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Seven years ago, the U.S. Congress created a new agency with a unique approach to foreign aid: It would only give money to countries committed to good governance. Today, that agency, the Millennium Challenge Corporation (MCC), is working all over Africa. We’ll talk with the head of MCC, an Ethiopia native, about how this experiment is working and what it tells us about the effectiveness of U.S. aid.
- Daniel Yohannes Chief Executive Officer, Millennium Challenge Corporation
MR. KOJO NNAMDIImagine if you were sitting on a big pile of cash and your job was to distribute it to your most deserving friends. Who would you give it to and what strings would you attach to make sure they didn't waste it? That, in a sense, is the job that Daniel Yohannes has with the U.S. government. He's head of the Millennium Challenge Corporation or MCC which was created in 2004 as a way to provide aid to countries committed to good governance. And so now that the program has been in place for seven years, we wanted to know is it working? Daniel Yohannes joins us in studio to talk about the role of his agency particularly in Africa and to share his own story of immigrating to the U.S. form Ethiopia as a teenager. Daniel Yohannes is chief executive officer as we said of the Millennium Challenge Corporation. Welcome, thank you for joining us.
MR. DANIEL YOHANNESThank you, Kojo, glad to be here. And also wish you a happy birthday. I understand you had a birthday last Saturday.
NNAMDISomebody spread that news around. I certainly did. Thank you for the birthday wish.
YOHANNESBut before we get into our conversation about development, I just want to express our condolences to the victims and families of the Arizona victim shootings. And sad day for America. I hope it will never happen again. But our prayers and thoughts are with the victims and with the families.
NNAMDIWe join you in that. When your agency was first created it was portrayed as a new and very different approach to foreign aid. Describe if you would the mission of the Millennium Challenge Corporation.
YOHANNESThe mission is primarily to reduce poverty through long term economic growth, working with poor countries, but those countries that are well governed, countries with good governance, countries that have demonstrated commitment to investing in their people and countries that have good economic policies within the countries.
NNAMDIThere are a lot of different kinds of projects that can fall under the umbrella of development. What kinds of projects does the MCC tend to fund?
YOHANNESKojo, all of our programs are country driven. We don't tell them how to invest it or where to invest it. Once countries are selected and they themselves have the solutions for the development, they're responsible in identifying the constraints to economic development just like in a business. First, we do our due diligence in terms of selecting which countries should be participating in our program. And once they're selected, then they themselves identify the projects that need to be funded. We do a very thorough analysis to make sure that the intended projects are going to pay big dividends. And we monitor and evaluate those projects from the beginning to the end to make sure that they have good dividends for American tax payers and for our partner countries.
NNAMDIIf you have questions or comments for Daniel Yohannes, chief executive officer of the Millennium Challenge Corporation, you can call us at 800-433-8850 or go to our website, kojoshow.org and raise your question or make your comment there. You mentioned that the countries choose the projects. One of the persistent critiques of foreign aid is that it often leaves out the recipient. The aid agencies are running their own programs and the people who live in the country aren't really involved or invested in the efforts. We saw this first hand on our trip to Haiti a few months ago. How do you address that issue at the MCC? How do you make sure that what governments want or what leaders of countries want are exactly what the people for whom the aid is intended want and need?
YOHANNESIn our program we require our partner countries to do a very thorough consultation processes with their citizens, civil society, NGOs, businesses and governments before they submit the intended programs or projects to us. So to give an example, I just got back from Honduras, a country that completed its compact last fall. We had three different administrations in Honduras. We had a major political crisis, but our projects were completed on time, on budget, achieving all the intended results because it was owned by the people. It was not owned by any particular president or prime minister. It was primarily based on their national interest.
YOHANNESThat's why the program was extremely successful. I was there I have seen the progress that was made. In Honduras alone, we trained 6,500 farmers. And in addition to training these farmers to help them become more self-sufficient, you know, we provided them not only the modern technology in terms of farming but also provided them skills in marketing, business skills. We also made credit available to them. We also build roads in their communities so they have access to markets. And many of the farmers I have spoken to while I was there. You know what, in most cases, they have doubled or tripled their income the last five years. So we see results on the ground and the projects are completed because it's their program, it's not MCC's program. It's the peoples program.
