17 April 2006
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[Federal Register: April 13, 2006 (Volume 71, Number 71)]
[Notices]
[Page 19391-19425]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13ap06-145]
[[Page 19391]]
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Part IV
Millennium Challenge Corporation
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Notice of Entering Into a Compact With the Government of the Republic
of Armenia; Notice
[[Page 19392]]
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MILLENNIUM CHALLENGE CORPORATION
[MCC FR 06-07]
Notice of Entering Into a Compact With the Government of the
Republic of Armenia
AGENCY: Millennium Challenge Corporation.
ACTION: Notice.
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SUMMARY: In accordance with Section 610(b)(2) of the Millennium
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium
Challenge Corporation (MCC) is publishing a summary and the complete
text of the Millennium Challenge Compact between the United States of
America, acting through the Millennium Challenge Corporation, and the
Government of the Republic of Armenia. Representatives of the United
States Government and the Government of the Republic of Armenia
executed the Compact documents on March, 27, 2006.
Dated: April 6, 2006.
Jon A. Dyck,
Vice President & General Counsel, Millennium Challenge Corporation.
Summary of Millennium Challenge Compact With the Government of the
Republic of Armenia
I. Introduction
A small, landlocked country in the Caucasus region, Armenia is
struggling to recover from the severe economic setbacks caused by the
collapse of the Soviet Union in the early 1990s. In 1994, Armenia
adopted a comprehensive stabilization and reform program that
transformed it into a liberal market economy and launched a period of
uninterrupted growth that saw its GDP increase at an average annual
rate of 8% over the next decade. Today, the per-capita GDP of Armenia's
3.2 million inhabitants is estimated at $1,100. Economic growth to date
has disproportionately benefited inhabitants of the capital, Yerevan,
and the rural poverty rate remains above 30%. More than one million
Armenians, or about 35% of the population, live in rural areas and are
dependant on semi-subsistence agriculture. These farmers are operating
on small, fragmented parcels of land and are constrained by poor
infrastructure and an underdeveloped agricultural economy.
The $235 million Millennium Challenge Compact with the Republic of
Armenia is focused on the reduction of rural poverty through a
sustainable increase in the economic performance of the agricultural
sector. The Program to be funded under the Compact will advance this
goal through a five-year program of strategic investments in rural
roads, irrigation infrastructure and technical assistance, and
financial support to water supply entities, farmers, and commercial
agribusinesses (the ``Program'').
II. Program Overview and Budget
To transform the economic performance of Armenia's agricultural
sector and reduce rural poverty, the Program will undertake a Rural
Road Rehabilitation Project and an Irrigated Agriculture Project.
A. Rural Road Rehabilitation Project ($67 million): This project
will rehabilitate up to 943 km of rural roads, or 35% of the
government-proposed lifeline road network. When complete, the lifeline
network will ensure that every rural community has essential road
access to markets, social services and the main road/interstate
network. In addition, funding will be provided to the Armenian Road
Directorate for a technical audit of the ongoing maintenance contracts
and for a road maintenance strategic plan.
B. Irrigated Agriculture Project ($146 million): This project
includes two activities:
The Infrastructure Activity ($113 million) will
rehabilitate up to 21 targeted irrigation infrastructure schemes across
the country, expanding the total area under irrigated production and
improving the overall efficiency of sourcing and delivery of water to
farmers.
The Water-to-Market Activity ($33 million) will build the
management capacities of the local and national water supply entities
and support the transition to higher-value agricultural systems of some
60,000 farmers by providing technical and rural credit assistance. This
will ensure the sustainable management of the improved irrigation
infrastructure and enable the emergence of profitable farming
operations.
The following table outlines the MCA contribution to the Program by
year and category.
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Timeline
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Description CY1 ($US CY2 ($US CY3 ($US CY4 ($US CY5 ($US Total
mil) mil) mil) mil) mil)
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Rural Road Rehabilitation Project. 0.89 18.32 23.32 14.16 10.40 67.10
Irrigated Agriculture Project..... 8.24 37.24 41.23 34.20 24.77 145.67
Program Administration and Audits. 2.06 4.12 4.69 3.81 3.11 17.79
Monitoring and Evaluation......... 1.44 0.92 0.95 0.97 0.81 5.08
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Total*........................ 12.63 60.61 70.20 53.13 39.09 235.65
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* Total amounts may not sum due to rounding.
III. Impact
The Program will directly impact approximately 750,000 people, or
75% of the rural population, increasing their annual income by an
estimated $36 million in 2010 and over $113 million in 2015. This
corresponds to agricultural value-added gains of 4% and 11% over the
same periods. By 2013, the rural poverty rate is projected to fall by 5
percentage points as a result of the Program. Continued reductions in
rural poverty are expected with a sustained transformation of the
agricultural sector.
The Rural Road Rehabilitation Project will reduce transport costs
for the greater rural community, including farmers and processors, by
an estimated $20 million annually beginning five years after material
project benefits are realized. The principal beneficiaries of this
project will be approximately 360,000 rural Armenians living in 265
communities connected by the portion of the road network to be
rehabilitated with MCC funds.
The Irrigated Agriculture Project will benefit approximately
250,000 farmer households, 34% of which are headed by women. The
Infrastructure Activity improvements will extend irrigation to an
additional 46,000 hectares (114,000 acres) of new and recovered
farmland, expanding the total area under irrigated production by more
than 40%.
[[Page 19393]]
Technical support provided under the Water-to-Market Activity will
enable over 60,000 participating farmers to increase their average net
incomes by approximately 25% through the adoption of improved on-farm
water management techniques and the cultivation of higher-value
agriculture. The Water-to-Market Activity will also boost the
development of small- and medium-sized agribusinesses by expanding
rural access to credit and providing training in post-harvest
processing and marketing.
IV. Program Management
The GOA will create a legal entity, MCA-Armenia, to manage and
oversee the Program. MCA-Armenia will consist of a Governing Council
and a Management Unit. The Governing Council, responsible for making
key strategic and management decisions, will be chaired by the Prime
Minister and include voting representatives from both government and
civil society. The Management Unit will include technical experts and
be responsible for the day-to-day management of the Program.
Project implementation will be carried out by three separate
entities reporting to the Management Unit. The Rural Road
Rehabilitation Project will be implemented by the Armenian Road
Directorate, and the Infrastructure Activity of the Irrigated
Agriculture Project will be implemented by the Irrigation Project
Implementation Unit previously established by the World Bank.
Implementation of the Water-to-Market Activity of the Irrigated
Agriculture Project will be contracted out to a private firm or non-
governmental organization (``NGO'').
A third-party non-government entity will be engaged to provide
fiscal agent services to MCA-Armenia, including funds control,
disbursement documentation and management, cash management and
accounting. The fiscal agent will have sole signatory authority to
authorize re-disbursements from the MCA-Armenia bank account into which
MCC funds will be disbursed.
The World Bank procurement guidelines--modified as necessary to
conform to MCC policies--will be used for procurement of the works,
goods and consulting services needed under the Program. MCC will review
and approve procurement plans on a periodic basis, as well as quarterly
reports of all completed procurement actions. Independent auditors will
also audit the procurement activity quarterly for compliance with MCC
requirements.
V. Assessment
A. Economic Analysis
The projects included in the Program represent sound investments
that will alleviate key constraints to economic growth and poverty
reduction in rural Armenia. Economic rates of return (``ERRs'') were
calculated for each infrastructure investment and technical assistance
activity to select the highest return projects. These returns, which
were modeled by the GOA's transaction team and reviewed by MCC,
quantify the expected incremental increase in income from each
individual activity. For the Rural Road Rehabilitation Project, savings
in transport costs were estimated. For the Irrigated Agriculture
Project, quantified benefits include additional income from newly
irrigated land, the increase in high value-added crop cultivation,
higher yields, lower production costs, and energy and water savings.
The economic rates of return of each of the activities were compared to
a benchmark of 12.5%, the average real growth rate for the past three
years. The overall economic rate of return of the Compact is estimated
at 25%.
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ERR for the
Scenario Key underlying Project ERR (percent) Armenia
assumptions Compact
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Base case............................. Base traffic estimates Roads--26..................... 25
and cost estimates. Irrigation--25................
Base benefit and cost
estimates.
Low return case 1..................... Cost increase of 30%.... Roads--21..................... 20
Irrigation--20................
Low return case 2..................... Current traffic is only Roads--18..................... 18
50% of estimated value. Irrigation--18................
Benefits are delayed by
two years.
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B. Consultative Process
The GOA based its Program proposal on a comprehensive consultative
process that was initiated in 2003 for the development of its Poverty
Reduction Strategy Paper (``PRSP''). The opportunity to apply for MCC
funding led to further review and dissemination of the PRSP through
electronic and printed media. In the initial priority-setting stage,
the GOA engaged a broad cross-section of civil society--including rural
community members, NGOs, and the private sector--through public
meetings and regional roundtables focused specifically on MCA proposal
development. The NGO community contributed substantially to the
proposal development and due diligence processes by electing its own
representatives to participate in meetings of the inter-governmental
board of trustees (``Board of Trustees'').
Issues raised will continue to be addressed through an ongoing
consultative process that incorporates feedback mechanisms reaching out
to stakeholders, particularly those involved in irrigation,
agriculture, rural road, policy development and advocacy, and groups
that specialize in monitoring and evaluation. In order to provide an
Internet-based resource and information portal, MCA-Armenia maintains
an interactive website that provides up-to-date information on the
Program, all meeting minutes, a forum page on which to post and debate
issues related to proposal development and implementation, and an e-
mail address for sending inquiries and concerns.
To ensure meaningful stakeholder participation in Compact
implementation, the MCA-Armenia Governing Council will include five
voting representatives of civil society. These representatives will be
appointed by a Stakeholders' Committee consisting of eight to twelve
individuals who represent Water User Associations (``WUAs''), farmer
groups, NGOs involved in the PRSP and MCA consultative processes, and
regional stakeholder committees. The Stakeholders' Committee will also
consult with the chairman of the Board of Trustees on its views and
recommendations regarding the performance and progress of the Program,
project and sub-project activities, components of the Implementation
Plan, procurement, and financial management. The minutes of these
meetings and discussions will be posted on the MCA-Armenia Web site.
C. Government Commitment and Effectiveness
The GOA has exhibited a high degree of commitment to the Program,
and will take the following measures to ensure
[[Page 19394]]
the effectiveness of the MCA investment:
Adopting into legislation policies that will ensure the
sustainability of the infrastructure investments, including user fee-
based cost recovery mechanisms for irrigation systems and assigning
maintenance responsibilities of the lifeline network to the Armenian
Road Directorate.
Developing and implementing a plan to restructure the
Water Supply Agency and transferring certain operations and maintenance
responsibilities to developing federations of WUAs.
Identifying and contributing to financing for the
rehabilitation of the rest of the lifeline network, in addition to the
roads rehabilitated with MCC funding.
Meeting the co-financing requirements of the WUAs for
tertiary canals consistent with the ongoing World Bank Irrigation
Development Project.
D. Sustainability
Currently, the GOA expends approximately $9 million per year for
routine maintenance on the entire road network. As rehabilitation of
the lifeline network proceeds, the GOA will commit additional resources
for future financing of routine maintenance on the lifeline network.
The Rural Road Rehabilitation Project will further help to
institutionalize performance-based contracts, which were instituted by
the Armenian Road Directorate in 2005.
The management of Armenia's irrigation network has recently been
decentralized to 53 WUAs, and the GOA has enhanced water management
efficiency by merging responsibilities for irrigation and drainage. The
Irrigated Agriculture Project will benefit from an extensive Water-to-
Market Activity that will provide technical and organizational support
to ensure WUAs and federations of WUAs have systems to effectively
manage and finance their operations. In addition, credit organizations
will receive training and capital to expand financing opportunities to
WUA member farmers and enterprises. The resulting transition to more
profitable operations by member farmers will enhance the financial
sustainability of the irrigation system, as will the replacement of
pumping systems with more energy-efficient gravity irrigation and the
increased capacity of the WUAs to finance themselves through member
contributions.
E. Environmental and Social Impacts
The Program is unlikely to cause significant environmental, health,
or safety hazards, and immitigable impacts on sensitive areas are not
expected. The Rural Road Rehabilitation Project is classified as a
``Category B'' according to MCC guidelines, requiring environmental and
social analyses due to potentially adverse site-specific environmental
impacts. The Irrigated Agriculture Project is classified as a
``Category A,'' requiring environmental and social impact assessments
due to potentially adverse environmental impacts resulting from the
construction of reservoirs, gravity schemes, and the Ararat Valley
drainage scheme. A baseline study will be required for the Ararat
Valley drainage scheme prior to initiating the required environmental
and social impact assessment, and a land compensation framework may be
required for certain reservoirs. Environmental management plans will be
developed for both projects. The environmental benefits expected from
the Irrigated Agriculture Project include reduced water losses through
increased efficiency, improved energy conservation and more sustainable
agricultural practices. After reviewing an initial environmental
assessment, the Armenian Ministry of Nature Protection issued a
positive evaluation of the overall Program, a prerequisite for further
environmental assessment and project design.
F. Donor Coordination
The Program builds upon an extensive body of work by several
international donors, particularly the World Bank, which produced much
of the research upon which the Program is based. In transportation, the
main donors have been the World Bank and the Lincy Foundation. The
Rural Road Rehabilitation Project complements the rehabilitation and
construction of larger roads, and serves as a catalyst for
contributions of future donors to the completion of the lifeline
network. In irrigation, the main donors have been the World Bank and
the International Fund for Agricultural Development. Other significant
donor projects include the USDA Marketing Assistance Project, the USAID
Micro Enterprise Development Initiative, and the USAID Armenia
Agribusiness Small and Medium Enterprise Market Development Project.
The Irrigated Agriculture Project will work closely with and build on
the contributions of these donors.
Millennium Challenge Compact Between the United States of America
Acting Through the Millennium Challenge Corporation and the Government
of the Republic of Armenia
Table of Contents
Article I. Purpose and Term
Section 1.1 Objectives
Section 1.2 Projects
Section 1.3 Entry into Force; Compact Term
Article II. Funding and Resources
Section 2.1 MCC Funding
Section 2.2 Government Resources
Section 2.3 Limitations on the Use or Treatment of MCC Funding
Section 2.4 Incorporation; Notice; Clarification
Section 2.5 Refunds; Violation
Article III. Implementation
Section 3.1 Implementation Framework
Section 3.2 Government Responsibilities
Section 3.3 Government Deliveries
Section 3.4 Government Assurances
Section 3.5 Implementation Letters; Supplemental Agreements
Section 3.6 Procurement; Awards of Assistance
Section 3.7 Policy Performance; Policy Reforms
Section 3.8 Records and Information; Access; Audits; Reviews
Section 3.9 Insurance
Section 3.10 Domestic Requirements
Section 3.11 No Conflict
Section 3.12 Reports
Article IV. Conditions Precedent; Deliveries
Section 4.1 Conditions Prior to the Entry into Force and
Deliveries
Section 4.2 Conditions Precedent to MCC Disbursements or Re-
Disbursements
Article V. Final Clauses
Section 5.1 Communications
Section 5.2 Representatives
Section 5.3 Amendments
Section 5.4 Termination; Suspension
Section 5.5 Privileges and Immunities
Section 5.6 Attachments
Section 5.7 Inconsistencies
Section 5.8 Indemnification
Section 5.9 Headings
Section 5.10 Interpretation; Definitions
Section 5.11 Signatures
Section 5.12 Designation
Section 5.13 Survival
Section 5.14 Consultation
Section 5.15 MCC Status
Section 5.16 Language
Section 5.17 Publicity; Information and Marking
Exhibit A: Definitions
Exhibit B: List of Certain Supplemental Agreements
Schedule 2.1(a)(iii): Description of Compact Implementation
Funding
Annex I: Program Description
Schedule 1 `` Rural Road Rehabilitation Project
Schedule 2 `` Irrigated Agriculture Project
Annex II: Financial Plan Summary
Annex III: Description of the M&E Plan
Millennium Challenge Compact
This Millennium Challenge Compact (the ``Compact'') is made between
the
[[Page 19395]]
United States of America, acting through the Millennium Challenge
Corporation, a United States Government corporation (``MCC''), and the
Government of the Republic of Armenia (the ``Government'') (referred to
herein individually as a ``Party'' and collectively, the ``Parties'').
A compendium of capitalized terms defined herein is included in Exhibit
A attached hereto.
Recitals
Whereas, MCC, acting through its Board of Directors, has selected
the Republic of Armenia as eligible to present to MCC a proposal for
the use of Millennium Challenge Account (``MCA'') assistance to help
facilitate poverty reduction through economic growth in Armenia;
Whereas, the Government has carried out a consultative process with
the country's private sector and civil society to outline the country's
priorities for the use of MCA assistance and developed a proposal,
which was submitted to MCC on March 28, 2005 (the ``Proposal'');
Whereas, the Proposal focused on increasing agricultural production
in poor, rural areas of the country through investments in irrigation
and rural roads;
Whereas, MCC has evaluated the Proposal and related documents to
determine whether the Proposal is consistent with core MCA principles
and includes proposed activities and projects that will advance the
progress of Armenia towards achieving economic growth and poverty
reduction;
Whereas, based on MCC's evaluation of the Proposal and related
documents and subsequent discussions and negotiations between the
Parties, the Government and MCC determined to enter into this Compact
to implement a program using MCC Funding to advance Armenia's progress
towards economic growth and poverty reduction (the ``Program''); and
Whereas, the Government intends to establish a legal entity, in a
form mutually agreeable to the Parties, which shall be responsible for
the oversight and management of the implementation of this Compact on
behalf of the Government (``MCA-Armenia'').
Now, Therefore, in consideration of the foregoing and the mutual
covenants and agreements set forth herein, the Parties hereby agree as
follows:
Article I. Purpose and Term
Section 1.1 Objectives
The overall objective of this Compact is to reduce rural poverty
through a sustainable increase in the economic performance of the
agricultural sector in Armenia (the ``Compact Goal''). The Parties have
identified the following project-level objectives (the ``Objectives'')
to advance the Compact Goal, each of which is described in more detail
in the Annexes attached hereto:
Expand the access of rural communities to agricultural markets,
non-farm income opportunities and social infrastructure by improving
the condition of rural roads (the ``Rural Road Rehabilitation
Objective''); and
Increase the productivity of the agricultural sector by extending
and improving the quality of the irrigation system, strengthening the
entities that manage the system and enabling farmers to commercialize
their products (the ``Irrigated Agriculture Objective'').
