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15 September 2006

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[Federal Register: September 15, 2006 (Volume 71, Number 179)]

[Notices]               

[Page 54523-54528]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr15se06-79]                         



=======================================================================

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MILLENNIUM CHALLENGE CORPORATION



[MCC FR 06-15]



 

Report on the Criteria and Methodology for Determining the 

Eligibility of Candidate Countries for Millennium Challenge Account 

Assistance in FY 2007



AGENCY: Millennium Challenge Corporation.



ACTION: Notice.



-----------------------------------------------------------------------



SUMMARY: Section 608(d) of the Millennium Challenge Act of 2003, Public 

Law 108-199 (Division D) requires the Millennium Challenge Corporation 

to publish a report that lists the countries determined by the Board of 

Directors of the Corporation to be eligible for assistance for Fiscal 

Year 2007. The report is set forth in full below.



    Dated: September 11, 2006.

William G. Anderson, Jr.,

Vice President & General Counsel (Acting), Millennium Challenge 

Corporation.



Report on the Criteria and Methodology for Determining the Eligibility 

of Candidate Countries for Millennium Challenge Account Assistance in 

FY 2007



Summary



    This report to Congress is provided in accordance with Section 

608(b) of the Millennium Challenge Act of 2003, 22 U.S.C.A. 7701, 

7707(b) (the ``Act'').

    The Act authorizes the provision of Millennium Challenge Account 

(MCA) assistance to countries that enter into Compacts with the United 

States to support policies and programs that advance the prospects of 

such countries achieving lasting economic growth and poverty reduction. 

The Act requires the Millennium Challenge Corporation (MCC) to take a 

number of steps in determining the countries that, based on their 

demonstrated commitment to just and democratic governance, economic 

freedom and investing in their people and the opportunity to reduce 

poverty and generate economic growth in the country, will be eligible 

for MCA assistance during Fiscal Year 2007 (FY07). These steps include 

the submission of reports to the congressional committees specified in 

the Act and the publication of Notices in the Federal Register that 

identify:

    1. The countries that are ``candidate countries'' for MCA 

assistance during FY07 based on their per-capita income levels and 

their eligibility to receive assistance under U.S. law, and countries 

that would be candidate countries but for specified legal prohibitions 

on assistance (Section 608(a) of the Act);

    2. The criteria and methodology that the Board of Directors of MCC 

(the ``Board'') will use to measure and evaluate the relative policy 

performance of the candidate countries consistent with the requirements 

of Section 607 of the Act in order to select ``MCA eligible countries'' 

from among the ``candidate countries'' (Section 608(b) of the Act); and

    3. The list of countries determined by the Board to be ``MCA 

eligible countries'' for FY07, with justification for eligibility 

determination and selection for compact negotiation, including which of 

the MCA eligible countries the Board will seek to enter into MCA 

compacts (Section 608(d) of the Act).

    This report sets out the criteria and methodology to be applied in 

determining eligibility for FY07 MCA assistance.



Changes to the Criteria and Methodology for FY07



    MCC has received constructive input on the indicators since the 

announcement of FY06's selection criteria and methodology. That input 

has been taken into account in creating the criteria and methodology 

for the selection of eligible countries for FY07.



Natural Resource Management Indicators



    In the FY06 report, MCC signaled interest in finding a better 

measure of a country's demonstrated commitment to `` * * * economic 

policies that promote * * * the sustainable management of natural 

resources.'' To that end, MCC launched a public process, spearheaded by 

Governor Whitman, to seek broad input from the academic community, 

public and private sector practitioners, researchers at think tanks and 

NGOs. We conducted extensive consultations, hosted several public 

meetings and researched over 120 potential natural resource indicators. 

In June 2005, at a large meeting of experts co-hosted by The Brookings 

Institution, MCC announced a public ``call for ideas'' to seek 

suggestions for an indicator. We also assembled a group of economists 

and natural resources management experts to help us evaluate the ideas 

we received. Eight ideas were evaluated, and two received high ratings 

from both the evaluators and MCC staff: a Natural Resources Management 

index from Columbia University's Center for International Earth Science 

Information Network (CIESIN) and the Yale Center for Environmental Law 

and Policy (YCLEP) and an Access to Land indicator from the 

International Fund for Agricultural Development (IFAD). As a result of 

technical consultations with experts in the environmental and land 

communities, MCC explored modifications to the original submissions and 

determined that the two indices, with some modifications, measure 

separate aspects of natural resources management and, thus taken 

together, represent a more comprehensive measurement of this criteria 

(as well as other criteria noted below).

