The Second MCC Compact. Indeed!

E. Ablorh-Odjidja

August 09, 2014

Ghana has won the U. S. Millennium Challenge compact for the second time. But this is not the time to spike the ball. Rather, it should be time for some sober reflections.

The first grant was under President John Kufuor in August 2006 in the amount of a princely $547,009,000.  This time it is $498, bringing the total in eight years span to some $1 billion US Dollars.

There should be no arrogance in the receipt.  The achievement on the Ghanaian’s part is due entirely to American largesse.

To get a sense of the worth of this largesse, juxtapose this munificence to the convoluted Chinese loans and their planned service payments that would drag on for years.

At the signing in Washington D.C. on Wednesday, August 6, 2014, of this new compact, the CEO of the MCC, Ms. Dana Hyde, thanked all those who worked tirelessly to develop this investment aimed at overcoming one of Ghana's key constraints to growth.

This grant is to enhance components within the energy sector in Ghana; perhaps a timely intervention in the face of the current “dumsor” blight.

A few years back, the first compact was for building capacity in the field of agriculture and the transportation sector. We got the Bush Highway as a result.

This intervention was immediately felt. A District Chief Executive from the Northern Region said of it that what would have taken about 50 years of (local) funding to accomplish, it took the MCC just 5 years to do that, thanks to the American funding.

This generosity should resonate more; through the homes of those who always felt that America was an uncaring capitalist nation.

A developmental need correctly identified is the essence of the compact. At the core of the matter is not only what you want.  It is the funding that enables you to obtain what you need. 

The latest American plan “to invest in projects ... to make Ghana's energy sector financially viable ... capable of attracting private investment, and... funds initiatives supporting greater energy efficiency.”

By partnering with countries committed to good governance, economic freedom, and investments in their citizens, the MCC's compact is mandated to reduce poverty through economic growth.

The compact is the brainchild of the George W. Bush administration. It is the most creative, effective, strategically placed foreign aid policy act conceived by a US government to date.  

But throughout the signing event on that Wednesday, John Kerry, the US Secretary of State, never mentioned the name George W. Bush.

Simple in concept and implementation, the MCC compact is signed when the US government accepts a request to fund a specific project proposed by a needy country.

The grant then begins to flow in tranches to the beneficiary, first to fund a beginning stage; followed by the release of the rest, tranche by tranche, but only when the previous stage has been completed.

The MCC compliance discourages abuses and corruption. And since the plan is based on prior-success, it should be possible to deduce that the success in gaining the latest grant was facilitated to some or greater extent by the way the Kufuor administration handled the first grant.

But some question the wisdom of granting this huge grant now to a Ghanaian regime beset by the perception of corruption, especially on the heels of the payments of fraudulent default judgment made to political cronies of the current administration.

But given the ironclad nature of the oversight in the administration of the compact, this concern is unnecessary now.  The compact worked under Kufuor and Mahama, it should be expected to do the same.

But, there is still a catch, ironclad or not.  All foreign aids have hidden problems. One is the dependency they induce. The other is the shell game that follows the grant. The money necessary or meant to fix some social and economic needs today would be shifted elsewhere.

But guess what, whose fault is it that Ghanaians at this late stage still lack, for instance, sound energy infrastructure?

The twin practices of corruption and policy reversal have collapsed earlier initiatives that would have made the objectives sought now unnecessary, all done on a cheap partisan political basis.

For instance, the Bush Highway, completed with funds from the first compact, could have been done after Nkrumah, under his golden triangle project that produced the Tema Motorway, which, by the way, is already being degraded by neglect or lack of maintenance.

It is the same destructive, reversal tendencies that are being rewarded by grants like the MCC.  What we wouldn’t do for ourselves we wait for others to do it for us.  The whopping $498 million grant is now in our development coffers. And the dependency switch is fortified.

Then there is also the problem of the shell game. To appreciate this game, you have to first understand that foreign aid is a subsidy that flows directly into the economy. It may go to support a particular program, but in the end, it helps to fill holes in the overall budgetary allocations..

But since budget allocations are fungible, the instance of a grant will allow a shift, not necessarily a surplus, to occur in budgetary planning.  Available government funds will be diverted elsewhere, usually into an account or a project that allows, perhaps, corruption. This, essentially, is the shell game.

Couple this shell game to the dependency factor and you have a worse situation - a skid row to further underdevelopment.

But all is not dire in the case of the MCC compact. At least, as already said, embedded in it is a format for fighting corruption.

On a visit to Ghana in 2009, President Obama asked Ghanaians that America’s commitment must be measured by more than just the dollars we spend.. the true sign of success is not whether we are a source of perpetual aid that helps people scrape by – it’s whether we are partners in building the capacity for transformational change.

This transformation change, the compact can bring, if only the grants are handled and used in total honesty.  The wish to pull upward into the first world has been there since independence. But our experiences have been those of disappointments.

Again, as correctly observed by President Obama in his speech, the transformation sought is more than just holding elections. It's also about what happens between elections; between regimes

“No country is going to create wealth if its leaders exploit the economy to enrich themselves -- No person wants to live in a society where the rule of law gives way to the rule by brutes.”

And for the clincher, he said, “history is not on the side of those who use coups or change constitutions to stay in power.”

The above is a fitting observation because the majority of past administrations in Ghana have committed all the listed offenses.  However, for the present moment in time, let’s say thanks to President George W. Bush for the idea of the compact.

This compact concept is still a better relief than the Chinese loan and its concomitant service payments that we have been pursuing and obtaining.

E. Ablorh-Odjidja, Publisher, www.ghanadot.com, Washington, DC, August 09, 2014
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