Country Ownership

By Sarah T. Lucas, Director

Department of Policy and Evaluation

November 2011

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MCC was founded with a focused mandate to reduce poverty 

through economic growth. MCC’s model is based on a set of 

core principles essential for development to take place and for 

development assistance to be effective—good governance, country 

ownership, focus on results, and transparency. 

The MCC Principles into Practice series offers a frank look at 

what it takes to make these principles operational. The experiences 

captured in this series will inform MCC’s ongoing efforts to 

refine and strengthen its own model. In implementation of the 

U.S. Global Development Policy, which emphasizes many of the 

principles at the core of MCC’s model, MCC hopes this series will 

allow others to benefit from and build on MCC’s lessons. 

“Country Ownership” is the second policy paper in the Principles 

into Practice series. The series is available at www.mcc.gov/

principlesintopractice.

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In Principle: MCC’s Approach to “Country 

Ownership”

Development investments are more effective and sustainable when they reflect countries’ own priorities and strengthen governments’ accountability to their citizens. This 

is the starting point for MCC’s approach to country ownership. To MCC, however, 

country ownership is more than this. Country ownership is embodied in partnership. 

MCC’s partner countries exercise ownership when, in close consultation with citizens, 

governments take the lead in setting priorities for MCC investments, implementing 

MCC-funded programs, and being accountable to domestic stakeholders for both making decisions and achieving results. This ownership is implemented in partnership with 

MCC: It takes place within the framework of MCC’s focused mandate; must be consistent with MCC’s standards for accountability, transparency and impact; and draws on 

MCC’s support and guidance.

In Practice: MCC’s Approach to “Country 

Ownership”

Country ownership is not a new concept. It is a core tenet of the aid effectiveness 

agenda promoted through the Paris Declaration and the Accra Agenda for Action. It 

has been incorporated into donor policy and programming globally for years, and is a 

centerpiece of the Obama administration’s Global Development Policy.

MCC was founded at a time when the country ownership principle was emerging as 

central to the global dialogue on aid effectiveness. MCC’s founders explicitly built into 

its model authorities and approaches to enhance strong and mutually accountable partnerships with compact countries. These include:

 Selectivity. MCC partners with poor countries that have a proven track record in 

good governance and policies that support economic growth and effective use of 

development assistance. With this as a starting point, MCC can pursue a fairly aggressive approach to country ownership, giving partner countries significant responsibility in prioritizing investments, implementing programs, and being accountable 

for results.

 Focused mandate. MCC’s mandate is clear: to support poverty reduction through 

economic growth. This puts clear parameters around the country ownership 

principle. MCC’s partners have significant influence in setting priorities for MCC 

investments, provided that proposed projects are consistent with MCC standards for 

cost-effective investments that raise incomes for beneficiaries.

 Flexibility. MCC is not subject to sector earmarks or directives. This means that 

MCC has the freedom to work in sectors that matter most for countries’ growth and 

poverty reduction, and to support investments that are priorities for partner country 
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governments, citizens, civil society, and the private sector, and promise the best 

returns in terms of increased incomes for beneficiaries.

 Five-year funding. MCC has the authority to commit five years of funding up front. 

This is important for country ownership because it makes funding predictable. At 

the outset, MCC partner countries know how much funding is committed, for what 

purposes, and over a five-year period, so governments can better plan their own 

development strategies and budgets. Five-year funding also enables MCC to support 

partner countries’ priorities for long-term growth investments, and gives local politicians the time and political courage necessary to implement tough policy reforms 

that support impact and sustainability.

 Transparency. For partner country governments and citizens to really “own” 

development investments, they need information about what donors are doing. For 

all compact programs, MCC publishes economic analyses that inform investment 

decisions, five-year budgets, expected results, data on ongoing program progress, 

and findings of independent impact evaluations as programs complete. MCC expects 

transparency from its partners as well, and each publishes information on implementation progress and procurement opportunities. This transparency empowers citizens to hold governments and donors accountable for how development resources 

are used and what results they achieve.

With this framework as a starting point, MCC enters into five-year bilateral grant agreements, called compacts, with eligible country governments. MCC puts the principle of 

country ownership into practice in three basic ways.

1. Setting priorities. Once eligible for MCC compact assistance, partner countries take 

the lead in setting priorities for MCC investments. MCC expects these priorities to 

be informed by economic analyses of countries’ key constraints to economic growth, 

and meaningful engagement with citizens, civil society, the private sector, and other 

donors. MCC and partner countries work together to design investments that meet 

country priorities, are cost-effective, and have strong potential to increase incomes. 

MCC did not set out to focus its investments in any particular sectors, and MCC’s 

portfolio is diverse (see Box 2). However MCC’s experience has been that when partner countries have the opportunity to set priorities for reducing poverty and promoting growth, they have focused largely on infrastructure and agriculture (see Box 3).

2. Implementing programs. MCC has very small field missions, and looks to partner 

country governments to establish accountable entities to lead implementation. 

These entities, known as Millennium Challenge Accounts (MCAs), are managed 

and largely staffed by country nationals and often work directly with existing 

government ministries. Two MCC staff members are based in-country (a Resident 

Country Director and a Deputy). A technical team based at MCC Headquarters in 

Washington provides support and oversight during compact implementation.

3. Being accountable. Each MCA reports to its own board of directors (or similar 

governing entities) that includes government officials and representatives of the local 
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civil society and private sector. MCA boards are accountable to national governments and their citizens for implementation of MCC-funded programs, transparent 

decision-making, and achieving results.

In the seven years in which MCC has operated under this model, the agency has learned 

a great deal about what it takes to put the principle of country ownership into practice. 

This paper identifies six of those lessons, provides in-depth examples, and discusses the 

practical implications for MCC’s compact investment portfolio.
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Six Lessons: What MCC has learned putting its 

“Country Ownership” principle into practice

Lesson 1:

Country ownership is a partnership based on 

mutual accountability that benefits from structure 

and clear expectations.

Ownership does not mean that countries have free rein; it means 

that countries enter into a partnership with MCC in which country 

priorities are considered within the context of MCC’s investment 

and accountability standards. MCC has learned that ownership is 

more meaningful when it is structured 

with clear expectations, rather than 

open-ended.

Country ownership is a 

partnership based on mutual 

accountability...

Ownership does not mean that countries have free 

rein; it means that countries enter into a mutually 

accountable partnership with MCC. MCC partner 

countries exercise ownership within the framework 

of MCC’s mandate of economic growth and poverty reduction.

During the compact development process, MCC 

investments are selected based on countries’ own 

priorities, but they must also meet MCC’s standards for expected economic returns and technical 

specifications. MCC makes this clear from the beginning, and enforces these standards. For example, 

some projects proposed by partner countries are 

not accepted. MCC has turned down country 

proposals with insufficient promise of high returns 

for growth and poverty reduction, and has paused 

Box 1.

Six Lessons on Country Ownership 

1. Country ownership is a partnership based 

on mutual accountability that benefits from 

structure and clear expectations.

2. Country ownership is a balancing act

between MCC principles and operational 

approaches.

3. Country ownership goes beyond national 

governments, both in setting investment 

priorities in compact development and in 

implementing compact programs.

4. Country ownership includes capacity building, but not everything has to be about 

capacity building.

5. Country ownership includes using elements of country systems where feasible,

but doesn’t mean that countries have to do 

everything.

6. Country ownership pays off, both for results 

and for leveraging policy reform. 
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project implementation out of concerns related to compliance with MCC standards for 

environmental protection, social impact, or health and safety.

