest increase in international assistance from the United States since the Marshall Plan. So it's a very significant effort. We're not talking about just a small new initiative - it is quite important, quite important for the developing world of our potential partners, as well as for the United States.
The second background to the Millennium Challenge has not received very much attention, and I think it's important, particularly now after the election, after a very partisan period with headlines being captured internationally, primarily with the war in Iraq, I think people have lost sight of what the United States is really trying to do internationally. And it has a much broader role and has been doing a lot of things. And I think particularly now in this time of coming together after the election, the United States wants to reemphasize what it is trying to do in a broader outreach in trying to bring people back together. You're seeing it some domestically: The President referred to it last week in terms of trying to bring the country together domestically, but it's also true internationally.
And if you see the Millennium Challenge in that context, I think it's helpful because early in the Administration there was a revision to a document that's called The National Security Strategy. That document has been around a long time. Historically it's been built on defense and diplomacy, and that these were the two fundamental principles for national security of the United States internationally. Early in the Administration, the President, Colin Powell and Condoleezza Rice recognized that development was missing, that the third "d" was missing, and the strategy was amended to add development as the third "d;" and to state that it was in the national security interest of the United States to promote poverty reduction and growth and development in the emerging world, not just because people feel good about it -- although I do believe a lot of what the United States does is a projection of values and what we're trying to do in Millennium Challenge is also a reflection of that -- but also that there is a security element to it.
And there have been a lot of things that have been done in the context of the National Security Strategy, not just Millennium Challenge, but if you look at what the United States has been doing in trade, in overall debt relief and in aid, it all ties back to the addition of the third "d." Specifically, what I'm talking about are: In the trade area, the extension of the African Growth and Opportunity Act, what's called AGOA III, which was done last year -- or this year, even. And this summer, in the middle of a political campaign, political capital was used to get this done because the United States has believed that opening the United States market and other developed markets to goods and services from emerging markets is critical to the development of emerging markets.
And so it's tried to do that in the trade area in at least three ways: One is AGOA and the extension of AGOA, opening up the U.S. market to goods and services from Sub-Saharan Africa.
Secondly, in the CAFTA, the Central American Free Trade Agreement, which has been negotiated now, which is quite important for a number of potential MCC-partner countries, but where the opportunity to open the U.S. market up to certain goods and services from Central America is important. As you know, the treaty is negotiated and not yet through Senate, but hopefully it will be ratified early in the new year.
And third, in a number of bilateral agreements between the United States and particularly in emerging markets to, again, improve the trade environment.
So you see in the trade area the beginning of the implementation of the National Security Strategy. In the debt relief area, obviously the U.S., with some other countries, including UK, have been leaders in the HIPC initiative to try to obtain debt relief, debt forgiveness for performing emerging markets.
In addition, the United States has been taking the lead in trying to have more international assistance funding take the form of grants rather than loans. Having helped to resolve the issue of debt burden through HIPC, the United States doesn't want to recreate it through additional assistance and so wants to, rather than create more debt on the books for emerging markets, to try to at least have more foreign assistance take the form of grants.
And then the third effort in the context of the National Security Strategy is in the foreign assistance area. Regarding traditional official development assistance, a target was set early in the Administration to increase it by 50 percent by the year 2006. That target was actually met in 2003, where traditional ODA has gone up quite dramatically over the years from 2001 to 2003. And that's before the new HIV/AIDS program, which doesn't show up in those numbers, which is $15 billion over five years and makes the United States the largest donor into the alleviation and prevention of AIDS internationally -- not only the largest donor, more than all other donors combined and the last figures I saw, more that twice all of the donors combined. That figure may be outdated, so double-check it. But that's the figures I've seen -- a large, significant commitment to the alleviation and prevention of AID in emerging markets. And then finally, Millennium Challenge, which will be the granddaddy of all the assistance programs once it reaches its full size.
So if you look back and realize what's happened in trade, what's happened in debt relief and what's happened in assistance, it ties back to the National Security Strategy and really is as much or more a statement of the way the United States sees its role internationally and in the emerging world than a lot of other things that are going on right now. And perhaps now that the election is behind us, that can be more seen to be the United States' role. And this is not a partisan statement. This effort is bipartisan effort. It is not Republican; it is not Democratic. This is the U.S. itself trying to do some things.
