Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance in Fiscal Year 2015, 57135-57140 [2014-22652]

Download as PDF Federal Register / Vol. 79, No. 185 / Wednesday, September 24, 2014 / Notices MILLENNIUM CHALLENGE CORPORATION [MCC FR 14–06] Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance in Fiscal Year 2015 Millennium Challenge Corporation. ACTION: Notice. AGENCY: This report to Congress is provided in accordance with Section 608(b) of the Millennium Challenge Act of 2003, as amended, 22 U.S.C. 7707(b) (the ‘‘Act’’). SUMMARY: Dated: September 18, 2014. John C. Mantini, Assistant General Counsel, Millennium Challenge Corporation. Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance for Fiscal Year 2015 Summary In accordance with section 608(b)(1) of the Millennium Challenge Act of 2003 (the ‘‘Act’’, 22 U.S.C. 7707(b)(1)), the Millennium Challenge Corporation (MCC) is submitting the following report. This report identifies the criteria and methodology that the Millennium Challenge Corporation (MCC) intends to use to determine which candidate countries may be eligible to be considered for assistance under the Act for FY 2015. Under section 608 (c)(1) of the Act, MCC will, for a thirty-day period following publication, accept and consider public comment for purposes of determining eligible countries under section 607 of the Act (22 U.S.C. 7706). II. How does the Board evaluate these countries? A. Overall Evaluation The Board looks at three legislatively mandated factors in its evaluation of any candidate country for compact eligibility: (1) Policy performance; (2) the opportunity to reduce poverty and generate economic growth; and (3) the availability of MCC funds. This document explains how the Board of Directors (Board) of the Millennium Challenge Corporation (MCC) will identify, evaluate, and determine eligibility of countries for Millennium Challenge Account (MCA) assistance for fiscal year (FY) 2015. The statutory basis for this report is set forth in appendix A. Specifically, this document discusses: 1. Policy Performance Because of the importance of needing to evaluate a country’s policy performance—and needing to do so in a comparable, cross-country way—the Board relies to the maximum extent possible upon the best-available objective and quantifiable indicators of policy performance. These indicators act as proxies of the country’s commitment to good governance, as laid out in MCC’s founding legislation. Comprised of 20 third-party indicators in the categories of ‘‘encouraging economic freedom,’’ ‘‘investing in people,’’ and ‘‘ruling justly,’’ MCC ‘‘scorecards’’ are created for all LICs and LMICs. To ‘‘pass’’ the indicators on the scorecard, the country must perform I. Which countries MCC will evaluate II. How the Board evaluates these countries A. Overall B. For selection for first compact eligibility C. For selection for second/subsequent compact eligibility D. For selection for the threshold program 1 This corresponds to LIC and LMIC definitions using the historic International Development Association (IDA) thresholds published by the World Bank. 2 By law, no more than 25 percent of all compact funds for a given fiscal year may be provided to LMIC countries (using this ‘‘funding’’ definition). Criteria and Methodology for FY 2015 asabaliauskas on DSK5VPTVN1PROD with NOTICES I. Which countries are evaluated? As discussed in the August 2014 Report on Countries that are Candidates for Millennium Challenge Account Eligibility for Fiscal Year 2015 and Countries that Would be Candidates but for Legal Prohibitions (the ‘‘Candidate Country Report’’), MCC evaluates all low-income countries (LICs) and lowermiddle income countries (LMICs) countries as follows: • For scorecard evaluation purposes for FY 2015, MCC defines LICs as those countries between $0 and $1985 GNI per capita, and LMICs as those countries between $1986 and $4125 GNI per capita.1 • For funding purposes for FY 2015, MCC defines the poorest 75 countries as LICs, and the remaining countries up to the upper-middle income (UMIC) threshold of $4125 as LMICs.2 Lists of all LICs and LMICs under scorecard evaluation are provided in appendix B, including which countries among them are statutorily prohibited from receiving U.S. assistance. The list using the ‘‘funding’’ definition appeared in the Candidate Country Report, which describes how funding categories work. VerDate Sep<11>2014 18:41 Sep 23, 2014 Jkt 232001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 57135 above the median among its income group (as defined above), except in the cases of inflation, political rights, civil liberties, and immunization rates (LMICs only), where minimum threshold scores have been established. In particular, the Board considers whether the country • Passed at least 10 of the 20 indicators, with at least one in each category, • passed the ‘‘Control of Corruption’’ indicator, and • passed either the ‘‘Political Rights’’ or ‘‘Civil Liberties’’ indicator. While satisfaction of all three aspects means a country is termed to have ‘‘passed’’ the scorecard, the Board also considers whether the country performed ‘‘substantially worse’’ in any one policy category than it does on the scorecard overall. Appendix C describes all 20 indicators, their definitions, what is required to ‘‘pass,’’ their source, and their relationship to the legislative criteria. The 20 policy performance indicators are the predominant basis for determining which countries will be eligible for MCC assistance, and the Board expects a country to be passing its scorecard at the point the Board decides to select the country for either a first or second/subsequent compact. However, the Board also recognizes that even the best-available data has inherent challenges. For example, data gaps, realtime events versus data lags, the absence of narratives and nuanced detail, and other similar weaknesses affect each of these indicators. In such instances, the Board uses its judgment to interpret policy performance as measured by the scorecards. The Board may also consult other sources of information to further enhance its understanding of a given country’s policy performance beyond the issues on the scorecard, which is especially useful given the unique perspective each Board member brings to the table (e.g., specific policy issues related to trade, civil society, other U.S. aid programs, financial sector performance, and security/foreign policy issues). The Board uses its judgment on how best to weigh such information in assessing overall policy performance. 2. The Opportunity To Reduce Poverty and Generate Economic Growth The Board also consults other sources of qualitative and quantitative information to have a more detailed view of the opportunity to reduce poverty and generate economic growth in a country. While the Board considers a range of other information sources depending on E:\FR\FM\24SEN1.SGM 24SEN1 57136 Federal Register / Vol. 79, No. 185 / Wednesday, September 24, 2014 / Notices the country, specific areas of attention typically include better understanding the issues, trends, and trajectory of: • The control of corruption and rule of law; • The state of democratic and human rights (especially of vulnerable groups 3); • The perspective of civil society on salient governance issues; • The potential for the private sector (both local and foreign) to lead investment and growth; • The levels of poverty within a country; and • The country’s institutional capacity. Where applicable, the Board also considers MCC’s own experience and ability to reduce poverty and generate economic growth in a given country— such as considering MCC’s core skills versus the country’s needs, capacity within MCC to work with a country, and the likelihood that MCC is seen by the country as a credible partner. The goal in using this information is to have greater clarity regarding the likelihood that MCC investments will have an appreciable impact on reducing poverty and generating economic growth in a given country. The Board has used such information both to not select countries that are otherwise passing their scorecards, as well as to better understand when a country’s performance on a particular indicator may not be up to date, and/or about to change. More details on this subject (sometimes referred to as ‘‘supplemental information’’) can be found on MCC’s Web site at http://www.mcc.gov/ documents/reports/report2012001121001-fy13-selectionsupplemental-info.pdf. asabaliauskas on DSK5VPTVN1PROD with NOTICES 3. The Availability of MCC Funds The final factor that the Board must consider when evaluating countries is the funding available. The agency’s allocation of its budget is constrained, and often specifically limited, by provisions in authorizing legislation and appropriations acts. MCC has a continuous pipeline of countries in compact development, compact implementation, and compact closure, as well as threshold programs. Consequently, the Board factors in the overall portfolio picture when making its selection decisions given the funding available for each of the agency’s programs. Sub-sections B and C describe how each of these three legislatively mandated factors are applied with 3 For example, women; children; lesbian, gay, bisexual, and transgender individuals; people with disabilities; and workers. VerDate Sep<11>2014 18:41 Sep 23, 2014 Jkt 232001 regard to two selection situations facing the Board each December: Selection of countries for first compact eligibility and selection of countries for second/ subsequent compact eligibility. Subsection D describes selection of countries for the threshold program. B. Evaluation for Selection of Countries for First Compact Eligibility When selecting countries for compacts, the Board looks at all three legislatively mandated aspects described in the previous section: (1) Policy performance, first and foremost as measured by the scorecards and bolstered through additional information as described in the previous section; (2) the opportunity to reduce poverty and generate economic growth, examined through the use of other supporting information, as described in the previous section; and (3) the funding available. At a minimum, the Board looks to see that the country passes its scorecard. It also examines supporting evidence that the country’s commitment to good governance is on a sound footing and on a positive trajectory, and that MCC has funding to support a meaningful compact with that country. Where applicable, previous threshold program information is also considered. The Board then weighs the information described above across each of the three dimensions. The approach described above is then applied in any additional years of selection of a country to continue to develop a first compact, with the added benefit of having cumulative scorecards, cumulative records of policy performance, and other accumulated supporting information to determine the overall pattern of performance over the emerging multi-year trajectory. C. Evaluation for Selection of Countries for Second/Subsequent Compact Eligibility Section 609(k) of the Millennium Challenge Act of 2003, as amended, specifically authorizes MCC to enter into ‘‘one or more subsequent Compacts.’’ MCC does not consider subsequent compact eligibility, however, before countries have completed their compact, or are within 18 months of completion, (e.g., a second compact if they have completed or are within 18 months of completing their first compact). Selection for subsequent compacts is not automatic and is intended only for countries that (1) exhibit successful performance on their previous compact; (2) exhibit improved scorecard policy performance during the partnership; and (3) exhibit a continued PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 commitment to further their sector reform efforts in any subsequent partnership. As a result, the Board has an even higher standard when selecting countries for subsequent compacts. 1. Successful Implementation of the Previous Compact To evaluate the degree of success of the previous compact, the Board looks to see if there is a clear evidence base of success within the budget and time limits of the compact, in particular by looking at three aspects: (a) The degree to which there is evidence of strong political will and management capacity: Is the partnership characterized by the country ensuring that both policy reforms and the compact itself are both being implemented to the best ability that the country can deliver; (b) The degree to which the country has exhibited a commitment and capacity to achieve program results: Are the financial and project results being achieved; to what degree is the country committing its own resources to ensure the compact is a success; to what extent is the private sector engaged (if relevant); and other compact-specific issues; and (c) The degree to which the country has implemented the compact in accordance with MCC’s core policies and standards: That is, is the country adhering to MCC’s policies and procedures, including in critical areas such as remediating unresolved fraud and corruption/abuse or misuse of funds issues; procurement; and monitoring and evaluation. Details on the specific types of information examined (and sources used) in each of the three areas are provided in appendix D. The overall sentiment is that the Board is looking for evidence that the previous compact will be completed or has been completed successfully, on time and on budget, and that there is a commitment to continued, robust reform going forward. 2. Improved Scorecard Policy Performance Beyond successful implementation of the previous compact, the Board expects the country to have improved its overall scorecard policy performance during the partnership and to pass the scorecard in the year of selection for the subsequent compact. The Board focuses on: • The overall scorecard pass/fail rate over time, what this suggests about underlying policy performance, as well as an examination of the underlying reasons; E:\FR\FM\24SEN1.SGM 24SEN1 Federal Register / Vol. 79, No. 185 / Wednesday, September 24, 2014 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES • The progress over time on policy areas measured by both hard-hurdle indicators—Control of Corruption, and Democratic Rights—including an examination of the underlying reasons; and • Other indicator trajectories as deemed relevant by the Board. In all cases, while the Board expects the country to be passing its scorecard, other sources of information are examined to understand the nuance and reasons behind scorecard or indicator performance over time, including any real-time updates, methodological changes within the indicators themselves, shifts in the relevant candidate pool, or alternative policy performance perspectives (such as gleaned through consultations with civil society and related stakeholders). Other sources of information are also consulted to look at policy performance over time in areas not covered by the scorecard but that are deemed important by the Board (such as trade, foreign policy concerns, etc.). 3. A Commitment To Further Sector Reform The Board expects that subsequent compacts will endeavor to tackle deeper policy reforms necessary to unlock an identified constraint to growth. Consequently, the Board considers its own experience during the previous compact in considering how committed the country is to reducing poverty and increasing economic growth, and therefore tries to gauge the country’s commitment for further sector reform should it be selected for a subsequent compact. This includes: • Assessing the country’s delivery of policy reform during the previous compact (as described above); • Assessing expectations of the country’s ability and willingness to continue embarking on sector policy reform in a subsequent compact; • Examining both other sources of information that describe the nature of the opportunity to reduce poverty and generate growth (as outlined in A.2 above), and the relative success of the previous compact overall, as already discussed; and • Finally, considering how well funding can be leveraged for impact, given its experience in the previous compact. Through this overall approach to subsequent compact selection, the Board applies the three legislatively mandated evaluation criteria (policy performance, the opportunity to reduce poverty and generate economic growth, and the funding available) in a way that rests critically on deeply assessing the VerDate Sep<11>2014 18:41 Sep 23, 2014 Jkt 232001 previous partnership: from a compact success standpoint, a commitment to improved scorecard policy performance standpoint, and a commitment to continued sector policy reform standpoint. The Board then weighs all of the information described above in making its decision. The approach described above is then applied in any additional years of selection to continue to develop the subsequent compact, with the added benefit of having even further detail on previous compact implementation, cumulative scorecards, cumulative records of policy performance, and other accumulated supporting information to determine the overall pattern of performance over the resulting multi-year trajectory. D. Evaluation for Eligibility for Threshold Programs The Board may also select countries to participate in the Threshold Program. The Threshold Program provides assistance to candidate countries that exhibit a significant commitment to meeting the eligibility criteria described in the previous sub-sections, but fail to meet such requirements. Specifically, in examining the policy performance, the opportunity to reduce poverty and generate economic growth, and the funding available, the Board will consider whether a country potentially eligible for threshold program assistance appears to be on a trajectory to becoming a viable contender for compact eligibility in the medium term. APPENDIX A: Statutory Basis for this Report This report to Congress is provided in accordance with section 608(b) of the Millennium Challenge Act of 2003, as amended, 22 U.S.C. 7707(b) (the Act). Section 605 of the Act authorizes the provision of assistance to countries that enter into a Millennium Challenge Compact with the United States to support policies and programs that advance the progress of such countries in achieving lasting economic growth and poverty reduction. The Act requires MCC to take a number of steps in selecting countries for compact assistance for FY 2015 based on the countries’ demonstrated commitment to just and democratic governance, economic freedom, and investing in their people, MCC’s opportunity to reduce poverty and generate economic growth in the country, and the availability of funds. These steps include the submission of reports to the congressional committees specified in the Act and publication of information in the Federal Register that identify: 1. The countries that are ‘‘candidate countries’’ for MCA assistance for FY 2015 based on per capita income levels and eligibility to receive assistance under U.S. PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 57137 law. (section 608(a) of the Act; 22 U.S.C. 7707(a)); 2. The criteria and methodology that MCC’s Board of Directors (Board) will use to measure and evaluate policy performance of the candidate countries consistent with the requirements of section 607 of the Act (22 U.S.C. 7706) in order to determine ‘‘eligible countries’’ from among the ‘‘candidate countries’’ (section 608(b) of the Act; 22 U.S.C. 7707(b)); and 3. The list of countries determined by the Board to be ‘‘eligible countries’’ for FY 2015, with justification for eligibility determination and selection for compact negotiation, including those eligible countries with which MCC will seek to enter into compacts (section 608(d) of the Act; 22 U.S.C. 7707(d)). This report reflects the satisfaction of item #2 above. APPENDIX B: Lists of all LICs, LMICs, and Statutorily Prohibited Countries for Evaluation Purposes Income Classification for Scorecards Since MCC was created, it has relied on the World Bank’s gross national income (GNI) per capita income data (Atlas