[Federal Register Volume 75, Number 191 (Monday, October 4, 2010)]
[Notices]
[Pages 61216-61219]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-24727]
-----------------------------------------------------------------------
MILLENNIUM CHALLENGE CORPORATION
[MCC FR 10-12]
Report on the Selection of Eligible Countries for Fiscal Year
2011
AGENCY: Millennium Challenge Corporation.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This report is provided in accordance with section 608(d)(1)
of the Millennium Challenge Act of 2003, Public Law 108-199, Division
D, (the ``Act''), 22 U.S.C. 7708(d)(1).
Dated: September 28, 2010.
Melvin F. Williams, Jr.,
VP/General Counsel and Corporate Secretary, Millennium Challenge
Corporation.
Report on the Criteria and Methodology for Determining the Eligibility
of Candidate Countries for Millennium Challenge Account Assistance for
Fiscal Year 2011
This report to Congress is provided in accordance with section
608(b) of the Millennium Challenge Act of 2003, as amended, 22 U.S.C.
7707(b) (the ``Act'').
The Act authorizes the provision of Millennium Challenge Account
(MCA) assistance to countries that enter into a Millennium Challenge
Compact with the United States to support policies and programs that
advance the prospects of such countries achieving lasting economic
growth and poverty reduction. The Act requires the Millennium Challenge
Corporation (MCC) to take a number of steps in determining what
countries will be selected as eligible for MCA compact assistance for
fiscal year 2011 (FY11) based on the countries' demonstrated commitment
to just and democratic governance, economic freedom, and investing in
their people, as well as MCC's opportunity to reduce poverty and
generate economic growth in the country. These steps include the
submission of reports to the congressional committees specified in the
Act and publication of notices in the Federal Register that identify:
The countries that are ``candidate countries'' for MCA assistance
for FY11 based on their per capita income levels and their eligibility
to receive assistance under U.S. law. This report also identifies
countries that would be candidate countries but for specified legal
prohibitions on assistance (section 608(a) of the Act; 22 U.S.C.
7707(a));
The criteria and methodology that MCC's Board of Directors (Board)
will use to measure and evaluate the policy performance of the
candidate countries consistent with the requirements of section 607 of
the Act (22 U.S.C. 7706) in order to determine ``MCA eligible
countries'' from among the ``candidate countries'' (section 608(b) of
the Act); and
The list of countries determined by the Board to be ``MCA eligible
countries'' for FY11, with justification for eligibility determination
and selection for compact negotiation, including with which of the MCA
eligible countries the Board will seek to enter into MCA compacts
(section 608(d) of the Act).
This report is the second of the three required reports listed
above.
Criteria and Methodology for FY11
The Board will base its selection of eligible countries on several
factors including:
The country's overall performance in three broad policy
categories--Ruling Justly, Encouraging Economic Freedom, and Investing
in People; MCC's opportunity to reduce poverty and generate economic
growth in a country; and Availability of funds to MCC.
Performance of Policy Categories
Section 607 of the Act requires that the Board's determination of
eligibility be based ``to the maximum extent possible, upon objective
and quantifiable indicators of a country's demonstrated commitment'' to
the criteria set out in the Act. For FY11, there will be two groups of
candidate countries--low income countries (LIC) and lower middle income
countries (LMIC). As outlined in MCC's Report on Countries that are
Candidate Countries for Millennium Challenge Account Eligibility for
Fiscal Year 2011 and Countries that would be Candidates but or Legal
Prohibitions (August 2010), LIC candidates are those countries that
have a per capita income equal to or less than $1,905 and are not
ineligible to receive United States economic assistance under part I of
the Foreign Assistance Act of 1961 by reason of the application of any
provision of the Foreign Assistant Act or any other provision of law.
LMIC candidates are those countries that have a per capita income
between $1,906 and $3,945 and are not ineligible to receive United
States economic assistance under the same stipulations.
The Board uses seventeen indicators to assess the policy
performance of individual countries (specific definitions of the
indicators and their sources are set out in the attached Annex A).
These indicators are grouped for purposes of the FY11 assessment
methodology under the three policy categories listed below.