For example, Nicaragua was one of the first countries selected as eligible for an 

MCC compact. During compact development in 2005, the Government of Nicaragua 

proposed a project for renewable energy investments and rural electrification. In its 

standard due diligence of such proposals, MCC considers whether a country’s policy 

environment is conducive to effective and sustainable investments. While Nicaragua 

had recently made important strides in terms of incentives for renewable energy and 

new laws against theft of electricity, the policy environment around independent regulation, tariff rates, and restructuring of the electricity sector was quite uncertain within 

the five-year compact time frame. This raised significant concerns about the potential 

returns and sustainability of the proposed projects. MCC determined that Nicaragua’s 

proposals for road infrastructure, agriculture and rural development, and property 

rights were more economically promising, and ultimately pursued those projects under 

the compact.

In the development of the Philippines Compact, signed in September 2010, the 

Government of the Philippines initially proposed 15 projects spanning agricultural 

productivity, infrastructure, human development and governance. Each project was 

reviewed with an eye toward potential returns and risks, including by peer reviewers 

external to MCC. A number of project proposals, such as a watershed management 

project and a conditional cash transfer project, were set aside due to concerns of low 

rates of return, environmental challenges, or limited institutional capacity for implementation. Instead, MCC and the Government of the Philippines decided to focus on 

supporting reforms and investments to modernize the Bureau of Internal Revenue, 

expanding a community-driven development project, and rehabilitating a secondary 

national road—all projects projected to have more sustainable and effective outcomes.

Country ownership based on partnership and mutual accountability continues from 

compact development through compact implementation. In some cases, issues emerge 

that require significant changes to project implementation approaches, or even project 

termination. For example, in the case of Mongolia, over half of the $285 million MCC 

compact was originally dedicated to a rail project, the success of which depended 

largely on the Government of Mongolia reaching a set of milestones designed to ensure 

that the rail company (jointly owned by the Governments of Mongolia and Russia) 

complied with international standards for financial management.

At the time of compact signing, MCC and the Government of Mongolia knew that 

this approach involved a degree of risk; MCC clearly stated that it would not proceed 

with project funding if these milestones were not met. MCC and the Government of 

Mongolia took the risk because potential returns were significant: The rail system is 

central to Mongolia’s economy, and the MCC compact could create the political space 

and leverage necessary for important reforms. However, when the first milestone, an 
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independent accounting audit of the rail company, proved politically challenging, the 

Government of Mongolia informed MCC that it would not be able to proceed with the 

rail project and asked that the funds be reallocated to new projects. MCC could have 

revoked the $188 million project funding at that point, but in the spirit of partnership, 

MCC worked with the Government of Mongolia to identify a set of alternative investments that met both the country’s priorities for economic growth and poverty reduction and MCC’s investment standards.

Social and environmental impact concerns are also a factor in implementation decisions. During implementation of the roads project funded under the Cape Verde

Compact, MCC discovered that the firm contracted for road construction had breached 

MCC’s resettlement policy by starting construction prior to providing appropriate compensation to affected local residents. Without proper remediation, the situation could 

have affected people living near the road, increased erosion, created serious drainage 

problems, and increased the likelihood of rockslides (posing risks to passing traffic). 

MCC, MCA-Cape Verde and the contractor agreed to pause construction and implement a remediation plan before construction resumed.1

The MCC compact with the Government of Tanzania includes several energy-related 

projects. One project, a $38 million investment in a small hydropower plant on the 

Malagarasi River in northwestern Tanzania, also experienced environmental impact 

challenges. Further environmental impact analysis conducted after compact signing 

revealed that construction could impact survival of several aquatic species endemic 

and unique to the project site. This posed a challenge much more complicated than 

simply balancing country ownership with MCC standards. It required MCC and the 

Government of Tanzania to weigh the risks of biodiversity loss against social and 

economic development needs in poor communities. MCC and the Government of 

Tanzania recognized the complexity of the question and decided to draw on independent expertise, and MCC funded an external rapid biodiversity assessment to gather 

more information.

To ensure open and informed decision-making, MCC worked with the Government 

of Tanzania to establish an independent advisory panel. The panel was comprised of 

international and local environmental scientists charged with providing internationallyrecognized expert advice. Biodiversity assessment findings and advisory panel recommendations ultimately revealed that an immediate solution was not feasible given the 

time constraints of the five-year compact term. In light of these results, MCC canceled 

the construction of the hydropower plant. MCC and the Government of Tanzania then 

collaborated to identify a number of alternative projects. A feasibility study is now 

underway for a hydropower plant in a less environmentally sensitive area that could 

generate more power than the originally-planned activity.

In some cases, country ownership includes countries adopting and adapting MCC accountability approaches as their own. For example, in Honduras, MCC’s approach to 

1 See “MCC and Fiduciary Responsibility” Achieving Value and Accountability for U.S. Taxpayers” at http://www.mcc.gov/documents/press/successstory-050509-results-capeverde.pdf
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resettlement of affected parties in infrastructure projects contributed to the compact’s 

road rehabilitation project being completed on time, on par with best practices in 

social safeguards, and with significant support from local communities.2 Based on this 

experience, the Government of Honduras is considering following a similar approach 

in a separate Inter-American Development Bank-funded urban transit project. The 

government is touting the MCC-like approach in national media as a selling point for 

the project.

In Armenia, the MCC compact includes investment in rehabilitation and new construction of irrigation infrastructure for agribusiness development. When dangerous 

asbestos was found in old water pumping stations planned for rehabilitation, MCC’s 

environmental guidelines required mitigation measures unprecedented in Armenia. The 

Government of Armenia’s Ministry of Nature Protection worked with MCC and MCAArmenia to approve guidelines for proper handling of construction waste containing 

hazardous materials. These guidelines now serve as a basis for promoting safe handling 

practices across the government to protect workers and the environment from potentially harmful hazardous materials, and are expected to be formalized through national 

legislation in the near future.

These experiences are telling of the successes and challenges of MCC’s partnershipbased approach to country ownership: willingness to take calculated risks on highreturn investments that require partner governments to undertake significant policy or 

institutional reforms; willingness to say “no” to investments if key measures for accountability, impact and sustainability are not in place; and commitment to work with partner 

countries to overcome implementation challenges and find creative solutions that meet 

both country priorities and MCC’s investment standards.

...and partnerships benefit from 

structure and clear expectations.

In its early days, MCC’s effort to adhere to the notion of country ownership meant 

it offered less guidance for country proposals. At times, this led to a frustrating and 

unstructured compact development process. MCC learned that clear expectations 

in compact development do not have to threaten country ownership; instead, clear 

expectations can enhance country ownership by better equipping countries to prepare 

proposals and focus stakeholder consultations. Over time, MCC has developed clear 

guidance for compact development, transparent standards against which MCC assesses 

and approves investment proposals, and operational tools to focus compact proposals.3

This defined process helps manage expectations and saves time and effort for both MCC 

and partner countries.

2 For more on this story, see MCC Success Story, “MCC Policy Reforms Show Why Resettlement Matters.”

3 MCC compact development guidance is available on MCC’s public website here: http://www.mcc.gov/pages/countrytools/tools/

compact-development
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In the earliest compacts, MCC and partner countries did not have clear and transparent 

methods in place to set priorities among varied needs. In response, MCC formalized 

the constraints analysis to help systematically and transparently identify key barriers to 

growth and discipline the process for setting priorities for MCC investment. Likewise, 

recognizing that partner countries were spending a year or more to develop detailed, 

technical proposals that might not yield sufficient returns in economic growth and 

poverty reduction, MCC applied a new tool early in the compact development process: 

the concept paper. Informed by the constraints analysis, and developed over a relatively 

short time frame (usually a few months), concept papers provide the initial overview of 

a proposed investment. They outline the fundamental investment rationale and address 

key questions about implementation, scope, timelines and potential partnerships. They 

undergo peer review within MCC and with external development partners and donors. 