    To measure the sustainable management of natural resources for 

FY07, MCC has added the Natural Resources Management index and a Land 

Rights and Access index (IFAD's Access to Land indicator combined with 

the International Finance Corporation's (IFC's) Time and Cost of 

Property Registration indicators) as sources of supplemental 

information. MCC's Board will consider later this year incorporating 

natural resource management indicators as part of the formal selection 

matrix for the FY08 selection process. MCC strives for transparency and 

continuity between years in our selection process and the indicators in 

order to maximize the incentive effect of the country selection 

process. The addition of two new indicators is a significant 

modification of the overall evaluation of candidate country 

performance. By using these indicators as supplemental information for 

FY07, with full consideration later this year of formal adoption as 

selection indicators for FY08, MCC will provide notice to countries of 

their performance and an opportunity to learn how they are being 

measured. MCC will engage countries in a dialogue about performance and 

potential reforms in these areas and will encourage countries to seek 

feedback from the institutions that produce these indicators.

    It is important to recognize that all of MCC's indicators have 

limitations, including these two additional indicators. For example, 

the Eco-Region Protection indicator described below attempts to measure 

the breadth and comprehensiveness of a government's commitment to 

habitat preservation and biodiversity protection but does not measure 

the effectiveness of such efforts. Therefore, MCC will continue to



[[Page 54524]]



review these indicators and explore potential improvements that more 

effectively measure a government's commitment to sustainable natural 

resource management.



Natural Resources Management Index



    CIESIN and YCLEP's composite measure of environmental health and 

environmental protection is made up of four indicators described below.

     Eco-Region Protection: Produced by CIESIN, this component 

assesses whether countries are protecting at least 10 percent of all 

their biomes (e.g., deserts, tropical rainforests, grasslands, savannas 

and tundra). It is designed to capture the comprehensiveness of a 

government's commitment to habitat preservation and biodiversity 

protection. The World Wildlife Fund provides the underlying biome data, 

and the United Nations Environment Program World Conservation 

Monitoring Center--in partnership with the IUCN World Commission on 

Protected Areas and the World Database on Protected Areas Consortium--

provide the underlying data on protected areas.

     Access to Improved Water: Produced by the World Health 

Organization (WHO) and the United Nations Children's Fund (UNICEF), 

this component measures the percentage of the population with access to 

at least 20 liters of water per person per day from an ``improved'' 

source (household connections, public standpipes, boreholes, protected 

dug wells, protected springs and rainwater collection) within one 

kilometer of the user's dwelling.

     Access to Improved Sanitation: Produced by the WHO and 

UNICEF, this component measures the percentage of the population with 

access to facilities that hygienically separate human excreta from 

human, animal and insect contact. Such facilities include sewers or 

septic tanks, poor-flush latrines and simple pit or ventilated improved 

pit latrines, provided that they are not public.

     Child Mortality (Ages 1-4): Produced by the Population 

Division of the United Nations Department of Economic and Social 

Affairs, this indicator measures the probability of a child dying 

between the ages of 1 and 4. Since the underlying causes of child 

mortality among 1-4 year olds are predominantly environmental, this 

indicator is considered to be an excellent proxy for environmental 

conditions.

Why It Matters

    Eco-region protection is important for sustainable economic growth 

and poverty reduction because ecosystems provide essential services 

such as clean water, fresh air, healthy soils, livable climates and 

wild foods that underpin human welfare. The establishment of 

``protected areas'' constitutes a proven approach to preserving 

ecosystems. Studies show that, in the absence of a well-managed 

protected areas system, the environment inside and outside of protected 

areas tends to deteriorate. In addition, protected areas can generate a 

significant amount of income by providing opportunities for investments 

in tourism and bio-prospecting, generating debt relief through debt-

for-nature swaps and carbon credit arrangements, and attracting 

international conservation investments. Weak protection of ecosystems 

has a particularly damaging effect on poor people since they rely 

directly upon the resource base for food, fiber, fuel, shelter and 

water. The benefit-to-cost ratio of effective conservation of wild 

areas is estimated to exceed 100:1.

