The Foreign Service Journal, December 2008

authorizing legislation has been remarkably successful in insulat- ing the Millennium Challenge Corporation’s decisionmaking process from national security, diplomatic and trade-related pressure to divert resources to purposes unrelated to develop- ment. More broadly, the Bush ad- ministration has created a “Three-D” framework — Defense, Diplomacy and Development — to define the essential instruments of national power in the post-9/11 age. Unfortunately, however, the development part of the equation has been organizationally the weakest. So while the funding increases and Millennium Challenge Corporation prin- ciples should be preserved, a new approach to organiza- tional structure and implementation needs to be taken. Accepting the Challenge While any new agency or department takes time to set up systems, hire staff and organize itself, the Millennium Challenge Corporation’s problems go well beyond those of a startup program. Foreign aid most often fails at the implementation stage, and that is where the MCC is flawed. Due to mistakes in its design, it has spent only a modest amount of its resources in recipient countries on construction contracts and grants to imple- menting agents. U.S. lawmakers from both parties are becoming restive at the slow pace. It must be over- hauled before its opponents use its glacial pace of exe- cution as an excuse to continue funding cuts (which Congress has just done in the FY 2009 budget) or even abolish it altogether, which would be a major setback to foreign aid reform, U.S. development policy and good development practice. The designers of the Millennium Challenge approach assumed that developing countries that meet the 17 eli- gibility criteria are automatically well governed enough to spend the money quickly and wisely. But this is sim- ply not the case, for many of the recipient countries have weak institutions — fragile budgeting, accounting, per- sonnel and procurement systems — the very systems needed to carry out large-scale development programs. That is why the World Bank has created parallel implementation mechanisms called project manage- ment units, to work around weak local institutions and the high risk of corruption and mis- management they pose. Unfor- tunately, PMUs create all sorts of other problems, yet the MCC is following that model for its own program. This is the conundrum of development: how to provide aid in a timely, competent and accountable fashion while still allowing local ownership, decisionmaking and leadership. Building local institu- tions takes time (10 to 20 years in many cases) precisely because there is no science to it. Some institution-build- ing techniques work in some countries, sometimes, but not in others. For two decades now, the Office of Management and Budget’s demands for measurement of results, Government Accountability Office and agency inspec- tor-general audits, and congressional staff oversight have all been driving the U.S. Agency for International Development away from institution-building — which takes too long, is more difficult to measure with preci- sion and cannot guarantee results — toward service delivery through contractors and nongovernmental organizations. This trend climaxed in 2003 with the Bush adminis- tration’s massive HIV/AIDS program, the President’s Emergency Plan for AIDS Relief, which is centrally designed in Washington. PEPFAR has little or no local input and follows a cookie-cutter approach. Like an assembly line, every program looks the same in each country, and there is no institution-building, little train- ing of local staff and little capacity-building. The focus has been on service delivery by outside aid organiza- tions that can administer a very complex program requiring high levels of data collection and processing. The result, according to the USAID inspector gen- eral, is a program that is unsustainable, even though it has administered anti-retroviral drugs to nearly two million people who would have died otherwise. The risk is that because no local institutions have been cre- ated in these countries to carry out the work when aid agencies one day curtail their operations, which the current economic hardships make more likely, the pro- gram could lose ground. Pres. Bush has signed new F O C U S D E C E M B E R 2 0 0 8 / F O R E I G N S E R V I C E J O U R N A L 35 The attempt to merge the diplomatic mission of State with the development mission of USAID has not been a success.