In terms of Millennium Challenge itself, as you know, we selected our first 16 countries last May. I think I was here just after that selection, newly on the job at that point. I think I was confirmed at least 12 hours before that meeting.
Certainly it seems a long time ago from what's happened in the meantime. But from those initial 16 countries, we've been working hard. We got our first proposal coming from the countries in August. As you know, being selected for Millennium Challenge eligibility is not a guarantee of funding. The countries first compete in terms of the quality of the policy environment they put in place. But then, their proposals still have to stand up as really leading to poverty reduction and growth, and stand up against the proposals coming in from other countries. But we've now received proposals or concept papers or discussion papers from 14 of the16 countries. They are in areas across the board and really show remarkable amount of thought and imagination by our partner countries -- a lot of rural integrated development programs, not just focused on agricultural extension or irrigation or rural roads, but a recognition that you have to address the whole problem. You can't just do a piece of it or you fail.
And I think the country ownership piece of this is important because they understand that. So the proposals we're getting in rural development include training for farmers and agricultural extension, they include improved irrigation, but they also include rural roads. They include micro credit. They include, in some cases, from the rural roads, secondary roads to get to the main roads to get products to market. Land reform, and titling, and tenure building on the work that Fernando DeSoto has been doing, and some others. These were all built into some of the proposals we've gotten from some of the countries.
Other areas we're seeing are financial sector reform, putting in place institutions and rules and regulations so that local capital can be brought together, can be mobilized, so that people have an alternative place that they can trust to put their savings, investments; put it in longer-term investing institutions, who will then put resources in the hand of local decision-makers who are investing on an economic basis that can drive growth -- some things in private sector and lending, some things in rural electrification or energy policy, some things in education, so it's quite a mix. It varies country by country and it's tailored very much by the various country proponents.
We've received 14 of 16 proposals. Our investment committee has approved going to formal due diligence on four of those at this point, and we've notified Congress that we're going to go into due diligence and to begin negotiations for a compact with four countries. Certainly there are no guarantees at the end that the full due diligence will be successful or reach an agreement, but at least we're moving forward on the first four and continuing work on the others.
The first four that we've notified Congress about are Honduras, Madagascar, Nicaragua and Georgia. We are undertaking significant due diligence on these proposals to be comfortable that they will lead to poverty reduction and growth. I think it's inevitable from the process that parts of the proposals will be knocked out. Some of them may not ever reach an agreement. But we are taking the approach and looking at things that lead to the greatest amount of poverty reduction and growth, essentially, whether this is going to be a good investment of U.S. tax dollars.
Now, when I talk about investment, I don't mean for a financial return because we're not [doing this for profit]. This is grant money. But we view what we're doing is an investment, a scarce resource, and so we want to get the highest growth return, the highest return in terms of poverty reduction, that we can get. And that's how the countries ultimately compete and we evaluate the quality of the proposals.
In addition to the ongoing due diligence process on the 14 countries, we named seven threshold countries at the end of September. And the threshold program is different. These are not countries that have qualified for MCA eligibility, which means they can tell us whatever their priorities are. But we've said to certain countries -- that are close to qualifying - that if they will present to us a credible program that looks like it will work to help improve their performance under a Millennium Challenge indicator and they need assistance, technical assistance or other funding to help do that, we will help them to do that.
This model is similar to the basic eligibility program. It is still fundamentally up to the country whether they want to give us a proposal and they ultimately have to have ownership for the design of it and the implementation of it. But we give them the opportunity to give us a proposal around policy reform specifically, which of course is, at the end of the day, what MCC is all about because our money is much less important than incentivizing a good policy environment that will promote poverty reduction and growth. Because if the countries can get that right, whether or not they get assistance from us is less material than the environment they're creating for ongoing growth and development.
Yesterday -- which is the purpose of today's briefing -- was a meeting of the Board of Directors where we chose the eligible countries for 2005 and the threshold countries for 2005. It is only six months since the last meeting. Typically, the selections would be a year apart. Last year, as you will recall, we didn't do it until late in the fiscal year because of the timing of the legislation founding the Millennium Challenge Corporation. But we're now on our regular schedule and going forward. We expect around the first quarter of the U.S. fiscal year, which starts October 1st, to be making the decisions for the upcoming year.