    Lack of access to clean water and sanitation services are two of 

the most important environmental threats to human health in the 

developing world. Every year, roughly 1.7 million lives and 54.2 

million ``life-years'' are lost to unsafe water and inadequate 

sanitation, and poor people disproportionately bear this burden. Access 

to these clean water and sanitation services affects economic growth 

and poverty reduction directly through the channels of improved health 

and higher total factor productivity. Lack of access to these basic 

services affects labor productivity by spreading diseases such as 

dengue, hepatitis A and E, cholera, dysentery and diarrheal diseases; 

encouraging the spread of malaria-infected mosquitoes; and making it 

difficult for people to retain food and nutrients. Poor people 

(disproportionately women and children) also spend a significant number 

of daylight hours fetching water, which further lowers levels of labor 

productivity. In addition, women and older children lose millions of 

working days caring for family members afflicted by water-borne 

diseases.

    A government's commitment to reducing child mortality among 1-4 

year-olds provides an excellent indication of its broader commitment to 

environmental health and environmental protection. Unlike infant 

mortality, the causes of child mortality among 1-4 year-olds are 

predominantly environmental. CIESIN and the YCLEP estimate that roughly 

80 percent of all of the deaths in the 1-4 age cohort are attributable 

to three factors: (1) Indoor air pollution; (2) unsafe water; and (3) 

unreliable sanitation. The direct economic impact of indoor air 

pollution and unsafe water and sanitation is staggering: 3.3 million 

lives and 92.7 million ``life-years'' are lost every year to these 

environmental health threats. Indoor air pollution, which is caused 

primarily by burning biomass, leads to acute respiratory infections 

(ARI), asthma, chronic obstructive pulmonary disease and a whole host 

of other health-related issues. Women and young children 

disproportionately bear this burden because they usually spend more 

time cooking and indoors. Yet with modest investments, these deaths and 

illnesses are completely preventable. Studies show that interventions 

such as dissemination of improved efficiency household stoves and 

public awareness campaigns about the importance of proper ventilation 

come at a very low cost and save lives. These interventions have also 

been shown to reduce unsustainable biomass harvesting.



Land Rights and Access Index



    The Land Rights and Access Index is made up of three indicators:

     Access to Land: Produced by IFAD, this indicator assesses 

the extent to which the institutional, legal and market framework 

provides secure land tenure and equitable access to land in rural 

areas. It is made up of five subcomponents: (1) The extent to which the 

law guarantees secure tenure for land rights of the poor; (2) the 

extent to which the law guarantees secure land rights for women and 

other vulnerable groups; (3) the extent to which land is titled and 

registered; (4) the functioning of land markets; and (5) the extent to 

which government policies contribute to the sustainable management of 

common property resources.

     Days to Register Property: Produced by the International 

Finance Corporation (IFC), this component measures how long it takes to 

register property in the capital city. The IFC records the full amount 

of time necessary when a business purchases land and a building, and to 

transfer the property title from the seller to the buyer so that the 

buyer can use the title for expanding business, as collateral in taking 

new loans, or, if necessary, to sell to another business.

     Cost of Registering Property: Produced by the IFC, this 

component measures the cost to register property as a percentage of the 

value of the property in the capital city. The IFC records all of the 

costs that are incurred when a



[[Page 54525]]



business purchases land and a building to transfer the property title 

from the seller to the buyer, so that the buyer can use it for 

expanding his business, as collateral in taking new loans, or, if 

necessary, to sell it to another business.

Why It Matters

    Secure land tenure is a critical component of sustainable natural 

resource management because those who lack clear ownership or use 

rights to their land are less likely to make long-term investments in 

land productivity and more likely to make short-term decisions with 

negative environmental impacts such as deforestation. In Ghana, for 

example, there is evidence that farmers are significantly more likely 

to make long-term investments in land by planting trees when their land 

rights are secure. Conversely, insecure land tenure can contribute to 

severe land degradation by encouraging the mining of soil fertility and 

organic matter, slash-and-burn agriculture and encroachment into 

ecologically sensitive areas. Studies show that land tenure insecurity 

has accelerated deforestation and a range of other unsustainable 

natural resource management practices in Latin America, Africa and 

Asia.

