Federal Register: March 5, 2004 (Volume 69, Number 44)
DOCID: FR Doc 04-4993
DEPARTMENT OF STATE
State Department
DOCUMENT ID: [Public Notice 4646]
NOTICE: NOTICES
ACTION: Reports and guidance documents; availability, etc.:
SUBJECT CATEGORY:
The Department of State on Behalf of the Millennium Challenge Corporation, Section 608(b), Public Law 108-199 (Division D); MCC FR 04-3: Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance in FY 2004
DATES: For a 30-day period beginning on March 5, 2004, the Millennium Challenge Corporation will accept public comment on the eligibility criteria and methodology contained in the report and will consider such comment for purposes of determining eligible countries.
DOCUMENT SUMMARY:
The Millennium Challenge Act of 2003, Public Law 108-199
(Division D) (the ``Act'') authorizes the provision of assistance to
countries that enter into compacts with the United States to support
policies and programs that advance the prospects of such countries achieving lasting economic
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growth and poverty reduction. The Act requires the Millennium Challenge
Corporation (MCC) to take a number of steps in determining the
countries that, based on their demonstrated commitment to just and
democratic governance, economic freedom and investing in their people,
will be eligible countries for Millennium Challenge Account (MCA)
assistance during Fiscal Year 2004. These steps include the publication of notices in the Federal Register that identify:
1. The ``candidate countries'' for MCA assistance (section 608(a) of the Act);
2. The eligibility criteria and methodology that will be used to choose ``eligible countries'' from among the ``candidate countries'' (section 608(b) of the Act); and
3. The countries determined by the Board of Directors of the Millennium Challenge Corporation to be ``eligible countries'' for FY 2004 and identify the countries on the list of eligible countries with which the Board will seek to enter into compacts (section 608 (d) of the Act).
This notice is the second of the three required notices listed above.
SUMMARY:
Millennium Challenge Corporation—; Millennium Challenge Account assistance; candidate countries eligibility; criteria and methodology,
SUPPLEMENTAL INFORMATION
Report on the criteria and methodology for determining the eligibility of candidate countries for Millennium Challenge Account assistance in FY 2004.
Summary
This report is provided in accordance with section 608(b) of the Millennium Challenge Act of 2003, Pub. L. 108199, Division D (the ``Act'').
The Act authorizes the provision of assistance to countries that enter into compacts with the United States to support policies and programs that advance the prospects of such countries to achieve lasting economic growth and poverty reduction. The Act requires the Millennium Challenge Corporation (MCC) to take a number of steps to determine the countries that, based on their demonstrated commitment to just and democratic governance, economic freedom and investing in their people, will be eligible to receive Millennium Challenge Account (MCA) assistance during a fiscal year. These steps include the submission of reports to appropriate congressional committees and the publication of notices in the Federal Register that identify:
1. The ``candidate countries'' for MCA assistance (section 608(a) of the Act);
2. The eligibility criteria and methodology that the MCC Board of Directors (the ``Board'') will use to select ``eligible countries'' from among the ``candidate countries'' (section 608(b) of the Act); and
3. The countries determined by the Board to be ``eligible countries'' for a fiscal year and the countries on the list of eligible countries with which the Board will seek to enter into MCA ``Compacts'' (section 608(d) of the Act).
This report sets out the criteria and methodology to be applied in determining eligibility for FY 2004.
Methodology
The Board will select eligible countries based on their overall performance in relation to their peers in three broad policy categories: ruling justly, encouraging economic freedom, and investing in people. Section 607 of the Act requires that the Board's determination of eligibility be based ``to the maximum extent possible, upon objective and quantifiable indicators of a country's demonstrated commitment'' to the criteria set out in the Act. For FY 2004, candidate countries are those countries that are eligible for assistance from the International Development Association, have a per capita income equal to or less than $1415, and are not ineligible to receive United States economic assistance.
The Board will make use of 16 indicators to assess policy
performance of individual countries (specific definitions of the
indicators and their sources are set out in Annex A). These indicators
are grouped for purposes of the assessment methodology under the three policy categories as follows:
Encouraging economic
Ruling justly freedom Investing in people
1. Civil Liberties.......... 1. Country Credit 1. Public
Rating. Expenditures on
Health as Percent
of GDP.
