History repeating – Are we going to lose MCC or not?

Aid Transparency Index 2020 – Source: https://www.publishwhatyoufund.org/wpcontent/uploads/dlm_uploads/2020/06/2020-Aid-Transparency-Index-report.pdf   

By a Special Correspondent

Background

It is ironic that Millennium Challenge Corporation (MCC) is yet to get off the ground though Sri Lanka was successful in applying and getting the approval for a $ 480 million outright grant in April 2019. The proposed MCC grant got politicised and became a key campaign issue at the 2019/20 elections. 

The distorted news that dominated the campaign trail included that MCC was going to buy 1.2 million acres of land, 28% of Sri Lankan land to be owned by the American Government for Rs. 180 per perch, going to build an electric fence dividing the country into three, creating an economic corridor from Colombo to Trincomalee, American soldiers were going to set up a military base on that American corridor, Sri Lankans needing to get an American visa to visit to Anuradhapura, etc. 

These made-up stories were well messaged and well communicated to the masses with attractive collateral of maps and graphics, videos and stories that were well amplified by mainstream media and well-funded on social media to reach the masses. The imaginary American phobia did work looking at the 2019/20 elections results.

Similarly, in 2004, there was an imaginary American phobia that was a key issue in the ‘rata perata kauwda mevata wage kiyanne’ (country forward, who is responsible for this) election campaign where President Mahinda Rajapaksa was elected as the President of Sri Lanka. 

One of the key campaign issues was that the 2001-04 Government of Prime Minister Ranil Wickremesinghe was going to sell Sigiriya and Galle Fort to the Americans. That time, the Sri Lanka tourism cluster devoted many years to consider new ways of developing the industry and providing guidance to tourism enterprises and policymakers to enhance the competitiveness of Sri Lanka in the global tourism marketplace. 

The tourism cluster included all leaders of the tourism sector and was skilfully led by a former Chairman of Aitken Spence Group during that time. The tourism cluster was one of the eight industry clusters under the USAID/Sri Lanka’s Competitiveness Initiative (TCI project) that worked on improving the competitiveness of Sri Lankan private sector. The industry level assistance was a natural evolution of the long history of the US Government’s development assistance to the private sector in Sri Lanka. 

The tourism thought leaders worked on how to add more value to the tourism product mix and upgrade the existing tourism offerings. Some of the initiatives, the tourism cluster supported were to create a sound and light show in Sigiriya and Galle tourism development to transform Galle Fort. 

The Sigiriya initiative made much progress as a well-known diversified Sri Lankan corporate won the contract and formed a joint venture with the Central Cultural Fund to operate and manage the Sigiriya sound and light show. International bids attracted specialists from Egypt, Europe, France and India that were to use the latest technologies like holograms projected on sheets of water or on smoke to tell the story of Sigiriya. This was similar to what is done in Egypt where tourists go to see the pyramids during the daytime as well as in the evening, thus adding value to the tourism mix. It is over 15 years, and Sri Lanka still does not have a single sound and light show yet.  

This was another missed opportunity as Sri Lanka seems to be making it a habit to miss the bus!  The Sigiriya sound and light show and the Galle Fort development project got caught in a political storm during that time. It was a tumultuous period as these development projects that were home grown and developed by the tourism industry leaders along with all relevant stakeholders to add more value and create more opportunities were projected as sinister conspiracy theory of Americans were going to buy Sigiriya and Galle Fort. 

Interesting, the same script and same actors that developed the imaginary American Sigiriya - Galle phobia in 2004/05 were behind this imaginary American Colombo-Trinco corridor phobia in 2019/20. Perhaps the difference was that the politicians, media and publicity professionals were more experienced and best in the business, where no one could match to counter the misinformation. The MCC fake news campaign was so meticulous and effective, perhaps was one issue that galvanised the undecided voters. 

The new Cabinet appointed a four-member MCC agreement review committee that completed a six-month review. The report includes so many false statements and assumptions and reflects a level of paranoia and suspicion that is astounding. 

The MCC 2005-2007 experience

The MCC review committee report mentioned that though MCC communicated to the Sri Lankan Government of Sri Lanka been eligible to apply for MCC grant in 2004-2007, only in 2015 that Sri Lanka applied for the grant. This statement is incorrect as President Mahinda Rajapaksa Government was fully engaged with MCC during the 2004-2007 period.  Mangala Samaraweera stated in a television interview recently, that he was given clear instruction as the Foreign Minister to convey to MCC that Sri Lanka is keen to get this large outright grant. 

