Changing

Lives

2007 Annual Report
s in Honduras. Port expansion in Cape Verde. Business d

evelopment services in Nicaragua. Assistance to farmers

rmers in Georgia. Upgrading wharfs in Vanuatu. Improve

redit services in Ghana. Providing legal aid in Benin. Wa

on in Cape Verde. Gas pipeline rehabilitation in Georgia.

mprove access to agriculture services in Mali. Enable dev

elopment of water point system in Mozambique. Provide

rop insurance in El Salvador. Teacher training in Mongol

Water supply improvements in Nicaragua. Formalize prop

perty rights in Benin. Improve ferry service in Ghana. Str

Rehabilitate health centers in Lesotho. Port upgrades in 

crease financial services in Morocco. Repair rural roads 

ocational education in El Salvador. Standardizes propert

ights in Mozambique. Promotes irrigation development 

n Ghana. Rural credit assistance to farmers in Armenia. 

Bridge construction in Cape Verde. Standardize land tenu

ure policies in Nicaragua. Water supply and sanitation im

mprovements in Georgia. Improve solid waste disposal in

n Mali. Construct fish landing sites in Morocco. Execute a

pilot wetlands restoration in Lesotho. Improve coconut p

roducers’ products in Mozambique. Introduce a long-te

angeland leasing system in Mongolia. Expand the capac

 water treatment plant in Tanzania. Strategic road main

tenance planning in Armenia. Modernize national interb

ank payment system in Madagascar. Road improvement

armer access to credit in Honduras. Improve credit infor

rmation bureau in Benin. Services to efficiently perform

contracts in Vanuatu. Construct a blood transfusion cent

Millennium Challenge Corporation. Reducing poverty thr
evelopment services in Nicaragua.

s

e

ater

.

velopment

e

lia.

perty

re

Morocco.

 in Tanzania.

ty

 in Ghana. 

ure

mprovements

n

a

producers’

rm

city

tenance

ank

ts 

rmation

ter

rough

Changing

Lives

2007 Annual Report

October 1, 2006–September 30, 2007
An acacia tree stands in a field in Tanzania.

2 2007 Annual Report
Executive Summary..................................................................................5

Who We Are..............................19

Message from Secretary of State 

Condoleezza Rice, Chair of the Board..........................................21

Message from Ambassador J

ohn J. Danilovich, Chief Executive Officer................................25

What We Do.............................45

Good Policy Performance: Selection Process........................47

Country Ownership: Compact Development Process.....59

Country Responsibility: Implementation Process...............64

Why We Do What We Do.....69

Changing the Conversation About Development................71

Changing Lives: Threshold Programs...........................................81

Changing Lives: Compacts................................................................98

Management Summary ........ 121

Message from the Acting Vice President of the 

Department of Administration and Finance..........................122

2007 Annual Report 3
14

Total Number 

of Compacts

signed through

fiscal year 2007:

Total Number of Compacts

signed during fiscal year 2007

(Oct. 1, 2006–Sept. 30, 2007):

Total Approximate Value of Compacts

signed through fiscal year 2007:

Total Approximate Value of Compacts signed 

during fiscal year 2007 (Oct. 1, 2006–Sept. 30, 2007):$4.55

billion

4 2007 Annual Report
Executive Summary

The measure of the Millennium Challenge Corporation’s success is our positive impact on the lives of the poor in our partner countries—countries that 

are committed to their own development and to building prosperity. This 

Annual Report chronicles our progress, specifically developments during 

fiscal year 2007 (October 1, 2006 through September 30, 2007), to reduce 

poverty through economic growth and, as a result, positively change those 

lives in tangible, meaningful, and sustainable ways.

The 2007 Annual Report is structured around three main themes—who we 

are, what we do, and why we do what we do—to guide American taxpayers, 

members of Congress, partner countries, nongovernmental organizations, 

and other U.S. government agencies in fully understanding how we go about 

our work to reduce poverty through economic growth. 

 The first section highlights MCC’s mission, milestones in terms of 

signed compacts and threshold programs, partnerships around the 

world, board members, senior management, staff, and brand. 

 The second section discusses MCC’s process: how good policies 

drive country selection, how country ownership drives compact 

development, and how tangible outcomes and measurable results 

drive implementation. Details are provided on MCC’s threshold 

program, the consultative process, working with other donors, and 

monitoring and evaluation. 

 The third section concentrates on the early results of implementation, demonstrating our purpose to better lives by reducing poverty 

2007 Annual Report 5
and stimulating economic growth. MCC is creating new conditions 

for the effective use of development assistance—including engaging 

women and building trade capacity. We can point to how the lives 

of beneficiaries are beginning to improve in partner countries implementing threshold programs and compacts. 

For an organization as young as ours, MCC has made enormous progress. 

We have successfully maneuvered through our start-up phase. We have 

demonstrated that we know how to partner with willing countries to 

reach sound antipoverty development plans, signing 14 compacts and 14 

threshold programs by the end of fiscal year 2007. Now, we are in our most 

crucial stage as we work to ensure that those agreements are successfully 

implemented to reach predetermined benchmarks and expected outcomes. 

That is the surest way we can continue delivering results where they matter 

most—in the lives of the poor.

6 2007 Annual Report
14

Total Number of

Threshold Programs

signed through

fiscal year 2007:

Total Number of Threshold Programs

signed during fiscal year 2007

(Oct. 1, 2006–Sept. 30, 2007):

$316

million

Total Approximate Value of

Threshold Programs

signed through fiscal year 2007:

Total Approximate Value of Threshold Programs

signed during fiscal year 2007 (Oct. 1, 2006–Sept. 30, 2007):

2007 Annual Report 7
Energy

$72 (2%)

Monitoring and Evaluation

$108 (2%)

Governance

$212 (5%)

Health, Education and 

Community Services

$240 (5%)

Water Supply

and Sanitation

$402 (9%)

Program Administration 

and Oversight

$428 (9%)

Finance and 

Enterprise Development

$517 (11%) Agriculture

$1,156 (25%)

Transportation

$1,415 (32%)

Sunrise in Zanzibar, Tanzania.

Photo by MCC staff member Marc Tkach.

8 2007 Annual Report
Looking Ahead:

Compacts

While the chart summarizes signed compacts through the end of 

FY 2007 totaling $4.55 billion, note that two compacts have already 

been approved for FY 2008. 

MCC’s compact with Mongolia was signed on October 22, 

2007 for nearly $285 million.

MCC’s compact with Tanzania was approved on September 

18, 2007 for $698 million, with an anticipated signing date in 

early 2008. 

Taking these compacts into account, MCC has a portfolio of 16 

approved compacts totaling $5.5 billion. We anticipate compact 

signings with Burkina Faso and Namibia during the late spring or 

summer of 2008, pending approvals from the Board of Directors. 

This would bring total MCC compact commitments to more than 

$6.4 billion.

Chart (opposite page): MCC Compacts Signed Through 

Fiscal Year 2007. Amounts are in millions of U.S. dollars.

MCC’s compact with 

2007 for nearly $285 million.

MCC’s compact with 

18, 2007 for $698 million, with an anticipated signing date in 

early 2008. 

2007 Annual Report 9
Looking Ahead:

Threshold

Programs

While the chart summarizes signed threshold programs through the 

end of FY 2007 totaling $316 million, note that additional threshold 

programs have been approved, signed, or are scheduled to be 

signed in FY 2008. 

MCC’s threshold program with São Tomé and Principe for 

$8.66 million was signed on November 9, 2007. 

MCC’s threshold program with the Kyrgyz Republic for $16 

million was approved on August 9, 2007, and signing is 

pending.

MCC’s threshold program with Yemen for $20.6 million was 

approved on September 12, 2007, and signing is pending.

MCC’s $35 million threshold program with Peru was approved on November 30, 2007, and signing is pending.

Taking these threshold programs into account, MCC has a portfolio 

of 18 approved threshold programs totaling almost $400 million.

Chart (opposite page): MCC Threshold Programs as of September 

2007; does not include monitoring and evaluation costs. Amounts 

are in millions of U.S. dollars.

MCC’s threshold program with the 

million was approved on August 9, 2007, and signing is 

pending.

MCC’s threshold program with 

approved on September 12, 2007, and signing is pending.

MCC’s $35 million threshold program with 

proved on November 30, 2007, and signing is pending.

MCC’s threshold program with 

$8.66 million was signed on November 9, 2007. 

10 2007 Annual Report
Trade Policy

$24.60

Rule of Law

$30.83

Political Rights

$16.50

Immunization Rates

$20.00

Government Effectiveness

$5.40

Girls' Primary Education Completion Rate

$12.90

Fiscal Policy

$5.76

Days and Cost 

to Start a Business

$2.60

Control of Corruption

$194.86

Machu Picchu, Peru.

Photo by MCC staff member Maria Longi.

2007 Annual Report 11
The Mayor of Al Hassa, Rana Hajaya, 

pictured upper-left wearing glasses, is one 

of hundreds of women elected in Jordan. 

12 2007 Annual Report
The 

Millennium Challenge Corporation 

invests in countries committed to

Ruling

Justly

In some partner countries, specific projects advance pluralism, the 

rule of law, government transparency, and the protection of private 

property rights.

Malawi’s threshold program supports ongoing anticorruption efforts, expands the work of civil society groups, and 

strengthens independent media coverage, including training 

45 journalists in investigative journalism. Anti-money laundering legislation has been passed. A Financial Intelligence 

Unit has been created to investigate financial crimes. These 

efforts helped Malawi improve its performance on the 

control of corruption indicator—from the 40th percentile 

in fiscal year 2005 to the 54th percentile in fiscal year 

2008—now making the country compact-eligible.

Jordan’s threshold program strengthens municipal governance by expanding the participation of its citizens, including women, in local elections and local government. Under 

the new municipalities law, 20 percent of municipal council 

seats are reserved for women. In the last elections, female 

candidates exceeded this quota and won 238 seats. 

Malawi’s

tion efforts, expands the work of civil society groups, and 

strengthens independent media coverage, including training 

Jordan’s

nance by expanding the participation of its citizens, includ

ing women, in local elections and local government. Under 

2007 Annual Report 13
A woman in Burkina Faso attends school as 

a result of the MCC Threshold Program.

Photo by Liz Bernard.

14 2007 Annual Report
The 

Millennium Challenge Corporation 

invests in countries committed to

Investing in 

the health and 

education of 

their citizens

In some partner countries, specific projects focus on investments in 

health, education, and skills to expand human capabilities. 

El Salvador’s compact contains both formal and non-formal 

education and training components to increase employment 

opportunities for the poor. 

Ghana’s compact will complement agriculture and infrastructure investments in rural communities by providing 

over 100 new and rehabilitated education facilities, 900 

additional water points, and electricity to 12 agro-processing 

facilities. 

Lesotho’s health sector project is designed to mitigate the 

negative economic impacts of poor maternal health, HIV/

AIDS, tuberculosis, and other diseases by strengthening the 

country’s health care system. MCC funding will support the 

government’s efforts to significantly increase access to lifeextending antiretroviral therapy by providing a sustainable 

platform to deliver this and other essential health services. 

Burkina Faso’s threshold program opens 132 new “girlfriendly” school complexes. Over 18,000 children—half of 

whom are girls—are attending school who would not have 

been able to otherwise. Over 250 literacy centers are open, 

and thousands have received literacy training. 

El Salvador’s

education and training components to increase employment 

opportunities for the poor. 

Ghana’s

structure investments in rural communities by providing 

over 100 new and rehabilitated education facilities, 900 

Lesotho’s

negative economic impacts of poor maternal health, HIV/

AIDS, tuberculosis, and other diseases by strengthening the 

Burkina Faso’s

friendly” school complexes. Over 18,000 children—half of 

whom are girls—are attending school who would not have 

2007 Annual Report 15
The 

Millennium Challenge Corporation 

invests in countries committed to

Promoting

Economic

In some partner countries, specific projects focus on maximizing 

Freedom

business development and investment opportunities, the true engines of economic growth.

Benin’s access to markets project will increase competitiveness at the Port of Cotonou by reducing transport costs 

through systems and infrastructure improvements, increasing the volume of merchandise traffic through the port. 

Honduras’s compact has begun training 800 farmers to 

grow and sell horticultural products and will train more than 

8,000 during the life of the program. 

Morocco’s financial services project will increase financial 

services for micro-enterprises by addressing key constraints 

to the development of a broader, deeper, and market-based 

financial sector. 

Paraguay’s threshold program reduced the cost to start a 

business, from $750 to $250, and cut the number of days 

required to do so in half to 36. 

Benin’s

ness at the Port of Cotonou by reducing transport costs 

through systems and infrastructure improvements, increas

Honduras’s

grow and sell horticultural products and will train more than 

8,000 during the life of the program. 

Morocco’s

services for micro-enterprises by addressing key constraints 

to the development of a broader, deeper, and market-based 

Paraguay’s

business, from $750 to $250, and cut the number of days 

required to do so in half to 36. 

16 2007 Annual Report
Benin’s compact increases the volume of imports and exports at the 

Port of Contonou by reducing delays and improving operations and 

infrastructure, providing greater access to markets for the Beninese. 

2007 Annual Report 17

Section 1

Who 

We 

Are

Leadership 

for a new approach 

to development

19
U.S. Secretary of State Condoleezza Rice
Message from

Secretary of State 

Condoleezza Rice, 

Chair of the Board

The Millennium Challenge Corporation (MCC) pioneered a revolution in 

development strategy, emphasizing that development assistance should be 

granted to countries that govern justly, invest in their people, and foster 

economic freedom. Created to reduce poverty through economic growth, 

the MCC reflects President Bush’s vision and Congress’s bipartisan support 

for delivering foreign aid with accountability on our part as well as on the 

part of countries receiving our help. The MCC awards sizeable grants to 

countries that practice good governance, seek to take responsibility for their 

own development, and are committed to achieving results. These countries 

look for help from the MCC as they seek to help themselves.

In less than four years, as of the end of Fiscal Year 2007, the MCC’s approach 

has resulted in 14 signed Compacts and 14 signed Threshold Programs, 

which are beginning to make a tangible difference in the lives of the poor. 

The MCC has entered into a new phase as more and more compacts enter 

into force, local accountable entities design and oversee major new contracts, and disbursements increase. To meet the challenges of this phase, the 

MCC has reorganized its staff and resources to shift its focus from Compact 

development to implementation. The MCC investments are supporting 

policy reforms, rehabilitating ports and gas pipelines, fixing roads so farmers 

2007 Annual Report 21
can deliver their products to market, combating corruption, and addressing 

other development needs. With ongoing program implementation, which is 

the MCC’s priority, we expect to see continued progress and success.

I thank Congress, other U.S. government agencies, and the development 

community for supporting the MCC and commend the dedication and 

excellence of the MCC’s staff and leadership. Such support and commitment are not only serving U.S. interests but also creating a better life for the 

world’s poorest. 

Condoleezza Rice

Chair

22 2007 Annual Report
“The Millennium Challenge 

program, which 

I think has been very 

successful around the world 

in creating the right incentives 

for countries to govern wisely, 

to fight corruption, to invest 

in the health and education 

of their own people, has 

been one of our most 

important tools in changing 

the conversation about how 

development takes place, 

that there is responsibility on 

behalf of donor countries but 

there is also responsibility on 

behalf of those who would 

receive our aid.”

—U.S. Secretary of State 

Condoleezza Rice, 

March 21, 2007

2007 Annual Report 23
MCC Chief Executive Officer 

Ambassador John Danilovich
Message from

Ambassador 

John J. Danilovich, 

Chief Executive Officer

The Millennium Challenge Corporation has entered its most exciting chapter. With early results on the ground, MCC is poised for further success as 

compacts and threshold programs reach full implementation.

Since MCC’s creation in 2004, it has dedicated tremendous effort to establishing a first class professional organization that incorporates the best 

lessons learned in development and delivers on the promise of reducing 

poverty through economic growth in countries practicing good governance, 

fighting corruption, investing in their peoples’ health and education, and 

promoting economic freedom. 

MCC’s efforts are already bearing tangible results. 

I am proud to report that as of the end of fiscal year 2007, MCC has signed 

compacts with 14 countries in Africa, Central America, Eurasia, and the 

Pacific totaling over $4.5 billion and entered into threshold programs with 

14 countries for more than $316 million. Because of MCC investments 

in compact and threshold countries, land titles are being issued, farmer 

incomes are increasing, infrastructure improvements are underway, and 

children—including girls—are being educated. Equally impressive is how 

MCC’s approach is changing the conversation about development by 

2007 Annual Report 25
shifting more accountability to the country recipients of MCC assistance. 

Often referred to as the benefits of the MCC Effect, MCC serves as a strong 

catalyst and powerful incentive in partner countries for sustained policy 

reforms, campaigns against corruption, building capacity, including all segments of society in development, and for creating conditions where private 

enterprise can flourish. This year’s Annual Report chronicles MCC’s progress in all these areas and highlights how we are creating a solid foundation 

for reducing poverty through economic growth.

These early results are the building blocks for the ongoing implementation 

of compacts and threshold programs. Delivering positive results in the lives 

of the poor is the impetus behind the dramatic measures MCC has taken 

to reorient itself from working with partner countries to develop compacts 

to also working with them to ensure that the compacts are implemented 

successfully. We have reorganized our talented professionals to utilize their 

expertise and experience for oversight and support of country-led, full-force 

implementation of programs. More responsibility and authority have been 

moved to our resident country directors in all of MCC’s partner countries, 

to give them the latitude to make decisions that will deliver results more 

expeditiously. As MCC moves forward from this successful beginning, we 

will increasingly focus on effective compact implementation, and we are 

realigning priorities, functions, and staff to meet that challenge. 

