The legislation creates a roughly 90-day period during which theCorporation will name the list of countries that will compete for MCA selection in the first year("candidate countries"), publish the methodology that will be used for identifying best performingcountries, seek public comment on the initiative, and consult with Congress. Introduction

In a speech on March 14, 2002, at the Inter-American Development Bank, President Bushoutlined a proposal for the United States to increase foreign economic assistance beginning inFY2004 so that by FY2006 American aid would be $5 billion higher than three years earlier. The fundswould be placed in a new Millennium Challenge Account (MCA) and be available on a competitivebasis to a few countries that have demonstrated a commitment to sound development policies andwhere U.S. support will have the best opportunities for achieving the intended results. Congress plays a key role in the approval of the initiative by way of considering authorization and funding legislation, and in confirming the head, or CEO, of the Millennium ChallengeCorporation that manages the MCA under the President's plan. initiative. Selection criteria and performance indicators. MCA participants will be selected based on their performance measured by 16 economic and political indicators. Program development and submission. The Administration asked and Congress approved the creation of a new entity -- the Millennium Challenge Corporation (MCC)-- that will be supervised by a Board of Directors chaired by the Secretary ofState. FY2004 funding. Number of countries participating. As enacted in Division D of P.L. Beginning in FY2006, low-middle income nations, with per-capita income above $1,415,may also participate, but they can only receive 25% of the amount appropriated for the MCA in thatyear. To qualify, a country must score above the median on half of the indicators in each policy area; in other words, a country's ranking must beabove the median of all 75 countries in the first year on three of the six indicators for ruling justlyand economic freedom, and two of the four for investing in people. Importantly, one indicator -- control of corruption -- will be a "pass-fail" test, in which any country scoring at or below the median on this measure will be disqualified regardless ofperformance on any of the other 15 indicators. (22)
Congressional proposals to modify Board of Directors discretion. Instead, S. 1160 placed the MCA within the StateDepartment under the authority of the Secretary of State and gave the Secretary thepower to determine eligible countries through the evaluation of a government'scommitment to several factors in the three areas of ruling justly, economic freedom,and investing in people. Foremost may be funding tradeoffs, especiallygiven rising budget deficits and the costs of fighting the war on terrorism. a.
In a speech on March 14, 2002, at the Inter-American Development Bank, President Bush outlined a proposal for the United States to increase foreign economic assistance beginning inFY2004 so that by FY2006 American aid would be $5 billion higher than three years earlier. Thenew funds, which would supplement the roughly $16.3 billion economic aid budget for FY2003,would be placed in a separate fund -- Millennium Challenge Account (MCA) -- and be availableon a competitive basis to a few countries that have demonstrated a commitment to sounddevelopment policies and where U.S. support is believed to have the best opportunities for achievingthe intended results. These "best-performers" would be selected based on their records in three areas -- ruling justly, investing in people, and pursuing sound economic policies.
Development of a new foreign aid initiative by the Bush Administration was influenced by a number of factors, including the widely perceived poor track record of past aid programs, recentevidence that the existence of certain policies by aid recipients may be more important for successthan the amount of resources invested, the war on terrorism, and the March 2002 U.N.-sponsoredInternational Conference on Financing for Development in Monterrey, Mexico.
The MCA initiative is limited to countries with per capita incomes below $2,935, although in the first two years -- FY2004 and FY2005 -- only countries below the $1,415 level would competefor MCA resources. Participants will be selected based on a transparent evaluation of a country'sperformance on 16 economic and political indicators, divided into three clusters corresponding tothe three policy areas of governance, economic policy, and investment in people. Eligible countriesmust score above the median on half of the indicators in each area. One indicator -- control ofcorruption -- is a pass/fail measure: a country must score above the median on this single measureor be excluded from further consideration.
The Administration proposed to create a new entity -- the Millennium Challenge Corporation (MCC) -- to manage the initiative. The MCC would be supervised by a Board of Directors chairedby the Secretary of State. Several other key issues, including the number of participating countriesand monitoring mechanisms, have yet to be determined.
Congress plays a key role in the policy initiative by considering authorization and funding legislation, and confirming the head of the proposed MCC. A number of issues have been addressedin the congressional debate, including country eligibility criteria, performance indicators used toselect participants, creation of the new MCC, and budget considerations. Congress approvedlegislation (Division D of P.L. 108-199 ) authorizing the new program and appropriating $994million for the first year. The measure creates a Corporation, as proposed, but alters the compositionand size of the Board of Directors. It further limits the extent to which lower-middle incomecountries in FY2006 and beyond can participate in the MCA so that more resources will be availablefor the poorest nations. The legislation creates a roughly 90-day period after the Corporation isestablished for consultation and public comment before selecting MCA participants for FY2004. It is expected that the Board will name the initial MCA eligible countries in May 2004.