The Second Compact of the Millennium Challenge Account: Why Ignore the Agricultural Sector?

Background President George W. Bush created the Millennium Challenge Account (MCA) in 2002 to provide assistance to the world’s poorest countries so that they may reap the benefits of neoliberal-led globalization, and help themselves out of poverty. One of most novel features of this development compact is the pre-emptive method in which it will administer the aid. Under the MCA, only countries that govern justly, invest in their people, and open their economies to foreign enterprise and entrepreneurship will qualify for funding. To this end, Ghana qualified for the first Compact of the MCA under President Kufour, and has qualified for Second Compact under president Mahama. The MCA funding is managed by a new Millennium Challenge Corporation (MCC) for financial assistance through a competitive selection process. As stated, the first Compact of $547million was secured by President John Agyekum Kufour. The five-year $547 million Compact was invested in agriculture and rural development. Poverty rates in the three targeted geographic areas were above 40%. The agriculture component ($241 million) provided training for farmer-based organizations, improved irrigation, provided greater access to credit, and rehabilitated local roads. The transport component ($143 million) sought to reduce transport costs to farmers by improving key roads, such as the one between the capital and the airport, and an important ferry service. Rural development programs ($101 million) constructed and rehabilitated education, water, and electric facilities, among other activities. However, the present Mahama-led administration has indicated of using the second Compact funds solely for the energy sector. Mr. President, the path to increased growth and prosperity of Ghana lies in our willingness and ability to adopt policies that promote economic freedom through Agricultural and infrastructural development, not the energy sector alone. To buttress my point, I will want to draw on an analysis of some of the country specific MCA Compacts to hone in the fact that diversified use of the Compact funds is the path most recipient countries are taking to reduce poverty in their countries. Armenia. The five-year, $236 million Compact concentrated on the agricultural sector, investing in the rehabilitation of rural roads ($67 million) and improving irrigation ($146 million). The program anticipates that it will benefit about 750,000 people, 75% of Armenia’s rural population, by improving 943 kilometers of rural roads and increasing the amount of land under irrigation by 40%. Honduras. The five-year, $215 million MCA Compact with Honduras focuses on two objectives — rural development and transportation. In Honduras, the Specific results sought in the Compact are: (a) double productivity in 15,000 hectares in rural area, (b) expand access to credit for farmers by over 20%, (c) upgrade the major road that links Honduras with commercial centers, and (d) upgrade about 1,500 kilometers of rural roads. El Salvador. The five-year $461 million Compact will address economic growth and poverty reduction concerns in El Salvador’s northern region where more than half the population lives below the poverty line. Education as well as water and sanitation, and electricity supply ($95.1 million); support for poor farmers and small and medium-sized business ($87.5 million); and transportation, including roads ($233.6 million) are the chief elements of program. Cape Verde. The MCC and Cape Verde have signed a five-year, $110 million Compact focused largely on improving the country’s investment climate, transportation networks, and agriculture productivity. Cape Verde has a component of Watershed Management and Agriculture Support — by investing $10.8 million to increase the collection, storage, and distribution of rainfall water, the project hopes to increase agricultural production and double the household income of farmers. Madagascar. The Madagascar Compact is a four year, $110 million program, focusing on rural agriculture development and poverty reduction. Specifically, the project has three objectives: 1) to increase land titling and land security ($36 million); 2) to expand the financial sector and increase competition ($36 million); and 3) to improve agricultural production technologies and market capacity in rural areas ($17million). Mali. The five-year $461 million Compact emphasizes an increase in agricultural production and expansion of trade. About half the funds ($234.6 million) will support a major irrigation project, including modernization of infrastructure and improvements in land tenure. Improvements in the airport ($89.6 million) will target both passenger and freight operations. An industrial park project located at the airport ($94.6 million) will assist agro-processing and other industry. Benin. Benin has been approved for a $307 million, five year program focused on four sectors: (a) Land rights, reducing the time and cost of obtaining property title, (b) Financial services, helping micro, small, and medium-sized businesses, (c) Justice reform, assisting the judicial systems capacity to resolve business and investment claims; and (d) Market access, improving the Port of Cotonou. Mr. President, as seen from the selected countries above, the Compact focused on important sectors such as Agricultural support, agricultural production technologies, and market capacity in rural areas. An improvement in the agricultural sector will undoubtedly, reduce poverty and ignite rapid economic development. Experts say the Compact funding could be too much of a good thing and strain the absorptive capacity of recipient countries to use the funds effectively. Based on other recipient countries examples, I can confidently say that using the funds solely for the energy sector cannot be an effective way in resolving our poverty problems. Finally, I will want your office to publish the Second Compact amount, how it was signed, sectors the fund will focus on, funds allotted to each sector, number of people that will benefit from the funds invested in that sector, and the expected outcomes of the investment in alleviating the suffering of Ghanaians. Thank you. Hon. Frank Annoh-Dompreh MP, Nsawam-Adoagyiri.