method) and the historical ceiling for eligibility as set by the World Bank’s International Development Association (IDA) to divide countries into two income categories for purposes of creating scorecards: LICs and LMICs. These categories are used to account for the income bias that occurs when countries with more per capita resources perform better than countries with fewer. Using the historical IDA eligibility ceiling for the scorecards ensures that the poorest countries compete with their income level peers and are not compared against countries with more resources to mobilize. MCC will continue to use the traditional income categories for eligibility to categorize countries in two groups for purposes of FY 2015 scorecard comparisons: • LICs are countries with GNI per capita below IDA’s historical ceiling for eligibility ($1,985 for FY 2015); and • LMICs, which are countries with GNI per capita above IDA’s historical ceiling for eligibility but below the World Bank’s upper middle income country threshold ($1,986– $4,125 for FY 2015). The list of countries categorized as LICs and LMICs for the purpose of scorecard assessments can be found below.4 4 In December 2011, a statutory change requested by the agency altered the way MCC must group countries for the purposes of applying MCC’s 25 percent LMIC funding cap. This change, designed to bring stability to the funding stream, affects how MCC funds countries selected for compacts and does not affect the way scorecards are created. For determining whether a country can be funded as an LMIC or LIC: • The poorest 75 countries are now considered LICs for the purposes of MCC funding. They are not limited by the 25 percent funding cap on LMICs. • Countries with a GNI per capita above the poorest 75 but below the World Bank’s upper middle income country threshold ($4,125 for FY 2015) are considered LMICs for the purposes of MCC funding. By law, no more than 25 percent of E:\FR\FM\24SEN1.SGM Continued 24SEN1 57138 Federal Register / Vol. 79, No. 185 / Wednesday, September 24, 2014 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES Low Income Countries (FY 2015 Scorecard) 1. Afghanistan 2. Bangladesh 3. Benin 4. Burkina Faso 5. Burma 6. Burundi 7. Cambodia 8. Cameroon 9. Central African Republic 10. Chad 11. Comoros 12. Congo, the Democratic Republic of 13. Cote d’Ivoire 14. Djibouti 15. Eritrea 16. Ethiopia 17. Gambia 18. Ghana 19. Guinea 20. Guinea-Bissau 21. Haiti 22. India 23. Kenya 24. Korea, Democratic People’s Republic of 25. Kyrgyz Republic 26. Laos 27. Lesotho 28. Liberia 29. Madagascar 30. Malawi 31. Mali 32. Mauritania 33. Mozambique 34. Nepal 35. Nicaragua 36. Niger 37. Pakistan 38. Rwanda 39. Sao Tome and Principe 40. Senegal 41. Sierra Leone 42. Solomon Islands 43. Somalia 44. South Sudan 45. Sudan 46. Tajikistan 47. Tanzania 48. Togo 49. Uganda 50. Uzbekistan 51. Vietnam 52. Yemen 53. Zambia 54. Zimbabwe Lower Middle Income Countries (FY 2015 Scorecard) 1. Armenia 2. Bhutan 3. Bolivia 4. Cabo Verde 5. Congo, Republic of 6. Egypt 7. El Salvador 8. Georgia 9. Guatemala 10. Guyana 11. Honduras all compact funds for a given fiscal year can be provided to these countries. The FY 2015 Candidate Country Report lists LICs and LMICs based on this new definition and outlines which countries are subject to the 25 percent funding cap. VerDate Sep<11>2014 18:41 Sep 23, 2014 Jkt 232001 12. Indonesia 13. Kiribati 14. Kosovo 15. Micronesia 16. Moldova 17. Mongolia 18. Morocco 19. Nigeria 20. Papua New Guinea 21. Paraguay 22. Philippines 23. Samoa 24. Sri Lanka 25. Swaziland 26. Syria 27. Timor-Leste 28. Ukraine 29. Vanuatu Statutorily Prohibited Countries for FY 2015 Scorecards (Included in the Data Pool for Comparative Purposes, but by Law Cannot Be Considered for Funding) 1. Bolivia 2. Burma 3. Cambodia 4. Eritrea 5. North Korea 6. Sudan 7. Syria 8. Zimbabwe APPENDIX C: Indicator Definitions The following indicators will be used to measure candidate countries’ demonstrated commitment 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 reduction of poverty and thus provide a sound environment for the use of MCA funds. The indicators are not goals in themselves; rather, they are proxy measures of policies that are linked to broad-based sustainable economic growth. The indicators were selected based on (i) their relationship to economic growth and poverty reduction; (ii) the number of countries they cover; (iii) transparency and availability; and (iv) relative soundness and objectivity. Where possible, the indicators are developed by independent sources. Listed below is a brief summary of the indicators (a detailed rationale for the adoption of these indicators can be found in the Public Guide to the Indicators on MCC’s public Web site at www.mcc.gov). Ruling Justly 1. Political Rights: Independent experts rate 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, among other things. Pass: Minimum score of 17 out of 40. Source: Freedom House 2. Civil Liberties: Independent experts rate countries on freedom of expression; association and organizational rights; rule of law and human rights; and personal autonomy and economic rights, among other PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 things. Pass: Minimum score of 25 out of 60. Source: Freedom House 3. Freedom of Information: Measures the legal and practical steps taken by a government to enable or allow information to move freely through society; this includes measures of press freedom, national freedom of information laws, and the extent to which a county is filtering internet content or tools. Pass: Score must be above the median score for the income group. Source: Freedom House/FRINGE Special/Open Net Initiative 4. Government Effectiveness: An index of surveys and expert assessments that rate countries on the quality of public service provision; civil servants’ competency and independence from political pressures; and the government’s ability to plan and implement sound policies, among other things. Pass: Score must be above the median score for the income group. Source: Worldwide Governance Indicators (World Bank/Brookings) 5. Rule of Law: An index of surveys and expert assessments that rate countries on the extent to which the public has confidence in and abides by the rules of society; the incidence and impact of violent and nonviolent crime; the effectiveness, independence, and predictability of the judiciary; the protection of property rights; and the enforceability of contracts, among other things. Pass: Score must be above the median score for the income group. Source: Worldwide Governance Indicators (World Bank/Brookings) 6. Control of Corruption: An index of surveys and expert assessments that rate countries on: ‘‘grand corruption’’ in the political arena; the frequency of petty corruption; the effects of corruption on the business environment; and the tendency of elites to engage in ‘‘state capture,’’ among other things. Pass: Score must be above the median score for the income group. Source: Worldwide Governance Indicators (World Bank/Brookings) Encouraging Economic Freedom 1. Fiscal Policy: The overall budget balance divided by gross domestic product (GDP), averaged over a three-year period. The data for this measure comes primarily from IMF country reports or, where public IMF data are outdated or unavailable, are provided directly by the recipient government with input from U.S. missions in host countries. All data are cross-checked with the IMF’s World Economic Outlook database to try to ensure consistency across countries and made publicly available. Pass: Score must be above the median score for the income group. Source: International Monetary Fund Country Reports, National Governments, and the International Monetary Fund’s World Economic Outlook Database 2. Inflation: The most recent average annual change in consumer prices. Pass: Score must be 15% or less. Source: The International Monetary Fund’s World Economic Outlook Database 3. Regulatory Quality: An index of surveys and expert assessments that rate countries on the burden of regulations on business; price controls; the government’s role in the economy; and foreign investment regulation, E:\FR\FM\24SEN1.SGM 24SEN1 Federal Register / Vol. 79, No. 185 / Wednesday, September 24, 2014 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES among other areas. Pass: Score must be above the median score for the income group. Source: Worldwide Governance Indicators (World Bank/Brookings) 4. Trade Policy: A measure of a country’s openness to international trade based on weighted average tariff rates and non-tariff barriers to trade. Pass: Score must be above the median score for the income group. Source: The Heritage Foundation 5. Gender in the Economy: An index that measures the extent to which laws provide men and women equal capacity to generate income or participate in the economy, including the capacity to access institutions, get a job, register a business, sign a contract, open a bank account, choose where to live, and to travel freely. Pass: Score must be above the median score for the income group. Source: International Finance Corporation 6. Land Rights and Access: An index that rates countries on the extent to which the institutional, legal, and market framework provide secure land tenure and equitable access to land in rural areas and the time and cost of property registration in urban and peri-urban areas. Pass: Score must be above the median score for the income group. Source: The International Fund for Agricultural Development and the International Finance Corporation 7. Access to Credit: An index that rates countries on rules and practices affecting the coverage, scope, and accessibility of credit information available through either a public credit registry or a private credit bureau; as well as legal rights in collateral laws and bankruptcy laws. Pass: Score must be above the median score for the income group. Source: International Finance Corporation 8. Business Start-Up: An index that rates countries on the time and cost of complying with all procedures officially