Lettre d’un senateur americain au directeur general du millenium challenge corporation les 270 milliards du Mca plus que jamais menacés

What Works
Behind the Curve
By J. Peter Pham
Stanford Social Innovation Review
Fall 2009
Copyright © 2009 by Leland Stanford Jr. University
All Rights Reserved
Action What Didn’t Work
Fall 2009 • STANFORD SOCIAL INNOVATION REVIEW 65

In 2004, the US. government-backed
Millennium Challenge Corporation (MCC) certifi ed
the West African nation of Senegal as eligible to receive
hundreds of millions of dollars in foreign aid. Initially,
Senegal seemed like an excellent choice for a
grant from the MCC, which targets aid to poor countries
that are committed to good governance, free markets,
and investments in people. Senegal is one of the
few African states that has never had a coup d’état.
And since the nation became independent from
France in 1960, Senegal’s leaders have peacefully transferred
power two times—most recently in 2000, when
citizens elected the current president, Abdoulaye Wade. In addition,
the country has encouraged private sector-led development and has
at least offi cially welcomed foreign companies.
Since Wade’s election, however, Senegal’s enthusiasm for economic
freedom, poverty reduction, and sustainable growth seems
to have fl agged. For instance, after giving the French and Canadian
consortium Hydro Québec International-Elyo a 34 percent stake in
senelec, Senegal’s monopoly electricity supplier, the Senegalese
government would not allow the company to recoup its investment
by raising prices. Frustrated in their attempts to turn a profi t and to
modernize the ramshackle power system, the investors were forced
to accept a government buyout after less than 18 months.
Likewise, Luxembourg-based Millicom International Cellular has
encountered problems with the Wade administration. Since receiving
a 20-year license in 1998, Millicom, whose local subsidiary operates
under the Tigo brand, has invested heavily in the Senegalese
market (more than $90 million in 2008 alone) to grow a nationwide
network of 1.8 million loyal subscribers—one-sixth of Senegal’s
population. Since Wade took offi ce, however, the government has
tried to pressure Millicom into renegotiating its license and paying
an additional $200 million. In September 2008, the government issued
a decree that purported to terminate Millicom’s license and
seize its holdings. The company is currently seeking arbitration
through the World Bank’s International Centre for Settlement of
Investment Disputes (ICSID). Subsequently, the Senegalese government
has threatened to charge the fi rm’s general manager with
illegal gambling because of a Tigo sales promotion that awarded
prizes (such as a goat) to participating customers.
Senegal’s commitment to good governance is also waning, with
the Wade government following an all-too-familiar pattern of seeking
to perpetuate itself indefi nitely. Wade initially promised to serve
only one seven-year term, but in 2007 he was reelected to a second
fi ve-year term. And since Wade came to power, some elections have
been delayed up to one year. Meanwhile, in June, the Senegalese
parliament created a presidentially appointed vice president post,
which many speculate will go to the president’s son, Karim. In his
previous government posts, including oversight of the 2008
Organization of the Islamic Conference summit in Dakar, Karim
Wade was criticized for cost overruns and accused of corruption.
Despite its departures from the MCC’s selection criteria, Senegal
is on track to receive major funding from the organization. In
April 2009, the MCC even gave the Senegalese government a $13.39
million grant to help the latter get ready to sign a “compact,” as the
J. Peter Pham is a senior fellow and director of the Africa Project at the National
Committee on American Foreign Policy. An advisor to governments and the private
sector on policy issues in Africa, he was the recipient of the 2008 Nelson
Mandela International Prize for African Security Development.
PHOTOGRAPH BY SEYLLOU/AFP/GETTY IMAGES
Behind
the Curve
Corrupt governments cash in
on the Millennium Challenge
Corporation’s outdated metrics
By J. Peter Pham
President Abdoulaye
Wade of Senegal—an
MCC grantee—and his
son Karim have been
accused of corruption.
Action What Didn’t Work
66 STANFORD SOCIAL INNOVATION REVIEW • Fall 2009
agency calls its multiyear funding agreements. The compact, which
the MCC lists as its leading priority, would pour hundreds of millions
into infrastructure projects—which Karim Wade would direct.
Although it is possible that the MCC’s local administrators in
Senegal are corrupt, a better explanation for the MCC’s misguided
investments is that bureaucrats in Washington are relying on out-ofdate,
inaccurate, third-party information. In turn, aid recipients, as
rational economic actors, sense the weaknesses in MCC’s selection
and monitoring processes and then exploit them to their own advantage.
This is happening not only in Senegal, but also in other
countries eligible for MCC compacts. For example, after Mongolia
received a fi ve-year, $285 million grant in 2007, it turned against private
investors, slapping a staggering 68 percent “windfall profi ts” tax
on holders of copper- and gold-mining licenses. Yet Mongolia’s decidedly
antidevelopment actions did not aff ect its MCC funding.