The Government expects to achieve, and shall use its best efforts
to ensure the achievement of, these Objectives during the Compact Term.
Section 1.2 Projects
The Annexes attached hereto describe the specific projects and the
policy reforms and other activities related thereto (each, a
``Project'') that the Government will carry out, or cause to be carried
out, in furtherance of this Compact to achieve the Objectives.
Section 1.3 Entry into Force; Compact Term
This Compact shall enter into force on the date of the last letter
in an exchange of letters between the Principal Representatives of each
Party confirming that each Party has completed its domestic
requirements for entry into force of this Compact and that all
conditions set forth in Section 4.1 have been satisfied by the
Government and MCC (such date, the ``Entry into Force''). This Compact
shall remain in force for five (5) years from the Entry into Force of
this Compact, unless earlier terminated in accordance with Section 5.4
(the ``Compact Term'').
Article II. Funding and Resources
Section 2.1 MCC Funding
(a) MCC's Contribution. MCC hereby grants to the Government,
subject to the terms and conditions of this Compact, an amount not to
exceed Two Hundred Thirty-Five Million Six Hundred Fifty Thousand
United States Dollars (USD $235,650,000) (``MCC Funding'') during the
Compact Term to enable the Government to implement the Program and
achieve the Objectives.
(i) Subject to Sections 2.1(a)(ii), 2.2(b) and 5.4, the allocation
of MCC Funding within the Program and among and within the Projects
shall be as generally described in Annex II or as otherwise agreed upon
by the Parties from time to time.
(ii) If at any time MCC determines that a condition precedent to an
MCC Disbursement has not been satisfied, MCC may, upon written notice
to the Government, reduce the total amount of MCC Funding by an amount
equal to the amount estimated in the applicable Detailed Financial Plan
for the Program, Project or Project Activity for which such condition
precedent has not been met. Upon the expiration or termination of this
Compact, (1) any amounts of MCC Funding not disbursed by MCC to the
Government shall be automatically released from any obligation in
connection with this Compact and (2) any amounts of MCC Funding
disbursed by MCC to the Government as provided in Section 2.1(b)(i),
but not re-disbursed as provided in Section 2.1(b)(ii) or otherwise
incurred as permitted pursuant to Section 5.4(e) prior to the
expiration or termination of this Compact, shall be returned to MCC in
accordance with Section 2.5(a)(ii).
(iii) Notwithstanding any other provision of this Compact and
pursuant to the authority of section 609(g) of the Millennium Challenge
Act of 2003, as amended (the ``Act''), upon the conclusion of this
Compact (and without regard to the satisfaction of all of the
conditions for Entry into Force required under Section 1.3), MCC shall
make available Five Hundred Thousand United States Dollars (USD
$500,000) (``Compact Implementation Funding'') to facilitate certain
aspects of Compact implementation as described in Schedule 2.1(a)(iii)
attached hereto; provided, such Compact Implementation Funding shall be
subject to (1) the limitations on the use or treatment of MCC Funding
set forth in Section 2.3, as if such provision were in full force and
effect, and (2) any other requirements for, and limitations on the use
of, such Compact Implementation Funding as may be required by MCC in
writing; provided, further, that any Compact Implementation Funding
granted in accordance with this Section 2.1(a)(iii) shall be included
in, and not additional to, the total amount of MCC Funding; and
provided, further, any obligation to provide such Compact
Implementation Funding shall expire upon the expiration or termination
of this Compact or five (5) years from the conclusion of this Compact,
whichever occurs sooner. Notwithstanding anything to the contrary in
this Compact, this Section 2.1(a)(iii) shall provisionally apply prior
to Entry into Force.
[[Page 19396]]
(b) Disbursements.
(i) Disbursements of MCC Funding. MCC shall from time to time make
disbursements of MCC Funding (each such disbursement, an ``MCC
Disbursement'') to a Permitted Account or through such other mechanism
agreed by the Parties under and in accordance with the procedures and
requirements set forth in Annex I, the Disbursement Agreement or as
otherwise provided in any other relevant Supplemental Agreement.
(ii) Re-Disbursements of MCC Funding. The release of MCC Funding
from a Permitted Account (each such release, a ``Re-Disbursement''),
shall be made in accordance with the procedures and requirements set
forth in Annex I, the Disbursement Agreement or as otherwise provided
in any other relevant Supplemental Agreement.
(c) Interest. Unless the Parties agree otherwise in writing, any
interest or other earnings on MCC Funding that accrue (collectively,
``Accrued Interest'') shall be held in a Permitted Account and accrue
in accordance with the requirements for the accrual and treatment of
Accrued Interest as specified in Annex I or any relevant Supplemental
Agreement. On a quarterly basis and upon the termination or expiration
of this Compact, the Government shall return, or ensure the return of,
all Accrued Interest to any United States Government account designated
by MCC.
(d) Conversion; Exchange Rate. The Government shall ensure that all
MCC Funding that is held in the Permitted Account(s) shall be
denominated in the currency of the United States of America (``United
States Dollars'') prior to Re-Disbursement; provided, that a certain
portion of MCC Funding may be transferred to a Local Account and may be
held in such Local Account in the currency of the Republic of Armenia
prior to Re-Disbursement in accordance with the requirements of Annex I
and any relevant Supplemental Agreement. To the extent that any amount
of MCC Funding held in United States Dollars must be converted into the
currency of the Republic of Armenia for any purpose, including for any
Re-Disbursement or any transfer of MCC Funding into a Local Account,
the Government shall ensure that such amount is converted consistent
with Annex I, including the rate and manner set forth in Annex I, and
the requirements of the Disbursement Agreement or any other
Supplemental Agreement between the Parties.
(e) Guidance. From time to time, MCC may provide guidance to the
Government through Implementation Letters on the frequency, form and
content of requests for MCC Disbursements and Re-Disbursements or any
other matter relating to MCC Funding. The Government shall apply such
guidance in implementing this Compact.
Section 2.2 Government Resources
(a) The Government shall provide or cause to be provided such
Government funds and other resources, and shall take or cause to be
taken such actions, including obtaining all necessary approvals and
consents, as are specified in this Compact or in any Supplemental
Agreement to which the Government is a party or as are otherwise
necessary and appropriate to effectively carry out the Government
Responsibilities or other responsibilities or obligations of the
Government under or in furtherance of this Compact during the Compact
Term and through the completion of any post-Compact Term activities,
audits or other responsibilities.
(b) If at any time during the Compact Term, the Government
materially reallocates or reduces the allocation in its national budget
or any other Armenian governmental authority at a departmental,
municipal, regional or other jurisdictional level materially
reallocates or reduces the allocation of its respective budget, of the
normal and expected resources that the Government or such other
governmental authority, as applicable, would have otherwise received or
budgeted, from external or domestic sources, for the activities
contemplated herein, the Government shall notify MCC in writing within
fifteen (15) days of such reallocation or reduction, such notification
to contain information regarding the amount of the reallocation or
reduction, the affected activities, and an explanation for the
reduction. In the event that MCC independently determines upon review
of the executed national annual budget that such a material
reallocation or reduction of resources has occurred, MCC shall notify
the Government and, following such notification, the Government shall
provide a written explanation for such reallocation or reduction and
MCC may (i) reduce, in its sole discretion, the total amount of MCC
Funding or any MCC Disbursement by an amount equal to the amount
estimated in the applicable Detailed Financial Plan for the activity
for which funds were reduced or reallocated or (ii) otherwise suspend
or terminate MCC Funding in accordance with Section 5.4(b).
(c) The Government shall use its best efforts to ensure that all
MCC Funding is fully reflected and accounted for in the annual budget
of the Republic of Armenia on a multi-year basis.
Section 2.3 Limitations on the Use or Treatment of MCC Funding
(a) Abortions and Involuntary Sterilizations. The Government shall
ensure that MCC Funding shall not be used to undertake, fund or
otherwise support any activity that is subject to prohibitions on use
of funds contained in (i) paragraphs (1) through (3) of section 104(f)
of the Foreign Assistance Act of 1961 (22 U.S.C. 2151b(f)(1)-(3), a
United States statute, which prohibitions shall apply to the same
extent and in the same manner as such prohibitions apply to funds made
available to carry out Part I of such Act; or (ii) any provision of law
comparable to the eleventh and fourteenth provisos under the heading
``Child Survival and Health Programs Fund'' of division E of Public Law
108-7 (117 Stat. 162), a United States statute.
(b) United States Job Loss or Displacement of Production. The
Government shall ensure that MCC Funding shall not be used to
undertake, fund or otherwise support any activity that is likely to
cause a substantial loss of United States jobs or a substantial
displacement of United States production, including:
(i) Providing financial incentives to relocate a substantial number
of United States jobs or cause a substantial displacement of production
outside the United States;
(ii) Supporting investment promotion missions or other travel to
the United States with the intention of inducing United States firms to
relocate a substantial number of United States jobs or a substantial
amount of production outside the United States;
(iii) Conducting feasibility studies, research services, studies,
travel to or from the United States, or providing insurance or
technical and management assistance, with the intention of inducing
United States firms to relocate a substantial number of United States
jobs or cause a substantial displacement of production outside the
United States;
(iv) Advertising in the United States to encourage United States
firms to relocate a substantial number of United States jobs or cause a
substantial displacement of production outside the United States;
(v) Training workers for firms that intend to relocate a
substantial number of United States jobs or cause a substantial
displacement of production outside the United States;
(vi) Supporting a United States office of an organization that
offers incentives
[[Page 19397]]
for United States firms to relocate a substantial number of United
States jobs or cause a substantial displacement of production outside
the United States; or
(vii) Providing general budget support for an organization that
engages in any activity prohibited above.
(c) Military Assistance and Training. The Government shall ensure
that MCC Funding shall not be used to undertake, fund or otherwise
support the purchase or use of goods or services for military purposes,
including military training, or to provide any assistance to the
military, police, militia, national guard or other quasi-military
organization or unit.
(d) Prohibition of Assistance Relating to Environmental, Health or
Safety Hazards. The Government shall ensure that MCC Funding shall not
be used to undertake, fund or otherwise support any activity that is
likely to cause a significant environmental, health, or safety hazard.
Unless MCC and the Government agree otherwise in writing, the
Government shall ensure that activities undertaken, funded or otherwise
supported in whole or in part (directly or indirectly) by MCC Funding
comply with environmental guidelines delivered by MCC to the Government
or posted by MCC on its Web site or otherwise publicly made available,
as such guidelines may be amended from time to time (the
``Environmental Guidelines''), including any definition of ``likely to
cause a significant environmental, health, or safety hazard'' as may be
set forth in such Environmental Guidelines.
(e) Taxation.
(i) Taxes. The Government shall ensure that the Program, all
Program Assets, MCC Funding and Accrued Interest shall be free from any
taxes imposed under laws currently or hereafter in effect in the
Republic of Armenia during the Compact Term. This exemption shall apply
to any use of any Program Asset, MCC Funding and Accrued Interest,
including any Exempt Uses, and to any work performed under or
activities undertaken in furtherance of this Compact by any person or
entity (including contractors and grantees) funded by MCC Funding, and
shall apply to all taxes, tariffs, duties, and other levies (each a
``Tax'' and collectively, ``Taxes''), including:
(1) To the extent attributable to MCC Funding, income taxes and
other taxes on profit or businesses imposed on organizations or
entities, other than nationals of the Republic of Armenia, receiving
MCC Funding, including taxes on the acquisition, ownership, rental,
disposition or other use of real or personal property, taxes on
investment or deposit requirements and currency controls in the
Republic of Armenia, or any other tax, duty, charge or fee of whatever
nature, except fees for specific services rendered; for purposes of
this Section 2.3(e), the term ``national'' refers to organizations
established under the laws of the Republic of Armenia, other than MCA-
Armenia or any other entity established solely for purposes of managing
or overseeing the implementation of the Program or any wholly-owned
subsidiaries, divisions, or Affiliates of entities not registered or
established under the laws of the Republic of Armenia;
(2) Customs duties, tariffs, import and export taxes, or other
levies on the importation, use and re-exportation of goods, services,
or the personal belongings and effects, including personally-owned
automobiles, for Program use or the personal use of individuals who are
neither citizens nor permanent residents of the Republic of Armenia and
who are present in the Republic of Armenia for purposes of carrying out
the Program or their family members, including all charges based on the
value of such imported goods;
(3) Taxes on the income or personal property of all individuals who
are neither citizens nor permanent residents of the Republic of
Armenia, including income and social security taxes of all types and
all taxes on the personal property owned by such individuals, to the
extent such income or property are attributable to MCC Funding; and
(4) Taxes or duties levied on the purchase of goods or services
funded by MCC Funding, including sales taxes, tourism taxes, value-
added taxes (``VAT''), or other similar charges.
(ii) This Section 2.3(e) shall apply, but is not limited to (1) any
transaction, service, activity, contract, grant or other implementing
agreement funded in whole or in part by MCC Funding; (2) any supplies,
equipment, materials, property or other goods (referred to herein
collectively as ``goods'') or funds introduced into, acquired in, used
or disposed of in, or imported into or exported from, the Republic of
Armenia by MCC, or by any person or entity (including contractors and
grantees) as part of, or in conjunction with, MCC Funding or the
Program; (3) any contractor, grantee, or other organization carrying
out activities funded in whole or in part by MCC Funding; and (4) any
employee of such organizations (the uses set forth in clauses (1)
through (4) are collectively referred to herein as ``Exempt Uses'').
(iii) If a Tax has been levied and paid contrary to the
requirements of this Section 2.3(e), whether inadvertently, due to the
impracticality of implementation of this provision with respect to
certain types or amounts of taxes, or otherwise, the Government shall
refund promptly to MCC to an account designated by MCC the amount of
such Tax in the currency of the Republic of Armenia, within thirty (30)
days (or such other period as may be agreed in writing by the Parties)
after the Government is notified in writing according to procedures
agreed by the Parties, whether by MCC or otherwise, of such levy and
tax payment; provided, however, the Government shall apply national
funds to satisfy its obligations under this Section 2.3(e)(iii) and no
MCC Funding, Accrued Interest, or any assets, goods, or property (real,
tangible, or intangible) purchased or financed in whole or in part
(directly or indirectly) by MCC Funding (``Program Assets'') may be
applied by the Government in satisfaction of its obligations under this
paragraph.
(iv) The Parties shall memorialize in a mutually acceptable
Supplemental Agreement or Implementation Letter or other suitable
document the mechanisms for implementing this Section 2.3(e), including
(1) a formula for determining refunds for Taxes paid, the amount of
which is not susceptible to precise determination, (2) a mechanism for
ensuring the tax-free importation, use, and re-exportation of goods,
services, or the personal belongings of individuals (including all
Providers) described in paragraph (i)(2) of this Section 2.3(e), and
(3) any other appropriate Government action to facilitate the
administration of this Section 2.3(e).
(v) The Parties agree that this Section 2.3(e) shall supplement,
without limiting in any manner, the provisions relating to tariffs,
dues, customs duties, import taxes and other similar taxes or charges
contained in the bilateral agreement entered into on December 12, 1992
between the Government of the United States of America and the
Government of the Republic of Armenia Regarding Cooperation to
Facilitate the Provision of Humanitarian and Technical Economic
Assistance (the ``Bilateral Agreement''), which agreement continues in
full force and effect. In case of any inconsistency between the
provisions of this Section 2.3(e) and the provisions relating to
tariffs, dues, customs duties, import taxes and other similar taxes or
charges contained in the Bilateral Agreement, the provisions of this
Section 2.3(e) shall prevail.
(f) Alteration. The Government shall ensure that no MCC Funding,
Accrued Interest or Program Assets shall be
[[Page 19398]]
subject to any impoundment, rescission, sequestration or any provision
of law now or hereafter in effect in the Republic of Armenia that would
have the effect of requiring or allowing any impoundment, rescission or
sequestration of any MCC Funding, Accrued Interest or Program Asset.
(g) Liens or Encumbrances. The Government shall ensure that no MCC
Funding, Accrued Interest or Program Assets shall be subject to any
lien, attachment, enforcement of judgment, pledge, or encumbrance of
any kind (each a ``Lien''), except with the prior approval of MCC in
accordance with Section 3(c) of Annex I, and in the event of the
imposition of any Lien not so approved, the Government shall promptly
seek the release of such Lien; provided, however, the Government shall
satisfy its obligations under this Section 2.3(g) at its own expense
and no MCC Funding, Accrued Interest or Program Assets may be applied
by the Government in satisfaction of its obligations under this Section
2.3(g).
(h) Other Limitations. The Government shall ensure that the use or
treatment of MCC Funding, Accrued Interest and Program Assets shall be
subject to such other limitations (i) as required by the applicable law
of the United States of America now or hereafter in effect during the
Compact Term, (ii) as advisable under or required by applicable United
States Government policies now or hereafter in effect during the
Compact Term, or (iii) to which the Parties may otherwise agree in
writing.
(i) Utilization of Goods, Services and Works. The Government shall
ensure that any Program Assets, services, facilities or works funded in
whole or in part (directly or indirectly) by MCC Funding, unless
otherwise agreed by the Parties in writing, shall be used solely in
furtherance of this Compact.
(j) Notification of Applicable Laws and Policies. MCC shall notify
the Government of any applicable United States law or policy affecting
the use or treatment of MCC Funding, whether or not specifically
identified in this Section 2.3, and shall provide to the Government a
copy of the text of any such applicable law and a written explanation
of any such applicable policy.
Section 2.4 Incorporation; Notice; Clarification
(a) The Government shall include, or ensure the inclusion of, all
of the requirements set forth in Section 2.3 in all Supplemental
Agreements to which MCC is not a party and shall use its best efforts
to ensure that no such Supplemental Agreement is implemented in
violation of the prohibitions set forth in Section 2.3.
(b) The Government shall ensure notification of all of the
requirements set forth in Section 2.3 to any Provider and all relevant
officers, directors, employees, agents, representatives, Affiliates,
contractors, sub-contractors, grantees and sub-grantees of any
Provider. The term ``Provider'' shall mean (i) MCA-Armenia and any
Government Affiliate or Permitted Designee involved in any activities
in furtherance of this Compact or (ii) any third party who receives at
least USD $50,000 in the aggregate of MCC Funding (other than employees
of MCA-Armenia) during the Compact Term or such other amount as the
Parties may agree in writing, whether directly from MCC, indirectly
through Re-Disbursements, or otherwise.