required for an entrepreneur to start up and formally operate an industrial or commercial business. Pass: Score must be above the median score for the income group. Source: International Finance Corporation Investing in People 1. Public Expenditure on Health: Total expenditures on health by government at all levels divided by GDP. Pass: Score must be above the median score for the income group. Source: The World Health Organization 2. Total Public Expenditure on Primary Education: Total expenditures on primary education by government at all levels divided by GDP. Pass: Score must be above the median score for the income group. Source: The United Nations Educational, Scientific and Cultural Organization and National Governments 3. Natural Resource Protection: Assesses whether countries are protecting up to 17 percent of all their biomes (e.g., deserts, tropical rainforests, grasslands, savannas and tundra). Pass: Score must be above the median score for the income group. Source: The Center for International Earth Science Information Network and the Yale Center for Environmental Law and Policy 4. Immunization Rates: The average of DPT3 and measles immunization coverage rates for the most recent year available. Pass: Score must be above the median score for LICs, and 90% or higher for LMICs. Source: The World Health Organization and the United Nations Children’s Fund 5. Girls Education: a. Girls’ Primary Completion Rate: The number of female students enrolled in the last grade of primary education minus repeaters divided by the population in the relevant age cohort (gross intake ratio in the last grade of primary). LICs are assessed on this indicator. Pass: Score must be above the median score for the income group. Source: United Nations Educational, Scientific and Cultural Organization b. Girls Secondary Enrollment Education: The number of female pupils enrolled in lower secondary school, regardless of age, expressed as a percentage of the population of females in the theoretical age group for lower secondary education. LMICs will be assessed on this indicator instead of Girls Primary Completion Rates. Pass: Score must be above the median score for the income group. Source: United Nations Educational, Scientific and Cultural Organization 6. Child Health: An index made up of three indicators: (i) access to improved water, (ii) access to improved sanitation, and (iii) child (ages 1–4) mortality. Pass: Score must be above the median score for the income group. Source: The Center for International Earth Science Information Network and the Yale Center for Environmental Law and Policy Relationship to Legislative Criteria Within each policy category, the Act sets out a number of specific selection criteria. A set of objective and quantifiable policy indicators is used to inform eligibility decisions for MCA assistance and to 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 objective indicators. Most are addressed by multiple indicators. The specific indicators appear in parentheses next to the corresponding criterion set out in the Act. Section 607(b)(1): Just and democratic governance, including a demonstrated commitment to— (A) Promote political pluralism, equality and the rule of law (Political Rights, Civil Liberties, Rule of Law, and Gender in the Economy); (B) respect human and civil rights, including the rights of people with disabilities (Political Rights, Civil Liberties, and Freedom of Information); (C) protect private property rights (Civil Liberties, Regulatory Quality, Rule of Law, and Land Rights and Access); Topic (D) encourage transparency and accountability of government (Political Rights, Civil Liberties, Freedom of Information, Control of Corruption, Rule of Law, and Government Effectiveness); and (E) combat corruption (Political Rights, Civil Liberties, Rule of Law, Freedom of Information, and Control of Corruption); 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 (Fiscal Policy, Inflation, Trade Policy, and Regulatory Quality); (B) promote private sector growth (Inflation, Business Start-Up, Fiscal Policy, Land Rights and Access, Access to Credit, Gender in the Economy, and Regulatory Quality); (C) strengthen market forces in the economy (Fiscal Policy, Inflation, Trade Policy, Business Start-Up, Land Rights and Access, Access to Credit, and Regulatory Quality); and (D) respect worker rights, including the right to form labor unions (Civil Liberties and Gender in the Economy); and Section 607(b)(3): Investments in the people of such country, particularly women and children, including programs that— (A) Promote broad-based primary education (Girls’ Primary Completion Rate, Girls’ Secondary Education Enrollment Rate, and Total Public Expenditure on Primary Education); (B) strengthen and build capacity to provide quality public health and reduce child mortality (Immunization Rates, Public Expenditure on Health, and Child Health); and (C) promote the protection of biodiversity and the transparent and sustainable management and use of natural resources (Natural Resource Protection). APPENDIX D: Subsequent Compact Considerations MCC reporting and data in the following chart are used to assess compact performance of MCC partners nearing the end of compact implementation (i.e., within the 18-month window). Some reporting used for assessment may contain sensitive information and adversely affect implementation or MCC-partner country relations. This information is for MCC’s internal use and is not made public. However, key implementation information is summarized in compact status and results reports that are published quarterly on MCC’s Web site under MCC country programs (www.mcc.gov/pages/countries) or monitoring and evaluation (http:// www.mcc.gov/pages/results/m-and-e) Web pages. MCC reporting/data source Published documents COUNTRY PARTNERSHIP Political Will: VerDate Sep<11>2014 18:41 Sep 23, 2014 Jkt 232001 PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 57139 E:\FR\FM\24SEN1.SGM 24SEN1 57140 Federal Register / Vol. 79, No. 185 / Wednesday, September 24, 2014 / Notices Topic MCC reporting/data source Published documents • Quarterly implementation reporting. • Quarterly results reporting ..... • Survey of MCC staff .............. • Program oversight/implementation. Æ project restructures. Æ partner response to MCA-unit capacity issues. • Political independence of MCA-unit Management Capacity • Project management capacity • Project performance • Level of MCC intervention/oversight • Relative level of resources required PROGRAM RESULTS Financial Results: • Commitments—including contributions to compact funding • Quarterly results published as ‘‘Table of Key Performance Indicators’’ (available by country): http://go.usa.gov/jMcC. Survey questions to be posted: http:// 1.usa.gov/1q0zp3n. • Indicator tracking tables ........ • Disbursements ..................................................................... • Quarterly financial reporting .. • Monitoring and Evaluation Plans (available by country): http://go.usa.gov/jMcC. • Quarterly Status Reports (available by country): http://1.usa.gov/NfEbcI. • Status of major conditions precedent .................................. Project Results: • Output, outcome, objective targets ...................................... • MCA-unit commitment to ‘focus on results’ ......................... • MCA-unit cooperation on impact evaluation ....................... • Percent complete for process/outputs. • Relevant outcome data • Details behind target delays Target Achievements ADHERENCE TO STANDARDS: • Procurement ........................................................................ • Environmental and social. • Fraud and corruption. • Program closure. • Monitoring and evaluation. • All other legal provisions. COUNTRY SPECIFIC Sustainability: • Implementation entity ........................................................... • Quarterly implementation reporting. • Quarterly results reporting. • Survey of MCC staff • Impact evaluations. • Audits (Government Accountability Office and MCC’s Office of the Inspector General). • Quarterly implementation reporting. • Survey of MCC staff • Published OIG and GAO Audits. • Survey questions to be posted: http:// 1.usa.gov/PE0xCX. • Quarterly implementation reporting. • Quarterly results reporting ..... • Survey of MCC staff .............. • Quarterly results published as ‘‘Table of Key Performance Indicators’’ (available by country): http://1.usa.gov/QoduNl. • Survey questions to be posted: http:// 1.usa.gov/PE0xCX. • MCC investments. Role of private sector or other donors: • Other relevant investors/investments. • Other donors/programming. • Status of related reforms. • Trajectory of private sector involvement going forward. asabaliauskas on DSK5VPTVN1PROD with NOTICES BILLING CODE 9211–03–P MORRIS K. UDALL AND STEWART L. UDALL FOUNDATION Sunshine Act Meetings 9:00 a.m. to 4:00 p.m., Thursday, October 16, 2014. TIME AND DATE: VerDate Sep<11>2014 18:41 Sep 23, 2014 Jkt 232001 The offices of the Morris K. Udall and Stewart L. Udall Foundation, 130 South Scott Avenue, Tucson, AZ 85701. STATUS: This meeting of the Board of Trustees will be open to the public, unless it is necessary for the Board to consider items in executive session. MATTERS TO BE CONSIDERED: (1) Chair’s Remarks and Appropriations Update; (2) Consent Agenda Approval, including PLACE: [FR Doc. 2014–22652 Filed 9–23–14; 8:45 am] PO 00000 Frm 00097 • Quarterly results published as ‘‘Table of Key Performance Indicators’’ (available by country): http://1.usa.gov/QoduNl. • Survey questions to be posted: http:// 1.usa.gov/PE0xCX. Fmt 4703 Sfmt 4703 the Minutes of the April 24, 2014, Board of Trustees Meeting, the Udall Center for Studies in Public Policy Workplan, and resolutions regarding Allocation of Funds to the Udall Center for Studies in Public Policy; Transfer of Funds to the Native Nations Institute for Leadership, Management, and Policy; and the Parks in Focus Fund, Inc., Bylaws; (3) Election of Secretary of the Board; (4) Election of Trustee to the Executive Committee; (5) E:\FR\FM\24SEN1.SGM 24SEN1