    In addition to cultivating a longer term perspective on land use, 

secure land tenure also eases the difficulty of establishing the 

systems of securitization that are necessary to deliver water and 

sanitation services; private companies and public utilities generally 

do not provide access to credit, water, sanitation, telephones or 

electricity unless the individuals requesting service possess a 

property title.

    Secure and formal land tenure and efficient title registration 

services also play a central role in the economic growth process by 

giving people long-term incentives to invest and save their income, 

enhancing access to essential public services, allowing for more 

productive use of time and money than protecting land rights, 

facilitating use of land as collateral for loans and contributing to 

social stability and local governance. These improvements also favor 

growth that is ``pro-poor'' because the benefits generally accrue to 

those who have not possessed such rights in the past and who are 

affected even more by high property registration costs in time and 

money. Land policy reform can be particularly meaningful for women. 

Research shows that when women have secure access to land and are able 

to exercise control over land assets, their ability to earn income is 

enhanced, household spending on healthcare, nutritious foods and 

children's education increase and human capital accumulation occurs at 

a faster rate. Women's ability to inherit and possess control rights to 

land also serves as a crucial social safety net.

    Consultations with the land policy community have revealed that, 

while IFAD's indicator places great emphasis on equitable access to 

land in rural areas, it does not fully address the efficiency of the 

property rights system and urban property issues. Therefore, MCC will 

combine IFAD's indicator with the IFC's time and cost of property 

registration indicators. The IFC indicators are compiled by means of a 

rigorous process of consultation with local experts, cross-checking 

with official sources, government officials and relevant stakeholders 

to ensure the accuracy of the information that is collected. These 

indicators are highly actionable and target the urban and peri-urban 

commercial and residential property areas not measured by the IFAD 

indicator. Non-rural land use is certainly important for poverty-

reducing economic growth, but the conversion of rural land to urban 

land is also important to sustainable natural resource management and 

sound land policy affects the quality of this process of land use 

change.



Placement of the Natural Resource Management Indices



    While MCC's authorizing legislation outlines the natural resource 

management indicator as a measure of economic policy in the economic 

freedom category, and the proposed indicators meet that criterion, MCC 

is considering eventual placement of both indicators in the Investing 

in People category as potentially the most appropriate. Investing in 

people means, among other characteristics, investing in the assets 

required for a sustainable livelihood. The Natural Resources Management 

index measures whether governments are investing their resources in 

ways that will enable poor people, particularly poor women and 

children, to live healthy and productive lives. The Access to Improved 

Water, Access to Improved Sanitation and Child Mortality subcomponents 

of this index are also responsive to MCC's legislative mandate of 

measuring a government's commitment to reducing child mortality. Land 

is a crucial asset and a social safety net that poor people rely on to 

improve their well-being. By measuring whether governments are 

improving their laws, policies and administrative practices to make 

land access more secure, the Land Rights and Access index will help MCC 

identify countries that are committed to investing in the 

entrepreneurship of their people and empowering people to more fully 

harness their skills and talents to improve their livelihoods. Access 

to land often determines whether or not the poor can earn enough income 

to survive and invest in their own futures. It is also important to 

note that the Land Rights and Access index explicitly addresses the 

issue of gender equality and qualifies as a measure of a government's 

commitment to investing in women (as outlined in MCC's authorizing 

legislation). Gender inequality has been an important component of MCC 

Compact development, and equitable access to land in particular has 

shown itself to be essential if all members of society are to benefit 

from economic growth. MCC's use of a Land Rights and Access index is 

also responsive to the broader legislative mandate that MCC, in all of 

its activities, ``take into account and assess the role of women and 

girls.''



Modification of Indicator Sources



    Due to improvements in data quality and availability, MCC has made 

several source changes to the FY07 selection criteria. Rather than 

relying on multiple sources for its Inflation indicator, MCC will rely 

exclusively on annual data reported in the International Monetary 

Fund's (IMF) World Economic Outlook (WEO) database. For Public 

Expenditure on Health, MCC will also substitute World Health 

Organization data for the data it has collected through national 

governments in previous years. Finally, for its Public Expenditure on 

Primary Education indicator, MCC will draw on the United Nations 

Educational, Scientific and Cultural Organization (UNESCO) as its 

primary source and self-reported data from national governments as a 

secondary source. Efforts are currently underway at UNESCO to improve 

country coverage, and MCC plans to discontinue use of self-reported 

country data as coverage expands.