The Sri Lankan Government appointed a MCC technical team to conduct the rigorous application process. This team included the then Secretary, Ministry of plan Implementation (took over from Nivard Cabraal as the focal point after he was appointed as the Governor of the Central Bank) and included an Additional Secretary, Ministry of Plan Implementation; Director Foreign Aid and Budget Monitoring, Ministry of Finance; Secretary Ministry of Irrigation; Secretary, Ministry of Highways; Secretary, Ministry of Power and Energy; and a private sector representative. Per the MCC guidelines, the Sri Lankan Government submitted a constraints analysis, concept paper and a proposal to MCC in 2005. This process was similar to what was followed in 2015-19 period to obtain the grant assistance. 

The Sri Lankan Government team made a visit to MCC in Washington DC in 2007 to discuss the project development. Midway through the process, MCC formally informed the government that it was terminating the MCC compact development work in Sri Lanka. The then President Mahinda Rajapaksa Government tried desperately to keep the grant alive – this was mentioned by Dr. Harsha De Silva, MP in Parliament who also showed the letter he sent to President George W. Bush urging him not to withdraw the MCC assistance. 

The situation in the country deteriorated further due to the escalation of the war, and Sri Lanka missed the bus again. President Mahinda Rajapaksa missed an opportunity to sign the MCC agreement at the White House. That time, given MCC was a brainchild of President George W. Bush on how to do international development more efficiently, the MCC model gave the opportunity for host governments to develop and implement MCC projects. During this time, it was customary for President Bush to sign all MCC agreements with the recipient Heads of State at the White House.  

The MCC 2015-2020 experience

Sri Lanka was eligible for a small threshold program in 2015 and a full compact (agreement) by 2016. The Ministry of Finance, Ministry of National Policies and Economic Affairs, and the Ministry of Strategic Development and International Trade played the lead role in the MCC re-engagement in Sri Lanka under the leadership of the then Prime Minister Ranil Wickremesinghe. 

In 2015, the Government commissioned the Center for International Development at Harvard University to do a Sri Lanka growth diagnostic analysis. All related Government agencies such as the Export Development Board, Board of Investments, Department of Commerce, External Resources Department, National Planning Department, the Central Bank, Institute of Policy Studies, and the Department Statistics were involved with this study. As a result, all the key Government agencies were engaged along with all other related government agencies, private sector, etc. in conducting the Sri Lanka growth diagnostic analysis along with the Harvard’s CID technical expertise. The growth diagnostic provided a snapshot of what we have done in the past decades, compared where we are with our peers and competitors and more importantly provided analytics to strategise where we needed to go. 

The CID’s growth diagnostic was based on the Harvard University’s Ricardo Haussmann model. MCC had clear guidelines on how to apply for the grant – the Haussmann model was an accepted framework to conduct the constraint analysis. Thus, the then government decided to expand the HCID’s scope to share the data sets and analytics in completing the constraint analysis for the MCC grant. As a result, the Sri Lankan Government was able to submit an evidence-based constraint analysis that was able to expedite the rigorous MCC grant process. The stakeholder engagement was extensive that went on from 2015 to 2019 until the grant was approved by the MCC Board and the US Congress in April 2019. 

The MCC agreement was to be signed on 14 December 2018. However, due to President Maithripala Sirisena’s constitutional crisis in October 2018, the Sri Lanka agreement was on hold until there was high level MCC mission that visited Sri Lanka in early 2019 and finally got the MCC Board and congressional approvals in April 2019. Since then, MCC has been caught in a political tsunami of unimaginable proportion which is a good case study for professionals in international development and communications. 

MCC Review Committee observations 

After the Presidential Elections, the new Cabinet appointed a four-member MCC review committee chaired by Colombo University Economics Department Prof. Lalithasiri Gunaruwan that included Nihal Jayawardena, D.S. Jayaweera, and Nalaka Jayaweera. They completed a six-month review and handed over the final review report to the President on 31 June 2020.

Interestingly, the much-anticipated review report did not address any programmatic issues. There was no mention of MCC buying 28% of Sri Lanka land, no electric fence separating the north and east, no creation of a Colombo-Trinco Corridor, and no American military base on the corridor, etc. the main issues addressed were the esoteric constitutional, legal and project implementation aspects of the agreement, an area perhaps the committee was not qualified nor had credentials to review. The report includes so many false statements and assumptions and reflects a level of paranoia and suspicion which is a zeitgeist of current times. The following are some observations on the MCC review report:

Refers to several clauses such as governing law, procurement guidelines, termination, diplomatic immunity, and program assets, IPR, etc. that are completely standard across donor assistance agreements as somehow violating the Constitution, been outside the legal framework and impinges on the sovereignty of Sri Lanka reflecting a clear lack of familiarity or experience with the basic provisions of such agreements. These are standard and comparable to grants and loan agreements Sri Lanka has signed with USAID, JICA, ADB and the World Bank over many decades. 