Agencies

[Federal Register Volume 79, Number 185 (Wednesday, September 24, 2014)]
[Notices]
[Pages 57135-57140]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22652]



[[Page 57135]]

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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 14-06]


Report on the Criteria and Methodology for Determining the 
Eligibility of Candidate Countries for Millennium Challenge Account 
Assistance in Fiscal Year 2015

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: This report to Congress is provided in accordance with Section 
608(b) of the Millennium Challenge Act of 2003, as amended, 22 U.S.C. 
7707(b) (the ``Act'').

    Dated: September 18, 2014.
John C. Mantini,
Assistant General Counsel, Millennium Challenge Corporation.

Report on the Criteria and Methodology for Determining the Eligibility 
of Candidate Countries for Millennium Challenge Account Assistance for 
Fiscal Year 2015

Summary

    In accordance with section 608(b)(1) of the Millennium Challenge 
Act of 2003 (the ``Act'', 22 U.S.C. 7707(b)(1)), the Millennium 
Challenge Corporation (MCC) is submitting the following report. This 
report identifies the criteria and methodology that the Millennium 
Challenge Corporation (MCC) intends to use to determine which candidate 
countries may be eligible to be considered for assistance under the Act 
for FY 2015.
    Under section 608 (c)(1) of the Act, MCC will, for a thirty-day 
period following publication, accept and consider public comment for 
purposes of determining eligible countries under section 607 of the Act 
(22 U.S.C. 7706).

Criteria and Methodology for FY 2015

    This document explains how the Board of Directors (Board) of the 
Millennium Challenge Corporation (MCC) will identify, evaluate, and 
determine eligibility of countries for Millennium Challenge Account 
(MCA) assistance for fiscal year (FY) 2015. The statutory basis for 
this report is set forth in appendix A. Specifically, this document 
discusses:

I. Which countries MCC will evaluate
II. How the Board evaluates these countries
    A. Overall
    B. For selection for first compact eligibility
    C. For selection for second/subsequent compact eligibility
    D. For selection for the threshold program

I. Which countries are evaluated?

    As discussed in the August 2014 Report on Countries that are 
Candidates for Millennium Challenge Account Eligibility for Fiscal Year 
2015 and Countries that Would be Candidates but for Legal Prohibitions 
(the ``Candidate Country Report''), MCC evaluates all low-income 
countries (LICs) and lower-middle income countries (LMICs) countries as 
follows:
     For scorecard evaluation purposes for FY 2015, MCC defines 
LICs as those countries between $0 and $1985 GNI per capita, and LMICs 
as those countries between $1986 and $4125 GNI per capita.\1\
---------------------------------------------------------------------------

    \1\ This corresponds to LIC and LMIC definitions using the 
historic International Development Association (IDA) thresholds 
published by the World Bank.
---------------------------------------------------------------------------

     For funding purposes for FY 2015, MCC defines the poorest 
75 countries as LICs, and the remaining countries up to the upper-
middle income (UMIC) threshold of $4125 as LMICs.\2\
---------------------------------------------------------------------------

    \2\ By law, no more than 25 percent of all compact funds for a 
given fiscal year may be provided to LMIC countries (using this 
``funding'' definition).
---------------------------------------------------------------------------

    Lists of all LICs and LMICs under scorecard evaluation are provided 
in appendix B, including which countries among them are statutorily 
prohibited from receiving U.S. assistance. The list using the 
``funding'' definition appeared in the Candidate Country Report, which 
describes how funding categories work.

II. How does the Board evaluate these countries?

A. Overall Evaluation

    The Board looks at three legislatively mandated factors in its 
evaluation of any candidate country for compact eligibility: (1) Policy 
performance; (2) the opportunity to reduce poverty and generate 
economic growth; and (3) the availability of MCC funds.
1. Policy Performance
    Because of the importance of needing to evaluate a country's policy 
performance--and needing to do so in a comparable, cross-country way--
the Board relies to the maximum extent possible upon the best-available 
objective and quantifiable indicators of policy performance. These 
indicators act as proxies of the country's commitment to good 
governance, as laid out in MCC's founding legislation. Comprised of 20 
third-party indicators in the categories of ``encouraging economic 
freedom,'' ``investing in people,'' and ``ruling justly,'' MCC 
``scorecards'' are created for all LICs and LMICs. To ``pass'' the 
indicators on the scorecard, the country must perform above the median 
among its income group (as defined above), except in the cases of 
inflation, political rights, civil liberties, and immunization rates 
(LMICs only), where minimum threshold scores have been established. In 
particular, the Board considers whether the country
     Passed at least 10 of the 20 indicators, with at least one 
in each category,
     passed the ``Control of Corruption'' indicator, and
     passed either the ``Political Rights'' or ``Civil 
Liberties'' indicator.
    While satisfaction of all three aspects means a country is termed 
to have ``passed'' the scorecard, the Board also considers whether the 
country performed ``substantially worse'' in any one policy category 
than it does on the scorecard overall. Appendix C describes all 20 
indicators, their definitions, what is required to ``pass,'' their 
source, and their relationship to the legislative criteria.
    The 20 policy performance indicators are the predominant basis for 
determining which countries will be eligible for MCC assistance, and 
the Board expects a country to be passing its scorecard at the point 
the Board decides to select the country for either a first or second/
subsequent compact. However, the Board also recognizes that even the 
best-available data has inherent challenges. For example, data gaps, 
real-time events versus data lags, the absence of narratives and 
nuanced detail, and other similar weaknesses affect each of these 
indicators. In such instances, the Board uses its judgment to interpret 
policy performance as measured by the scorecards. The Board may also 
consult other sources of information to further enhance its 
understanding of a given country's policy performance beyond the issues 
on the scorecard, which is especially useful given the unique 
perspective each Board member brings to the table (e.g., specific 
policy issues related to trade, civil society, other U.S. aid programs, 
financial sector performance, and security/foreign policy issues). The 
Board uses its judgment on how best to weigh such information in 
assessing overall policy performance.
2. The Opportunity To Reduce Poverty and Generate Economic Growth
    The Board also consults other sources of qualitative and 
quantitative information to have a more detailed view of the 
opportunity to reduce poverty and generate economic growth in a 
country.
    While the Board considers a range of other information sources 
depending on

[[Page 57136]]

the country, specific areas of attention typically include better 
understanding the issues, trends, and trajectory of:
     The control of corruption and rule of law;
     The state of democratic and human rights (especially of 
vulnerable groups \3\);
---------------------------------------------------------------------------

    \3\ For example, women; children; lesbian, gay, bisexual, and 
transgender individuals; people with disabilities; and workers.
---------------------------------------------------------------------------

     The perspective of civil society on salient governance 
issues;
     The potential for the private sector (both local and 
foreign) to lead investment and growth;
     The levels of poverty within a country; and
     The country's institutional capacity.
    Where applicable, the Board also considers MCC's own experience and 
ability to reduce poverty and generate economic growth in a given 
country--such as considering MCC's core skills versus the country's 
needs, capacity within MCC to work with a country, and the likelihood 
that MCC is seen by the country as a credible partner.
    The goal in using this information is to have greater clarity 
regarding the likelihood that MCC investments will have an appreciable 
impact on reducing poverty and generating economic growth in a given 
country. The Board has used such information both to not select 
countries that are otherwise passing their scorecards, as well as to 
better understand when a country's performance on a particular 
indicator may not be up to date, and/or about to change. More details 
on this subject (sometimes referred to as ``supplemental information'') 
can be found on MCC's Web site at http://www.mcc.gov/documents/reports/report-2012001121001-fy13-selection-supplemental-info.pdf.
3. The Availability of MCC Funds
    The final factor that the Board must consider when evaluating 
countries is the funding available. The agency's allocation of its 
budget is constrained, and often specifically limited, by provisions in 
authorizing legislation and appropriations acts. MCC has a continuous 
pipeline of countries in compact development, compact implementation, 
and compact closure, as well as threshold programs. Consequently, the 
Board factors in the overall portfolio picture when making its 
selection decisions given the funding available for each of the 
agency's programs.
    Sub-sections B and C describe how each of these three legislatively 
mandated factors are applied with regard to two selection situations 
facing the Board each December: Selection of countries for first 
compact eligibility and selection of countries for second/subsequent 
compact eligibility. Subsection D describes selection of countries for 
the threshold program.

