Putting the Emphasis on Infrastructure – Dana Hyde on MCC's Next Decade

Summary

---

Podcast Summary: "Putting the Emphasis on Infrastructure – Dana Hyde on MCC's Next Decade"

The CGD Podcast | Center for Global Development
Guest: Dana Hyde, CEO, Millennium Challenge Corporation
Host: Rajesh Merchandani
Date: May 11, 2015

---

Episode Overview

In this episode, host Rajesh Merchandani speaks with Dana Hyde, CEO of the Millennium Challenge Corporation (MCC), about the organization’s first decade and its vision for the future. The discussion centers around MCC’s unique approach to reducing poverty through economic growth, its emphasis on infrastructure, and its commitment to accountability, country ownership, and results. The episode also explores the broader trends in development finance, especially the evolving role of private investment and performance-based aid.

---

Key Discussion Points & Insights

MCC’s Guiding Principles and Achievements

• Mission and Method:
  • MCC’s purpose is to "reduce poverty through economic growth" ([00:32]).
  • Founded with three principles: accountability for results, country ownership, and partnerships/data ([00:39]).
• Investment Focus:
  • 65% of MCC's portfolio has gone to Africa; 70% to infrastructure ([00:52]).
  • MCC’s country-led, demand-driven model is seen as ahead of its time ([01:23]).
  • "Absolutely...we're seeing a very demand-driven focus from countries...They are looking for jobs, they're looking for economic growth..." — Dana Hyde ([01:25]).
• Country Ownership Model:
  • Collaboration with finance ministries and economists to diagnose constraints to growth and target investments ([02:15]).
  • Recognition of urbanization and youth bulge as key development drivers ([02:10]).

Measuring Success and Results

• Impact on Governance:
  • MCC uses selection criteria centered on governance and performance, spurring participating countries to reform laws even before receiving funds ([02:59], [03:07]).
    • "Countries are changing their laws just to be eligible to get our assistance. I think that's phenomenal." — Dana Hyde ([03:08]).
• Infrastructure Expertise:
  • Unique capacity to deliver large-scale projects like roads and power infrastructure ([03:25]).
• Rigorous Results Measurement:
  • All projects are independently evaluated: 40% impact, 60% performance evaluations ([04:18]).
  • Outputs (like completed infrastructure) are meeting targets; outcomes (income rises) are slower to materialize ([04:54]).
  • Recognition that intangible impacts, such as policy and institutional reforms, need better tracking ([05:40]).

Embracing "Pay for Results"

• Alignment with MCC’s Approach:
  • Pay-for-results fits with MCC’s focus on outcomes and country-led development ([06:24]).
  • At least one of the nine upcoming compacts will pilot a pay-for-results model ([06:24]–[07:13]).
    • "It is happening. It is happening. We are shaping..." — Dana Hyde ([06:52]).
• Future Investment Plans:
  • Upcoming $2 billion investment across nine compacts, with results-based financing included in an increasing number ([07:10]).

MCC’s Size, Growth, and Influence

• Agency Scale and Expectations:
  • MCC’s budget has been flat or declining (~$900M), but seeks an increase due to its catalytic impact ([07:47]–[08:43]).
    • "MCC, I'd like to say, punches above its weight." — Dana Hyde ([07:47]).
• Leveraging Influence:
  • Beyond direct funding, MCC influences policy and institutional change, amplifying its impact ([07:51]).

The Evolution of Development Finance

• From Monterey to Addis Ababa:
  • MCC launched as a "deliverable" at Monterey; now a "contributor" to global dialogue ([09:13]).
    • "MCC has gone from the deliverable to the contributor 10 years later." — Dana Hyde ([09:13]).
  • Expectation that new international conferences will focus on leveraging private investment and establishing measurable goals ([09:22]–[10:06]).
• Role in the Next Decade:
  • MCC seen as a vanguard in unlocking private sector resources (e.g., via co-financing and public-private partnerships) ([10:18]).
    • Reference to Ghana Compact as an example ([10:35]).

