Report on the Criteria and Methodology for Determining the Eligibility of Candidate Countries for Millennium Challenge Account Assistance for Fiscal Year 2023, 60204-60210 [2022-21453]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 87, Number 191 (Tuesday, October 4, 2022)]
[Notices]
[Pages 60204-60210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-21453]


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

MILLENNIUM CHALLENGE CORPORATION

[MCC FR 22-13]


Report on the Criteria and Methodology for Determining the 
Eligibility of Candidate Countries for Millennium Challenge Account 
Assistance for Fiscal Year 2023

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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

SUMMARY: This report to Congress is provided in accordance with the 
Millennium Challenge Act of 2003. The Millennium Challenge Act of 2003 
requires the Millennium Challenge Corporation to publish a report that 
identifies the criteria and methodology that MCC intends to use to 
determine which candidate countries may be eligible to be considered 
for assistance under the Millennium Challenge Act for fiscal year 2023. 
The report is set forth in full below.

(Authority: 22 U.S.C. 7707(b)(2))

    Dated: September 28, 2022.
Thomas G. Hohenthaner,
Acting VP/General Counsel and Corporate Secretary.

Report on the Criteria and Methodology for Determining the Eligibility 
of Candidate Countries for Millennium Challenge Account Assistance for 
Fiscal Year 2023

    This document explains how the Board of Directors (the Board) of 
the Millennium Challenge Corporation (MCC) will identify, evaluate, and 
select eligible countries for fiscal year (FY) 2023. Specifically, this 
document discusses the following:

(I) Which countries MCC will evaluate
(II) How the Board evaluates these countries
    A. Overall evaluation
    B. For selection of an eligible country for a first compact
    C. For selection of an eligible country for a subsequent compact
    D. For selection of an eligible country for a concurrent compact
    E. For threshold program assistance
    F. A note on potential transition to upper middle income country 
status after initial selection

    This report is provided in accordance with section 608(b) of the 
Millennium Challenge Act of 2003, as amended (the Act), as more fully 
described in Appendix A.

(I) Which countries are evaluated?

    MCC evaluates the policy performance of all candidate countries and 
statutorily-prohibited countries by dividing them into two income 
categories for the purposes of creating ``scorecards.'' 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. In FY 2023, those scorecard evaluation income categories 
\1\ are:
---------------------------------------------------------------------------

    \1\ These income groups correspond to the definitions of low 
income countries and lower middle countries using the historical 
International Development Association (IDA) threshold published by 
the World Bank. MCC has used these categories to evaluate country 
performance since FY 2004. Our amended statute no longer uses those 
definitions for funding purposes, but we continue to use them for 
evaluation purposes.
---------------------------------------------------------------------------

     Countries whose gross national income (GNI) per capita is 
$2,045 or less; and
     Countries whose GNI per capita is between $2,046 and 
$4,255.
    Appendix B lists all candidate countries and statutorily-prohibited 
countries for scorecard evaluation purposes.

(II) How does the Board evaluate these countries?

A. Overall Evaluation

    The Board looks at three legislatively-mandated factors when it 
evaluates 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
    Appendix C describes all 20 indicators, their definitions, what is 
required to ``pass,'' their source, and their relationship to the 
legislative criteria. Because of the importance of evaluating a 
country's policy performance in a comparable, cross-country way, the 
Board relies to the maximum extent possible upon the best-available 
objective and quantifiable policy performance indicators. These 
indicators act as proxies for a country's commitment to just and 
democratic governance, economic freedom, and investing in its people, 
per MCC's founding legislation. Comprised of 20 third-party indicators 
in the categories of ruling justly, encouraging economic freedom, and 
investing in people, MCC scorecards are created for all candidate 
countries and statutorily-prohibited countries. To ``pass'' most 
indicators on its scorecard, a country's score on each indicator must 
be above the median score in its income group (as defined above for 
scorecard evaluation purposes). For the inflation, political rights, 
civil liberties, and immunization rates \2\ indicators, however, 
minimum or maximum scores for ``passing'' have been established. In 
particular, the Board considers whether a country
---------------------------------------------------------------------------

