Georgia: Give Tbilisi a Millennium Challenge Second Chance

Of the wide variety of international assistance programs operating in Georgia, the Millennium Challenge Corporation, an independent US aid agency, is the most innovative and important American assistance mechanism.

The US Government provides long-term assistance via a variety of US-based implementers, mainly through USAID. At the same time, the US participates in many international aid efforts via such global organizations as the United Nations and the World Bank. There are also earmarks, not to mention aid tied to treaty obligations and the Pentagon.

Of all the ways of providing foreign aid, the Millennium Challenge Corporation (MCC) is unique. First of all, it publicly evaluates countries according to their respective democratization records, and it opts to invest in ways designed to promote prosperity and economic freedom. If MCC compact nations don’t meet their reform targets, their funds can be cut off. With other methods of assistance, even if the government is backsliding, the funds are still in the pipeline and get delivered anyway.

Second, compared to other methods of assistance delivery, MCC is transparent. On its website, the MCC spells out how it judges a country’s progress, what its funds do, and the time line. In addition, it is far easier for journalists or watchdog groups to monitor MCC aid projects than most other assistance programs.

And finally, the government of the recipient country decides how to spend MCC money. This is rare. With other programs, donors tend to decide where the money goes, and the government may be ambivalent about the importance of the effort since it had little to do with the decision. According to its website, the MCC has “approved over $7.4 billion in compact and threshold programs” since its inception in 2004.

Millennium Challenge compact countries tend not to be in the news. They are the ones that are working quietly to build institutions, promoting political stability and economic prosperity. There is a growing recognition that instead of careening from disaster to disaster, from headline to headline, the United States needs to help the best MCC performers, making sure that they remain on the right development path. The lesson of Afghanistan is instructive on this point. The West made a big mistake by ignoring Afghanistan in the 1990s after the end of the Soviet occupation. The resulting dysfunction gave rise to the Taliban.

With the Millennium Challenge, each country that seeks a compact must prove that it has a well-thought-out way to use MCC funds. They must also show that they have fair and transparent contracting and reporting methods in place, and that it can easily track expenditures.

The best thing about Millennium Challenge is that a second compact is possible to obtain, but by no means guaranteed. The country has to prove that not only is its overall record improving, but that the projects of the first compact have been successfully implemented. So far only one country, Cape Verde, has been given a second compact due to is successful implementation of the first, along with showing laudable democratic development.

In a few days, the board of the Millennium Challenge Corporation will pass judgment on Georgia. Although located in a rough neighborhood, in the last six years, Georgia has been one of the counties in the world that has been most successful in its fight against petty corruption and in fostering economic development. It has been successfully bringing to a close the infrastructure projects outlined in its first compact. As with the rest of the world, Georgia has suffered as a result of the global economic crisis and requires increased investments in health and education to sustain its economic development.

As Washington lawmakers try to identify fat in the US budget, nothing should be sacred. But the transparency and conditionality of the Millennium Challenge makes it the most cost-effective international assistance operation that the United States operates. Congress should help it continue its vital work. And when it meets in December, the Millennium Challenge board, which includes Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, should recognize the progress that Georgia has made and award it a second compact.