The progress made to date will help the Millennium Challenge Corporation deliver a wide range of significant and sustainable results that will 

stimulate economic growth, reduce poverty, and make a real difference in 

the lives of the poor around the world. As MCC continues this journey, we 

appreciate and rely upon the ongoing support and advice of members of 

Congress, fellow agencies, nongovernmental organizations, and experts in 

the development field. MCC’s success reflects this group effort along with 

the uncompromising commitment of partner countries to achieve their own 

sustainable development and growth. 

John J. Danilovich

Chief Executive Officer

26 2007 Annual Report
MCC’s Mission 

The Millennium Challenge Account (MCA) is a development assistance 

program whose mission is to reduce poverty through sustainable economic 

growth in some of the world’s poorest countries that create and maintain 

sound policy environments. The program supports American security and 

foreign policy objectives and is true to America’s commitment to working 

toward a safer and more prosperous world. The Millennium Challenge Corporation (MCC) is an independent U.S. government corporation established 

by an act of Congress in 2004 to administer the MCA. 

MCC’s Milestones

As of the end of fiscal year 2007, MCC signed 14 compacts, totaling nearly 

$4.55 billion. MCC also signed threshold programs with 14 countries, totaling about $316 million. 

Compacts in Signing Order

Country

Award

(in millions) Signing Date Entry Into Force

Madagascar $109.8 April 18, 2005 July 27, 2005

Honduras $215.0 June 13, 2005 September 29, 2005

Cape Verde $110.0 July 4, 2005 October 17, 2005

Nicaragua $175.1 July 14, 2005 May 26, 2006

Reducing poverty through economic growth

2007 Annual Report 27
Country

Award

(in millions) Signing Date Entry Into Force

Georgia $295.3 September 12, 2005 April 7, 2006

Benin $307.3 February 22, 2006 October 6, 2006

Vanuatu $65.7 March 2, 2006 April 28, 2006

Armenia $235.7 March 27, 2006 September 29, 2006

Ghana $547.0 August 1, 2006 February 16, 2007

Mali $460.8 November 13, 2006 September 17, 2007

El Salvador $461.0 November 29, 2006 September 20, 2007

Mozambique $506.9 July 13, 2007 Estimated Entry into Force 

projected for Autumn 2008

Lesotho $362.6 July 23, 2007 Estimated Entry into Force 

projected for Autumn 2008

Morocco $697.5 August 31, 2007 Estimated Entry into Force 

projected for Autumn 2008

Compact

A compact is a multi-year agreement 

between MCC and an eligible country to 

fund specific programs aimed at reducing 

poverty and stimulating economic growth. 

It is a mutual promise between the U.S. government and a partner country, each with 

specific responsibilities to fulfill.

Entry into Force

After compact signing, entry into force is the 

point at which funds are obligated and the 

full implementation of compact programs 

begins.

Compact Entry into Force

28 2007 Annual Report
Threshold Programs in Signing Order

Country

Amount

(in millions) Signing Date

Burkina Faso $12.9 July 22, 2005

Malawi $20.9 September 23, 2005

Albania $13.9 April 3, 2006

Tanzania $11.2 May 3, 2006

Paraguay $34.6 May 8, 2006

Zambia $22.7 May 22, 2006

The Philippines $20.7 July 26, 2006

Jordan $25.0 October 17, 2006

Indonesia $55.0 November 17, 2006

Ukraine $45.0 December 4, 2006

Moldova $24.7 December 15, 2006

Kenya $12.7 March 23, 2007

Uganda $10.4 March 29, 2007

Guyana $6.7 August 23, 2007

2007 Annual Report 29
Moldova

Albania

Nicaragua

Honduras

Morocco

Burkina Faso

Benin

São Tomé

& Principe

Cape Verde

Ghana

Mali 

Paraguay

Bolivia

Peru

Guyana

Senegal

Mauritania

El Salvador

MCC Engagement 

Around the World

Compact-Eligible Countries

Suspended Compact-Eligible Countries

Compacts Signed
Jordan

Malawi

Rwanda

Tanzania

Kenya

Uganda

Ukraine

Georgia

Mongolia

Kyrgyz Republic

Mozambique

Indonesia

Philippines

Timor-leste

Armenia

Madagascar

Yemen

Niger

Lesotho

Vanuatu

Namibia

Zambia

03.11.08

Compact-Eligible and Threshold Eligible

Compact-Eligible with Threshold Agreement Signed

Compact Signed and Threshold Agreement Signed

Threshold-Eligible Countries

Threshold Agreements Signed

Threshold Countries Suspended
MCC’s Board of Directors

MCC is managed by a Chief Executive Officer and is overseen by a 

public-private Board of Directors comprised of the Secretary of State, the 

Secretary of the Treasury, the U.S. Trade Representative, the USAID Administrator, the CEO, and four individuals from the private sector appointed by 

the President with the advice and consent of the U.S. Senate. 

Chair

Condoleezza Rice

Secretary of State 

Lorne W. Craner

President, 

International 

Republican Institute 

Vice Chair

Henry M. Paulson, Jr.

Secretary of Treasury 

Senator 

William H. Frist, M.D.

Schultz Class of 1951 

Visiting Professor 

of International 

Economic Policy 

Woodrow Wilson 

School of Public and 

International Affairs 

Princeton University

Susan C. Schwab

United States 

Trade Representative 

Kenneth Hackett

President, 

Catholic Relief 

Services 

Henrietta Holsman Fore

Administrator, 

U.S. Agency for 

International 

Development

Alan J. Patricof

Founder and 

Managing Director, 

Greycroft, LLC 

John J. Danilovich

MCC Chief 

Executive Officer

Christine Todd 

Whitman

Former Governor 

of New Jersey 

Three-year term 

ended June 27, 2007.

32 2007 Annual Report
MCC’s Senior Management

Key leaders in MCC’s senior management include:

Matthew L. Bohn

Chief of Staff 

Rodney G. Bent

Deputy Chief 

Executive Officer

John J. Danilovich

MCC Chief 

Executive Officer

William G. 

Anderson, Jr.

Vice President 

and General 

Counsel

Michael 

Casella

Acting

Vice President

Department of 

Administration 

and Finance

Maureen 

Harrington

Vice President 

Department 

of Policy and 

International 

Relations

John 

Hewko

Vice President 

Department of

Compact 

Development

Darius

Mans

Vice President

Department of

Compact 

Implementation

Matthew K. 

McLean

Vice President 

Department of 

Congressional 

and Public 

Affairs

Charles O. 

Sethness

Senior 

Investment 

Counselor

2007 Annual Report 33
Senior Staff

Name Title

Jonathan Bloom Deputy Vice President, 

Department of Compact Implementation

Henry C. Pitney Deputy General Counsel

Frances Reid Deputy Vice President, 

Department of Compact Implementation

Darius Teter Deputy Vice President, 

Department of Compact Development

Harry “Hap” Carr Managing Director, Monitoring and Evaluation

Timothy W. Docking Executive Secretary and 

Senior Advisor to the CEO

Doug Fehrer Managing Director, Human Resources 

Carol Hessler Managing Director, Infrastructure, 

Environment, and Social Assessment

Robert Hindle Managing Director, Agriculture, 

Land, Private Sector Development, 

Financial Accountability, Procurement, and 

Monitoring and Evaluation

Jeri Jensen Managing Director, Private Sector Initiatives

Monica V. Kladakis Managing Director, Threshold Programs

Sherri Kraham Managing Director, Development Policy

James Mazzarella Managing Director, Congressional Affairs

Richard Morford Managing Director, 

Donor & Multilateral Relations

Dennis Nolan Deputy Chief Financial Officer

Shirley Puchalski Managing Director, Administrative Services 

W. Stacy Rhodes Managing Director, Compact Development

Aaron H. Sherinian Managing Director, Public Affairs

Franck Wiebe Chief Economist

Greg Williams Managing Director, Contracts 

and Grants Management

34 2007 Annual Report
MCC’s Staff

We reached our planned corporate headquarters staffing level of 300 in 

fiscal year 2007. Our workforce (full-time, direct-hire MCC employees) is 

a diverse one, composed of 25 percent minorities and 55 percent women. 

We continue to assess how best to balance workforce availability with 

workload demands and are determining which activities should remain 

core competencies within MCC and which should be outsourced.

MCC’s Reorganization to Focus 

on Implementation Support

Since 2004, supporting partner countries in compact development has been 

at the core of MCC’s efforts. With the negotiations and signings completed 

for a number of results-oriented compacts to reduce poverty and stimulate 

growth, we now enter a new phase of our evolution. While continuing 

compact development on a regular basis, over the long-term, MCC’s core 

activity will focus on oversight and support for country-led compact implementation. This new focus will also help MCC to implement best practices 

to build country capacity in procurement, to monitor and accommodate 

changes in requirements during implementation of infrastructure projects, 

and to ramp up disbursements while maintaining the highest level of accountability. 

In late fiscal year 2007, MCC initiated a major reorganization to position 

ourselves to meet the long-term demands required to work with partner 

countries to implement compacts with quality and speed. We have taken 

concrete measures to reorient from working with partner countries in 

developing compacts to also working with them to ensure that the compacts 

are implemented successfully. This means fully utilizing the expertise and 

experience of MCC professionals to focus on oversight and support of 

program implementation. It has meant moving more responsibility and authority to resident country directors in all partner countries by giving them 

the latitude to make decisions that will expedite compact implementation. 

It has meant combining and restructuring two existing departments—the 

Department of Operations and the Department of Accountability—to form 

MCC employees Karen 

DeLaBarre Chase and John 

Polk were honored for their 

volunteer efforts with the 

President’s Volunteer 

Service Award.

2007 Annual Report 35
two new departments—the Department of Compact Development and the 

Department of Compact Implementation. 

We initiated such a comprehensive reorganization at MCC to address the 

challenges associated with compact implementation. Our new structure 

bolsters capacity building to empower our partner countries to launch 

transparent procurement processes, implement their compact projects in a 

timely manner, and monitor and evaluate the overall results.

The future success of MCC in 2008 and beyond depends on achieving the 

expected results from our partner countries’ compact implementation. As 

a result, we have realigned priorities, goals, functions, and staff to meet that 

challenge and are better equipped now to achieve successful compact implementation, without compromising our dedication to financial and procurement accountability, the important role of gender in development, effective 

monitoring and evaluation, sound economic underpinnings for programs, 

and international best practice management of social and environmental 

issues. 

Department Highlights 

Through the professionalism of our staff, we are continuously improving 

operations and exercising best practices to make our mission of reducing 

poverty through growth a reality for program beneficiaries. This also led to 

our strategic reorganization. Key process improvements throughout MCC 

in fiscal year 2007 included:

Office of the General Counsel

The Office of the General Counsel undertook a review of all compact-related 

documents, which resulted in reducing both the number of supplemental 

agreements and the size and complexity of compacts. This effort to streamline documentation has directly contributed to more efficient compact development and implementation. Also, in order to shift more authority from 

MCC headquarters to staff in the field, the Office of the General Counsel 

provided guidance and legal documentation that delegated many decisions 

to resident country directors and their staffs. While headquarters maintains 

36 2007 Annual Report
overall oversight and accountability for the programs, this initiative contributes to ongoing efforts to improve compact implementation.

Department of Accountability 

(With the Department of Operations, this department has been restructured 

to form two new departments—the Department of Compact Development 

and the Department of Compact Implementation—as of fiscal year 2008.) 

The Department of Accountability developed improved tools and increased 

transparency for economic analysis, including joint efforts with newly 

eligible countries to conduct a growth constraints analysis as a framework 

for consultation on program development, enhanced beneficiary analysis, 

and improved sensitivity analysis of expected returns. Three different MCC 

Colleges for partner countries were held on procurement policies and best 

practices, monitoring and evaluation methodologies and approaches, and 

actualizing environmental and social assessment guidelines. Significant 

guidance documents were produced in several areas, such as interim 

financial accountability plans, best practices in resettlement, codification of 

what we have learned about monitoring and impact evaluation, and multiple 

procurement topics. Accountability participated in a cross-departmental 

team tasked with installing a common payment system designed to create 

efficiencies and minimize idle cash balances in countries entering implementation. It worked closely with Administration and Finance to develop 

terms of reference for an MCC-wide business intelligence, reporting, and 

data management system. Accountability also entered into an Inter-Agency 

Agreement with USAID in cooperation with the World Bank, the InterAmerican Development Bank, and the United Nations Development 

Program to develop a Capacity Assessment Tool to measure the strengths 

and weaknesses of partner countries as a contribution to the Development 

Assistance Committee of the Organization for Economic Co-operation and 

Development Joint Venture on Managing for Development Results.

2007 Annual Report 37
Department of 

Administration and Finance 

The Department of Administration and Finance (A&F) developed an 

enterprise architecture model that provides a framework to align MCC’s 

future business vision with technology planning and procurement efforts. 

To further MCC’s commitment to implementing a fully integrated financial 

system compliant with the requirements of the Federal Financial Management Improvement Act, the department completed an assessment of MCC’s financial systems needs and developed options 

for moving to a fully integrated system in the next two years. 

It piloted a Common Payment System in Mali, which centralizes the payment of compact expenses with MCC’s financial 

services provider and eliminates the need to “advance” funds 

to partner countries. A&F also began developing a Business 

Intelligence and Data Storage tool that will automate reporting from partner countries and merge performance and financial data to 

support managerial cost accounting, budget/performance integration, and 

reporting to internal and external stakeholders. MCC’s workforce diversity 

profile significantly improved, and A&F conducted an employee engagement 

survey and installed a new system to manage MCC’s staffing and personnel 

management needs. The Office of Personnel Management, in conjunction 

with a study conducted by the American University, recognized MCC as one 

of the best small agencies to work for in the federal government.

Department of 

Congressional and Public Affairs

The Department of Congressional and Public Affairs continued critical legislative, stakeholder, and media outreach to inform interested constituencies 

about MCC’s progress. One-on-one meetings and briefings with members 

of Congress continue through ongoing engagement. A well-visited website, 

which was viewed by a growing number of unique visitors throughout 

the year, and a thriving Speakers Bureau that matched MCC experts with 

various speaking requests, remained part of MCC’s strategic communications. Routine meetings with the NGO community and a full calendar of 

MCC was named one of the 

2007 Best Places to Work

within the U.S. government, 

ranking fifth out of 31 small 

federal agencies.

38 2007 Annual Report
outreach events, where attendance typically exceeded capacity, informed 

the public about MCC’s progress and increased organizational transparency. 

To coincide with compact signings, Congressional and Public Affairs also 

launched investment workshops to discuss private sector opportunities for 

doing business in partner countries. It also conducted specific briefings on 

procurement opportunities directly with MCC. Domestic media coverage 

on MCC increased, including articles and editorials in The Washington Post, 

The Wall Street Journal, and The New York Times. In addition, the department’s public diplomacy efforts increased through continued coordination 

with the public affairs offices at U.S. embassies in partner countries worldwide, which resulted in strong, positive international press coverage about 

MCC. Efforts by Congressional and Public Affairs considerably strengthened the MCC brand moving forward.

Department of Operations 

(With the Department of Accountability, this department has been restructured to form two new departments—the Department of Compact Development and the Department of Compact Implementation—as of fiscal year 

2008.) 

The Department of Operations continued to learn and apply lessons from 

early compact country experience to strengthen compact development and 

implementation. One key lesson has been to work with new compact countries to establish key program structures, staff, and systems prior to entry 

into force. For example, in El Salvador the accountable entity and board of 

directors were established, key implementing entity agreements were signed, 

and several major contracts (including for the procurement agent) were 

prepared for negotiation prior to entry into force. These steps will allow El 

Salvador to more fully dedicate compact time to program implementation. 

Operations hosted a conference for all resident and deputy resident country 

directors to share experiences and to make recommendations to MCC headquarters about ways to improve compact implementation oversight. These 

recommendations directly informed MCC’s institutional reorganization and 

efforts to streamline implementation.

2007 Annual Report 39
Department of Policy 

and International Relations 

The Department of Policy and International Relations made advances 

throughout its four divisions. The Threshold Division hired a program officer 

dedicated solely to monitoring and evaluation to assess the impact of the 

threshold program and to determine “lessons learned” for future program 

development. A new managing director for Private Sector Initiatives is 

strengthening efforts to integrate private sector activities into MCC compacts, leverage MCC compacts with the private sector, align corporate social 

responsibility efforts with compacts, and stimulate follow-on investments 

in MCC countries. Donor and Multilateral Relations conducted a survey 

of other donors’ regular reporting requirements, identifying ways for MCC 

to streamline its own quarterly reporting. It developed guidance on the 

Paris Declaration, sector-wide approaches, common donor terms, and MCC 

donor coordination. In joint meetings with donor partners, it identified 

opportunities to improve field-level donor coordination and further leverage 

MCC investments. Development Policy dramatically improved the guidance 

documents that are provided to compact eligible countries for proposal 

development, including guidance on the consultative process. A working 

paper—Building Public Integrity through Positive Incentives—was published 

to address how MCC’s role in the fight against corruption incorporates best 

practices. A database was established to track and report examples of the 

MCC effect. 