    \2\ A minimum score required to pass has been established for 
the immunization rates indicator only when the median score is above 
a 90 percent immunization rate. Countries must score above 90 
percent or the median for their scorecard income pool, whichever is 
lower, in order to pass the indicator.
---------------------------------------------------------------------------

     passed at least 10 of the 20 indicators, with at least one 
pass in each of the three categories,
     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 performs ``substantially worse'' in any one policy category 
than it does on the scorecard overall.
    The mandatory passing of either the Political Rights or Civil 
Liberties indicators is called the Democratic

[[Page 60205]]

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. The hurdle 
is an important signal of the importance MCC places on democratic 
governance and the role of MCC programs in helping democracies deliver 
development results for their citizens--a democratic dividend.
     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 a compact. The 
Board, however, also recognizes that even the best-available data has 
inherent challenges. Data gaps, real-time events versus data lags, the 
absence of narratives and nuanced detail, and other similar weaknesses 
affect each of these indicators. As such, the Board uses its judgment 
to interpret policy performance as measured by the scorecards. The 
Board may also consult other sources of information to enhance its 
understanding of the context underpinning a country's policy 
performance beyond scorecard issues (e.g., specific policy issues 
related to trade, the treatment of civil society, other U.S. aid 
programs, financial sector performance, and security/foreign policy 
concerns). The Board uses its judgment on how best to weigh such 
information in assessing overall policy performance and making a final 
determination.
(2) The Opportunity To Reduce Poverty and Generate Economic Growth
    While the Board considers a range of other information sources 
depending on the country, specific areas of attention typically include 
better understanding issues and trends in, and trajectory of:
     the state of democratic and human rights (especially 
vulnerable groups \3\);
---------------------------------------------------------------------------

    \3\ For example: women; children; LGBTQI+ individuals; people 
with disabilities; and workers.
---------------------------------------------------------------------------

     civil society's perspective 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;
     poverty levels 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 areas of expertise and skills 
versus a country's needs, and MCC's capacity to work with a country.
    This information provides greater clarity on the likelihood that 
MCC programs will have an appreciable impact on reducing poverty by 
generating economic growth in a given country. The Board has used such 
information to better understand when a country's performance on a 
particular indicator may not be up to date or is about to change. It 
has also used supplemental information to decline to select countries 
that are otherwise passing their scorecards. More details on this 
subject (sometimes referred to as ``supplemental information'') can be 
found on MCC's website: www.mcc.gov/who-we-select/indicators.
(3) The Availability of MCC Funds
    The final factor that the Board must consider when evaluating 
countries is the availability of funds. The agency's budget allocation 
is constrained, and often specifically limited, by provisions in our 
authorizing legislation and appropriations acts. MCC has a continuous 
pipeline of countries in compact development, compact implementation, 
threshold programs, and program closure. Consequently, the Board 
factors in MCC's overall portfolio when making its selection decisions 
given the funding available for each planned or existing program.
* * * * *
    The following subsections describe how each of these three 
legislatively-mandated factors are applied by the Board: selection of 
countries for a compact, selection of countries for a subsequent 
compact, selection of countries for the threshold program, and 
selection of countries for a concurrent compact. A note follows on 
considerations for countries that might transition to upper middle 
income country status after initial selection.

B. Evaluation for Selection of Eligible Countries for a First Compact

    When selecting eligible countries for a compact, 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 supplemental 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) available 
funding.
    At a minimum, the Board considers whether a country passes its 
scorecard. It also examines supporting evidence that a 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), and that MCC has the funds to 
support a meaningful compact with that country. Where applicable, 
previous threshold program information is also considered. For those 
countries that are currently developing or implementing a threshold 
program, the Board will examine the progress the country has made 
toward substantial implementation.
    The Board then weighs the information described above across each 
of the three dimensions. During the

[[Page 60206]]

compact development period following initial selection, the Board 
reevaluates a selected country based on this same approach.