NNAMDITo avoid the confusion that may exist in some people's minds. How does your organization work complement USAID? I know that there have been a number of people over the years who were concerned that the MCC would drain resources away from USAID.
YOHANNESWe have a very narrow and specific mission. Our mission is to reduce poverty. We complement USAID. You know they have a wide range of responsibilities in this field, but we have a very narrow field. That is to reduce poverty through long term economic growth working with very select countries.
NNAMDIQuestion for the members of the audience. What approach do you think the U.S. should be taking when it comes to foreign aid for poor countries? 800-433-8850 or you can send us a tweet @kojoshow. Over the years, Daniel Yohannes, Congress typically has given your agency less money than many would like to to achieve its goals. Do you feel like you have the support you need from the Congress?
YOHANNESIn fact when MCC was created in 2004, MCC got a lot of support both from Republicans and Democrats, and we still continue to get a lot of support from the Obama Administration, and let's keep in mind that when MCC was created seven years ago, it was based on the best practices learned from other development agencies around the world.
YOHANNESSo we do enjoy a lot of support from both parties. We also need to understand that we are working in a very constrained budget environment today, so we have to make sure that we spend taxpayer's money effectively and efficiently with projects that have very good dividends.
NNAMDIThe MCC requested $1.28 billion in funding for fiscal year 2011. That's the lowest level since the agency's creation, that -- according to the Center for Global Development. Is that because of the state of the economy?
YOHANNESI think a couple things. Number one, I think there was a year, in 2008 I believe, where the agency received about $875 million. But having said that, I think we want to take funds in which we could deploy them effectively and efficiently, and that's why more so today than any other time in the past that we have to leverage the expertise, and we need to do more in terms of operating with other agencies, both here at home, and also with the private sector to make sure that, you know, we're leveraging our resources in a way that could bring about a tremendous economic growth to many of those countries we work with.
NNAMDII wanted to get back to one of the issues you raised earlier about Honduras, because we all remember the crisis there. What happens if and when the political situation in a country changes dramatically after you have already given it some assistance? Has that actually happened in cases besides Honduras, and if not, what would you do in a situation like that?
NNAMDII don't know if you are currently giving aid to Cote d'Ivoire Ivory Coast, but when one looks at the political crisis occurring there with a president who seems to have lost an election, but refuses to leave office, how does that affect how you operate in that environment?
YOHANNESNumber one, we work with countries that have taken responsibilities and accountabilities for their own citizens. So unfortunately, Ivory Coast is now one of our clients. But...
NNAMDII suspected that, but go ahead.
YOHANNESBut in cases like, you know, Madagascar was one of the first countries, that received our investments, and because of coup d'état we had to terminate our programs. And, you know, there's been some cases whereby the board made a decision to suspend or terminate some of our programs in Nicaragua. In some cases we put a hold on Armenia. So we take action if in fact the countries work with, if they don't abide by the same principles that they have agreed upon, then we have no choice but to terminate or suspend or put on hold. So we are very serious with our principles.
YOHANNESSo we expect our partner countries to behave and act as they were when they were first elected to become a participant of our program.
NNAMDISome would say that good governance is in the eye of the beholder. How do you define good governance, and what do you do to make sure that countries are living up to their promises?
YOHANNESI think that's a very good question. I mean, you have to have very good governance, particularly in this environment if you want to progress economically. But when we talk about good governance as developing democratic institutions we look at civil liberties, we look at the government's commitment to fight corruption, because corruption is a major hindrance to economic development, and the people if you will, they have to participate in their democratic rights.
YOHANNESAnd those countries that have demonstrated and shown the commitment to these processes are those that are making a significant progress in economic growth, whether it be in Africa or in other places.
NNAMDIWe're going to take a short break. There are callers on the line for you. Please hold. We'll get back to your call when we get back from this break. If you haven't called yet, 800-433-8850. What approach do you think the U.S. should be taking when it comes to foreign aid for poor countries? You can also go to our website, kojoshow.org, or send us an e-mail to firstname.lastname@example.org with your question or comment. I'm Kojo Nnamdi.
NNAMDIWe're talking with Daniel Yohannes, chief executive officer of the Millennium Challenge Corporation, and taking your calls at 800-433-8850. Here is Dennis in McLean, Va. Dennis, you're on the air. Go ahead, please.
