Millennium Challenge Corporation — Overview (Part 2/3)

Part 1 (Fact-check): https://blog.watchdog.paladinanalytics.com/mcc-fact-check/

Part 3 (Questions): https://blog.watchdog.paladinanalytics.com/mcc-questions/

Resources:

1. MCC Sri Lanka Agreement: https://drive.google.com/file/d/120Qi_8tNapsT-B97ss9YXIgdXV5MD0Am/view
2. Constraint Analysis: https://assets.mcc.gov/content/uploads/constraints-analysis-sri-lanka.pdf
3. MILLENNIUM CHALLENGE ACT OF 2003: https://www.mcc.gov/content/uploads/2017/05/mca_legislation.pdf
4. Congressional Research Service Report: https://fas.org/sgp/crs/row/RL32427.pdf

Millennium Challenge Corporation

The Millennium Challenge Corporation (MCC) provides economic assistance through a competitive selection process to developing nations that demonstrate positive performance in three areas: ruling justly, investing in people, and fostering economic freedom. From the outset, Congress has been integrally involved with MCC’s creation, mandate, operations, and budgets.

(Source: Congressional Research Service Report)

• Congress approved the new initiative in January 2004 in the Millennium Challenge Act of 2003
• It established MCC as a government entity separate from the Department of State, the Treasury, and the U.S. Agency for International Development (USAID)

(Sources: Congressional Research Service Report / MCC Website)

MCC Grants

Threshold Programs

Threshold programs are smaller grants focused on policy and institutional reform in selected countries that come close to passing MCC’s eligibility criteria and show a firm commitment to improving their policy performance. These programs are designed to assist promising candidate countries to become compact eligible.

Number of countries awarded: 29

Grant Statuses:

• Closed 23
• Closure 1
• Development 3
• Implementation 4

Median grant value: US $ 16,898,160

MCC Compact

MCC compacts are five-year grant agreements, proposed and implemented by well-governed countries. Compacts aim to achieve poverty reduction through economic growth by targeting the principal “binding constraints to growth” in an economy. To date, the MCC Board has approved 37 compacts in 29 countries worth more than $13 billion.

(Source: Congressional Research Service Report / MCC Website)

Number of countries awarded: 29

Grant Statuses:

• Closed 24
• Closure 1
• Development 8
• Implementation 7
• Signed 3
• Suspended 1
• Terminated 2

Median grant value: US $ 362,551,000

Eligibility for Compact

To be eligible for an MCC Compact grant, the G.N.I. Per capita of the country should be less than ~$4000. The countries are also scored based on 20 third-party indicators (List below).

Sources:

• https://www.mcc.gov/about
• Congressional Research Service Report: https://fas.org/sgp/crs/row/RL32427.pdf

---

MCC Sri Lanka

Town hall announcing Sri Lanka's selection into the MCC Compact program: https://www.mcc.gov/news-and-events/video/video-121616-post-board-town-hall

The Constraint Analysis:

An Analysis Prepared by:

• The Government of Sri Lanka — Led by Mr. Charitha Ratwatte, Heads of Policy Development Office and Senior Advisor to the Prime Minister
• The Millennium Challenge Corporation of the United States of America
• Harvard University’s Center for International Development

Separate meetings were also held with:

• Ministries and agencies
• Board of Investment (BOI)
• American and Ceylon Chambers of Commerce
• Other private sector and civil society stakeholders in Colombo

MCC and the Government of Sri Lanka agreed that the analysis identifies three binding constraints to economic growth:

1. Lack of access to land (Section 2.1)
2. Policy uncertainty (Section 2.2)
3. Inadequate overland transport. (Section 2.3)

Other issues identified in the course of the analysis:

• The capacity of electricity and access to water and wastewater services for certain industries and areas of the country.
• The shortage of skills in science, technology, engineering and math (STEM).