C. Evaluation for Selection of Eligible Countries for a Subsequent 
Compact

    Section 609(l) of the Act authorizes MCC to enter into ``one or 
more subsequent Compacts.'' MCC does not consider the eligibility of a 
country for a subsequent compact, however, before the country has 
completed its compact or is within 18 months of compact completion. 
Selection for a subsequent compact is not automatic and is intended for 
countries that (1) exhibit successful performance on their previous 
compact(s); (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(s)
    To evaluate the previous compact's success, the Board examines 
whether the compact succeeded within its budget and time limits, 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 of that country's 
ability?
     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?
     The degree to which the country has implemented the 
compact in accordance with MCC's core policies and standards: Is the 
country adhering to MCC's policies and procedures, including in 
critical areas such as: remediating unresolved claims of fraud, 
corruption, or abuse of funds; procurement; and monitoring and 
evaluation?
    Details on the specific information types 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(s) will be or 
has been completed on time and on budget, and that there is a 
commitment to continued, robust reform going forward.
(2) Improved Scorecard Policy Performance
    The Board also 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 following:
     The overall scorecard pass/fail rate over time, and 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 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 those gleaned 
through consultations with civil society and related stakeholders). 
Other information sources 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 MCC's own experience during 
the previous compact in considering how committed the country is to 
reducing poverty and increasing economic growth, and tries to gauge the 
country's commitment to 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 information sources describing the 
opportunity to reduce poverty by generating growth (as outlined in A.2 
above), and the prior compact's relative success 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 selection for a subsequent 
compact, the Board applies the three legislatively mandated evaluation 
criteria (policy performance, the opportunity to reduce poverty and 
generate economic growth, and available funds) in a way that assesses 
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 a decision.
    During the compact development period following initial selection, 
the Board reevaluates a selected country based on this same approach.

D. Evaluation for Concurrent Compacts

    Section 609(k) of the Act authorizes MCC to enter into one 
additional concurrent compact with a country if one or both of the 
compacts with the country is for the purpose of regional economic 
integration, increased regional trade, or cross-border collaborations.
    The fundamental criteria and process for the selection of countries 
for such compacts remains the same as those for the selection of 
countries for non-concurrent compacts: countries continue to be 
evaluated and selected individually, as described in sections II.A, 
II.B, II.C, and II.F.
    Section 609(k) also requires as a precondition for a concurrent 
compact that the Board determine that the country is making 
``considerable and demonstrable progress in implementing the terms of 
the existing Compact and supplementary agreements thereto.'' This 
statutory requirement is fully consistent with prior Board practice 
regarding the selection of a country for a non-concurrent compact. For 
a country where a concurrent compact is contemplated, the Board will 
take into account whether there is clear evidence of success, as 
relevant to the phase of the current compact. Among other information, 
the Board will examine the evaluation criteria described in Section 
II.C.1 above, notably:
     The degree to which there is evidence of strong political 
will and management capacity;

[[Page 60207]]

     The degree to which the country has exhibited commitment 
and capacity to achieve program results; and
     The degree to which the country has implemented the 
compact in accordance with MCC's core policies and standards.
    In addition to providing information to the Board so it can make 
its determination regarding the country's progress in implementing its 
current compact, MCC will provide the Board with additional information 
relating to the potential for regional economic integration, increased 
regional trade, or cross-border collaborations for any country being 
considered for a concurrent compact. This information may include items 
such as:
     The current state of a country's regional integration, 
such as common financial and political dialogue frameworks, integration 
of productive value chains, and cross-border flows of people, goods, 
and services.
     The current and potential level of trade between a country 
and its neighbors, including analysis of trade flows and unexploited 
potential for trade, and an assessment of the extent and significance 
of tariff and non-tariff barriers, including information regarding the 
patterns of trade.
     The potential gains from cross-border cooperation between 
a country and its neighbors to alleviate bilateral and regional 
bottlenecks to economic growth and poverty reduction, such as through 
physical infrastructure or coordinated policy and institutional 
reforms.
    The Board can then weigh all information as a whole--the 
fundamental selection factors described in sections II.A, II.B, II.C, 
and II.F, the information regarding implementation of the current 
compact, and any additional relevant information regarding potential 
regional integration--to determine whether or not to direct MCC to seek 
to enter into a concurrent compact with a country.