Concept papers form the basis for an open dialogue with partner governments about 

which investments warrant further development and which do not.

The benefit of better-defined structure and expectations is evident in comparing the 

experiences of MCC’s very first partner country, Madagascar, to one of MCC’s most 

recent, Malawi. When MCC and the Government of Madagascar started their partnership in 2004, MCC did not yet have written guidance for compact development, and 

had few formal parameters around the principle of “country ownership.” The Wall 

Street Journal, at the time, described the resulting compact development process: 

“Government officials came up with a wish list of traditional development projects: a 

new hospital, more school spending, aid to rice farmers.”4

When Malawi began compact development in 2008, MCC had formal compact development guidance for constraints analysis and concept papers.5 The Malawi constraints 

analysis identified three binding constraints to growth. The Government of Malawi’s 

compact development core team then used the results of this analysis to engage in a 

series of national consultations that included representatives from local and national 

government, private sector firms, civil society organizations, universities, and local 

communities in each of Malawi’s main regions. Consultations enabled all sectors in 

Malawi not only to agree on and verify identified binding constraints to growth, but 

also, more importantly, to systematically unpack the root causes of those constraints 

and identify each stakeholder’s role in contributing to eventual solutions. This process 

resulted in a $350 million compact investment focused on the energy sector that includes key infrastructure investments and institutional, regulatory and environmental 

projects designed to ensure impact and sustainability of MCC funds.

4 “New Bush Strategy Faces Test in Madagascar.” Michael Phillips, Wall Street Journal, April 18, 2005.

5 On July 26, 2011, MCC placed an operational hold on the Malawi Compact due to concerns about Government of Malawi 

actions relating to MCC standards for good governance and political freedom. All examples of Malawi Compact development cited in 

this paper pre-date the operational hold. At the time of this paper’s publication, the operational hold remains in place. 
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Box 2. 

MCC Commitments by Sector. 

MCC’s investment portfolio reflects areas that countries deem essential for economic growth and poverty 

reduction. This chart reflects MCC compact commitments across the 22 countries that have, or have had, 

MCC compacts, between 2005 and March 2011.

MCC Commitments by Sector, 2005 to March 2011

Monitoring

& Evaluation

2% Governance

4%

Health, Education &

Community Services

9%

Energy

4%

Banking &

Financial Services

6%

Water Supply & 

Sanitation

11%

Agriculture

23%

Transport

(Roads, Water, Air)

41%

2011-017-0939-01

Countries that have or have had MCC Compacts from 2005 to March 2011 are: Armenia, Benin, Burkina 

Faso, Cape Verde, El Salvador, Georgia, Ghana, Honduras, Jordan, Lesotho, Madagascar, Mali, Moldova, 

Mongolia, Morocco, Mozambique, Namibia, Philippines, Senegal, Tanzania, and Vanuatu. MCC’s compact 

with Malawi was signed in April 2011. Its power sector investments are not reflected here. 
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Box 3. Why Countries Prioritize Infrastructure for Poverty Reduction

Why do MCC partner countries prioritize infrastructure investments? These country 

governments, civil societies, private sectors and local communities recognize that 

better infrastructure is essential for economic growth and for connecting the poor to 

sources of growth. The right infrastructure investments can bring the benefits of growth 

to people living in rural and isolated areas, which will allow them to take full advantage 

of economic opportunities and social services, and will reduce poverty.

For example, improving transportation infrastructure is critical to the poor. Workers 

in isolated rural areas tend to earn less and have fewer opportunities, in part because 

poor or costly transportation hinders their ability to get their products to market. 

Improvements in rural roads help lower transportation costs for farmers and provide 

better access to non-farm employment. Improved transportation infrastructure also 

increases access to healthcare and education services for the poor, not only increasing 

the chances that they will benefit from these services, but reducing access costs and 

time .

Reliable electricity makes it easier for the poor to start businesses, especially those 

that take advantage of productivity-increasing machinery and information and communication technologies. With improvements in energy infrastructure, the poor no 

longer waste a significant portion of their most valuable asset, labor, searching for fuel. 

Reliable energy supply also makes it easier for schools and clinics to function properly, 

and allows families to shift away from fuel sources such as firewood and carbon that 

require significant time to collect, often at the expense of children’s schooling, and are 

harmful to health.

Investments in water and sanitation infrastructure can dramatically reduce incidences of 

water-borne diseases, improving health outcomes, increasing the ability of workers to 

participate in income-generating activities, and increasing opportunity for children to 

attend school.*

* An extensive body of research into past experiences demonstrates the strong links 

between infrastructure and poverty reduction. For a good overview, see “Current 

Debates in Infrastructure Policy,” World Bank Policy Research Working Paper 4410, 

November 2007.
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Lesson 2:

Country ownership is a balancing act between MCC 

principles and operational approaches. 

MCC is constantly challenged to balance country ownership alongside its other core principles. MCC’s results principle, for example, 

may require MCC to say “no” to proposals even if they are country 

priorities. Among MCC partner countries, capacity and experience 

in managing ambitious development investments range widely. As 

a result, MCC and each partner country must work together to develop a tailored balance between ownership, accountability, support 

and oversight.

Country ownership is a 

balancing act among MCC principles...

One of the biggest lessons MCC has learned about country ownership is that it is just 

one part—though a critical one—of MCC’s overall focus. MCC is constantly challenged 

to balance country ownership alongside MCC’s other core principles and priorities. 

For example, while an ownership principle might suggest supporting an investment 

proposal because it is important to local communities and politicians, a results principle 

might require MCC to say “no” to the proposal if it does not have sufficient potential to 

cost-effectively raise incomes among beneficiaries.

MCC’s commitment to broad-based country ownership means that a wide range of 

stakeholders, including politicians, government officials, local beneficiaries, civil society 

networks and private sector partners, are part of decision-making for and implementation of MCC investments. Many stakeholders shape compact plans, and have high 

expectations for results. It can be difficult to manage these expectations when compact 

projects have to be scaled back or even eliminated, which can occur for a number of 

reasons. This aspect of ownership complicates MCC’s commitment to “results” in terms 

of always supporting the most cost-effective investments. In many cases these principles 

are not at odds because MCC country partners also want to achieve results, and indeed 

to claim credit for the results obtained through MCC investments. In some cases, however, partners’ priorities are more complex than just achieving the best possible return 

on a development investment.

In many compacts, there have been either planned or unexpected junctures at which 

MCC and partner countries must revisit investment decisions after compacts are 
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signed. For example, in Honduras and Nicaragua, road projects included explicit 

criteria for selecting target roads for investment from a “candidate pool” of possible 

roads. In both countries, criteria included requirements that selected road segments be 

local priorities and have economic rates of return above set “hurdle rates.” Criteria were 

very transparent from the outset (included in the public compact agreements) and the 

process worked well. In both Honduras and Nicaragua, MCC funds were directed to 

roads that projected good economic returns in terms of income gains for beneficiaries 

and reflected local communities’ priorities.

A similar approach had a more complicated result in Tanzania. The Tanzania Compact 

also identified explicit criteria for selecting roads for funding, including that they be 

assessed according to an economic rate of return methodology acceptable to MCC. 