To remind you who is on the Board of Directors, currently there are seven people. We have two vacancies that are not yet filled. The Chairman is Secretary of State Colin Powell. The Vice Chairman is Secretary of the Treasury John Snow. Other members of the Board are the United States Trade Representative Bob Zoellick, and the head of AID, Andrew Natsios. I'm on the Board, and we have two outside members selected from lists provided by Congress: Christine Todd Whitman, who is a former cabinet officer, head of the Environmental Protection Agency; and Ken Hackett, who is the head of Catholic Relief Services globally.
The Board met yesterday and determined, first, who would be the eligible countries for 2005. We had a list of candidate countries of some 82 countries. These are the poorest countries of the world. By design, we only focus on the poorest countries of the world. Of those 82, a few were eliminated from consideration because it's illegal under the Foreign Assistance Act for the United States to provide them aid, and you could probably name most of those. If you don't know who they are, you can go on our website and I think you'll understand why it's illegal.
But most of the countries are eligible. Of countries on the list that were candidates and were selected in 2004, one country we have selected as eligible is not on the list for 2005 because they moved above the per capita income ceiling. And as I mentioned, we really only focus on the poorest countries of the world. Primarily due to exchange rate movements, Cape Verde moved above the ceiling and so was not eligible to compete for 2005. This does not have an operational impact on Cape Verde. They are eligible for 2004 funding and we are in the midst of discussions with them, their proposal development, but they were not eligible to compete this year in the 2005 funding. One of the threshold countries also moved above the ceiling -- Albania. And so they were not able to compete this year.
But of the countries that did compete, the Board first confirmed that all of the other 15 that we selected in May would be eligible for 2005 as well, and added only one country, added Morocco. In terms of its performance under the indicators, it's newly come onto the list of candidate countries and we believed that Morocco does meet the standards for MCA eligibility and so they were named this year for FY2005.
That means we have a total of 17 countries currently eligible for Millennium Challenge assistance in terms of putting proposals to us, and the 17 are: newly added this year, Morocco; and from last year who were reconfirmed yesterday: Armenia, Georgia, Mongolia, Sri Lanka, Vanuatu, Bolivia, Honduras, Nicaragua, Benin, Mali, Madagascar, Ghana, Lesotho, Mozambique and Senegal; and then, on the list from '04, Cape Verde.
In terms of the threshold countries, the Board reconfirmed the status, the threshold status, of the six carry-over threshold countries. As I mentioned, Albania is still on the list from '04. Those six carry-overs are East Timor, Kenya, Sao Tome and Principe, Tanzania, Uganda and Yemen. And yesterday, six more were added as threshold countries: Burkina Faso, Guyana, Malawi, Paraguay, the Philippines, and Zambia.
We would hope and expect that over the next few months we will get a proposal for eligibility from Morocco, and threshold proposals from the countries that were added yesterday, as well as those existing ones from whom we don't have proposals.
With that, I do want to congratulate the countries particularly selected for eligibility, because it's quite a recognition and honor. They are in, in our evaluation, at least the top quartile of all emerging markets that are in the poorest countries in the world in terms of their performance, in terms of policy development, and in terms of governance, in terms of anti-corruption, in terms of investing in human capital and in terms of promoting economic freedom.
The threshold countries also deserve recognition because they're close. The message is a little more mixed because they still have to do some work, and they need to focus on the areas where they're not quite ready for eligibility. But we'll be glad to work with them and help them.
On that, let me turn it open to questions and see what's on your mind.
MR. DENIG: We ask you, as usual, to use the microphone, identify yourself and your news organization. We'll take the gentleman on the right here.
QUESTION: Hi, I'm, actually, I'm Andrew Balls from The Financial Times.
I just had a couple -- two quick questions and one slightly more substantial one. The first one is when do you think the first funds are going to be paid out? The second one was whether the 5 billion figure is still, you know, the right figure for us to concentrate on, given what's happened in Congress so far? And the third one is whether -- some development experts who think this is a wonderful approach to development funding say that already the rules are being bent a little bit in the case of Georgia, to have Georgia as part of that group. And I just wanted to say -- ask if that's a reasonable criticism or one you dismiss?
MR. APPLEGARTH: The first question, if you didn't hear it, was when will we begin disbursing money?
