03 July 2020

The MCC Compact: US Embassy should stop being cagey

Maybe Mangala Samaraweera knows what happened to the USD 10 million pledged!


The committee appointed to review the Millennium Challenge Corporation (MCC) Compact has raised serious concerns about the draft agreement. Noting that the document as it stands is detrimental to the national interest and essentially subverts sovereignty while surrendering judicial oversight, the committee clearly recommends that the Government should not sign the document unless such sections are amended. The US Government has not indicated any willingness to alter anything.

Media statements published by the Embassy, comments of Ambassador Alaina B Teplitz and relevant tweets tell an interesting story. When asked to comment on the final report of the Review Committee, the Embassy said ‘no monies were ever transferred to or spent by the Sri Lankan Government under the proposed USD 480 million grant. Obviously ‘spending’ is out of the question if money had not been transferred, but let’s just smile and move on.

Okay. So, no money has been released so far from the grant itself. If there’s no agreement signed, then money cannot be released. Fair enough. Makes sense. The Embassy has however mentioned funds for preparatory activities in a tweet on June 26, 2020: ‘Funds for preparatory activities have been canceled or indefinitely postponed, pending the Government’s decision whether to proceed with the grant.’

Let’s take a look at the subject ‘Funds for preparatory activities.’ The Embassy, in a statement released on July 27, 2017 refers to an MCC delegation led by Fatema Z Sumar, Regional Deputy Vice President for Europe, Asia, the Pacific and Latin America. Sumar, on a visit to Sri Lanka to push the MCC compact pledged USD 7.4 million ‘to support the development of the compact.’

On June 13, 2018 the Embassy issued another statement. Caroline Nguyen, MCC’s Managing Director for the very same regions, and the Embassy’s Deputy Chief of Mission Robert Hilton signed an agreement with the Ministry of Finance to provide an additional USD 2.6 ‘to finalize compact development,’ the statement claimed.

Why should there be a top-up unless funds originally allocated were insufficient? Note the word ‘finalize.’ It indicates that much of the ‘development’ (of the agreement) had been completed.

The final report of the Review Committee however claims that there is no record at the External Resources Department of the Finance Ministry regarding any payments being made for ‘preparatory work’ or ‘feasibility studies’ pertaining to the MCC.  

This raises a few questions. Why should additional monies be pledged if that which was agreed upon previously was not used? If indeed the first tranche of USD 7.4 million was used, where did it go? Could the amount have been used to pay ‘consultants’ hired by MCC? Since an agreement has already been signed shouldn’t approval for payment be obtained from the Government of Sri Lanka? If indeed approval was obtained, why is there no record of it?

There’s another serious issue. Now USD 10 million does seem stiff to write what is essentially a glorified project proposal, but let’s assume that it is a complex agreement requiring extensive research involving data collection and input from a wide range of experts.

Now let’s assume that not one cent of the funds pledged for ‘preparatory work' has been released. If someone said money is needed for preparatory work ‘to develop the compact,’ and if someone else says ‘yes, you are right and I will provide it to you,’ it means that preparation CANNOT happen if money wasn’t forthcoming. Now Teplitz and the US Embassy would have us believe that a) preparation needs bucks, and b) no bucks have been provided.

What then can be said about the draft agreement? Was it ‘developed’ without any money for relevant preparatory work? Was it a half-baked document? Was it just a copy-paste of similar agreements (for example Nepal’s MCC Compact whose ‘development’ was overseen by Teplitz, no less!)? What really happened?

It is on record that local research outfits, Verite and LIRNEasia, have been involved in compact development. Perhaps these organizations will reveal what they did, for whom, for how much and whether or not payments were made. Unless of course it was for gratis.  

The Embassy states that MCC-managed funding to support grant preparatory activities ‘was made available under the same highly transparent and accountable procedures used to enable other US development work.’  It is indeed strange therefore that there’s no evidence of ‘high transparency’ or ‘accountability’ with respect to payments and beneficiaries.

The Embassy and the Ambassador have repeatedly insisted that this was a ‘grant’ and that it’s all about ‘wanting to be a friend and partner.’ The truth is that the USA and indeed outfits such as LIRNEasia and Advocata (which are ideological pals of Washington and have championed the myth of the free market) subscribe to the neoliberal doctrine which insists ‘no free lunches.’ Why offer Sri Lanka a free lunch worth USD 480 million then? Why offer appetizers worth USD 10 million?  What’s in it for the USA? What benefits are anticipated from the ‘partnership’ (since ‘friendship’ cannot really be banked)?

Control. That’s obvious. The Review Committee has spelled out in detail the benefits that would accrue to the USA and what Sri Lanka loses on the flip side of the deal.

The Government has stated that the report would be submitted to Cabinet. Action, one way or the other, would follow, we can expect. The bottom line is that the Review Committee report clearly forbids this government from going ahead with the MCC Compact. We need the details of the process, however. The Government, having pledged to review and having been provided with a review, has to decide and make public the decision. Foot dragging will raise suspicions of ‘deals’ being discussed on the sly.  

The External Resources Department claims to be clueless. The Government, then, must immediately launch an investigation regarding the USD 7.4 million tranche. Mangala Samaraweera was the subject Minister when the Sumar and Nguyen delegations visited Sri Lanka, held talks with ministry officials and signed agreements. He can also show some love for transparency and accountability.

The Embassy and the Ambassador have been cagey over details. If, as Teplitz claims, the USA truly values ‘highly transparent and accountable procedures,’ then the truth about disbursements and recipients needs to be revealed. ‘Suspended or indefinitely postponed,’ is not a satisfactory response because it is opaque.

If the first tranche of USD 7.4 million was not used, why was a further USD 2.6 million pledged? Was money spent, yes or no? If ‘yes,’ for what was it spent and who received how much? If, as Teplitz and the US Embassy imply, no money has been released for ‘preparatory work,’ is the final draft ‘unprepared’? Why on earth would the USA expect any Government to sign a half-baked document? It can’t be difficult for Teplitz and/or the US Embassy to answer these simple questions ‘in the interest of transparency and accountability,’ right?

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