40 2007 Annual Report
MCC’s Brand

As part of our communications strategy, MCC unveiled a state-of-the-art 

and user-tested website during fiscal year 2007, reflecting best industry 

practices. Its easy navigation and constantly updated content drew an everincreasing number of visitors, making the website one of our most effective 

tools in showcasing progress to date. In fact, in the year since the launch of 

the redesigned website, visits skyrocketed an average of 294 percent from 

the previous year. 

Another tool in communicating MCC’s mission is the tremendous public 

relations work undertaken by partner countries themselves. As accountable 

entities are established in each partner country to implement compacts, 

they are writing newsletters, maintaining their own websites, engaging the 

press, organizing events, communicating with stakeholders, and interacting 

with nongovernmental organizations to explain and highlight how MCC investments are fighting poverty, stimulating growth, and improving the lives 

of the poor. MCC’s visibility in each partner country plays an instrumental 

role in advancing U.S. public diplomacy efforts. 

2007 Annual Report 41
Each partner country establishes a government entity to be responsible for compact implementation and to 

oversee its Millennium Challenge Account (MCA). Some existing MCA accountable entities in partner countries include: 

Armenia http://www.mca.am/new/enversion/index.php

Benin http://www.mcabenin.bj/

Cape Verde http://www.mca.cv/

El Salvador http://www.mca.gob.sv/fomilenio/index.php

Georgia http://www.mcg.ge/

Ghana http://www.mida.gov.gh/

Honduras http://www.mcahonduras.hn/

Madagascar http://www.mcamadagascar.org/

Mali http://www.mcamali.org/

Nicaragua http://www.cuentadelmilenio.org.ni/

Vanuatu http://www.governmentofvanuatu.gov.vu/

mca-vanuatu/Home/tabid/54/Default.aspx

MCA Accountable Entities

42 2007 Annual Report
2007 Annual Report 43
Colin Buckley, MCC Resident Country Director in Georgia, shakes hands with Leri 

Mikaberidze, Construction Manager for the Georgian company responsible for repairs to the 

North-South Gas Pipeline. The pipeline is a major component of the compact with Georgia.
Section 2

What 

We 

Do

Innovation 

in awarding 

development assistance 

45
Good policy performance:

Selection process

Country ownership:

Compact development process

Country responsibility:

Implementation process

Together, 

this process leads to tangible results, 

the focus of Section 3.

The MCC Process

The Millennium Challenge Corporation awards grants—not loans—to 

partner countries through an innovative and competitive process built upon 

four fundamental principles that are essential for the effective and efficient 

use of development assistance—good policy performance, country ownership, country responsibility, and tangible results.

46 2007 Annual Report
Good Policy Performance:

Selection Process

We work with countries that are committed to ruling justly, investing in 

their people, and promoting economic freedom. We assess a government’s 

performance in these three areas by using objective, transparent, and thirdparty indicators taken from non-U.S. government sources. We use these 

indicators to create a scorecard measuring a country’s policy performance 

among its own peer group in the same per capita income range. Our Board 

of Directors then uses these scorecards to determine and select annually 

which countries are eligible to receive our aid based on policy performance.

Fiscal Year 2007 

Country Selection: 

The Competition to Participate

The Millennium Challenge Act of 2003, 22 U.S.C.A. 7701, 7707 (b) (the 

“Act”) requires that MCC carry out a series of steps to determine countries 

eligible for MCA assistance during the fiscal year based on their commitment to just and democratic governance, investing in their people, and 

economic freedom. There must also be strong opportunities for poverty 

reduction and economic growth. 

In fiscal year 2007, we completed our fourth cycle of selecting countries 

eligible to apply for assistance. Required reports were transmitted to the 

2007 Annual Report 47
Ghana FY08 GNI/Cap: $520 LIC

Population: 22,112,800

Investing In People

Ruling Justly

Economic Freedom

How to Read this Scorecard: Each MCC Candidate Country receives an annual scorecard assessing its performance in 3 policy categories: Ruling Justly, Investing in People, 

and Economic Freedom. Under the name of each indicator is the country’s score and percentile ranking in its income peer group (0% is worst; 50% is the median; 100% is 

best). Under each country’s percentile ranking is the peer group median. Country performance is evaluated relative to the peer group median and passing scores, or scores 

above the median, are represented with green. Failing scores, or scores at or below the median, are represented with red. The black line that runs along the horizontal axis 

represents the peer group median. Each World Bank Institute indicator is accompanied by a margin of error, which is represented by the vertical blue bar.

Sources: Freedom House

Sources: World Health Org.

Sources: World Bank Institute

Freedom House World Bank Institute World Bank Institute World Bank Institute World Bank Institute

World Health Org. UNESCO/National Sources UNESCO CIESIN/YCELP

IFAD/IFC IFC Heritage Foundation IMF WEO National Sources

For more information regarding the Millennium Challenge Account Selection Process and these indicators, please consult MCC’s website: www.mcc.gov

0

10

2 0

3 0

4 0

'02 '04 '06

Median 20

Political Rights

Data 37 (100%) 

0

2 0

4 0

6 0

'02 '04 '06

Median 30

Civil Liberties

47 (93%) 

Median 0.00

Control of 

Corruption

0.65 (93%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Government 

Effectiveness

0.92 (99%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Rule of Law

0.74 (92%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Voice and 

Accountability

1.07 (97%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Median 0.00

Regulatory Quality

0.60 (99%) 

-2.0

- 1.0

0.0

1.0

2.0

'02 '04 '06

Data

-8.00

-5.50

-3.00

-0.50

2.00

4.50

'02 '04 '06

Median -1.34

Fiscal Policy

-3.94 (19%) 

2 0

4 0

6 0

8 0

10 0

'02 '04 '06

Median 84

Immunization Rates

Data 84.5 (51%) 

0

0.2

0.4

0.6

0.8

1

'03 '05 '07

Median 0.610

Land Rights and 

Access

0.768 (86%) 

0

0.25

0.5

0.75

1

'03 '05 '07

Median 0.930

Business Start-Up

0.952 (74%) 

2 0

4 0

6 0

8 0

10 0

'03 '05 '07

Median 58.2

Trade Policy

58.0 (49%) 

0

10

2 0

3 0

'02 '04 '06

Max. 15

Inflation

10.91 (20%) 

10

4 0

70

10 0

13 0

'02 '04 '06

Median 67.8

Girls' Primary 

Education Completion 

67.8 (49%) 

0

3

6

9

12

15

'01 '03 '05

Median 2.07

Health Expenditures

2.59 (56%) 

0

2 5

50

75

10 0

'03 '05 '07

Median 66.53

Natural Resource 

Management

67.69 (56%) 

0

2

4

6

8

10

'02 '04 '06

Median 1.67

Primary Education 

Expenditures

1.70 (52%) 

10/10/2007

For more information regarding the Millennium Challenge Account Selection Process and these indicators, please consult MCC’s we

Sample MCC Scorecard showing how a 

country performs on the indicators.

48 2007 Annual Report
appropriate Congressional committees at each of the following three stages 

of the selection process and are available on MCC’s website. 

Stage 1: 

Identification of 

Fiscal Year 2007 Candidate Countries

In accordance with the Act, MCC submitted a Report to Congress on August 

11, 2006, listing the countries that were candidates for MCA assistance during fiscal year 2007 based on their per capita income levels and their eligibility to receive assistance under U.S. law. This report identified 69 candidate 

countries in the “low income” category and 30 candidate countries in the 

“lower middle income” category for fiscal year 2007. “Low income” candidate countries have a per capita income equal to or less than $1,675. “Lower 

middle income” candidate countries have a per capita income between 

$1,676 and $3,465. 

Stage 2: 

Selection Criteria and 

Methodology Report

In accordance with the Act, MCC submitted a Report to Congress on 

September 8, 2006, indicating the criteria and methodology to be used to 

measure and evaluate the candidate countries in order for our Board of Directors to select eligible countries from among them. Following the submission of this report and its posting to MCC’s website and the Federal Register, 

we solicited and considered public comments for a period of 30 days. 

At that time, candidate countries competed against their income peer group 

on 16 policy indicators that assess the degree to which the political, social, 

and economic conditions in these countries promote—and can sustain—

poverty reduction and economic growth. These independently developed 

indicators are selected based on a number of factors, including their theoretical or empirical link to economic growth and poverty reduction; analytical rigor, quality, and objectivity; public availability; broad country-coverage; 

comparability across countries; and broad consistency in results from year 

2007 Annual Report 49
to year. The 16 indicators used for fiscal year 2007 are listed in the chart 

below.

To become eligible, candidate countries are expected to score above the 

median on half of the indicators in each of these three criteria areas and

above the median specifically on the Control of Corruption indicator. One 

exception to this methodology is that to pass the Inflation indicator, a 

country’s inflation rate needs to be under a fixed ceiling of 15 percent. A 

performance scorecard was created for each candidate country, which was 

published on MCC’s website. MCC staff met with representatives from 

many of these countries to discuss policy performance on the indicators and 

to highlight areas where reforms might increase future chances of qualifying 

for assistance.

As a general practice, we continually review the indicators used to ensure 

they are the best possible measures of country performance, consulting 

with experts across the U.S. government, the development community, 

public and private sector practitioners, researchers at think tanks, donors, 

and academia. From time to time, we recommend changes or refinements 

Ruling Justly

1. Civil Liberties

2. Political Rights

3. Voice and 

Accountability

4. Government 

Effectiveness

5. Rule of Law

6. Control of 

Corruption

Investing in People

1. Public Expenditure 

on Health

2. Public Expenditure on 

Primary Education

3. Immunization Rates

(DPT3 and Measles)

4. Girls’ Primary 

Education 

Completion

Encouraging 

Economic Freedom

1. Cost of Starting a 

Business

2. Inflation

3. Fiscal Policy

4. Trade Policy

5. Regulatory Quality

6. Days to Start 

a Business 

The 16 Indicators Used for FY 2007
Source

Created by Columbia University’s Center for International Earth Science Information Network and the Yale 

Center for Environmental Law and Policy

Components

1. Protection of Eco-Regions: assesses whether countries are protecting at least 10 percent of all their 

biomes (e.g., deserts, tropical rainforests, grasslands, savannas, tundra) 

2. Access to Improved Water: measures the percentage of the population with access to at least 20 liters 

of water per person per day from an “improved” source (household connections, public standpipes, 

boreholes, protected dug wells, protected springs, rainwater collection) within one kilometer of the 

user’s dwelling. 

3. Access to Improved Sanitation: measures the percentage of the population with access to facilities that 

hygienically separate human excreta from human, animal, and insect contact

4. Child Mortality (Ages 1-4): measures the probability of a child dying between the ages of 1 and 4, which 

is determined largely by efforts to reduce indoor air pollution and expand access to potable water and 

sanitation services

Why It Matters

The Natural Resources Management Index measures whether governments are investing their resources in 

ways that will enable poor people, particularly poor women and children, to live healthy and productive lives. 

Eco-region protection is important for sustainable economic growth and poverty reduction because ecosystems provide essential clean water, fresh air, healthy soils, livable climates, and wild foods that underpin 

human welfare. The Access to Improved Water, Access to Improved Sanitation, and Child Mortality subcomponents of this index measure a government’s commitment to providing basic environmental services.

New Indicator: Natural Resource Management Index

2007 Annual Report 51
Source

Created by combining the International Fund for Agricultural Development’s Access to Land indicator with 

the International Finance Corporation’s Time and Cost of Property Registration indicators

Components

1. Access to Land: assesses the extent to which the institutional, legal, and market framework provides 

secure land tenure and equitable access to land in rural areas, including (a) the extent to which the law 

guarantees secure tenure for land rights of the poor; (b) the extent to which the law guarantees secure 

land rights for women and other vulnerable groups; (c) the extent to which land is titled and registered; 

(d) the functioning of land markets; and (e) the extent to which government policies contribute to the 

sustainable management of common property resources

2. Days to Register Property: measures how long it takes to register property in the capital city

3. Cost of Registering Property: measures the cost to register property as a percentage of the value of the 

property in the capital city

Why It Matters

Land is a crucial asset and a social safety net that poor people rely on to improve their well-being. Access to 

land often determines whether or not the poor can earn enough income to survive and invest in their own 

futures. It also addresses gender equality and assesses a government’s commitment to investing in women. 

Secure land tenure is also a critical component of sustainable natural resource management because those 

who lack clear ownership or use rights to their land are less likely to make long-term investments in land 

productivity and more likely to make short-term decisions with negative environmental impacts, such as 

deforestation. By measuring whether governments are improving their laws, policies and administrative 

practices to make land access more secure, MCC can better identify countries committed to investing in 

the entrepreneurship of their people and empowering them to more fully harness their skills and talents to 

improve their own livelihoods.

New Indicator: Land Rights and Access Index

52 2007 Annual Report
if better indicators or improved sources of data are identified. For instance, 

due to improvements in data quality and availability, we made several source 

changes to the fiscal year 2007 selection criteria. Rather than relying on 

multiple sources for the Inflation indicator, we relied exclusively on annual 

data reported in the International Monetary Fund’s World 

Economic Outlook database. For Public Expenditure on Health, 

we substituted World Health Organization data for data 

previously collected through national governments. Finally, 

for the Public Expenditure on Primary Education indicator, 

we established the United Nations Educational, Scientific and 

Cultural Organization (UNESCO) as the primary source and 

self-reported data from national governments as a secondary 

source. 

For the first time in fiscal year 2007, MCC measured each candidate country’s sustainable management of natural resources 

using two new indicators: a Natural Resources Management 

Index and a Land Rights and Access Index. The two new 

indicators measure how well candidate countries provide clean 

drinking water, expand sanitation services, streamline the 

property registration process, and make land rights accessible 

and secure for poor and vulnerable populations. They were developed over the course of more than a year and resulted from 

a public process led by former MCC Board member Christine 

Todd Whitman. They involved extensive consultations with 

Congress, executive agencies, nongovernmental organizations, think tanks, 

and academics.

The Natural Resources Management Index and a Land Rights and Access 

Index provided non-binding, supplemental information in fiscal year 2007 

and were formally adopted by the Board in September 2007 for use as 

selection indicators for fiscal year 2008 and beyond. The Natural Resources 

Management Index has been placed in the investing in people category, and 

the Land Rights and Access Index has been placed in the economic freedom 

category. The gradual and transparent integration of the two new indicators into MCC’s selection framework provided candidate countries with an 

“The Millennium Challenge 

Corporation has already 

made a big contribution to 

development in a different 

way: by tying its money to 

a set of quantifiable and 

publicly-available indicators 

of reform progress. This 

allows an open discussion of 

what it takes to qualify for 

the Corporation’s money and 

cuts down on favoritism.” 

—Simeon Djankov, 

December 9, 2007, 

World Bank Institute blog

2007 Annual Report 53
opportunity to understand how the new benchmarks would be used in the 

eligibility selection process. 

With the Board’s formal adoption of these two natural resources management indicators and the decision it took to consolidate into one index the 

two indicators we use from the International Finance Corporation to assess 

the number of days and cost to start a business, the total number of performance indicators moving forward increased from 16 to 17. 

Stage 3: 

MCC’s Board Names 

Fiscal Year 2007 Eligible 

and Threshold Countries

The third and final step in the country selection process was the Board’s 

determination of fiscal year 2007 compact eligible and threshold eligible 

countries. MCC submitted this list in its Report to Congress on November 

13, 2006 (Section 608(d) of the Act). In making its decision, the Board of 

Directors evaluated each candidate country’s performance scorecard and 

exercised its discretion in considering additional information, including 

adjustments for data gaps, lags, or other weaknesses. The Board also considered whether MCA assistance would have an impact on poverty reduction 

and economic growth in a particular country as well as the extent of available MCC funds. 

The re-selected countries from the “low income” category were: Armenia, 

Benin, Bolivia, Burkina Faso, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Mozambique, Nicaragua, Senegal, Sri Lanka, 

Tanzania, Timor-Leste, and Vanuatu. 

The re-selected countries from the “lower middle income” category included: Cape Verde, El Salvador, and Namibia. 

These 21 countries in the “low income” and “lower middle income” categories had each been selected in at least one previous cycle, and the Board 

reselected them for fiscal year 2007 based on their continued policy performance since their prior selection. However, six of these countries—Benin, 

54 2007 Annual Report
Cape Verde, Ghana, Madagascar, Senegal, and Sri Lanka—did not perform 

above the median in relation to their peers on at least half of the indicators 

in each of the three policy categories. Yet, we did not believe that a serious 

erosion of policy performance had occurred in any of these countries and 

they were, consequently, reselected. Each of their governments 

committed to specific courses of actions to address indicator 

performance weaknesses and to improve performance overall. 

Three additional countries were selected for the first time in 

fiscal year 2007: Moldova and Ukraine in the “low income” category and Jordan in the “lower middle income” category. While 

now eligible for compact assistance, all three of these countries 

are also currently participating in the threshold program. The 

governments of Moldova, Ukraine, and Jordan are required to 

successfully implement their respective threshold programs—

and corresponding reforms—even during the compact development process. Proceeding with a compact depends on successful performance in each country’s threshold program. 