Access to Land (Section 2.1) — Summary

• States owns approximately 80 percent of land through multiple ministries.
• Poor coordination, slow and unclear process resulting in the inability to match the demand for land needed for private sector investment, including export-oriented FDI.
• Problems with land use and titling affect manufacturing, agriculture, construction, residential and commercial development, and tourism.
• Restrictions on land parcel size, the absence of land titles, and longstanding laws affecting rural land use all reduce agricultural productivity and rural well-being.
• Existing laws disadvantage the property rights of women.
• Development of new industrial zones has not kept pace with the demand.
• 50 acre per person restriction prevents economies of scale in the case of large private sector agriculture investment.

High Costs of Overland Transport (Section 2.3) — Summary

• Economic activity is concentrated in the Colombo metropolitan area and the surrounding Western Province.
• Movement of goods and people within the Western Province is increasingly problematic.
• The current state of transport infrastructure generally frustrates the development of inter-regional economic activity and arguably the suitability of locating investments outside the western region and near other concentrations of population on the island.

The MCC Agreement

Official Title:

Millennium Challenge Compact between The United States of America Acting Through the Millennium Challenge Corporation and The Democratic Social Republic of Sri Lanka Acting Through The Ministry of Finance

Compact Goal: Promoting economic growth and the elimination of extreme poverty in Sri Lanka.

MCA — Sri Lanka:

MCA - Sri Lanka is a company limited by guarantee under Sri Lanka’s Companies Act No. 7 of 2007.

The Sri Lankan Government has principal responsibility for overseeing and managing the implementation of the project.

Board of Directors of MCA - Sri Lanka shall consist of: (Source: Annex I - 34 of the MCC Agreement)

1. Representative from the President’s Office
2. Representative from the Prime Minister’s Office
3. Secretary to the Ministry of Finance
4. Secretary to the Ministry of Transport and Civil Aviation
5. Secretary to the Ministry of Land and Parliamentary Reforms
6. Secretary to the Ministry of Megapolis and Western Development
7. Secretary to the Ministry of Highway and Road Development and Petroleum Resources Development
8. Secretary to the Ministry of Women and Children’s Affairs and Development of Dry Zone
9. One private sector representative
10. Two civil society representatives

Project Objectives:

Transport Project

• To increase relative efficiency and capacity of the road network and bus system in the Colombo Metropolitan Region (CMR).
• To reduce the cost of transport in order to facilitate the flow of passengers and goods between the central region of the country and ports and markets.

Land Project

• To increase the availability of information on private land and under-utilized state land in order to increase land market activity.

Funding and Resources:

Total Project Funding: US$480,000,000

Funding Breakdown:

• Program Funding (US$ 447,500,000)
  • For the use by the Sri Lankan Government to implement the Program.
• Compact CDF (US$ 32,500,000)
  • Under Section 609(g) of the Millennium Challenge Act of 2003
  • For use by the Government to facilitate implementation of this Compact, including for the following purposes:
    1. Financial management and procurement activities
    2. Administrative activities
    3. Monitoring and evaluation activities
    4. Feasibility, design, and other project preparatory studies
    5. Other activities to facilitate the Compact implementation as requested by the Government and approved by MCC

Transport Project

Objectives:

1. Increase the relative efficiency and capacity of the road network and bus system in the CMR (Colombo Metropolitan Area).
2. To reduce the cost of transport in order to facilitate the flow of passengers and goods between the central region of the country and ports and markets.

How to achieve:

1. Upgrading physical road networks
2. Modernising the traffic system
3. Improving performance of the public transportation system
4. Introducing an enabling policy and regulatory environment
5. Providing technical assistance to transport agencies and other relevant stakeholders to ensure long-term sustainability of the transport infrastructure and undertaking initiatives designed to improve the safety and security of passengers using the public transportation system.

Expected Results:

1. Safer, more comfortable, and reliable public transportation system for the traveling public, and to reduce the transport costs required to move people and goods from lagging regions to ports and markets.

