The Millennium Challenge Corporation (MCC) second compact preparations are gaining momentum following refinery studies being undertaken towards increasing land productivity and accelerated growth corridor earmarked for implementation next year.
MCC five-year Compact agreements are a vehicle through which the United States Government provides grants to partner countries to support programmes to reduce poverty through economic growth.
The country is set to sign the second compact towards the end of this year, with implementation starting early 2022.
In a statement, MCC says in collaboration with Malawi Millennium Development (MMD) Trust, it is now undertaking independent studies that will further inform the refinement of project proposals and identification of implementation areas.
Reads the statement in part: “MCC seeks to identify and alleviate binding constraints to private investment in order to accelerate economic growth and poverty reduction in its partner countries.
“When designing compacts, MCC aims to integrate mechanisms and tools that will attract and mobilise private investment in and around MCC-funded projects”.
In the second compact, Malawi presented two project proposals to MCC in October, firstly on increasing land productivity and secondly on accelerated growth corridors.
Fortunately, the MCC internal revival committee met and endorsed the two areas.
Currently, MCC in collaboration with MMD Trust is conducting feasibility studies to assess technical, economic, legal and cultural factors that can ascertain completion of the projects.
Government through the MMD Trust which is led by Dye Mawindo, and MCC identified the high price of road freight transport service and barriers to linking farms to markets in rural areas and difficulties with access to land for investment due to mismanagement of the estate sector.
Additionally, the government also looked at unclear land rights, particularly for women smallholders as the most binding constraints that will be targeted in Malawi’s second compact.
On December 11 2018, the Millennium Challenge Corporation (MCC) Board of Directors, a United States Government agency, selected Malawi as one of the three countries that qualified for MCC bilateral compact, which is a five-year grant programme.
In October 2019, using a root-cause analysis approach, the Malawi Government developed two concept papers aimed to address the root-causes leading to high price of road freight and barriers to linking farms to markets in rural areas as well as access to land.
These Concept Papers were approved by MCC in February 2020, since then, discussions and groundwork has been ongoing.
The authorisation allowed the Government of Malawi to prepare project proposals that further clarified, organised, and prioritised mentioned endorsed investment ideas.
The endorsed strategic interventions for ‘increasing land productivity’ project include mobilising land for increased productivity; improving land revenues and resources for land administration and management; and targeted institutional building.
The endorsed strategic investments for ‘accelerated growth corridors project’ include capital-intensive investments in transport and logistics – rural roads; support diversification to build more inclusive agriculture value chains and improve transport and logistical services.
This will be achieved through a grant facility that will provide grants and leverage private sector co-financing on a competitive basis through three windows.
It will ensure targeted investments to improve policy and institutional regulatory reforms in transport, agriculture, trade and environment sectors, planning, coordination, resource mobilisation, and effective delivery of public goods and services.
Earlier, MCC country director for Malawi Joel Wiegert appealed for patience among Malawians for the second compact, saying practical implementation may only begin in 2022.
He said: “There is some impatience; one would say we should rush and may be leave some things out but we will not have done well to get it right.
“All things being equal we anticipate the compact to roll out in 2022.”
Wiegert also clarified that the US Government only offers two compacts to its partner countries such as Malawi, stressing that the second compact will be the final in its nature; hence, needs thorough planning and execution to make a sustained economic impact.
On December 11 2018, MCC selected Malawi as an eligible country to develop a second compact based on Malawi’s excellent implementation of the first compact.
Malawi also met rigorous standards for good governance and economic management, according to MCC’s scorecard.
Malawi was the only country on the African continent to become eligible for the development of a second compact during the selection round.
The development of the second compact comes on the back of a successful implementation of the first $350.7 million energy compact, which expired on September 20 2018.