(c) In the event the Government or any Provider requires
clarification from MCC as to whether an activity contemplated to be
undertaken in furtherance of this Compact violates or may violate any
provision of Section 2.3, the Government shall notify, or ensure that
such Provider notifies, MCC in writing and provide in such notification
a detailed description of the activity in question. In such event, the
Government shall not proceed, and shall use its best efforts to ensure
that no relevant Provider proceeds, with such activity, and the
Government shall ensure that no Re-Disbursements shall be made for such
activity, until MCC advises the Government or such Provider in writing
that the activity is permissible.
Section 2.5 Refunds; Violation
(a) Notwithstanding the availability to MCC, or exercise by MCC of,
any other remedies, including under international law, this Compact, or
any Supplemental Agreement:
(i) If any amount of MCC Funding or Accrued Interest, or any
Program Asset, is used for any purpose prohibited under this Article II
or otherwise in violation of any of the terms and conditions of this
Compact, any guidance in any Implementation Letter, or any Supplemental
Agreement between the Parties, MCC may require the Government to repay
promptly to MCC to an account designated by MCC or to others as MCC may
direct the amount of such misused MCC Funding or Accrued Interest, or
the cash equivalent of the value of any misused Program Asset, in
United States Dollars, plus any interest that accrued or would have
accrued thereon, within thirty (30) days (or such other period as may
be agreed in writing by the Parties) after the Government is notified,
whether by MCC or otherwise, of such prohibited use; provided, however,
the Government shall apply national funds to satisfy its obligations
under this Section 2.5(a)(i) and no MCC Funding, Accrued Interest or
Program Assets may be applied by the Government in satisfaction of its
obligations under this Section 2.5(a)(i); and
(ii) If all or any portion of this Compact is terminated or
suspended and upon the expiration of this Compact, the Government
shall, subject to the requirements of Sections 5.4(e) and 5.4(f),
refund, or ensure the refund, to MCC to such account(s) designated by
MCC the amount of any MCC Funding, plus any Accrued Interest, promptly,
but in no event later than thirty (30) days after the Government
receives MCC's request for such refund; provided, that if this Compact
is terminated or suspended in part, MCC may request a refund for only
the amount of MCC Funding, plus any Accrued Interest, then allocated to
the terminated or suspended portion; provided, further, that any refund
of MCC Funding or Accrued Interest shall be to such account(s) as
designated by MCC.
(b) Notwithstanding any other provision in this Compact or any
other agreement to the contrary, MCC's right under this Section 2.5 for
a refund shall continue during the Compact Term and for a period of (i)
five (5) years thereafter or (ii) one (1) year after MCC receives
actual knowledge of such violation, whichever is later.
(c) If MCC determines that any activity or failure to act violates,
or may violate, any Section in this Article II, MCC may refuse any
further MCC Disbursements for or conditioned upon such activity, and
may take any action to prevent any Re-Disbursement related to such
activity.
Article III. Implementation
Section 3.1 Implementation Framework
This Compact shall be implemented by the Parties in accordance with
this Article III and as further specified in the Annexes and in
relevant Supplemental Agreements.
Section 3.2 Government Responsibilities
(a) The Government shall have principal responsibility for
oversight and management of the implementation of the Program (i) in
accordance with the terms and conditions specified in this Compact and
relevant
[[Page 19399]]
Supplemental Agreements, (ii) in accordance with all applicable laws
then in effect in the Republic of Armenia, and (iii) in a timely and
cost-effective manner and in conformity with sound technical, financial
and management practices (collectively, the ``Government
Responsibilities''). Unless otherwise expressly provided, any reference
to the Government Responsibilities or any other responsibilities or
obligations of the Government herein shall be deemed to apply to any
Government Affiliate and any of their respective directors, officers,
employees, contractors, sub-contractors, grantees, sub-grantees, agents
or representatives.
(b) The Government shall ensure that no person or entity shall
participate in the selection, award, administration or oversight of a
contract, grant or other benefit or transaction funded in whole or in
part (directly or indirectly) by MCC Funding, in which (i) the entity,
the person, members of the person's immediate family or household or
his or her business partners, or organizations controlled by or
substantially involving such person or entity, has or have a financial
or other interest or (ii) the person or entity is negotiating or has
any arrangement concerning prospective employment, unless such person
or entity has first disclosed in writing to the Government the conflict
of interest and, following such disclosure, the Parties agree in
writing to proceed notwithstanding such conflict. The Government shall
ensure that no person or entity involved in the selection, award,
administration, oversight or implementation of any contract, grant or
other benefit or transaction funded in whole or in part (directly or
indirectly) by MCC Funding shall solicit or accept from or offer to a
third party or seek or be promised (directly or indirectly) for itself
or for another person or entity any gift, gratuity, favor or benefit,
other than items of de minimis value and otherwise consistent with such
guidance as MCC may provide from time to time.
(c) The Government shall not designate any person or entity,
including any Government Affiliate, to implement, in whole or in part,
this Compact or any Supplemental Agreement between the Parties
(including any Government Responsibilities or any other
responsibilities or obligations of the Government under this Compact or
any Supplemental Agreement between the Parties) or to exercise any
rights of the Government under this Compact or any Supplemental
Agreement between the Parties, except as expressly provided herein or
with the prior written consent of MCC; provided, however, the
Government may designate MCA-Armenia or, with the prior written consent
of MCC, such other mutually acceptable persons or entities, to
implement some or all of the Government Responsibilities or any other
responsibilities or obligations of the Government or to exercise any
rights of the Government under this Compact or any Supplemental
Agreement between the Parties (referred to herein collectively as
``Designated Rights and Responsibilities''), in accordance with the
terms and conditions set forth in this Compact or such Supplemental
Agreement (each, a ``Permitted Designee''). Notwithstanding any
provision herein or any other agreement to the contrary, no such
designation shall relieve the Government of such Designated Rights and
Responsibilities, for which the Government shall retain ultimate
responsibility. In the event that the Government designates any person
or entity, including any Government Affiliate, to implement any portion
of the Government Responsibilities or other responsibilities or
obligations of the Government, or to exercise any rights of the
Government under this Compact or any Supplemental Agreement between the
Parties, in accordance with this Section 3.2(c), then the Government
shall (i) cause such person or entity to perform such Designated Rights
and Responsibilities in the same manner and to the full extent to which
the Government is obligated to perform such Designated Rights and
Responsibilities, (ii) ensure that such person or entity does not
assign, delegate, or contract (or otherwise transfer) any of such
Designated Rights and Responsibilities to any other person or entity
and (iii) cause such person or entity to certify to MCC in writing that
it will so perform such Designated Rights and Responsibilities and will
not assign, delegate, or contract (or otherwise transfer) any of such
Designated Rights and Responsibilities to any person or entity without
the prior written consent of MCC.
(d) The Government shall, upon a request from MCC, execute, or
ensure the execution of, an assignment to MCC of any cause of action
which may accrue to the benefit of the Government, a Government
Affiliate or any Permitted Designee, including MCA-Armenia, in
connection with or arising out of any activities funded in whole or in
part (directly or indirectly) by MCC Funding.
(e) The Government shall ensure that (i) no decision of MCA-Armenia
is modified, supplemented, unduly influenced or rescinded by any
governmental authority, except by a non-appealable judicial decision or
any judicial decision which MCA-Armenia, with the agreement of MCC,
decides not to appeal, and (ii) the authority of MCA-Armenia shall not
be expanded, restricted, or otherwise modified, except in accordance
with this Compact, the Governance Agreement or any other Supplemental
Agreement between the Parties.
(f) The Government shall ensure that all persons and individuals
that enter into agreements to provide goods, services or works under
the Program or in furtherance of this Compact shall do so in accordance
with the Procurement Guidelines and shall obtain all necessary
immigration, business and other permits, licenses, consents and
approvals to enable them and their personnel to fully perform under
such agreements.
Section 3.3 Government Deliveries
The Government shall proceed, and cause others to proceed, in a
timely manner to deliver to MCC all Government deliveries required to
be delivered by the Government under this Compact or any Supplemental
Agreement between the Parties, in form and substance as set forth in
this Compact or in any such Supplemental Agreement.
Section 3.4 Government Assurances
The Government hereby provides the following assurances to MCC that
as of the date this Compact is signed:
(a) The information contained in the Proposal and any agreement,
report, statement, communication, document or otherwise delivered or
otherwise communicated to MCC by or on behalf of the Government on or
after the date of the submission of the Proposal (i) are true, correct
and complete in all material respects and (ii) do not omit any fact
known to the Government that if disclosed would (1) alter in any
material respect the information delivered, (2) likely have a material
adverse effect on the Government's ability to effectively implement, or
ensure the effective implementation of, the Program or any Project or
to otherwise carry out its responsibilities or obligations under or in
furtherance of this Compact, or (3) have likely adversely affected
MCC's determination to enter into this Compact or any Supplemental
Agreement between the Parties;
(b) Unless otherwise disclosed in writing to MCC, the MCC Funding
made available hereunder is in addition to the normal and expected
resources that the
[[Page 19400]]
Government usually receives or budgets for the activities contemplated
herein from external or domestic sources;
(c) This Compact does not conflict and will not conflict with any
international agreement or obligation to which the Government is a
party or by which it is bound; and
(d) No payments have been (i) received by any official of the
Government or any other government body in connection with the
procurement of goods, services or works to be undertaken or funded in
whole or in part (directly or indirectly) by MCC Funding, except fees,
taxes, or similar payments legally established in the Republic of
Armenia or (ii) made to any third party, in connection with or in
furtherance of this Compact, in violation of the United States Foreign
Corrupt Practices Act of 1977, as amended (15 U.S.C. 78a et seq.).
Section 3.5 Implementation Letters; Supplemental Agreements
(a) MCC may, from time to time, issue one or more letters to
furnish additional information or guidance to assist the Government in
the implementation of this Compact (each, an ``Implementation
Letter''). The Government shall apply such guidance in implementing
this Compact.
(b) The details of any funding, implementing and other arrangements
in furtherance of this Compact may be memorialized in one or more
agreements between (i) the Government (or any Government Affiliate or
Permitted Designee) and MCC, (ii) MCC and/or the Government (or any
Government Affiliate or Permitted Designee) and any third party,
including any of the Providers or Permitted Designee or (iii) any third
parties where neither MCC nor the Government is a party, before, on or
after the Entry into Force (each, a ``Supplemental Agreement''). The
Government shall deliver, or cause to be delivered, to MCC within five
(5) days of its execution a copy of any Supplemental Agreement to which
MCC is not a party.
Section 3.6 Procurement; Awards of Assistance
(a) The Government shall ensure that the procurement of all goods,
services and works by the Government or any Provider in furtherance of
this Compact shall be consistent with the procurement guidelines (the
``Procurement Guidelines'') reflected in a Supplemental Agreement
between the Government (and/or a mutually acceptable Government
Affiliate such as MCA-Armenia) and MCC (the ``Procurement Agreement''),
which Procurement Guidelines shall include the following requirements:
(i) Internationally accepted procurement rules with open, fair and
competitive procedures are used in a transparent manner to solicit,
award and administer contracts, grants, and other agreements and to
procure goods, services and works;
(ii) Solicitations for goods, services, and works shall be based
upon a clear and accurate description of the goods, services or works
to be acquired;
(iii) Contracts shall be awarded only to qualified and capable
contractors that have the capability and willingness to perform the
contracts in accordance with the terms and conditions of the applicable
contracts and on a cost effective and timely basis; and
(iv) No more than a commercially reasonable price, as determined,
for example, by a comparison of price quotations and market prices,
shall be paid to procure goods, services, and works.
(b) The Government shall maintain, and shall use its best efforts
to ensure that all Providers maintain, records regarding the receipt
and use of goods, services and works acquired in furtherance of this
Compact, the nature and extent of solicitations of prospective
suppliers of goods, services and works acquired in furtherance of this
Compact, and the basis of award of contracts, grants and other
agreements in furtherance of this Compact.
(c) The Government shall use its best efforts to ensure that
information, including solicitations, regarding procurement, grant and
other agreement actions funded (or to be funded) in whole or in part
(directly or indirectly) by MCC Funding shall be made publicly
available in the manner outlined in the Procurement Guidelines or in
any other manner agreed upon by the Parties in writing.
(d) The Government shall ensure that no goods, services or works
funded in whole or in part (directly or indirectly) by MCC Funding are
procured pursuant to orders or contracts firmly placed or entered into
prior to the Entry into Force, except as the Parties may otherwise
agree in writing.
(e) The Government shall ensure that MCA-Armenia and any other
Permitted Designee follows, and uses its best efforts to ensure that
all Providers follow, the Procurement Guidelines in procuring
(including soliciting) goods, services and works and in awarding and
administering contracts, grants and other agreements in furtherance of
this Compact, and shall furnish MCC evidence of the adoption of the
Procurement Guidelines by MCA-Armenia no later than the time specified
in the Disbursement Agreement.
(f) The Government shall include, or ensure the inclusion of, the
requirements of this Section 3.6 into all Supplemental Agreements
between the Government or any Government Affiliate or Permitted
Designee or any of their respective directors, officers, employees,
Affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives or agents, on the one hand, and a Provider, on the
other hand.
(g) The Government shall ensure that approvals of the procurement
of goods, works and services in furtherance of this Compact by the
Governing Council pursuant to the terms of the Procurement Agreement
shall not be subject to any additional approval by the Government.
Section 3.7 Policy Performance; Policy Reforms
In addition to the specific policy and legal reform commitments
identified in Annex I and the Schedules thereto, the Government shall
seek to maintain and improve its level of performance under the policy
criteria identified in section 607 of the Act, and the MCA selection
criteria and methodology published by MCC pursuant to section 607 of
the Act from time to time (``MCA Eligibility Criteria'').
Section 3.8 Records and Information; Access; Audits; Reviews
(a) Reports and Information. The Government shall furnish to MCC,
and shall use its best efforts to ensure that all Providers and any
other third party receiving MCC Funding, as appropriate, furnish to the
Government (and the Government shall provide to MCC), any records and
other information required to be maintained under this Section 3.8 and
such other information, documents and reports as may be necessary or
appropriate for the Government to effectively carry out its obligations
under this Compact, including under Section 3.12.
(b) Government Books and Records. The Government shall maintain,
and shall use its best efforts to ensure that all Providers maintain,
accounting books, records, documents and other evidence relating to
this Compact adequate to show, to the satisfaction of MCC, without
limitation, the use of all MCC Funding, including all costs incurred by
the Government and the Providers in furtherance of this Compact, the
receipt, acceptance and use of goods, services and works acquired in
furtherance of this Compact by the Government and the Providers,
agreed-upon cost sharing requirements,
[[Page 19401]]
the nature and extent of solicitations of prospective suppliers of
goods, services and works acquired by the Government and the Providers
in furtherance of this Compact, the basis of award of Government and
other contracts and orders in furtherance of this Compact, the overall
progress of the implementation of the Program, and any documents
required by this Compact or any Supplemental Agreement between the
Parties or reasonably requested by MCC upon reasonable notice
(``Compact Records''). The Government shall maintain, and shall use its
best efforts to ensure that all Covered Providers maintain, Compact
Records in accordance with generally accepted accounting principles
prevailing in the United States, or at the Government's option and with
the prior written approval by MCC, other accounting principles, such as
those (i) prescribed by the International Accounting Standards
Committee (an affiliate of the International Federation of Accountants)
or (ii) then prevailing in the Republic of Armenia. Compact Records
shall be maintained for at least five (5) years after the end of the
Compact Term or for such longer period, if any, required to resolve any
litigation, claims or audit findings or any statutory requirements.
(c) Access. Upon the request of MCC, the Government, at all
reasonable times, shall permit, or cause to be permitted, authorized
representatives of MCC, the Inspector General, the United States
Government Accountability Office, any auditor responsible for an audit
contemplated herein or otherwise conducted in furtherance of this
Compact, and any agents or representatives engaged by MCC or a
Permitted Designee to conduct any assessment, review or evaluation of
the Program, at all reasonable times the opportunity to audit, review,
evaluate or inspect activities funded in whole or in part (directly or
indirectly) by MCC Funding or undertaken in connection with the
Program, the utilization of goods and services purchased or funded in
whole or in part (directly or indirectly) by MCC Funding, and Compact
Records, including of the Government or any Provider, relating to
activities funded or undertaken in furtherance of, or otherwise
relating to, this Compact, and shall use its best efforts to ensure
access by MCC, the Inspector General, the United States Government
Accountability Office or relevant auditor, reviewer or evaluator or
their respective representatives or agents to all relevant directors,
officers, employees, Affiliates, contractors, representatives and
agents of the Government or any Provider.
(d) Audits.
(i) Government Audits. The Government shall, on at least an annual
basis and as the Parties may otherwise agree in writing, conduct, or
cause to be conducted, financial audits of all MCC Disbursements and
Re-Disbursements during the year since the Entry into Force or since
the prior anniversary of the Entry into Force in accordance with the
following terms, except as the Parties may otherwise agree in writing.
As requested by MCC in writing, the Government shall use, or cause to
be used, or select, or cause to be selected, an auditor named on the
approved list of auditors in accordance with the Guidelines for
Financial Audits Contracted by Foreign Recipients (the ``Audit
Guidelines'') issued by the Inspector General (the ``Inspector
General'') of the United States Agency for International Development
(``USAID'') and as approved by MCC, to conduct such annual audits. Such
audits shall be performed in accordance with such Audit Guidelines and
be subject to quality assurance oversight by the Inspector General in
accordance with such Audit Guidelines. An audit shall be completed no
later than 90 days after the first anniversary of the Entry into Force
of this Compact and no later than 90 days after each anniversary of the
Entry into Force thereafter, or such other period as the Parties may
otherwise agree in writing.
(ii) Audits of U.S. Entities. The Government shall ensure that
Supplemental Agreements between the Government or any Provider, on the
one hand, and a United States nonprofit organization, on the other
hand, state that the United States organization is subject to the
applicable audit requirements contained in OMB Circular A-133,
notwithstanding any other provision of this Compact to the contrary.
The Government shall ensure that Supplemental Agreements between the
Government or any Provider, on the one hand, and a United States for-
profit Covered Provider, on the other hand, state that the United
States organization is subject to audit by the cognizant United States
Government agency, unless the Government and MCC agree otherwise in
writing.
(iii) Audit Plan. The Government shall submit, or cause to be
submitted, to MCC, no later than twenty (20) days prior to the date of
its adoption, in form and substance satisfactory to MCC, a plan, in
accordance with the Audit Guidelines, for the audit of the expenditures
of any Covered Providers, which audit plan, in the form and substance
as approved by MCA-Armenia, the Government shall adopt, or cause to be
adopted, no later than sixty (60) days prior to the end of the first
anniversary of the Entry into Force of this Compact or prior to the end
of the first period to be audited.
