Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance in Fiscal Year 2018, 46289-46297 [2017-21448]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 82, Number 191 (Wednesday, October 4, 2017)]
[Notices]
[Pages 46289-46297]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21448]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 17-06]


Report on the Criteria and Methodology for Determining the 
Eligibility of Candidate Countries for Millennium Challenge Account 
Assistance in Fiscal Year 2018

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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

    Dated: September 29, 2017.
Jeanne M. Hauch,
VP/General Counsel and Corporate Secretary, Millennium Challenge 
Corporation.

Report on the Criteria and Methodology for Determining the Eligibility 
of Candidate Countries for Millennium Challenge Account Assistance for 
Fiscal Year 2018

Summary

    In accordance with section 608(b)(2) of the Millennium Challenge 
Act of 2003 (the ``Act,'' 22 U.S.C. 7707(b)(l)), the Millennium 
Challenge Corporation (MCC) is submitting the enclosed report. This 
report identifies the criteria and methodology that MCC intends to use 
to determine which candidate countries may be eligible to be considered 
for

[[Page 46290]]

assistance under the Act for fiscal year 2018.
    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 2018

    This document explains how the Board of Directors (Board) of the 
Millennium Challenge Corporation (MCC) will identify, evaluate, and 
select eligible countries for fiscal year (FY) 2018. 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 Threshold Program Assistance
    E. A Note on Potential Regional Investments
    F. A Note on Potential Transition to Upper Middle Income Country 
(UMIC) Status After Initial Selection

I. Which countries are evaluated?

    MCC evaluates all low-income countries (LICs) and lower-middle 
income countries (LMICs) as follows:
     For scorecard evaluation purposes for FY 2018, MCC defines 
LICs as those countries between $0 and $1,905 GNI per capita, and LMICs 
as those countries between $1,906 and $3,955 GNI per capita.\1\
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    \1\ This corresponds to LIC and LMIC definitions using the 
historic International Development Association (IDA) thresholds 
published by the World Bank.
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     For funding purposes for FY 2018, MCC defines the poorest 
75 countries as LICs, and the remaining countries up to the UMIC 
threshold of $3,955 as LMICs.\2\
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    \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).
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    In Appendix B, lists of all LICs, LMICs and statutorily prohibited 
countries for scorecard evaluation purposes are provided. The list 
using the ``funding'' definition was outlined in the August 2017 Report 
on Countries that are Candidates for Millennium Challenge Account 
Eligibility for Fiscal Year 2018 and Countries that Would be Candidates 
but for Legal Prohibitions (the ``Candidate Country Report''), and 
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 just and 
democratic governance, economic freedom, and investing in its people, 
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 for scorecard evaluation purposes), except in 
the cases of inflation, political rights, civil liberties, and 
immunization rates (LMICs only), where 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 either the Political Rights or Civil Liberties 
indicator, and
     Passed the Control of Corruption 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 mandatory passing of either the Political Rights or Civil 
Liberties indicators is called the Democratic Rights ``hard hurdle'' on 
the scorecard, while the mandatory passing of the Control of Corruption 
indicator is called the Control of Corruption ``hard hurdle.'' Not 
passing either ``hard hurdle'' results in not passing the scorecard 
overall, regardless of whether at least 10 of the 20 other indicators 
are passed.
     Democratic Rights ``hard hurdle:'' This hurdle sets a 
minimum bar for democratic rights below which the Board will not 
consider a country for eligibility. Requiring that a country pass 
either the Political Rights or Civil Liberties indicator creates a 
democratic incentive for countries, recognizes the importance democracy 
plays in driving poverty-reducing economic growth, and holds MCC 
accountable to working with the best governed, poorest countries. When 
a candidate country is only passing one of the two indicators 
comprising the hurdle (instead of both), the Board will also closely 
examine why it is not passing the other indicator to understand what 
the score implies for the broader democratic environment and trajectory 
of the country. This examination will include consultation with both 
local and international civil society experts, among others.
     Control of Corruption ``hard hurdle:'' Corruption in any 
country is an unacceptable tax on economic growth and an obstacle to 
the private sector investment needed to reduce poverty. Accordingly, 
MCC seeks out partner countries that are committed to combatting 
corruption. It is for this reason that MCC also has the Control of 
Corruption ``hard hurdle,'' which helps ensure that MCC is working with 
countries where there is relatively strong performance in controlling 
corruption. Requiring the passage of the indicator provides an 
incentive for countries to demonstrate a clear commitment to 
controlling corruption, and allows MCC to better understand the issue 
by seeing how the country performs relative to its peers and over time.
    Together, the 20 policy performance indicators are the predominant 
basis for determining which eligible countries will be selected 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