Refers to terminations and suspensions in countries where implementation is ongoing without issue (e.g. Niger) or that have never been eligible for a compact (e.g. Yemen, Mauritania). It also refers to signed second compacts in countries where MCC never had agreements (e.g. the Philippines, Moldova). Where MCC has worked over the years and where/why MCC terminated or a few compact and threshold-eligible countries suspended (e.g. Madagascar, Honduras) due to undemocratic governance could have been easily verified online. 

Cites academics who claim that MCC devastated farmers’ livelihoods and took over land by bringing in multinationals in countries where MCC never funded land projects (e.g. Uganda, Sierra Leone, and Peru). Some of the academic papers cited are more than 13 years old and were published years before MCC had finished a single compact!

Connects MCC to SOFA and ACSA 12 times in the report. The MCC agreement does not have a single reference to SOFA and ACSA and has a clause that clearly states that MCC funds cannot be used for military purposes.  

Insinuates that MCC will own the IPR on software and all the data generated and will have to pay MCC an annual user fee in the digitisation initiatives. The committee mentions that will be a national security issue for the country. Sri Lanka has worked with many donors and has successfully automated and digitised the issuing of national identity cards, passport, driving license, stock exchange, etc. All these projects were well managed under the guidance of Sri Lankan Government officials and professionals. It is sad to note that the review committee has speculated and cast aspersions of this nature.

Relies heavily on flawed submissions from unqualified sources including GMOA, SPUR, and many other professionals and associations. Ironically, they were part of the anti MCC propaganda that spread fake news and misinformation before the presidential elections in 2019. The MCC Review Committee has rubber stamped all their submissions without verifying if correct or not which casts serious doubt if this was an objective independent assessment.

This confirms that MCC was completely politicised during the 2019/20 elections. The MCC review committee too produced a flawed report as it was far from been an objective review of the MCC agreement. There is ample evidence online that shows that some of the review committee members had a conflict of interest as some were active members of various associations and groups that propagated anti MCC conspiracies, misinformation, and fake news prior to the elections. Unfortunately, all those personal prejudices are clearly reflected in this review report. 

The main report was released to the public on the eve of the general elections, without any prior consultation or even a courtesy discussion with the US Embassy and MCC, thus MCC become a key campaign issue for the second time.  There was yet another round of misinformation and fake news doing the rounds in the media led by the review committee members themselves. Overall, this experience of creating of misinformation shows the significant institutional deterioration and professional dishonesty that has penetrated the academic, professional institutions and Associations in our country. This is another issue and needs to be addressed separately. 

Honouring the past

Sri Lanka has been a recipient of foreign assistance from multilateral and bilateral development partners since independence. US Government has been a key bilateral donor for many decades. Foreign assistance is an esoteric subject that is generally handled at the highest levels at the Finance Ministry and its External Resources Department under the guidance of the Attorney General’s Department in Sri Lanka. Has the general public ever had access to any such bilateral or multilateral foreign assistance agreement before the MCC agreement? Has anyone seen a loan or multilateral or bilateral donor agreement? Recently however, there were many MCC experts in Sri Lanka!

In particular, bilateral agreements are funded by the taxpayers' money of those respective countries. Consequently, the respective country will have their own foreign assistance framework with conditionality and implementing mechanisms to make sure there is oversight and accountability of their taxpayers’ money. One of the key inferences the review committee makes is basically if MCC wants to provide assistance to Sri Lanka, they first need to go back and make legislative changes to MCC foreign assistance delivery policies and mechanisms to work in Sri Lanka! Development professionals engaged in international development know that these agreements are standard provisions in the donor world. 

The proposed MCC grant agreement is comparable to grant and loan agreements Sri Lanka has signed with JICA, USAID, ADB, and the World Bank over the decades, with similar standard language on governing law, procurement guidelines, termination, diplomatic immunity, program assets, etc. If the MCC review committee allegations are correct that US assistance is against the constitution, sovereignty and Sri Lankan legal framework means the donor support provided by the US taxpayers since 1956 was not valid too! 

USAID was established in Sri Lanka on 28 April 1956. The US Government has provided over $ 2 billion of donor assistance and is one of the largest donors in Sri Lanka. The U.S. Government assistance has covered many sectors across Sri Lanka during the last 64 years. The grant assistance has included malaria eradication, support for railway and road development, nutritional boost for school children, protecting biological diversity, watershed management, water and sanitation, rice research, low income housing, support health ministry capacity development, the Mahaweli accelerated project, automation of the Colombo Stock Market, vocational training, young entrepreneur Sri Lanka program, assistance for agriculture diversification and agri-business, agriculture professional capacity development, agri-processing, and tsunami shelter and reconstruction, etc. 