2. Political Rights......... 2. 1year Consumer .................... Price Inflation.
3. Voice and Accountability. 3. Fiscal Policy.... 2. Immunization
Rates: DPT3 and
Measles.
4. Government............... 4. Trade Policy..... 3. Public Primary
Education Spending
as Percent of GDP.
5. Rule of Law.............. 5. Regulatory .................... Quality.
6. Control of Corruption.... 6. Days to Start a 4. Primary Education
Business. Completion Rate.
In making its determination of eligibility with respect to a particular candidate country, the Board will consider whether such country performs above the median in relation to its peers on at least half of the indicators in each of the three policy categories and above the median on the corruption indicator. One exception to these relative comparisons is inflation, for which a country needs to pass an absolute test of having an inflation rate under 20%.
The indicators methodology will be the predominant basis for determining which countries will be eligible for MCA assistance. In addition, the Board may exercise discretion in evaluating and translating the indicators into a final list of eligible countries. In this respect, the Board may also consider whether any adjustments should be made for data gaps, lags, trends, or other weaknesses in particular indicators. Likewise, the Board may deem a country ineligible if it performs substantially below average on any indicator and has not taken appropriate measures to address this shortcoming.
Where necessary, the Board may also take into account other data and quantitative information as well as qualitative information to determine whether a country performed satisfactorily in relation to its peers in a given category. As provided in the Act, the CEO's report to Congress setting out the list of eligible countries and which of those countries the MCC will seek to enter into Compact negotiations will include a justification for such eligibility determinations and selections for Compact negotiation.
There are elements of the criteria set out in the Act for which there is either limited quantitative information (e.g.,
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rights of people with disabilities) or no welldeveloped performance
indicator (e.g., sustainable management of natural resources). Until
such data and/or indicators are developed, in assessing performance in
these areas the Board may rely on supplemental data and qualitative information such as:
Within each policy category, the Act sets out a number of specific criteria. A set of objective and quantifiable indicators is being used to establish eligibility and measure the relative performance by candidate countries against these criteria. The Board's approach to determining eligibility ensures that performance against each of these criteria is assessed by at least one of the 16 objective indicators and most are addressed by multiple indicators.
Section 607(b)(1): Just and democratic governance, including a demonstrated commitment to
(A) Promote political pluralism, equality, and the rule of law:
IndicatorsPolitical Rights, Civil Liberties, Voice and Accountability and Rule of Law.
(B) Respect human and civil rights, including the rights of people
with disabilities; IndicatorsPolitical Rights and Civil Liberties.
(C) Protect private property rights; IndicatorsCivil Liberties, Regulatory Quality and Rule of Law.
(D) Encourage transparency and accountability of government; and IndicatorsPolitical Rights, Civil Liberties, Voice and
Accountability, and Government Effectiveness.
(E) Combat corruption; IndicatorsCivil Liberties and Control of Corruption.
Where necessary the Board will also draw on supplemental data and qualitative information including: the State Department's Human Rights Report and Transparency International Corruption Perception's Index.
Section 607(b)(2): Economic freedom, including a demonstrated commitment to economic policies that
(A) Encourage citizens and firms to participate in global trade and
international capital markets; IndicatorsCountry Credit Rating,
Fiscal Policy, Inflation, Trade Policy, and Regulatory Quality.
(B) Promote private sector growth and the sustainable management of
natural resources; IndicatorsInflation, Days to Start a Business, Fiscal Policy, and Regulatory Quality.
(C) Strengthen market forces in the economy; and IndicatorsFiscal Policy, Inflation, and Regulatory Quality.
(D) Respect worker rights, including the right to form labor unions; and IndicatorsCivil Liberties.
Where necessary the Board will also draw on supplemental data and qualitative information including: the State Department's Human Rights Report, access to sanitation, deforestation, conservation of land and marine resources, land tenure institutions, and protection of threatened and endangered species.
Section 607(b)(3): Investments in the people of such country, particularly women and children, including programs that
(A) Promote broadbased primary education; and IndicatorsPrimary
Education Completion Rate and Public Spending on Primary Education.
(B) Strengthen and build capacity to provide quality public health
and reduce child mortality. IndicatorsImmunization and Public Spending on Health.
