VP of Millennium Challenge Corp. outlines program's goals, challenges (07/10/05)

VP of Millennium Challenge Corp. outlines program's goals, challenges

by Andrew Nynka

PARSIPPANY, N.J. - As a vice-president at the Millennium Challenge Corp., a U.S. government entity created last year to fund needy countries, Ukrainian American John Hewko is aware of the great responsibility of his job.

Proposed initially by President George W. Bush in 2002 and created by Congress two years later, the corporation was meant to create "a new compact for global development," Mr. Bush told an audience in Washington prior to the program's creation.

As the program's vice-president for country relations, Mr. Hewko is the man chiefly responsible for managing the MCC's relationship with countries that receive funds. The program is designed to link greater contributions from developed nations to greater responsibility from developing nations, Ukraine among them.

In 2004 Congress provided $1 billion to the Millennium Challenge Account - the fund used by the corporation to gather money for needy countries. Mr. Bush asked that funding be increased to $3 billion in 2006, though Congress responded recently by giving the MCC $1.8 billion, a 20 percent increase from the 2005 level of funding.

Mr. Bush outlined his view of the program in Washington before it was officially created. The account would be "devoted to projects in nations that govern justly, invest in their people and encourage economic freedom," the president said.

As the chief of the corporation's Country Programs Department, Mr. Hewko is responsible for managing the relationship with eligible countries and maintaining continuous contact with them for all phases of the relationship: proposal development, proposal due diligence, compact negotiation and compact implementation.

"I'm in charge of maintaining our relationships from start to finish, working on proposals, getting the agreements signed and post agreement implementation," said Mr. Hewko, who has been at the corporation for a year and a half and oversees its largest sector.

He noted that Ukraine is considered a candidate country to receive aid from the fund, as its per capita GDP income is below $1,465, the cutoff used by the corporation to determine which countries are in need.

However, Ukraine is not currently eligible to receive funding from the MCC because it has received a failing grade on a corruption indicator, one of 16 indicators used by officials to determine a country's eligibility. But steps taken recently to combat corruption there mean Ukraine could receive funding in the future, Mr. Hewko said.

"Ukraine did very well on 14 of the 16 indicators," Mr. Hewko said.

"Now, even if Ukraine, or a country, doesn't formally pass the indicators, the board can still use its discretion and make a country eligible because there's data lag on the indicators," Mr. Hewko said. "Very often the indicator results come out in the summer and they may not accurately reflect the latest trends in the country."

The indicators used are not created or maintained by the U.S., but by the World Bank, Freedom House and Transparency International.

Mr. Hewko explained that countries are ranked among their peer group. "You have to be above the median on half of the indicators, and you have to be above on the corruption indicator," he said, noting that new rankings are expected to come out this summer and will be used to make decisions for 2006.

"Based on those, our board will meet in the fall to determine which countries will become eligible in 2006, so Ukraine may or may not become eligible," Mr. Hewko said. "If a country got its act together, we could sign something in eight or nine months."

The Ukrainian government has shown interest in presenting a proposal to the MCC. "Mr. Yushchenko mentioned it several times when he was in Washington during his visit and their government has been interested in finding out how they can become eligible," Mr. Hewko said. "And the answer is quite simple, do well on the indicators and have a great story to tell."

The corporation, created on January 23, 2004, is managed by a chief executive officer appointed by the president and confirmed by the Senate and overseen by a board of directors. The secretary of state is the chairman of the board.

The board meets once a year and determines what countries are eligible to provide proposals. The board will likely meet again in the fall and evaluate which countries, including Ukraine, will be eligible in 2006 to provide proposals.

"The beauty of the MCC is that if a country is chosen as an eligible country it gets to come to us with its proposal, and we'll fund anything," Mr. Hewko said. "It could be health, education, infrastructure. The only thing we ask is that, first of all, the proposal reflects a consultative process, so that the proposal is not so much the government's proposal but a country's proposal. And, second, we will fund in any area, but it has to lead to poverty reduction through sustainable economic growth." The corporation must also foresee measurable results.

The corporation has recently undergone criticism from members of Congress who say the fund has not acted quickly enough to disperse funds. To date, the corporation has signed compacts with Honduras, Madagascar, Cape Verde and Nicaragua. On June 15, CEO Paul Applegarth announced that he was resigning "at a time of mutual convenience in order to ensure a smooth transition."

A nominee for Mr. Applegarth's spot has not yet been named and Mr. Hewko said he had no indication of who would be nominated for the position, though his placement as a vice-president at the corporation would appear to make him a candidate.

Prior to joining the MCC, Mr. Hewko was an international partner with the law firm Baker & McKenzie, specializing in international corporate transactions in emerging markets.

An adjunct professor at Georgetown Law School, he most recently worked with Baker & McKenzie in the Czech Republic and previously in Ukraine and Russia. He also served as an advisor to the Ukrainian Parliament.

While working in Prague, Mr. Hewko was responsible for overseeing 13 attorneys and over 500 multinational and Czech clients. He established Baker & McKenzie's office in Ukraine and worked on mergers and acquisitions, joint venture negotiations, technology transfer, privatization and other issues.

Mr. Hewko's international experience includes assignments with U.S. and foreign law firms in Washington, Brazil, Argentina, Mexico and Ecuador. He received his law degree from Harvard Law School, his master's degree from Oxford University in England, and his bachelor's degree in government and Soviet studies from Hamilton College in Clinton, N.Y.

Mr. Hewko is a member of Ukrainian National Association Branch 174 and in his youth was active in the Plast Ukrainian Scouting Organization. He speaks Ukrainian, Spanish, Portuguese, Russian and Czech.

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