For the MCC to achieve its mission of reducing global poverty
through sustainable economic growth, it needs to consider its data
more critically. It also needs more timely assessments of grantees.
faith-based science
Established in 2004, the MCC is arguably one of the most signifi –
cant foreign policy legacies of George W. Bush’s presidency. The
MCC uses 17 third-party-generated policy indicators to select recipient
nations for large, multiyear, fl exible grants, called Millennium
Challenge Compacts. These compacts allow recipients to defi ne
their greatest obstacles to sustainable development, and then to determine
how to overcome these obstacles. Twenty of the 39 countries
that are eligible for MCC funding are in Africa, and more than
three-quarters of the funding committed so far has been destined
for the continent.
Although initiated by a Republican administration, the MCC
continues to enjoy broad bipartisan support. President Barack
Obama himself requested an almost two-thirds increase in funding
for the MCC for 2010, raising its budget to $1.43 billion.
Yet the very reason for the MCC’s popularity—the program’s
use of “objective” selection criteria—actually undermines its broader
goals. To shield its decision-making process from undue politicization,
the MCC relies on third parties to generate the data it uses
to select grantees. To assess countries’ regard for civil liberties and
human rights, for instance, the MCC consults Washington, D.C.-
based Freedom House scores. Using a 1 to 7 scale (on which 1 is the
highest rating and 7 is the lowest), the 2008 edition of Freedom
House’s Freedom in the World report gives Senegal a rating of 2 on
political freedom and a 3 on civil liberties. These ratings designate
Senegal a “free country”—one of fewer than a dozen African states.
These third parties, however, take a long time to gather and analyze
their data. The most recent Freedom House scores, for example,
come from the group’s 2008 report, which is based on observations
from the fi rst part of 2007. By the time the MCC uses the third-party
indicators to make decisions, some of the inputs are several years old
and may no longer represent the facts on the ground.
Potential aid recipients seem to be aware of this loophole and
time their backsliding accordingly. In the case of Senegal, the current
MCC scorecard does not capture the country’s increasingly unfriendly
investment climate or the Wades’ tightening grip on power, both of
which will impact the country’s economic prospects. Yet the U.S.
State Department’s most recent annual report on investment climate—
a more subjective document—warns
that “potential investors, and indeed all businesses,
face obstacles, including non-transparent
regulation and high factor costs” and
that “court rulings can be inconsistent, arbitrary,
and non-transparent.”
In short, although the use of third-party
indicators reassures observers that the MCC is practicing “smart
aid,” appearances can be deceiving. The notion that numerical indicators
are more scientifi c than qualitative analysis is based more on
conceit than on evidence.
better aid to africa
Over the past 50 years, Africa has received more than $1 trillion in
foreign assistance. After subtracting the $400 billion that these
countries have paid back, the continent has received a net transfer
of more than $600 billion. Yet donors and recipients have little to
show for this unprecedented redistribution of wealth. Although a
few African countries have recorded impressive economic growth
in recent years, per capita income across the continent remains essentially
where it was in 1960. In 2008, all 22 countries that the
United Nations Development Programme (UNDP) characterized
as having “low human development” were in sub-Saharan Africa.
This failure of foreign aid suggests that simply increasing assistance
levels will not necessarily buy more development. Indeed, my
conclusion is quite the opposite: Unless aid carefully avoids reinforcing
fl awed policies, supporting poor governance, weakening
African institutions, and creating dependence, it will actually buy
less development. I am not alone in this conclusion; New York
University economics professor William Easterly and former World
Bank consultant Dambisa Moyo have also indicted foreign aid. (For
a review of Moyo’s Dead Aid, see the summer 2009 issue of the
Stanford Social Innovation Review.) Likewise, as Rwandan President
Paul Kagame declared in the Financial Times this year, “The cycle of
aid and poverty is durable: As long as poor countries are focused on
receiving aid they will not work to improve their economies.”
Yet many other African leaders are still willing to play on donors’
lingering colonial guilt. And despite widespread criticisms of current
practices, donor countries are unlikely to scale back their assistance
anytime soon. If no one turns off the spigots of foreign aid, then donors
must at least make aid more eff ective by adopting more strategic
approaches. The MCC is a valiant attempt at this. But if the
granting of hundreds of millions of dollars to countries like Senegal
is any indication, it has a long way to go before it will truly revolutionize
foreign assistance. Decisions about aid need to be not only
well intentioned, but also well researched and well timed.
If the granting of hundreds of millions of dollars to countries
like Senegal is any indication, the MCC has a long
way to go before it will truly revolutionize foreign aid.