PACIFIC ISLANDS REPORT

Pacific Islands Development Program/East-West Center
With Support From Center for Pacific Islands Studies/University of Hawai‘i

• Full Text of GAO Report Entitled Millennium Challenge Corporation: Vanuatu Compact Overstates Projected Program Impact (GAO-07-909)
• Testimony of David B. Gootnick, Director International Affairs and Trade, Before the Subcommittee on Asia, the Pacific, and the Global Environment, Committee on Foreign Affairs, U.S. House of Representatives (GAO-07-1122T)

In January 2004, Congress established the Millennium Challenge Corporation (MCC) for foreign assistance. Congress has appropriated almost $6 billion to MCC. As of March 2007, MCC had signed almost $3 billion in compacts with 11 countries, including a 5-year, $65.7 million compact with Vanuatu. MCC states that the Vanuatu compact will have a transformational effect on the country’s economy, increasing per capita income and GDP and benefiting 65,000 poor, rural people. GAO examined (1) MCC’s methods of projecting economic benefits, (2) MCC’s portrayal and analysis of the projected benefits, and (3) risks that may affect the compact’s impact. GAO reviewed MCC's analyses and met with officials and business owners in Vanuatu as well as with other donors.

GAO recommends that the Chief Executive Officer of MCC (1) revise the public reporting of the Vanuatu compact’s projected impact, (2) assess whether similar reporting in other compacts accurately reflects underlying analyses, and (3) improve its economic analyses by more fully accounting for risks to project benefits. MCC did not directly address our recommendations but commented that it had not intended to make misleading statements and that its portrayal of projected results was factual and consistent with underlying data.