[[Page 46291]]

especially useful given the unique perspective of each Board member 
(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 the country, specific areas of attention typically include 
better understanding the issues on, trends in, and trajectory of:
     The state of democratic and human rights (especially of 
vulnerable groups \3\);
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    \3\ For example, women; children; lesbian, gay, bisexual, and 
transgender individuals; people with disabilities; and workers.
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     The perspective of civil society on salient governance 
issues;
     The control of corruption and rule of law;
     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.
    This information provides greater clarity on 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 or is about 
to change. More details on this subject (sometimes referred to as 
``supplemental information'') can be found on MCC's Web site.
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 
the authorizing legislation and appropriations acts. MCC has a 
continuous pipeline of countries in compact development, compact 
implementation, and compact closeout, 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 planned or existing programs.
* * * * *
    The following subsections describe how each of these three 
legislatively-mandated factors are applied with regard to the selection 
situations the Board encounters each December: selection of countries 
for first compact eligibility, selection of countries for second/
subsequent compact eligibility, and selection of countries for the 
threshold program. Thereafter, notes are included on consideration of 
countries for potential regional investments, and issues for 
consideration for countries that might graduate to upper middle income 
country status after initial selection.

B. Evaluation for Selection of Countries for First Compact Eligibility

    When selecting eligible countries, 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 just and democratic governance, economic freedom, and 
investing in its people is on a sound footing and performance is on a 
positive trajectory (especially on the `hard hurdles' of Democratic 
Rights and Control of Corruption, as described in the previous 
section), 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:
     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 program 
itself are both being implemented to the best ability that the country 
can deliver;
     The degree to which the country has exhibited 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
     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 and 
abuse or misuse of

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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. Overall, 
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;
     The progress over time on policy areas measured by both 
hard-hurdle indicators--Democratic Rights and Control of Corruption--
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 the country's 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 necessary as the country continues to develop the 
subsequent compact, with the added benefit of having further detail on 
previous compact implementation, cumulative scorecards, 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 Threshold Program Assistance

    The Board may also evaluate countries for participation in the 
Threshold Program. The Threshold Program provides assistance to 
candidate countries that exhibit a significant commitment to meeting 
the 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 that 
potentially qualifies for threshold program assistance appears to be on 
a trajectory to becoming viable for compact eligibility in the medium 
term.

E. A Note on Potential Regional Investments

    FY 2018 marks the third year that the Board may consider selecting 
countries where potential regional investments (i.e., complementary 
assistance by MCC to two or more countries in a region) may be 
developed.
    With respect to regional investments, the fundamental criteria and 
process for selection will remain unchanged: Countries will continue to 
be evaluated and selected individually, as described in sections A, B, 
and C above. However, for countries where regional investments might be 
contemplated, the Board will also examine additional supplemental 
information looking at the policy environment from a regional 
dimension.
    Specifically, the Board will examine additional data and 
information related to:
     The current state of the country's political and economic 
integration with its region and neighbors;
     Impediments to further integration with its region and 
neighbors; and
     The potential gains from investing at a regional level, 
including illustrative potential sector opportunities.
    The Board will weigh this additional regional information in tandem 
with the other supplemental factors described earlier in sections A, B, 
and C. The Board will then decide whether or not it will direct MCC to 
explore some form of a regional investment with the country.

F. A Note on Potential Transition to Upper Middle Income Country (UMIC) 
Status After Initial Selection

    Some candidate countries may have a high LMIC per capita income 
and/or a high growth rate that implies there is a chance they could 
transition to UMIC status during the life of an MCC partnership. In 
such cases, it is not possible to accurately predict when such a 
country may or may not transition to UMIC status.
    Nonetheless, such countries may have more resources at their 
disposal for funding their own growth and poverty reduction strategies. 
As a result, in addition to using the regular selection criteria 
described in the previous sections, the Board will also use its 
discretion to assess both the need and the opportunity presented by 
partnering with such a country, in order to ensure that there is a 
higher bar for possible selection.
    Specifically, if a candidate country with a high probability of 
transitioning

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to UMIC status is under consideration for selection, the Board will 
examine additional data and information related to:
     Whether the country faces significant challenges accessing 
other sources of development financing (such as international capital, 
domestic resources, and other donor assistance) and, if so, examining 
if MCC grant financing would be an appropriate tool.
     Whether the nature of poverty in the country (for example, 
high inequality or poverty headcount ratios relative to peer countries) 
presents a clear and strategic opportunity for MCC to assist the 
country in reducing such poverty through investments that spur economic 
growth.
     Whether the country demonstrates particularly strong 
policy performance, including policies and actions that demonstrate a 
clear priority on poverty reduction.
     Whether MCC can reasonably expect that the country would 
contribute a significant amount of funding to the compact.
    These additional criteria would then be applied in any additional 
years of selection as the country continues to develop its compact. 
Should the country eventually transition to UMIC status during compact 
development, the country would no longer be a candidate country for 
that fiscal year. Consequently, continuing the partnership beyond that 
point would then be at the Board's discretion, and would rely on 
funding from previous fiscal years from when the country was a 
candidate country.