Ultimately, development of the proposals is the responsibilities of the countries. And so the timing is very much dependent on them. We couldn't start working with them until -- it was August when we actually got the first proposal. I think the delay, at least, between August, May and August, was actually well-used, in two ways: A little longer than I might have personally guessed, but it was used well, one, to take a genuine effort at consultation within the country. Because as many of you know, our first test of a proposal is will it work to lead to poverty reduction and growth? But secondly, how did you pick your priority? And rather than having to be just the idea of one or two people in the capital, in the Ministry of Finance, the Ministry of Foreign Affairs or the Prime Minister's office, we really want a genuine broad-based discussion within the country of what their Millennium Challenge priorities ought to be.
We have a scarce resource. We view ourselves as fiduciaries for the U.S. taxpayer in terms of this money and making a good investment, but we also encourage our potential partner countries to consider themselves to be fiduciaries for their own people, because it is not often you get the amounts of money that we're talking about in an MCA program that are unrestricted in terms of sector and that are unrestricted in terms of the type of equipment purchased, and that don't have the kind of conditions or ties that a lot of donors systems has.
And so, this is a rare resource. We've encouraged our partner countries to take it seriously. Most of them, as a matter of fact, all of them have, and they've also taken the consultative process seriously. But as they've gone around to town meetings elsewhere that process has taken time. It's still taking time as the proposals are refined and narrowed down.
The second thing that's taking time is as our counterparts have begun to think outside the box, realize this isn't a traditional model, and that they have unbounded or much greater flexibility than they're used to, and some things they might have thought about that were unfunded by traditional donors aren't the only things they ought to be thinking about. And so you see a lot more discussion about how proposals might work, hang together, lots of innovative ideas, new ideas. So it's taken longer in that context, but I think for good reasons.
We've moved forward now to due diligence on four of the proposals. We still have to finish the due diligence, make sure we're comfortable with the plan and make sure our partners are comfortable with the plan, make sure we're comfortable with how they're going to measure results because we're not looking at how you spend the money, we're looking at what are we trying to get out of -- for the results for the money, and in some cases, even designing those measures remains to be -- is something that hasn't been done before. So that takes some time.
And then at the end of the day, we have to do a government-to-government agreement. I would hope -- so I can't give you a final answer -- if we could get anything, any comeback completed by the end of the year, I think it would be a real achievement. I've done a lot of investment on the private sector side. If you've got a proposal in mid-August in the private sector, if you can get something done in four months, that's really quite good from the time of first receiving a proposal. In that case, they want financial returns. In our case, we have to decide what we want and how we're going to measure it.
And then, third, we don't [yet] have the government-to-government agreement at the end of it. So we may get it done. If not, I would expect in the first quarter you'll see some significant movement.
In terms of the funding level, the question, is $5 billion realistic? Right now we're focused on the request for $2.5 billion for this current fiscal year, FY-05. The request was cut substantially in both the House and the Senate. An increase, which in a tough budget year would itself be a recognition of bipartisan support for what we're trying to do, but we are quite concerned about the MCA's ability to fulfill its mission, fulfill the promise that has been offered, and the cuts at the current level of funding would impact seriously either the number of countries or the size of the compacts that we can enter into. And we think that would be not consistent with the objectives of the program. And we, and the Administration, we're generally making getting the funding levels up a priority in the ongoing budget discussion. And I hope we will know the outcomes of this going forward, but it will be a priority.
In terms of the $5 billion a year, that's next fiscal year's issue, for FY-06. Certainly, the need is there. We won't have cured world global poverty or transformed all the policy environments in the world in the next six months.
And again, if we are going to have the credible impact on policy in emerging markets to both encourage governments, provide them an incentive to take some hard decisions, because some of the things we're talking about on anti-corruption, some of the things we're talking about in rule of law, reforming the court system, opening up the political system, these are not easy decisions. If they were easy decisions, they would have been done already. So to get that done, to provide the incentive and to provide the proper amount of aid and assistance to the governments that have created that kind of environment, we clearly need the amount the President has targeted in FY-06, which is $5 billion a year going forward.
In terms of the criteria in specific reference to Georgia, I can assure you the Board pays very close attention to the criteria. And I think if you look at the decisions yesterday, you'll see that Morocco is clearly the one that is most qualified for eligibility. And and I think of the original 16 that were picked, I think there's been no question raised that 13 of the 16 were clearly qualified under the criteria or potentially qualified. Of the ones that didn't, I think Georgia has provoked the most discussion. And to me, this is the core of what MCC is about. You have a Board as strong as our Board to apply informed judgment. Inevitably, the ratings we use, the rankings we use, are dated in terms of the data. We use only third-party-sourced rankings. We want them from credible sources. We want the methodology to be transparent. We want it to be credible. We also want it linked to policy so that if a country wants to improve its ranking, it's obvious what it has to do, and we also want it linked to policy -- to results, in terms of promoting poverty reduction and growth.