As a result of the fiscal year 2007 selection process, Niger, Peru,

and Rwanda were selected for the threshold program, joining 17 

countries chosen during previous MCC threshold program selection rounds in 2004 through 2006. (Read “MCC’s Threshold 

Program” on page 58 for more details.)

MCC as Smart Power:

MCC is a strategic, 

“soft power” asset in 

America’s foreign 

policy toolbox, 

an important complement to 

other economic and political 

tools that support a more 

prosperous and secure world 

in a foundational 

and sustainable way. 

In a report issued 

in November 2007, 

the CSIS Commission on 

Smart Power cites MCC as 

addressing critics’ concerns 

about corrupt governance 

in developing nations. The 

report states that MCC has 

“created incentives by which 

continued aid is tied to 

good performance.”

2007 Annual Report 55
To provide further incentive for policy reform and to assist countries to become compact eligible, MCC’s legislation established a threshold program for countries that demonstrate a significant commitment to meeting the eligibility criteria but fall short on several indicators. Threshold assistance helps countries address 

specific areas of policy weakness identified in the MCA selection indicators. Up to ten percent of MCC’s 

appropriation may be spent on the threshold program.

Threshold countries

The following countries were eligible for threshold program assistance in fiscal year 2007: Albania, Burkina 

Faso, Guyana, Indonesia, Kenya, Kyrgyz Republic, Jordan, Malawi, Moldova, Niger, Paraguay, Peru, Philippines, 

Rwanda, Saõ Tomé and Principe, Tanzania, Uganda, Ukraine, Yemen, and Zambia. Of these, Niger, Peru, and 

Rwanda were selected in fiscal year 2007 to participate in the threshold program. 

Certain threshold countries have subsequently been selected as compact-eligible, and performance on any 

ongoing threshold program will be considered by MCC’s Board of Directors in approving a possible future 

compact. 

Countries with approved threshold programs 

As of the end of fiscal year 2007, MCC has approved and signed 14 threshold programs totaling about $316 

million with Burkina Faso, Malawi, Tanzania, Albania, Paraguay, Zambia, Philippines, Ukraine, Jordan, Indonesia, Moldova, Kenya, Uganda, and Guyana. 

MCC’s Threshold Program

56 2007 Annual Report
The Making of a Threshold Program

Threshold Program Development Implementation

Indicator Analysis

Once a resholdeligible government 

indicates that it is 

interested in developing 

a reshold Country 

Plan, MCC initiates the 

process by conducting a 

comprehensive 

assessment of the 

country’s performance 

on our eligibility 

criteria.  e resulting 

Indicator Analysis is 

shared with the 

government to stimulate 

an extensive dialogue 

between reshold 

country officials and 

MCC on indicator 

performance and areas 

for improvement.

Section I of the 

reshold Country 

Plan

Based on the Indicator 

Analysis, the 

reshold-eligible 

government is invited to 

submit a general 

summary of its 

proposed reshold 

Country Plan.  Section I 

broadly states which 

specific indicators will 

be addressed in a 

reshold program and 

how this will advance 

policy reform in the 

country. 

reshold Country 

Plan

Once Section I is 

reviewed and approved 

by MCC’s Investment 

Committee, the 

reshold-eligible 

government is invited to 

more fully develop its 

reshold Country Plan 

through an iterative 

process.  is involves 

consultation with civil 

society and donors, as 

well as input from MCC 

and other U.S. 

Government agencies.  

Upon finalization, the 

reshold Country Plan 

is submitted to the 

MCC Investment 

Committee again for a 

recommendation for 

consideration by the 

Board of Directors. 

Board Approval and 

Congressional 

Notification

Once approved by 

MCC’s Board of 

Directors, Congress is 

notified of the 

reshold Country Plan.

Signing

After the 15-day 

Congressional 

notification of the 

Board’s decision has 

passed, a reshold 

agreement can be 

signed.

Implementation

e reshold program 

is implemented by a U.S. 

Government agency, 

working with one or 

more implementing 

partners, which may 

include eligible local, 

U.S. and other 

international firms, 

non-governmental 

organizations and 

international 

organizations.  e 

implementing 

partner(s), together with 

the primary U.S. 

Government 

implementing agency 

and MCC, monitor and 

evaluate progress 

toward achieving 

performance 

benchmarks throughout 

the reshold program’s 

implementation.

Indicator

Analysis

Section I of the 

Threshold 

Country Plan

Threshold

Country Plan

Board Approval 

& Congressional 

Notification

Signing In-Country 

Implementation

2007 Annual Report 57
At the 2005 Gleneagles summit, President Bush and other G8 leaders agreed to double aid to Africa by 2010. 

Later that year at the WTO meetings in Hong Kong, the U.S. committed to more than double aid-for-trade 

from $1.3 billion in 2005 to $2.7 billion by 2010, provided development partners prioritize trade in their development plans. MCC plays an important role in helping the United States work toward these commitments. 

Over 60 percent of the $5.5 billion MCC has approved in compacts through the first quarter of fiscal year 

2008 benefits sub-Saharan Africa, and MCC has become the largest U.S. contributor to aid-for-trade, with 

nearly $778 million in obligated aid-for-trade activities in FY 2007. 

MCC is among the largest donors in each of our partner countries. After the initial compacts, which were 

smaller in size, MCC is now among the top three donors in most partner countries and has helped raise the 

overall profile of the United States as a donor.

MCC as a Major Donor

58 2007 Annual Report
Country Ownership:

Compact 

Development 

Process

Once countries qualify and are selected for full MCC assistance because of 

their policy performance, they are invited to develop a proposal for funding—through an agreement we call a compact—to address their constraints 

to poverty reduction and economic growth. In keeping with MCC’s core 

value of country ownership, we expect countries to inform MCC of what 

they need to achieve their antipoverty strategies, rather than MCC selecting and designing the programs we think we should be funding. This level 

of expectation—and responsibility—demanded by country ownership has 

stretched existing capabilities among our partner countries and developed 

new capacities. The process is making our partner countries the leaders of 

their own development.

Eligible countries must first identify their main constraints to poverty reduction and economic growth through a timely and meaningful consultative 

process with their civil societies, including the private sector, nongovernmental organizations, private voluntary organizations, other donors, 

women, and the poor themselves who are to benefit from the programs. 

Eligible countries are expected to design and submit their own proposals for 

funding addressing their identified constraints. We make it clear that should 

MCC approve their proposals, we expect them to be responsible for the 

2007 Annual Report 59
implementation. For this reason, we ask partner countries to think through 

their implementation mechanisms as part of the proposal process. 

We evaluate and conduct due diligence on each proposal to determine 

whether it will lead to poverty reduction and growth. If a country’s proposal 

is approved for funding—and approval is not automatic—MCC and the 

country enter into a country-specific compact. This mutual agreement outlines responsibilities for both MCC and the partner country and stipulates 

progress benchmarks along the way to ensure accountability and outcomes. 

 

1. Designate MCC Point of 

Contact and establish a 

Core Country Team.

2. Conduct Economic 

Constraints Analysis

3. Begin Consultative 

Process

4. Based on 2 and 3, 

identify possible 

compact components 

to propose

5. Identify Beneficiaries for 

each project/program

6. Develop preliminary 

monitoring and 

evaluation plan

7. Conduct preliminary 

feasibility studies

8. Economic analytics 

(financial and opportunity cost-benefit 

and ERR)

9. 609g funding as needed

10. Country submits 

compact proposal

1. MCC submits 

Opportunity Memo to 

begin due diligence

2. MCC conducts due 

diligence:

a. Economic impacts

b. Environmental 

and social risk

c. Alternative solutions

d. Proposal development process

3. Implementation 

Planning

a. Procurement 

process

b. Accountable entity

c. Banking/funding

d. Strengthening 

monitoring and 

evaluation plan

4. U.S. Congressional 

notification and briefing

5. Final compact 

negotiations 

(MCC and county)

6. MCC submits Investment Memo to Board 

for compact approval

7. MCC notifies U.S. 

Congress

1. Finalization of 

legal documents

2. Compact signing

3. Staffing up of 

Accountable Entity

4. Negotiation of Audit 

and Marking procedures

5. Entry into Force 

of the Compact

6. Collect baseline data for 

monitoring and 

evaluation plans

7. Initial disbursement

8. Secure fiscal agent, 

procurement agent, and 

contractors

1. Compact’s provisions in 

full-force and effect in 

the country

2. Quarterly Progress 

Reports

3. Procurement 

Performance Reports

4. Financial Reports

Proposal 

Development and 

Program Design

Due Diligence 

and Program 

Refinement

Mobilization

and Start Up

In-Country

Implementation

Close

Out

Compact Development Compact Implementation

Proposal 

Submission

Country 

Eligible

Compact

Signing

Entry

into Force

Compact

Completion

The Making of a Compact

60 2007 Annual Report
MCC and MCA teams have coordinated investments with USAID, other U.S. agencies, and donors throughout compact development and implementation. Some current compact activities build upon successful 

programs of other donors, complement existing donor initiatives, and are helping catalyze new donor investments. For example:

In Armenia, MCA-Armenia has accelerated the construction planning on approximately 20 kilometers 

of rural roads by using detailed design studies made available by the Lincy Foundation. This cooperative effort will result in approximately $50,000 in savings to the MCA-Armenia program and allow 

MCA-Armenia to break ground in late 2007.

In El Salvador, the Central American Bank for Economic Integration has provided a $55 million loan 

to the National Registry Center that is critical to the sustainability of MCC compact results. The loan 

supports El Salvador’s Northern Zone Development Program and will be used to fund the necessary strengthening of land rights and the modernization of the cadastre and property registration 

systems.

In Georgia, MCC’s Agribusiness Development Activity joined the USAID-funded activity AgVANTAGE 

in the publication and distribution of a magazine for farmers that reports on wholesale market prices 

for agricultural products and raw materials. 

In Lesotho, PEPFAR activities supported the Ministry of Health and Social Welfare in developing MCC’s first successful health proposal. In turn, projected MCC investments in health systems 

strengthening and infrastructure helped provide the impetus for PEPFAR to increase its in-country 

staff from seven in FY 2007 to nine in FY 2008 and enabled PEPFAR to make key FY 2008 budgeting decisions.

In Mongolia, the Vocational Education Project builds on complementary investments funded by the 

Asian Development Bank, the German Agency for Technical Cooperation, the Japan Fund for Poverty 

Reduction, and the Nordic Development Fund. The prior work of these donors saved MCC time 

and money during the project design phase and will likely yield further benefits by allowing MCAMongolia to incorporate lessons learned into the Vocational Education Project’s implementation.

In Morocco, the compact’s Financial Services Project builds on the strategic priorities articulated by 

other donors and industry professionals. MCC is partnering with the Agence Française de Développement, Germany’s Kreditanstalt für Wiederaufbau, and the International Finance Corporation to 

invest in the Jaida fund, which provides debt funding to the Moroccan micro-credit sector.

In Mozambique, the compact’s Water Supply and Sanitation Project builds on pioneering World Bank 

work started over a decade ago. MCC’s approved investments in water and sanitation will benefit 

from $40 million in complementary support through the World Bank’s Water Services and Institutional Support Project and are attracting other donor investments into the sector as well. 

MCC increased efforts to share experiences and learn from others in broader donor and development fora 

in areas such as evaluation, procurement, gender, and aid effectiveness. MCC donor coordination, both in 

partner countries and at headquarters, has helped save time and money and leverage MCC investments.

Working with Other Donors and U.S. Agencies

In 

of rural roads by using detailed design studies made available by the Lincy Foundation. This coop

erative effort will result in approximately $50,000 in savings to the MCA-Armenia program and allow 

In 

to the National Registry Center that is critical to the sustainability of MCC compact results. The loan 

supports El Salvador’s Northern Zone Development Program and will be used to fund the neces

In 

in the publication and distribution of a magazine for farmers that reports on wholesale market prices 

for agricultural products and raw materials. 

In Lesotho, PEPFAR activities supported the Ministry of Health and Social Welfare in develop

ing MCC’s first successful health proposal. In turn, projected MCC investments in health systems 

strengthening and infrastructure helped provide the impetus for PEPFAR to increase its in-country 

In 

Asian Development Bank, the German Agency for Technical Cooperation, the Japan Fund for Poverty 

Reduction, and the Nordic Development Fund. The prior work of these donors saved MCC time 

In 

other donors and industry professionals. MCC is partnering with the Agence Française de Dével

oppement, Germany’s Kreditanstalt für Wiederaufbau, and the International Finance Corporation to 

In 

work started over a decade ago. MCC’s approved investments in water and sanitation will benefit 

from $40 million in complementary support through the World Bank’s Water Services and Institu

2007 Annual Report 61
MCC is committed to a participatory, timely, and meaningful consultative process as key to successful compact 

proposal development and implementation. This process takes into account the local input and perspectives 

of the rural and urban poor, women, private and voluntary organizations, the business community, and other 

donors in each partner country. Consultations are tailored to each specific phase of compact evolution.

Phase

Purpose of Consultations 

at this phase include:

Consultations enable 

partner countries:

1. Proposal development 

and program design

To explain the compact development process and consultations to 

the public

To gather information on problems 

and priorities from a wide range of 

stakeholders

To identify economic obstacles with 

broad impact 

To identify solutions and program 

ideas to propose as compact components

To draft and submit a compact 

proposal

2. Due diligence and 

program refinement 

To explain publicly why the elements included in the compact 

proposal were selected

To gather local-, sector- and stakeholder-specific information needed 

to refine technical elements of the 

proposal through consultations 

with domestic and international 

technical experts, the donor community, and groups that are likely 

to benefit from or be affected by 

the implementation of a proposed 

program or project

To make technical decisions relating 

to the proposal to maximize the 

number of beneficiaries, increase 

public participation, ensure genderequal access, alleviate cost burdens 

on vulnerable groups, and fine-tune 

an impact monitoring and evaluation plan

The Consultative Process

62 2007 Annual Report
Phase

Purpose of Consultations 

at this phase include:

Consultations enable 

partner countries:

3. Mobilization and start up To promote realistic public understanding of the compact, including 

outlining and managing public 

expectations about its implementation

To establish transparent communication channels that can be 

used throughout implementation 

to continue interacting with the 

beneficiaries of the proposed 

programs or projects, civic and 

private sector groups that seek 

information—including procurement 

opportunities—during implementation, and the media

4. In country implementation To provide beneficiaries with the 

information needed to encourage 

and enable them to participate in 

compact programs

To gather information from beneficiaries and stakeholders about 

the impact and effectiveness of 

compact programs 

To provide interested stakeholders and the general public with 

information about the progress and 

impact of the compact 

To continue an ongoing exchange 

of information with the public 

throughout implementation, with 

an eye to correcting problems and 

scaling up positive outcomes

2007 Annual Report 63
Country Responsibility:

Implementation 

Process

Once a partner country has successfully gone through the selection process 

and has developed its own feasible and approved compact, it is responsible for implementing its own compact programs and is accountable for 

maintaining policy performance and achieving program results. This responsibility reinforces MCC’s commitment to country ownership. Tangible 

results in the lives of the poor are an outgrowth of successful, country-led 

implementation, which requires a partner country’s willingness to mobilize 

its own resources and talented professionals for implementation. Such 

mobilization entails 

 establishing an independent, in-country accountable entity, the 

organization formed by the country to manage and implement 

compact activities, 

 developing systems for financial control and oversight, 

 finalizing the legal documentation requirements, and 

 concluding detailed project planning. 

64 2007 Annual Report
Establishing the 

accountable entity

Each country’s accountable entity—not MCC—is responsible for the daily 

management, operation, coordination, implementation, as well as monitoring and evaluation of the compact. The accountable entity 

becomes the central point of contact for MCC, other donors, 

contractors, consultants, and the country’s citizens overall. The 

country decides what type of entity would best advance the goals 

of government accountability, transparency, efficiency, and operational capability, as well as the inclusion of stakeholders during 

compact implementation. The accountable entity develops and 

carries out all plans for the implementation of compact activities, 

including financial plans, procurement plans, the monitoring and 

evaluation plan, the fiscal accountability plan, work plans, as well 

as any audit plan. 

Mobilization of fiscal 

and procurement agents

Along with establishing an accountable entity, each MCC partner 

country also selects fiscal and procurement agents. These agents 

are responsible for establishing the financial and reporting 

systems, developing standard bidding documents, and beginning 

work on any procurement activities required prior to the compact’s entry into force. In some countries, MCC uses government 

systems and ministries for these functions. 

Finalizing legal 

documentation

MCC’s legal team and the country’s legal counsel cooperate in finalizing all 

legal documentation to provide for the compact’s entry into force. These 

documents give full legal effect to the compact, describe in detail how the 

Eighty-six percent of country 

partner respondents feel 

MCC fits in well with their 

country’s overall development 

strategy, and 81 percent 

believe MCC’s approach to 

country ownership will help 

their country achieve its 

development objectives. 

Moreover, partner countries 

report that the MCC model 

of engagement provides 

significant oversight, 

helps them move toward 

sustainability, and supports 

the building of country 

capacity. 

—November 2007 

Gallup Survey

2007 Annual Report 65
accountable entity will be structured and managed, and are required to lay 

the foundations for how procurements and finances are to be managed. 

Detailed project planning

With assistance from MCC staff, the accountable entities create work plans 

to guide compact activities. Along with such plans, the accountable entities 

develop feasibility studies, environmental impact assessments, and strategic 

environmental assessments. Procurement plans and disbursement requests 

are also devised to map out the steps and timelines required for procurement actions.