Ruling Justly
Civil Liberties
Political Rights
Voice and Accountability
Government Effectiveness
Rule of Law
Control of Corruption
Encouraging Economic Freedom
Inflation
Fiscal Policy
Business Start-up
Trade Policy
Regulatory Quality
Land Rights Access
Investing in People
Public Expenditure on Health
Public Expenditure on Primary Education
Immunization Rates
Girls' Primary Education Completion
Natural Resource Management
In making its determination of eligibility with respect to a
particular candidate country, the Board will consider whether a country
performs above the median in relation to its income level peers (LIC or
LMIC) on at least three of the indicators in each of the Ruling Justly,
Encouraging Economic Freedom, and Investing in People categories, and
above the median on the Control of Corruption indicator. One exception
to this methodology is that the median is not used for the Inflation
indicator. Instead, to pass the Inflation indicator a country's
inflation rate must be under a fixed ceiling of 15 percent. The Board
may also take into consideration whether a country performs
substantially below the median on any indicator (i.e., below the 25th
percentile) and has not taken appropriate measures to address this
shortcoming.
Approach to Income Classification Transition
Each year a number of countries shift income groups, and some
countries formerly classified as LICs suddenly face new, higher
performance standards in the LMIC group. As a result, they typically
perform relatively worse as an LMIC, even if they performed relatively
well as an LIC, and maintained or improved performance over the
previous year in absolute terms. To address the challenges associated
with sudden changes in performance standards for these countries, MCC
has adopted an approach to income category
[[Page 61217]]
transition whereby the Board may consider the indicator performance of
countries that transitioned from the LIC to the LMIC category both
relative to their LMIC peers, as well as in comparison to the current
fiscal year's LIC pool for a period of three years.
Supplemental Information
While the indicators are the predominant basis for determining
which countries will be eligible for MCA assistance, it is consistent
with the Act for the Board to exercise discretion when evaluating
performance on the indicators and determining a final list of eligible
countries. The Board may take into account other quantitative and
qualitative information (supplemental information) to determine whether
a country performed satisfactorily in relation to its peers in a given
income category. Such supplemental information is important because
there are elements of the eligibility criteria set out in the Act for
which there is either limited quantitative information (e.g., the
rights of people with disabilities) or no well-developed performance
indicator. Until such data and/or indicators are developed, the Board
may rely on additional data and qualitative information to assess
policy performance. For example, the State Department Human Rights
Report contains qualitative information to make an assessment on a
variety of criteria outlined by Congress, such as the rights of people
with disabilities, the treatment of women and children, workers rights,
and human rights.
Supplemental information is also important because it makes up for
data gaps, lags, trends, or other weaknesses in particular indicators.
For example, the median score (and passing threshold) for the Girls'
Primary Education Completion indicator in the LMIC group has
historically been very high. Recognizing that this may pose limitations
on the indicator's ability to meaningfully differentiate policy
performance, the Board may consider that a girls' primary education
completion rate above 95 percent essentially represents full
completion, regardless of where the median score for this indicator
falls. As additional information in the area of corruption, the Board
may consider how a country is evaluated by supplemental sources like
Transparency International's Corruption Perceptions Index and the
Global Integrity Report, among others, as well as on the defined
indicator.
Consideration for Subsequent Compacts
Countries nearing the end of compact implementation may be
considered for eligibility for a second compact. In determining
eligibility for a second compact, the Board will consider, among other
factors, the country's policy performance using the methodology and
criteria described above and the country's track record of performance
implementing its first compact. To assess implementation of a first
compact, the Board will consider the nature of the country partnership
with MCC, the degree to which the country has demonstrated a commitment
and capacity to achieve program results, and the degree to which the
country has implemented the compact in accordance with MCC's policies
and standards.
Continuing Policy Performance
Partner countries that are developing or implementing a compact are
expected to seek to maintain and improve policy performance. MCC
recognizes that partner countries may not meet the indicator criteria
from time to time due to a number of factors, such as changes in the
peer-group median; transition into a new income category (e.g., from
LIC to LMIC); numerical declines in score that are within the
statistical margin of error; slight declines in policy performance;
revisions or corrections of data; the introduction of new sub-data
sources; or changes in the indicators used in measuring performance.
None of these factors alone signifies a significant policy reversal or
warrants suspension or termination of eligibility and/or assistance.
However, MCC may issue a warning, suspension, or termination of
eligibility and/or assistance to countries that demonstrate a
significant policy reversal. According to MCC's authorizing
legislation, ``[a]fter consultation with the Board, the Chief Executive
Officer may suspend or terminate assistance in whole or in part for a
country or entity * * * if * * * the country or entity has engaged in a
pattern of actions inconsistent with the criteria used to determine the
eligibility of the country or entity * * *.'' Because of data lags,
this pattern of actions need not be captured in the indicators for MCC
to take action.