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 2018 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 assistance 
for FY 2018 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 2018, 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 satisfies 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 
2018 scorecard comparisons:
     LICs are countries with GNI per capita below IDA's 
historical ceiling for eligibility ($1,905 for FY 2018); and
     LMICs are countries with GNI per capita above IDA's 
historical ceiling for eligibility but below the World Bank's upper 
middle income country threshold ($1,906-$3,955 for FY 2018).
    The list of countries categorized as LICs and LMICs for the purpose 
of FY 2018 scorecard assessments can be found below.\4\
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    \4\ In December 2011, a statutory change requested by MCC 
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 
($3,955 for FY 2018) 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 2018 Candidate Country Report lists LICs and LMICs based 
on this definition and outlines which countries are subject to the 
25 percent funding cap.
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Low Income Countries (FY 2018 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. Democratic Republic of Congo
13. Republic of Congo
14. C[ocirc]te d'Ivoire
15. Djibouti
16. Eritrea
17. Ethiopia
18. Gambia
19. Ghana
20. Guinea
21. Guinea-Bissau
22. Haiti
23. India
24. Kenya
25. Kyrgyz Republic
26. Lesotho
27. Liberia
28. Madagascar
29. Malawi
30. Mali
31. Mauritania
32. Mozambique
33. Nepal
34. Niger
35. North Korea
36. Pakistan
37. Rwanda
38. S[atilde]o Tom[eacute] and Principe
39. Senegal
40. Sierra Leone
41. Solomon Islands
42. Somalia
43. South Sudan
44. Syria

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45. Tajikistan
46. Tanzania
47. Timor-Leste
48. Togo
49. Uganda
50. Yemen
51. Zambia
52. Zimbabwe

Lower Middle Income Countries (FY 2018 Scorecard)

1. Angola
2. Armenia
3. Bhutan
4. Bolivia
5. Cabo Verde
6. Egypt
7. El Salvador
8. Georgia
9. Guatemala
10. Honduras
11. Indonesia
12. Jordan
13. Kiribati
14. Kosovo
15. Lao PDR
16. Micronesia
17. Moldova
18. Mongolia
19. Morocco
20. Nicaragua
21. Nigeria
22. Papua New Guinea
23. Philippines
24. Sri Lanka
25. Sudan
26. Swaziland
27. Tunisia
28. Ukraine
29. Uzbekistan
30. Vanuatu
31. Vietnam

Statutorily Prohibited Countries for FY18 \5\
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    \5\ This list is current as of August 1, 2017. Between such date 
and the December 2017 selection Board meeting, other countries may 
also be the subject of future statutory restrictions or 
determinations, or changed country circumstances, that affect their 
legal eligibility for assistance under part I of the Foreign 
Assistance Act by reason of application of the Foreign Assistance 
Act or any other provision of law for FY2018. Even though these 
countries are prohibited from received assistance, scorecards are 
still created for them to ensure all countries are included in an 
income group in order to determine the global medians/scores for 
that income group.
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1. Bolivia
2. Burma
3. Eritrea
4. North Korea
5. South Sudan
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 MCC 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.\6\ 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 website at www.mcc.gov).
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    \6\ Special note on Kosovo: Since UN agencies do not currently 
publish data for Kosovo due to non-recognition status, MCC is unable 
to source data directly from the UN for the six indicators that are 
constructed in all or in part from this data: Land Rights and 
Access, Health Expenditures, Primary Education Expenditures, 
Immunization Rates, Girls' Secondary Education Enrollment Rate, and 
Child Health. As result, MCC publishes data from UNKT (the UN Kosovo 
Team) in cases where UNKT uses comparable methodologies to their UN 
sister organizations. See https://www.unkt.org/ for more information.
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Ruling Justly

    1. Political Rights: Independent experts rate countries on the 
prevalence of free and fair electoral processes; political pluralism 
and participation of all stakeholders; government accountability and 
transparency; 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: 
Score must be above the minimum score of 17 out of 40. Source: Freedom 
House
    2. Civil Liberties: Independent experts rate countries on freedom 
of expression and belief; association and organizational rights; rule 
of law and human rights; and personal autonomy and economic rights, 
among other things. Pass: Score must be above the 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/Centre for Law 
and Democracy.
    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: General government net lending/borrowing as a 
percent of gross domestic product (GDP), averaged over a three year 
period. Net lending/borrowing is calculated as revenue minus total 
expenditure. The data for this measure comes from the IMF's World 
Economic Outlook. Pass: Score must be above the median score for the 
income group. Source: 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

