MILLENNIUM CHALLENGE CORPORATION JUNE VISIT TO

UNCLAS SECTION 01 OF 03 ACCRA 001298

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EAID ECON GH MCA
SUBJECT: MILLENNIUM CHALLENGE CORPORATION JUNE VISIT TO
GHANA


Summary
--------------

1. (SBU) Millennium Challenge Corporation (MCC) officials met
with GoG leaders, donors and Ghana's private sector, civil
society and media during their June 6-9 visit. Finance
Minister Osafo Maafo reiterated Ghana's intention to use the
Ghana Poverty Reduction Strategy (GPRS) as a framework for
the MCA compact. Donors urged the MCC to provide direct
budget support. Private sector/civil society supported this
strategy, but questioned the GoG's ability to draft,
implement and monitor a sound proposal. The Finance Minister
wants Ghana to be one of the first to submit a quality
proposal. The MCC team agreed to clarify and supplement
existing guidance on proposal preparation. End Summary.

MCC Team Lays out Framework
--------------

2. (SBU) The MCC team of Drew Luten, Rod Norman and Delia
Welsh made a three-day visit to Accra, Ghana, June 6-9.
During multiple meetings with GoG officials,
Parliamentarians, business leaders, civil society and other
donors, they introduced the MCA, discussed its concepts, and
clarified and expanded the guidance for preparing compacts.
Team leader Drew Luten emphasized that Ghana must take
ownership of the program and drive the process. The proposal
should not be a laundry list of ideas and should not include
projects that other donors had rejected. It must provide a
strategic vision for how it plans to promote faster economic
growth while at the same time reducing poverty, and explain
how proposed projects support that vision. The GoG should
identify major constraints to growth, and present a plan for
overcoming these constraints with the help of MCA funds. The
GoG must also justify why MCA is the appropriate source of
funding. Civil society buy-in and donor coordination are
critical to the process, and must be reflected in the compact.


3. (SBU) Luten said the GoG should use the MCC website
guidance to coordinate and develop a proposal that includes
the strategic vision, specific project proposals,
implementation plan, plans for monitoring and evaluation and
accountability, and clear and measurable results. (Comment:
The point is to force governments to come up with big impact
projects that they and civil society believe will have the
largest impact on the economy, short, medium or long term.
End Comment)


4. (SBU) The MCC team clarified that there is no deadline for
proposals, and countries should err on the side of quality
rather than early completion. The MCC will move on the best
proposals first and defer low-quality proposals that require
extensive consultation. Luten expects the MCC to receive the
first proposals within a few months.

Government Reaction and Perspectives
--------------

5. (SBU) Finance Minister Yaw Osafo Maafo lead the GoG side,
which included Ministers of Trade, Private Sector
Development, Health, Education, and Roads and Transport. GoG
officials said they understood the importance of civil
society buy-in and donor coordination and were confident that
they could handle it. Osafo Maafo reiterated earlier
statements that the GoG would use the GPRS as a guide for
selecting priority projects and developing a compact. The
GPRS is the existing "strategic vision" and already has
society-wide endorsement. It has principles similar to the
MCA: economic stability, growth and employment generation,
human resource development, good governance, and help for the
vulnerable and excluded.


6. (SBU) The GPRS was completed over 20 months, during which
a GoG team identified priorities with community input,
drafted a policy framework with targets and a monitoring and
evaluation plan, held national consultations on the draft
document, and obtained Parliamentary approval of the final
strategy. The GPRS is reviewed annually at the National
Economic Dialogue. IMF, World Bank, and Multi-Donor Budget
Support (MDBS) donors use it to guide their programs. It
provides the basis for developing the annual budget.


7. (SBU) Osafo Maafo stated the current task is to identify
specific priorities out of the broader GPRS priorities.
There is no shortage of ideas. The Health Minister called
for assistance to doctors to alleviate the brain drain. The
Education Minister commented that most donors support primary
education, but funding is needed for tertiary levels,
particularly technical education. Every ministry is
promoting its own projects, and even Parliament is working on
a proposal.


8. (SBU) Osafo Maafo is a strong proponent of education as an
engine of economic development, but also expressed support
for using MCA funds to promote private sector development, an
area neglected by donors focused on poverty reduction. Trade
Minister Alan Kyerematen supported this position, and plugged
a venture capital fund and a Ghanaian Small Business
Administration, both aimed to alleviate a major constraint to
growth -- lack of access to capital.

Consultation with Development Partners
--------------

9. (SBU) IMF, World Bank, and MDBS donors supported using the
GPRS as the framework and also argued for integrating MCA
funding into the MDBS process and measuring broad outcomes
not specific project results. They claimed that the budget
is the only instrument capable of absorbing large assistance
inflows. Luten downplayed the possibility of providing
budget support, but promised close consultation with the
donor community. He also stressed that MCA money could be
used to co-finance projects supported by other donors.