To ensure transparency and accountability, our assistance is disbursed according to such timelines only as performance benchmarks are achieved. 

66 2007 Annual Report
Extensive monitoring and evaluation (M&E) plans are integrated into each MCC program to benchmark progress and measure impact. In fact, we work with eligible countries to develop instruments and procedures 

to enable them to carry out comprehensive and rigorous program performance monitoring and impact 

evaluation. M&E spans the entire life cycle of a program from concept through implementation and beyond, 

generally covering three main stages: 

First

We ask that countries analyze their constraints to growth and opportunities for investment before constructing a proposal. MCC conducts an economic analysis of every proposal submitted to identify potential economic impacts. Assessing the economic growth and poverty reduction rationale for each project also helps 

to identify key indicators of progress in implementation.

Second

A set of indicators for monitoring performance during implementation is developed, with annual targets for 

each. This helps eligible countries identify problems early-on and make mid-course corrections during implementation in order to ensure that the program is on track to achieve the ultimate outcomes and impact. 

Third

While good program monitoring is essential, it is often not sufficient to measure the long term impact of a 

program on the well-being and incomes of beneficiaries as well as on national economic growth and poverty 

reduction. Thus, MCC incorporates impact evaluations into compact implementation as well. We are also 

working on ways to measure and evaluate program impacts beyond the typical five year compact duration.

Taken alone these are not new ideas, but the combination and unique implementation of these three steps, in 

addition to the central role the countries play, achieve the intended outcomes.

Monitoring and Evaluation

2007 Annual Report 67
The girl in this photo lives in the village of Gomo Coura, Mali, a region where MCC is funding 

a road project to bring, among other things, more economic growth to the region. The village 

will directly benefit from the project. Photo by MCC staff member Marc Tkach.
Section 3

Why 

We 

Do 

What 

We 

Do

Meaningful,

tangible results in the

lives of the poor 69
“...I couldn’t help but be struck with 

how often [HELP] Commissioners 

and panelists raised the MCA as 

an example of a model of good 

development assistance. It was 

used as an example of an innovative 

ambitious program that gets caught 

in the crosshairs of our annual budget 

cycle. It was used as an example of 

results-based assistance. It meets the 

Commission’s recommendations for 

country-led development, economic 

growth focus, enhanced monitoring 

and evaluation of aid, and support 

for democratic principles. And 

[MCC] certainly is a program that is 

providing much needed resources to 

infrastructure, an oft-cited challenge to 

real development by the panelists.” 

—Sheila Herrling 

on the Center for Global 

Development blog of 

December 12, 2007, 

commenting on the 

Helping to Enhance the Livelihood of 

People around the Globe 

(HELP) Commission Report

70 2007 Annual Report
Changing the 

Conversation 

About Development

While delivering country-specific results through compacts and threshold 

programs, MCC’s approach also offers positive incentives for creating the 

very conditions that make development sustainable and transformative. 

This, too, is at the core of our early successes and demonstrates how we are 

changing the conversation about how development takes place.

Changing lives 

through policy reforms

MCC motivates reforms. By stressing sound political, economic, and social 

policies, MCC motivates the hard work of policy changes in countries that 

want to either maintain their eligibility with us or qualify for it. As a result, 

these governments are making improvements in governance, increasing 

investments in health and education, and creating pro-business conditions. 

Even before a dollar of our assistance is invested, countries begin investing 

in their own development to qualify for MCC funding, a phenomenon we 

call the MCC incentive effect. 

 According to the World Bank’s Doing Business project, 24 countries 

specifically cited MCC as the primary motivation for their efforts 

to improve their business climate. Interministerial committees and 

2007 Annual Report 71
When MCC was created as a new model for foreign aid, we also envisioned a new way for evaluating our 

progress, to get at the very core of what makes development sustainable. Four key questions guide us in our 

self-evaluation: 

 First, are MCC candidate and partner countries elevating their focus on maintaining and improving policy 

performance through necessary reforms?

 Second, are countries consulting with their citizens and other stakeholders to present well-designed 

programs that stimulate growth and transform the lives of the poor? 

 Third, are partner countries implementing projects in an effective and transparent way? 

 Fourth, did the projects deliver the desired results during implementation and upon completion?

presidential commissions have been set up in at least a dozen countries to devise reform strategies that address our selection criteria. 

 Many countries—though not yet eligible for MCC assistance—are 

undertaking the hard work of policy reform and improving their 

practices and procedures with the expectation of qualifying for 

our assistance. For instance, motivated by its interest to qualify for 

MCC funding, Guatemala has taken significant steps to improve 

its policy performance on MCC’s indicators. Tough anticorruption reform measures include prosecuting high-ranking officials 

on charges of corruption, creating a financial crimes unit, hiring a 

foreign accounting firm to audit congressional spending, initiating 

online disclosure of government procurements, and implementing a 

performance-based budgeting process. 

Once countries become eligible, they must continue an aggressive reform 

agenda to keep pace with an increasingly demanding standard for eligibility. 

Competition is getting tougher, and countries must continue maintaining 

and improving policy performance. 

 Madagascar reduced the minimum capital requirement for new 

businesses by 80 percent in 2006 and saw a 26 percent increase 

in new business registrations. Similarly, El Salvador reduced the 

number of days it takes to start a business from 115 to 26 days. 

Evaluating Progress: The Questions to Ask

72 2007 Annual Report
The MCC Effect has been externally validated by NGOs, third-party indicator institutions, other donors, and 

heads of state of partner countries.

The World Bank’s 2007 Celebrating Reform report hails MCC as a catalyst for reform: “When the United 

States’ Millennium Challenge Account made eligibility for funding dependent on the ease of business startup, 

countries from Burkina Faso to El Salvador to Georgia to Malawi started reforms.” 

The World Bank Institute reports that numerous MCC candidate, threshold, and compact countries have 

contacted them for advice on policy reforms needed to improve performance on their governance indicators. 

Over the last year and a half, the World Bank Institute met with Dominican Republic, El Salvador, Fiji, Guatemala, Rwanda, Yemen, Ecuador, Honduras, Kyrgyz Republic, Nigeria, Paraguay, Tanzania, Uganda, Cameroon, 

Malawi, the Philippines, and Indonesia, among many other countries.

Steve Radelet, of the Center for Global Development, has identified “a strong MCC Effect in which the 

requirement to pass specified quantitative indicators has created the incentives for potential recipients to 

more carefully track the data and introduce the policy changes needed to meet the requirements. There are 

examples from all around the world of the incentive effect of the MCA selection process.” Radelet refers to 

the MCC Effect as “the major success story of the MCC.” The Millennium Challenge Account in Africa: Testimony before the House Committee on Foreign Affairs Subcommittee on Africa and Global Health, 

June 28, 2007

Michael Gerson, Senior Fellow at the Council on Foreign Relations, points out that “since the global competition for [MCC] compacts is vigorous, nations are willing to make major changes to receive them.... When I 

worked at the White House, the finance minister of an African country seeking MCC funds once said to me: 

‘I keep telling others in my government that we’ve got to do better fighting corruption. We’ve got to compete.’” Washington Post op-ed, August 1, 2007

The MCC Effect

2007 Annual Report 73
To maintain its eligibility, El Salvador also passed a new ethics/

anticorruption law and other reforms, resulting in its inclusion in 

the World Bank’s 2007 Doing Business report as a top 10 performer 

worldwide.

 Madagascar, Mali, and Benin are undertaking land reform measures, 

which are necessary to promote secure land rights, access to credit, 

investments, and increased productivity. MCC is the leading donor 

for land reform in Madagascar, where only seven percent of land is 

officially titled, and the backlog of registration requests could take 

over 100 years to process without these key reforms. 

 Nicaragua and Honduras implemented reforms to secure unprecedented levels of funding for road maintenance. These funds improve 

the sustainability of the road investments MCC and others are making. In a country where road maintenance funds were insufficient to 

maintain the road network in sustainable ways, Nicaragua, specifically, collected $10 million for road maintenance in the first year. In 

Honduras, not only has funding for road maintenance dramatically 

increased, but also the reporting requirements for the country’s 

road maintenance plan have improved transparency in planning and 

execution. 

Changing lives 

by rejecting corruption

MCC demands transparency. MCC is the only donor that currently ties 

eligibility for assistance to performance on a transparent and public Control 

of Corruption indicator. This creates a powerful incentive for countries to 

adopt tough anticorruption laws, strengthen oversight institutions, open up 

the public policymaking process to greater scrutiny, and step up corruptionrelated investigations and prosecutions. 

 To promote transparency and good governance, each compact 

adheres to strict fiscal and procurement standards. This not only 

protects MCC investments in partner countries from waste and 

74 2007 Annual Report
fraud, but also helps countries learn the importance of adopting and 

applying sound budget, fiscal, and procurement management.

 Benin produced an action plan to ensure compliance with the MCC 

corruption indicator. On its own, it initiated sweeping reform of 

several government offices and ministries to reduce corruption and 

establish a “no tolerance for corruption” campaign. Several highlevel government personnel have been dismissed or indicted on 

charges of embezzlement or misuse of public funds.

 Georgia adopted dramatic anticorruption reforms leading to a 

significant improvement in its control of corruption indicator from 

the 36th percentile of low income candidate countries in 2004 to 

the 78th in 2005. The percentage of firms in Georgia reporting that 

bribes are necessary to get things done plummeted from 37 to seven 

percent. Georgia has arrested scores of corrupt public officials, 

made legislative changes that facilitate the prosecution of corruption 

cases, and increased the salaries of 10,000 public servants to counter 

the lure of petty corruption. In September 2007, Transparency International released its 2007 Corruption Perception Index, and other 

than the Baltic countries, Georgia outperformed all other countries 

in the former Soviet Union. The World Bank’s 2006 and 2007 Doing 

Business reports identified Georgia as one of the world’s most aggressive reformers. 

 The majority of MCC’s threshold programs are designed to fight 

corruption.

Changing lives 

through capacity building

MCC helps countries build institutional capacity. By insisting that 

partner countries design and implement their own development plans, we 

are strengthening institutions and jumpstarting critical thinking about the 

policies necessary to ensure sustainability. Country ownership encourages 

civil participation and accountability and helps sustain high environmental 

2007 Annual Report 75
and social impact standards. It reinforces the good policies we demand in 

the first place. And, good practices are spreading beyond just MCC-funded 

programs in partner countries.

 In Ghana, one of the obstacles to successful development has 

been the lack of adequately trained procurement specialists. MCC 

is funding a procurement capacity-building initiative within the 

Ghanaian government designed to strengthen the effectiveness of 

various procurement entities to help Ghana help itself overcome 

this barrier to its own development. Ghana also plans to use the 

consultative and rigorous project evaluation process MCC requires 

for compact development to evaluate non-MCC funded activities 

within the country. Moreover, to share experiences and lessons 

learned in developing and implementing compacts, Ghana hosted 

a conference for representatives of other African countries with 

compacts.

 In Georgia, extensive collaborative efforts are strengthening the 

Georgia Department of Statistics to ensure that Millennium Challenge Georgia—which is responsible for compact implementation, 

monitoring, and evaluation—has the best possible data to evaluate 

its program in particular and to generate stronger impact evaluation 

and data gathering capacity within the Georgian government overall. Asking countries to develop their own compacts—including the 

monitoring and evaluation plans for them—enhances their abilities 

and skills to evaluate other government programs. MCC partner 

countries are responsible for establishing baselines and demonstrating and measuring results to focus on outcomes and impacts rather 

than project inputs and outputs. 

 In Nicaragua, extensive public participation in designing and implementing the compact program has generated unwavering support 

from local officials, civil society groups, and program beneficiaries. 

This support serves to buoy the program during elections and political transitions, allowing it to progress uninterrupted.

76 2007 Annual Report
 Mali conducted an MCA Press Corps training workshop. Journalists 

from various media were briefed on both MCC and the components 

of the Mali’s compact in a focus-group format. This has led to more 

in-depth investigative reporting of the program, increased reporting 

volume, widening coverage to radio and multiple language formats, 

and has inspired improved reporting on the MCA program and its 

synergies with other donor organizations.

 In Honduras, representatives from 200 municipalities attended 

workshops to identify roads to be improved under the Farm to 

Market Roads activity, resulting in applications for improvements 

to 6,645 kilometers of road, about 10 times what can be funded with 

the $21.5 million budget for this activity. Civil engineers are now 

using publicly available criteria to conduct field assessments of the 

applications to make selections. The wide participation of municipalities and the use of transparent and objective criteria to select the 

roads are making this a model process in Honduras.

 Georgia’s program raised the bar on environmental protection as 

well as health and safety by improving standards applied to gas pipeline repairs. Georgian corporations have embarked on a program to 

raise project construction and supervision to international environmental, safety, and health standards for the first time.

 Farmers in the MCC-funded Farmer Training and Development 

Activity in Honduras have sharply reduced their pesticide and fertilizer use and improved their handling of these products, directly 

improving their health and that of other users, while minimizing 

damage to the watershed and improving crop yields. In addition, 

the MCA-Honduras program is implementing a resettlement 

process that is fairer and more transparent than anything previously 

done in Honduras. 

2007 Annual Report 77
Changing lives by 

giving voice to women

MCC engages women in development. In keeping with our gender policy, 

we demand that women, alongside men, be involved throughout every stage 

of our assistance, including country selection, compact development and 

implementation, and program monitoring and evaluation. The participation 

of women in the process and helping them realize their political and economic rights are central to any discussion of development.

 In Benin, over 100 local civil society organizations elected representatives to the working group to design that country’s compact; 

and representatives of Benin’s leading NGO promoting women’s 

rights played an instrumental role in expressing the views of rural 

women and addressing the interrelated issues of land ownership and 

agricultural production. 

 Lesotho’s parliament enacted a law to confer equal legal status 

on married women so as to engage them fully in that country’s 

economic life. MCC welcomed this groundbreaking policy reform 

as critical to the success of the Lesotho compact. MCC is partially 

funding the government of Lesotho’s commitment to identifying existing laws that conflict with the Legal Capacity of Married Person’s 

Bill and introducing legislation to harmonize certain laws prior to 

the compact’s initial disbursement after entry into force.

 In Ghana, the Agriculture Productivity Project and the Land Regularization Activity address the constraints to women’s participation 

along the productive value chain for rural agriculture and in land 

access, ownership, and management. For both activities, MiDA 

(MCA-Ghana) has taken the lead in developing gender assessments 

to ensure that female beneficiaries are able to both participate and 

benefit. 

 Both MCA-Mozambique and MCA-Tanzania, through their respective gender officers, are developing gender integration strategies to 

78 2007 Annual Report
“It was through the work of the 

Millennium Challenge Corporation 

that we were able to encourage the 

best instincts of Lesotho’s political 

leadership to make these changes 

to the law. It is instructive to 

pay attention to how the MCC’s 

leadership convinced Lesotho to 

make these changes. They did not 

demand the change as a quid pro quo 

for MCC assistance. Instead, they 

appealed to the Lesotho government’s 

sense of reason, by convincing them 

that any assistance provided by 

the United States for economic 

development would be only half as 

effective if half of Lesotho’s population 

was excluded from the formal 

economy.”

—Statement by Congresswoman 

Diane Watson of California, 

noting the role MCC played 

in supporting gender equality 

in Lesotho

July 24, 2007

ensure that both sexes are represented in the planning, implementation, and evaluation of compact activities.

Changing lives through 

entrepreneurship and trade

MCC paves the way for greater private enterprise and trade. 

Fundamental to MCC programs is the belief that aid alone can 

not end poverty and that MCC compacts should lay the foundation for self-sustaining economic growth. The most significant 

development benefit we can bring to a country is to serve as a 

catalyst for private sector-led investment over the long-term. The 

private sector brings the jobs, technology, and training necessary 

to encourage further policy reform and economic growth to end, 

ultimately, the trap of poverty. 

MCC can play a unique role within the U.S. government to foster 

and leverage mainline international investment and help scale up 

viable private sector activity. We do this by coordinating efforts 

with other U. S. government agencies and international programs 

to maximize private sector incentives for investment in MCC 

economies. We are integrating private sector activities into MCC 

compacts and working to stimulate follow-on investments in 

MCC countries. We also address critical constraints to private 

sector development, such as inadequate infrastructure, by investing in partner countries’ infrastructure priorities. 

As the Finance Minister of Indonesia asserts, the real draw of 

MCC’s eligibility and selection process is not necessarily the development assistance but the “good housekeeping seal of approval,”

which sends a powerful signal to private investors that conditions 

are right in MCC countries for investing and doing business.

 Grupo Beta, a textile manufacturing firm, made a $6 

million investment in Nicaragua, attracted by the favor2007 Annual Report 79
able business conditions MCC helped create. The investment is 

projected to create 1,200 new jobs. 

 Honduras, Nicaragua, and El Salvador, which are not only partners 

with MCC but also partners in trade through CAFTA-DR, are accelerating the pace of domestic market-led growth, while building 

greater trading capacity to maximize regional free trade arrangements already in place. MCC-sponsored workshops held in Honduras and Miami with Nicaraguan farmers have stimulated over $3 

million in new private sector commitments in agricultural exports. 