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foreign investment regulation, 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 factors such as 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
    a. Due to an expansion in the number of areas examined by the 
indicator institution since this indicator's conception in FY 2012, 
from FY 2019 the Gender in the Economy indicator will be expanded, and 
incorporate new areas such as property rights protections, protections 
against domestic violence, and child marriage (among others). Expanded 
details regarding these changes are provided in the annual Guide to the 
Indicators and Selection Process, and annual Data Notes, available on 
MCC's website.
    b. To phase in this new construction of the indicator, the original 
version of the indicator will be used on the FY 2018 scorecards. 
However, an appendix to the scorecards will be published that will show 
how countries would perform under the new construction of the 
indicator. From FY 2019, the new construction of the indicator will 
then fully replace the current version on the scorecard.
    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 are 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 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

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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 18-months of compact end date). 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 website under MCC 
country programs (https://www.mcc.gov/where-we-work) or monitoring and 
evaluation (https://www.mcc.gov/our-impact/m-and-e) webpages.

------------------------------------------------------------------------
                                MCC reporting/
            Topic                 data source       Published documents
------------------------------------------------------------------------
                           COUNTRY PARTNERSHIP
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Political Will:                Quarterly   Quarterly
 Status of major       implementation      results published as
 conditions precedent.         reporting.          ``Table of Key
 Program oversight/    Quarterly   Performance
 implementation.               results             Indicators''
[cir] project restructures.    reporting.          (available by
[cir] partner response to      Survey of   country): https://
 MCA capacity issues.          MCC staff.          www.mcc.gov/our-
 Political                                 impact/m-and-e.
 independence of MCA.                              Survey
                                                   questions to be
                                                   posted: https://www.mcc.gov/resources/doc/summary-compact-survey-summary-fy18.
Management Capacity:
     Project
     management capacity.
     Project
     performance.
     Level of MCC
     intervention/oversight.
     Relative level
     of resources required.
------------------------------------------------------------------------
                             PROGRAM RESULTS
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Financial Results:             Indicator   Monitoring
 Commitments--         tracking tables.    and Evaluation Plans
 including contributions to    Quarterly   (available by
 compact funding.              financial           country): https://
 Disbursements.        reporting.          www.mcc.gov/our-
Project Results:               Quarterly   impact/m-and-e.
 Output, outcome,      implementation      Quarterly
 objective targets.            reporting.          Status Reports
 MCA commitment to     Quarterly   (available by
 `focus on results'.           results             country): https://
 MCA cooperation on    reporting.          www.mcc.gov/our-
 impact evaluation.            Survey of   impact/m-and-e.
 Percent complete      MCC staff.          Quarterly
 for process/outputs.          Impact      results published as
 Relevant outcome      evaluations.        ``Table of Key
 data.                                             Performance
 Details behind                            Indicators''
 target delays.                                    (available by
                                                   country): https://www.mcc.gov/our-impact/m-and-e.
                                                   Survey
                                                   questions to be
                                                   posted: https://www.mcc.gov/resources/doc/summary-compact-survey-summary-fy18.
Target Achievements.
------------------------------------------------------------------------
                         ADHERENCE TO STANDARDS
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
 Procurement.          Audits      Published OIG
 Environmental and     (GAO and OIG).      and GAO audits.
 social.                       Quarterly   Survey
 Fraud and             implementation      questions to be
 corruption.                   reporting.          posted: https://
 Program closure.      Survey of   www.mcc.gov/resources/
 Monitoring and        MCC staff.          doc/summary-compact-
 evaluation.                                       survey-summary-fy18.
 All other legal
 provisions.
------------------------------------------------------------------------
                            COUNTRY SPECIFIC
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
Sustainability:                Quarterly   Quarterly
 Implementation        implementation      results published as
 entity.                       reporting.          ``Table of Key
 MCC investments.      Quarterly   Performance
Role of private sector or      results             Indicators''
 other donors:                 reporting.          (available by
 Other relevant        Survey of   country): https://
 investors/investments.        MCC staff.          www.mcc.gov/our-
 Other donors/                             impact/m-and-e.
 programming.                                      Survey
 Status of related                         questions to be
 reforms.                                          posted: https://
 Trajectory of                             www.mcc.gov/resources/
 private sector involvement                        doc/summary-compact-
 going forward.                                    survey-summary-fy18.
------------------------------------------------------------------------


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[FR Doc. 2017-21448 Filed 10-2-17; 4:15 pm]
 BILLING CODE 9211-03-P