Consideration of Changes to the Criteria and Methodology
For FY11, there are no changes to the core criteria or methodology
used in FY10.
In keeping with MCC's commitment to aid effectiveness through
regular evaluation of its own practice, MCC is undertaking a
comprehensive review of its country selection process. At the time the
selection system was established, MCC's country scorecard represented
the most effective way to use third-party data to compare policy
performance as objectively as possible across the broad majority of low
and lower middle income countries. After using this system for six
years, MCC believes it is appropriate to undertake a review to ensure
that the most effective indicator system is being used to evaluate and
select countries for eligibility. While the review may find that MCC
should make no changes to the selection system, it may, alternatively,
identify recommended adjustments. Any such adjustments could be
implemented as part of the fiscal year 2012 selection process.
The selection review is in its early stages and planned to extend
through mid-2011. The review will include consultations with a broad
range of stakeholders and experts in the development community. As a
first step, MCC encourages broad participation in the formal public
comment period that follows the publication of this report and lasts
until December 15.
Relationship to Statutory Criteria
Within each policy category, the Act sets out a number of specific
selection criteria. As indicated above, a set of objective and
quantifiable policy indicators is used in determining eligibility for
MCA assistance and in measuring the relative performance by candidate
countries against these criteria. Performance against each of these
criteria is assessed by at least one of the seventeen objective
indicators and some criteria are addressed by multiple indicators. The
following list of the criteria set forth in the Act identifies in
parentheses the corresponding indicators.
Section 607(b)(1): Just and democratic governance, including a
demonstrated commitment to--
(A) Promote political pluralism, equality and the rule of law
(Political Rights, Civil Liberties, Voice and Accountability, and Rule
of Law);
(B) Respect human and civil rights, including the rights of people
with disabilities (Political Rights, Civil Liberties, and Voice and
Accountability);
(C) Protect private property rights (Civil Liberties, Regulatory
Quality, Rule of Law, and Land Rights and Access);
(D) Encourage transparency and accountability of government
(Political Rights, Civil Liberties, Voice and Accountability, Control
of Corruption, Rule of Law, and Government Effectiveness); and
[[Page 61218]]
(E) Combat corruption (Political Rights, Civil Liberties, Rule of
Law, and Control of Corruption).
Section 607(b)(2): Economic freedom, including a demonstrated
commitment to economic policies that--
(A) Encourage citizens and firms to participate in global trade and
international capital markets (Fiscal Policy, Inflation, Trade Policy,
and Regulatory Quality);
(B) Promote private sector growth (Inflation, Business Start-Up,
Fiscal Policy, Land Rights and Access, and Regulatory Quality);
(C) Strengthen market forces in the economy (Fiscal Policy,
Inflation, Trade Policy, Business Start-Up, Land Rights and Access, and
Regulatory Quality); and
(D) Respect worker rights, including the right to form labor unions
(Civil Liberties and Voice and Accountability).
Section 607(b)(3): Investments in the people of such country,
particularly women and children, including programs that--
(A) Promote broad-based primary education (Girls' Primary Education
Completion and Public Expenditure on Primary Education);
(B) Strengthen and build capacity to provide quality public health
and reduce child mortality (Immunization Rates, Public Expenditure on
Health, and Natural Resource Management); and
(C) Promote the protection of biodiversity and the transparent and
sustainable management and use of natural resources (Natural Resource
Management).
Annex A
Indicator Definitions
The following 17 indicators will be used in measuring candidate
countries' demonstrated commitment to the criteria set forth in section
607(b) of the Act. The indicators are intended to assess the degree to
which the political and economic conditions in a country serve to
promote broad-based sustainable economic growth and reduction of
poverty, and thus provide a sound environment for the use of MCA funds.
The indicators are not goals in themselves; rather they are proxy
measures of policies that are linked to broad-based sustainable
economic growth. The indicators were selected based on their (i)
Relationship to economic growth and poverty reduction; (ii) the number
of countries they cover; (iii) transparency and availability; and (iv)
relative soundness and objectivity. Where possible, the indicators are
developed by independent sources.
