Embassy of the United States

Ambassador Speeches

Remarks by Ambassador Martinez at the Millennium Challenge Account Institute of Directors Luncheon

Mr. Esau Nebwe, President of the Institute of Directors

Mr. Mumba Kapumpa, Vice-President of IOD

Mrs. Victoria Silutongwe, Executive Director

Members of the Institute of Directors

I am pleased to be here today with so many prominent members of Zambia's business community, to speak on a subject that should hold great appeal for you: the U.S. government's support for business expansion through trade and development, and a key vehicle for this support, the Millennium Challenge Account.

I'd like to start with a more global perspective: The United States is a committed partner with developing countries around the world to support greater prosperity and the attainment of the Millennium Development goals. In fact, no other country in the world can match our achievements. We are the world's largest individual donor of official development assistance, including emergency humanitarian relief; the biggest provider of private charitable funding; and the chief source of private financial flows (imports, direct investment and remittances) to the developing world.

The total amount of official development assistance (ODA) provided around the world by the United States for 2005 came to $27.5 billion – a near tripling of ODA since 2001. These vastly increased resources have also come with new responsibilities—to focus on performance, results, accountability—and ultimately, to define success as the ability of a nation to graduate from aid and become a full global partner in international peace and prosperity.

The prevailing U.S. approach to development seeks to use each country’s own good performance to catalyze economic growth and poverty reduction. Perhaps no single U.S. development initiative better demonstrates the U.S. approach than the Millennium Challenge Account (MCA), which directs new aid to those countries that rule justly, invest in people, and encourage economic freedom. The Millennium Challenge Account is built on the belief that sustainable economic growth occurs fastest in countries that adopt and adhere to good policies.

The MCA draws on lessons learned about development over the past 50 years:

First, that aid is most effective when it reinforces sound political, economic and social policies - which are key to encouraging the inflows of private capital and increased trade - the real engines of economic growth;

Second, that development plans supported by a broad range of stakeholders, and for which countries have a primary responsibility, engender country ownership and are more likely to succeed;

And third, that integrating monitoring and evaluation into the design of activities boosts effectiveness, accountability, and the transparency with which taxpayer resources are used.

The Millennium Challenge Corporation (MCC) was established with strong bipartisan support from the U.S. Congress on January 23, 2004, to administer the MCA. The MCA works using 16 different policy indicators that rank countries according to three areas of good governance: ruling justly, investing in people, and promoting economic freedom.
Each year in November, the MCC Board meets and selects MCA-compact eligible countries based on their performance. Countries that score above the median on half of the indicators in each of the three baskets and pass an important corruption indicator are prime candidates. Twenty-three countries have been selected so far as “compact eligible” to develop proposals for MCA consideration.

One strong feature of the MCA compact program is its focus on ownership and responsibility by participating governments. The program encourages potential Millennium Challenge countries to conceive, develop, and eventually implement their MCA programs. The MCC insists that countries formulate their own proposals and develop their own programs – importantly, in consultation with a broad segment of their own society, including key "stakeholders" such as the private sector and civil society. The MCA approach also encourages partner countries to create and promote a policy environment that will allow the programs that they designed to succeed. MCA Compacts are not just a collection of projects, but are also instruments for capacity building and policy reform to make the program feasible and sustainable.

Another important aspect of the program is monitoring to ensure a continued commitment to reform and good governance on the part of Millennium Challenge countries. Those countries that are accepted into the program but later move backwards on polices, or fail to design good proposals, or fail to implement their Compacts well, risk losing their eligibility. The U.S. government will not hesitate to say “no” or “no more” when circumstances merit.

In its first three years, MCA received over $4 billion in funding. To date, MCC has concluded eight Compacts—which is what we call full-fledged MCA assistance programs (with Madagascar, Cape Verde, Honduras, Nicaragua, Georgia, Armenia, Vanuatu and Benin) totaling over $1.5 billion. Active discussions on Compacts are in process with several other countries, in hopes of finalizing several more compacts this year.

The MCC also offers a "Threshold Program" for countries that come close, but fall short of qualifying for the broader Compacts. The Threshold Program is designed to assist countries to meet the eligibility for Compact status. The MCC has extended an offer to 18 countries to provide assistance if they put forward a proposal that shows they want to address the areas on which they fall short on the indicators. USAID serves as implementer of the threshold program for MCC in the field.

MCC's threshold program assistance now totals approximately $116 million in six countries: Burkina Faso, Malawi, Tanzania, Albania, Paraguay and Zambia—whose proposal for a threshold program was finalized with MCC in May this year.

Based on the MCA's emphasis on broad consultations with "stakeholders" that I described earlier, I would hope that some of you in this room have contributed to or are familiar with some aspects of the Zambian Threshold Program. Allow me to outline the program briefly for you:

Over the course of the next 24 months, the Threshold Program will address key areas under two components that will ultimately help Zambia become eligible for MCA Compact status. The "Ruling Justly" Component addresses anti-corruption efforts through the Anti-Corruption Commission (ACC) and reduces the opportunities for administrative corruption at three pilot institutions. The "Economic Freedom" Component will help reduce barriers to investment and business growth, and assist the government to increase the efficiency of its borders.

The "Ruling Justly" Component of the MCA threshold program builds the capacity of the ACC to oversee corruption prevention activities on behalf of the Government. Anti-corruption will be addressed at the three pilot institutions – the Ministry of Lands, the Department of Immigration, and the Zambia Revenue Authority -- through simplifying and streamlining business processes in order to reduce the opportunities for corruption. Internal watchdog units will be established within each of the institutions to establish corruption prevention programs and monitor and investigate suspicious and corrupt behavior. Resources will also be provided to create efficient citizen monitoring and reporting mechanisms within the institutions.

Activities under the “Economic Freedom Component” address barriers to investment and trade. As you probably know, the government has already approved the establishment of the Zambia Development Agency (ZDA), which consolidates the functions of 5 separate agencies into a “one-stop shop” for establishing a business. The MCA Threshold Program will help the ZDA simplify business registration, licensing, and inspection procedures, and rationalize the economic regulatory framework. Provincial offices of the Patents and Companies Registration Offices (PACRO) will be supported to facilitate greater business and investment creation outside of the capital. The program will help increase the efficiency at the borders by building capacity in modern customs techniques and integrating border control and management. A Comprehensive Integrated Tariff System will be established to incorporate fees and tariffs into a single payment. The import and export processes will be enhanced by strengthening the capacity of border agencies to meet regional and international certification and inspection standards.

We hope that business community representatives like you will directly benefit from the threshold program activities that I have just described, and that these activities will enable Zambia to qualify for MCA Compact status and experience more economic growth and development.

Our experience to date with the Millennium Challenge Account shows that the approach has yielded some impressive results -- in terms of building local capacity, encouraging broad consultation, and in thinking about the policy environment necessary to ensure these programs endure in the long term. This “aid with accountability” program not only supports greater responsibility for how funds provided by the U.S. people are spent on foreign assistance, but also encourages our partner governments to be answerable to their citizens in implementing MCA programs.

Secretary of State Rice recently noted that "In today's world, America's security is linked to the capacity of foreign states to govern justly and effectively. The resources we commit must empower developing countries to strengthen security, to consolidate democracy, to increase trade and investment, and to improve the lives of their people."

I am confident that the resources the U.S. government is committing to Zambia's MCA Threshold Program will contribute to these critical objectives and will help attain our shared goals of peace, democracy, prosperity, and health. Thank you.