(iv) Covered Provider. A ``Covered Provider'' is (1) a non-United
States Provider that receives (other than pursuant to a direct contract
or agreement with MCC) USD $300,000 or more of MCC Funding in any MCA-
Armenia fiscal year or any other non-United States person or entity
that receives (directly or indirectly) USD $300,000 or more of MCC
Funding from any Provider in such fiscal year or (2) any United States
Provider that receives (other than pursuant to a direct contract or
agreement with MCC) USD $500,000 or more of MCC Funding in any MCA-
Armenia fiscal year or any other United States person or entity that
receives (directly or indirectly) USD $500,000 or more of MCC Funding
from any Provider in such fiscal year.
(v) Corrective Actions. The Government shall use its best efforts
to ensure that Covered Providers take, where necessary, appropriate and
timely corrective actions in response to audits, consider whether a
Covered Provider's audit necessitates adjustment of its own records,
and require each such Covered Provider to permit independent auditors
to have access to its records and financial statements as necessary.
(vi) Audit Reports. The Government shall furnish, or use its best
efforts to cause to be furnished, to MCC an audit report in a form
satisfactory to MCC for each audit required by this Section 3.8, other
than audits arranged for by MCC, no later than 90 days after the end of
the period under audit, or such other time as may be agreed by the
Parties from time to time.
(vii) Other Providers. For Providers who receive MCC Funding under
this Compact pursuant to direct contracts or agreements with MCC, MCC
shall include appropriate audit requirements in such contracts or
agreements and shall, on behalf of the Government, unless otherwise
agreed by the Parties, conduct the follow-up activities with regard to
the audit reports furnished pursuant to such requirements.
(viii) Audit by MCC. MCC retains the right to perform, or cause to
be performed, the audits required under this Section 3.8 by utilizing
MCC Funding or other resources available to MCC for this purpose, and
to audit, conduct a financial review, or otherwise ensure
accountability of any Provider or any other third party receiving MCC
[[Page 19402]]
Funding, regardless of the requirements of this Section 3.8.
(e) Application to Providers. The Government shall include, or
ensure the inclusion of, at a minimum, the requirements of:
(i) Paragraphs (a), (b), (c), (d)(ii), (d)(iii), (d)(v), (d)(vi),
and (d)(viii) of this Section 3.8 into all Supplemental Agreements
between the Government, any Government Affiliate, any Permitted
Designee or any of their respective directors, officers, employees,
Affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives or agents (each, a ``Government Party''), on the one
hand, and a Covered Provider that is not a non-profit organization
domiciled in the United States, on the other hand;
(ii) Paragraphs (a), (b), (c), (d)(ii), and (d)(viii) of this
Section 3.8 into all Supplemental Agreements between a Government Party
and a Provider that does not meet the definition of a Covered Provider;
and
(iii) Paragraphs (a), (b), (c), (d)(ii), (d)(v) and (d)(viii) of
this Section 3.8 into all Supplemental Agreements between a Government
Party and a Covered Provider that is a non-profit organization
domiciled in the United States.
(f) Reviews or Evaluations. The Government shall conduct, or cause
to be conducted, such performance reviews, data quality reviews,
environmental and social audits, or program evaluations during the
Compact Term or otherwise and in accordance with the M&E Plan or as
otherwise agreed in writing by the Parties.
(g) Cost of Audits, Reviews or Evaluations. MCC Funding may be used
to fund the costs of any Audits, reviews or evaluations required under
this Compact, including as reflected on Exhibit A to Annex II, and in
no event shall the Government be responsible for the costs of any such
Audits, reviews or evaluations from financial sources other than MCC
Funding.
Section 3.9 Insurance
The Government shall, to MCC's satisfaction, insure or cause to be
insured all Program Assets and shall obtain or cause to be obtained
such other appropriate insurance and other protections to cover against
risks or liabilities associated with the operations of the Program,
including by requiring Providers to obtain adequate insurance and post
adequate performance bonds or other guarantees. MCA-Armenia or the
Implementing Entity, as applicable, shall be named as the payee on any
such insurance and the beneficiary of any such guarantee, including
performance bonds. MCC and, to the extent it is not named as the payee,
MCA-Armenia shall be named as additional insureds on any such insurance
or other guarantee, to the extent permissible under applicable laws.
The Government shall ensure that any proceeds from claims paid under
such insurance or any other form of guarantee shall be used to replace
or repair any loss of Program Assets or to pursue the procurement of
the covered goods, services or works; provided, however, at MCC's
election, such proceeds shall be deposited in a Permitted Account as
designated by MCA-Armenia and acceptable to MCC or otherwise as
directed by MCC. To the extent MCA-Armenia is held liable under any
indemnification or other similar provision of any agreement between
MCA-Armenia, on the one hand, and any other Provider or other third
party, on the other hand, the Government shall pay in full on behalf of
MCA-Armenia any such obligation; provided, further, the Government
shall apply national funds to satisfy its obligations under this
Section 3.9 and no MCC Funding, Accrued Interest, or Program Asset may
be applied by the Government in satisfaction of its obligations under
this Section 3.9.
Section 3.10 Domestic Requirements
The Government shall proceed in a timely manner to seek any
required ratification of this Compact or similar domestic requirement,
which process the Government shall initiate promptly after the
conclusion of this Compact. Notwithstanding anything to the contrary in
this Compact, this Section 3.10 shall provisionally apply prior to the
Entry into Force.
Section 3.11 No Conflict
The Government shall undertake not to enter into any agreement in
conflict with this Compact or any Supplemental Agreement during the
Compact Term.
Section 3.12 Reports
The Government shall provide, or cause to be provided, to MCC at
least on each anniversary of the Entry into Force and otherwise within
thirty (30) days of any written request by MCC, or as otherwise agreed
in writing by the Parties, the following information:
(a) The name of each entity to which MCC Funding has been provided;
(b) The amount of MCC Funding provided to such entity;
(c) A description of the Program and each Project funded in
furtherance of this Compact, including:
(i) A statement of whether the Program or any Project was solicited
or unsolicited; and
(ii) A detailed description of the objectives and measures for
results of the Program or Project;
(d) The progress made by the Republic of Armenia toward achieving
the Compact Goal and Objectives;
(e) A description of the extent to which MCC Funding has been
effective in helping the Republic of Armenia to achieve the Compact
Goal and Objectives;
(f) A description of the coordination of MCC Funding with other
United States foreign assistance and other related trade policies;
(g) A description of the coordination of MCC Funding with
assistance provided by other donor countries;
(h) Any report, document or filing that the Government, any
Government Affiliate or any Permitted Designee submits to any
government body in connection with this Compact;
(i) Any report or document required to be delivered to MCC under
the Environmental Guidelines, any Audit Plan, or any component of the
Implementation Plan; and
(j) Any other report, document or information requested by MCC or
required by this Compact or any Supplemental Agreement between the
Parties.
Article IV. Conditions Precedent; Deliveries
Section 4.1 Conditions Prior to the Entry Into Force and Deliveries
As conditions precedent to the Entry into Force, the Parties shall
satisfy the conditions set forth in this Section 4.1.
(a) The Government (acting through a mutually acceptable Government
Affiliate and/or MCA-Armenia) and MCC shall execute a Disbursement
Agreement, which agreement shall be in full force and effect and, if
required, ratified in Armenia as of the Entry into Force.
(b)(i) The Government (acting through a mutually acceptable
Government Affiliate and/or MCA-Armenia) shall deliver one or more of
the Supplemental Agreements identified in Exhibit B attached hereto,
which agreements shall be duly executed by the parties thereto and in
full force and effect and, if required, ratified in Armenia as of the
Entry into Force, or (ii) the Government (acting through a mutually
acceptable Government Affiliate and/or MCA-Armenia) and MCC execute one
or more term sheets that set forth the material and principal terms and
conditions that will be included in any such
[[Page 19403]]
Supplemental Agreement that has not been entered into as of the Entry
into Force (the ``Supplemental Agreement Term Sheets'').
(c) The Government (acting through a mutually acceptable Government
Affiliate and/or MCA-Armenia) and MCC shall execute a Procurement
Agreement, which agreement shall be in full force and effect and, if
required, ratified in Armenia as of the Entry into Force.
(d) The Government shall deliver a written statement as to the
incumbency and specimen signature of the Principal Representative and
each Additional Representative executing any document under this
Compact, such written statement to be signed by the Prime Minister or a
duly authorized official of the Government other than the Principal
Representative or any such Additional Representative.
(e) The Government shall deliver a letter signed and dated by the
Minister of Justice of the Government certifying:
(i) That the Government has completed all of its domestic
requirements for this Compact to be fully enforceable under Armenian
law; and
(ii) That attached thereto are true, correct and complete copies of
any decree, legislation, regulation or other governmental document
relating to its domestic requirements for this Compact to enter into
force, which MCC may post on its Web site or otherwise make publicly
available.
(f) MCC shall deliver a letter signed and dated by the Principal
Representative of MCC certifying that MCC has completed its domestic
requirements for this Compact to enter into force.
(g) MCC shall deliver a written statement as to the incumbency and
specimen signature of the Principal Representative and each Additional
Representative executing any document under this Compact, such written
statement to be signed by a duly authorized officer of MCC other than
the Principal Representative or any such Additional Representative.
Section 4.2 Conditions Precedent to MCC Disbursements or Re-
Disbursements
Prior to, and as condition precedent to, any MCC Disbursement or
Re-Disbursement, the Government shall satisfy, or ensure the
satisfaction of, all applicable conditions precedent in the
Disbursement Agreement.
Article V. Final Clauses
Section 5.1 Communications
Unless otherwise expressly stated in this Compact or otherwise
agreed in writing by the Parties, any notice, certificate, request,
report, document or other communication required, permitted, or
submitted by either Party to the other under this Compact shall be: (a)
In writing; (b) in English; and (c) deemed duly given: (i) Upon
personal delivery to the Party to be notified; (ii) when sent by
confirmed facsimile or electronic mail, if sent during normal business
hours of the recipient Party, if not, then on the next business day; or
(iii) two (2) business days after deposit with an internationally
recognized overnight courier, specifying next day delivery, with
written verification of receipt to the Party to be notified at the
address indicated below, or at such other address as such Party may
designate:
To MCC:
Millennium Challenge Corporation, Attention: Vice President of
Operations, (with a copy to the Vice President and General Counsel),
875 Fifteenth Street, NW., Washington, DC 20005, United States of
America, Facsimile: (202) 521-3700, Phone: (202) 521-3600, E-mail:
VPOperations@mcc.gov (Vice President of Operations);
VPGeneralCounsel@mcc.gov (Vice President and General Counsel).
To the Government:
Ministry of Finance and Economy, Attention: Minister of Finance and
Economy, 1, Melik-Adamyan Str., Yerevan 375010, Republic of Armenia,
Facsimile: +374 (10) 59-53-28, Phone: +374 (10) 59-52-22 or 23, E-mail:
minister@mfe.am.
Notwithstanding the foregoing, any audit report delivered pursuant
to Section 3.8, if delivered by facsimile or electronic mail, shall be
followed by an original in overnight express mail. This Section 5.1
shall not apply to the exchange of letters contemplated in Section 1.3
or any amendments under Section 5.3.
Section 5.2 Representatives
Unless otherwise agreed in writing by the Parties, for all purposes
relevant to this Compact, the Government shall be represented by the
individual holding the position of, or acting as, Minister of Finance
and Economy, and MCC shall be represented by the individual holding the
position of, or acting as, Vice President of Operations (each, a
``Principal Representative''), each of whom, by written notice, may
designate one or more additional representatives (each, an ``Additional
Representative'') for all purposes other than signing amendments to
this Compact. The names of the Principal Representative and any
Additional Representative of each of the Parties shall be provided,
with specimen signatures, to the other Party, and the Parties may
accept as duly authorized any instrument signed by such representatives
relating to the implementation of this Compact, until receipt of
written notice of revocation of their authority. A Party may change its
Principal Representative to a new representative of equivalent or
higher rank upon written notice to the other Party, which notice shall
include the specimen signature of the new Principal Representative.
Section 5.3 Amendments
The Parties may amend this Compact only by a written agreement
signed by the Principal Representatives of the Parties and subject to
the respective domestic approval requirements to which this Compact was
subject.
Section 5.4 Termination; Suspension
(a) Subject to Section 2.5 and paragraphs (e) through (h) of this
Section 5.4, either Party may terminate this Compact in its entirety by
giving the other Party thirty (30) days' written notice.
(b) Notwithstanding any other provision of this Compact, including
Section 2.1, or any Supplemental Agreement between the Parties, MCC may
suspend or terminate this Compact or MCC Funding, in whole or in part,
and any obligation or sub-obligation related thereto, upon giving the
Government written notice, if MCC determines, in its sole discretion
that:
(i) Any use or proposed use of MCC Funding or Program Assets or
continued implementation of the Compact would be in violation of
applicable law or United States Government policy, whether now or
hereafter in effect;
(ii) The Government, any Provider, or any other third party
receiving MCC Funding or using Program Assets is engaged in activities
that are contrary to the national security interests of the United
States;
(iii) The Government or any Permitted Designee has committed an act
or omission or an event has occurred that would render Armenia
ineligible to receive United States economic assistance under Part I of
the Foreign Assistance Act of 1961, as amended (22 U.S.C. 2151 et
seq.), by reason of the application of any provision of the Foreign
Assistance Act of 1961 or any other provision of law;
(iv) The Government or any Permitted Designee has engaged in a
pattern of
[[Page 19404]]
actions or omissions inconsistent with the MCA Eligibility Criteria, or
there has occurred a significant decline in the performance of the
Republic of Armenia on one or more of the eligibility indicators
contained therein;
(v) The Government or any Provider has materially breached one or
more of its assurances or any covenants, obligations or
responsibilities under this Compact or any Supplemental Agreement;
(vi) An audit, review, report or any other document or other
evidence reveals that actual expenditures for the Program or any
Project or any Project Activity were greater than the projected
expenditure for such activities identified in the applicable Detailed
Financial Plan or are projected to be greater than projected
expenditures for such activities;
(vii) If the Government (1) materially reduces the allocation in
its national budget or any other Government budget of the normal and
expected resources that the Government would have otherwise received or
budgeted, from external or domestic sources, for the activities
contemplated herein; (2) fails to contribute or provide the amount,
level, type and quality of resources required to effectively carry out
the Government Responsibilities or any other responsibilities or
obligations of the Government under or in furtherance of this Compact;
or (3) fails to pay any of its obligations as required under this
Compact or any Supplemental Agreement, including such obligations which
shall be paid solely out of national funds;
(viii) If the Government, any Provider, or any other third party
receiving MCC Funding or using Program Assets, or any of their
respective directors, officers, employees, Affiliates, contractors,
sub-contractors, grantees, sub-grantees, representatives or agents, is
found to have been convicted of a narcotics offense or to have been
engaged in drug trafficking;
(ix) Any MCC Funding or Program Assets are applied (directly or
indirectly) to the provision of resources and support to, individuals
and organizations associated with terrorism, sex trafficking or
prostitution;
(x) An event or condition of any character has occurred that: (1)
Materially and adversely affects, or is likely to materially and
adversely affect, the ability of the Government or any other party to
effectively implement, or ensure the effective implementation of, the
Program or any Project or to otherwise carry out its responsibilities
or obligations under or in furtherance of this Compact or any
Supplemental Agreement or to perform its obligations under or in
furtherance of this Compact or any Supplemental Agreement or to
exercise its rights thereunder; (2) makes it improbable that the
Objectives will be achieved during the Compact Term; (3) materially and
adversely affects the Program Assets or any Permitted Account; or (4)
constitutes misconduct injurious to MCC, or constitutes a fraud or a
felony, by the Government, any Government Affiliate, Permitted Designee
or Provider, or any officer, director, employee, agent, representative,
Affiliate, contractor, grantee, subcontractor or sub-grantee thereof;
(xi) The Government or any Permitted Designee or Provider has taken
any action or omission or engaged in any activity in violation of, or
inconsistent with, the requirements of this Compact or any Supplemental
Agreement to which the Government or any Permitted Designee or Provider
is a party;
(xii) There has occurred a failure to meet a condition precedent or
series of conditions precedent or any other requirements or conditions
in connection with MCC Disbursement as set out in and in accordance
with any Supplemental Agreement between the Parties; or
(xiii) Any MCC Funding, Accrued Interest or Program Asset becomes
subject to a Lien without the prior approval of MCC, and the Government
fails to obtain the release of such Lien (at its own expense and not
with MCC Funding, Accrued Interest or Program Assets) within 30 days
after the imposition of such Lien.
(c) MCC may reinstate any suspended or terminated MCC Funding under
this Compact or any Supplemental Agreement if MCC determines, in its
sole discretion, that the Government or other relevant party has
demonstrated a commitment to correcting each condition for which MCC
Funding was suspended or terminated.
(d) The authority to suspend or terminate this Compact or any MCC
Funding under this Section 5.4 includes the authority to suspend or
terminate any obligations or sub-obligations relating to MCC Funding
under any Supplemental Agreement without any liability to MCC
whatsoever.
(e) All MCC Disbursements and Re-Disbursements shall cease upon
expiration, suspension, or termination of this Compact; provided,
however, (i) reasonable expenditures for goods, services and works that
are properly incurred under or in furtherance of this Compact before
expiration, suspension or termination of this Compact and (ii)
reasonable expenditures for goods and services (including certain
administrative expenses) properly incurred within one hundred and
twenty (120) days after the expiration, suspension or termination of
the Compact in connection with the winding up of the Program may be
paid from MCC Funding, provided that in the case of clauses (i) and
(ii) the request for such payment is (1) properly submitted within
ninety (90) days after the expiration, suspension or termination of the
Compact and (2) subject to the prior written consent of MCC.
(f) Other than payments permitted pursuant to Section 5.4(e), in
the event of the suspension or termination of this Compact or any
Supplemental Agreement, in whole or in part, each Party, shall suspend,
for the period of the suspension, or terminate, or ensure the
suspension or termination of, as applicable, any obligation or sub-
obligation of the Parties to provide financial or other resources under
this Compact or any Supplemental Agreement, or to the suspended or
terminated portion of this Compact or such Supplemental Agreement, as
applicable. In the event of such suspension or termination, the
Government shall use its best efforts to suspend or terminate, or
ensure the suspension or termination of, as applicable, all such
noncancelable commitments related to the suspended or terminated MCC
Funding. Any portion of this Compact or any such Supplemental Agreement
that is not suspended or terminated shall remain in full force and
effect.