Once the technical studies and economic analysis were complete, MCC concluded 

that only four of the five proposed roads had rates of return that passed MCC’s “hurdle 

rate.” MCC did not, however, make the final investment decision based solely on the 

economic rates of return. In the end, MCC also took into account several important 

non-economic factors, including the political sensitivities of the region in which the 

road network was located (connecting politically diverse communities) and the timing 

of the investment decision (just prior to important elections). There were concerns, 

among both U.S. and Tanzanian government officials, that a decision to not fund the 

road might be incorrectly perceived as a politically-motivated endorsement of one side 

over the other.

In many compact countries, major infrastructure projects have faced higher than expected costs or longer than expected preparation periods. Given fixed compact budgets 

and timelines, this has meant that MCC and partner countries are faced with difficult 

decisions about re-scoping projects and re-allocating funds across compact projects. 

In these circumstances, the balance between country ownership and other MCC 

principles can get especially complicated. In most cases of project re-scoping, MCC and 

partner countries have identified solutions that are amenable to country counterparts, 

and that, despite increased costs and reduced scope, still promise good returns in terms 

of income gains for beneficiaries. This was the case for roads project re-scopings in 

Armenia, Ghana, Honduras, and Vanuatu, as well as for the port rehabilitation project 

in Cape Verde, the Alatona irrigation project in Mali, and the water and sanitation 

project in Mozambique. In several of these cases, partner governments came forth with 

funding commitments to make up for budget shortfalls.

Some cases are more difficult, such as the originally-planned $18 million water supply 

activity under the Tanzania Compact. Despite significant buy-in to the project by the 

Government of Tanzania and the donor community, built up over several years, MCC 

decided to cancel the project based in part on detailed project design and economic 

analysis during compact implementation that suggested the investment would yield far 

lower returns than expected. In Mali, MCC cancelled a planned industrial park investment when costs grew significantly higher than expected and necessary institutional 

reforms seemed unlikely to materialize. In Mozambique, however, MCC continues 
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to support a series of road investments that have higher costs and lower returns than 

originally expected, in part because government and local communities’ buy-in and expectations are sufficiently high. These examples illustrate the variety of factors that must 

be weighed as MCC and its partner countries work to strike the right balance between 

country ownership and MCC’s other core principles.

...and in operational approaches.

In other cases, balancing applies to tradeoffs in operational approaches. MCC has high 

expectations for partner countries—to design, manage and be accountable for results 

of big, complex investments with fixed timelines and budgets. Among MCC partner 

countries there is a wide range in capacity and experience in managing such ambitious 

programs. As a result, MCC and each partner country must develop a different balance 

between ownership, accountability, support and oversight.

MCC’s oversight role varies across countries. In some cases, after start-up support, 

MCC steps back so country counterparts can really lead in managing the many facets 

of program implementation. These include procurement actions, financial reporting, 

environmental and social impact assessment and mitigation, sector policy reforms, 

and management of implementation challenges, all within a fixed five-year timeline. In 

other countries, MCC has had to stay engaged with much more technical support than 

expected, and even pressure, to ensure that projects stay on track.

MCC has found that it must calibrate its engagement based on compact maturity and 

country conditions. While heavy engagement is essential for keeping some programs on 

track, it can slow others down; too many overlapping controls intended to manage risk 

can grind implementation to a halt. MCC executes quarterly portfolio reviews as one 

method of responsibly managing tradeoffs between ownership and oversight. Quarterly 

reviews focus on identifying and addressing implementation risks, where MCC support 

is needed, or where intense oversight is inhibiting efficient implementation or creative 

MCA solutions to implementation challenges.

MCC has much more to learn in striking the right balance between ownership and 

oversight, and incentives are not always clear. For example, in the name of sustainability, 

capacity building and ownership, MCC would often prefer to allow more time for learning and for country counterparts to take the lead in solving implementation challenges. 

MCC, however, is accountable to Congress and U.S. taxpayers for achieving compact 

results within a five-year time frame. This accountability creates the incentive, and even 

the expectation, that MCC will engage very proactively to keep investments on track to 

meet their goals. While the time frame is critical to accountability, and to achieving the 

results that partner countries themselves have prioritized, it can pose important challenges to capacity building.
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Lesson 3:

Country ownership goes beyond national governments, 

both in setting investment priorities during compact 

development and in implementing compact programs. 

Ownership extends beyond national governments to include local 

citizens, civil society, the private sector, local elected officials, and 

program beneficiaries. Over time, MCC and partner countries have 

learned to better structure meaningful engagement with these parties 

in both compact development and implementation—but MCC still 

has room to grow to make the most of consultation.

Country ownership goes beyond national governments...

Ownership extends beyond national governments to include local citizens, civil society, 

private sector, local elected officials, and program beneficiaries. Consultation with these 

parties has been a hallmark of MCC’s model since its creation. MCC has learned, however, that “consultation” is too limited a term. Meaningful, strategic, targeted, and ongoing engagement with stakeholder groups is essential for setting investment priorities, 

designing programs with beneficiaries’ needs in mind, leveraging additional resources 

for increased impact, monitoring program implementation, and keeping MCC and 

partner governments accountable for results.

...both in setting investment 

priorities during compact development...

MCC’s tools for guiding this engagement during compact development have evolved 

over time, based largely on lessons learned in early compacts and feedback from 

Washington-based civil society groups. For example, in its first official guidance for 

partner countries on the consultative process, MCC focused heavily on the types of 

groups with which partner countries should engage. While consultation experiences 

varied considerably across countries, this approach tended to lead to big town hall-style 

meetings that invited a wide range of ideas and raised unrealistic expectations about 

what compacts might include. With this experience, MCC revised its guidance on the 

consultative process to focus less on who to engage with and more on what kind of 

information is useful to inform compact development. As per its revised guidelines, 

the consultative process should emphasize making “as much use of existing domestic 
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institutions and processes as possible, and avoiding one-off efforts to gather information 

from citizens or civic groups through forums that cannot be re-convened later.”6

Introduction of the constraints analysis also helps focus consultations by providing a 

starting point for discussion—the most binding constraints to growth in a country. For 

example, in Zambia, which is currently engaged in the compact development process, 

the government decided to conduct consultations using an existing national system of 

sector advisory groups (SAGs). SAGs include representatives from civil society, the private sector, and partner donors, and had been originally established to assist in developing and monitoring implementation of Zambia’s Poverty Reduction Strategy Paper and 

the fifth National Development Plan, both of which pre-dated MCC engagement. The 

Government of Zambia’s compact development core team held consultative sessions 

with 16 SAGs considered relevant to the compact, all of which reviewed the constraints 

analysis and were invited to submit project ideas for the MCC compact. In total, a technical review committee received and reviewed 37 three-page project proposals.

The committee shortlisted seven project ideas representing five priority sectors: primary and vocational education, hydropower, roads, tourism, and water and sanitation. 

In part as a result of these consultations, the Zambia Compact currently under development focuses on several SAG-identified priority sectors. The proposed Greater Kafue 

National Park and Community Economic Development Project would offer a comprehensive approach to generating tourism-related income by investing in infrastructure, 

park and wildlife management, marketing, and community development programs 

designed to increase incomes and reduce pressure on natural resources. The proposed 

Lusaka Water Supply, Sanitation and Drainage Project may, depending on further feasibility work, include expansion and rehabilitation of a critical water supply, sewer and 

drainage networks, provision of sanitation facilities, and community-based health and 

hygiene education activities.