DENNISThank you, Kojo. I was a Peace Corps volunteer in West Africa in the '70s, and I was in Liberia. And I just wondered if you're supporting Liberia, or if you have any plans to support Liberia, and I'll take your call offline here. Thank you so much.
NNAMDIThank you for your call, Dennis.
YOHANNESIn fact, we just signed a threshold program with Liberia last year. We have an investment primarily in education as well as working with the government to improve their fiscal and (word?) policy.
NNAMDIYou -- Africa has been getting a lot of attention from the Millennium Challenge Corporation. The Economist had an interesting story about Africa recently. According to that magazine, six of the ten fastest growing economies of the last decade are in Africa, which is certainly not the story we tend to hear about that continent to generalize. Where are African economies heading? Do you think we may see a situation soon where many countries are viewed primarily as business partners rather than aid recipients?
YOHANNESIn fact, Kojo, I saw the same article over the weekend, and then not only the countries that made a significant improvement in the last ten years, but if you look in terms of what's projected for the next five years, seven of the countries are in the continent of Africa. And, you know, they've made some significant efforts and significant results in the last decade. And MCC is there to help many of those countries.
YOHANNESIn fact, I was in Ghana at the beginning of last year. In Ghana alone, you know, we trained 65,000 farmers, and I spent time with a number of those farmers that were trained by MCC. And I could tell you, in fact, this resonates in my head all the time. I met with a woman farmer, her name, Mavis, who told me that after she received our training program in terms of how she able to increase her rice production from five bags of rice to 140 rice -- bags of rice in one year.
YOHANNESAnd this woman has now paid her bank debts and is planning to expand her farms and buying equipment. The story goes again and again as you speak to more people. And in Ghana's case also, we've seen a lot of interest from other companies, both from here and then also from regional companies that are relocating or expanding their business opportunities in Ghana to take advantage of the Ghanaian-trained farmer.
YOHANNESSo yes, we are seeing some significant improvement. And the story could be told the same thing in Cape Verde, where Cape Verde for example, through our efforts in partnership with them, have cut down the number of days it takes to start a business from 57 days to less than one hour, improving and creating the conditions in both countries for investment to flow both within the country as well as from the outside. And ultimately replacing aid dollars with private sector dollars, and to get them off of aid to become self sufficient.
YOHANNESSo we are seeing some significant progresses made in Africa, Ghana, Cape Verde, Mali...
NNAMDIEthiopia was one of the countries mentioned in The Economist article that have been doing well. You were born in Ethiopia, but every time we mention Ethiopia on this broadcast, given the number of Ethiopians living in the diaspora in this particular area, we get a lot of calls -- challenging calls, on the issue of good government in Ethiopia. Can you talk about that?
YOHANNESWell, unfortunately Ethiopia is not one of the countries that partnered with the Millennium Challenge Corporation, and I must tell you that I've seen the same Economist report that indicated that Ethiopia had very good growth in the last ten years, and has projected growth of another eight percent in the next five years. But let me speak about Tanzania, a country that I just also came from that's making a significant improvement in that area where we have a $700 million investment in that country primarily to improve the infrastructure area.
YOHANNESWe're building roads Tanga to (word?) eventually to Mombasa, which will create investment and other business opportunities for the country, and also, you know, we have a big project in Mali. Mali, as you know, is a landlocked country and we are building a major airport in Bamako, which would also help to, you know, increase investment tourism and other business activities.
YOHANNESSo the goal of the Millennium Challenge Corporation is really to work with many of our African partners.
NNAMDIWhat is like for you in a personal sense, as someone who grew up in Africa and Ethiopia to now have a role where you're now providing assistance in a very different and specific way to African nations?
YOHANNESIt is an exciting opportunity. I'm extremely thankful to the President for nominating me, and for U.S. Congress for confirming me. You know, I come from one of the poorest countries on earth. I understand poverty better than most people. It's dehumanizing, it creates war, it creates instability, and to be able to work now in an institution where we are trying to make a significant difference in terms of people's lives, particularly in Africa where we have approximately 70 percent of our investments in MCC are in the continent of Africa.
YOHANNESOut of eight billion, about 5.4 billion is really committed to Africa. And I am excited. I am fortunate to be able to see this, and I bring a lot of passion to the job, and also bring in my 30 years of experience in the private sector. I come from banking and finance background, and ultimately the only way we could transform many of these countries are primarily through the private sector engagement. So I want to work with the private sector but within our partner countries as well as from outside to make sure that they consider many of these countries to work with because they have created the conditions, the environments that are extremely conducive for investments from the private sector.