 In connection with its MCC compact, the Port of Cotonou in Benin 

has enacted dramatic changes that have allowed it to comply with 

the International Ship and Port Security code nearly two years 

earlier than expected. $169 million is being used to improve the 

port’s operations and infrastructure, resulting in fewer delays, lower 

operational costs, and a significant increase in the volume of merchandise traffic. 

 MCA-Honduras is training farmers in small business skills and 

production practices needed to compete under CAFTA-DR. For 

example, MCA is providing training on EurepGAP standards for 

good agricultural practice. EurepGAP training involves actions not 

only to ensure good agricultural product quality during production, 

processing, and transportation, but also to guarantee food safety as 

well as the protection of the environment and field workers. EurepGAP will allow Honduran farmers to meet global export standards.

 Ghana has identified farmer and enterprise training to accelerate 

the development of commercial skills and post-harvest handling 

facilities for fruits and vegetables as a priority for trade, which is 

expected to significantly expand Ghana’s pineapple trade.

80 2007 Annual Report
Changing Lives: 

Threshold Programs

At of the end of FY 2007, highlights of threshold program progress include:

In Burkina Faso, construction of 132 new school complexes has 

been completed. A recent analysis of MCC-funded schools reported 

an attendance rate of over 95 percent and a drop-out rate of less than two 

percent. 

In Malawi, 45 journalists were trained on investigative reporting 

techniques. As a result, a journalist from Capital Radio broke a 

story on officials diverting fertilizer subsidies, another exposed waste in the 

salaries of the Privatization Commission, and others reported dwindling 

medicines and school closures because of corruption and mismanagement. 

All 13 standing committees of Malawi’s National Assembly convened for the 

first time in its history to exert the effective parliamentary oversight that is 

critical to executive branch accountability and the sustainability of anticorruption efforts.

In Zambia, the business registration process at the Patents and 

Companies Registration Office has been reduced from 10 days to 

one, effectively reducing the number of days required to start a business 

from 35 to less than 10. The projected benefit from the savings in business 

personnel time and earlier initiation of business activity is estimated at more 

than $12 million per year.

In 

been completed. A recent analysis of MCC-funded schools reported 

In 

techniques. As a result, a journalist from Capital Radio broke a 

In 

Companies Registration Office has been reduced from 10 days to 

2007 Annual Report 81
In Jordan, legislation to reform municipal governments passed, 

allowing for the election of municipal mayors and council members, 

the reduction of the voter eligibility age from 19 to 18, and the establishment 

of a 20 percent quota for women in municipal councils. MCC support is 

now assisting nine municipalities—including one with a female mayor—to 

respond better to the priority needs of their citizenry through targeted 

trainings, grants, and public discussion programs. 

In Tanzania, MCC support for training in investigative journalism 

has resulted in Tanzanian newspapers publishing over 800 stories 

exposing corruption. 

In 

allowing for the election of municipal mayors and council members, 

In 

82 2007 Annual Report
Changing Lives in Africa

Burkina Faso

Signed: July 22, 2005

Program Description

Burkina Faso’s $12.9 million threshold program seeks to improve performance on girls’ primary education completion rates. Specific interventions 

include the construction of girl-friendly schools, teacher training, takehome dry rations for girls who maintain a minimum 90 percent school 

attendance rate, and literacy training for mothers. 

USAID is administering this program on MCC’s behalf.

Notable Results

 Construction of 132 planned new “girl-friendly” school complexes 

has been completed. 

 Just under 5,000 students were enrolled in the 2005-2006 school 

year, over 40 percent more than projected. Over half of these students were girls. In the 2006-2007 school year, over 12,400 students 

were enrolled, 30 percent more than projected. Again, more than 

half were girls. 

 A recent analysis of MCC funded schools reported an attendance 

rate of over 95 percent and a drop-out rate of less than two percent.

2007 Annual Report 83

Early Results in Countries with Threshold Programs
Changing Lives in Africa 

Kenya

Signed: March 23, 2007

Program Description

Kenya’s $12.7 million threshold program aims to reduce opportunities for 

corruption in public governance. Specifically, the program will target corruption in public procurement, the delivery of health care, and the monitoring and evaluation of reforms.

USAID is administering this program on MCC’s behalf.

Highlights of Expected Results

 Improve transparency and accountability, and decrease corruption 

in the public sector. 

 Reduce undocumented extra payments or bribes connected with the 

awarding of public contracts. 

 Reduce the extent to which the health sector is affected by corruption. 

84 2007 Annual Report

Early Results in Countries with Threshold Programs
Changing Lives in Africa

Malawi

Signed: September 23, 2005

Program Description

Malawi is implementing 15 specific interventions over the two-year period 

of its $20.9 million threshold program aimed at preventing corruption, 

enhancing oversight functions, and building enforcement and deterrence 

capacity. The interventions intend to create more effective legislative and 

judicial branches of government, provide support for lead anti-corruption 

agencies, strengthen independent media coverage, and expand and intensify 

the work of civil society organizations.

USAID is administering this program on MCC’s behalf. In addition, portions of the program are being implemented by the U.S. Department of 

Treasury and the U.S. Department of Justice.

Notable Results

 The prosecutorial abilities of Malawi’s Department of Public Prosecutions, the Anticorruption Bureau, and the police force have been 

strengthened. 

 Police training has been standardized to include practical skills for 

handling both crime victims and suspects.

 A Financial Intelligence Unit was created in August 2007, pursuant 

to an anti-money laundering bill passed in August 2006 defining 

penalties for engaging in the activity.

 The government of Malawi put into operation an Integrated Financial Management Information System (IFMIS) during the first half 

of 2007. This new system of financial controls contributes to greater 

transparency and accountability. 

2007 Annual Report 85

Early Results in Countries with Threshold Programs
Changing Lives in Africa 

 All 13 standing committees of Malawi’s National Assembly convened 

for the first time in its history to exert the effective parliamentary 

oversight that is critical to executive branch accountability and the 

sustainability of anticorruption efforts. 

 Forty-five journalists were trained on investigative reporting techniques. As a result, a journalist from Capital Radio broke a story 

on officials diverting fertilizer subsidies, another exposed waste in 

the salaries of the Privatization Commission, and others reported 

dwindling medicines and school closures because of corruption and 

mismanagement.

 With the support of threshold program activities, Malawi’s sovereign credit rating was upgraded from CCC+ to B-. A higher sovereign credit rating indicates improved financial transparency and 

practices, which increases a country’s prospects for foreign direct 

investment. 

86 2007 Annual Report

Early Results in Countries with Threshold Programs
Changing Lives in Africa

Tanzania

Signed: May 3, 2006

Program Description

The $11.2 million Tanzania threshold program is focused on four specific 

anti-corruption initiatives: 1) building the monitoring capacity of the nongovernmental sector; 2) strengthening the rule of law for good governance; 

3) establishing a Financial Intelligence Unit; and 4) curbing corruption in 

public procurement. 

USAID is administering this program on MCC’s behalf. In addition, portions of the program are being implemented by the U.S. Department of 

Treasury and the U.S. Department of Justice.

Notable Results

 The government set up a Financial Intelligence Unit in July 2007, 

tasked with analyzing suspicious financial transactions in order to 

combat corruption. 

 The government approved the Prevention of Corruption Act of 

2007, effective July 1, 2007. This act created 20 new corruptionrelated offenses, including in procurement, and gave the Prevention 

and Combating of Corruption Bureau greater powers, including the 

right to seize assets. 

 With MCC support for training in investigative journalism, Tanzanian newspapers published over 800 stories exposing corruption, 

exceeding the program’s target. 

 Five districts initiated public expenditure tracking systems (PETS) 

activities in the third quarter of FY 2007, bringing the total number 

of districts using PETS in Tanzania to 31. Improved financial systems reduce opportunities for corruption. 

2007 Annual Report 87

Early Results in Countries with Threshold Programs
Changing Lives in Africa 

Uganda

Signed: March 29, 2007

Program Description

The $10.4 million threshold program in Uganda aims to reduce corruption 

by improving public procurement and financial management practices, 

strengthening the role of civil society, and building capacity to facilitate 

more effective follow-up of reported malpractices. 

USAID is administering this program on MCC’s behalf.

Highlights of Expected Results

 Reduce losses due to procurement-related corruption by $10 million 

from a baseline estimate of between $64 and $85 million. 

 Decrease by 33 percent the amount of unaccounted-for central 

government expenditures. 

 Increase the number of procurement audit findings that lead to 

investigations, legal or administrative actions or referrals to other 

agencies, from three to 10 per year. 

 Increase the number of convictions as a percentage of all corruption 

cases investigated from 30 to 50 percent. 

 Through the work of civil society organizations, expose at least 10 

corruption cases, with three public institutions, five private companies, and two high-profile individuals subject to in-depth inquiry. 

88 2007 Annual Report

Early Results in Countries with Threshold Programs
Changing Lives in Africa

Zambia

Signed: May 22, 2006

Program Description

The $22.7 million Zambia threshold program focuses on reducing corruption and improving government effectiveness. The program is funding three 

components aimed at increasing control of corruption within the public 

sector, improving public service delivery to the private sector, and strengthening border management of trade. 

USAID is administering this program on MCC’s behalf.

Notable Results

 Integrity Committees, or internal watchdog units, have been established, and codes of conduct and ethics for public officials have been 

developed at key institutions to fight corruption and reduce the 

incidence of bribery and improper behavior. 

 To reduce corruption in the border management of trade, a centralized “single window” process has been launched. 

 The Value Added Tax registration process at the Zambia Revenue 

Authority has been reduced from 21 to three days. 

 The business registration process at the Patents and Companies 

Registration Office has been reduced from 10 days to one, effectively 

reducing the number of days required to start a business in Zambia 

from 35 to less than 10. The projected benefit from the savings in 

business personnel time and earlier initiation of business activity is 

estimated at more than $12 million per year. 

2007 Annual Report 89

Early Results in Countries with Threshold Programs
Changing Lives in Eurasia 

Albania

Signed: April 3, 2006

Program Description

Reducing corruption is the primary focus of the $13.9 million Albania 

threshold program. Albania is receiving assistance from MCC for three 

programs aimed at reforming tax administration, public procurement, and 

business administration. The program is designed to increase the national 

tax base and combat the corruption and red tape that make it difficult to 

start a new business. 

USAID is administering this program on MCC’s behalf.

Notable Results

 The government of Albania adopted legislation to simplify business 

registration procedures and remove the courts from this process. 

 In September 2007, Albania launched a “National Registration Center” in Tirana to provide citizens with a “one stop shop” for starting a 

business. Service windows will be launched in 29 municipalities. 

90 2007 Annual Report

Early Results in Countries with Threshold Programs
Changing Lives in Eurasia

Indonesia

Signed: November 17, 2006

Program Description

The $55 million threshold program seeks to ensure that Indonesia immunizes at least 80 percent of children under the age of one for diphtheria, 

tetanus, and pertussis and 90 percent of all children for measles on a 

sustained basis. The threshold program also is intended to help curb public 

corruption by reforming the judiciary and anti-corruption institutions and 

assisting with procurement reform. 

USAID is administering this program on MCC’s behalf. Portions of the 

program are being implemented by the U.S. Department of Justice.

Highlights of Expected Results

 For children under one year of age, increase diphtheria, tetanus, and 

pertussis immunization rates to 80 percent and measles immunization rates to 90 percent in all 222 districts and 90 percent of villages. 

 Improve performance on Transparency International’s Corruption 

Perception Index and World Bank Institute’s Control of Corruption 

Indicator. 

 Reduce money laundering through banks and undocumented extra 

payments or bribes connected with getting favorable judicial results. 

 Reduce the pervasiveness of money laundering through banks and 

non-bank channels. 

 Increase the number of high-level government officials prosecuted 

for corruption. 

 Reduce undocumented extra payments, bribes or other favoritism 

connected with the awarding of public contracts. 

2007 Annual Report 91

Early Results in Countries with Threshold Programs
Changing Lives in Eurasia 

Jordan

Signed: October 17, 2006

Program Description

The $25 million Jordanian threshold program aims to strengthen democratic 

institutions by supporting Jordan’s homegrown efforts to broaden public 

participation in the political and electoral process, increasing local government transparency and accountability, and enhancing the efficiency and 

effectiveness of customs administration. 

USAID is administering this program on MCC’s behalf.

Notable Results

 Jordan passed legislation to reform municipal governments. 

Changes brought about by this law allow for the election of municipal mayors and council members, the reduction of the voter eligibility age from 19 to 18, and the establishment of a 20 percent quota 

for women in municipal councils. Voter turnout among women was 

greater than voter turnout among men during the July 2007 municipal elections.

 Jordan has selected the nine provinces to receive threshold program 

assistance under the Municipal Governance component. MCC 

implementers have held meetings with stakeholders and have begun 

program activities in the specified municipalities.

92 2007 Annual Report

Early Results in Countries with Threshold Programs
Changing Lives in Eurasia

Moldova

Signed: December 15, 2006

Program Description

The $24.7 million Moldovan threshold program seeks to reduce corruption 

in the public sector through reforms to the judicial, health, tax, police, 

customs systems, and the national anti-corruption agency. The reforms will 

complement Moldova’s national strategy aimed at reducing corruption and 

will help civil society and the media monitor the government’s progress. 

USAID is administering this program on MCC’s behalf. In addition, portions of the program are being implemented by the U.S. Department of 

Justice.

Highlights of Expected Results

 Reduce bribes connected with getting favorable judicial decisions.

 Improve public reporting of corruption cases by Moldovan media.

 Reduce the extent to which the health care sector is affected by 

bribes and other corruption.

 Reduce corruption in the tax administration, customs service, and 

police, including payment of bribes by business owners. 

2007 Annual Report 93

Early Results in Countries with Threshold Programs
Changing Lives in Eurasia 

The Philippines

Signed: July 26, 2006

Program Description

The $20.7 million Philippines threshold program aims at improving revenue 

administration and anticorruption efforts. Specifically, the program is intended to reduce corruption by strengthening the Office of the Ombudsman 

and strengthening enforcement within specific offices of the Department of 

Finance. 

USAID is administering this program on MCC’s behalf.

Notable Results

 The Philippine government matched MCC’s threshold program 

funding with an additional $20 million to fight corruption. 

 Antismuggling and tax evasion enforcement has increased significantly from pre-program levels with MCC support. 

 A U.S. Federal Prosecutor provided training to counterpart agencies, 

including the justices at the Philippine Anti-Graft Court, on effective investigation and prosecution of fraud and corruption cases.

 The Run After The Smugglers program was created within the Bureau of Customs on May 22, 2007 and filed cases against five firms 

and 17 individuals for smuggling. 

 The computerization of seven (of 75 planned) district offices of the 

Bureau of Internal Revenue was completed.

 The number of anti-tax evasion cases filed was 87 in the third quarter of FY 2007, well above the target of 50.

94 2007 Annual Report

Early Results in Countries with Threshold Programs
Changing Lives in Eurasia

Ukraine

Signed: December 4, 2006

Program Description

MCC has signed a $45 million threshold program with Ukraine that is 

intended to address corruption in higher education and the judiciary, create 

internal inspection divisions in government institutions, and help streamline 

government regulations in customs and other areas. This program also aims 

to strengthen civil society and the media’s ability to monitor and expose 

corruption. 

USAID is administering this program on MCC’s behalf. In addition, portions of the program are being implemented by the U.S. Department of 

Justice.

Notable Results

 Activities under the Ukraine threshold program received considerable media attention with the May 2007 publication of the results of 

a national survey on perceptions about corruption.

 Subgrants totaling $460,000 were given to 39 NGOs throughout 

Ukraine, in addition to 50 awards to media organizations, to support 

anticorruption programs. 

2007 Annual Report 95

Early Results in Countries with Threshold Programs
Changing Lives in Latin America 

Guyana

Signed: August 23, 2007

Program Description

The $6.7 million threshold program with Guyana aims to improve its fiscal 

policies and create a more business-friendly environment. The grant helps 

the government implement its new value-added tax system and develop 

ways to assist and educate taxpayers, while at the same time helping Guyana better plan and control spending. The grant will also help reduce the 

number of days and costs required to start a business by modernizing and 

streamlining the business registration process. 

USAID is administering this program on MCC’s behalf.

Highlights of Expected Results

 Achieve a VAT compliance ratio (actual receipts to potential receipts) of 82 percent. 

 Reduce the number days for customs clearance by 50 percent.

 Decrease the average number of days to register a business from 46 

to 30. 

96 2007 Annual Report

Early Results in Countries with Threshold Programs
Changing Lives in Latin America

Paraguay

Signed: May 8, 2006

Program Description

The principal objective of the $34.6 million Paraguay threshold program 

is to reduce corruption. The program aims to strengthen the rule of law 

by increasing penalties for corruption and to build a transparent business 

environment by confronting informal business transactions. The threshold 

program also has a business development component aimed at reducing the 

number of days required to start a business. 

USAID is administering this program on MCC’s behalf. In addition, portions of the program are being implemented by the U.S. Department of 

Treasury.

Results Achieved

 The cost to start a business has been reduced from $750 to $250, 

and the number of days required to start a business has been cut in 

half from 74 to 36. 

 Paraguay’s business registration “one stop shop” registered its first 

companies in January 2007. 

 The Fedatario Program, which encourages increased tax compliance, opened 280 cases against tax evasion, corruption, and contraband.