The project is comprised of:

1. Advanced Traffic Management System (ATMS)
   • Reduce cost of transportation on the movement of goods and people in the CMA (Colombo Metropolitan Area).
   • Aims to reduce relative travel time by reducing traffic delays
   • Improving road safety in the most heavily congested arterial corridors
2. Bus Transport Service Modernisation (BTSM)
3. Central Ring Road Network (CRRN)
   • Reduce the transport cost of people and goods by improving five sections along the road network (Total length: ~131km) connecting the Western Province to :
     1. Central
     2. Sabaragamuwa
     3. Uva
     4. Eastern provinces

Environment and Social Performance (Annex I - 24 ):

• Transport project has been screened as “Category B” in accordance with the MCC Environment Guidelines because potential environmental and social impacts are generally site-specific, few if any are irreversible, and mitigation measures are generally well understood. (Annex I - 25)
• The agreement highlights and raises concerns about potential land acquisition and resettlement that might be needed to facilitate ATMS and CRRN Activities. Here’s an extract from the document:

Donor Coordination: MCC has coordinated closely with development partners, including the World Bank(WB), Asian Development Bank, Japan International Cooperation Agency, and the Korean International Cooperation Agency. (Annex I - 25)

Land Project

Project Objectives:

• Increase the availability of information on private land and under-utilized state lands in order to increase land market activity.
• Increase tenure security and tradability of land for smallholders, women, and firms through policy and legal reforms.
• Land activities build on existing government initiatives such as:
  • the Electronic State Land Information Management System (eSlims)
  • eLand registry system (eLand Registry)
  • “Bim Saviya” program, which has not been able to realize its potential due to lack of resources.

Activities of the Land Project:

1. The Parcel Fabric Map and State Land Inventory Activity

   • Creation of a parcel fabric map that covers up to 28% of the land area of Sri Lanka, focused on seven "targeted districts.":

     • Anuradhapura
     • Kandy
     • Kegalle
     • Kurunegala
     • Matale
     • Pollonnaruwa
     • Trincomalee

   • Builds on top of Sri Lankan Goverment's eSlims initiative.

2. The Deeds Registry Improvement Activity

   • Digitizing paper deeds, capturing key legal rights and land parcel identification data.
   • Records to be uploaded to the eLand registry.
   • Digitized records will be linked to the Digital Parcel Fabric to provide spatial context.

3. Land Valuation System Improvement Activity

   • Supporting digitization of valuation documents and government efforts to move information to the digital valuation by ICTA and the Valuation Department (Department under the Ministry of Finance)

4. Land Grants Registration and Deed Conversion Activity

   1. Registration of Absolute Land Grants Sub-Activity (The Sri Lankan Government withdrew the bill referenced in this section. Hence, the section should be removed in the next version of the grant agreement):
      • Supports Sri Lankan Government’s efforts to convert permits and grants in State Land to “absolute land grants” that are expected to be registered as freehold rights in land.
      • Sub-activity would support the conversion of State Lands to the private domain, creating a marketable and bankable title to this land in the name of the land holder.
      • The Land Special Provisions Act (LSPA) is expected to define the process the Government shall use for this conversion of land rights.
        
   2. Conversion of Deeds Sub-Activity
      • Supports expansion and improvement of the “Bim Saviya” program. The Sri Lankan Government has been converting private properties from the deeds system to the title registration system under “Bim Saviya” since 2006.
      • MCC funding for this sub-activity is contingent upon the enactment of amendments to the Registration of Title Act of 1998 (“RTA”) that addresses the difficulties in moving deeded properties into the title system.

5. Land Policy and Legal Governance Improvement Activity

   • The establishment of a Land Policy Research Group (LPRG) at a high level of government.
   • MCC funding will support hiring staff and equipting an office for the duration of the Land Project.
   • Objectives and responsibilities of the LRPG:
     • Direct policy studies.
     • Support Sri Lankan Government's efforts to adopt new land policy and enact supporting legistlation.
     • Technical support, organizing, public outreach etc.

