By-Liner

The Power of Good Policies

August 20, 2009

By: Karl Fickenscher

The global economic crisis has forced governments and organizations around the world to focus once again on the effectiveness of international assistance spending. When it comes to providing development assistance to countries worldwide, the United States remains committed to doing so in ways that achieve sustainable results and make a lasting difference in the lives of the poor. Reflecting this commitment, the U.S. Government’s Millennium Challenge Corporation (MCC), enhances accountability in international aid by partnering with countries already committed to practicing sound political, economic, and social policies.

Sound policies are the foundation of sustainable poverty reduction and economic growth. A country needs policies in place to protect the rule of law, political rights, free and fair elections, and other pillars of democratic good governance and civil society engagement. A country needs policies in place to advance the health and education of all its citizens, including girls and women. A country needs policies in place to advance a climate favorable for businesses to operate, generate jobs, and engage in trade and commerce. And, a country needs enforceable policies in place to control corruption.

This is why MCC partners with countries committed to ruling justly, investing in health and education, and expanding economic freedom. MCC uses 17 policy indicators—taken from independent, objective, third-party sources—to determine who would make our best partners in the fight against global poverty. By focusing on those partner countries that are seriously committed to performing, and performing well, on these policy indicators, we believe that our investments will have the greatest impact on growth and poverty reduction. Conversely, a country’s failure to adequately pursue such policies inhibits its ability to reduce poverty and grow economically. This process of partnering with countries based on their policy performance is fundamental to how MCC operates.

Tanzania is an MCC partner country with the largest compact awarded to date. In 2008, Tanzania effectively transitioned from an MCC threshold program focused on anticorruption activities to implementing its $698 million compact to improve its transport, energy, and water sector infrastructure. As part of each compact, every MCC partner country, including Tanzania, has an obligation to maintain or improve its policy performance, as measured through the 17 indicators used by MCC. When a country fails to do so in some significant respect, MCC can and has, at times, acted to suspend or terminate assistance. We welcome Tanzania’s ongoing commitment to maintaining and improving its policy performance in ruling justly, investing in its people, and expanding economic freedom.

Good policies lead to good development results. If we are serious about creating lasting change in the lives of the world’s poor, including here in Tanzania, we must invest in a policy framework that supports, strengthens, and sustains our efforts to promote opportunities for growth. MCC’s policy performance-based approach to development—and how partner countries worldwide, including Tanzania, have embraced that approach—provide positive proof of the power of sound policies to deliver on the promise of poverty reduction and economic growth.