14 March 2005

Madagascar to Receive First U.S. Millennium Challenge Funding

press release

Washington, DC — $110 million to reduce poverty, promote growth, MCC chief says

The Bush administration's Millennium Challenge Corporation (MCC) announced that its first Millennium Challenge Account funding agreement will be with Madagascar.

The agreement -- called a compact -- is for nearly $110 million for a four-year project in Madagascar aimed at reducing poverty by expanding property rights for the country's citizens, strengthening its banking and financial sector, and promoting investment in agriculture.

The compact is based on a proposal Madagascar submitted in October 2004 and reflects the priorities of the people of Madagascar, said Paul Applegarth, MCC chief executive officer.

Applegarth briefed reporters March 14 at the State Department.

Earlier in the day, the MCC board of directors met to approve the compact and then notified Congress of the decision as required by law.

The compact will likely be signed by the United States and Madagascar in early April, Applegarth said.

"MCC and the Malagasy have worked as partners to develop a results-based program focused on poverty reduction through sustainable economic growth," he said.

The Millennium Challenge Account is the administration's supplemental foreign-aid program that rewards countries that demonstrate a commitment to govern well, promote economic growth and invest in improving the lives of their people.

Following is the text of an MCC press releases followed by a fact sheet on the MCC-Madagascar compact:

Millennium Challenge Corporation

Press Release

March 14, 2005

Millennium Challenge Corporation Board Approves First Compact with Madagascar

Washington, D.C. -- Today, the Millennium Challenge Corporation (MCC) Board of Directors approved MCC's first Millennium Challenge Compact. The nearly $110 million, four-year Compact with Madagascar aims to reduce poverty through economic growth and focuses on projects in three areas: property rights, financial sector, and agricultural business investment.

"All credit should go to the people and Government of Madagascar," said MCC CEO Paul Applegarth. "It is their commitment and hard work that led Madagascar to become the first country to finalize a Compact with MCC. Throughout the process, MCC and the Malagasy have worked as partners to develop a results-based program focused on poverty reduction through sustainable economic growth. This program will allow the rural poor in Madagascar the opportunity to secure property rights, obtain access to credit, and better understand market opportunities."

MCC and the Government of Madagascar expect to sign the Compact in April.

Mr. Applegarth added, "The Millennium Challenge Account, an initiative launched by President Bush, is a historic approach to development assistance that recognizes sound policies and good governance are vital to poverty reduction and economic growth in developing countries. The MCA directs assistance to countries that govern justly, invest in their people, and promote economic freedom. MCC is working closely with other eligible countries as they move forward on their proposals for MCA assistance."

Fact Sheet

March 14, 2005

MCC and Madagascar: Building a Partnership for Poverty Reduction and Growth

Millennium Challenge Corporation's Board of Directors has approved a four-year, nearly $110 million Compact with the Republic of Madagascar.

The funding to be provided to Madagascar under the Compact will support a program designed to raise incomes in rural areas by enabling better land use, expansion of the financial sector, and increased investment in farms and other rural businesses. This three-pronged approach will provide the rural population with sustainable alternatives to practices which threaten Madagascar's natural environment, renowned for its biodiversity. The Millennium Declaration's goal of reducing hunger and poverty can be achieved in Madagascar through the integrated approach to rural development outlined in this Compact.

Madagascar and its people determined their own priorities for poverty reduction and economic growth. The Compact contains measurable development objectives set by Madagascar to improve the standards of living for the rural poor. The Malagasy chose to focus most of the program on specific areas of the country, to be selected according to the country's need and potential. Included in the activities Millennium Challenge Corporation funds will support are projects to:

-- secure formal property rights to land and make land registration services more efficient;

-- improve a weak banking system to make financial services available to rural areas, improve credit skills training, and reduce delays in the time it takes checks to clear from 45 to 3 days; and

-- establish a program to help rural Malagasy identify investment opportunities and to train farmers and entrepreneurs in production, management, and marketing techniques.

Background: Poverty in Madagascar is overwhelmingly rural: seven out of every ten people live in a rural area and four out of every five rural inhabitants live on less than 41 cents a day. The Government of Madagascar consulted with representatives of non-governmental organizations, civil society, local business communities, and other donors to solicit ideas for specific programs to help reduce poverty. These consultations were the basis for the development priorities contained in the Compact.

MCC and the Government of Madagascar have designed a rigorous budget and control system to ensure fiscal accountability. The Government of Madagascar will have primary responsibility for implementation of the program.

MCC and the Government of Madagascar anticipate signing the Compact in April.

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