Land Projects in other countries under MCC:

Agreement	Signed	Completed	Status	Remarks	Links
Benin Compact	February 22, 2006	October 6, 2011	Closed	Access to Land Project. Original Amount: $31,932,939. This Project aims to create secure land tenure for the poor and non-poor alike and to create effective, transparent governance of land and property issues. This Project is expected to reduce the time and cost to obtain a title and to increase land security.	https://www.mcc.gov/where-we-work/program/benin-compact
Burkina Faso Compact	July 14, 2008	July 31, 2014	Closed	Rural Land Governance Project:Improve land tenure security and land management, enhance the volume and value of agriculture production,Total disbursed: $58,255,723	https://www.mcc.gov/where-we-work/program/burkina-faso-compact
Ukraine Threshold Program	December 4, 2006	December 31, 2009	Closed	Sub-Project of:Strengthen Civil Society Project. Grants program to NGOs that support among other things: land and property ownership, the permit systems for construction, land us	https://www.mcc.gov/where-we-work/program/ukraine-threshold-program
Senegal Compact	September 16, 2009	September 23, 2015	Closed	Sub-Project of:Irrigation and Water Resource Management ProjectLand tenure security activity was designed to accompany the irrigation rehabilitation to ensure that Project beneficiaries receive rights to their land and to mitigate potential land conflict that often results from the improved value of the irrigated areas.	https://www.mcc.gov/where-we-work/program/senegal-compact
Namibia Compact	July 28, 2008	September 16, 2014	Closed	Sub-Project of Agriculture Project.Aims:Improve the communal land regime and introduce effective community-based rangeland and livestock management activities;	https://www.mcc.gov/where-we-work/program/namibia-compact
Moazambique Compact	July 13, 2007:	September 22, 2013	Closed	Land tenure services project:supporting an improved policy environment, including addressing implementation problems for the existing land law, and engaging in regulatory review to improve upon it;improving public land administration agencies responsible for implementing policies and providing quality public land-related services; and,facilitating access to land use by helping people and business	https://www.mcc.gov/where-we-work/program/mozambique-compact
Mongolia Compact	October 22, 2007	September 17, 2013	Closed	The Property Rights Project: to improve the national property registration system and help poor households obtain titles to land in ger districts. Facilitated the leasing of pasture land to herder groups in peri-urban areas and invested in infrastructure and training to improve livestock productivity and herder incomes in peri-urban areas.	https://www.mcc.gov/where-we-work/program/mongolia-compact
Mali Compact	November 13, 2006	August 24, 2012	Terminated in 2012 (coup)	Alatona irrigation project: Improve land tenure securityintroduce innovative land tenure management practices	https://www.mcc.gov/where-we-work/program/mali-compact
Madagascar Compact	April 18, 2005	August 31, 2009	Terminated in 2009 (undemocratic transfer of power)	The Land Tenure Project: designed to increase land titling and land security, and improve the efficiency of land service administration	https://www.mcc.gov/where-we-work/program/madagascar-compact
Lesotho Compact	July 23, 2007	September 17, 2013	Closed	Subproject: (Indirect effect on land) Private sector development project:improving the administration of land titles	https://www.mcc.gov/where-we-work/program/lesotho-compact
Ghana Compact	August 1, 2006	February 16, 2012	Closed	The Land Title Facilitation Activity (LTF): to increase investment and productivity by strengthening property rights.to improve tenure securityfacilitate access to land for commercial crops through systematic provision of titles.	https://www.mcc.gov/where-we-work/program/ghana-compact

---

Notes

Congressional Research Service:

The Congressional Research Service (CRS) works exclusively for the United States Congress, providing policy and legal analysis to committees and Members of both the House and Senate, regardless of party affiliation. (http://www.loc.gov/crsinfo/)