Class Notes

Government Startup

Paul V. Applegarth J.D./M.B.A. '74 runs a government corporation with a new approach to foreign aid

Paul V.
ApplegarthIt was in Vietnam's Mekong Delta that Paul V. Applegarth, then a U.S. Army lieutenant fresh out of college, had his first exposure to international development work. But along with building schools and training village chiefs came combat.

These days, Applegarth J.D./M.B.A. '74 is leading a much larger international development effort on behalf of the U.S. government--and this time no rifle is required.

Last year, President Bush appointed Applegarth CEO of the Millennium Challenge Corp., the independent government corporation he charged with implementing a new approach to foreign aid.

To choose recipients, the MCC uses criteria such as a demonstrated commitment to political and economic freedom. It provides grants instead of loans and treats recipients more like partners than beneficiaries of handouts. Applegarth said the job "represents a culmination of an awful lot I've done in my life. The job and the whole mission seemed to be made for me."

He first caught the bug for international affairs during a college backpacking trip through Central America. After graduating from Yale, he wound up in Vietnam, serving in the Army in a role he says was part Peace Corps and part Special Forces.

Applegarth returned to the relative calm of Cambridge, where he graduated from Harvard Law and Harvard Business schools.

After nearly a decade at the World Bank, Applegarth jumped to Wall Street, working as a financier at Bank of America, American Express and Lehman Brothers. But the job he's most proud of was at the United Way of America, where, as chief financial officer, he helped restore credibility to the scandal-plagued charity.

His interest in international development drew him to an asset management firm that focused on emerging markets, where he was responsible for operations in the Philippines and Indonesia. He also was the chief operating officer of a fund, sponsored by European governments, that combined public- and private-sector money to build roads, power plants and other infrastructure in sub-Saharan Africa.

That work caught the eye of the Bush administration, eager to find a leader for the MCC. Applegarth jumped at the chance to lead the organization, which he likens to a government startup. "I've always been a builder," he said.

His first office in the MCC's new headquarters was certainly a starter-upper when he arrived last year. But that's fine with Applegarth, who intends to lead a lean, businesslike operation of fewer than 200 employees. He's outsourced administrative functions such as financial accounting and information technology.

Applegarth still speaks the language of a financier, promising to undertake "due diligence" before picking recipients and thinking about aid in terms of what would be a "good investment of taxpayer money."

"He's treating this like a business," said Patrick M. Cronin, senior vice president at the Center for Strategic and International Studies, a Washington, D.C., think tank. "That's been very impressive to all who have seen him in action."

It's too early to gauge whether Applegarth's new organization will help ease global poverty or grow the economies of developing nations.

The MCC has only recently made its final selection of the first 17 countries that are eligible to receive assistance. The board approved the first package of grants in March--$110 million for Madagascar--but the money Congress has appropriated for the organization ($2.5 billion) is not nearly as much as was originally proposed by the Bush administration.

Still, Applegarth says his travels from Mongolia to Mozambique suggest that potential recipients are taking notice: While proposing an anticorruption program, Bangladesh's finance minister, Saifur Rahman, recently cited his country's exclusion from eligibility for aid as an example of the price his country was paying for being considered corrupt.

"This," Applegarth said, "is the United States at its best."

Next profile: Social Change Inc.


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