The rankings are very important. At the same time, some of the rankings are dated. They only get updated every year, or in a couple of cases, every two years. The Board does look at events since the time the data was put out. And we give them as much updated information as we can, as well as in areas where we don't have rankings, like the management of natural resources, other areas.
And in the case of Georgia, if you look at the data sheet, it primarily looks red rather than green. If you haven't seen our data sheets, I encourage you to go on the website and you can look up your countries you're interested in and see them on the web. But that data reflects the prior Georgian government. There was the Rose Revolution that took place in November. The new leadership across the board is taking quite serious steps to address corruption, address rule of law, and a number of other areas. And the Board decided in May that it wanted to give a very explicit signal that this was the kind of leadership and aggressive addressing of problems that it wanted to recognize. And so the vote on Georgia was an explicit decision to recognize that kind of leadership.
It was also recognized it was a bet. Now, it wasn't a bet in terms of funding, because in May, Georgia didn't get a check, but they are named eligible to get an opportunity to present a proposal to us. But we also know that we have another five or six months or longer to evaluate the performance of the government to see whether it's continuing on track. Right now, that looks very good, notwithstanding a very different environment around it, and trying to pull the country together, and a lot of other things. The continued focus still seems to be there, the feedback we're getting from a variety of sources, not only governmental sources, but NGOs, private sector, other people we talk to -- we're constantly in the flow of events as part of just keeping track of what's going on, plus our own due diligence, that still looks very good, but we'll see.
But that's the theory of what we're about, in terms of looking at the indicators and updating them with the most informed judgments. Certainly, the rankings and the indicators were the primary driver of all the decisions yesterday, and most particularly on the new countries added, both to the eligibility, in terms of Morocco, and to the threshold program.
MR. DENIG: Let's go to Ben in the middle, please.
QUESTION: Thank you, sir. My name is Ben Bangoura, Guinea News in Washington, D.C.
Have you got any --
MR. APPLEGARTH: One second, what's your agency?
QUESTION: Oh, Guinea News, Washington.
MR. APPLEGARTH: Sure.
QUESTION: Yes. Have you got any specific proposal from governments in Senegal and Mali and what those proposals are about?
MR. APPLEGARTH: Some of you will know of our 16 first eligible, eight were in sub-Saharan Africa. I think this surprised some people who felt that: Well, Africa can't possibly compete. Even among the poorest countries of the world, on a global basis, you have to make a special exception for Africa. I think these governments have shown that that's simply a myth. These countries have good leadership, they're taking hard steps, they're good examples to their neighbors, and they are competing quite well. Over half of our threshold countries are also African, Sub-Saharan African. I think that's important.
I mentioned that we had received proposals from all but two countries. Neither of those two are in Africa. So all of the sub-Saharan Africa countries have given us at least concept papers, if not developed proposals, and we do have initial proposals from Mali and Senegal. I actually will be in Mali at the end of next week to talk more with the government about it and fundamentally get to know our potential partner better. And at that point, we'll be in a position to help moving forward in the evaluation of their proposals.
MR. DENIG: Okay, let's go back to the back there.
QUESTION: Nestor Ikeda. I'm an Associated Press reporter for Latin America.
I have two questions. The first one is related to my personal confusion. What is the difference of being a country eligible for the 2004 and eligible for the 2005? Because they are the same countries and they have not been -- they have not received that disbursement yet, up to now.
And the second question is some voices in Congress said that these 16 countries represent only the 2 percent of the very poor in the world. And what is your response to that?
MR. APPLEGARTH: The difference between 2004 and 2005 is, in operational terms, really does not have much significance. The fact [is, eligibility for 2005] allows the countries to participate in 2005 funding levels. If they were only eligible in 2004, we'd have to look at only the 2004 pool of funding. This is perhaps a coincidence of the timing. I think we'll assess this going forward in terms of how it will work.
