- The Washington Times - Sunday, January 4, 2009

ANALYSIS/OPINION:

COMMENTARY:

To millions of Africans, last month’s electoral victory by Barack Obama carried with it the promise of renewed commitment from and enhanced engagement with America. The 44th president of the United States will build on the foundations laid by his predecessor who, to the surprise of many, elevated relations with the countries of the continent to a level unprecedented in American diplomatic history.

One of the most significant legacies George W. Bush bequeaths the new president is the Millennium Challenge Corp. (MCC), an initiative that has revolutionized U.S. foreign assistance. The MCC targets a select group of countries based on their demonstrated commitment to good governance, free markets and investments in people. Targeted countries are provided with sums of money large enough and with flexible enough terms to make a real difference. Half of the 39 countries worldwide currently eligible for some MCC funding are in Africa and more than two-thirds of the funding committed so far has been destined for Africa.

Although initiated by a Republican administration, the MCC has enjoyed broad bipartisan support. A report co-authored last year by Gayle E. Smith, one of President-elect Obama’s leading advisers on development, hailed the program as “a significant mechanism” and lamented that its funding was not at least twice what it was. Another Obama adviser, Susan E. Rice, who has been nominated U.S. ambassador to the United Nations has even argued that “the Millennium Challenge philosophy should be applied to Iraq’s reconstruction.”

Despite strong support in Washington, the MCC has serious weaknesses. Recent history shows that once a country is declared “eligible” for MCC support, bureaucratic inertia can set in and what was a reward morphs into an entitlement. If not addressed, these will undermine support for an otherwise worthy program.

An example of this is the West African country of Senegal, which earlier this year was upheld by the MCC’s chief executive officer, Ambassador John Danilovich, as one of six “deserving” countries. Surely Senegal deserves recognition as one of the few African states that has never had a coup d’ etat, boasting two peaceful transfers of power since independence in 1960. The current president, Abdoulaye Wade, was elected in 2000 after leading the political opposition for nearly a quarter-century. Senegal consistently scores above the median for countries in its income peer group in terms of political rights and civil liberties.

Despite this, Senegal’s commitment to economic freedom and, consequently, to poverty reduction through sustainable growth has deteriorated since the country was deemed eligible for the program. And this strikes at the very heart of the MCC innovation in aid to developing countries.

In the most recent report of indicators, Senegal registered failing scores on land rights and access, business start-up, and fiscal policy. The State Department’s most recent annual report on investment climate noted that while the government of Senegal officially welcomes foreign investment, “nontransparent regulation combined with high cost factors are obstacles to potential investors” and “settlement of disputes within the cumbersome, slow and occasionally nontransparent Senegalese judiciary can be a significant burden to business.”

The State Department noted that court “decisions can be inconsistent, arbitrary and nontransparent.” Consequently, the report concluded, “some foreign and domestic investors believe that the investment climate in Senegal is worsening.”

These conclusions are based on a disconcerting trend of backsliding, especially evident since Mr. Wade’s election eight years ago. In 1999, for example, the then-government made a public offering of shares in SENELEC, the monopoly electrical supplier, as a means of raising much needed capital to upgrade the country’s ramshackle power grid. A Canadian and French consortium, Hydro Quebec International-Elyo, offered the highest share price for a 34 percent stake in SENELEC. Following the election, however, it discovered the new administration would not allow it to raise prices in order to recoup its investment. Frustrated in its attempt to turn a profit from its efforts to modernize the system, the investors were forced to accept a government buy-out after less than eighteen months.

Even more egregious has been the manner in which the Senegalese authorities have dealt with Millicom International Cellular, a Luxembourg-based company traded on America’s Nasdaq that specializes in providing cellular telephone service in emerging markets. Since it was granted a 20-year license in 1998, Millicom, whose local Sentel subsidiary operates under the “Tigo” brand name, has grown a nationwide network with a loyal base of 1.8 million subscribers, one-sixth of Senegal’s population.

According to the complaint which the company filed before the International Center for the Settlement of Investment Disputes last month, ever since the Wade administration took office in 2000, it has tried to pressure Millicom into renegotiating the license and paying an additional $200 million, threatening to otherwise revoke the franchise. When the company failed to buckle under, it was presented in September with a decree which purported to terminate its license - backdating the revocation to 2000 for good measure.

Despite these blatant assaults on economic freedom, Senegal remains on track to receive significant funding from the United States. In October, the MCC’s Senegal transaction team recommended proceeding with developing six proposed projects. MCC compacts, it should be noted, involve large sums of taxpayer dollars; Senegal’s neighbors to the east, Mali and Burkina Faso, have signed deals worth $461 million and $480.9 million, respectively.

And Senegal isn’t the only country to backslide while benefiting from U.S. tax dollars. To ensure accountability, a better mechanism is required for linking ongoing funding availability to continuing progress, rather than waiting for wholesale backsliding before addressing the situation.

Senegal should not be in line for a half-billion dollars from U.S. taxpayers at a time when Americans have fiscal worries of their own and the African country’s behavior mocks the economic premises of the program under which the money is made available in the first place.

President-elect Obama has pledged not only to make development “a key pillar of U.S. foreign policy,” but to also “use tax dollars more responsibly” in pursuit of that goal. One place to start would be to review MCC proposals currently under development and determine whether, on the basis of the latest information from the field, governments like Senegal are living up to their commitments.

J. Peter Pham is director of the Nelson Institute for International and Public Affairs at James Madison University and a senior fellow at the Foundation for the Defense of Democracies. Mr. Pham is also the winner of the 2008 Nelson Mandela International Prize for African Security and Development.

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