DEVELOPMENT: U.S. Sees Growth as The Way

DEVELOPMENT: U.S. Sees Growth as The Way
By Stefania Bianchi

BRUSSELS, Jan 27 (IPS) - Encouraging and rewarding good policies that lead to sustainable economic growth is key to poverty reduction, says Paul Applegarth, chief executive officer of the Millennium Challenge Corporation in the United States.

"The Millennium Challenge Corporation's mission is poverty reduction in the poorest countries and our technique is through growth," Applegarth told IPS inan interview. "The programme was established to focus on the longer-term and to really encourage policy reform in countries that promote growth."

The Millennium Challenge Corporation (MCC), which celebrates a year in existence this week, administers the Millennium Challenge Account (MCA) - a newly established U.S. government corporation that aids developing countries that spend money on health and education, on remaking their laws, and adopting market- opening measures.

Poor countries are eligible to receive money from the MCA only if they perform well on 16 criteria in three broad categories the guidelines set out - "ruling justly, encouraging economic freedom, and investing in people."

Indicators include civil liberties and political rights, an open fiscal and trade policy, control of corruption, and immunisation from diseases like measles.

Under the scheme, poor countries that score above the median in the corruption criterion and at least half of the criteria in each of the three categories are eligible to apply for MCA funds, which are awarded as grants rather than loans.

The MCA budget for 2005 is 1.5 billion dollars (1.1 billion euros). This will benefit 16 countries - Armenia, Benin, Bolivia, Cape Verde, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Mozambique, Nicaragua, Senegal, Sri Lanka and Vanuatu.

But before they receive the money the 16 nations are expected to outline measures they intend to take to fulfil their pledges.

There are no specific deadlines for the process, and the money will be disbursed depending on how fast a country develops its plan.

"This way the country has to take responsibility for its own growth, policies matter, and the focus is on results," says Applegarth. Of the 16 countries, Applegarth says the MCA is close to starting negotiations with Georgia, Honduras, Nicaragua and Madagascar.

"These countries have got a more detailed plan in place and are much closer to being ready to go. Hopefully we'll be able to sign the closing compact with these countries within two months and then there will be significant flows of official development assistance," he said.

If these countries are successful they will enter into a three-to-five-year development partnership with the MCC.

Applegarth rejects criticism that the MCC system may lead to greater marginalisation of poor countries that fail to meet the policy conditions that determine which countries will be eligible for the aid.

"We are focused on finding those countries which will use the money well. Yes we do differentiate amongst countries, but it's up to the countries themselves whether they qualify, and we have a clear method of evaluation," he said.

"Our aim is poverty reduction and we are going to do it with countries that have shown commitments to good leadership and reform," he said. "We're not going to work with countries that are squandering resources or getting in the way of development."

Applegarth says this approach is working. "So far we've had a tremendous response," he said. "We have seen countries taking hard decisions so that they can change policies to improve their chances of funding. Countries are taking tough steps because it is in their interest to do so, and that is before we've put a dollar on the table."

Applegarth says the programme is not designed to contribute to the Millennium Development Goals (MDGs), which include halving world poverty by 2015, but that it is likely to have an impact on achieving the targets.

"We're not going tell a country that it has to put up a programme that conforms to the MDGs because then we're setting their priorities for them," he said. "We expect that many of the programmes we're seeing will enhance progress towards the MDGs but the key is that you cannot achieve the MDGs without growth."

Applegarth, who is in Brussels to discuss the MCC programme with European Union (EU) officials and to raise public awareness of the initiative, says little is known about this programme in Europe. But he hopes to change this by coordinating MCC activities with the EU.

"I think people are realising that there are a lot of synergies and a lot of complementarities between what we are doing and what the EU is doing," he said. "Our fundamental goals are the same - to promote growth and development for poverty reduction."

Applegarth says both the EU and the United States also believe in country ownership - allowing countries to set their own priorities - and in the importance of policies.

"Money alone will not help poor countries. The government in those countries also has to create an overall environment that promotes political liberties and also entrepreneurial activities," he said.

But the similarities seem to end there. "Whereas the U.S. is focused on poorest countries around the world, the EU is focused on the neighbourhood and some broader objectives in Africa," he said.

But Applegarth says coordination between the EU and the United States are key to poverty reduction. (END/2005)

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