NNAMDILet's go back to the telephones. Here is John in Arlington, Va. John, you're on the air. Go ahead, please.
JOHNHello. To help us understand how you choose countries to invest in, I'm asking why do you not invest in Cambodia, and you do invest in Honduras? Thank you very much. I appreciate this opportunity.
NNAMDICambodia versus Honduras, is...
YOHANNESYeah. You know, we have very strict guidelines. We look at policy performance of the majority of the country -- all countries before they are selected eligible for our program. And they would have to pass three major categories. One is ruling justly which deals with governance. The other one is investing in people. The country's commitment in investing in education, health, and managing natural resources.
YOHANNESThe third one is we look in terms of economic freedom. The country's trade policy, inflation management, fiscal policy, and we get many of these reports from independent agencies like the U.N., the Heritage Foundation, Freedom House and so forth. And the board makes a decision which is the most likely country to work with the Millennium Challenge Corporation. So it's very competitive.
YOHANNESThere is about 95 or so countries that could be eligible, but we only work with 22 countries that have shown the commitment and the accountability and the performance in many of these areas that I have talked about. That is good governance, investing in people, and economic freedom.
NNAMDIYou've been with the MCC for about a year now. Before your arrival, there were some complaints that the agency's projects were talking too long to show results. Has that changed?
YOHANNESYou know, by nature, what we do, approximately 65 percent of our investments are invested in agriculture and infrastructure. I mean, even in this country you can't get a project completed primarily when you deal with airports or expanding, you know, ports like Benin or Cape Verde in one year. It just takes a very long time. And so, you know, having said that, you know, we're still on target.
YOHANNESAnd, you know, Cape Verde completed the first compacts on time within five years. Honduras completed the first project in five years, and we have five countries that are targeted to complete the projects this years, and they're all on target. So it might have been slow at the beginning because you do a lot of the due diligence, but nevertheless, the last three years, that's when you really work hard trying to complete those projects.
YOHANNESSo they are being completed on time showing great results on the ground with Ghana, Cape Verde, or, you know, in Tanzania or Georgia, another country I just came from where it's going to complete the five year program this April. I saw how our investments are helping people on the ground. I met with a trout farmer who increased the production from five tons to about 20 tons in one year after he received our technical training and investment.
YOHANNESThe story goes from place to place, from country to country.
NNAMDIHere is Anna in Washington, D.C. Anna, you are now on the air. Go ahead, please.
ANNAHi. I'm interested in promoting social responsibility in youths, and that's what I do here in the city. And I'm curious if there's any contingencies working with these countries that once they reach a certain level that they would pay it forward or do something to their neighboring countries along the lines. Thank you.
NNAMDIAny such aspect of MCC's aid in investments? Where Tanzania can be used as an example to Uganda or something like that?
YOHANNESIn fact what happens is because a program is extremely popular and everybody wants to be in our list, that there is an MCC impact, if you will, that everybody wants to be on our list. So for example, the case I've given you in Ghana, where the company that moved their operations or expanded were from Kenya. So we are beginning to see some regional movement from one country to another country.
YOHANNESSo in this case, you know, Vegpro, a Kenyan company, expanded their operations in Ghana primarily to grow fruits and vegetables for the outside market, and they're currently utilizing or using MCC-trained farmers in Ghana. So we are seeing American companies like Dole that have expanded their presence in Ghana, and are sourcing Ghanaian-produced pineapples to the European markets.
NNAMDIThat could presumably have a ripple effect on the economy in Kenya also.
YOHANNESIt would have a rippling in Kenya. Also, it would have a rippling effect here at home creating additional jobs for Americans. Not only we are encouraging Americans to participate in our procurement processes, but it also open up markets in the future for American products and services.
NNAMDIAnd I'm afraid that's all the time we have. Daniel Yohannes, this is your first visit with us. We won't let you leave unless you promise to come back.
YOHANNESI will come back, Kojo. Thank you for having me.
NNAMDIDaniel Yohannes is chief executive officer of the Millennium Challenge Corporation. Thank you all for listening. I'm Kojo Nnamdi.
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