(g) Upon the full or partial suspension or termination of this
Compact or any MCC Funding, MCC may, at its expense, direct that title
to Program Assets be transferred to MCC if such Program Assets are in a
deliverable state; provided, for any Program Asset(s) partially
purchased or funded (directly or indirectly) by MCC Funding, the
Government shall reimburse to a United States Government account
designated by MCC the cash equivalent of the portion of the value of
such Program Asset(s).
(h) Prior to the expiration of this Compact or upon the termination
of this Compact, the Parties shall consult in good faith with a view to
reaching an agreement in writing on (i) the post-Compact Term treatment
of MCA-Armenia, (ii) the process for ensuring the refunds of MCC
Disbursements that have not yet been released from a Permitted Account
through a valid Re-Disbursement nor otherwise committed in accordance
with Section 5.4(e), or (iii) any other matter related to the
[[Page 19405]]
winding up of the Program and this Compact.
Section 5.5 Privileges and Immunities
MCC is an agency of the Government of the United States of America
and its personnel assigned to the Republic of Armenia will be notified
pursuant to the Vienna Convention on Diplomatic Relations as members of
the mission of the Embassy of the United States of America. The
Government shall ensure that any personnel of MCC, including
individuals detailed to or contracted by MCC, and the members of the
families of such personnel, while such personnel are performing duties
in the Republic of Armenia, shall enjoy the privileges and immunities
that are enjoyed by a member of the United States Foreign Service, or
the family of a member of the United States Foreign Service, as
appropriate, of comparable rank and salary of such personnel, if such
personnel or the members of the families of such personnel are not a
national of, or permanently resident in the Republic of Armenia.
Section 5.6 Attachments
Any annex, schedule, exhibit, table, appendix or other attachment
expressly attached hereto (collectively, the ``Attachments'') is
incorporated herein by reference and shall constitute an integral part
of this Compact.
Section 5.7 Inconsistencies
(a) Conflicts or inconsistencies between any parts of this Compact
shall be resolved by applying the following descending order of
precedence:
(i) Articles I through V; and
(ii) Any Attachments.
(b) In the event of any conflict or inconsistency between this
Compact and any Supplemental Agreement between the Parties, the terms
of this Compact shall prevail. In the event of any conflict or
inconsistency between any Supplemental Agreement between the Parties
and any other Supplemental Agreement, the terms of the Supplemental
Agreement between the Parties shall prevail. In the event of any
conflict or inconsistency between Supplemental Agreements between any
parties, the terms of a more recently executed Supplemental Agreement
between such parties shall take precedence over a previously executed
Supplemental Agreement between such parties. In the event of any
inconsistency between a Supplemental Agreement between the Parties and
any component of the Implementation Plan, the terms of the relevant
Supplemental Agreement shall prevail.
Section 5.8 Indemnification
The Government shall indemnify and hold MCC and any MCC officer,
director, employee, Affiliate, contractor, agent or representative
(each of MCC and any such persons, an ``MCC Indemnified Party'')
harmless from and against, and shall compensate, reimburse and pay such
MCC Indemnified Party for, any liability or other damages which (i) are
(directly or indirectly) suffered or incurred by such MCC Indemnified
Party, or to which any MCC Indemnified Party may otherwise become
subject, regardless of whether or not such damages relate to any third-
party claim, and (ii) arise from or as a result of the negligence or
willful misconduct of the Government, any Government Affiliate, MCA-
Armenia or any Permitted Designee, (directly or indirectly) connected
with, any activities (including acts or omissions) undertaken in
furtherance of this Compact; provided, however, the Government shall
apply national funds to satisfy its obligations under this Section 5.8
and no MCC Funding, Accrued Interest, or Program Asset may be applied
by the Government in satisfaction of its obligations under this Section
5.8.
Section 5.9 Headings
The Section and Subsection headings used in this Compact are
included for convenience only and are not to be considered in
construing or interpreting this Compact.
Section 5.10 Interpretation; Definitions
(a) Any reference to the term ``including'' in this Compact shall
be deemed to mean ``including without limitation'' except as expressly
provided otherwise.
(b) Any reference to activities undertaken ``in furtherance of this
Compact'' or similar language shall include activities undertaken by
the Government, any Government Affiliate, MCA-Armenia, any Permitted
Designee, any Provider or any other third party receiving MCC Funding
involved in carrying out the purposes of this Compact or any
Supplemental Agreement, including their respective directors, officers,
employees, Affiliates, contractors, sub-contractors, grantees, sub-
grantees, representatives or agents, whether pursuant to the terms of
this Compact, any Supplemental Agreement or otherwise.
(c) References to ``day'' or ``days'' shall be calendar days unless
provided otherwise.
(d) The term ``United States Government'' shall, for the purposes
of this Compact, mean any branch, agency, bureau, government
corporation, government chartered entity or other body of the Federal
government of the United States.
(e) The term ``Affiliate'' of a party is a person or entity that
controls, is controlled by, or is under the same control as the party
in question, whether by ownership or by voting, financial or other
power or means of influence.
(f) The term ``Government Affiliate'' is an Affiliate, ministry,
bureau, department, agency, government corporation or any other entity
chartered or established by the Government.
(g) References to any Affiliate or Government Affiliate herein
shall include any of their respective directors, officers, employees,
affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives, and agents.
(h) Any references to ``Supplemental Agreement between the
Parties'' shall mean any agreement between MCC on the one hand, and the
Government or any Government Affiliate or Permitted Designee on the
other hand.
Section 5.11 Signatures
Other than a signature to this Compact or an amendment to this
Compact pursuant to Section 5.3, a signature delivered by facsimile or
electronic mail in accordance with Section 5.1 shall be deemed an
original signature, and the Parties hereby waive any objection to such
signature or to the validity of the underlying document, certificate,
notice, instrument or agreement on the basis of the signature's legal
effect, validity or enforceability solely because it is in facsimile or
electronic form. Such signature shall be accepted by the receiving
Party as an original signature and shall be binding on the Party
delivering such signature.
Section 5.12 Designation
MCC may designate any Affiliate, agent, or representative to
implement, in whole or in part, its obligations, and exercise any of
its rights, under this Compact or any Supplemental Agreement between
the Parties.
Section 5.13 Survival
Any Government Responsibilities, covenants, or obligations or other
responsibilities to be performed by the Government after the Compact
Term shall survive the termination or expiration of this Compact and
expire in accordance with their respective terms. Notwithstanding the
termination or expiration of this Compact, the following provisions
shall remain in
[[Page 19406]]
force: Sections 2.2, 2.3, 2.5, 3.2, 3.3, 3.4, 3.5, 3.8, 3.9 (for one
year), 3.12, 5.1, 5.2, 5.4(d), 5.4(e) (for 120 days), 5.4(f), 5.4(g),
5.4(h), 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, this Section 5.13,
5.14, and 5.15.
Section 5.14 Consultation
Either Party may, at any time, request consultations relating to
the interpretation or implementation of this Compact or any
Supplemental Agreement between the Parties. Such consultations shall
begin at the earliest possible date. The request for consultations
shall designate a representative for the requesting Party with the
authority to enter consultations and the other Party shall endeavor to
designate a representative of equal or comparable rank. If such
representatives are unable to resolve the matter within 20 days from
the commencement of the consultations then each Party shall forward the
consultation to the Principal Representative or such other
representative of comparable or higher rank. The consultations shall
last no longer than 45 days from date of commencement. If the matter is
not resolved within such time period, either Party may terminate this
Compact pursuant to Section 5.4(a). The Parties shall enter any such
consultations guided by the principle of achieving the Compact Goal in
a timely and cost-effective manner.
Section 5.15 MCC Status
MCC is a United States government corporation acting on behalf of
the United States Government in the implementation of this Compact. As
such, MCC has no liability under this Compact, is immune from any
action or proceeding arising under or relating to this Compact and the
Government hereby waives and releases all claims related to any such
liability. In matters arising under or relating to this Compact, MCC is
not subject to the jurisdiction of the courts or other body of the
Republic of Armenia or any other jurisdiction.
Section 5.16 Language
This Compact is prepared in English and in the event of any
ambiguity or conflict between this official English version and any
other version translated into any language for the convenience of the
Parties, this official English version shall prevail.
Section 5.17 Publicity; Information and Marking
The Government shall give appropriate publicity to this Compact as
a program to which the United States, through MCC, has contributed,
including by posting this Compact, and any amendments thereto, on the
MCA-Armenia Web site, identifying Program activity sites, and marking
Program Assets; provided, any announcement, press release or statement
regarding MCC or the fact that MCC is funding the Program or any other
publicity materials referencing MCC, including the publicity described
in this Section 5.17, shall be subject to prior approval by MCC and
shall be consistent with any instructions provided by MCC from time to
time in relevant Implementation Letters. Upon the termination or
expiration of this Compact, MCC may request the removal of, and the
Government shall, upon such request, remove, or cause the removal of,
any such markings and any references to MCC in any publicity materials
or on the MCA-Armenia Web site.
In Witness Whereof, the undersigned, duly authorized by their
respective governments, have signed this Compact this 27th day of
March, 2006 and this Compact shall enter into force in accordance with
Section 1.3.
Done at Washington, DC in the English language.
For the United States of America, acting through the Millennium
Challenge Corporation, Name: John J. Danilovich, Title: Chief Executive
Officer.
For the Government of the Republic of Armenia, Name: Vardan
Khachatryan, Title: Minister of Finance and Economy.
Exhibit A--Definitions
The following compendium of capitalized terms that are used in this
Compact is provided for the convenience of the reader. To the extent
that there is a conflict or inconsistency between the definitions in
this Exhibit A and the definitions elsewhere in the text of this
Compact, the definition elsewhere in this Compact shall prevail over
the definition in this Exhibit A. Defined terms importing the singular
also include the plural and vice versa.
Accrued Interest is any interest or other earnings on MCC Funding
that accrues as specified in Section 2.1(c).
Act means the Millennium Challenge Act of 2003, as amended.
Ad Hoc Evaluation shall have the meaning set forth in Section 3(b)
of Annex III.
Additional Representative is a representative as may be designated
by a Principal Representative, by written notice, for all purposes
other than signing amendments to this Compact.
Affiliate means the affiliate of a party, which is a person or
entity that controls, is controlled by, or is under the same control as
the party in question, whether by ownership or by voting, financial or
other power or means of influence. References to Affiliate herein shall
include any of their respective directors, officers, employees,
affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives, and agents.
AMD means Armenian Drams, the currency of the Republic of Armenia.
Annex means any annex to this Compact.
ARD means the Armenian Road Directorate that manages the main and
republican roads.
Attachments means any annex, schedule, exhibit, table, appendix or
other attachment to this Compact.
Audit Guidelines means the ``Guidelines for Financial Audits
Contracted by Foreign Recipients'' issued by the Inspector General of
the United States Agency for International Development.
Auditor means an auditor as defined in, and engaged pursuant to,
Section 3(h) of Annex I and as required by Section 3.8(d) of the
Compact.
Auditor/Reviewer Agreement is an agreement between MCA-Armenia and
each Auditor or Reviewer, in form and substance satisfactory to MCC,
that sets forth the roles and responsibilities of the Auditor or
Reviewer with respect to the audit, review or evaluation, including
access rights, required form and content of the applicable audit,
review or evaluation and other appropriate terms and conditions such as
payment of the Auditor or Reviewer.
Bank(s) means any bank holding a Permitted Account referenced in
Section 4(d) of Annex I.
Bank Agreement means an agreement between MCA-Armenia and a Bank,
satisfactory to MCC, that sets forth the signatory authority, access
rights, anti-money laundering and anti-terrorist financing provisions,
and other terms related to a Permitted Account.
Beneficiaries means the intended beneficiaries identified in
accordance with Annex I.
Bilateral Agreement means the bilateral agreement entered into on
December 12, 1992 between the Government of the United States of
America and the Government of the Republic of Armenia Regarding
Cooperation to Facilitate the Provision of Humanitarian and Technical
Economic Assistance.
Chair means the Chair of the Governing Council.
Chief Executive Officer means the Chief Executive Officer of MCA-
Armenia.
Civil Society Members are the five members of civil society
appointed by
[[Page 19407]]
the Stakeholders' Committee as described in Section 3(d)(ii)(2)(A)(vii)
of Annex I, to serve as voting members on the Governing Council.
Compact means the Millennium Challenge Compact made between the
United States of America, acting through the Millennium Challenge
Corporation, and the Government of the Republic of Armenia.
Compact Goal means reducing rural poverty through a sustainable
increase in the economic performance of the agricultural sector in
Armenia.
Compact Goal Indicator(s) means the Indicators in the M&E Plan that
will measure the results for the overall Program. A table of Compact
Goal Indicators with their definitions is set forth at Section 2(a)(i)
of Annex III.
Compact Implementation Funding shall have the meaning set forth in
Section 2.1(a)(iii).
Compact Records shall have the meaning set forth in Section 3.8(b).
Compact Reports means any documents or reports delivered to MCC in
satisfaction of the Government's reporting requirements under this
Compact or any Supplemental Agreement between the Parties.
Compact Term means the term for which this Compact shall remain in
force, which shall be the five (5) year period from the Entry into
Force, unless earlier terminated in accordance with Section 5.4.
Covered Provider shall have the meaning set forth in Section
3.8(d)(iv).
Designated Rights and Responsibilities shall have the meaning set
forth in Section 3.2(c).
Detailed Financial Plan means the financial plans that detail the
annual and quarterly budget and projected cash requirements for the
Program (including administrative costs) and each Project, projected
both on a commitment and cash requirement basis.
Disbursement Agreement is a Supplemental Agreement that MCC, the
Government (or a mutually acceptable Government Affiliate) and MCA-
Armenia shall enter into that (i) further specifies the terms and
conditions of any MCC Disbursements and Re-Disbursements, (ii) is in a
form and substance mutually satisfactory to the Parties, and (iii) is
signed by the Principal Representative of each Party (or in the case of
the Government, the principal representative of the applicable
Government Affiliate) and of MCA-Armenia.
EMPs means environmental management plans.
Entry into Force means the entry into force of this Compact, which
shall be on the date of the last letter in an exchange of letters
between the Principal Representatives of each Party confirming that all
conditions set forth in Section 4.1 have been satisfied by the
Government and MCC.
Environmental Guidelines means the environmental guidelines
delivered by MCC to the Government or posted by MCC on its Web site or
otherwise publicly made available, as such guidelines may be amended
from time to time.
Environmental Observer is a representative of an environmentally
focused NGO appointed by the Stakeholders' Committee to serve as an
Observer on the Governing Council.
ESI Officer means the Environmental and Social Impact Officer
within the Management Unit of MCA-Armenia who will ensure that
environmental and social mitigation measures are followed for all
Project Activities in accordance with the provisions set forth in this
Compact and in relevant Supplemental Agreements.
ESIAs means environmental and social impact assessments.
Evaluation Component means the component of the M&E Plan that
specifies a methodology, process and timeline for the evaluation of
planned, ongoing, or completed Projects and Project Activities to
determine their efficiency, effectiveness, impact and sustainability.
Exempt Uses shall have the meaning set forth in Section 2.3(e)(ii).
Final Evaluation shall have the meaning set forth in Section 3(a)
of Annex III.
Financial Plan means collectively, the Multi-Year Financial Plan,
each Detailed Financial Plan and each amendment, supplement or other
change thereto.
Financial Plan Annex means Annex II of this Compact, which
summarizes the Multi-Year Financial Plan for the Program.
Fiscal Accountability Plan shall have the meaning set forth in
Section 4(c) of Annex I.
Fiscal Agent shall have the meaning set forth in Section 3(g) of
Annex I.
Fiscal Agent Agreement is an agreement between MCA-Armenia and each
Fiscal Agent, in form and substance satisfactory to MCC, that sets
forth the roles and responsibilities of the Fiscal Agent and other
appropriate terms and conditions, such as payment of the Fiscal Agent.
GDP means gross domestic product.
Governance Agreement is an agency agreement to be entered into by
the Government, MCC and MCA-Armenia, that, in addition to the Governing
Documents, sets forth the terms and conditions that govern MCA-Armenia
and as is further described in Section 3(d)(i) of Annex I.
Governing Council means an independent governing council of MCA-
Armenia to oversee MCA-Armenia's responsibilities and obligations under
this Compact.
Governing Documents shall have the meaning set forth in Section
3(c)(i)(10) of Annex I.
Government means the Government of the Republic of Armenia.
Government Affiliate is an Affiliate, ministry, bureau, department,
agency, government corporation or any other entity chartered or
established by the Government. References to Government Affiliate shall
include any of their respective directors, officers, employees,
affiliates, contractors, sub-contractors, grantees, sub-grantees,
representatives, and agents.
Government Members are the government members identified in Section
3(d)(ii)(2)(A)(i-vi) of Annex I serving as voting members on the
Governing Council, and any replacements thereof in accordance with
Section 3(d)(ii)(2)(A) of Annex I.
Government Party means the Government, any Government Affiliate,
any Permitted Designee or any of their respective directors, officers,
employees, Affiliates, contractors, sub-contractors, grantees, sub-
grantees, representatives or agents.
Government Responsibilities shall have the meaning set forth in
Section 3.2(a).
HVA means high value added.
IDP means the Irrigation Development Project of the World Bank.
IFAD means the International Fund for Agricultural Development.
Implementation Letter is a letter that may be issued by MCC from
time to time to furnish additional information or guidance to assist
the Government in the implementation of this Compact.
Implementation Plan is a detailed plan for the implementation of
the Program and each Project, which will be memorialized in one or more
documents and shall consist of: (i) A Financial Plan; (ii) a Fiscal
Accountability Plan; (iii) Procurement Plans; (iv) Program and Project
Work Plans; and (v) an M&E Plan.
Implementing Entity means a Government Affiliate, nongovernmental
organization or other public- or private-sector entity or persons to
which MCA-Armenia may provide MCC Funding to implement and carry out
the Projects or any other activities to be carried out in furtherance
of this Compact.
Implementing Entity Agreement is an agreement between MCA-Armenia
and
[[Page 19408]]
an Implementing Entity, in form and substance satisfactory to MCC, that
sets forth the roles and responsibilities of such Implementing Entity
and other appropriate terms and conditions, such as payment of the
Implementing Entity.
Indicators means the quantitative, objective and reliable data that
the M&E Plan will use to measure the results of the Program.
