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  • US aid chief faces challenge of tight funds

    From: [email protected]
    Subject: US aid chief faces challenge of tight funds

    US aid chief faces challenge of tight funds

    FT.com site; Apr 07, 2006
    By Andrew Bounds in Brussels


    The man in charge of doling out US development aid is facing
    challenges on two fronts. At home, John Danilovich, chief executive of
    the Millennium Challenge Corporation, is vying with other departments
    for funding from cash-strapped Washington. Abroad, he wants poor
    countries to compete against each other for the funds he has to offer.

    Last month, Mr Danilovich asked Congress for $3bn (€2.4bn,
    £1.7bn) for 2007. The indications are he will be lucky to get
    much more than the $1.7bn the MCC received for this year.

    "We have a complicated budget process because of the demands of Iraq
    and Hurricane Katrina [which devastated New Orleans this year]. The
    defence department needs the money first," he admits.

    It is a personal blow since the former ambassador to Brazil and Costa
    Rica has reformed the MCC, established by President George W. Bush in
    2004, to please Congress. Almost his first act after getting the job
    in November was to suspend aid to Yemen for backsliding on its
    commitments. "This communicated a strong message to other countries
    that we do have the will and courage to take steps to ensure the money
    comes to a screeching halt," he said.

    The MCC is now talking to Yemen about what it must do to have the aid
    tap turned on again. It is also in deadlock with Bolivia. It agreed a
    record $598m grant for infrastructure and export assistance weeks
    before populist ex-coca farmer Evo Morales won a December election in
    the Latin American state. Yet the plan is gathering dust. "We have had
    no sign of engagement from the Morales government and we are dependent
    on them to take this to the next stage."

    Mr Danilovich's next act was to produce a "how to" manual for
    countries seeking aid.

    The MCC is set up more

    as a company than a federal agency and gives out money in quarterly
    instalments over five years, expecting business plans from its client
    countries. Condoleezza Rice, secretary of state, is chairman, and Rob
    Portman, trade representative, John Snow, Treasury sec-retary, and
    Randall Tobias, USAID chief, are also members. Two seats are unfilled.

    Mr Danilovich has been praised for his work. Bono, the rock star and
    anti-poverty campaigner who helped to conceive the MCC idea, visited
    its headquarters last month. "It has had its problems getting off the
    ground but it is getting a lot better under Danilovich," said Jamie
    Drummond, director of Data, Bono's organisation.

    Some 23 countries have qualified for assistance by hitting the
    indicators, drawn up by institutions such as the World Bank and the
    rightwing Heritage Foundation. They measure indicators such as
    standards of governance, economic liberalism, democracy and women's
    rights.

    "The aim is to incentivise countries. The ones that move fastest can
    jump from the back of the queue to the front," said Mr
    Danilovich. They are competing for the "honey pot" at the end. He
    cites the west African state of Benin as a success story –
    it completed a $307m deal in February in near-record time and has just
    had a democratic transfer of power.

    Seven other countries have agreed programmes totalling $1.2bn:
    Madagascar, Honduras, Nicaragua, Georgia, Armenia, Cape Verde and
    Vanuatu. Five more have concluded smaller so-called threshold
    agreements to help them qualify for further funding. Mr Danilovich
    expects to sign a deal with Ghana in the next few months, and El
    Salvador, Sri Lanka, Mali and Mongolia by the end of the year.

    This month he will accompany Jim Kolbe, the House of Representatives
    foreign appropriations committee chairman, to Armenia and Georgia to
    show what a difference US money is making.
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