October 5, 2004 Tuesday
HEADLINE: HEARING OF THE SENATE FOREIGN RELATIONS COMMITTEE
SUBJECT: MILLENNIUM CHALLENGE CORPORATION PROGRESS REPORT
CHAIRED BY: SENATOR RICHARD LUGAR (R-IN)
WITNESS: PAUL APPLEGARTH, CEO, MILLENNIUM CHALLENGE CORPORATION
LOCATION: 419 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C.
SEN. RUSSELL FEINGOLD (D-WI): Mr. Chairman, just very briefly, I thank you very much for having this hearing. And Mr. Applegarth, it's good to see you again.
As I know-as you know, I believe that the president's Millennium Challenge Account initiative is an admirable one. It recognizes two important facts: that sustainable development overseas is in our national interest and that development efforts are most likely to succeed in countries that are actually taking serious steps to get their own fiscal houses in order, to also crack down on corruption, to respect the rule of law and basic human rights, and then to invest in their own citizens' well-being.
As I'm sure you are already experiencing and have experienced before, good ideas are not always easy to implement. A lot of people were skeptical about creating a new institution to implement this initiative. And I for one have not yet heard concrete plans for how the Millennium Challenge Corporation plans to monitor and evaluate U.S. taxpayer-funded projects overseas.
I also want to be sure that very valuable programs are not used-the funding from those funds-from those programs used in order to fund this. My understanding is, this was to be on top of other things that we believe strongly in, and I would have some questions about that as well.
But I am eager to hear how it's going, and I very much appreciate your being here.
Thank you, Mr. Chairman.
BREAK IN TEXT
SEN. FEINGOLD: Thank you, Mr. Chairman.
And I'd like to start, Mr. Applegarth, by asking you essentially the same question that I asked at your confirmation hearing in March, which is how will the MCC monitor the very significant expenditures of taxpayer resources with a total staff of about 200 people? I understand that it's your intention to have about 20 people based overseas to monitor programs in 30 countries by fiscal year 2006. As the recent Inspector General's report noted, $5 billion a year, as the president called for, spread over 30 countries still averages out to $167 million per country per year. Do you think that 20 roving employees can adequately monitor the use of these taxpayer dollars?
MR. APPLEGARTH: I think we're different, Senator, that-because we have the true country partner buy-in as to what we're doing. And it's not only our resource that we-we view ourselves as fiduciaries for the American taxpayer, but at the end of the day, this is also their resource. This opportunity is a rare one for them. And we're fortunate in picking really the best of the-the highest ranked of the potential countries in working with us.
We will, as part of the detailed implementation plans under a compact, have explicit monitoring benchmarks and methods and particulars built in. And essentially, we will monitor the monitors. We don't expect our staff to be doing the detailed monitoring, but we will be working with the partner countries to make sure that that happens correctly.
In addition, those compacts and those procedures will all be public and available. And we were trying to encourage both the community here, as well as in the countries, to participate. So they know what the benchmarks are, they know what the intentions for the way the money is supposed to go are. So we expect to have not 20 watchdogs, we expect to have thousands of watchdogs in each country in some way that are helping us to do this, informally as well as formally, through the procedures we build together with the country in the compact.
SEN. FEINGOLD: I appreciate that answer. Let me follow by asking if these plans for monitoring and evaluation of the Millennium Challenge are based on any existing model? Is there some existing arrangement that you could point to that would give us confidence that we'll be able to keep close tabs on our taxpayers' dollars, especially since you're talking about a relatively modest staff of American employees, and an interesting concept of thousands of other people helping us in those countries. But I'm wondering if there's some other model that would signal that that would work?
MR. APPLEGARTH: We're looking at the best that's out there. We are different in some ways because we are-we're combining what the private sector does in terms of ongoing, short-term monitoring, quarterly monitoring, if you like, or even more frequently, as you would if you were sitting on the board of a company, together with some things that the World Bank has been doing and the IDB has been doing and elsewhere in both looking at the long-term impact, but also the short-term monitoring basis. It's going to-we've been looking closely at both successes and failures in monitoring in those other institutions, and we'll try to pick the best of them from the-depending on the sector and depending on the country, and it really is just going to vary by both.
