It was once the centre of heated political debates and a topic for after-class TED Talks of Advanced Level tuition teachers. It was approved by the Cabinet of Ministers and yet was refused to be approved by a President before the end of his tenure. It was hated bitterly by patriots and faced protests and even petitions. If you have not guessed what it is by now, it is the widely known Millenium Challenge Corporation (MCC) grant to Sri Lanka.
After all these events, the $ 480 million grant was withdrawn from Sri Lanka by the Corporation two weeks ago due to the lack of engagement from the Sri Lankan Government. The Sunday Morning Business is this week taking a look at whether this withdrawal is an achievement of nationalists or a missed opportunity for the country and its economy.
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MCC Managing Director for Europe, Asia, Pacific, and Latin America Caroline Nguyen visiting then Treasury Secretary R.H.S. Samaratunga in 2018 [/caption]
MCC – Sri Lanka: The truth
The MCC is an independent US foreign assistance agency established in 2004. It provides economic assistance through a competitive selection process to developing nations. According to a report, prepared on “MCC: Overview and Issues” by the Congressional Research Service (CRS), a public policy research institute of the US Congress, from 2004 to 2019, MCC has signed 37 grant agreements, known as compacts, with 29 countries, targeting poor but well-governed states with good prospects for poverty reduction through economic growth.
Sri Lanka was one amongst the three countries that were selected to be eligible for the MCC grant in 2019. Sri Lanka’s $ 450 million compact was targeted at traffic management, modernisation of the bus system, development of logistics facilities, establishing a national land information system, and enhancing mapping, surveying, and titling of land. The $ 350 million transport project has an estimated economic rate of return of 19% while the $ 67 million land project has an estimated economic rate of return of 26%. Together, the two projects were projected to benefit 11.3 million people, which accounts for 54% of Sri Lanka’s population.
Although many out there do not know the exact contents of the grant, they know one thing; if signed, ownership of Sri Lankan lands involved in this project will go to the US Government and this will pose a threat to Sri Lanka’s national security, thanks to random videos, round-table discussions, and hundreds of social media posts. It has to be highlighted that the MCC had not faced civil unrest from any grant countries as much as it did with Sri Lanka.
However, nowhere in the publicly available information on this grant has it been stated that ownership of the lands involved in this project has to be transferred to the US Government. The US Embassy in Sri Lanka and the Corporation already clarified that when partner governments must acquire land, it is in order to build roads or other infrastructure funded by the MCC. In fact, the MCC had never acquired lands for itself or for the US Government.
For example, even in the Mali compact, which ended in 2012, the Government requested that the MCC work on 20,000 hectares of land as part of the compact; MCC did not initiate this activity nor did it take over any of this land. The land was transferred from the management by the "Office du Niger" to the control of the Office of the President of Mali to expedite reforms.
The next point most Sri Lankans were focused on with a strong view of not wanting the MCC was that the MCC might withdraw or terminate the grant given to Sri Lanka halfway, forcing them to borrow money and finish the rest. They pointed out what happened to the Madagascar and Honduras MCC grants, conveniently letting go of the fact that Madagascar’s MCC compact was terminated in the third year due to a political coup, and part of the Honduras compact was likewise terminated due to an undemocratic transition in power back in 2009.
In addition to this, there were many concerns regarding the grant. This includes the claim that the Millenium Challenge Account (MCA) – Sri Lanka, a company that will be set up under the grant, is an American company, while in fact it is a company limited by guarantee under Sri Lanka’s Companies Act No. 7 of 2007.
According to the MCC agreement, the MCA – Sri Lanka Board will consist of representatives from the President’s Office, the Prime Minister’s Office, the Secretary to the Ministry of Finance, the Secretary to the Ministry of Transport and Civil Aviation, the Secretary to the Ministry of Land and Parliamentary Reforms, the Secretary to the Ministry of Megapolis and Western Development, the Secretary to the Ministry of Highways and Road Development and Petroleum Resources Development, the Secretary to the Ministry of Women and Children’s Affairs and Development of Dry Zone, one private sector representative, and two civil society representatives.
The agreement clearly states that the Sri Lankan Government has principal responsibility for overseeing and managing the implementation of this programme. Against this context, lack of engagement from the Sri Lankan side and subsequent withdrawal of the grant by MCC, according to reports and research done on extensive MCC grants, is a significant loss for Sri Lanka.
MCC’s land project in Mozambique, which ended in 2013, strengthened government capacity for land administration and provided titles for some 160,000 plus citizens and their families. In Madagascar, the MCC compact, which ended in 2009, enabled national, regional, and municipal governments to implement new land legislation that the Government of Madagascar adopted, including issuance of land certificates to legally recognise traditionally held rights. Likewise, MCC’s Sri Lankan project could have benefitted over half of the population.