B. Evaluation for Selection of Countries for First Compact Eligibility

    When selecting countries for compacts, the Board looks at all three 
legislatively mandated aspects described in the previous section: (1) 
Policy performance, first and foremost as measured by the scorecards 
and bolstered through additional information as described in the 
previous section; (2) the opportunity to reduce poverty and generate 
economic growth, examined through the use of other supporting 
information, as described in the previous section; and (3) the funding 
available.
    At a minimum, the Board looks to see that the country passes its 
scorecard. It also examines supporting evidence that the country's 
commitment to good governance is on a sound footing and on a positive 
trajectory, and that MCC has funding to support a meaningful compact 
with that country. Where applicable, previous threshold program 
information is also considered. The Board then weighs the information 
described above across each of the three dimensions.
    The approach described above is then applied in any additional 
years of selection of a country to continue to develop a first compact, 
with the added benefit of having cumulative scorecards, cumulative 
records of policy performance, and other accumulated supporting 
information to determine the overall pattern of performance over the 
emerging multi-year trajectory.

C. Evaluation for Selection of Countries for Second/Subsequent Compact 
Eligibility

    Section 609(k) of the Millennium Challenge Act of 2003, as amended, 
specifically authorizes MCC to enter into ``one or more subsequent 
Compacts.'' MCC does not consider subsequent compact eligibility, 
however, before countries have completed their compact, or are within 
18 months of completion, (e.g., a second compact if they have completed 
or are within 18 months of completing their first compact). Selection 
for subsequent compacts is not automatic and is intended only for 
countries that (1) exhibit successful performance on their previous 
compact; (2) exhibit improved scorecard policy performance during the 
partnership; and (3) exhibit a continued commitment to further their 
sector reform efforts in any subsequent partnership. As a result, the 
Board has an even higher standard when selecting countries for 
subsequent compacts.
1. Successful Implementation of the Previous Compact
    To evaluate the degree of success of the previous compact, the 
Board looks to see if there is a clear evidence base of success within 
the budget and time limits of the compact, in particular by looking at 
three aspects:
    (a) The degree to which there is evidence of strong political will 
and management capacity: Is the partnership characterized by the 
country ensuring that both policy reforms and the compact itself are 
both being implemented to the best ability that the country can 
deliver;
    (b) The degree to which the country has exhibited a commitment and 
capacity to achieve program results: Are the financial and project 
results being achieved; to what degree is the country committing its 
own resources to ensure the compact is a success; to what extent is the 
private sector engaged (if relevant); and other compact-specific 
issues; and
    (c) The degree to which the country has implemented the compact in 
accordance with MCC's core policies and standards: That is, is the 
country adhering to MCC's policies and procedures, including in 
critical areas such as remediating unresolved fraud and corruption/
abuse or misuse of funds issues; procurement; and monitoring and 
evaluation.
    Details on the specific types of information examined (and sources 
used) in each of the three areas are provided in appendix D. The 
overall sentiment is that the Board is looking for evidence that the 
previous compact will be completed or has been completed successfully, 
on time and on budget, and that there is a commitment to continued, 
robust reform going forward.
2. Improved Scorecard Policy Performance
    Beyond successful implementation of the previous compact, the Board 
expects the country to have improved its overall scorecard policy 
performance during the partnership and to pass the scorecard in the 
year of selection for the subsequent compact. The Board focuses on:
     The overall scorecard pass/fail rate over time, what this 
suggests about underlying policy performance, as well as an examination 
of the underlying reasons;

[[Page 57137]]

     The progress over time on policy areas measured by both 
hard-hurdle indicators--Control of Corruption, and Democratic Rights--
including an examination of the underlying reasons; and
     Other indicator trajectories as deemed relevant by the 
Board.
    In all cases, while the Board expects the country to be passing its 
scorecard, other sources of information are examined to understand the 
nuance and reasons behind scorecard or indicator performance over time, 
including any real-time updates, methodological changes within the 
indicators themselves, shifts in the relevant candidate pool, or 
alternative policy performance perspectives (such as gleaned through 
consultations with civil society and related stakeholders). Other 
sources of information are also consulted to look at policy performance 
over time in areas not covered by the scorecard but that are deemed 
important by the Board (such as trade, foreign policy concerns, etc.).
3. A Commitment To Further Sector Reform
    The Board expects that subsequent compacts will endeavor to tackle 
deeper policy reforms necessary to unlock an identified constraint to 
growth. Consequently, the Board considers its own experience during the 
previous compact in considering how committed the country is to 
reducing poverty and increasing economic growth, and therefore tries to 
gauge the country's commitment for further sector reform should it be 
selected for a subsequent compact. This includes:
     Assessing the country's delivery of policy reform during 
the previous compact (as described above);
     Assessing expectations of the country's ability and 
willingness to continue embarking on sector policy reform in a 
subsequent compact;
     Examining both other sources of information that describe 
the nature of the opportunity to reduce poverty and generate growth (as 
outlined in A.2 above), and the relative success of the previous 
compact overall, as already discussed; and
     Finally, considering how well funding can be leveraged for 
impact, given its experience in the previous compact.
    Through this overall approach to subsequent compact selection, the 
Board applies the three legislatively mandated evaluation criteria 
(policy performance, the opportunity to reduce poverty and generate 
economic growth, and the funding available) in a way that rests 
critically on deeply assessing the previous partnership: from a compact 
success standpoint, a commitment to improved scorecard policy 
performance standpoint, and a commitment to continued sector policy 
reform standpoint. The Board then weighs all of the information 
described above in making its decision.
    The approach described above is then applied in any additional 
years of selection to continue to develop the subsequent compact, with 
the added benefit of having even further detail on previous compact 
implementation, cumulative scorecards, cumulative records of policy 
performance, and other accumulated supporting information to determine 
the overall pattern of performance over the resulting multi-year 
trajectory.

D. Evaluation for Eligibility for Threshold Programs

    The Board may also select countries to participate in the Threshold 
Program. The Threshold Program provides assistance to candidate 
countries that exhibit a significant commitment to meeting the 
eligibility criteria described in the previous sub-sections, but fail 
to meet such requirements. Specifically, in examining the policy 
performance, the opportunity to reduce poverty and generate economic 
growth, and the funding available, the Board will consider whether a 
country potentially eligible for threshold program assistance appears 
to be on a trajectory to becoming a viable contender for compact 
eligibility in the medium term.

APPENDIX A: Statutory Basis for this Report

    This report to Congress is provided in accordance with section 
608(b) of the Millennium Challenge Act of 2003, as amended, 22 
U.S.C. 7707(b) (the Act).
    Section 605 of the Act authorizes the provision of assistance to 
countries that enter into a Millennium Challenge Compact with the 
United States to support policies and programs that advance the 
progress of such countries in achieving lasting economic growth and 
poverty reduction. The Act requires MCC to take a number of steps in 
selecting countries for compact assistance for FY 2015 based on the 
countries' demonstrated commitment to just and democratic 
governance, economic freedom, and investing in their people, MCC's 
opportunity to reduce poverty and generate economic growth in the 
country, and the availability of funds. These steps include the 
submission of reports to the congressional committees specified in 
the Act and publication of information in the Federal Register that 
identify:
    1. The countries that are ``candidate countries'' for MCA 
assistance for FY 2015 based on per capita income levels and 
eligibility to receive assistance under U.S. law. (section 608(a) of 
the Act; 22 U.S.C. 7707(a));
    2. The criteria and methodology that MCC's Board of Directors 
(Board) will use to measure and evaluate policy performance of the 
candidate countries consistent with the requirements of section 607 
of the Act (22 U.S.C. 7706) in order to determine ``eligible 
countries'' from among the ``candidate countries'' (section 608(b) 
of the Act; 22 U.S.C. 7707(b)); and
    3. The list of countries determined by the Board to be 
``eligible countries'' for FY 2015, with justification for 
eligibility determination and selection for compact negotiation, 
including those eligible countries with which MCC will seek to enter 
into compacts (section 608(d) of the Act; 22 U.S.C. 7707(d)).

    This report reflects the satisfaction of item 2 above.