Broader Policy Context

• US Foreign Policy and Development:
  • Development positioned as a core component of American strategy, on par with diplomacy and defense, as highlighted by the Quadrennial Diplomacy and Development Review (QDDR) ([11:27]–[11:53]).
    • "I think there is for economic reasons, ... for strategic reasons...and for moral reasons, it's the right thing to do..." — Dana Hyde ([11:53]).

Vision for MCC’s Next Decade

• Looking Forward:
  • Continued emphasis on facilitating private investment, supporting reforms, and achieving outsized policy impact ([12:33]).
    • "MCC I think will really have made a mark in how to put pressure private capital to work in the developing world." — Dana Hyde ([12:33]).

---

Notable Quotes & Memorable Moments

• Country-Driven Approach:
  "We're seeing a very demand-driven focus from countries... They're looking to figure out how we can move the dial on markets." — Dana Hyde ([01:25])

• Incentivizing Good Governance:
  "Countries are changing their laws just to be eligible to get our assistance. I think that's phenomenal." — Dana Hyde ([03:08])

• Results and Learning:
  "The early results are not showing as much as we want in terms of income rise, which is what we're looking for. And we're... making changes accordingly in the portfolio." — Dana Hyde ([04:54])

• Innovating with Performance-Based Aid:
  "It is happening. We are shaping... You will see pay for results in some of those [compacts]." — Dana Hyde ([06:52], [07:08])

• Development’s Place in Foreign Policy:
  "Putting development on par with diplomacy and defense has been a cornerstone of this administration. And I think it's the right thing to do and it's the smart thing to do." — Dana Hyde ([12:18])

---

Key Timestamps

• 00:39: MCC’s core principles explained
• 01:23: Country-driven, demand-responsive model
• 02:59 – 03:25: Major successes: governance, country ownership, infrastructure
• 04:18 – 05:22: Independent evaluation of projects, lessons learned
• 06:24 – 07:13: Introduction and commitment to pay-for-results pilots
• 07:47 – 08:43: MCC’s scale, budget, and strategic role
• 09:13 – 10:06: Role of MCC in international finance conferences and private sector catalytic efforts
• 11:27 – 11:53: US foreign policy, development, and the QDDR
• 12:33 – 13:02: MCC’s future vision for next decade

---

Conclusion

Through this engaging conversation, Dana Hyde underscores MCC’s commitment to data-driven, country-owned, and results-oriented development. The agency’s focus on infrastructure, good governance, innovation in aid models (like pay-for-results), and catalytic influence on both policy and private investment continues to set it apart. As the global landscape shifts towards more private sector involvement, MCC aims to remain at the forefront, shaping development practices for the next decade and beyond.

Transcript

[A]

Hello and welcome to another podcast from cgd. I'm Rajesh Merchandani. My guest today leads an organization that in its first 10 years carried out more than $10 billion worth of operations in some 25 countries across five continents. It's been quite a first decade for the Millennium Challenge Corporation and its CEO Dana Hyde is with me for the podcast. Dana, great to see you.

[B]

Pleasure to be here.

[A]

Now, your guiding principle at MCC is reduce poverty through economic growth. How's that going for you?

[B]

It's been quite a decade. MCC was created 10 years ago out of the Monterey Conference of Financing for Development and it was grounded in these three core principles. So the principles are accountability for results, country ownership, and the importance of partnerships and data and whatnot. We have had a tremendous run over the last decade. 65% of the portfolio has been invested in Africa and 70% of the portfolio has been invested in infrastructure. So you see the needs and the conversations happening now around both of those.

[A]

And that's quite prescient, isn't it really? Because all the knowledge we're gaining now about what people in Africa particularly actually want its infrastructure. So do you think you guys were ahead of the curve?

[B]

Absolutely. So, you know, I think that the way that we work with countries, so it's really committed to a very country owned, country led model of development which is hard to translate to folks who aren't experiencing it. But we're seeing a very demand driven focus from countries and they are certainly telling us that they're looking for jobs, they're looking for economic growth, they're looking to figure out how we can move the dial on markets. And I think that's where we've been able to have an impact.

[A]

But are they telling you that? Because that's what they know you deal in. I'm wondering if economic growth is the right thing to be measuring as an indicator of development.