Right now, we only have a billion dollars for 2004. The proposals we've received total over $4 billion -- and that's before the addition of Morocco, or the last couple we've got. It's now clear that some of those proposals will fall away. But as we evaluate the proposals, the ability to use 2005 funding is important to really fund out the proposals -- the plans and programs, which is why the 2005 funding level that we've received from Congress will be quite important because there are good, credible proposals on the table that will require funding. The fact that Cape Verde is only participating in 2004 is not important because we can only, under our law, have only one compact at a time, so all their funding will come from 2004 funding if we reach a compact with them. So operationally, it doesn't make a difference. Funding level doesn't really make a difference.
I think what does make a difference is a reconfirmation that these governments and leaders remain on track in terms of policy development. If they were moving away or falling back, then I think we'd have to have a question as to whether it was prudent to enter into a compact with them, whether we're going to achieve the results that we want to achieve in terms of poverty reduction and growth. So that's the real difference. And I think the countries that were re-selected for 2005 should take quite an amount of satisfaction they were re-selected, and similarly for the threshold program.
In terms of the funding levels, whether it's 2 percent of the population, my first reaction is I need to check my math. I think it may have been a little bit higher than that, particularly when you incorporate the threshold countries. But, you know, those numbers are quite distorted because you can have a tremendous swing if you have China and India in the program. If you knock those numbers out, I think our percentage of the non-Chinese, non-Indian population is much higher.
More important, we're looking at leadership and examples, and investing and applying our funds where it's going to get the highest economic return and growth return, partly because we want to show, to create incentive. We'd much rather work with, initially at least, a few countries that are really taking a leadership role and give them meaningful amounts of assistance, help them to create incentive for other countries, and to show by example that this works.
We're seeing that in some of the surrounding countries. One of the leaders of one of the threshold countries, I'm told, has asked to get the ranking sheets of all of his neighbors and he takes considerable delight -- he's from a smaller country -- he takes considerable delight in going around to his neighboring presidents and pointing out that they may have been not giving him due respect in the past, and now he's qualified for MCC and they haven't, and there's a certain amount of serious joshing around this point. And if we can create that kind of environment, this is what we're trying to do.
MR. DENIG: Let's go to the lady up front here, please.
QUESTION: Thank you. María Isabel Rivero, with the German Press Agency.
MR. APPLEGARTH: I'm sorry, which agency?
QUESTION: German Press Agency, DPA. I'm confused. From the $1 billion for 2004, has any of that been disbursed yet?
MR. APPLEGARTH: No, it will be disbursed as part of the first compacts that we do, of which there are four. As soon as those are done, we can begin disbursing. But until we have an agreement, an agreed plan with a partner government, we know how it's going to work, be assured that the money's going to get to the right place, there will not be a disbursement, so there has not yet been a disbursement.
And we really encourage our partner countries to take their time to get this right. We have something very unusual under the U.S. budget system, which is something called "No-year Money." It doesn't go away on September the 30th, which is the end of the fiscal year. And this is important because it goes back to the whole investment approach we're taking. Investors don't rush to throw their money out the door. This is a scarce resource. We encourage our partner countries to take that kind of approach.
And so that's what it's about. So I would obviously like to begin to get some compacts, tell them that we want the flow of assistance to begin. But at the same time, we're already having the impact on policy we wanted to do. We're creating the impact and having the effects even before the dollars flow. And when the dollars flow, they should flow well, in a thoughtful way to things that are really country priorities and in a way that people can understand how they're supposed to go, can help us in the monitoring and evaluation, and to achieve the results we have. So we'd rather make sure the plan is right and then disburse.
QUESTION: Okay. And as you said, the eligibility doesn't mean that they will get money. I cover Latin America. Honduras, Bolivia and Nicaragua are among those countries that will receive money of the 2004 or 2005 fund?
MR. APPLEGARTH: Well, I agree with everything you say except the word "will." They have the opportunity to present proposals for funding. Okay. And we're still in the due diligence process.
QUESTION: But -- sorry, I thought that was for 2005, but that for 2004 you already had proposals or you don't --
MR. APPLEGARTH: We have proposals from them, but we have not reached an agreement on the plan or the program yet. And, as I mentioned earlier, both Honduras and Nicaragua are more advanced in terms of our having gone to formal due diligence now, we've notified Congress, we're in discussions with them. But it's never over until it's over. We have to assure ourselves that the plan will work. We have to assure ourselves that the priorities that have been presented to us by the government reflect a true consultative process in the country and reflect priorities within the countries, and then we will have a discussion, as well, on additional policy changes. But when that is done and we would reach agreement and the Board approves a compact -- it's still subject to Board approval -- and once we have approvals and negotiated documents, we we can sign and we would disburse at that point.