APPENDIX B: Lists of all LICs, LMICs, and Statutorily Prohibited 
Countries for Evaluation Purposes

Income Classification for Scorecards

    Since MCC was created, it has relied on the World Bank's gross 
national income (GNI) per capita income data (Atlas method) and the 
historical ceiling for eligibility as set by the World Bank's 
International Development Association (IDA) to divide countries into 
two income categories for purposes of creating scorecards: LICs and 
LMICs. These categories are used to account for the income bias that 
occurs when countries with more per capita resources perform better 
than countries with fewer. Using the historical IDA eligibility 
ceiling for the scorecards ensures that the poorest countries 
compete with their income level peers and are not compared against 
countries with more resources to mobilize.
    MCC will continue to use the traditional income categories for 
eligibility to categorize countries in two groups for purposes of FY 
2015 scorecard comparisons:
     LICs are countries with GNI per capita below IDA's 
historical ceiling for eligibility ($1,985 for FY 2015); and
     LMICs, which are countries with GNI per capita above 
IDA's historical ceiling for eligibility but below the World Bank's 
upper middle income country threshold ($1,986-$4,125 for FY 2015).
    The list of countries categorized as LICs and LMICs for the 
purpose of scorecard assessments can be found below.\4\
---------------------------------------------------------------------------

    \4\ In December 2011, a statutory change requested by the agency 
altered the way MCC must group countries for the purposes of 
applying MCC's 25 percent LMIC funding cap. This change, designed to 
bring stability to the funding stream, affects how MCC funds 
countries selected for compacts and does not affect the way 
scorecards are created. For determining whether a country can be 
funded as an LMIC or LIC:
     The poorest 75 countries are now considered LICs for 
the purposes of MCC funding. They are not limited by the 25 percent 
funding cap on LMICs.
     Countries with a GNI per capita above the poorest 75 
but below the World Bank's upper middle income country threshold 
($4,125 for FY 2015) are considered LMICs for the purposes of MCC 
funding. By law, no more than 25 percent of all compact funds for a 
given fiscal year can be provided to these countries.
    The FY 2015 Candidate Country Report lists LICs and LMICs based 
on this new definition and outlines which countries are subject to 
the 25 percent funding cap.

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[[Page 57138]]

Low Income Countries (FY 2015 Scorecard)

1. Afghanistan
2. Bangladesh
3. Benin
4. Burkina Faso
5. Burma
6. Burundi
7. Cambodia
8. Cameroon
9. Central African Republic
10. Chad
11. Comoros
12. Congo, the Democratic Republic of
13. Cote d'Ivoire
14. Djibouti
15. Eritrea
16. Ethiopia
17. Gambia
18. Ghana
19. Guinea
20. Guinea-Bissau
21. Haiti
22. India
23. Kenya
24. Korea, Democratic People's Republic of
25. Kyrgyz Republic
26. Laos
27. Lesotho
28. Liberia
29. Madagascar
30. Malawi
31. Mali
32. Mauritania
33. Mozambique
34. Nepal
35. Nicaragua
36. Niger
37. Pakistan
38. Rwanda
39. Sao Tome and Principe
40. Senegal
41. Sierra Leone
42. Solomon Islands
43. Somalia
44. South Sudan
45. Sudan
46. Tajikistan
47. Tanzania
48. Togo
49. Uganda
50. Uzbekistan
51. Vietnam
52. Yemen
53. Zambia
54. Zimbabwe

Lower Middle Income Countries (FY 2015 Scorecard)

1. Armenia
2. Bhutan
3. Bolivia
4. Cabo Verde
5. Congo, Republic of
6. Egypt
7. El Salvador
8. Georgia
9. Guatemala
10. Guyana
11. Honduras
12. Indonesia
13. Kiribati
14. Kosovo
15. Micronesia
16. Moldova
17. Mongolia
18. Morocco
19. Nigeria
20. Papua New Guinea
21. Paraguay
22. Philippines
23. Samoa
24. Sri Lanka
25. Swaziland
26. Syria
27. Timor-Leste
28. Ukraine
29. Vanuatu

Statutorily Prohibited Countries for FY 2015 Scorecards (Included 
in the Data Pool for Comparative Purposes, but by Law Cannot Be 
Considered for Funding)

1. Bolivia
2. Burma
3. Cambodia
4. Eritrea
5. North Korea
6. Sudan
7. Syria
8. Zimbabwe

APPENDIX C: Indicator Definitions

    The following indicators will be used to measure candidate 
countries' demonstrated commitment 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 reduction of 
poverty and thus provide a sound environment for the use of MCA 
funds. The indicators are not goals in themselves; rather, they are 
proxy measures of policies that are linked to broad-based 
sustainable economic growth. The indicators were selected based on 
(i) their relationship to economic growth and poverty reduction; 
(ii) the number of countries they cover; (iii) transparency and 
availability; and (iv) relative soundness and objectivity. Where 
possible, the indicators are developed by independent sources. 
Listed below is a brief summary of the indicators (a detailed 
rationale for the adoption of these indicators can be found in the 
Public Guide to the Indicators on MCC's public Web site at 
www.mcc.gov).

Ruling Justly

    1. Political Rights: Independent experts rate 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, 
among other things. Pass: Minimum score of 17 out of 40. Source: 
Freedom House
    2. Civil Liberties: Independent experts rate countries on 
freedom of expression; association and organizational rights; rule 
of law and human rights; and personal autonomy and economic rights, 
among other things. Pass: Minimum score of 25 out of 60. Source: 
Freedom House
    3. Freedom of Information: Measures the legal and practical 
steps taken by a government to enable or allow information to move 
freely through society; this includes measures of press freedom, 
national freedom of information laws, and the extent to which a 
county is filtering internet content or tools. Pass: Score must be 
above the median score for the income group. Source: Freedom House/
FRINGE Special/Open Net Initiative
    4. Government Effectiveness: An index of surveys and expert 
assessments that rate countries on the quality of public service 
provision; civil servants' competency and independence from 
political pressures; and the government's ability to plan and 
implement sound policies, among other things. Pass: Score must be 
above the median score for the income group. Source: Worldwide 
Governance Indicators (World Bank/Brookings)
    5. Rule of Law: An index of surveys and expert assessments that 
rate countries on the extent to which the public has confidence in 
and abides by the rules of society; the incidence and impact of 
violent and nonviolent crime; the effectiveness, independence, and 
predictability of the judiciary; the protection of property rights; 
and the enforceability of contracts, among other things. Pass: Score 
must be above the median score for the income group. Source: 
Worldwide Governance Indicators (World Bank/Brookings)
    6. Control of Corruption: An index of surveys and expert 
assessments that rate countries on: ``grand corruption'' in the 
political arena; the frequency of petty corruption; the effects of 
corruption on the business environment; and the tendency of elites 
to engage in ``state capture,'' among other things. Pass: Score must 
be above the median score for the income group. Source: Worldwide 
Governance Indicators (World Bank/Brookings)

Encouraging Economic Freedom

    1. Fiscal Policy: The overall budget balance divided by gross 
domestic product (GDP), averaged over a three-year period. The data 
for this measure comes primarily from IMF country reports or, where 
public IMF data are outdated or unavailable, are provided directly 
by the recipient government with input from U.S. missions in host 
countries. All data are cross-checked with the IMF's World Economic 
Outlook database to try to ensure consistency across countries and 
made publicly available. Pass: Score must be above the median score 
for the income group. Source: International Monetary Fund Country 
Reports, National Governments, and the International Monetary Fund's 
World Economic Outlook Database
    2. Inflation: The most recent average annual change in consumer 
prices. Pass: Score must be 15% or less. Source: The International 
Monetary Fund's World Economic Outlook Database
    3. Regulatory Quality: An index of surveys and expert 
assessments that rate countries on the burden of regulations on 
business; price controls; the government's role in the economy; and 
foreign investment regulation,

[[Page 57139]]

among other areas. Pass: Score must be above the median score for 
the income group. Source: Worldwide Governance Indicators (World 
Bank/Brookings)
    4. Trade Policy: A measure of a country's openness to 
international trade based on weighted average tariff rates and non-
tariff barriers to trade. Pass: Score must be above the median score 
for the income group. Source: The Heritage Foundation
    5. Gender in the Economy: An index that measures the extent to 
which laws provide men and women equal capacity to generate income 
or participate in the economy, including the capacity to access 
institutions, get a job, register a business, sign a contract, open 
a bank account, choose where to live, and to travel freely. Pass: 
Score must be above the median score for the income group. Source: 
International Finance Corporation
    6. Land Rights and Access: An index that rates countries on the 
extent to which the institutional, legal, and market framework 
provide secure land tenure and equitable access to land in rural 
areas and the time and cost of property registration in urban and 
peri-urban areas. Pass: Score must be above the median score for the 
income group. Source: The International Fund for Agricultural 
Development and the International Finance Corporation
    7. Access to Credit: An index that rates countries on rules and 
practices affecting the coverage, scope, and accessibility of credit 
information available through either a public credit registry or a 
private credit bureau; as well as legal rights in collateral laws 
and bankruptcy laws. Pass: Score must be above the median score for 
the income group. Source: International Finance Corporation
    8. Business Start-Up: An index that rates countries on the time 
and cost of complying with all procedures officially required for an 
entrepreneur to start up and formally operate an industrial or 
commercial business. Pass: Score must be above the median score for 
the income group. Source: International Finance Corporation