Where necessary the Board will also draw on supplemental data and qualitative information including: the State Department's Human Rights Report and Girl's Primary Enrollment Rate.
Annex A: Indicator Definitions
The following 16 indicators will be used to measure candidate
countries' adherence to the criteria found in section 607(b) of the
Act. The indicators are intended to assess the degree to which the
political and economic conditions in a country serve to promote broad
based sustainable economic growth and thus provide a sound environment
for the use of MCA funds. The indicators are not goals in themselves;
rather they measure policies that are necessary conditions for a
country to achieve broadbased sustainable economic growth. The
indicators were selected based on their relationship to growth and
poverty reduction, the number of countries they cover, their
transparency and availability, and their relative soundness and
objectivity. Where possible, the indicators rely on indices of performance developed by independent sources.
Ruling Justly
(1) Civil Liberties: A panel of independent experts rates countries
on: freedom of expression, association and organizational rights, rule
of law and human rights, and personal autonomy and economic rights. Source: Freedom House.
(2) Political Rights: A panel of independent experts rates
countries on: The prevalence of free and fair elections of officials
with real power; the ability of citizens to form political parties that
may compete fairly in elections; freedom from domination by the
military, foreign powers, totalitarian parties, religious hierarchies
and economic oligarchies; and the political rights of minority groups. Source: Freedom House.
(3) Voice and Accountability: An index of surveys that rates
countries on: ability of institutions to protect civil liberties, the
extent to which citizens of a country are able to participate in the
selection of governments, and the independence of the media. Source: World Bank Institute.
(4) Government Effectiveness: An index of surveys that rates
countries on: the quality of public service provision, civil services'
competency and independence from political pressures, and the
government's ability to plan and implement sound policies. Source: World Bank Institute.
(5) Rule of Law: An index of surveys that rates countries on: The
extent to which the public has confidence in and abides by rules of
society; incidence of violent and nonviolent crime; effectiveness and
predictability of the judiciary; and the enforceability of contracts. Source: World Bank Institute.
(6) Control of Corruption: An index of surveys that rates countries
on: the frequency of ``additional payments to get things done,'' the effects of corruption on the business
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environment, ``grand corruption'' in the political arena and the
tendency of elites to engage in ``state capture.'' Source: World Bank Institute.
Encouraging Economic Freedom
(1) Country Credit Rating: A semiannual survey of bankers' and
fund managers' perceptions of a country's risk of default. Source: Institutional Investor Magazine.
(2) Inflation: The most recent 12 month change in consumer prices
as reported in the IMF's International Financial Statistics or in
another public forum by the relevant national monetary authorities. Source: Multiple.
(3) Fiscal Policy: The overall budget deficit divided by GDP,
averaged over a threeyear period. The data for this measure is being
provided directly by the recipient government and will be cross checked
with other sources and made publicly available to try to ensure
consistency across countries. Source: National Governments.
(4) Days To Start a Business: The Private Sector Advisory Service
of the World Bank Group works with local lawyers and other
professionals to examine specific regulations that impact business
investment. One of their studies measures how many days it takes to open a new business. Source: World Bank.
(5) Trade Policy: A measure of a country's openness to
international trade based on average tariff rates and nontariff
barriers to trade. Source: The Heritage Foundation's Index of Economic Freedom.
(6) Regulatory Quality Rating: An index of surveys that rates
countries on: the burden of regulations on business, price controls,
the government's role in the economy, foreign investment regulation and many other areas. Source: World Bank Institute.
Investing in People
(1) Public Expenditure on Health: Total expenditures by government
at all levels on health divided by GDP. Source: National Governments.
(2) Immunization: The average of DPT3 and measles immunization
rates for the most recent year available. Source: The World Health Organization WHO.
(3) Total Public Expenditure on Primary Education: Total
expenditures by government at all levels on primary education divided by GDP. Source: National Governments.
(4) Primary Completion Rate: The number of students completing
primary education divided by the population in the relevant age cohort. Source: World Bank and UNESCO.
Dated: March 2, 2004.
Alan Larson,
Interim Chief Executive Officer, Millennium Challenge Corporation, Department of State.
[FR Doc. 044993 Filed 3404; 8:45 am]
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