Infrastructure Activity is the Project Activity described in
Section 2(a) of Schedule 2 of Annex I under the Irrigated Agriculture
Project.
Inspector General means the Inspector General of the United States
Agency for International Development.
Irrigated Agriculture Objective is an Objective of this Compact to
increase the productivity of the agricultural sector by extending and
improving the quality of the irrigation system, strengthening the
entities that manage the system and enabling farmers to commercialize
their products.
Irrigated Agriculture Project means the Project described and
summarized in Schedule 2 of Annex I that the Parties intend to
implement in furtherance of the Irrigated Agriculture Objective.
Irrigation PIU means the Water Sector Development and Institutional
Project Implementation Unit under the authority of the State Water
Committee that will implement the Infrastructure Activity of the
Irrigated Agriculture Project.
Lien means any lien, attachment, enforcement of judgment, pledge,
or encumbrance of any kind.
LLN means a lifeline network of roads from among the republican and
local roads in Armenia, the objective of which is to ensure that all
communities, towns and villages are linked to the main road network,
either directly or through other communities.
Local Account is an interest-bearing local currency of Armenia
account at either the Central Bank of Armenia or at a commercial bank
that is procured through a competitive process to which the Fiscal
Agent may authorize transfers from any U.S. Dollar Permitted Account
for the purpose of making Re-Disbursements payable in local currency.
M&E Annex means Annex III of this Compact, which generally
describes the components of the M&E Plan for the Program.
M&E Plan means the plan to measure and evaluate progress toward
achievement of the Compact Goal and Objectives of this Compact.
Management Unit means the management unit of MCA-Armenia that will
have overall management responsibility for the implementation of this
Compact.
Material Agreement shall have the meaning set forth in Section
3(c)(i)(3) of Annex I.
Material Re-Disbursement means any Re-Disbursement that requires
MCC approval under applicable law, the Governing Documents, the
Procurement Agreement, Procurement Guidelines, or any Supplemental
Agreement.
Material Terms of Reference means any terms of reference for the
procurement of goods, services or works that require MCC approval under
applicable law, the Governing Documents, the Procurement Agreement,
Procurement Guidelines, or any Supplemental Agreement.
MCA means the Millennium Challenge Account.
MCA-Armenia shall have the meaning set forth in the Recitals.
MCA-Armenia Web site means the Web site operated by MCA-Armenia.
MCA Eligibility Criteria means the MCA selection criteria and
methodology published by MCC pursuant to section 607 of the Act from
time to time.
MCC means the Millennium Challenge Corporation.
MCC Disbursement means the disbursement of MCC Funding by MCC from
time to time to a Permitted Account or through such other mechanism
agreed by the Parties as defined in and in accordance with Section
2.1(b)(i) of this Compact.
MCC Disbursement Request means the applicable request that the
Government and MCA-Armenia will jointly submit for an MCC Disbursement
as may be specified in the Disbursement Agreement.
MCC Funding shall have the meaning set forth in Section 2.1(a).
MCC Indemnified Party means MCC and any officer, director,
employee, Affiliate, contractor, agent or representative of MCC.
MCC Representative is a representative appointed by MCC to serve as
an Observer on the Governing Council.
Monitoring Component means the component of the M&E Plan that
specifies how progress toward the Objectives and intermediate results
of each Project and Project Activity set forth in the M&E Annex will be
monitored.
MoTC means the Ministry of Transport and Communications.
Multi-Year Financial Plan means the multi-year financial plan for
the Program and for each Project, which is summarized in Annex II.
Multi-Year Financial Plan Summary means a multi-year Financial plan
summary attached to this Compact as Exhibit A of Annex II.
NGOs means non-governmental organizations.
Objective(s) are the following project-level objectives of this
Compact that have been identified by the Parties, each of which is (i)
key to advancing the Compact Goal and (ii) described in more detail in
the Annexes attached hereto: (a) The Rural Road Rehabilitation
Objective and (b) the Irrigated Agriculture Objective.
Objective Indicator means the Indicator for each Objective in the
M&E Plan that will measure the final results of the Projects to monitor
their success in meeting each of the Objectives. A table of Objective
Indicator definitions is set forth at Section 2(a)(ii) of Annex III.
Observers means the non-voting observers of the Governing Council
described in Section 3(d)(ii)(2) of Annex I.
Outcome Indicator means the Indicator in the M&E Plan that will
measure the intermediate results achieved under each of the Project
Activities to provide an early measure of the likely impact of the
Project Activities. A table of Outcome Indicator definitions is set
forth at Section 2(a)(ii) of Annex III.
Outcomes is the progress made toward the Objectives and the
intermediate results of each Project and Project Activity.
Output Indicator means the Indicator in the M&E Plan to measure the
direct outputs of the Project Activities.
Outside Project Manager means the qualified persons or entities
engaged by MCA-Armenia, to serve as outside project managers in
accordance with Section 3(f) of Annex I.
Parties means the United States, acting through MCC, and the
Government.
Party means (i) the United States, acting through MCC or (ii) the
Government.
Permitted Account(s) shall have the meaning set forth in Section
4(d) of Annex I.
Permitted Designee shall have the meaning set forth in Section
3.2(c).
Pledge means any pledge of any MCC Funding or any Program Assets,
or any guarantee (directly or indirectly) of any indebtedness.
Principal Representative means (i) for the Government, the
individual holding the position of, or acting as, the Minister of
Finance and Economy, and (ii) for MCC, the individual holding the
position of, or acting as, the Vice President of Operations.
[[Page 19409]]
Procurement Agent(s) are the procurement agents that MCA-Armenia
will engage to carry out and/or certify specified procurement
activities in furtherance of this Compact on behalf of the Government,
MCA-Armenia, any Outside Project Manager or Implementing Entity.
Procurement Agent Agreement is an agreement between MCA-Armenia and
each Procurement Agent, in form and substance satisfactory to MCC, that
sets forth the roles and responsibilities of the Procurement Agent with
respect to the conduct, monitoring and review of procurements and other
appropriate terms and conditions, such as payment of the Procurement
Agent.
Procurement Agreement is a Supplemental Agreement between the
Government (and/or a mutually acceptable Government Affiliate such as
MCA-Armenia) and MCC, which includes the Procurement Guidelines, and
governs the procurement of all goods, services and works by the
Government or any Provider in furtherance of this Compact.
Procurement Guidelines shall have the meaning set forth in Section
3.6(a).
Procurement Plan means a procurement plan adopted by MCA-Armenia,
which forecasts the upcoming six month procurement activities and be
updated every six months.
Program means the program to be implemented under this Compact
using MCC Funding to advance Armenia's progress towards economic growth
and poverty reduction.
Program Annex means Annex I to this Compact, which generally
describes the Program that MCC Funding will support in Armenia during
the Compact Term and the results to be achieved from the investment of
MCC Funding.
Program Assets means (i) MCC Funding, (ii) Accrued Interest, or
(iii) any assets, goods, or property (real, tangible, or intangible)
purchased or financed in whole or in part by MCC Funding.
Project(s) are the specific projects and the policy reforms and
other activities related thereto that the Government will carry out, or
cause to be carried out in furtherance of this Compact to achieve the
Objectives and the Compact Goal, specifically the Rural Road
Rehabilitation Project and the Irrigated Agriculture Project.
Project Activity means the activities that will be undertaken in
furtherance of each Project.
Proposal is the proposal for use of MCA assistance submitted to MCC
by the Government on March 28, 2005.
Provider shall have the meaning set forth in Section 2.4(b).
Re-Disbursement is the release of MCC Funding from a Permitted
Account.
Reviewer shall have the meaning set forth in Section 3(h) of Annex
I.
Rural Road Rehabilitation Objective is an Objective of this Compact
to expand the access of rural communities to agricultural markets, non-
farm income opportunities and social infrastructure by improving the
condition of rural roads.
Rural Road Rehabilitation Project means the Project described and
summarized in Schedule 1 of Annex I that the Parties intend to
implement in furtherance of the Rural Road Rehabilitation Objective.
Stakeholders' Committee is a committee that shall be representative
of the various beneficiaries of the Program and as is further described
in Section 3(d)(iv)(1) of Annex I.
Supplemental Agreement shall have the meaning set forth in Section
3.5(b).
Supplemental Agreement between the Parties means any agreement
between MCC on the one hand, and the Government or any Government
Affiliate or Permitted Designee on the other hand.
Supplemental Agreement Term Sheets shall have the meaning set forth
in Section 4.1(b).
Target means each Indicator will have one or more expected results
that specify the expected value and the expected time by which that
result will be achieved.
Tax(es) shall have the meaning set forth in Section 2.3(e)(i).
USAID means the United States Agency for International Development.
USDA means the United States Department of Agriculture.
United States Dollars or U.S. Dollars (USD) means the currency of
the United States of America.
United States Government means any branch, agency, bureau,
government corporation, government chartered entity or other body of
the Federal government of the United States.
VAT means value-added taxes.
Voting Members are the voting members on the Governing Council as
described in Section 3(d)(ii)(2) of Annex I.
Water-to-Market Activity is the Project Activity described in
Section 2(b) of Schedule 2 of Annex I under the Irrigated Agriculture
Project.
Work Plans means work plans for the overall administration of the
Program and for each Project.
WSA means the national Water Supply Agency.
WUAs means Water User Associations.
Exhibit B--List of Certain Supplemental Agreements
1. Governance Agreement.
2. Fiscal Agent Agreement.
3. Implementing Entity Agreements.
4. Bank Agreement.
Schedule 2.1(a)(iii)--Description of Compact Implementation Funding
Compact Implementation Funding
The Compact Implementation Funding provided pursuant to Section
2.1(a)(iii) shall support the following activities and expenditures in
an amount not to exceed the amounts specified below:
(a) Payments for reasonable and normal staff salaries and
administrative expenses of MCA-Armenia (or mutually acceptable
Government Affiliate) such as rent, computers, and other information
technology equipment, in an amount not to exceed USD $500,000; * and
(b) Conduct fiscal and procurement administration activities, in an
amount not to exceed USD $500,000.*
[* Note:
Notwithstanding the amount specified for this activity or
payment, the total amount of funds disbursed in accordance with
Section 2.1(a)(iii) shall not exceed the amount set forth in Section
2.1(a)(iii).]
Annex I--Program Description
This Annex I to the Compact (the ``Program Annex'') generally
describes the Program that MCC Funding will support in Armenia during
the Compact Term and the results to be achieved from the investment of
MCC Funding. Prior to any MCC Disbursement or Re-Disbursement,
including for the Projects described herein, MCC, the Government (or a
mutually acceptable Government Affiliate) and MCA-Armenia shall enter
into a Supplemental Agreement that (i) further specifies the terms and
conditions of such MCC Disbursements and Re-Disbursements, (ii) is in a
form and substance mutually satisfactory to the Parties, and (iii) is
signed by the Principal Representative of each Party (or in the case of
the Government, the principal representative of the applicable
Government Affiliate) and of MCA-Armenia (the ``Disbursement
Agreement'').
Except as specifically provided herein, the Parties may amend this
Program Annex only by written agreement signed by the Principal
Representative of each Party. Except as defined in this Program Annex,
each capitalized term in this Program Annex shall have the same meaning
given such term elsewhere in this Compact. Unless otherwise expressly
stated, each Section
[[Page 19410]]
reference herein is to the relevant Section of the main body of the
Compact.
1. Background; Consultative Process
(a) Background. Economic development in Armenia suffered a severe
setback in the early 1990s following the collapse of the Soviet Union.
In 1994, Armenia adopted a comprehensive stabilization and reform
program that transformed it into a liberal market economy and launched
a period of uninterrupted growth with an average increase of eight
percent of gross domestic product (``GDP'') per year. In recent years,
the Government has continued to focus on improving the business
investment climate by pursuing macroeconomic stability, low inflation,
strong fiscal discipline, and the privatization of state-owned
enterprises.
Armenia's economic growth, however, has mainly benefited
inhabitants of the capital Yerevan and a few other cities, and poverty
remains widespread among the rural population. In 2004, per capita GDP
was estimated at USD $1,100, with 35 percent of the population
classified as poor. Data from household surveys show that the impact of
agricultural sector growth on reducing rural poverty in Armenia has
been much stronger than that of GDP growth. Consequently, specific
policies and investments aimed at promoting sustainable growth in the
agricultural sector are central to bringing about a reduction in rural
poverty.
There are two important preconditions for growth in the Armenian
agricultural sector: (i) Investment in the rural road network, which is
essential for improving access to markets and communities and (ii)
investment in irrigated agriculture to increasing productivity. Only 10
percent of Armenia's rural road network is in good condition and there
has been minimal investment in, or maintenance of, the network over the
past decade. Currently, less than ten percent of total agricultural
land is irrigated, while nearly 85 percent of total crop production is
produced with irrigation.
(b) Consultative Process. In connection with the Program, Armenia
engaged in a comprehensive consultative process based on the Poverty
Reduction Strategy Paper initiated in 2003. In the initial priority-
setting stage, the Government engaged a broad cross-section of the
public, specifically civil society and rural communities, in a
consultative process focused on MCA compact development. Issues were
addressed through a continuous process that incorporated a feedback
mechanism reaching out to stakeholders, particularly those involved in
irrigation, rural road, policy development and advocacy, and groups
that specialize in monitoring and evaluation.
The Government engaged in rounds of regional, municipal, and local
village level meetings to seek input and feedback on potential Proposal
components. Meetings were held outside of city centers with
announcements published beforehand. In addition to face-to-face
meetings, the Government utilized various forms of mass media to reach
more remote areas of Armenia, including radio and television
announcements and programs, electronic mailing lists that are managed
by non-governmental organizations (``NGOs'') throughout Armenia, and
the printing of information brochures.
The selection of the irrigation and rural roads components of the
Program also introduced new challenges that focused on issues ranging
from communal land rights and responsibilities, sustainability of the
investments and involvement of civil society in compact development and
implementation. To address concerns of the NGO community, the
Government offered to have the NGOs elect their own representatives to
participate in the meetings of the MCA-Armenia Board of Trustees--an
inter-governmental body, chaired by the Prime Minister that was
established to oversee the MCC Proposal and Compact development
process. Using existing NGO electronic mailing lists and a self-
regulated selection process, NGOs voted to select three representatives
to participate in the meetings.
The Government has created and maintains an interactive Web site
(http://www.mca.am) (the ``MCA-Armenia Web site'') that provides access
to up-to-date information and a forum page on which to post and debate
issues related to the Proposal process. The MCA-Armenia Web site also
makes publicly available the Board of Trustees meeting minutes and the
minutes of all meetings convened to discuss the Proposal.
2. Overview
(a) Program. The Program involves a series of specific and
complementary interventions that the Parties expect will achieve the
Irrigated Agriculture Objective and the Rural Road Rehabilitation
Objective and advance the progress of Armenia toward the Compact Goal.
(b) Projects. To achieve the Objectives, the Parties have
identified Projects that the Government will implement, or cause to be
implemented, using MCC Funding, each of which is described in the
Schedules to this Program Annex. The Schedules to this Program Annex
identify the activities that will be undertaken in furtherance of each
Project (each, a ``Project Activity''). Notwithstanding anything to the
contrary in this Compact, the Parties may agree to amend, terminate or
suspend these Projects or Project Activities or create a new project by
written agreement signed by the Principal Representative of each Party
without amending this Compact; provided, however, any such amendment of
a Project or Project Activity or creation of a new project is (i)
consistent with the Objectives; (ii) does not cause the amount of MCC
Funding to exceed the aggregate amount specified in Section 2.1(a) of
this Compact; (iii) does not cause the Government's responsibilities or
contribution of resources to be less than specified in Section 2.2 of
this Compact or elsewhere in this Compact; and (iv) does not extend the
Compact Term.
(c) Beneficiaries. The intended beneficiaries of each Project are
described in the respective Schedule to this Program Annex and Annex
III to the extent identified as of the date hereof. The intended
beneficiaries shall be identified more precisely during the initial
phases of the implementation of the Program. The Parties shall agree
upon the description of the intended beneficiaries of the Program,
including publishing such description on the MCA-Armenia Web site.
(d) Civil Society. Civil society will participate in overseeing the
implementation of the Program through its representation on the
Stakeholders' Committee as further described in Section 3(d)(iv) of
this Program Annex. In addition, the Work Plans for each Project shall
note the extent to which civil society will have a role in the
implementation of a particular Project Activity. Finally, members of
civil society may be recipients of training or other public awareness
programs that are related to the Project Activities.
(e) Monitoring and Evaluation. Annex III of this Compact generally
describes the plan to measure and evaluate progress toward achievement
of the Compact Goal and Objectives of this Compact (the ``M&E Plan'').
As outlined in the Disbursement Agreement and other Supplemental
Agreements, continued payment of MCC Funding under this Compact will be
contingent on successful achievement of targets set forth in the M&E
Plan.
[[Page 19411]]
3. Implementation Framework
The implementation framework and the plan for ensuring adequate
governance, oversight, management, monitoring, evaluation and fiscal
accountability for the use of MCC Funding is summarized below and in
the Schedules attached to this Program Annex, or as may otherwise be
agreed in writing by the Parties.
(a) General. The elements of the implementation framework will be
further described in relevant Supplemental Agreements and in a detailed
plan for the implementation of the Program and each Project (the
``Implementation Plan''), which will be memorialized in one or more
documents and shall consist of a Financial Plan, a Fiscal
Accountability Plan, Procurement Plans, Program and Project Work Plans,
and an M&E Plan. MCA-Armenia shall adopt each component of the
Implementation Plan in accordance with the requirements and timeframe
as may be specified in this Program Annex, the Disbursement Agreement
or as may otherwise be agreed by the Parties from time to time. MCA-
Armenia may amend the Implementation Plan or any component thereof
without amending this Compact, provided, any material amendment of the
Implementation Plan or any component thereof has been approved by MCC
and is otherwise consistent with the requirements of this Compact and
any relevant Supplemental Agreement between the Parties. By such time
as may be specified in the Disbursement Agreement or as may otherwise
be agreed by the Parties from time to time, MCA-Armenia shall adopt one
or more work plans for the overall administration of the Program and
for each Project (collectively, the ``Work Plans''). The Work Plan(s)
shall set forth the details of each activity to be undertaken or funded
by MCC Funding as well as the allocation of roles and responsibilities
for specific Project activities, or other programmatic guidelines,
performance requirements, targets, or other expectations for a Project.
(b) Government.