E. Evaluation for Threshold Program Assistance

    The Board may also evaluate countries for participation in the 
threshold program. Threshold programs provide assistance to candidate 
countries exhibiting a significant commitment to meeting the criteria 
described in the previous subsections, but failing to meet such 
requirements. Specifically, in examining a candidate country's policy 
performance, the opportunity to reduce poverty and generate economic 
growth, and available funds, the Board will consider whether a country 
appears to be on a trajectory to becoming viable for compact 
eligibility in the medium or short term.

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

    Some candidate countries may have a high per capita income or a 
high growth rate that implies there is a chance they could transition 
to UMIC status during the life of an MCC partnership. It is not 
possible to accurately predict if or when such a transition may occur.
    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 use its discretion 
to assess both the need and the opportunity presented by partnering 
with such a country, in order to ensure that MCC's scarce grant funds 
are directed appropriately.
    Specifically, if a candidate country with a high probability of 
transitioning to UMIC status is under consideration for selection, the 
Board will examine additional data and information related to the 
following:
     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, whether 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 projects that spur economic 
growth;
     Whether the country demonstrates particularly strong 
policy performance, including policies and actions that demonstrate a 
clear priority on poverty reduction; and
     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 a country eventually transition to UMIC status during compact 
development, a country would no longer be a candidate for selection for 
that fiscal year. Continuing compact development beyond that point 
would then be at the Board's discretion.

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 (the 
Act), 22 U.S.C. 7707(b).
    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 2023 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 2023 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 2023, 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 Candidate Countries and Statutorily-Prohibited 
Countries for Evaluation Purposes

Income Groups 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. 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 scorecard evaluation groups 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 historical IDA classifications for 
eligibility to categorize countries in two groups for purposes of FY 
2023 scorecard comparisons:

[[Page 60208]]

     Countries with GNI per capita equal to or less than 
IDA's historical ceiling for eligibility (i.e., $2,045 for FY 2023); 
and
     Countries with GNI per capita above IDA's historical 
ceiling for eligibility but below the World Bank's upper middle 
income country threshold (i.e., $2,046 and $4,255 for FY 2023).
    The list of countries for FY 2023 scorecard assessments is set 
forth below:

Countries With GNI per Capita of $2,045 or Less

1. Afghanistan
2. Angola
3. Benin
4. Burkina Faso
5. Burundi
6. Cambodia
7. Cameroon
8. Central African Republic
9. Chad
10. Comoros
11. Congo, Democratic Republic of the
12. Congo, Republic of
13. Eritrea
14. Ethiopia
15. Gambia, The
16. Guinea
17. Guinea-Bissau
18. Haiti
19. Kenya
20. Korea, North
21. Kyrgyzstan
22. Lesotho
23. Liberia
24. Madagascar
25. Malawi
26. Mali
27. Mauritania
28. Mozambique
29. Myanmar
30. Nepal
31. Nicaragua
32. Niger
33. Pakistan
34. Rwanda
35. Senegal
36. Sierra Leone
37. Somalia
38. South Sudan
39. Sudan
40. Syria
41. Tajikistan
42. Tanzania
43. Timor-Leste
44. Togo
45. Uganda
46. Uzbekistan
47. Yemen
48. Zambia
49. Zimbabwe