...and in implementing compact programs,...

During compact implementation, ongoing engagement with non-government actors 

and local authorities can play an important role in ensuring project quality and accountability. MCC asks partner country governments to establish structures that facilitate 

ongoing engagement, including MCA boards of directors that include government, civil 

society and private sector representatives; and, in some countries, stakeholder committees to advise on specific program implementation issues. Experiences have been quite 

mixed across MCC’s portfolio. In some cases, countries’ existing structures may better 

serve the interests of the compact than an MCC-mandated entity .

For example, under the compact agreement with El Salvador, MCC required creation 

of an advisory council to the MCA board of directors, and mandated the nature of its 

6 MCC “Guidelines for the Consultative Process,” http://www.mcc.gov/documents/guidance/

guidance-2010001005001-consultativeprocess.pdf
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composition and its roles and responsibilities. MCC’s intention was to ensure that local 

leaders and civil society members of the Northern Zone region, where the compact 

investments are focused, would have a formal voice in compact implementation. In 

practice, this group, created exclusively for the purposes of the compact, has gained 

much less traction than a non-mandated mayors’ committee formed to provide input 

in the earliest stages of compact development. The mayors’ committee includes 22 of 

the 94 mayors in the Northern Zone serving when compact development began, with 

representation from a variety of El Salvador’s political parties.

The local ownership reflected by this committee’s engagement helped ensure that the 

MCC compact received unanimous support from El Salvador’s Congress upon ratification. The mayors’ committee has remained engaged during compact implementation, 

including through identification of households that are suitable beneficiaries for the 

compact’s rural electricity and education programs, providing 20 percent of municipal 

matches for water and sanitation maintenance and road construction, and helping cover 

the costs of resettlement associated with MCC’s investments.

In Namibia, a combination of new and existing consultative structures has proven to 

be a successful approach for managing broad governmental and non-governmental 

engagement in compact implementation. From the outset, the Government of Namibia 

wanted to use its existing National Planning Commission’s Board of Commissioners 

as the MCA board of directors. It soon became clear, however, that the Board of 

Commissioners, with its many unrelated responsibilities, had insufficient linkage to the 

compact to provide meaningful oversight and guidance. MCC and the Government of 

Namibia subsequently agreed to the formation of a new 10-member board, four members of which are from civil society and the private sector. These four non-governmental 

members chair each of the Board’s four subcommittees (one for each of the three compact projects, and one for procurement and finance).

In contrast, with respect to implementation of specific projects within the Namibia 

compact program, MCC and MCA-Namibia have relied on existing sector-specific 

groups to ensure stakeholder input. For each of the three compact project areas—tourism, agriculture and education—MCA-Namibia identified existing stakeholder committees composed of representatives from local NGOs and private sector, government 

officials, and donors. These groups disseminate information about compact implementation through their established networks, provide input for program implementation, 

identify initiatives that can complement MCC program investments, and identify suitable partners for project implementation.

For example, the Namibia Compact’s agriculture project focuses on improving the 

economic performance of the livestock sector in the northern area of the country. One 

of the project activities involves establishing a market efficiency fund to alleviate challenges present in the current supply chain. The livestock stakeholder committee was 

instrumental in identifying viable marketing strategies based on input from field visits, 

and in liaising with traditional authorities about land use decisions in target areas. This 
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is just one example of how local stakeholder committees are helping improve the impact 

and sustainability of MCC investments in Namibia.

...but MCC still has room to grow 

to make the most of consultation.

MCC’s broad-based ownership approach creates an open door for a variety of stakeholders to engage throughout the compact partnership. In countries that have strong, 

well-organized local governments, civil societies, and private sectors with experience 

in policy engagement, the strength of these institutions allows for substantive influence 

on compact design and implementation. MCC has seen, however, that opening the door 

to consultation is not always enough. Each country’s civil society, private sector, and 

citizenry have different levels of experience and resources for engaging in development 

planning and policy, and MCC guidance must be adaptable.

While MCC is aware of these differences and of what national standards exist for 

consultation, and holds government partners accountable for meaningful engagement, 

MCC does not have the capacity or intent to address capacity gaps where they exist. In 

some countries strategic partners have helped fill these gaps, as in Nicaragua, where 

the United Nations Development Program and the UK’s Department for International 

Development provided funding for early compact consultations. MCC has not, however, made as concerted an effort to seek out consultation partnerships as it has to 

seek partnerships in other aspects of compact development. Nor does MCC have staff 

dedicated to providing technical support to partner countries in this area, in strong 

contrast to, for example, the technical support provided for economic analysis or gender 

integration in compact programs.

MCC’s commitment to non-governmental consultation, combined with its commitment to transparency, creates significant opportunities for civil society to serve 

monitoring and accountability functions for MCC and MCAs. Perhaps not surprisingly, 

this is most notable in the United States, through mechanisms like the nonprofit Center 

for Global Development’s online MCA Monitor publication.7 In the country of Georgia, 

the national chapter of the Open Society Institute monitored benchmarks and results 

throughout compact implementation. In general, however, the degree to which civil 

society plays a monitoring function in most partner countries is limited.

The extent to which local government representatives monitor program implementation is also difficult to assess. In many MCC countries, national legislatures have ratified 

MCC compact agreements. In these instances, legislatures have the opportunity to 

debate how their MCC compact fits with national development strategies; arguably, this 

debate generates more interest in and knowledge of the program to support active monitoring. MCC has not, to date, tracked the degree to which legislatures play a continued 

7 http://www.cgdev.org/section/initiatives/_active/mcamonitor
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role in monitoring compact implementation. These areas illustrate opportunities for 

MCC, with appropriate staffing, strategic partnerships, and greater consistency in practice, to take a greater lead in consultation and engagement of a variety of stakeholders in 

partner countries.

Lesson 4:

Country ownership includes capacity building, 

but not everything has to be about capacity building. 

MCC partner countries are responsible for implementing MCCfunded programs. The MCAs that they establish for this purpose often partner with existing government ministries. This provides MCA 

and ministry staff opportunities for capacity building, and many 

MCC projects have capacity-building components built in. However, 

the ultimate, measurable goal of MCC projects is to increase 

incomes for beneficiaries, so not every activity needs to focus on 

capacity building.

Country ownership includes capacity building...

Under the MCC ownership model, country counterparts are responsible for implementing MCC-funded programs. Partner governments establish MCAs to manage 

implementation for most compact projects, and MCAs establish close partnerships with 

existing government ministries. While the role of these ministries varies significantly 

across countries, these partnerships can give existing government entities an important 

role in program implementation and opportunities for capacity building.

A sampling of MCA partnerships include: In Benin, the Ministry of Finance’s regulatory 

unit for the microfinance sector, the National Geographic Institute, and the Chamber 

of Commerce and Industry; in Burkina Faso the Ministries of Finance, Agriculture and 

Infrastructure; in El Salvador, the Ministry of Public Works and Transportation and 

the Multisectoral Investment Bank; in Lesotho, the Ministry of Gender and Youth, and 

the Water and Sewage Authority; in Mongolia, the Ministries of Health, of Education 

and of Transportation, Construction and Urban Development; and in Namibia, the 

Ministries of Education, and of Water, Agriculture and Forestry.

