President George W. Bush created the Millennium Challenge Account (MCA) in 2002 to provide assistance for the world?s poorest countries, so that they may reap the benefits of a neoliberal-led globalisation and help themselves out of poverty.
One of the 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 Kufuor and has qualified for a 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 $547 million was secured by former President John Agyekum Kufuor. The five-year $547 million compact was invested in agriculture and rural development. Poverty rate in the three targeted geographic areas was above 40 per cent.
The agriculture component ($241 million) provided training for farmer-based organisations, 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 programmes ($101 million) constructed and rehabilitated education, water and electric facilities, among other activities.
However, the present Mahama-led administration has indicated using the second compact solely for the energy sector.
Mr President, the path to increased growth and prosperity in 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 the fact that diversified use of the compact funds is the path most recipient countries are taking to reduce poverty in their countries.
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 programme anticipates that it will benefit about 750,000 people, 75 per cent of Armenia?s rural population, by improving 943 kilometres of rural roads and increasing the amount of land under irrigation by 40 per cent.
The five-year $215 million MCA compact for 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 per cent, (c) upgrade the major road that links Honduras with commercial centres and (d) upgrade about 1,500 kilometres of rural roads.
The five-year $461 million compact will address economic growth and poverty reduction concerns in El Salvador?s northern region where more than half of 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 the programme.
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, and 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.
The Madagascar compact is a four-year $110 million programme focused 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 ($17 million).
The five-year $461 million compact emphasises an increase in agricultural production and expansion of trade. About half the fund ($234.6 million) will support a major irrigation project, including modernisation of infrastructure and improvements in land tenure system. 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 industries.
Benin has approved a $307 million five-year programme 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 system?s 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 would like the Office of the President to publish the amount for the second compact, how it was signed; sectors the fund would focus on; funds allotted to each sector; number of people that would benefit from the funds invested in that sector and the expected outcomes of the investment in alleviating the suffering of Ghanaians.
The writer Frank Annor is MP, Nsawam-Adoagyiri