Countries With GNI per Capita Between $2,046 and $4,255

1. Algeria
2. Bangladesh
3. Bhutan
4. Bolivia
5. Cabo Verde
6. Cote d'Ivoire
7. Djibouti
8. Egypt
9. El Salvador
10. Eswatini
11. Ghana
12. Honduras
13. India
14. Indonesia
15. Iran
16. Kiribati
17. Laos
18. Lebanon
19. Micronesia, Federated States of
20. Mongolia
21. Morocco
22. Nigeria
23. Papua New Guinea
24. Philippines
25. Samoa
26. Sao Tome and Principe
27. Solomon Islands
28. Sri Lanka
29. Tunisia
30. Ukraine
31. Vanuatu
32. Vietnam

Statutorily-Prohibited Countries

1. Burkina Faso
2. Burma
3. Cambodia
4. Eritrea
5. Ethiopia
6. Haiti
7. Iran
8. Korea, North
9. Mali
10. Nicaragua
11. South Sudan
12. Sri Lanka
13. Sudan
14. Syria
15. 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. 
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 website at www.mcc.gov/who-we-select/indicators).

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 shutting down social media or the internet. Pass: Score 
must be above the median score for the income group. Source: 
Reporters Without Borders/Access Now/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 percent 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

[[Page 60209]]

the burden of regulations on business; price controls; the 
government's role in the economy; and 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, to 
travel freely, property rights protections, protections against 
domestic violence, and child marriage, among others. Pass: Score 
must be above the median score for the income group. Source: Women, 
Business, and the Law (World Bank) and the WORLD Policy Analysis 
Center (UCLA).
    6. Land Rights and Access: An index that rates countries on the 
extent to which the institutional, legal, and market framework 
provides secure land tenure and equitable access to land in rural 
areas and the extent to which men and women have the right to 
private property in practice and in law. Pass: Score must be above 
the median score for the income group. Source: The International 
Fund for Agricultural Development and Varieties of Democracy Index
    7. Access to Credit: An index that ranks countries based on 
access and use of formal and informal financial services as measured 
by the number of bank branches and ATMs per 100,000 adults and the 
share of adults that have an account at a formal or informal 
financial institution. Pass: Score must be above the median score 
for the income group. Source: Financial Development Index 
(International Monetary Fund) and Findex (World Bank)
    8. Employment Opportunity: Measures a country government's 
commitment to ending slavery and forced labor, preventing employment 
discrimination, and protecting the rights of workers and people with 
disabilities. Pass: Score must be above the median score for the 
income group. Sources: Varieties of Democracy Institute and WORLD 
Policy Analysis Center (UCLA).

Investing in People

    1. Public Expenditure on Health: Total current expenditures on 
health by government (excluding funding sourced from external 
donors) 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 a country government's 
commitment to preserving biodiversity and natural habitats, 
responsibly managing ecosystems and fisheries, and engaging in 
sustainable agriculture. Pass: Score must be above the median score 
for the income group. Source: 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 either the median score for the income 
group or 90 percent, whichever is lower. 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). Countries with a GNI/capita of 
$2,045 or less 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. Countries with 
a GNI/capita between $2,045 and $4,255 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, 
Employment Opportunity, 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, Employment 
Opportunity);
    (E) combat corruption (Political Rights, Civil Liberties, Rule 
of Law, Freedom of Information, and Control of Corruption); and
    (F) the quality of the civil society enabling environment (Civil 
Liberties, Freedom of Information, Employment Opportunity, and Rule 
of Law)
    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, 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, Land Rights and Access, Access to Credit, 
and Regulatory Quality); and
    (D) respect worker rights, including the right to form labor 
unions (Employment Opportunity, Civil Liberties, and Gender in the 
Economy)
    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, Total 
Public Expenditure on Primary Education, and Employment 
Opportunity);
    (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 and Concurrent Compact Considerations

    MCC reporting and data in the following chart are used to assess 
threshold program performance, compact performance of MCC compact 
countries nearing the end of compact implementation (i.e., within 18 
months of compact end date), or for current MCC compact countries 
under consideration for a concurrent compact, where appropriate. 
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 (www.mcc.gov/where-we-work) or monitoring and evaluation (www.mcc.gov/our-impact/m-and-e) 
web pages.
    For completed compacts, additional information is used to assess 
compact