 Training is underway for select personnel to carry out confiscations of contraband along the country’s borders. During the spring 

of 2007, DETAVE, a new Customs Agency unit, conducted over 

80 antismuggling and contraband operations. The unit has seized 

contraband and other illegal goods worth approximately $950,000. 

(Customs seizures in all of 2006 totaled $1.4 million.)

2007 Annual Report 97

Early Results in Countries with Threshold Programs
Changing Lives: 

Compacts

Initial performance results reported by countries in compact implementation demonstrate that MCC is making substantial progress. As of the end of 

fiscal year 2007, highlights of progress include:

In Madagascar, a total of more than 876,000 documents have been 

inventoried to enable better land use. Six Agricultural Business 

Centers are now operational in five zones, with over 3,950 visitors 

to date and 45 field agents as of June 2007 providing services to 

small and medium enterprises. The agricultural project is providing 

technical assistance to over 7,500 farmers in five zones.

In Armenia, 2,453 participants have been trained in on-farm water 

management to ultimately increase agricultural production, of 

which 571—almost 23 percent—are female farmers.

In Georgia, the first round of emergency repairs to the North-South 

Gas Pipeline in Georgia have been completed, improving the long 

term security and diversification of the country’s natural gas supply 

and providing Georgian citizens and businesses with electricity 

and heating as temperatures drop. In addition, grants totaling $1.1 

million to 34 new or expanding agribusinesses are helping them 

improve technologies and access markets. These agribusinesses will 

employ about 400 people and do business with 22,000 customers 

and suppliers. 

In 

inventoried to enable better land use. Six Agricultural Business 

In 

management to ultimately increase agricultural production, of 

In 

Gas Pipeline

98 2007 Annual Report
In Nicaragua, thousands of farmers and rural entrepreneurs 

have benefited from technical assistance and business 

development services.

While infrastructure projects in compact countries typically take longer to 

launch as quarterly and other performance reports suggest, supplemental 

indicators indicate that MCC is reaching key process milestones on these 

projects so that longer-term objectives can be achieved. In certain cases, targets have been reached ahead of schedule. One of the targets for road rehabilitation in Cape Verde was exceeded, and a target for the value of regional 

infrastructure projects in Georgia was surpassed. Georgia also completed 

100 percent of its emergency pipeline repairs. The rise in procurements to 

mobilize key activities indicates that progress on infrastructure and other 

projects will intensify in fiscal year 2008. 

Overall, results reported on various process milestones, initial performance 

indicators, and annual targets demonstrate that partner countries are 

achieving substantive progress. 

In 

have benefited from technical assistance and business 

development services.

2007 Annual Report 99
Changing Lives in Africa 

Benin

Program Description

The five-year, $307 million MCC compact with Benin aims to increase 

investment and private sector activity. The compact is comprised of four 

projects: increasing access to land through more secure and useful land 

tenure; expanding access to financial services through grants given to micro, 

small, and medium enterprises; providing access to justice by bringing 

courts closer to rural populations; and improving access to markets by 

eliminating physical and procedural constraints currently hindering the flow 

of goods through the Port of Cotonou.

Results Achieved

 The rural land titling program has begun and is expected to formalize land registries in 300 villages across Benin over the next four 

years.

 Through MCC support, stricter entrance regulations for the Port of 

Cotonou have been implemented to improve efficiency and security. 

 Studies of the demand for financial services and of technological 

alternatives for the provision of financial services have been completed and form the basis for a competitive grant facility to begin in 

2008.

 A firm has been contracted to examine the land registration system 

and produce a White Paper recommending the policy foundation 

for Benin’s new land policy, to be enacted in 2008.

100 2007 Annual Report

Early Results in Countries with Compacts
Changing Lives in Africa

Cape Verde

Program Description

The five-year, $110 million MCC compact with Cape Verde is intended to 

help that country achieve its national development goal of transforming its 

economy from aid-dependency to sustainable, private sector-led growth. 

The compact seeks to increase rural incomes of the poor by increasing 

agricultural productivity, integrating internal markets, reducing transportation costs, and developing the private sector through greater private sector 

investment and financial sector reform. 

Result Achieved

 Construction has begun on the first of several roads and bridges on 

the islands of Santiago and Santo Antao. 

2007 Annual Report 101

Early Results in Countries with Compacts
Changing Lives in Africa 

Ghana

Program Description

The five-year, $547 million MCC compact aims to reduce poverty by raising farmer incomes through private sector-led, agribusiness development. 

Specifically, MCC investments are intended to increase the production and 

productivity of high-value cash and food staple crops in some of Ghana’s 

poorest regions and to enhance the competitiveness of Ghana’s agricultural 

products in regional and international markets.

Results Achieved

 Ghana entered into force on February 16, 2007. 

 The Millennium Development Authority (MiDA), the accountable 

entity responsible for the compact’s implementation, has signed Implementing Entity Agreements with the Bank of Ghana to implement 

the agricultural credit program; the Public Procurement Authority 

to implement the Procurement Capacity Building project; the Ministry of Food and Agriculture to implement an activity within the 

Commercial Training of Farmer Based Organizations project; and 

the Institute of Social Scientific and Economic Research to conduct 

preparation work for a major household survey used for compact 

monitoring and evaluation and the Ghana Statistical Service to carry 

out such a survey.

102 2007 Annual Report

Early Results in Countries with Compacts
Changing Lives in Africa

Lesotho

Program Description

The five-year, $363 million compact is expected to have an economy-wide 

impact affecting Lesotho’s entire population. It seeks to increase water 

supplies for industrial and domestic use, alleviate the devastating affects 

of poor maternal health, HIV/AIDS, tuberculosis, and other diseases by 

substantially strengthening the country’s health care infrastructure and human resources for health capacity, and remove barriers to foreign and local 

private sector investment

Results Achieved

This compact has yet to enter into force.

2007 Annual Report 103

Early Results in Countries with Compacts
In the district of Faratsiho, the Land Tenure Project component of Madagascar’s $110 million compact with 

the Millennium Challenge Corporation is beginning to pay off. As part of its activities, the project works to 

secure land rights for smallholder farmers to encourage them to make investments in their land, which will 

contribute to an increase in household income and land productivity. 

Justine Rasoamanahirana, like most of the rural population in Madagascar, inherited her land from her parents. This traditional method of transferring land ownership consists of simply a verbal agreement between 

family members. Because there is no legal documentation of this transfer of ownership, customary rights to 

land are not registered at the state-run land administration offices located in the regional capitals. Owners 

of non-titled land are vulnerable to people encroaching on their property and outsiders purchasing the land 

through transactions at the regional land administration offices.

For years, Justine has seen her four parcels of land get smaller and smaller as her neighbors slowly stretched 

the boundaries of their adjacent fields. Even though the parcels total only 0.33 hectares, this land represents 

her livelihood, which comes from potato and rice farming. After hearing about the project’s local land 

management office operated in partnership with the government’s land reform program, Justine decided to 

obtain land certificates—new land rights documents that local authorities are empowered to issue—to legalize her property claim. In August 2007, she and her family received certificates to all four parcels, securing 

her legal right to her land. 

Having secured her land, Justine went to work leveraging her assets. She used two of her parcels as collateral 

for a $500 loan from a microfinance institution, which she used to invest in her potato farm. The tenure 

security on another plot gave her the confidence to invest in the construction of a small house that she rents. 

The rental income from this house has been enough to pay for her children’s school fees and to purchase 

oxen which the family uses to transport their crops to market. Justine, her husband, and her four children are 

now living a more secure life in Madagascar. 

Through the Land Tenure Project, and its activities to decentralize land management services, formal property rights are being made accessible to rural farmers in Madagascar for the first time. The Land Tenure 

Project has opened 19 local land management offices and plans to open another 236 offices in 2008. The 

Land Tenure Project also supports other pillars of the government’s land reform program, including modernizing regional land administration services and making legal and policy changes. In addition, the Madagascar 

compact increases farmer access to financial credit by supporting microfinance institutions and banks and 

encourages agricultural investment and profitable enterprises by providing business management and agricultural production training for farmers.

Compact Helps a Malagasy Family Live Securely

104 2007 Annual Report
Changing Lives in Africa

Madagascar

Program Description

The key goal of the four-year, $110 million compact with Madagascar is to 

help the island nation move from subsistence to a market-driven economy, 

particularly in agricultural production. The compact will support a program 

designed to raise incomes in rural areas by enabling better land use, expanding the financial sector, and increasing investment in farms and other rural 

businesses.

Results Achieved

 19 local land offices are now in operation and have issued some 729 

land certificates.

 All existing land documents in 29 land administration services—a 

total of more than 876,000 documents—have been inventoried. 

 Sites for four of six new rural branches of the National Savings Bank 

have been identified and building designs are being completed. Expanded services from these new branches will improve rural access 

to finance. 

 The institutional support fund for microfinance institutions (MFIs) 

has awarded five grants to MFIs, totaling $750,000 to enable them to 

expand their services in rural Madagascar.

 Six Agricultural Business Centers are now operational in five zones, 

with over 3,950 visitors and 45 field agents as of June 2007 providing 

services to small and medium enterprises.

 The agricultural project is providing technical assistance to over 

7,500 farmers in five zones. 

2007 Annual Report 105

Early Results in Countries with Compacts
Changing Lives in Africa 

 Over 340 business plans have been developed by newly established 

or formalized cooperatives, associations, and small enterprises. 

 Land certificate acquisitions provided through land offices and 

complimentary training in business plan development and improved 

production technology provided by the Agricultural Business 

Centers have resulted in the mobilization of $485,000 of credit from 

microfinance institutions.

106 2007 Annual Report

Early Results in Countries with Compacts
Changing Lives in Africa

Mali

Program Description

The five-year, $461 million compact with Mali seeks to increase the productivity of the agriculture sector and regional enterprises. The compact is 

intended to serve as a catalyst for sustainable economic growth and poverty 

reduction through key infrastructure investments that capitalize on two of 

Mali’s major assets, the Bamako-Sénou International Airport, gateway for 

regional and international trade, and the Niger River for irrigated agriculture.

Results Achieved

 The MCA program is applying important lessons from first-round 

MCA countries by putting key systems in place early. Fiscal and 

procurement agents are mobilized, the bank agreement has been 

executed, the compact has been ratified, and feasibility and design 

work has commenced for major infrastructure, all before entry into 

force on September 17, 2007.

 The MCA-Mali unit has been transferred from the Prime Minister’s 

office to the Presidency. This reflects the close integration of the 

MCC program within the President’s five year socio-economic 

development plan and the close oversight the President wishes to 

exercise. As a result, the MCC program has received very high visibility. 

 The recruitment process for nine key MCA-Mali positions is progressing.

2007 Annual Report 107

Early Results in Countries with Compacts
Changing Lives in Africa 

Morocco

Program Description

The five-year, $697.5 million compact seeks to increase productivity and 

improve employment in high potential sectors, including investments in 

fruit tree productivity, small-scale fisheries, and artisan crafts. Small business creation and growth will be supported also by investments in financial 

services and support.

Results Achieved

This compact has yet to enter into force.

108 2007 Annual Report

Early Results in Countries with Compacts
Changing Lives in Africa

Mozambique

Program Description

The five-year, $507 million compact seeks to increase the productive capacity of the population in selected districts with the intended impact of reducing the poverty rate, increasing household income and employment, and 

reducing chronic malnutrition. The program aims to improve water systems, 

sanitation, access to markets, land tenure services, and agriculture in the 

targeted districts.

Results Achieved

This compact has yet to enter into force.

 With strong support from the government’s top leadership, including President Guebuza, the private sector, and civil society, several 

activities have prepared for compact implementation since signing. 

 The compact was ratified on August 7, 2007 by the Council of 

Ministers, which also approved the creation of MCA- Mozambique 

to manage implementation. The Ministry of Public Works, the 

Ministry of Agriculture, and the Ministry of Finance continue to 

prepare and plan for the implementation of their respective projects 

and activities. 

 The Council of Ministers approved the Water Sector Policy, including a water resources management strategy as well as a national 

water policy and water allocation licensing regulation. This is a 

policy reform essential to the compact’s success.

 The MCC office has officially opened for business and the staff is on 

board. 

2007 Annual Report 109

Early Results in Countries with Compacts
Changing Lives in Eurasia 

Armenia 

Program Description

The five-year, $235 million MCC compact with Armenia is focused on increasing economic performance in the agricultural sector. Investments are 

planned to upgrade up to 943 kilometers of roads, providing communities 

and rural residents with reduced transport costs and better access to jobs, 

markets, and social services, and increase the productivity of as many as 

250,000 farmer households through improved water supply, higher yields, 

higher-value crops, and a more competitive agricultural sector.

Results Achieved

 Armenia exercised a groundbreaking approach to evaluating the impact of an on-farm water management training that various villages 

and communities are to receive. A public meeting was held with 

Armenian stakeholders, non-governmental organizations, press, 

and government officials to randomly select the order in which communities would receive training. Such rigorous randomization in 

impact evaluation highlights the ongoing consultative process, demonstrates a commitment to fairness and transparency, and increases 

accountability. 

 2,453 participants have been trained in on-farm water management 

to ultimately increase agricultural production, of which 571—almost 

23 percent—are female farmers.

 The design phase for initial rural road and irrigation infrastructure 

is nearing completion, and road construction is anticipated to begin 

by the end of 2007.

110 2007 Annual Report

Early Results in Countries with Compacts
Changing Lives in Eurasia

Georgia

Program Description

The five-year, $295 million MCC compact is intended to help Georgians 

reduce poverty by renovating key regional infrastructure and improving the 

development of regional enterprises. The compact’s infrastructure projects 

seek to improve rural transportation, providing agricultural suppliers the 

opportunity to connect more easily with consumers and increase regional 

trade. By providing funding and technical assistance to targeted regional 

enterprises, the compact aims to enhance productivity in farms, agribusinesses, and other enterprises that will increase jobs and rural income.

Results Achieved

 The Agribusiness Development Project has awarded grants worth 

$1.1 million to 34 new or expanding agribusinesses. These grants will 

support agribusiness development projects by improving technologies and facilitating market access. They will employ about 400 

people and do business with 22,000 customers and suppliers.

 Phase I repairs on the North-South Gas Pipeline have been completed. These repairs protect the pipeline from corrosion, landslide, 

and floodwaters. As a result of the rehabilitation, existing technical 

losses of natural gas from the pipeline will be reduced and the 

probability of accidents on the pipeline as well as health hazards 

and environmental risks caused by gas leaks will decrease. The 

Georgian Oil and Gas Corporation, which is managing the project, 

is strengthening its capacity to ensure the pipeline’s sustainability 

over the long term. In addition to transmitting commercial and 

residential gas for the entire country, the pipeline also provides gas 

to an electric power plant.

 The Georgia Regional Development Fund made its first investment, 

a combination of debt and equity that will total $1.7 million. 

2007 Annual Report 111

Early Results in Countries with Compacts
The successful emergency repair to Georgia’s North-South Gas Pipeline near the village of Gldani, outside 

the capital of Tbilisi, could not have been timelier. Some 141 meters of the pipeline lay exposed over the 

Gldanula River. Every spring, when rains flooded the river, the pipeline took a beating. Its already corroded 

state would be hammered further by rocks and boulders sliding down from the mountains and high water 

levels would scour the pipeline. The North-South Gas Pipeline at the Gldanula River crossing was in urgent 

need of repairs before another spring flooding season. Without repairs, the pipeline’s failure would cause 

severe safety and environmental hazards and disrupt gas supply to Tbilisi and Georgia’s one gas-fired electricity power plant. 

Repairing the North-South Gas Pipeline became a priority for the Georgian government and was incorporated in the Millennium Challenge Georgia’s Energy Infrastructure Rehabilitation Project, one component in 

Georgia’s overall $295.3 million MCC compact. Repairing the pipeline at the Gldanula River crossing is one of 

six high risk priority sections identified for replacement to protect against corrosion, landslide, and floodwaters. 

The solution in Gldani was to safely bury the exposed pipeline under the riverbed before the spring floods. 

Throughout the winter, a consortium of local Georgian firms tackled the project. GeoEngineering raced 

against time to divert the river deep underground so they could repair the pipeline. The new pipe was lowered into a trench, given a protective concrete coating, and then covered. The day after the new pipe was 

connected, melting snows and torrential rains flooded the Gldanula River, but the pipe lay securely buried 

and undisturbed beneath the raging torrent. 

True to MCC’s commitment to countries owning and implementing their own MCC compacts, the Georgian 

Oil and Gas Corporation, which operates the pipeline on the government’s behalf, designed and supervised 

repairs. In preparing for the project, BP, an oil and gas corporation with extensive experience in the region, 

independently provided the Georgian Oil and Gas Corporation with technical assistance and on-the-job 

training in project, health, safety, and environmental management. 

As a result, the Georgian Oil and Gas Corporation and the local Georgian contractor managed to complete 

the pipeline repair in full compliance with international environmental, safety, and health standards for the 

very first time. The technical skills and expertise gained from working to these standards set a new bar for 

engineering achievement in Georgia and strengthened local capacity to ensure the pipeline’s sustainability 

well into the future. With such experience in hand, the Georgian Oil and Gas Corporation is planning to 

implement new operating standards and is now supervising additional rehabilitations funded by the Georgian 

government. 

Most important, by repairing priority sections of the North-South Gas Pipeline, the rehabilitation project 

improves the long term security and diversification of Georgia’s natural gas supply, and Georgian citizens 

and businesses are already benefiting from the power of the repaired pipeline, with access to electricity and 

heating as temperatures drop. 