MR. DENIG: Let's go to the gentleman up front here, please.
QUESTION: José Katigbak, The Philippine Star.
MR. APPLEGARTH: I know your paper well. I used to read it many times.
QUESTION: Thank you. You mentioned rankings. Could we have discourse of, say, the qualifying countries and the threshold countries to find out how far the threshold countries are from moving to the qualifying countries? That's a general question. And a particular question for me is that the Philippines failed to make it to the qualifying round, so to speak. On what grounds did it fail? In other words, do they know what they have to do to get into the good graces, so to speak, of the Millennium Challenge Account?
MR. APPLEGARTH: All of the country rankings are on the web, website. I didn't -- I may have an example of one with me. Just a minute, I'll see. I don't have them all with me today.
MR. DENIG: Could you perhaps provide the website to them?
MR. APPLEGARTH: I don't have it. Do you happen to have a ranking sheet with you? No, okay. I'm sorry. Normally I do have one. But if you go to www.mcc.gov, MCC for Millennium Challenge Corporation, you can get all the rankings. And the whole point is to make it transparent to the countries involved, how the rankings work, who does them, what's the methodology, and how they do? And you have to be above the median, relative to the other competing countries, to pass a particular indicator, and you have to pass over half the indicators in each of the three categories that we evaluate, which are good governance, investing in people, and promoting economic freedom, and to pass the corruption indicator. Even if you do add up, you're substantially below on certain indicators, and not seen to be taking active steps to improve your performance, that also requires further Board consideration.
In the case of the Philippines, just specifically, it is substantially below in the case of health expenditures and fiscal policy; the information we have is that fiscal policy is deteriorating further and that would be an issue. I think overall, and not only in the Philippines but elsewhere, there's continued concern about rule of law, quality of the court system. In all of the countries we're potentially working with, the levels of corruption are an issue, although in the case of the Philippines, it does relatively well on the indicator. But these are matters, which I think would be need to be addressed in many countries. In the case of the Philippines, at least, the ones where it does not do well particularly on the indicators are in the cases of health expenditures and fiscal policy.
MR. DENIG: All right, let's go to the back to Austria.
QUESTION: Thank you. Edith Grunwald, Austrian Press Agency.
I have a more general question. How do you see this program in relation to multilateral help organizations like the World Bank or UN Development Programs? Do you think this is strengthening the U.S. commitment to these organization or do you think it's weakening it, or do you think there's no impact?
MR. APPLEGARTH: We work very hard to coordinate closely with other donors. We think their efforts are quite important to what we do. When I meet with other donors, and I meet with them in every country I visit, and I've also met with the heads of the UN agencies in New York, and the head of UNDP, Mark Malloch Brown, really sponsored the trip, and I thought it was quite useful, helpful. We've met at length with Jim Wolfensohn and others at the World Bank.
So we see this outreach as important. My first message to all other donors is: Do not use the excuse of MCC coming into the country to cut your own programs or to pull back. For us to have the impact on poverty reduction and growth and on policy, we have to be additional. We have to be a genuine incentive. So we start from that. We want them staying alongside us.
Secondly, we want to coordinate programs with them. We ask the governments, in their proposals to us, to explain how what they're asking us to do fits in with what other governments are doing and what other donors are doing, because we don't want to be redundant. We have the flexibility, though, for example, that if another donor has started a program that's going all right and it's a priority of the country, we could put money into that program. It doesn't have to be a distinctly MCC-owned program. If it just needs more fuel or gasoline for the engine, we can give it, if that's the country's priority and we believe the program is working well.
At the same time, other donors can come in alongside us. We actually have one European bilateral country which has expertise in a particular sector that one of our partner countries wants to work with us on. They are going to put people onto to our due diligence team. So we're going to have the donor actually as part of our evaluation team figuring out what they can do and what we can do. And we would encourage that, and the more of it we can do, the better.
In another case, the World Bank and the IADB are doing something in a country; we can provide the last link to really complete it. And so we will end up to be sort of the keystone in what they're trying to do. We have active conversations and we encourage it.
MR. DENIG: Okay, thank you very much, Mr. Applegarth. Thank you, ladies and gentlemen.
MR. APPLEGARTH: Thank you, all.