In some cases, explicit capacity-building and institutional strengthening efforts are 

built into project design. For example, the MCC compact with Georgia included a $36 

million investment to secure and diversify Georgia’s domestic gas supply for household 
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and commercial use. In addition to rehabilitating the gas pipeline, the project also 

strengthened the Georgian Oil and Gas Corporation (GOGC), which emerged from the 

compact a stronger entity, capable of managing the pipeline sustainably and to improve 

standards. Through a deliberate phased approach of technical support, MCA-Georgia 

and GOGC worked together with international partners, including from the private 

sector, to increase capacity for project management; engineering oversight; environmental, health and safety standards; land acquisition requirements; public outreach; 

and procurement. International support was eventually phased out, and GOGC alone 

managed the last phases of project implementation. The expertise gained from working 

in accordance with international standards of project management and environmental 

protection set a higher bar for engineering achievement in Georgia and strengthened 

local capacity to ensure the investment’s sustainability.8

As part of the Ghana Compact’s Rural Development Project, MCC is supporting a procurement capacity activity. Residents of rural areas of Ghana have spotty and poor access to basic community services such as potable water, community sanitation, schools 

at all levels and domestic electricity. In the past, the government delivered community 

services, such as schools and water and sanitation facilities, with primary direction from 

the central government and little input from local governments or beneficiaries. In the 

last few years, however, the government committed to a strategy of decentralization to 

empower local governments and beneficiaries in the hopes of more efficient delivery of 

community services.

A major obstacle to successful implementation of this strategy is a lack of adequately 

trained specialists in local governments. For instance, lack of capacity at the local 

level to conduct public procurement results in leakage, misuse, and suboptimal use of 

public resources. The compact’s procurement capacity activity, therefore, is designed 

to strengthen the capacity of the various procurement entities within the Government 

of Ghana to procure necessary goods, works and services with greater economy, efficiency and effectiveness. The procurement capacity activity was undertaken under 

an implementing entity agreement with the Public Procurement Authority; under the 

agreement, the authority will continue the activity after the compact term ends.

In Lesotho, the MCC compact includes activities specifically designed to increase 

citizens and local authorities’ capacity to implement new national legislation aimed 

at improving economic rights for women. Prior to compact signature, MCC joined a 

chorus of other donors and groups pressing for change; the prospect of MCC compact 

funding prompted the Government of Lesotho to pass landmark legislation giving 

women the legal right to own property and the right to enter into binding contracts 

for the first time. MCC and its Lesotho counterparts then designed a compact activity 

explicitly to build on this new legal framework. The Gender Equality Project trains and 

educates both women and men about the new law. This training strives to ensure equal 

access to economic resources and to expand opportunities for meaningful participation 

in the economy by all segments of Lesotho’s society, including training key institutions 

8 For more on this story, please see MCC Success Story, “Building Energy Security through Sustainable Investments in Georgia.”
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and sensitizing relevant authorities and stakeholders to develop knowledge, awareness, 

and practices that support gender equality in economic rights.

In the course of project implementation, an exciting new opportunity for capacity 

building has emerged in Tanzania. Two American companies, Symbion Power and Pike 

Electric, competed for and won a significant portion of the Tanzania Compact’s $206 

million energy project. In partnership, these two companies will install approximately 

3,000 kilometers of power lines in six regions, providing electricity to over 330 communities previously without power. As Symbion and Pike finalize preparations for 

construction, they are using their own corporate social responsibility funds to implement a unique training plan for construction workers. Symbion and Pike identified and 

sent three senior Tanzanian workers to Northwest Lineman College in Meridian, Idaho, 

where the workers learned about electrical systems, accident prevention, and construction methods during a 60-day “train the trainer” program. Subsequently, Symbion and 

Pike established a training facility in Morogoro, Tanzania, where these newly trained 

Tanzanian workers—together with Symbion and Pike instructors—will train and work 

with more than 200 Tanzanian construction crew members on the MCC-funded transmission and distribution activity.9

...but not everything has to be about capacity building.

Capacity building is seen as an important part of country ownership, but is rarely defined clearly. In an effort to help bolster MCA management capacity, MCC established 

educational training sessions for partner countries to learn more about procurement, 

financial management, project management, quarterly reporting, and adhering to 

environmental guidelines. This generally basic training designed to facilitate program 

implementation is specific to MCC and its implementation guidelines. While this training strengthens skills for key individuals, many of whom will likely continue to support 

development efforts in their countries, it is not explicit capacity building designed to 

strengthen national institutions for sustained management of broader development 

priorities.

The ultimate, measurable goal of MCC projects is to increase incomes for beneficiaries—for example, in building a road to help farmers move their goods to market 

and thereby increase their incomes. This is very different from a project that has the 

ultimate, measurable goal of strengthening the long-term capacity of the ministry of 

transport to plan, fund, manage and maintain the nation’s road network. This difference 

is acceptable; not every project has to be a capacity building project. The key is to be 

clear about objectives, and to measure progress against those objectives.

9 Excerpt from MCC blog, “Two U.S. Companies leverage Best Practices to Ensure Capacity and Sustainability in Tanzania.”
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Lesson 5:

Country ownership includes using elements of country 

systems where feasible, but country ownership doesn’t 

mean country partners have to do everything. 

MCC’s current policy is to use elements of country systems to the 

“maximum extent possible,” though always based on assessment 

of capacity to comply with MCC’s accountability standards. This 

guidance has yielded a diversity of approaches across countries, 

with some relying on external agents and others relying on existing 

government ministries for procurement and financial management 

functions. MCC has learned a lot about what partner countries 

should not have to do in the name of country ownership, particularly 

with regards to creating basic operational tools for implementation.

Country ownership includes using elements of country 

systems, where feasible...

Many in the development community consider use of country systems an important 

part of country ownership, especially with regards to key management functions like 

procurement and financial management. MCC has learned a lot about balancing this 

aspect of country ownership with U.S. standards for accountability. In its early days, 

MCC generally required MCAs to hire external firms to serve as procurement and fiscal 

agents. This was motivated by a desire to ensure accountability for use of MCC funds 

and compliance with MCC’s procurement and financial management standards. It was 

quickly evident, however, that external agents do not necessarily ensure success. Some 

MCAs had to discontinue contracts with external procurement or fiscal agents due to 

poor performance. External agents come at a significant cost that is only justified if their 

performance is strong and the capacities do not exist elsewhere. There is no one-sizefits-all approach that works across countries, and therefore MCC learned to take a more 

flexible approach based on country conditions. The current compact portfolio reflects a 

diversity of arrangements, including some use of country institutions to perform these 

functions.

MCC’s current policy is to use elements of country systems for procurement, financial 

management and monitoring and evaluation to the “maximum extent possible.” This is 

in addition to MCC’s standard practice that partner country MCAs, rather than MCC, 

are responsible for implementing MCC-funded investments. This reliance on partner 
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countries for implementation, combined with the intent to use country systems for 

accountability functions where possible, has helped make MCC a leader among U.S. 

agencies in exercising country ownership in development.

For cases in which partner countries want MCC to consider the use of country systems, 

MCC assesses those systems according to its Guidelines for the Use of Country Systems 

in the Implementation of MCC Compacts.10,11 These public guidelines make the agency’s 

approach transparent, so expectations and decision-making criteria are clear. MCC uses 

these guidelines to assess existing government entities for new compacts, and refers to 

these standards in assessing, for example, whether it may be beneficial for an MCA to 

transition away from external agents to bring procurement or fiscal management inhouse (to the MCA or another government entity).