[B]

So I do think and what resonates with me, I recently read the paper by Ben Leo here at the center and he talked about how that's the focal. When you do surveys here, you see that what folks are looking for in the developing world is economic benefits. I think there's a real focus on the youth population that is coming up in countries. And so I hear that time and time again there's a focus on the urbanization trend and leaderships of countries are looking around how do I create jobs in my economy? And they are very keen to work with MCC in that approach. We start with the economists getting together. So it's Usually the Finance Ministry, working with our economists and taking a very analytical approach to what are the constraints to growth in this economy. And from there we go into a concept and into a particular sector to work in.

[A]

What would you say have been your biggest successes?

[B]

I think the way that mcc. Well, I'd say at least three. First, MCC is incentivizing around its selection criteria, governance and good governance and performance and rule of law. So there's been penetration, particularly in Africa. And what it has shown and what we see is that countries are changing their laws just to be eligible to get our assistance. I think that's phenomenal. Before any money is spent, you're driving performance and governance. Second, I would say that the way that we have put the modality into operation around this country led, country driven construct that I've talked to has been a real success for us. And third, we have developed an expertise in infrastructure, in building roads and building power lines and transmission lines, which is very unique in development.

[A]

And one thing that has set MCC apart from other US agencies also is your insistence on results and evaluation. And you've had 29 projects, or compacts as you call them, in your first 10 years. 18 of them are finished and you're starting to get results through from some of them. Only seven have got results through so far at the moment. It's a bit slow, but what are you learning?

[B]

Yes. So MCC is unique in that 100% of our projects are independently evaluated and of those 40% are impact evaluations and 60% are performance evaluations. And that is really the gold standard, as you know, independent impact evaluations, they're trickling out. And many of the results we're seeing are from the first generation of compacts and they take time, years to come out. Once the completion of the first generation. We are seeing, I think there's three things to say. First with respect to outputs, which is, you know, we're looking for outcomes, but outputs in and of themselves in terms of infrastructure are challenging and we are seeing ourselves hitting and meeting those targets. In terms of outcomes, we're seeing reductions in transit time and transit costs. The early results are not showing as much as we want in terms of income rise, which is what we're looking for. And we're looking at some of those early results and seeing why we think that is and making changes accordingly in the portfolio.

[A]

So does that mean the compacts are not working?

[B]

No, I would say that we have a breadth of results and absolutely not. I mean, these are project by project. So when we say the Compact overall. Oftentimes we'll just have one project in a particular compact that's been evaluated and.

[A]

That'S the thing that shows no income.

[B]

Growth on a project, on a particular project. But there are other projects in the compact. The other thing that I would say is that we have not yet, I think fully captured the breadth of MCC's results. So in many cases we are driving a policy reform in that country, in that sector, we are driving institutional changes and we need to going forward, do a better job of capturing those results.

[A]

One thing talking about results that CGG does a lot of work on is payments for results, payments for performance, cash on delivery aid. And I know that's something that you are going to be looking at or more than looking at in the future. I wonder if you can tell us a bit more about your plans on that.

[B]

I think the pay for result approach is rightly aligned with mcc. First because of the focus on outcomes and second because of the focus on country led development. So we have nine compacts under development and one of those will surely contain. At least one of those will contain a pilot around pay for results approaches.

[A]

Can you tell us about which pilot that will be?

[B]

Stay tuned.

[A]

So one of those. At least.

[B]

At least one of those.

[A]

So it's happening.

[B]

It is happening. It is happening. We are shaping. So I would say the timeline is that in the next two years we will come forward with over $2 billion of investment in at least nine compacts. In nine compacts. And you will see pay for results in some of those.

[A]

In some of those. You said one, but now it's some.

[B]

It could one or more.

[A]

An increasing number, hopefully. Well, that's very good to hear. We'll be very glad to hear that here at cgd. Come back and tell us how it goes. I want to talk to you about the size of mcc because you're quite a small agency. We are in a way. But compared to the scale of US development assistance, $900 million, approximately. Budget. But your budget request for next year is about 30, 40% more. So do you want to be bigger? Because President Bush, who created MCC back in Monterey 2002, envisaged you being at about $5 billion.