[[Page 60210]]

performance and is found in a country's Star Report. The Star Report 
and its associated quarterly business process capture key 
information to provide a framework for results and improve the 
ability to disseminate learning and evidence throughout the 
lifecycle of an MCC investment from selection to final evaluation. 
For each compact and threshold program, evidence is collected on 
performance indicators, evaluation results, partnerships, 
sustainability efforts, and learning, among other elements.

----------------------------------------------------------------------------------------------------------------
                     Topic                        MCC reporting/data source           Published documents
----------------------------------------------------------------------------------------------------------------
                                               COUNTRY PARTNERSHIP
----------------------------------------------------------------------------------------------------------------
Political Will:                                  Quarterly              Quarterly results
 Status of major conditions precedent.   implementation reporting.      published as ``Table of Key
 Program oversight/implementation.       Quarterly results      Performance Indicators''
[cir] project restructures.                      reporting.                     (available by country): https://
[cir] partner response to accountable entity     MCC Star Reports.      www.mcc.gov/our-impact/m-and-e.
 capacity issues.                                                               Star Reports (available
 Political independence of the                                          by country): https://www.mcc.gov/
 accountable entity.                                                            resources?fwp_resource_type=star-
                                                                                report.
Management Capacity:
 Project management capacity.
 Project performance.
 Level of MCC intervention/oversight.
 Relative level of resources required.
----------------------------------------------------------------------------------------------------------------
                                                 PROGRAM RESULTS
----------------------------------------------------------------------------------------------------------------
Financial Results:                               Indicator tracking     Monitoring and
 Commitments--including contributions    tables.                        Evaluation Plans (available by
 to compact and threshold funding .              Quarterly financial    country): https://www.mcc.gov/
 Disbursements.                          reporting.                     our-impact/m-and-e.
Project Results:                                 Quarterly              Quarterly results
 Output, outcome, objective targets.     implementation reporting.      published as ``Table of Key
 Accountable entity commitment to        Quarterly results      Performance
 `focus on results'.                             reporting.                     Indicators''(available by
 Accountable entity cooperation on       Impact evaluations.    country): https://www.mcc.gov/
 impact evaluation.                              MCC Star Reports.      our-impact/m-and-e.
 Percent complete for process/outputs.                                  Star Reports (available
 Relevant outcome data.                                                 by country): https://www.mcc.gov/
 Details behind target delays.                                          resources?fwp_resource_type=star-
                                                                                report.
Target Achievements
----------------------------------------------------------------------------------------------------------------
                                             ADHERENCE TO STANDARDS
----------------------------------------------------------------------------------------------------------------
 Procurement                             Audits (GAO and OIG)   Published OIG and GAO
 Environmental and social.               Quarterly              audits
 Fraud and corruption.                   implementation reporting       Star Reports (available
 Program closure.                        MCC Star Reports       by country): https://www.mcc.gov/
 Monitoring and evaluation.                                             resources?fwp_resource_type=star-
 All other legal provisions.                                            report
----------------------------------------------------------------------------------------------------------------
                                                COUNTRY SPECIFIC
----------------------------------------------------------------------------------------------------------------
Sustainability:                                  Quarterly              Quarterly results
 Implementation entity.                  implementation reporting.      published as ``Table of Key
 MCC investments.                        Quarterly results      Performance Indicators''
                                                 reporting.                     (available by country): https://
                                                 MCC Stars Reports.     www.mcc.gov/our-impact/m-and-e.
                                                                                Star Reports (available
                                                                                by country): https://www.mcc.gov/resources?fwp_resource_type=star-report report.
----------------------------------------------------------------------------------------------------------------
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. 2022-21453 Filed 10-3-22; 8:45 am]
BILLING CODE 9211-03-P