SEN. FEINGOLD: What will it cost for the MCC to maintain these 20 employees who are based overseas? And are you asking the State Department or USAID to share some of the costs? And how much?
MR. APPLEGARTH: Well, we have been working closely with State and AID to make sure that we're leveraging our staff resources to the extent that we can. You know, by design, we are not intended to create another bureaucracy. We are really modeled much more on a professional services entity, where we are subcontracting out anything that is not critical to our mission. So we subcontract out things like our personnel administration, our internal accounting, even our security clearances, so that our folks really are directed to our mission, which is to work with the countries to make these things work.
In many countries we expect to actually be housed in the embassy or with the AID mission. It will vary on the country circumstances, but that would be our intention. To the extent that we can leverage the use of other U.S. government resources in the area, we'd like to do that. And we've been getting quite good cooperation on the ground from both our ambassadors and the mission heads from AID, in particular.
SEN. FEINGOLD: I think I understood that answer. Let me follow it by asking, does the MCC anticipate asking State or USAID personnel to actually assist in the monitoring and evaluation effort?
MR. APPLEGARTH: We can. And I think it will be country specific. As you know-we certainly will be seeking their views and their input. Whether or not they have the resources to do that for us, I think, is really up to them.
SEN. FEINGOLD: Would State or USAID be reimbursed for these costs?
MR. APPLEGARTH: We would attempt, I think, to work out on a country-kind of country basis some arrangements that would work for them as well as for us. We're not going to divert them from their primary mission.
SEN. FEINGOLD: Some have voiced concerns that lobbyists have been retained at a significant cost to extremely poor countries to help represent developing countries that wish to participate in the Millennium Challenge Initiative. Obviously, this is troubling, since the whole premise behind this initiative is that objective performance will be rewarded. It's not supposed to be about who is in or out of political favor or who has a high-priced lobbyist and who does not. What's more, the objective indicators are well known and publicized. Certainly our embassies should be able to explain clearly how one qualifies for MCA assistance. So it would trouble me if some countries believe that by hiring some professional lobbyist, that that's a good investment, rather than, say, implementing the actual policies that the chairman was talking about to root out corruption.
Does this phenomenon trouble you? Do you have any ideas of how widespread the phenomenon is? And what steps are being taken by the MCC to discourage this kind of activity?
MR. APPLEGARTH: I share your concerns 100 percent, Senator. This is not a good use of funds. I've been quite public about that this is not an approach a country should take. As recently as last Thursday, I spoke before a large Bretton Woods conference, and in response to a particular question from an emerging-market ambassador, repeated the fact that success with MCA does not involve lobbyists.
We've only seen a couple instances of it. And I can't think of a case where a lobbyist was hired that I'm aware of where the country was selected in this first round. The board takes it quite seriously that its selections are based on the criteria and not politics and lobbying. And I think that's the best signal, both our jawboning and the fact that it doesn't work.
SEN. FEINGOLD: I'm very pleased to hear you've shown concern about this already, and over time I want to work with you to make sure we stay on top of this possible problem.
What steps has the MCC taken to ensure that civil society in qualifying countries is engaged in actually developing compact proposals so that this program really empowers citizens and not just empowering governments overseas? What can you do to bring civil society into this process?
MR. APPLEGARTH: We have been-you know, transparency is our biggest ally, particularly now when we're trying to build confidence that we will use the money well. In the countries-in every country that we visited on initial rounds, we had separate meetings with civil society, with NGOs, and members of the business community. Most of our follow-up trips have involved similar meetings. We've asked the countries to-in their compact proposals to discuss and explain their consultative process. And it's clear to them that we're taking it seriously, and as a result they're taking it seriously. And it's constantly reinforced in our messages with the countries and our discussions, and they know it will be a key element of our due diligence.
SEN. FEINGOLD: Thank you, Mr. Chairman.