Compact Unleashes the Power of a Pipeline
Changing Lives in Eurasia

Vanuatu

Program Description

The five-year, $65 million compact addresses the country’s poor transportation infrastructure. Consisting of up to 11 infrastructure projects– including 

roads, wharfs, an airstrip, and warehouses–the program seeks to benefit 

poor, rural agricultural producers and providers of tourist related goods and 

services by reducing transportation costs and improving the reliability of 

access to transportation services.

Results Achieved

 The National Budget contains a substantial increase of $4.5 million 

for the Public Works Department’s budget for road maintenance. 

The funds are being used for community maintenance contracts and 

small civil works.

2007 Annual Report 113

Early Results in Countries with Compacts
Changing Lives in Latin America 

El Salvador

Program Description

In El Salvador, the five-year, $461 million compact seeks to improve the lives 

of Salvadorans through strategic investments in education, public services, 

agricultural production, rural business development, and transportation 

infrastructure. The largest of the compact’s components, the transportation 

project, intends to physically unify El Salvador’s Northern Zone with the rest 

of the country, enabling new economic opportunities for rural households, 

lower transportation costs, and decreased travel times to markets.

Results Achieved

 The MCA program made excellent use of its pre-entry into force 

(EIF) period to prepare for efficiently implementing the compact. 

As of the point of EIF on September 20, 2007, El Salvador had accomplished the following: (1) the entity implementing the compact, 

FOMILENIO, became fully staffed and is operating at full capacity; 

(2) the Board of Directors has been confirmed and met nearly a 

dozen times; (3) program implementation plans are well advanced, 

including key feasibility studies and environmental/ social impact 

studies which will speed program execution; and (4) FOMILENIO

signed banking agreements to manage program funds, signed a $2.5 

million service contract to support the productive development program, and published a number of requests for proposals for program 

activities.

114 2007 Annual Report

Early Results in Countries with Compacts
Changing Lives in Latin America

Honduras

Program Description

The five-year compact with Honduras aims to reduce poverty by alleviating 

the two key impediments to economic growth: low agricultural productivity 

and high transportation costs. The $215 million compact places an emphasis 

on increasing the productivity and business skills of farmers who operate 

small- and medium-sized farms and their employees and reducing transportation costs between targeted production centers and national, regional, and 

global markets.

Results Achieved

 Over 800 program farmers are receiving technical assistance for 

crop production and product commercialization, out of more than 

8,000 on track to be trained by the end of the program. 

 Relationships with exporters and local markets for the commercialization of products grown by program farmers have been formalized and continue to be strengthened. 325 program farmers have 

developed business plans following their participation in a business 

planning workshop. 

 More than 1,200 kilometers of rural roads have been traveled in 

the process of evaluating their overall conditions, location, and 

compliance with defined qualifying criteria in addition to collecting 

information required to estimate the economic rate of return. The 

mayors of the corresponding municipalities continue to actively support MCA-Honduras teams in completing this step in the process of 

selecting rural roads to be improved under the project.

 18 proposals for funding under the Agriculture Public Goods Grant 

Facility were received and are in the process of being evaluated. 

2007 Annual Report 115

Early Results in Countries with Compacts
Changing Lives in Latin America

 MCA-Honduras contracted with a local firm to develop and implement resettlement action plans for those people affected by road 

improvements. The firm has completed surveys of some 850 people 

and will begin the process of clearing the right of way and acquiring 

land in October 2007. 

 Designs for the northern half of the t improvement have been finalized and the selection of construction firms has begun. Construction is expected to begin in March 2008. 

116 2007 Annual Report

Early Results in Countries with Compacts
Andrés Velásquez of Puentecito, a village in Honduras, lives with his wife and five children and grows crops 

on a small farm. During the last three years he has been producing tomatoes on a .35 hectare plot by using 

a small drip irrigation system, preparing beds for the crops, and rotating the crops. With this basic level of 

agricultural knowledge and farming technology, Andrés farm produced enough for the survival of his family

Honduras and MCC signed a $215 million compact to reduce poverty through increasing the productivity 

and business skills of farmers that operate small- and medium-sized farms and reducing their transportation costs to major production centers. In August 2006, as part of the Farmer Training and Development 

Integrated Crop Management program, a component in MCC’s compact with Honduras, a field agronomist 

provided personalized training to Andrés. 

With training, technical assistance, and farm investment inputs, Andrés was able to quickly modify the drip 

irrigation design. He learned how to use and maintain the drip irrigation system by controlling the pressure, 

repairing leaks, irrigating daily, and fertilizing. Through the program, he learned other production techniques, 

such as improving soil preparation and using starter solutions and weed control. 

As a result, Andrés has noticed a marked improvement in his harvest including reduced labor and fertilization costs and superior quality and volume of his produce. As is the tradition in his village, Andrés sold his 

“ready to harvest” crop to a local intermediary buyer. In comparison with prior harvests, his income from this 

harvest was significantly higher than previous incomes. 

Andrés attributed his success and increased income to technologies learned from the Farmer Training and 

Development program. With his success, Andrés is sharing his knowledge with his neighbors who have 

sought out his advice. Andrés said that “the project is very good...it has an excellent approach. The personalized assistance makes the difference and will have a great impact in the community.”

Compact Helps Honduran Farmer Increase Income

2007 Annual Report 117
The Rural Business Development component of Nicaragua’s $175 million Millennium Challenge Corporation 

compact provides $33.7 million to help poor farmers transition to higher-profit agriculture. One of the most 

important crops is red beans, currently a subsistence-farming commodity that supports a majority of the 

population in Nicaragua’s Leon and Chinandega areas.

Through this project, MCA-Nicaragua is helping Edelmiro Espinales, a red bean farmer, sell his beans at a better price this year through improved seeds, irrigation, and drying that will yield higher production levels and 

uniformity in the red bean. 

MCA-Nicaragua is providing technical assistance to 600 red bean producers, with the goal of helping them 

achieve an additional income of $125 per farmer for this harvest year. With this increase in income, the future 

seems more optimistic for Edelmiro, who says, “We grow very little but the additional earnings from what 

was exported was very good because it is money we did not expect. With the money I earned exporting 

beans, I bought food and some clothes for my seven children.”

MCA-Nicaragua also helped launch two marketing campaigns for the northern Nicaraguan red bean producers to attract potential buyers from El Salvador and Honduras. This effort resulted in the sale of 1.5 million 

pounds of red beans. Of this total, 800,000 pounds were exported to El Salvador and Honduras, creating an 

additional profit of $5 per 100 pounds of red beans. This translates into $75,000 in additional income for the 

Nicaraguan producers, including additional income for Edelmiro and his family.

Compact Helps Red Bean Farmers See Higher Incomes

118 2007 Annual Report
Changing Lives in Latin America

Nicaragua

Program Description

In Nicaragua, the five-year, $175 million compact seeks to support those living in the Leon and Chinandega region by significantly increasing incomes 

of rural farmers and entrepreneurs. The compact will reduce transportation 

costs, improve access to markets, strengthen property rights, increase 

investment, and raise incomes for farms and rural businesses.

Results Achieved

 Early titling efforts are underway, and 26 beneficiaries have received 

titles and 500 more beneficiaries are in the process of receiving 

titles.

 Approximately 1,070 bean, cassava, and sesame seed producers have 

received technical assistance to commercialize their products, helping them sell their crops above market prices in the region during 

one crop cycle. During another crop cycle, some 1,072 beneficiaries 

producing agricultural and livestock products received technical 

assistance and key inputs.

 374 rural and urban small- and medium-sized enterprises benefited 

from business development services. 

 Some 476 business plans for forestry producers are being implemented. 

 In total, 4,568 men and women have benefited from the rural business development project. 

 425 new jobs have been created through new businesses attracted 

through investment promotion activities. 

2007 Annual Report 119

Early Results in Countries with Compacts
Changing Lives in Latin America

 MCA-Nicaragua is cooperating with local communities on two 

management plans for environmentally sensitive areas. These plans, 

when implemented with MCA funding, will help communities find 

productive and economic activities in those areas.

 MCA-Nicaragua has assisted local municipal governments in 

elaborating environmental policies and regulation through technical 

assistance.

 MCA-Nicaragua has developed and implemented a gender policy 

which secures equal access for women to the program’s benefits.

 MCA-Nicaragua has developed technical capacity that has resulted 

in signing $21.7 million in 299 contracts through an open and transparent procurement process. 

120 2007 Annual Report

Early Results in Countries with Compacts
Management 

Summary

121
Message from the

Acting Vice President 

of the Department 

of Administration 

and Finance

The 2007 Annual Report of the Millennium Challenge Corporation reflects 

our commitment to the highest standards of federal management as 

embodied in the President’s Management Agenda. Since inception, MCC 

has received an unqualified or “clean” audit opinion from the Office of the 

Inspector General (OIG) on our financial statements, including the latest 

unqualified opinion for fiscal year 2007. Full financial statements and the 

opinion of the Inspector General were published in November 2007 in our 

2007 Performance and Accountability Report, which is publicly available on 

our website at www.mcc.gov.

We have worked aggressively to resolve outstanding OIG issues from our 

fiscal year 2006 financial audit, and I am pleased to report that the number 

of audit findings decreased from nine in fiscal year 2006 to four in fiscal year 

2007. We have accepted responsibility to resolve these findings and plans are 

already underway to address each finding:

 MCC will more rigorously review outstanding cash balances in 

compact countries before making additional disbursements to these 

122 2007 Annual Report
countries in order to minimize the extent of outstanding cash balances. In addition, MCC is undertaking an aggressive roll-out of the 

Common Payments System (CPS), which centralizes the payment 

of compact expenses with MCC’s financial services provider and 

eliminates the need to “advance” most funds to partner countries. 

CPS was successfully piloted in Mali in September 2007, and a CPS 

operating manual was completed in February 2008. MCC plans to 

deploy the CPS in all new and existing compact countries by the 

summer of 2008. 

 MCC is developing a Business Intelligence and Data Storage (BIDS)

tool that will automate reporting from our partner countries, provide a workflow component for the efficient approval and storage of 

documents, and merge performance and financial data to support 

managerial cost accounting, budget/performance integration, and 

reporting to internal and external stakeholders. The BIDS system 

will help ensure that the roles and responsibilities for ensuring 

receipt of required reports from partner countries are clearly documented and understood. We plan to have the tool deployed in three 

pilot countries—Benin, Georgia, and Honduras—by April 2008, and 

plan to deploy it in all compact countries by the end of 2008.

 To further our commitment to implement a fully integrated financial 

system compliant with the requirements of the Federal Financial 

Management Improvement Act, we have completed an assessment 

of our financial systems needs and developed options for moving 

to a fully integrated system. We are assessing potential public and 

private financial management service providers and plan to hold a 

public/private competition during 2008 to select a cost-effective service provider that meets all federal requirements, with the transition 

to a new system to be completed by the end of 2010.

 In our fiscal year 2007 Federal Information Security Management 

Act (FISMA) audit, the number of open findings was reduced to 

three, from 13 in the previous year’s report. We plan to have at least 

two of these remaining findings closed by the time of the next OIG 

2007 Annual Report 123
FISMA engagement with MCC in February 2008, with the goal of 

fully addressing FISMA requirements in 2008.

We have also worked to resolve other audit issues dealing with management 

accountability. For example, a recent follow-up audit by the OIG of MCC’s 

Contracts and Grants Management Division resulted in no new findings, 

and an acknowledgement that all previous recommendations had been 

resolved. This is a significant achievement in an area vital to the success of 

the MCC model.

As MCC focuses its efforts on compact development and implementation, 

it is our goal to provide the financial, contracting, personnel, and technology support to ensure our future continued success. This focus will provide 

the necessary tools to demonstrate accountability, results, and the effective 

utilization of U.S. taxpayer resources. 

Michael Casella

Acting Vice President

Administration and Finance

124 2007 Annual Report
For Detailed 

Performance, Financial, 

and Audit Information

In compliance with OMB Circular A-136, MCC published audited financial 

statements on November 15, 2007 in our 2007 Performance and Accountability Report. 

For detailed performance, financial, and audit information regarding the 

Millennium Challenge Corporation, please review the 2007 Performance and 

Accountability Report available through MCC’s website at http://www.mcc.

gov/about/reports/other/index.php.

Compact Obligations 

and Disbursements

According to Section 613 of the Millennium Challenge Act of 2003, MCC is 

required to present to the President and Congress an Annual Report on the 

assistance provided to compact and compact eligible countries, including 

the amount of obligations and expenditures for assistance to each eligible 

country during the prior fiscal year. 

2007 Annual Report 125
Millennium Challenge Corporation

Compact and 609(g)* Obligations and Disbursements, Data through FY2007

FY07 Cumulative

Country Fund

Entry 

Into

Force Obligations Disbursements Obligations Disbursements

Armenia Compact FY06 7,929,263 235,650,000 7,933,089

Benin Compact FY07 305,781,626 13,125,384 307,298,040 13,427,670

Cape Verde 609g 58,619 246,200 242,081

Compact FY06 6,403,753 110,078,488 13,930,617

Georgia 609g 1,645,540 4,761,600 3,542,540

Compact FY06 19,924,100 294,693,400 30,037,210

Ghana 609g 2,785,329 3,284,000 2,855,388

Compact FY07 536,638,050 9,340,341 547,009,000 9,340,341

Honduras Compact FY05 7,956,287 215,000,000 10,972,681

Lesotho 609g 148,097 641,301 1,387,813 978,083

Compact 15,668,416 0 15,668,416 0

Morocco Compact 32,400,000 0 32,400,000 0

Madagascar 609g 0 0 0

Compact FY05 13,082,170 109,773,000 22,730,265

Mali 609g 4,596,000 4,654,452 9,699,139 5,336,057

Compact FY07 460,684,411 2,054,163 460,684,411 2,054,163

Mozambique 609g 6,743,695 13,445,807 7,537,244

Compact 24,930,702 0 25,346,200 0

Nicaragua Compact FY06 7,512,402 175,000,000 9,685,116

Senegal 609g 2,951,713 6,535,699 4,605,175

El Salvador Compact FY07 460,939,996 2,224,217 460,939,996 2,224,217

Tanzania 609g 9,800,000 0 9,800,000 0

Vanuatu Compact FY06 431,984 65,690,000 2,006,608

Total 1,851,587,298 109,464,712 3,104,391,209 149,438,543

* Understanding 609(g) funding: MCC has authority to provide funds above and beyond grants for compacts for 

two purposes: 1) to help countries develop a compact if they have capacity constraints so that they may get to a 

signed compact and 2) to help countries implement a compact after it is signed. The section that provides this 

authority in MCC’s authorizing legislation is section 609(g), and therefore MCC refers to this funding as “609(g) 

126 2007 Annual Report
funding.” Using the authority provided by section 609(g), MCC makes 

available up to two percent of a compact’s funding for the period between 

when a compact is signed and when it enters into force. These Compact 

Implementation Funds (CIF) are utilized by the partner country for the work 

required to set up the partner country team, which will be responsible for 

program implementation and to finalize program details in anticipation of 

entry into force. Such work may include standing up the accountable entity 

and funding feasibility studies, among other necessary costs. Therefore, 

even though some countries have yet to enter into force, MCC shows some 

compact obligations. Obligation occurs at the point when a compact enters 

into force.

2007 Annual Report 127
Colophon

Text compiled, written, or edited by Linda J. Smiroldo of the 

Millennium Challenge Corporation.

Cover and interior designed and composed by Brett A. Bearce of the 

Millennium Challenge Corporation in Adobe Warnock Pro with heads in 

Hoefler & Frere-Jones Gotham using Adobe InDesign CS3.

128 2007 Annual Report

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Reducing pove
er in Lesotho. Improves potable water access in El Salva

Create agricultural business centers in Madagascar. Assis

crease drip irrigation usage in Cape Verde. Expand finan

ncial services in Benin. Strengthen public sector procure

ement capacity in Ghana. Construct a new airport passen

nger terminal in Mali. Farmer and enterprise training for

commercial agriculture in Ghana. Construct small and me

dium irrigation infrastructure in Morocco. Rehabilitate w

water treatment plants in Tanzania. Install animal shelters

n Mongolia. Provide technical assistance to farmers in E

Salvador. Modernize the commercial legal system in Les

Promote legal and regulatory reform in Madagascar. Rep

Decentralize land registration in Benin. Improve access to

o financial and market information in Mali. Designs, const

ructs, and rehabilitates secondary roads in El Salvador. 

Provide support and training to promote gender equality 

in Lesotho. Provides technical assistance to fish vendors 

n Morocco. Increase rail traffic in Mongolia. Lay a subma

ine electric transmission cable in Tanzania. Construct wa

ater reservoirs in Cape Verde. Rehabilitate a primary roa

n Nicaragua. Improve rural land tenure security in Mada

Construct a weight control system in Mongolia. Expand t

 water treatment plant in Honduras. Strengthens superv

ision of microfinance institutions in Benin. Expand irriga

ion infrastructure in Mali. Increase electricity coverage i

n El Salvador. Provide technical skills to youth and unem

mployed persons in Mongolia. Help financial institutions 

oans in Benin. Expand total area under irrigation produc

rty through growth. Millennium Challenge Corporation. 
2008-03-001-007-01-BAB