MCC’s current partners use a mix of approaches for procurement and financial 

management. In the case of procurement, of the 22 countries that have or have had 

compacts as of March 2011, 11 use external procurement agents. Seven MCAs have 

internal procurement functions, four of which have transitioned from external to 

internal based on proven performance by the MCA, with the result of greatly reduced 

costs and increased efficiency. In some cases, the procurement function is performed 

primarily, or in close partnership with, existing government entities. For example, under 

the Morocco Compact, the Ministry of Agriculture, the National Fishing Office and 

the ministry covering artisan activities all serve procurement functions for the MCC 

projects on which they partner. In the case of Tanzania, the government agencies 

overseeing roads, power and airports all serve procurement functions for related MCCfunded projects. In both cases, the MCAs retain the services of independent firms to 

serve as procurement oversight advisors. In Jordan, as well, the Government Tenders 

Directorate performs procurement functions for the compact.

In the case of fiscal management, Honduras was an early example of working directly 

through an existing government entity, the Ministry of Finance. More recently, for the 

Jordan Compact, which focuses on the water sector, the Water Authority of Jordan’s 

Finance Department will provide fiscal agent services to the MCA. To ensure compliance with MCC requirements and to aid in successful implementation, MCC has 

funded technical assistance to build additional capacity of this entity and the entity performing the procurement function for the compact program. MCAs have also formed 

formal partnerships with national statistical institutes in countries such as Armenia, 

Cape Verde, Georgia, and Mozambique to align monitoring and evaluation data with 

data that countries already collect and use nationally.

Even when MCC relies on local personnel and institutions such as existing government 

ministries or the MCAs to perform these crucial functions, the use of country systems 

10 In some cases, partner countries actually prefer external agents, because they buffer MCAs from pressure to use funds in a 

politically-motivated way, or simply in the name of efficiency. After all, it is fairly standard practice globally, including in the United 

States, for national and local government entities to outsource some management functions without sacrificing their ownership of 

overall investment objectives and results.

11 Available on MCC’s website here: http://www.mcc.gov/documents/guidance/guidance-2010001010701-use-of-country-systems.pdf
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is limited because MCC requires compliance with its own procurement guidelines and 

financial management standards and reporting, rather than national laws.

...but country ownership doesn’t 

mean country partners have to do everything.

How much do country counterparts actually have to do to constitute “ownership”? The 

answer is different in every country. That is why MCC’s approach to managing fiscal 

and procurement agents is flexible to adapt to country conditions. Likewise, MCC has 

worked with MCAs to identify when complex project management, especially for major 

infrastructure projects, can or should be contracted out to specialized firms rather 

than managed solely from within MCAs and existing ministries. While this may appear 

to be a reduction in ownership, in some cases, it can actually enhance ownership. For 

example, in Benin, the MCA used an outside engineering firm to assist in negotiating 

the private sector concession for the port project; alone, the MCA did not have the 

technical credibility to draw hard lines during the negotiation process. Successful MCA 

management of these specialized firms can improve chances of countries’ priority 

investments being completed on time and with expected impacts, and can provide a 

model for effective management of future host country investments.

MCC has learned a lot about what countries should not have to do in the name of 

country ownership, especially when it comes to basic operational tools for program 

implementation. For example, in its 2007 Nicaragua Field Report, the Center for Global 

Development’s MCA Monitor noted, “In the name of country ownership, each country 

is expected to devise its own administrative procedures and tools. This includes operations manuals, financial plans, standard bidding documents, standard requests for proposal (RFPs), technical specifications for investments, etc.... MCAs are, in a sense, each 

spending at least six months reinventing the wheel.”12 In recognition of this, MCC has 

since standardized a number of operational tools, such as MCA procurement manuals, 

and developed public standard bidding documents for all types of procurements.

Lesson 6:

Country ownership pays off for 

results and for leveraging policy reform. 

MCC has seen that focusing on country ownership can enhance 

results, improve program design, increase impact and sustainability 

of investments, leverage important policy reforms, and provide opportunities for capacity building.

12 Nicaragua: Field Report : Center for Global Development : Initiatives: Active: U.S. Assistance: MCA Monitor: Reports from the Field
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Country ownership pays off for results...

MCC’s approach to country ownership has been essential for achieving results, especially when it has served as an anchor for MCA programs in times of political transition 

in partner countries. For example, consistent implementation of MCC’s compact in 

Honduras, which reached completion in September 2010, continued successfully 

throughout three national political transitions—including a controversial interim 

government—because country ownership extended beyond the central government 

to local stakeholders. MCC’s country counterparts at MCA-Honduras, dedicated 

Honduran professionals, implemented the program. Honduran civil society and private 

sector were part of ongoing consultations, and served on the MCA’s Board of Directors; 

together with government officials, they were accountable for program success. Smalltown leaders from different parties brought resources, creativity and energy to the table 

in program implementation in their communities. The Honduran Congress passed laws 

in the financial sector, road maintenance, and resettlement policy that increase the impact and sustainability of MCC investments. Together, Hondurans owned and anchored 

the program through the political transitions.

The amount of political transition during the Honduras compact was greater than most. 

However, in countries such as Ghana, El Salvador and Mongolia, MCC’s five-year 

compacts have stayed the course through elections and other political transitions, again 

because country ownership goes beyond central governments to include many other 

actors in the country’s development, and because ownership is deeply embedded from 

program planning through implementation to accountability for results.

Likewise, MCC’s broad-based ownership approach creates opportunities for better 

program design and implementation. For example, in Malawi, once access to reliable 

electricity was identified as the priority constraint that the compact program would 

address, Malawi’s compact development core team used a “problem tree” analysis with 

stakeholders throughout the country. This participatory analysis identified several factors that the government alone would not likely have focused on, especially governance 

and regulatory problems contributing to stagnating growth and insufficient and unreliable power, and natural resource management issues.

The participatory and public nature of the analysis, where government, utility managers, customers and even the regulatory body identified institutional and regulatory 

problems in the sector, gave MCC extra leverage to engage the government in difficult 

discussions around policy reform. As a result, the compact includes a major $26 million policy reform component. The technical, legal and capacity building support the 

compact provides for the Government of Malawi, the electric utility, and the regulatory 

body is expected to bolster the Government of Malawi’s reform agenda in the power 

sector.
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...and for leveraging policy reform.

MCC has seen that the dialogue inherent in a country ownership model—about what 

matters most for countries’ growth and poverty reduction, and what investments will 

bring the greatest returns—creates opportunities to engage countries on tough policy 

reforms that will increase the impact and sustainability of development investments. 

“Owning” these policy reforms is often as important as “owning” programs, and can be 

a lot harder to do. In areas such as land tenure, management of public utilities, financial 

sector strengthening, and ongoing maintenance of infrastructure investments, MCC 

partners are taking on tough reforms that have lasting impacts. In some cases, these 

policy reforms are built into compact design as conditions for or complements to other 

investments, aimed primarily at enhancing impact and sustainability. In other cases, 

MCC supports policy reform through explicit, funded compact activities.

MCC’s compact with Tanzania includes a $205 million investment in the energy sector. 

The project seeks to increase incomes through new investment and economic activity 

for businesses and communities, some of which will receive electricity for the first time. 

In working with Tanzanian counterparts to design this project, MCC determined that 

infrastructure investments alone would not increase sustainability and efficiency in the 

power sector. Institutional and policy reform were essential for enhancing reliability and 

attracting the private sector investments necessary to sustain the sector. For this reason, 

the compact includes requirements for the Government of Tanzania to pass a new electricity law that will update existing laws (dating from the 1930s) and bolster the sector’s 

independent regulatory body, move toward self-sufficiency through tariff reform, and 

increase the independence of the Tanzania Electrical Supply Company.