(i) The Government shall promptly take all necessary and
appropriate actions to carry out the Government Responsibilities under
and in furtherance of this Compact, including undertaking or pursuing
such legal, legislative or regulatory actions, procedural changes and
contractual arrangements as may be necessary or appropriate to achieve
the Objectives, to successfully implement the Program, and to establish
MCA-Armenia. The Government shall promptly deliver to MCC certified
copies of any documents, orders, decrees, laws or regulations
evidencing such legal, legislative, regulatory, procedural, contractual
or other actions.
(ii) During the Compact Term, the Government shall ensure that MCA-
Armenia is duly authorized and organized and sufficiently staffed and
empowered to fully carry out the Designated Rights and
Responsibilities. Without limiting the generality of the preceding
sentence, MCA-Armenia shall be organized, and have such roles and
responsibilities, as described in Section 3(d) of this Program Annex
and as provided in the Governance Agreement and any Governing
Documents, which shall be in a form and substance satisfactory to MCC;
provided, however, the Government may, subject to MCC approval, carry
out any of the roles and responsibilities designated to be carried out
by MCA-Armenia and described in Section 3(d) of this Program Annex or
elsewhere in this Program Annex, applicable law, the Governing
Documents, or any Supplemental Agreement prior to and during the
initial period of the establishment and staffing of MCA-Armenia, but in
no event longer than the earlier of (i) the formation of the Management
Unit and the engagement of each of the officers and (ii) six months
from the Entry into Force, unless otherwise agreed by the Parties in
writing.
(c) MCC.
(i) Notwithstanding Section 3.1 of this Compact or any provision in
this Program Annex to the contrary, and except as may be otherwise
agreed upon by the Parties from time to time, MCC must approve in
writing each of the following transactions, activities, agreements and
documents prior to the execution or carrying out of such transaction,
activity, agreement or document and prior to MCC Disbursements or Re-
Disbursements in connection therewith:
(1) MCC Disbursements;
(2) The Financial Plan and any amendments and supplements thereto;
(3) Agreements (i) between the Government and MCA-Armenia, (ii)
between the Government, MCA-Armenia or other Government Affiliate, on
the one hand, and any Provider or Affiliate of a Provider, on the other
hand, which require such MCC approval under applicable law, the
Governing Documents, the Procurement Agreement or any other
Supplemental Agreement, or (iii) in which the Government, MCA-Armenia
or other Government Affiliate appoints, hires or engages any of the
following in furtherance of this Compact:
(A) Auditor or Reviewer;
(B) Fiscal Agent;
(C) Bank;
(D) Procurement Agent;
(E) Outside Project Manager;
(F) Implementing Entity; and
(G) Director, Observer, officer and/or other key employee or
contractor of MCA-Armenia, including any compensation for such person.
(Any agreement described in clause (i) through (iii) of this Section
3(c)(i)(3) and any amendments and supplements thereto, each, a
``Material Agreement'');
(4) Any modification, termination or suspension of a Material
Agreement, or any action that would have the effect of such a
modification, termination or suspension of a Material Agreement;
(5) Any agreement that is (i) not at arm's length or (ii) with a
party related to the Government, including MCA-Armenia, or any of their
respective Affiliates;
(6) Any Re-Disbursement (each, a ``Material Re-Disbursement'') that
requires such MCC approval under applicable law, the Governing
Documents, the Procurement Agreement, Procurement Guidelines or any
Supplemental Agreement;
(7) Terms of reference for the procurement of goods, services or
works that require such MCC approval under applicable law, the
Governing Documents, the Procurement Agreement, Procurement Guidelines
or any Supplemental Agreement (each, a ``Material Terms of
Reference'');
(8) The Implementation Plan, including each component plan thereto,
and any material amendments and supplements to the Implementation Plan
or any component thereto;
(9) Any pledge of any MCC Funding or any Program Assets or any
guarantee (directly or indirectly) of any indebtedness (each, a
``Pledge'');
(10) Any decree, legislation, contractual arrangement or other
document establishing or governing MCA-Armenia, including the
Governance Agreement and the charter of MCA-Armenia (the ``Governing
Documents''), and any disposition (in whole or in part), liquidation,
dissolution, winding up, reorganization or other change of (A) MCA-
Armenia, including any revocation or modification of, or supplement to,
any Governing Document, or (B) any subsidiary or Affiliate of MCA-
Armenia;
(11) Any change in character or location of any Permitted Account;
(12) Formation or acquisition of any subsidiary (direct or
indirect) or other Affiliate of MCA-Armenia;
[[Page 19412]]
(13) Any (A) change of a Director, Observer, officer or other key
employee or contractor of MCA-Armenia, or in the composition of the
Governing Council, including approval of the nominee for Chair, or (B)
filling of any vacant seat of the Chair, a Director or an Observer or
vacant position of an officer or other key employee or contractor of
MCA-Armenia;
(14) The management information system to be developed and
maintained by the Management Unit of MCA-Armenia, and any material
modifications to such system;
(15) Any decision to amend, supplement, replace, terminate or
otherwise change any of the foregoing; and
(16) Any other activity, agreement, document or transaction
requiring the approval of MCC in this Compact, applicable law, the
Governing Documents, the Procurement Agreement, Procurement Guidelines,
the Disbursement Agreement, or any other Supplemental Agreement between
the Parties.
The Chair of the Governing Council (the ``Chair'') and/or the Chief
Executive Officer of MCA-Armenia (the ``Chief Executive Officer'') or
other designated officer, as provided in applicable law and the
Governing Documents, shall certify any documents or reports delivered
to MCC in satisfaction of the Government's reporting requirements under
this Compact or any Supplemental Agreement between the Parties (the
``Compact Reports'').
(ii) MCC shall have the authority to exercise its approval rights
set forth in this Section 3(c) in its sole discretion and independent
of any participation or position taken by the MCC Representative at a
meeting of the Governing Council. MCC retains the right to revoke its
approval of a matter if MCC concludes that its approval was issued on
the basis of incomplete, inaccurate or misleading information furnished
by the Government or MCA-Armenia.
(d) MCA-Armenia.
(i) General. Unless otherwise agreed by the Parties in writing,
MCA-Armenia shall be responsible for the oversight and management of
the implementation of this Compact. MCA-Armenia shall be governed by
the Governing Documents, including the terms and conditions set forth
in an agency agreement to be entered into by the Government, MCC and
MCA-Armenia (the ``Governance Agreement'') on or before the Entry into
Force, and based on the following principles:
(1) The Government shall ensure that MCA-Armenia shall not assign,
delegate or contract any of the Designated Rights and Responsibilities
without the prior written consent of the Government and MCC. MCA-
Armenia shall not establish any Affiliates or subsidiaries (direct or
indirect) without the prior written consent of the Government and MCC;
and
(2) Unless otherwise agreed by the Parties in writing, MCA-Armenia
shall consist of (a) an independent governing council (the ``Governing
Council'') to oversee MCA-Armenia's responsibilities and obligations
under this Compact (including any Designated Rights and
Responsibilities) and (b) a management unit (the ``Management Unit'')
to have overall management responsibility for the implementation of
this Compact.
(ii) Governing Council.
(1) Formation. The Government shall ensure that the Governing
Council shall be formed, constituted, governed, maintained and operated
in accordance with applicable law and the terms and conditions set
forth in this Section 3(d), the Governing Documents and relevant
Supplemental Agreements.
(2) Composition. Unless otherwise agreed by the Parties in writing,
the Governing Council shall consist of eleven (11) voting members (the
``Voting Members'') and two non-voting observers (the ``Observers''),
each of whom must be acceptable to MCC, taking into consideration
appropriate gender and ethnic representation.
(A) The Voting Members shall be as follows, provided, that the
members identified in subsections (i)-(vi) below (the ``Government
Members'') may be replaced by another government official of comparable
rank from a ministry or other government body relevant to the Program
activities, subject to approval by the Government and MCC (such
replacement to be referred to thereafter as a Government Member):
(i) Prime Minister;
(ii) Chief Economic Advisor to the President;
(iii) Minister of Finance and Economy;
(iv) Minister of Transport and Communication;
(v) Minister of Agriculture;
(vi) Minister of Territorial Administration; and
(vii) Five (5) members of civil society appointed by the
Stakeholders' Committee (the ``Civil Society Members'').
The following provisions apply to the Voting Members:
(a) Each Government Member may be replaced by another government
official, subject to approval by the Government and MCC;
(b) Subject to the Governing Documents, the Parties contemplate
that the Prime Minister shall initially fill the seat of Chair;
(c) Each Government Member position shall be filled by the
individual then holding the office identified and such individuals
shall serve in their capacity as the applicable Government official and
not in their personal capacity. In the event that a Government Member
is unable to participate in a meeting of the Governing Council such
member's principal deputy or equivalent may participate in the member's
stead; and
(d) Each Civil Society Member may appoint an alternate, approved by
majority vote of the other Civil Society Members, to serve when he or
she is unable to participate in a meeting of the Governing Council.
(B) The Observers shall be:
(i) A representative appointed by MCC (the ``MCC Representative'');
and
(ii) A representative of an environmentally focused NGO appointed
by the Stakeholders' Committee (the ``Environmental Observer'');
provided, that if one of the Civil Society Members on the Governing
Council already represents an environmentally focused NGO, then such
Civil Society Member shall also act as the Environmental Observer. The
initial Environmental Observer shall serve for a period of one year
from the date of the first Governing Council meeting after the Entry
into Force, and on each anniversary thereof, the Stakeholders'
Committee shall appoint another representative to serve as the
Environmental Observer for the subsequent year. The Stakeholders'
Committee may nominate an alternate to attend one or more meetings of
the Governing Council in the event that the Environmental Observer is
unable to attend.
The Observers shall have the right to attend all meetings of the
Governing Council, participate in discussions of the Governing Council,
and receive all information and documents provided to the Governing
Council, together with any other rights of access to records, employees
or facilities as would be granted to a member of the Governing Council
under the Governance Agreement and any Governing Document.
(3) Voting. Unless otherwise agreed by the Parties, the Governing
Documents of MCA-Armenia shall include voting and quorum provisions so
as to require participation by the Civil Society Members in all
decisions of the Governing Council.
(4) Roles and Responsibilities.
[[Page 19413]]
(A) The Governing Council shall oversee the overall implementation
of the Program and the performance of the Designated Rights and
Responsibilities.
(B) Certain actions may be taken, and certain agreements and other
documents may be executed and delivered, by MCA-Armenia only upon the
approval and authorization of the Governing Council as provided under
applicable law and in the Governing Documents, including each MCC
Disbursement Request, selection or termination of certain Providers,
any component of the Implementation Plan, certain Re-Disbursements and
certain terms of reference.
(C) The Chair shall certify the approval by the Governing Council
of all Compact Reports or any other documents or reports from time to
time delivered to MCC by MCA-Armenia (whether or not such documents or
reports are required to be delivered to MCC), and that such documents
or reports are true, accurate and complete.
(D) Without limiting the generality of the Designated Rights and
Responsibilities, and subject to MCC's contractual rights of approval
as set forth in Section 3(c) of this Program Annex or elsewhere in this
Compact or any relevant Supplemental Agreement, the Governing Council
shall have the exclusive authority for all actions defined for the
Governing Council under applicable law and in the Governing Documents
and which are expressly designated therein as responsibilities that
cannot be delegated further.
(5) Meetings. The Governing Council shall hold at least quarterly
meetings as well as such other periodic meetings or subcommittee
meetings as may be necessary from time to time.
(6) Indemnification of Civil Society Members; MCC Representative.
The Government shall ensure, at the Government's sole cost and expense,
that appropriate insurance is obtained and appropriate indemnifications
and protections are provided, acceptable to MCC, to ensure that Civil
Society Members shall not be held personally liable for the actions or
omissions of the Governing Council. Pursuant to Section 5.5 and Section
5.8 of this Compact, the Government and MCA-Armenia shall hold harmless
the MCC Representative and the Environmental Observer for any liability
or action arising out of their roles as non-voting Observers on the
Governing Council. The Government hereby waives and releases all claims
related to any such liability. In matters arising under or relating to
the Compact, the MCC Representative is not subject to the jurisdiction
of the courts or other body of Armenia.
(iii) Management Unit. Unless otherwise agreed in writing by the
Parties, the Management Unit shall report, through the Chief Executive
Officer or other officer as designated in the Governing Documents,
directly to the Governing Council, and shall have the composition,
roles and responsibilities described below and set forth more
particularly in the Governing Documents.
(1) Composition. The Government shall ensure that the Management
Unit shall be composed of qualified experts from the public or private
sectors, including such officers and staff as may be necessary to carry
out effectively its responsibilities, each with such powers and
responsibilities as set forth in the Governance Agreement, any
Governing Document, and from time to time in any Supplemental Agreement
between the Parties, including without limitation the following: (i) A
Chief Executive Officer, (ii) a chief financial officer, (iii) a
monitoring and evaluation officer, (iv) an environment and social
impact officer, (v) a rural roads project officer, (vi) an irrigation
project officer, (vii) a water-to-market project officer and (viii) a
procurement officer. The Management Unit will be supported by an office
manager and appropriate administrative and support personnel.
(2) Appointment of Management Unit. Unless otherwise specified in
the Governance Agreement or any Governing Documents, the Governing
Council shall appoint the Chief Executive Officer after an open and
competitive recruitment and selection process, which appointment shall
be subject to the approval of MCC. The remaining officers of the
Management Unit shall be appointed by the Chief Executive Officer after
an open and competitive recruitment and selection process, which
appointments shall be subject to the approval of the Governing Council
and MCC.
(3) Roles and Responsibilities.
(A) The Management Unit shall assist the Governing Council in
overseeing the implementation of the Program and shall have principal
responsibility (subject to the direction and oversight of the Governing
Council and subject to MCC's rights of approval as set forth in Section
3(c) of this Program Annex or elsewhere in this Compact or any relevant
Supplemental Agreement) for the overall management of the
implementation of the Program.
(B) The Management Unit shall report to and meet with, on a
quarterly basis, the Stakeholders' Committee, and shall include a
report on the feedback provided by the Stakeholders' Committee and the
ways in which that feedback has informed the activities of MCA-Armenia
in the next following quarterly report to the Governing Council.
(C) Without limiting the foregoing general responsibilities or the
generality of Designated Rights and Responsibilities that the
Government may designate to MCA-Armenia, the Management Unit shall
develop the components of the Implementation Plan, oversee the
implementation of the Projects, manage and coordinate monitoring and
evaluation, maintain internal accounting records, conduct and oversee
certain procurements, and such other responsibilities as set out in the
Governing Documents or delegated to the Management Unit by the
Governing Council from time to time.
(D) Subject to the provisions of this Compact, the Procurement
Agreement and the Governing Documents, appropriate officers of the
Management Unit shall have the authority to contract on behalf of MCA-
Armenia.
(E) The Management Unit shall have the obligation and right to
approve certain actions and documents or agreements, including certain
Re-Disbursements, certain human resources decisions, and certain
procurement actions, as provided in the Governing Documents. The
Management Unit shall also prepare MCC Disbursement Requests and
Compact Reports for approval by the Governing Council.
(iv) Stakeholders' Committee.
(1) Formation. The Government shall ensure the establishment of a
stakeholders' committee (the ``Stakeholders' Committee'') that shall be
representative of the various beneficiaries of the Program. Unless
otherwise agreed by the Parties, the Government shall invite members of
the NGO community, representatives of the WUAs and farmer groups to
participate in national and regional forums to elect the Stakeholders'
Committee. The Government will provide adequate notice of such forums
to ensure widespread participation. Initially, the Stakeholders'
Committee will consist of eleven (11) members, taking into
consideration appropriate gender and ethnic representation. The number
of members of the Stakeholders' Committee may be increased, but in no
event to more than fifteen (15) members, upon the majority vote of the
then existing members and the vacancies created by such increase shall
be filled by the majority vote of the then existing members, subject to
the approval of MCA-Armenia and MCC. Each Stakeholders' Committee
member may
[[Page 19414]]
appoint an alternate, approved by majority vote of the other members,
to serve when he or she is unable to participate in a meeting of the
Stakeholders' Committee.
(2) Roles and Responsibilities.
(A) The Stakeholders' Committee shall be a mechanism to provide
representatives of the private sector, civil society and local and
regional communities the opportunity to provide advice and input to
MCA-Armenia regarding the implementation of the Compact.
(B) During quarterly meetings of the Stakeholders' Committee, the
Management Unit shall present an update on the implementation of this
Compact and progress towards achievement of the Objectives. The
Management Unit shall provide copies of the M&E Plan, the
Implementation Plan, and reports on the Projects and Project
Activities. The Stakeholders' Committee will have an opportunity to
regularly provide to the Chief Executive Officer and to the Governing
Council its views and recommendations. The Governing Council may, in
response to the Stakeholders' Committee, require the Management Unit to
provide such other information and documents as the Governing Council
deems advisable.
(C) The Management Unit shall include in its quarterly reports to
the Governing Council, a report on the Stakeholders' Committee meetings
that occurred during the period covered by such report.
(D) The Stakeholders' Committee shall appoint one of their members
to be the secretary to, among other things, take official minutes of
the meetings of the Stakeholders' Committee.
(3) Meetings. The Stakeholders' Committee shall hold quarterly
meetings of the full Stakeholders' Committee as well as such other
periodic meetings of the Stakeholders' Committee or subcommittees
thereof designated along sectoral, regional, or other lines, as may be
necessary or appropriate from time to time.
(4) Accessibility; Transparency. Stakeholders' Committee members
will be accessible to the beneficiaries they represent to receive the
beneficiaries' comments or suggestions regarding the Program. The
minutes of all meetings of the Stakeholders' Committee and any
subcommittees shall be made public on the MCA-Armenia Web site in a
timely manner.
(e) Implementing Entities. Subject to the terms and conditions of
this Compact and any other Supplemental Agreement between the Parties,
MCA-Armenia may provide MCC Funding, to one or more Government
Affiliates or to one or more nongovernmental or other public- or
private-sector entities or persons to implement and carry out the
Projects or any other activities to be carried out in furtherance of
this Compact (each, an ``Implementing Entity''). The Government shall
ensure that MCA-Armenia enters into an agreement with each Implementing
Entity, in form and substance satisfactory to MCC, that sets forth the
roles and responsibilities of such Implementing Entity and other
appropriate terms and conditions, such as payment of the Implementing
Entity (the ``Implementing Entity Agreement''). An Implementing Entity
shall report directly toMCA-Armenia as designated in the applicable
Implementing Entity Agreement or as otherwise agreed by the Parties.