Potential Future Changes



    MCC reviews all of its indicators annually to ensure the best 

measures are being used and may, from time to time, recommend changes 

or refinements if MCC identifies better indicators or improved sources 

of data. MCC takes into account public comments received on the 

previous year's criteria and methodology and consult with a broad range 

of experts in the development community and within the U.S. Government. 

In assessing new indicators, MCC favors those that: (1) Are developed 

by an independent third



[[Page 54526]]



party; (2) utilize objective, analytically rigorous and high-quality 

data; (3) are publicly available; (4) have broad country-coverage; (5) 

are comparable across countries; (6) have a clear theoretical or 

empirical link to economic growth and poverty reduction; (7) are 

policy-linked (i.e., measure factors that governments can influence 

within a two- to three-year horizon); and (8) have broad consistency in 

results from year to year. There have been numerous noteworthy 

improvements to data quality and availability to current indicators as 

a result of MCC's application of the indicators and the regular 

dialogue MCC has established with the indicator institutions.

    In addition to the changes identified in this Report, MCC will 

explore additional changes to the indicators for the FY08 process. For 

example, in the FY06 Report, MCC signaled its interest in a more 

comprehensive measure of trade barriers. MCC has not yet identified a 

more comprehensive measure with good country coverage and which is 

publicly available, but several new indicators of tariff and non-tariff 

barriers are under development. The Heritage Foundation, for instance, 

plans to make significant revisions to its Trade Policy indicator in 

order to better account for non-tariff barriers such as quotas, 

voluntary export restraints, import bans, import and export taxes, 

import and export subsidies, import and export licensing requirements 

and the red tape involved with each stage of importing and exporting. 

MCC hopes that by highlighting our intention to look for better and 

more comprehensive indicators MCC will stimulate interest in improving 

the available data.



Criteria and Methodology



    The Board will select eligible countries based on the following, 

among other factors: (1) Their overall performance in relation to their 

peers in three broad policy categories--Ruling Justly, Encouraging 

Economic Freedom and Investing in People; and (2) the opportunity to 

reduce poverty and generate economic growth. Section 607 of the Act 

requires that the Board's determination of eligibility be based ``to 

the maximum extent possible, upon objective and quantifiable indicators 

of a country's demonstrated commitment'' to the criteria set out in the 

Act. For FY07, there will be two groups of candidate countries--low-

income countries and lower middle-income countries. Low-income 

candidate countries refer to those countries that have a per capita 

income equal to or less than $1,675 and are not ineligible to receive 

United States economic assistance under part I of the Foreign 

Assistance Act of 1961 by reason of the application of any provision of 

the Foreign Assistance Act or any other provision of law. Lower middle-

income candidate countries are those that have a per capita income 

between $1,676-$3,465 and are not ineligible to receive United States 

economic assistance.

    The Board will make use of sixteen indicators to assess policy 

performance of individual countries (specific definitions of the 

indicators and their sources are set out in Annex A). These indicators 

are grouped for purposes of the FY07 assessment methodology under the 

three policy categories listed below.



------------------------------------------------------------------------

                                      Encouraging        Investing in

          Ruling justly            economic freedom         people

------------------------------------------------------------------------

1. Civil Liberties..............  1. Cost of          1. Public

                                   Starting a          Expenditure on

                                   Business.           Health.

2. Political Rights.............  2. Inflation......  2. Public

                                                       Expenditure on

                                                       Primary

                                                       Education.

3. Voice and Accountability.....  3. Fiscal Policy..  3. Immunization

                                                       Rates (DPT3 and

                                                       Measles).

4. Government Effectiveness.....  4. Trade Policy...  4. Girls' Primary

                                                       Education

                                                       Completion.

5. Rule of Law..................  5. Regulatory

                                   Quality.

6. Control of Corruption........  6. Days to Start a

                                   Business.

------------------------------------------------------------------------



    In making its determination of eligibility with respect to a 

particular candidate country, the Board will consider whether a country 

performs above the median in relation to its peers on at least half of 

the indicators in each of the three policy categories and above the 

median on the corruption indicator. One exception to this methodology 

is that the median is not used for the Inflation indicator. Instead, to 

pass the Inflation indicator a country's inflation rate needs to be 

under a fixed ceiling of 15 percent. The indicator methodology will be 

the predominant basis for determining which countries will be eligible 

for MCA assistance. In addition, the Board may exercise discretion in 

evaluating and translating the indicators into a final list of eligible 

countries. In this respect, the Board may also consider whether any 

adjustments should be made for data gaps, lags, trends or other 

weaknesses in particular indicators. Likewise, the Board may deem a 

country ineligible if it performs substantially below the median on any 

indicator and has not taken appropriate measures to address this 

shortcoming.