MCC was not the first development partner in Tanzania to emphasize reforms in the 

power sector. Donors such as the World Bank and the Governments of Norway and 

Sweden have engaged with the Government of Tanzania for years on the importance 

of these reforms. MCC’s investment in the sector served as an important contributing 

incentive for the government to follow through with sector reform plans. One of the 

biggest changes for Tanzania in recent years has been the formation and operationalization of an independent regulatory body. The regulatory body is tasked with the difficult 

job of balancing the interests of the utility and the customers with the government’s 

policy framework. This puts it at the center of complex dynamics, such as managing 

cost-recovery tariff rates, support for new private investors, and the public’s interest 

in reliable and affordable power. By most accounts, the regulatory body has performed 

effectively and responsibly in balancing divergent interests. This translates into more 

reliable services for citizens, business and new entrepreneurs working hard to create 

jobs and increase incomes.

In the context of many MCC partnerships, countries recognize the importance of land 

tenure reform for economic growth and poverty reduction, and propose MCC support 
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for tough policy reforms in this area. In Mali, land tenure reform is an integral part of 

the compact’s Alatona Irrigation Project and will provide secure property rights to over 

one thousand farming families. These families will, for the first time, receive formal 

ownership through registered title documents, allowing them to better respond to market signals, decide which crops to grow, how best to improve productivity, and to whom 

to sell their products. These reforms not only create poverty-reducing investment 

opportunities, but create conditions conducive to private investment and long-term 

sustainable development. Moreover, the project is making a strong push to promote 

women’s land rights through encouraging farm families to have their titles issued jointly 

to both men and women through extensive public outreach; encouraging women farmers to apply for land, a portion will be earmarked for qualified women; and allocating 

small plots of “market garden” land to women for growing food for home consumption 

or sale.

In a show of bold country ownership, countries as diverse as Benin, Burkina Faso, 

Ghana, Lesotho, Madagascar, Mongolia, Mozambique, Namibia, Nicaragua and 

Senegal have asked MCC to support such politically-sensitive reforms as formalization of land rights and related legal and regulatory reform, institutional strengthening, 

public outreach and capacity building around new land laws, and conflict resolution 

measures.

Tackling tough and long-standing policy issues takes time. When policy or institutional 

reforms are conditions for moving forward with other compact investments, lack of 

progress on reforms can slow projects and threaten the five-year compact timeline. In 

many cases, this has meant that MCC has had to work closely with compact partners 

to build political will and capacity to keep policy reforms on track, and, in some cases, 

reduce the scope of projects in response to unmet policy commitments.

The Benin Compact is an example of where MCC and a partner country were extremely 

ambitious in pursuing policy reforms, some of which have proven quite challenging 

during implementation. The Benin Compact includes four projects, all of which include 

major policy reform components:

 The Access to Markets project focuses on the Port of Cotonou, and seeks to improve 

the port’s performance and security, expand its capacity, and reduce its operating 

costs, including through a private sector concession and customs reform.

 The Access to Land project pursues legal reforms to help secure both rural and 

urban land rights.

 The Access to Justice project seeks to strengthen the institutional environment for 

business and investment in Benin by overhauling the Code of Civil Procedures and 

improving the ability of the judicial system to resolve claims.

 The Access to Financial Services project seeks to enhance the growth of micro, small 

and medium-sized enterprises by reducing costs and improving access to financial 
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services, in part through reforms to the financial sector regulatory environment and 

strengthening management of microfinance institutions.

All of these reform areas are complex and politically sensitive, and some have faced 

challenges that contributed to delays or missed program targets. For example, in the 

Port of Cotonou project, activities to support new management systems for customs 

administration are on track, but it has proven harder to tackle some of the more 

entrenched practices that reduce the government’s capacity to raise revenues from 

customs duties. In the land project, thanks to extensive consultation and outreach with 

community members, local mayors and key ministries, the rural land reform activity 

will meet its goals for formalizing land holdings. The urban land reform activity within 

the land project, however, has had to reduce its ambitious goal of formalizing 30,000 

land titles to about 8,000, mostly because the institutional reforms were completed too 

late to reach all planned beneficiaries within the five-year compact timeline. Indeed, for 

both the land and justice projects, reforms only gained traction once MCC made it clear 

it would withhold funding for planned investments unless the reforms took place.

The fixed five-year compact time frame means there is very little room for delays associated with policy reforms. This can create risks for program completion, but it may 

also create leverage that partner countries’ internal reformers can use to push through 

politically challenging changes. MCC has learned a lot about how difficult policy reforms can be, and how much support partner countries may need to achieve them. For 

this reason, in recent compacts, MCC has elevated its focus on policy and institutional 

reform and capacities needed to achieve them. This provides a more sustained focus on 

policy actions, and makes the reform agenda more visible to internal stakeholders and 

the public. Additionally, institutional monitoring and evaluation plans are being added 

to these components to improve accountability, support deeper policy dialogue, and 

increase the likelihood that agreed reforms will be implemented and sustained.

This approach is clear in the Malawi Compact, which couples $280 million in energy 

infrastructure investments with $26 million in institutional, legal and regulatory support. Under this concept, as Malawi’s power generation, transmission and distribution 

is upgraded, so too is the institutional effectiveness of the major implementing institutions: the electricity company, as it more efficiently manages the system and adds more 

customers; the regulator, as it builds capacity to analyze, set and support tariff rates; and 

the energy ministry, as it builds an environment for private sector investment necessary 

to energy capacity growth.

In the Philippines, a key constraint to economic growth is a lack of growth-enhancing 

investments in public goods such as infrastructure and social services, due in part to inadequate revenue collection. The MCC compact supports a $54 million revenue administration reform project to address the need to raise tax revenues and reduce tax evasion 

and corruption. This project will focus on increasing the efficiency and sustainability 

of revenue collection, and improving the predictability and impartiality with which 
Principles into Practice: Country Ownership | November 2011 30

PRINCIPLESinto PRACTICE

MILLENNIUM CHALLENGE CORPORATION

revenue laws and regulations are enforced. MCC and MCA-Philippines are developing 

a dynamic monitoring and evaluation system for monitoring progress and maintaining 

accountability throughout the compact term.

Country ownership pays off.

After seven years of putting into practice its country ownership principle, MCC has 

plenty of experience to show that ownership pays off: for results, for leveraging policy 

reforms crucial for impact and sustainability, and for capacity building. MCC also believes that the focus on ownership helps strengthen another unique aspect of the MCC 

model—the incentive effect caused by MCC’s approach to selecting partner countries 

based on good policy performance. By publicly setting priorities and committing to 

program objectives, partner governments that implement MCC-funded programs take 

on responsibility for achieving results. This creates opportunities for governments to 

be accountable to their people and demonstrate good governance, and it creates the 

motivation for governments to maintain good policies that both benefit their people 

and maintain MCC eligibility.

But MCC also has seen that the notion of “country ownership” is not as simple as it 

sounds. In fact, MCC enters into complex partnerships with its compact countries; like 

all partnerships, careful balancing of each others’ interests, priorities, and capabilities is 

necessary to achieve success. MCC is still learning how to strike the right balance with 

each of its partner countries. After seven years, MCC has a lot more humility about 

how demanding it is to live up to a commitment to country ownership and true partnership. It is clear, however, that ownership is worth the challenge. MCC will continue 

to apply its ambitious approach to country ownership, and its lessons learned, to new 

partnerships. In doing so, MCC will continue to be transparent about its successes and 

challenges so that it can continue to strengthen its approach, and help others learn from 

its experiences.

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