Investing in People

    1. Public Expenditure on Health: Total expenditures on health by 
government at all levels divided by GDP. Pass: Score must be above 
the median score for the income group. Source: The World Health 
Organization
    2. Total Public Expenditure on Primary Education: Total 
expenditures on primary education by government at all levels 
divided by GDP. Pass: Score must be above the median score for the 
income group. Source: The United Nations Educational, Scientific and 
Cultural Organization and National Governments
    3. Natural Resource Protection: Assesses whether countries are 
protecting up to 17 percent of all their biomes (e.g., deserts, 
tropical rainforests, grasslands, savannas and tundra). Pass: Score 
must be above the median score for the income group. Source: The 
Center for International Earth Science Information Network and the 
Yale Center for Environmental Law and Policy
    4. Immunization Rates: The average of DPT3 and measles 
immunization coverage rates for the most recent year available. 
Pass: Score must be above the median score for LICs, and 90% or 
higher for LMICs. Source: The World Health Organization and the 
United Nations Children's Fund
    5. Girls Education:
     a. Girls' Primary Completion Rate: The number of female 
students enrolled in the last grade of primary education minus 
repeaters divided by the population in the relevant age cohort 
(gross intake ratio in the last grade of primary). LICs are assessed 
on this indicator. Pass: Score must be above the median score for 
the income group. Source: United Nations Educational, Scientific and 
Cultural Organization
     b. Girls Secondary Enrollment Education: The number of female 
pupils enrolled in lower secondary school, regardless of age, 
expressed as a percentage of the population of females in the 
theoretical age group for lower secondary education. LMICs will be 
assessed on this indicator instead of Girls Primary Completion 
Rates. Pass: Score must be above the median score for the income 
group. Source: United Nations Educational, Scientific and Cultural 
Organization
    6. Child Health: An index made up of three indicators: (i) 
access to improved water, (ii) access to improved sanitation, and 
(iii) child (ages 1-4) mortality. Pass: Score must be above the 
median score for the income group. Source: The Center for 
International Earth Science Information Network and the Yale Center 
for Environmental Law and Policy

Relationship to Legislative Criteria

    Within each policy category, the Act sets out a number of 
specific selection criteria. A set of objective and quantifiable 
policy indicators is used to inform eligibility decisions for MCA 
assistance and to 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 objective 
indicators. Most are addressed by multiple indicators. The specific 
indicators appear in parentheses next to the corresponding criterion 
set out in the Act.

Section 607(b)(1): Just and democratic governance, including a 
demonstrated commitment to--

    (A) Promote political pluralism, equality and the rule of law 
(Political Rights, Civil Liberties, Rule of Law, and Gender in the 
Economy);
    (B) respect human and civil rights, including the rights of 
people with disabilities (Political Rights, Civil Liberties, and 
Freedom of Information);
    (C) protect private property rights (Civil Liberties, Regulatory 
Quality, Rule of Law, and Land Rights and Access);
    (D) encourage transparency and accountability of government 
(Political Rights, Civil Liberties, Freedom of Information, Control 
of Corruption, Rule of Law, and Government Effectiveness); and
    (E) combat corruption (Political Rights, Civil Liberties, Rule 
of Law, Freedom of Information, and Control of Corruption);

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 (Fiscal Policy, Inflation, Trade 
Policy, and Regulatory Quality);
    (B) promote private sector growth (Inflation, Business Start-Up, 
Fiscal Policy, Land Rights and Access, Access to Credit, Gender in 
the Economy, and Regulatory Quality);
    (C) strengthen market forces in the economy (Fiscal Policy, 
Inflation, Trade Policy, Business Start-Up, Land Rights and Access, 
Access to Credit, and Regulatory Quality); and
    (D) respect worker rights, including the right to form labor 
unions (Civil Liberties and Gender in the Economy); and

Section 607(b)(3): Investments in the people of such country, 
particularly women and children, including programs that--

    (A) Promote broad-based primary education (Girls' Primary 
Completion Rate, Girls' Secondary Education Enrollment Rate, and 
Total Public Expenditure on Primary Education);
    (B) strengthen and build capacity to provide quality public 
health and reduce child mortality (Immunization Rates, Public 
Expenditure on Health, and Child Health); and
    (C) promote the protection of biodiversity and the transparent 
and sustainable management and use of natural resources (Natural 
Resource Protection).

APPENDIX D: Subsequent Compact Considerations

    MCC reporting and data in the following chart are used to assess 
compact performance of MCC partners nearing the end of compact 
implementation (i.e., within the 18-month window). Some reporting 
used for assessment may contain sensitive information and adversely 
affect implementation or MCC-partner country relations. This 
information is for MCC's internal use and is not made public. 
However, key implementation information is summarized in compact 
status and results reports that are published quarterly on MCC's Web 
site under MCC country programs (www.mcc.gov/pages/countries) or 
monitoring and evaluation (http://www.mcc.gov/pages/results/m-and-e) 
Web pages.

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                                  MCC reporting/
             Topic                  data source     Published documents
------------------------------------------------------------------------
COUNTRY PARTNERSHIP
Political Will:

[[Page 57140]]

 
     Status of major                Quarterly
     conditions precedent.        Quarterly         results published as
                                  implementation    ``Table of Key
                                  reporting.        Performance
                                            Indicators''
                                  Quarterly         (available by
                                  results           country): http://
                                  reporting.        go.usa.gov/jMcC.
                                  Survey   Survey questions to
                                  of MCC staff.     be posted: http://1.usa.gov/1q0zp3n.
     Program oversight/
     implementation.
        [cir] project
         restructures.
        [cir] partner response
         to MCA-unit capacity
         issues.
     Political
     independence of MCA-unit
Management Capacity
     Project management
     capacity
     Project
     performance
     Level of MCC
     intervention/oversight
     Relative level of
     resources required
PROGRAM RESULTS
Financial Results:
     Commitments--                  Monitoring
     including contributions to   Indicator         and Evaluation Plans
     compact funding.             tracking tables.  (available by
                                                    country): http://go.usa.gov/jMcC.
     Disbursements.....             Quarterly
                                  Quarterly         Status Reports
                                  financial         (available by
                                  reporting.        country): http://1.usa.gov/NfEbcI.
Project Results:
     Output, outcome,               Quarterly
     objective targets.           Quarterly         results published as
                                  implementation    ``Table of Key
                                  reporting.        Performance
                                                    Indicators''
                                                    (available by
                                                    country): http://1.usa.gov/QoduNl.
                                                    Survey
                                                    questions to be
                                                    posted: http://1.usa.gov/PE0xCX.
     MCA-unit            
     commitment to `focus on      Quarterly
     results'.                    results
                                  reporting.
     MCA-unit             Survey
     cooperation on impact        of MCC staff
     evaluation.                  Impact
                                  evaluations.
     Percent complete
     for process/outputs.
     Relevant outcome
     data
     Details behind
     target delays
Target Achievements
ADHERENCE TO STANDARDS:
     Procurement.......   Audits    Published
                                  (Government       OIG and GAO Audits.
                                  Accountability    Survey
                                  Office and        questions to be
                                  MCC's Office of   posted: http://
                                  the Inspector     1.usa.gov/PE0xCX.
                                  General).
                                 
                                  Quarterly
                                  implementation
                                  reporting.
                                  Survey
                                  of MCC staff.
     Environmental and
     social.
     Fraud and
     corruption.
     Program closure...
     Monitoring and
     evaluation.
     All other legal
     provisions.
COUNTRY SPECIFIC
Sustainability:
     Implementation                 Quarterly
     entity.                      Quarterly         results published as
                                  implementation    ``Table of Key
                                  reporting.        Performance
                                            Indicators''
                                  Quarterly         (available by
                                  results           country): http://
                                  reporting.        1.usa.gov/QoduNl.
                                  Survey    Survey
                                  of MCC staff.     questions to be
                                                    posted: http://1.usa.gov/PE0xCX.
     MCC investments...
Role of private sector or other
 donors:
     Other relevant
     investors/investments.
     Other donors/
     programming.
     Status of related
     reforms.
     Trajectory of
     private sector involvement
     going forward.
------------------------------------------------------------------------

[FR Doc. 2014-22652 Filed 9-23-14; 8:45 am]
BILLING CODE 9211-03-P