Ruling Justly
Civil Liberties: Independent experts rate countries on: Freedom of
expression; association and organizational rights; rule of law and
human rights; and personal autonomy and economic rights, among other
things. Source: Freedom House.
Political Rights: Independent experts rate countries on: The
prevalence of free and fair elections of officials with real power; the
ability of citizens to form political parties that may compete fairly
in elections; freedom from domination by the military, foreign powers,
totalitarian parties, religious hierarchies and economic oligarchies;
and the political rights of minority groups, among other things.
Source: Freedom House.
Voice and Accountability: An index of surveys and expert
assessments that rate countries on: The ability of institutions to
protect civil liberties; the extent to which citizens of a country are
able to participate in the selection of governments; and the
independence of the media, among other things. Source: Worldwide
Governance Indicators (World Bank/Brookings Institution).
Government Effectiveness: An index of surveys and expert
assessments that rate countries on: The quality of public service
provision; civil servants' competency and independence from political
pressures; and the government's ability to plan and implement sound
policies, among other things. Source: Worldwide Governance Indicators
(World Bank/Brookings Institution).
Rule of Law: An index of surveys and expert assessments that rate
countries on: The extent to which the public has confidence in and
abides by the rules of society; the incidence and impact of violent and
nonviolent crime; the effectiveness, independence, and predictability
of the judiciary; the protection of property rights; and the
enforceability of contracts, among other things. Source: Worldwide
Governance Indicators (World Bank/Brookings Institution).
Control of Corruption: An index of surveys and expert assessments
that rate countries on: ``Grand corruption'' in the political arena;
the frequency of petty corruption; the effects of corruption on the
business environment; and the tendency of elites to engage in ``state
capture,'' among other things. Source: Worldwide Governance Indicators
(World Bank/Brookings Institution).
Encouraging Economic Freedom
Inflation: The most recent average annual change in consumer
prices. Source: The International Monetary Fund's World Economic
Outlook Database.
Fiscal Policy: The overall budget balance divided by GDP, averaged
over a three-year period. The data for this measure come primarily from
IMF country reports or, where public IMF data are outdated or
unavailable, are provided directly by the recipient government with
input from U.S. missions in host countries. All data are cross-checked
with the IMF's World Economic Outlook database to try to ensure
consistency across countries and made publicly available. Source:
International Monetary Fund Country Reports, National Governments, and
the International Monetary Fund's World Economic Outlook Database.
Business Start-Up: An index that rates countries on the time and
cost of complying with all procedures officially required for an
entrepreneur to start up and formally operate an industrial or
commercial business. Source: International Finance Corporation.
Trade Policy: A measure of a country's openness to international
trade based on weighted average tariff rates and non-tariff barriers to
trade. Source: The Heritage Foundation.
Regulatory Quality: An index of surveys and expert assessments that
rate countries on: the burden of regulations on business; price
controls; the government's role in the economy; and foreign investment
regulation, among other areas. Source: Worldwide Governance Indicators
(World Bank/Brookings Institution).
Land Rights and Access: An index that rates countries on the extent
to which the institutional, legal, and market framework provide secure
land tenure and equitable access to land in rural areas and the time
and cost of property registration in urban and peri-urban areas.
Source: The International Fund for Agricultural Development and the
International Finance Corporation.
Investing in People
Public Expenditure on Health: Total expenditures on health by
government at all levels divided by GDP. Source: The World Health
Organization.
Immunization Rates: The average of DPT3 and measles immunization
coverage rates for the most recent year available. Source: The World
Health Organization and the United Nations Children's Fund.
Total Public Expenditure on Primary Education: Total expenditures
on
[[Page 61219]]
primary education by government at all levels divided by GDP. Source:
The United Nations Educational, Scientific and Cultural Organization
and National Governments.
Girls' Primary Completion Rate: The number of female students
enrolled in the last grade of primary education minus repeaters divided
by the population in the relevant age cohort (gross intake ratio in the
last grade of primary). Source: United Nations Educational, Scientific
and Cultural Organization.
Natural Resource Management: An index made up of four indicators:
eco-region protection, access to improved water, access to improved
sanitation, and child (ages 1-4) mortality. Source: The Center for
International Earth Science Information Network and the Yale Center for
Environmental Law and Policy.
[FR Doc. 2010-24727 Filed 10-1-10; 8:45 am]
BILLING CODE 9211-03-P