[B]

Yes. So MCC, I'd like to say, punches above its weight. I think we are able to leverage beyond our particular investments, particularly in the ways I described to you about policy reform and institutional reforms. Our budget has been flat or declining for the last five years and currently it is less than 900 million. So I know that 30% or 40% increase sounds like quite a bit, but it's starting from a very low base. So we do think that this is a tool of foreign assistance that punches well above its weight, that is catalytic in many ways and that has great potential over the next decade for us to increase our impact. So the President's budget does reflect that confidence as well as the confidence that we have a very data driven, evidence based approach to development. And we are actively having that conversation with folks on Capitol Hill as well.

[A]

Now you talked about Monterey earlier on, which is how MCC was created back in 2002. That was a key moment in development, a financing for development conference. And of course another one of those is happening in Addis Ababa in July. What are you expecting from that? Because what we're hearing is that private finance is the new big frontier in development finance. And I'm just wondering if you expect something as big as the creation of MCC to be happening.

[B]

Well, first it's very good and I think we should all pause and reflect on the fact that MCC has gone from the deliverable to the contributor 10 years later.

[A]

What do you mean by that?

[B]

The deliverable at Monterey to a contributor rather at the next in Addis. So that's been just the span of a decade. It reflects the commitment of this administration. President Bush, obviously I would expect MCC and I would what we will see out of Addis to be very focused, as you said, on what works on clear ambitious goals on private sector. How do we use development assistance as catalytic to private investment. And I think MCC is uniquely positioned in that space. At the root of the model is how do we unlock private investment. And I think we can do more.

[A]

And with the way that development has changed, the landscape has changed. With ODA being a smaller component than private finance. Where do you see MCC in say its next 10 years sitting in that development landscape?

[B]

I think MCC is uniquely poised to be in the vanguard of that effort. I think MCC has shown through the model how we can unlock private investment. I think we can do more of that through co financing, through public private partnerships. And I think you see in compacts like the Ghana Compact how we will focus that effort in the future.

[A]

If there's one thing that you would like to see come out of Addis, whether it's something that the US brings or whether it's something that other countries bring, what would it be? What do you think would make a really big difference?

[B]

Well, I think President Obama has made development at the front of his administration since the beginning. So I do think the world Coming together is hugely important around these needs.

[A]

But it needs to be more than just kind of people meeting. There's got to be something.

[B]

It does. It does need to be more of a conference. And I think if there were clear, ambitious goals that were measurable with a focus on economic growth and something that we can measure year after year, I think that would be a large contribution.

[A]

You said there that President Obama had done a lot in terms of development. And one of the things that happened under his watch was the inaugural Quadrennial Development and Diplomacy Review, the second of which just came out recently, the qddr, which puts development at the heart of US foreign policy. Why is it important that that's where it sits? What does it show in terms of what development is about, really?

[B]

Yes. Well, I think America's leadership in the world, I think development we undertake for three important reasons. I think there is for economic reasons, we live in a global economy. For strategic reasons, obviously we see what happens with the lack of stability in the world. And for moral reasons, it's the right thing to do and express of American values for those reasons. Putting development on par with diplomacy and defense has been a cornerstone of this administration. And I think it's the right thing to do and it's the smart thing to do.

[A]

So in 10 years from now, what's the conversation we're going to be having about MCC? What is the MCC that are 20 years old?

[B]

20 MCC I think will really have made a mark in how to put pressure private capital to work in the developing world. I think it will continue to drive standards of reform and governance in developing nations. And I think it will continue to have sort of an outsized impact in the policies that it is incentivizing. And I think the future is bright for MCC.

[A]

Okay, well, in 10 years time, if we're both still here, if we're both, please come back and talk to us about it.

[B]

I promise I make that commitment today.

[A]

Excellent. Dana Hyde, it's been great to have you here on the CGD podcast. Thanks very much for joining us.

[B]

Thank you. Thank you.

[A]

Don't forget you can find out much more about all our work on our website, www.cgdev.org. i'm Rajesh Merchandani and do join me again for the next podcast from cgd, the center for Global sa.