10. (SBU) Donors praised the USG for developing an innovative
assistance vehicle that promotes transparency and
competition, but cautioned that human capacity issues in
Ghana could impede implementation. They also warned against
overburdening the GoG, which already contends with numerous
and overlapping donor initiatives -- e.g., MDBS, IMF, World
Bank, NEPAD and the UN Millennium Development Goals.
Finally, they commented that it took the World Bank and MDBS
donors two years to agree on a reform program with the GoG,
suggesting that the MCC timeline is ambitious.

Meetings with Civil Society, Business and Town Hall
-------------- --------------

11. (SBU) The MCC team also participated in well-attended
roundtables with business leaders and civil society. GoG
officials did not participate in these meetings so as not to
hinder discussions. Business and civil society reps
supported the GoG strategy of using the GPRS as the basis for
developing a compact, but were skeptical about the GoG's
capacity to develop and implement a good proposal. On June
9, the GoG hosted its own private sector/civil society
roundtable, with similar results.


12. (SBU) Several civil society representatives questioned
whether the GoG would engage other sectors in the MCA
process, and expressed a preference for having the MCC play a
more hands-on role. They also questioned whether the GoG
partnership with the MCC would be as one-sided or unequal as
the World Bank/IMF relationships. While business leaders
fully supported the MCA's pro-growth orientation, civil
society supported the GPRS focus on poverty alleviation, and
raised concerns as to whether growth would be equitable.


13. (SBU) In addition to the GPRS, representatives
highlighted other public/private consultations, including the
National Economic Dialogue and the GoG's engagement of the
Private Enterprise Foundation and other private sector bodies
on the national budget. Other initiatives include NEPAD and
the UN Millennium Development Goals and there had been little
effort to link these to the GPRS. (Note: The Finance
Minister has also commented that the GoG needs to do more to
harmonize these initiatives. End Note) Many echoed donor
calls to link the MCA to the MDBS.


14. (SBU) The MCC team clarified that funding will go through
the GoG, which must coordinate the drafting and submission of
the compact. (Note: Some participants asked about local
media allegations that country selections were linked to
Article 98 and the International Criminal Court. Luten
clarified that Article 98 had no role in the MCA process,
which is totally transparent and accessible via the website.
End Note)


15. (SBU) The MCC team also participated in an Embassy-wide
town hall meeting on June 9 to explain the new assistance
program to Embassy employees, especially FSNs. Many local
employees, especially senior USAID FSNs, raised similar
concerns regarding funding mechanisms, GoG capacity,
coordination with other donors, and inclusion of civil
society.

Next Steps
--------------

16. (SBU) The MCC team agreed to review the website guidance
and supplement or clarify it where necessary -- to narrow the
range of ambiguity. They also agreed to consider whether to
provide broad funding parameters, to give countries a better
idea of what size projects they should pursue. Luten told
Emboffs that MCC staff would also consider providing guidance
on what is expected in terms of a first draft. They do not
want governments to develop detailed proposals that are
totally off the mark. Rather, they may first ask governments
to present something of a scope paper -- more than an
outline, but less than a proposal.


17. (SBU) Osafo Maafo agreed to identify the key GoG points
of contact for MCA matters. While he seemed to understand
the MCC directive on quality, his clear objective is to be
one of the first in the queue. He stated that it was "clear
in his mind" that the GoG proposal should include a
combination of projects in different sectors. (Comment:
Finance Ministry officials reassured Econoffs that Osafo
Maafo realizes his job is to carefully vet all internal
proposals and pick the few, high-impact ones that fit within
the pared down GPRS strategic vision. End Comment)

Comment
--------------

18. (SBU) There are many critical questions outstanding,
including how the funding mechanisms will work, how to ensure
the governments provide quality proposals with adequate
societal consultation, and what role, if any, Embassies
should or can play. The MCC team clarified that they do not
expect Embassies to avoid the normal contact and interaction
with government officials, and said they understood that MCA
would come up in our conversations. However, Emboffs should
restrain from discussing specific proposals and giving
technical advice. This limitation does not apply to other
donors, and Post is aware that mid-level World Bank and GoG
officials have informally discussed the prospect of using MCA
money to fund the GoG's equity stake in the West Africa Gas
Pipeline.


19. (SBU) Despite uncertainties and civil societies concerns
about capacity, the GoG is in relatively good shape to
develop a decent proposal, or at least a first draft. The
GPRS provides a good framework and has broad support.
Finance Minister Osafo Maafo is one of the strongest
ministers and is personally overseeing the project
development process. Finally, Ghana has the advantage of the
MDBS process, which has created sophisticated harmonization
and communication among donors and with the GoG. End Comment.
Yates