09 November 2012

TL's MCC scores getting worse

A few days ago, the U.S. Government's Millennium Challenge Corporation (MCC) released its annual scorecards for Low- and Low-Middle income developing countries. These Fiscal Year 2013 (FY13) scores describe the situation in 2011.

The 20 scores come from ratings by several international agencies and compare each country with others in the same income category. They are in three broad areas: Economic Freedom, Investing in People and Ruling Justly. If a country passes at least half the indicators in every area, they are eligible for an MCC Compact (major grant support), under the philosophy of helping those who help themselves.

The graph at right shows how Timor-Leste's scores on MCC indicators have changed over last four years. Timor-Leste has not been Compact-eligible since Fiscal Year 2009, although we do receive some support through the MCC Threshold Program to help improve our anti-corruption and health scores.

Since 2010, MCC has categorized Timor-Leste as a Low-Middle Income Country (LMIC)  since 2010, due to oil revenues which make up about 3/4 of our income. MCC has rated Timor-Leste since 2004; click here for previous scorecards and an analysis of MCC's history in Timor-Leste.

Unfortunately, MCC ratings for Timor-Leste declined significantly this year. Although this is partly because some MCC indicators are inaccurate for Timor-Leste, most of it is because our economy, governance and human services are not improving as quickly as other LMICs.

We scored well on Fiscal Policy because we had no external debt in 2011. The Health Expenditure score is a statistical error. (MCC measures this as a percent of GDP, and Timor-Leste's GDP does not include  oil revenues, producing a score four times higher than it should be. As a percentage of GNI, we spend less on health than all but three LMICs.)

Timor-Leste improved on Business Start-up (because it takes less time to get a business license) and moved up slightly on Freedom of Information (because other countries got worse). MCC changed how they decide if Civil Liberties is passing, so we moved from fail to pass even though our score did not change.

Unfortunately, Timor-Leste's scores worsened on every other measure, although none moved from "pass" to "fail." We now barely pass Natural Resource Protection and Political Rights. Our 13.5% Inflation rate is higher than all other LMICs, although not quite failing (defined as above 15%).

Our Control of Corruption score continues to fall -- only two of the 33 LMIC countries (Iraq and Republic of Congo) scored worse. Nobody gets MCC Compact funding without passing Control of Corruption.

To become eligible for a compact again as a LMIC, Timor-Leste needs to pass Control of Corruption, at least one more indicator in "Investing in People" and at least two more in "Economic Freedom." In addition, we must maintain passing grades in all indicators which we passed in Fiscal Year 2013.

Follow these links for MCC's FY2013 scorecards of all countries, a description of the indicators or the history of MCC and Timor-Leste.

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