The private sector assistance through the Technology Initiative for the Private Sector, Ag Enterprise Development, Connecting Rural Economies, and the Competitiveness Initiative, etc. were significant. The many successful industrial, agricultural and service sector domestic entrepreneurs and exporters will provide testimony how they benefitted to expand their businesses from USAID/Sri Lanka support over the last many decades. The list is too long to mention here, but no other donor in Sri Lanka can match the breadth and depth of US grant assistance provided, thus far.    

Therefore, it would be interesting to study how the US Government, a long-term bilateral donor’s MCC program became such a feared institution in Sri Lanka. One of the unintended consequences of social media, is the way misinformation and fake news spread like wildfire to the masses. Where are the checks and balances on spreading fake news and misinformation? Even today, this misinformation continues as there are many that continue to produce baseless anti-MCC propaganda that is shameful. This too is a separate discussion.

Respecting the now 

The Aid Transparency Index is the only independent measure of aid transparency among the world’s major development agencies. Since 2011, it is the flagship publication of Publish What You Fund and now covers 47 global donors. The Index tracks and measures donors’ progress towards transparency. This public comparative ranking of donor agencies based on a robust methodology enables us to identify changes needed and galvanise major donors to progressively increase and improve the aid and development information they make available towards greater transparency and openness. 

The global Aid Transparency Index for 2020 was published on 24 June 2020 and MCC was ranked as the most transparent agency in the US Government and also the top bilateral donor in the world for aid transparency! This graph is self-explanatory that shows many donors that are active in Sri Lanka how they are ranked in the world for transparency and openness. 

The snowball effect of MCC misinformation that can be traced back to 30 January 2019. At that time, Wimal Weerawansa at a public forum made insinuations and propagated a misinformation campaign that tried to cause reputational damage to MCC. In addition to the politicians, the propagation of misinformation was carried further on by many academics and professionals that fed fake news to the gullible masses. This professional dishonesty continues even today. Actions have consequences! Such misinformation jeopardises other development assistance programs and now the latest been the light rail project that was to be funded under JICA and the Kelani Valley railway line project to be funded by ADB.  

The MCC projects selected by the Government would reduce traffic congestion, improve public transportation in Colombo, upgrade provincial roads, strengthen land rights by supporting existing Sri Lankan Government initiatives. The much talked about land component was allocated only $67 million of the $480 million outright grant. It is a fairy tale to think that for $67 million anyone can buy 28% of Sri Lankan land and the US Government was the buyer! 

The proposed MCC grant would benefit many Sri Lankans. The hard work was done to qualify and get approval for this grant and now it is up to the new Sri Lankan Government to take it forward and show the world that Sri Lanka is open for business. The implementation of MCC would have a strong multiplier in Sri Lanka’s efforts to attract serious investors as it would generate confidence as a transparent and predictable destination that follow the rule of law, economic freedom, and investing in people. 

MCC initiatives will also provide much-needed opportunities for Sri Lankan private sector. In awarding contracts, MCC does not provide a preference to companies or individual consultants from the US as in other donor projects. Because of this policy, only 7% of MCC-funded contracts globally have gone to American companies. Consequently, MCC will provide opportunities for Sri Lankan companies to win multi-million-dollar contracts, particularly in IT systems and equipment, civil works, construction, and surveying.

Making a difference in the future

Historically, successive UNP governments have done the hard work of engaging and developing the idea, packaging and handing over the baton to the SLFP-led governments.  USAID was established in Sri Lanka on 28 April 1956 and S.W.R.D Bandaranaike become Prime Minister of Sri Lanka after the General Elections held on 5 April 1956. There are many more examples from the past. In the recent history too, the short UNP Government of 2001-04 developed the idea on the way forward under ‘Regaining Sri Lanka’ that identified 64 large infrastructure initiative that became a part of the ‘Mahinda Chinthana’ policy framework that went on to implement highways and infrastructure projects. Is history repeating itself again as many initiatives including the MCC grant were developed during 2015-2020 have now graciously been handed over to the new President Gotabaya Rajapaksa to make it his legacy?

The President’s ‘National Framework for Vistas of Prosperity and Splendour,’ the new Government’s vision, clearly identifies transport and land as two areas that needs urgent attention to take Sri Lanka forward. President Gotabaya Rajapaksa is leading from the front understanding people’s land and transport issues and working to reset the Government service delivery to make the system more efficient and demand driven. 

Is history repeating itself? Are we going to lose MCC like 2005/07? Or is it going to be like 1956 when USAID was established in Sri Lanka under Prime Minister S.W.R.D. Bandaranaike? I wish President Gotabaya Rajapaksa who was elected with a clear majority all success to make the right decisions. I hope his legacy will take Sri Lanka towards prosperity and splendour for all citizens!

(The writer is an International Development Professional with over 25 years of experience.)