    Where necessary, the Board may also take into account other 

quantitative and qualitative information to determine whether a country 

performed satisfactorily in relation to its peers in a given category. 

As provided in the Act, the Chief Executive Officer's report to 

Congress setting out the list of eligible countries and identifying 

which of those countries the MCC will seek to enter into Compact 

negotiations with will include a justification for such eligibility 

determinations and selections for Compact negotiation.

    There are elements of the criteria set out in the Act for which 

there is either limited quantitative information (e.g., rights of 

people with disabilities) or no well-developed performance indicator. 

Until such data and/or indicators are developed, the Board may rely on 

supplemental data and qualitative information to assess policy 

performance. For example, the State Department Human Rights report 

contains qualitative information to make an assessment on a variety of 

criteria outlined by Congress, such as the rights of people with 

disabilities, the treatment of women and children, worker rights and 

human rights. Similarly, as additional information in the area of 

corruption, the Board may consider how a country scores on Transparency 

International's Corruption Perceptions Index as well as on the defined 

indicator.



Relationship to Legislative Criteria



    Within each policy category, the Act sets out a number of specific 

selection criteria. As indicated above, a set of objective and 

quantifiable policy indicators is being used to establish eligibility 

for MCA assistance and measure the relative performance by candidate 

countries against these criteria. The Board's approach to determining 

eligibility ensures that performance against each of these criteria is 

assessed by at least one of the sixteen objective indicators. Most are 

addressed by multiple indicators. The specific indicators used to 

measure each



[[Page 54527]]



of the criteria set out in the Act are listed below.

    Section 607(b)(1): Just and democratic governance, including a 

demonstrated commitment to:

    (A) Promote political pluralism, equality and the rule of law; 

Indicators--Political Rights, Civil Liberties, Voice and Accountability 

and Rule of Law.

    (B) Respect human and civil rights, including the rights of people 

with disabilities; Indicators--Political Rights and Civil Liberties.

    (C) Protect private property rights; Indicators--Civil Liberties, 

Regulatory Quality, Rule of Law and Land Rights and Access.

    (D) Encourage transparency and accountability of government; and 

Indicators--Political Rights, Civil Liberties, Voice and Accountability 

and Government Effectiveness.

    (E) Combat corruption; Indicators--Civil Liberties and Control of 

Corruption.

    Section 607(b)(2): Economic freedom, including a demonstrated 

commitment to economic policies that:

    (A) Encourage citizens and firms to participate in global trade and 

international capital markets; Indicators--Fiscal Policy, Inflation, 

Trade Policy and Regulatory Quality

    (B) Promote private sector growth and the sustainable management of 

natural resources; Indicators--Inflation, Days to Start a Business, 

Cost of Starting a Business, Fiscal Policy and Regulatory Quality.

    (C) Strengthen market forces in the economy; and Indicators--Fiscal 

Policy, Inflation and Regulatory Quality.

    (D) Respect worker rights, including the right to form labor 

unions; Indicators--Civil Liberties and Voice and Accountability.

    Section 607(b)(3): Investments in the people of such country, 

particularly women and children, including programs that:

    (A) Promote broad-based primary education and

    (B) Strengthen and build capacity to provide quality public health 

and reduce child mortality. Indicators--Girls' Primary Education 

Completion, Public Expenditure on Primary Education, Immunization 

Rates, Public Expenditure on Health.

    Where necessary the Board will also draw on supplemental data and 

qualitative information, including Natural Resources Management (CIESIN 

& YCLEP) and Land Rights and Access (IFAD and IFC) indices, the State 

Department's Human Rights Report and Transparency International's 

Corruption Perception's Index.



Annex A: Indicator Definitions



    The following 16 indicators will be used to measure candidate 

countries' demonstrated commitment to the criteria found in Section 

607(b) of the Act. The indicators are intended to assess the degree to 

which the political and economic conditions in a country serve to 

promote broad-based sustainable economic growth and reduction of 

poverty; and thus provide a sound environment for the use of MCA funds. 

