By Dharshan Weerasekera, Attorney-at-Law Courtesy Island

The report of the special Presidential Commission headed by Dr. Laksiri Gunaruwan to assess the proposed Millennium Challenge Corporation (MCC) Compact was released to the public on 23rd June 2020. It paints a grim picture of what would happen if the Compact is signed and recommends that the Government reject it. To the best of my knowledge, there has been little discussion of the report in the print media as well as academic and professional journals.

This is surprising, because, it is unreasonable to suppose that the United States still the most powerful nation in the world will take what amounts to a peremptory dismissal of a project to which U.S. officials had devoted considerable time and resources, lying down. The present Government will have to enact legislation to protect Sri Lanka from an attempt to revive the MCC project. Prior to such legislation, it is essential that there is a broad public discussion of the dangers involved in the MCC Compact or others like it.

The best way to begin such a discussion is by reviewing the findings and conclusions of the Gunaruwan Report and supplementing it with the work of international scholars who have looked into the operations of the MCC in other countries. The purpose of the present article is to briefly explain the findings of the ‘Gunaruwan Report’ and set it in context with the conclusions of Emma Mawdsley the well-known lecturer in geography at Cambridge University, in an article titled, “The Millennium Challenge Account: Neoliberalism, development and security.” (Review of International Political Economy, August 2007, www.researchgate.net.)

I argue that, the Gunaruwan Report’s conclusions on the dangers of the proposed MCC Compact are consistent with the conclusions reached by Mawdsley and others in their studies of the operations of the MCC in other countries, namely, though the MCC claims that its purpose is to help poor countries reduce their poverty it is in reality a means for the Americans to extend economic hegemony over such nations.

The Background to the MCC

The Millennium Challenge Corporation (MCC) is the agency that controls the Millennium Challenge Account (MCA) established by the Bush Administration ostensibly to help impoverished nations advance economically. According to Mawdsley, The MCA is an integral part of the Bush Administration’s National Security Strategy (NSS) formulated in 2002.

Following the 9/11 attacks in September 2001, the Bush Administration adopted a new security-development paradigm in foreign policy, one designed to help the U.S. prosecute the so-called “War on Terror” which had by then become the top priority of the Administration. The new policy was based on three pillars: Defence (hunting down and destroying terrorists), Diplomacy (arranging relations among the powerful nations in order to facilitate the said operations), and Development (improving the living conditions in poor countries so that they don’t become breeding-grounds for terrorists). The MCA was for this third purpose.

With the MCA, the U.S. introduced a novel method for awarding foreign assistance. Normally, foreign aid is given when a poor nation makes a request for assistance along with various promises that the projects for which the assistance is sought will in fact be completed. The MCA takes a different approach. Here, the U.S. Government screens all the countries that fall within a certain bracket, say, lower to middle-income earning countries, according to 16 indicators that fall into three categories: a) promoting economic freedom, b) ruling justly and c) investing in the people.

In order to qualify for a grant, a country must score above the median in at least half of the indicators in each category. The only non-negotiable indicator, purportedly, is corruption. So, once a country passes all these tests, the MCC invites it to submit a development proposal. In theory, the MCC and the Government of the recipient country along with all relevant stakeholders are supposed to discuss the proposal extensively and generate a final agreement. The funds are released when the latter is signed. I shall now turn to the Gunaruwan Report.

The ‘Gunaruwan Report’

The argument of the ‘Gunaruwan Report,’ in a nutshell, is that though the MCC Compact is advertised as a means for Sri Lanka to overcome certain economic obstacles without getting into further international debt it has the potential to do to among other things compromise the country’s sovereignty and national security. The report makes three points:

a) There are items in the Compact that can have an adverse impact on the national, social and economic welfare of the country.

b) There are items in the Compact and also the MCA-Sri Lanka Corporation (the entity that is to enforce the Compact) that are contrary to the Constitution and local laws of Sri Lanka and also the “national intentions, sovereignty and national security” of this country.

c) Though the MCC grant appears to be a development grant on the surface it is designed to advance the U.S. Indo-Pacific Strategy and if implemented along with the ACSA and SOFA agreements there is a potential for Sri Lanka to be made into an integral part of U.S. military/naval strategy in the said region with related adverse consequences.

The report recommends that, a) the Government reject the Compact, b) if the Government is to give even minimal consideration to the Compact it should only be after the harmful provisions identified by the report are removed or amended and even then the Compact should be subjected to a broad discussion among professional as well as members of the public and pursued further only after being tabled in Parliament and approved by a majority. I shall now turn to Mawdsley’s article.

Emma Mawdsley’s article

In the article, written in 2007, Mawdsley assesses the first five recipients of the MCC grant—Cape Verde, Honduras, Madagascar, Nicaragua and Georgia. The article is important for two reasons: first, it provides independent confirmation for some of the broader conclusions reached by the Gunaruwan panel, and second, it contains excellent arguments with which to counter some of the main claims that MCC officials and other advocates have been using to defend the Compact in Sri Lanka. In regard to the first matter, the following observation of Mawdsley’s is highly relevant. She says:

“The MCA is not directed towards poverty reduction as it claims, but to the expansion of U.S. economic hegemony. In this respect it should be placed within the larger history of empire through its attempts to actively reshape the legal, institutional, infrastructure and financial context of poorer countries to better serve U.S. economic interests.” (p. 489)

Mawdsley’s main critique of the MCC is that the formula for development that underpins the agency’s work, namely “neoliberal economic growth=poverty reduction=security” is based on a simplistic set of assumptions that ignore the adverse effects of such growth on certain segments of the population of poor countries. In this regard, she makes four points:

a) There is no acknowledgment that economic growth will promote inequality, i.e. disproportionately reward particular social and political groups,

b) There is no reference to shorter or longer term risks associated with neoliberal growth strategies such as vulnerability to market fluctuations.

c) No mention of northern protectionism and unequal access to markets.

d) No mention of sovereignty despite MCC’s direct interventions and indirect influence in reforming legal/regulatory systems.

To turn to the second matter, MCC officials and other advocates in their defence of the Compact have focused on two points: a) it is the Government of Sri Lanka that identified the areas that are to be developed under the grant and therefore it is unreasonable to accuse the Americans of malfeasance, and b) the final agreement was produced after extensive consultations with relevant stakeholders and so it is unfair to dismiss it out of hand. In regard to the first point, the following observation of Mawdsley’s is highly relevant. She says:

“MCC makes much of the fact that the eligible countries identify the greatest barriers to their development and formulate the related plan …. But a reading of the Compact fact sheets placed on the MCC website suggest a different scenario. The individual compacts are remarkably similar. It would appear that every single country independently identified agribusiness, rural entrepreneurial development and transport infrastructure as their key priorities. There is little deviation from this blueprint. (p. 498.)

In regard to the second point, the following observation is pertinent: “consultative’ and ‘participatory’ processes and meetings organized by governments and donor organizations are now standard practice, but are little more than rubber-stamping exercises from the ‘domesticated’ end of the civil society spectrum.” (p. 499)

Conclusion

The findings of the ‘Gunaruwan report’ are consistent with the findings of reputed international scholars who have studied the operations of the MCC in other countries. In the coming weeks and months, the government along with other concerned parties should take steps to encourage a sustained discussion of the work of such scholars, perhaps accompanied by invitations to visit Sri Lanka to give a series of public lectures or seminars on the MCC and related topics. This will be of immense help in better educating the Sri Lankan public about the dangers of ventures such as the MCC and in general informing the government’s own future formulation of policies in regard to foreign assistance and development.