From: MihranK@aol.com
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.