The indicators are not goals in themselves; rather they measure 

policies that are necessary conditions for a country to achieve broad-

based sustainable economic growth. The indicators were selected based 

on their relationship to economic growth and poverty reduction, the 

number of countries they cover, their transparency and availability and 

their relative soundness and objectivity. Where possible, the 

indicators are developed by independent sources.



Ruling Justly



    1. Civil Liberties: A panel of independent experts rates countries 

on: freedom of expression; association and organizational rights; rule 

of law and human rights; and personal autonomy and economic rights. 

Source: Freedom House.

    2. Political Rights: A panel of independent experts rates countries 

on: the prevalence of free and fair elections of officials with real 

power; the ability of citizens to form political parties that may 

compete fairly in elections; freedom from domination by the military, 

foreign powers, totalitarian parties, religious hierarchies and 

economic oligarchies; and the political rights of minority groups. 

Source: Freedom House.

    3. Voice and Accountability: An index of surveys that rates 

countries on: ability of institutions to protect civil liberties; the 

extent to which citizens of a country are able to participate in the 

selection of governments; and the independence of the media. Source: 

World Bank Institute.

    4. Government Effectiveness: An index of surveys that rates each 

country on: the quality of public service provision; civil services' 

competency and independence from political pressures; and the 

government's ability to plan and implement sound policies. Source: 

World Bank Institute.

    5. Rule of Law: An index of surveys that rates countries on: the 

extent to which the public has confidence in and abides by rules of 

society; incidence of violent and nonviolent crime; effectiveness and 

predictability of the judiciary; and the enforceability of contracts. 

Source: World Bank Institute.

    6. Control of Corruption: An index of surveys that rates countries 

on: the frequency of ``additional payments to get things done;'' the 

effects of corruption on the business environment; ``grand corruption'' 

in the political arena; and the tendency of elites to engage in ``state 

capture.'' Source: World Bank Institute.



Encouraging Economic Freedom



    1. Cost of Starting a Business: The Private Sector Advisory Service 

of the World Bank Group works with local lawyers and other 

professionals to examine specific regulations that impact business 

investment. One of their studies measures the cost of starting a new 

business as a percentage of per capita income. Source: World Bank 

Group.

    2. Inflation: The most recent 12-month change in consumer prices as 

reported in the IMF's International Financial Statistics or in another 

public forum by the relevant national monetary authorities. Source: The 

International Monetary Fund's World Economic Outlook (WEO) database.

    3. Fiscal Policy: The overall budget deficit divided by GDP, 

averaged over a three-year period. The data for this measure is being 

provided directly by the recipient government and will be cross-checked 

with other sources and made publicly available to try to ensure 

consistency across countries. Source: National Governments and the 

International Monetary Fund's World Economic Outlook (WEO) database.

    4. Days to Start a Business: The Private Sector Advisory Service of 

the World Bank Group works with local lawyers and other professionals 

to examine specific regulations that impact business investment. One of 

their studies measures how many days it takes to open a new business. 

Source: World Bank Group.

    5. Trade Policy: A measure of a country's openness to international 

trade based on average tariff rates and nontariff barriers to trade. 

Source: The Heritage Foundation's Index of Economic Freedom.

    6. Regulatory Quality: An index of surveys that rates each country 

on: the burden of regulations on business; price controls; the 

government's role in the economy; foreign investment regulation; and 

many other areas. Source: World Bank Institute.



Investing in People



    1. Public Expenditure on Health: Total expenditures by government 

at all levels on health divided by GDP.



[[Page 54528]]



Source: The World Health Organization (WHO).

    2. Immunization: The average of DPT3 and measles immunization rates 

for the most recent year available. Source: The World Health 

Organization (WHO).

    3. Total Public Expenditure on Primary Education: Total 

expenditures by government at all levels of primary education divided 

by GDP. Source: The United Nations Educational, Scientific and Cultural 

Organization (UNESCO) and National Governments.

    4. Girls' Primary Completion Rate: The number of female students 

completing primary education divided by the population in the relevant 

age cohort. Source: World Bank and the United Nations Educational, 

Scientific and Cultural Organization (UNESCO).



 [FR Doc. E6-15323 Filed 9-14-06; 8:45 am]



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