Can Sri Lanka get the MCC?

Can Sri Lanka get the MCC?

4 July 2020 08:39 am

We wondered how to get an economic commentary on the MCC that has become a topic that everyone talks about these days. So we met Mr. Vincent Mervin Fernando, a country-renowned economist, former director of the Central Bank, and author of 65 books.

 


Why are all of us talking about MCC again these days?

 

The Millennium Challenge Corporation, which was heavily criticized in the last presidential election, came to the fore again with the release of its report on June 23, 2020, by a committee appointed by the new government to investigate and submit a report.


What is this MCC? What are the requirements?

 

MCC is a new agency for the payment of financial assistance created by the United States Congress, the Millennium Challenge Act of 2004, to provide financial assistance to the United States to "eliminate the impediments and impediments to the eradication of poverty and economic growth." The country concerned must complete two things to obtain the assistance of this institution.

 

  1. There should be a limit on per capita income in the relevant country and the country should report lower upper middle income level 
  2. Should have met the eligibility requirements for the grant of MCC. (Economic freedom, equitable governance, and investing in the people are the three main qualifications.

You said MCC started in 2004. What have we done about this from 2004 to 2020?

 

MCC trajectory from 2004 - 2020

  1. Established in 2004 by an act of the United States Congress passed in 2003.
  2. A letter to the Foreign Secretary of Sri Lanka through the US Embassy in Sri Lanka dated 02.11.2004 stating that Sri Lanka is eligible. (At that time the per capita income in Sri Lanka was $ 1063).
  3. The latest committee report states that the government did not take any MCC grant from 2005 to 2015
  4. 2015 Once the Yahapalana Government came to power, the MCC resumed negotiations.
  5. 20 th March of 2017 Steps are being taken to establish a project office at the Prime Minister's Office to coordinate MCC activities. Under this, the following 9 fields are reviewed. Which are;
    Access to Land
    Transport sector
    Tax policy instability
    Water
    Education, Electricity
    Labor regulations
    Access to Capital Financing,
    Health
  6. 2017 In a note to the Prime Minister's Office sent to the MCC on 1. Development of the Transport Sector.2. Two projects for land administration agreements were signed on July 26, 2017, to raise US $ 7.4 million and to increase it to $ 10 million.
  7. On June 21, 2018, MCC agreed to fund development projects in the field of transport and land administration.


What do we get if we sign the MCC? What did we do to get it?

Overall, the value of all grants received by MCC is as follows.

Reconstruction

US $ million

Rehabilitation of Land Administration Systems

67.3

Transport Sector Development

350.0

Project Evaluation and Monitoring

12.7

Program Administration

50.0

Total

480.0

It was intended to sign the MCC agreement by the end of 2018. But in late October 2018, Sri Lanka's governments changed and Mahinda Rajapaksa became the Prime Minister.

However, the Cabinet decision was taken on October 29, 2019 to re-sign the MCC on the terms agreed, following the resignation of Mahinda Rajapaksa as the Prime Minister according to the Supreme court decision. However, due to strong opposition, it was postponed

One of the main reasons for the election victory of Gotabhaya Rajapaksa was the fact that he revealed the MCC agreement which was passed by the Yahapalana government was very dangerous. However, the incumbent government did not reject the MCC agreement and appointed a committee to study the matter. According to the report, only 11% had agreed to sign the agreement. 75% have said that they are totally against signing it.8% say that all information should be made public before a poll.6% have no opinion. President Gotabhaya Rajapaksa says that this should be opened to the public and implemented only if the people wish.


Can you explain the facts agreeing to the agreement and objecting it?

There are many arguments in favor of and against the MCC agreement.

Arguments in favor

This is an attempt by the Sri Lankan authorities to apply to the MCC and not to impose on us.

Of the $ 480 million in grants, 350 will be used for development.

  1. To ease traffic congestion in the Western Province
  2. Development of 8 major roads in Colombo.
  3. Linking the network system development to SLTB and private bus services.
  4. Provide an easy sale of products to people living in the provinces - will be done.

Nowhere in the report is there a provision that interferes with national security.

This is an agreement that will boost the country's economic growth, reduce poverty, and boost the collapsed economy fallen from the COVID crisis.


Opposition arguments

Since this is a state signing an international treaty, the signing of such an agreement must be passed by a majority of parliament and not enforced by a few.

In the current geopolitical context, developing countries such as Sri Lanka should not sign treaties with conditions that fall prey to international power camps.

Not publicizing the draft Bill with the intention of concealing from the public the consequences of the provisions of the agreement.

The need to completely eliminate controversial and land-related programs that could lead to risky outcomes such as land accumulation, fragmentation or foreignization

That could endanger national security

Most of the countries that implemented the agreement are part of the US war strategy.

There are many who see the MCC agreement as a great opportunity to rebuild the Sri Lankan economy that fell through the COVID 19 crisis. But in June 2019, it is doubtful whether the MCC would be good enough for Sri Lanka, a high middle-income country. But our per capita income in 2018 declined from $ 4079 to $ 3852 in 2019. Therefore, it may not be a problem for the MCC to obtain Sri Lanka as low middle incomes are likely to be recovered from the high middle-income countries.

Is it true that the government has already received some money through the MCC?

The US embassy says they have not paid much money. In fact, it was reported to the Central Bank's "Financial Intelligence Unit" (FIU) because it was over Rs. 500,000. There is no such report. Therefore, it is not acceptable.


Finally, what are you thinking about MCC? Is it better to take it?

What I am saying is that it is good to agree to implement the rest by talking about getting rid of the negative proposals that have been made to us by the MCC. COVID 19 is a serious economic problem for Sri Lanka. The President's decision to get the people's consent for this is justifiable.