Sri Lanka did not have to repay the Corporation and this grant was set to address key issues in the country’s infrastructure. Since the Sri Lankan Government is financially incapable of addressing these infrastructure concerns on its own, it has to once again depend on lending countries for financial assistance to undertake such projects. This leads to mounting debt and further increases the percentage of debt to the national GDP. Or else, given that the Government now has no-borrowing policies to implement its infrastructure projects, initiatives like significantly improving the country’s public transport sector could even be unreachable fruits for a long term. One can see that the MCC withdrawal is a missed opportunity for Sri Lanka rather than a victory of patriots.
MCC Managing Director for Europe, Asia, Pacific, and Latin America Caroline Nguyen visiting then Treasury Secretary R.H.S. Samaratunga in 2018 [/caption]
MCC – Sri Lanka: The truth
The MCC is an independent US foreign assistance agency established in 2004. It provides economic assistance through a competitive selection process to developing nations. According to a report, prepared on “MCC: Overview and Issues” by the Congressional Research Service (CRS), a public policy research institute of the US Congress, from 2004 to 2019, MCC has signed 37 grant agreements, known as compacts, with 29 countries, targeting poor but well-governed states with good prospects for poverty reduction through economic growth.
Sri Lanka was one amongst the three countries that were selected to be eligible for the MCC grant in 2019. Sri Lanka’s $ 450 million compact was targeted at traffic management, modernisation of the bus system, development of logistics facilities, establishing a national land information system, and enhancing mapping, surveying, and titling of land. The $ 350 million transport project has an estimated economic rate of return of 19% while the $ 67 million land project has an estimated economic rate of return of 26%. Together, the two projects were projected to benefit 11.3 million people, which accounts for 54% of Sri Lanka’s population.
Although many out there do not know the exact contents of the grant, they know one thing; if signed, ownership of Sri Lankan lands involved in this project will go to the US Government and this will pose a threat to Sri Lanka’s national security, thanks to random videos, round-table discussions, and hundreds of social media posts. It has to be highlighted that the MCC had not faced civil unrest from any grant countries as much as it did with Sri Lanka.
However, nowhere in the publicly available information on this grant has it been stated that ownership of the lands involved in this project has to be transferred to the US Government. The US Embassy in Sri Lanka and the Corporation already clarified that when partner governments must acquire land, it is in order to build roads or other infrastructure funded by the MCC. In fact, the MCC had never acquired lands for itself or for the US Government.
For example, even in the Mali compact, which ended in 2012, the Government requested that the MCC work on 20,000 hectares of land as part of the compact; MCC did not initiate this activity nor did it take over any of this land. The land was transferred from the management by the "Office du Niger" to the control of the Office of the President of Mali to expedite reforms.
The next point most Sri Lankans were focused on with a strong view of not wanting the MCC was that the MCC might withdraw or terminate the grant given to Sri Lanka halfway, forcing them to borrow money and finish the rest. They pointed out what happened to the Madagascar and Honduras MCC grants, conveniently letting go of the fact that Madagascar’s MCC compact was terminated in the third year due to a political coup, and part of the Honduras compact was likewise terminated due to an undemocratic transition in power back in 2009.
In addition to this, there were many concerns regarding the grant. This includes the claim that the Millenium Challenge Account (MCA) – Sri Lanka, a company that will be set up under the grant, is an American company, while in fact it is a company limited by guarantee under Sri Lanka’s Companies Act No. 7 of 2007.
According to the MCC agreement, the MCA – Sri Lanka Board will consist of representatives from the President’s Office, the Prime Minister’s Office, the Secretary to the Ministry of Finance, the Secretary to the Ministry of Transport and Civil Aviation, the Secretary to the Ministry of Land and Parliamentary Reforms, the Secretary to the Ministry of Megapolis and Western Development, the Secretary to the Ministry of Highways and Road Development and Petroleum Resources Development, the Secretary to the Ministry of Women and Children’s Affairs and Development of Dry Zone, one private sector representative, and two civil society representatives.
The agreement clearly states that the Sri Lankan Government has principal responsibility for overseeing and managing the implementation of this programme. Against this context, lack of engagement from the Sri Lankan side and subsequent withdrawal of the grant by MCC, according to reports and research done on extensive MCC grants, is a significant loss for Sri Lanka.
MCC’s land project in Mozambique, which ended in 2013, strengthened government capacity for land administration and provided titles for some 160,000 plus citizens and their families. In Madagascar, the MCC compact, which ended in 2009, enabled national, regional, and municipal governments to implement new land legislation that the Government of Madagascar adopted, including issuance of land certificates to legally recognise traditionally held rights. Likewise, MCC’s Sri Lankan project could have benefitted over half of the population.
Sri Lanka did not have to repay the Corporation and this grant was set to address key issues in the country’s infrastructure. Since the Sri Lankan Government is financially incapable of addressing these infrastructure concerns on its own, it has to once again depend on lending countries for financial assistance to undertake such projects. This leads to mounting debt and further increases the percentage of debt to the national GDP. Or else, given that the Government now has no-borrowing policies to implement its infrastructure projects, initiatives like significantly improving the country’s public transport sector could even be unreachable fruits for a long term. One can see that the MCC withdrawal is a missed opportunity for Sri Lanka rather than a victory of patriots.