(f) Outside Project Manager.MCA-Armenia shall have the authority to
engage qualified persons or entities to serve as outside project
managers (each, an ``Outside Project Manager'') in the event that it is
advisable to do so for the proper and efficient day-to-day management
of a Project; provided, however, that the appointment or engagement of
any Outside Project Manager after a competitive selection process shall
be subject to approval by the Governing Council and MCC prior to such
appointment or engagement. Upon Governing Council approval,MCA-Armenia
may delegate, assign, or contract to the Outside Project Managers such
duties and responsibilities as it deems appropriate with respect to the
management of the Implementing Entities and the implementation of the
specific Projects; and provided, further, that the Management Unit
shall remain accountable for those duties and responsibilities and all
reports delivered by the Outside Project Manager notwithstanding any
such delegation, assignment or contract and the Outside Project Manager
shall be subject to the oversight of the Fiscal Agent and Procurement
Agent. The Governing Council may determine that it is advisable to
engage one or more Outside Project Managers and instructMCA-Armenia
and, where appropriate, a Procurement Agent to commence and conduct the
competitive selection process for such Outside Project Manager.
(g) Fiscal Agent. The Government shall ensure thatMCA-Armenia
engages one or more fiscal agents (each, a ``Fiscal Agent''), who shall
be responsible for, among other things, (i) ensuring and certifying
that Re-Disbursements are properly authorized and documented in
accordance with established control procedures set forth in the
Disbursement Agreement, the Fiscal Agent Agreement and other relevant
Supplemental Agreements, (ii) instructing a Bank to make Re-
Disbursements from a Permitted Account, following applicable
certification by the Fiscal Agent, (iii) providing applicable
certifications for MCC Disbursement Requests, (iv) maintaining proper
accounting of all MCC Funding financial transactions, and (v) producing
reports on MCC Disbursements and Re-Disbursements (including any
requests therefore) in accordance with established procedures set forth
in the Disbursement Agreement, the Fiscal Agent Agreement or any other
relevant Supplemental Agreements. Upon the written request of MCC, the
Government shall ensure thatMCA-Armenia terminates a Fiscal Agent,
without any liability to MCC, and the Government shall ensure thatMCA-
Armenia engages a new Fiscal Agent, subject to the approval by the
Governing Council and MCC. The Government shall ensure thatMCA-Armenia
enters into an agreement with each Fiscal Agent, in form and substance
satisfactory to MCC, that sets forth the roles and responsibilities of
the Fiscal Agent and other appropriate terms and conditions, such as
payment of the Fiscal Agent (``Fiscal Agent Agreement'').
(h) Auditors and Reviewers. The Government shall ensure thatMCA-
Armenia carries out the Government's audit responsibilities as provided
in Sections 3.8(d), (e) and (f), including engaging one or more
auditors (each, an ``Auditor'') required by Section 3.8(d). As
requested by MCC in writing from time to time, the Government shall
ensure thatMCA-Armenia shall also engage an independent (i) reviewer to
conduct reviews of performance and compliance under this Compact
pursuant to Section 3.8(f), which reviewer shall have the capacity to
(1) conduct general reviews of performance or compliance, (2) conduct
environmental and social audits, and (3) conduct data quality
assessments in accordance with the M&E Plan, as described more fully in
Annex III, and/or (ii) evaluator to assess performance as required
under the M&E Plan (each, a ``Reviewer'').MCA-Armenia shall select the
Auditor(s) or Reviewers in accordance with the Governing Documents or
relevant Supplemental Agreement. The Government shall ensure thatMCA-
Armenia enters into an agreement with each Auditor or Reviewer, in form
and substance satisfactory to MCC, that sets forth the roles and
responsibilities of the Auditor
[[Page 19415]]
or Reviewer with respect to the audit, review or evaluation, including
access rights, required form and content of the applicable audit,
review or evaluation and other appropriate terms and conditions such as
payment of the Auditor or Reviewer (the ``Auditor/Reviewer
Agreement''). In the case of a financial audit required by Section
3.8(f), such Auditor/Reviewer Agreement shall be effective no later
than 120 days prior to the end of the relevant fiscal year or other
period to be audited; provided, however, if MCC requires concurrent
audits of financial information or reviews of performance and
compliance under this Compact, then such Auditor/Reviewer Agreement
shall be effective no later than a date agreed by the Parties in
writing.
(i) Procurement Agent. If requested by MCC, the Government shall
ensure thatMCA-Armenia engages one or more procurement agents (each, a
``Procurement Agent'') to carry out and/or certify specified
procurement activities in furtherance of this Compact on behalf of the
Government,MCA-Armenia, any Outside Project Manager or Implementing
Entity. The roles and responsibilities of such Procurement Agent and
the criteria for selection of a Procurement Agent shall be as set forth
in the applicable Implementation Letter or Supplemental Agreement. The
Government shall ensure thatMCA-Armenia enters into an agreement with
the Procurement Agent, in form and substance satisfactory to MCC, that
sets forth the roles and responsibilities of the Procurement Agent with
respect to the conduct, monitoring and review of procurements and other
appropriate terms and conditions, such as payment of the Procurement
Agent (the ``Procurement Agent Agreement''). Any Procurement Agent
shall adhere to the procurement standards set forth in the Procurement
Agreement and Procurement Guidelines and ensure procurements are
consistent with the procurement plan (the ``Procurement Plan'') adopted
byMCA-Armenia, which plan shall forecast the upcoming six month
procurement activities and be updated every six months.
4. Finances and Fiscal Accountability
(a) Financial Plan.
(i) Financial Plan. The multi-year financial plan for the Program
and for each Project (the ``Multi-Year Financial Plan'') is summarized
in Annex II to this Compact.
(ii) Detailed Financial Plan. During the Compact Term, the
Government shall ensure thatMCA-Armenia delivers to MCC for approval
timely financial plans that detail the annual and quarterly budget and
projected cash requirements for the Program (including administrative
costs) and each Project, projected both on a commitment and cash
requirement basis (each a ``Detailed Financial Plan''). Each Detailed
Financial Plan shall be delivered by such time as specified in the
Disbursement Agreement or as may otherwise be agreed by the Parties.
The Multi-Year Financial Plan, each Detailed Financial Plan and each
amendment, supplement or other change thereto are collectively, the
``Financial Plan.''
(iii) Expenditures. No financial commitment involving MCC Funding
shall be made, no obligation of MCC Funding shall be incurred, and no
Re-Disbursement shall be made or MCC Disbursement Request submitted for
any activity or expenditure, unless the expense is provided for in the
Detailed Financial Plan and unless uncommitted funds exist in the
balance of the Detailed Financial Plan for the relevant period or
unless the Parties otherwise agree in writing.
(iv) Modifications to Financial Plan. Notwithstanding anything to
the contrary in this Compact,MCA-Armenia may amend or supplement the
Financial Plan or any component thereof without amending this Compact,
provided, any material amendment or supplement has been approved by MCC
and is otherwise consistent with the requirements of this Compact and
any relevant Supplemental Agreement between the Parties.
(b) Disbursement and Re-Disbursement. The Disbursement Agreement
(and disbursement schedules thereto), as amended from time to time,
shall specify the terms, conditions and procedures on which MCC
Disbursements and Re-Disbursements shall be made. The obligation of MCC
to make MCC Disbursements or approve Re-Disbursements is subject to the
fulfillment or waiver of any such terms and conditions. The Government
and MCA-Armenia shall jointly submit the applicable request for an MCC
Disbursement (the ``MCC Disbursement Request'') as may be specified in
the Disbursement Agreement. MCC will make MCC Disbursements in tranches
to a Permitted Account from time to time as provided in the
Disbursement Agreement or as may otherwise be agreed by the Parties,
subject to Program requirements and performance by the Government, MCA-
Armenia and other relevant parties in furtherance of this Compact. Re-
Disbursements will be made from time to time based on requests by an
authorized representative of the appropriate party designated for the
size and type of Re-Disbursement in accordance with the Governing
Documents and Disbursement Agreement; provided, however, unless
otherwise agreed by the Parties in writing, no Re-Disbursement shall be
made unless and until the written approvals specified herein or in the
Governing Documents and Disbursement Agreement for such Re-Disbursement
have been obtained and delivered to the Fiscal Agent.
(c) Fiscal Accountability Plan. By such time as specified in the
Disbursement Agreement or as otherwise agreed by the Parties, MCA-
Armenia shall adopt as part of the Implementation Plan a fiscal
accountability plan that identifies the principles and mechanisms to
ensure appropriate fiscal accountability for the use of MCC Funding
provided under this Compact, including the process to ensure that open,
fair, and competitive procedures will be used in a transparent manner
in the administration of grants or cooperative agreements and the
procurement of goods and services for the accomplishment of the
Objectives (the ``Fiscal Accountability Plan''). The Fiscal
Accountability Plan shall set forth, among other things, requirements
with respect to the following matters: (i) Funds control and
documentation; (ii) separation of duties and internal controls; (iii)
accounting standards and systems; (iv) content and timing of reports;
(v) policies concerning public availability of all financial
information; (vi) cash management practices; (vii) procurement and
contracting practices, including timely payment to vendors; (viii) the
role of independent auditors; and (ix) the roles of fiscal agents and
procurement agents.
(d) Permitted Accounts. The Government shall establish, or cause to
be established, such accounts (each, a ``Permitted Account,'' and
collectively ``Permitted Accounts'') as may be agreed by the Parties in
writing from time to time, including:
(i) A single, completely separate U.S. Dollar interest-bearing
account at either the Central Bank of Armenia or at a commercial bank
to receive MCC Disbursements;
(ii) If necessary, an interest-bearing local currency of Armenia
account (the ``Local Account'') at either the Central Bank of Armenia
or at a commercial bank that is procured through a competitive process
to which the Fiscal Agent may authorize transfer from any U.S. Dollar
Permitted Account for the purpose of making Re-Disbursements payable in
local currency; and
(iii) Such other interest-bearing accounts to receive MCC
Disbursements
[[Page 19416]]
in such banks as the Parties mutually agree upon in writing.
No other funds shall be commingled in a Permitted Account other
than MCC Funding and Accrued Interest thereon. All MCC Funding held in
an interest-bearing Permitted Account shall earn interest at a rate of
no less than such amount as the Parties may agree in the respective
Bank Agreement or otherwise. MCC shall have the right, among other
things, to view any Permitted Account statements and activity directly
on-line or at such other frequency as the Parties may otherwise agree.
By such time as shall be specified in the Disbursement Agreement or as
otherwise agreed by the Parties, the Government shall ensure that MCA-
Armenia enters into an agreement with each Bank, respectively,
satisfactory to MCC, that sets forth the signatory authority, access
rights, anti-money laundering and anti-terrorist financing provisions,
and other terms related to the Permitted Account, respectively (each a
``Bank Agreement''). For purposes of this Compact, any bank holding a
Permitted Account referenced in Section 4(d) of this Program Annex are
each a ``Bank'' and, are collectively referred to as the ``Banks.''
(e) Currency Exchange. The Bank shall convert MCC Funding to the
currency of the Republic of Armenia at a rate to which the Parties
mutually agree with the Bank in the Bank Agreement.
5. Transparency; Accountability
Transparency and accountability to MCC and to the beneficiaries are
important aspects of the Program and Projects. Without limiting the
generality of the foregoing, in an effort to achieve the goals of
transparency and accountability, the Government shall ensure that MCA-
Armenia:
(a) Establishes an e-mail suggestion box as well as a means for
other written comments that interested persons may use to communicate
ideas, suggestions or feedback to MCA-Armenia;
(b) Considers as a factor in its decision-making the
recommendations of the Stakeholders' Committee;
(c) Develops and maintains the MCA-Armenia Web site in a timely,
accurate and appropriately comprehensive manner, such MCA-Armenia Web
site to include postings of information and documents in English and
Armenian and other languages where relevant; and
(d) Posts on the MCA-Armenia Web site and otherwise makes publicly
available from time to time the following documents or information:
(i) The Compact and all Compact Reports;
(ii) All minutes of the meetings of the Governing Council and
Stakeholders' Committee;
(iii) The M&E Plan, as amended from time to time, along with
periodic reports on Program performance;
(iv) All Project environmental and social impact assessments
(``ESIAs'') and supporting documents;
(v) All audit reports by an Auditor and any periodic reports or
evaluations by a Reviewer;
(vi) Disbursement Agreement, as amended from time to time;
(vii) All procurement policies and procedures (including standard
documents and procurement plans) and any other documents required to be
made publicly available pursuant to the Procurement Agreement; and
(viii) A copy of any legislation and other documents related to the
formation, organization and governance of MCA-Armenia, including the
Governing Documents, and any amendments thereto.
Schedule 1 to Annex I--Rural Road Rehabilitation Project
This Schedule 1 describes and summarizes the key elements of the
rural road rehabilitation project (``Rural Road Rehabilitation
Project'') that the Parties intend to implement in furtherance of the
Rural Road Rehabilitation Objective. Additional details regarding the
implementation of the Rural Road Rehabilitation Project will be
included in the Implementation Plan and in relevant Supplemental
Agreements.
1. Background
Armenia's public road network consists of 7,703 km of roads,
including 1,561 km of main roads, 1,800 km of secondary roads (referred
to in Armenia as ``republican'' roads) and 4,342 km of local roads.
Main and republican roads are managed by the Armenian Road Directorate
(``ARD'') and local roads are managed at the regional (Marz) level.
In 2002, the World Bank financed a rural infrastructure study which
identified a lifeline network (the ``LLN'') from among the republican
and local roads. The objective was to ensure all communities, towns and
villages are linked to the main road network, either directly or
through other communities. The resulting network comprises 2703 km, of
which 759 km (28 percent) are republican roads, and 1943 km (72
percent) are local roads.
The Government is committed to bringing the entire LLN up to a
maintainable standard and ensuring sustainable maintenance of this
network. Moreover, the Government has committed to re-classifying the
entire LLN as republican roads so that they will come under the
management and maintenance responsibility of the ARD.
2. Summary of the Project
(a) Project Description. MCC Funding will be used to rehabilitate
up to 943 km of high priority LLN roads (45 percent of the LLN),
consisting of 85 road segments throughout the country and amounting to
321 km of republican roads and 622 km of local roads. All
rehabilitation works will be on existing alignments and will include
pavement rehabilitation, improvements to up to 19 bridges, drainage
facilities, and road safety features.
MCA-Armenia will select roads from among the LLN roads described
above. MCC Funding will be provided to rehabilitate selected roads
subject to the condition that each road must:
Have an economic rate of return at least equal to 12.5
percent, calculated in a manner acceptable to MCC and based on a
feasibility study and final design;
Conform to Government requirements and MCC's Environmental
Guidelines; and
Conform to the World Bank policy on Involuntary
Resettlement, where relevant.
MCC Funding will also be provided to ARD to conduct a technical
audit of its existing performance based maintenance contracts and for
technical assistance to create a long-term road maintenance strategic
plan.
The M&E Plan (described in Annex III) will set forth anticipated
results and, where appropriate, regular benchmarks that may be used to
monitor implementation progress of the Rural Road Rehabilitation
Project. Performance against these benchmarks and the overall impact of
the Rural Road Rehabilitation Project will be assessed and reported at
regular intervals to be specified in the M&E Plan or otherwise agreed
by the Parties from time to time. The Parties expect that additional
benchmarks may be identified during implementation of the Project.
Estimated amounts of MCC Funding for the Rural Road Rehabilitation
Project are identified in Annex II of this Compact. Conditions
precedent and sequencing of the Project shall be set forth in the
Disbursement Agreement or other relevant Supplemental Agreements.
(b) Project Implementation. The Rural Road Rehabilitation Project
will be implemented through the ARD, under the authority of the
Ministry of Transport and Communications (``MoTC''). ARD is responsible
for planning, design and construction of all
[[Page 19417]]
state owned roads in Armenia and is responsible for the maintenance of
all main and republican roads. It has departments for design and
tender, planning (road survey and economic evaluation), construction
and rehabilitation and routine maintenance, as well as a road safety
group and an on-site laboratory. ARD was the project implementation
unit for two World Bank projects in the last 10 years and has a trained
staff and the basic technical capacity to implement the Project. The
Government will establish a rural roads coordination unit within the
ARD, staffed with members of the former project implementation unit
established by the World Bank for its completed transportation project.
MCA-Armenia will enter into an Implementing Entity Agreement with the
ARD that will set out the terms and conditions for the use of MCC
Funding in implementing the Rural Road Rehabilitation Project.
3. Beneficiaries
The principal beneficiaries of the Rural Road Rehabilitation
Project are expected to be approximately 360,000 Armenians living in
265 rural communities connected by the rehabilitated LLN. Particular
beneficiaries include: Farmers who use the improved roads to get
products to market and to get inputs to production; users of public
transport; and other travelers.
4. Donor Coordination
The Rural Road Rehabilitation Project will complement the
rehabilitation and construction of larger roads and other rural roads
recently undertaken by other donors. In addition, MCC support to the
redefinition and management of the LLN will require collaboration and
coordination with other donors active in the road sector. Although the
World Bank's two transportation projects in Armenia, the Highway
Project and the Transport Project, are closed, the World Bank takes an
active interest in the sustainable maintenance arrangements of the
roads. Coordination will also continue with the Lincy Foundation, which
has completed several main road rehabilitation projects and is
considering additional ones. Other donors include: The Japan
International Cooperation Agency which is currently funding a landslide
survey; the Kuwait Fund, which is currently considering a request to
fund the rehabilitation of rural roads leading to places of historical
and tourist significance; and the Asian Development Bank, which is
establishing a country office in Armenia and has also expressed
interest in road sector investments.
5. Sustainability
(a) Institutional Sustainability
The Government will ensure continued institutional support of the
Project through the passage of appropriate legislation establishing the
LLN as republican roads, placing them under the operations and
maintenance jurisdiction of the ARD. The portion of the LLN to be
rehabilitated with MCC Funding represents the initial phase of the
establishment of this network and creates a commitment by the
Government to build out the rest of the LLN, as well as establish a
sustainable maintenance program for the LLN and main road network. The
Rural Road Rehabilitation Project will further help to institutionalize
performance based contracts, which were instituted by ARD in 2005 and
provide a mechanism to promote local contractors by establishing a
competitive and reliable contracting environment.
(b) Financial Sustainability
Financial sustainability is a function of the Government's
commitment to finance necessary annual road maintenance programs for
the rehabilitated roads. Currently, the Government finances
approximately USD $9 million annually of routine maintenance on the
entire road network. As rehabilitation on the LLN proceeds, additional
resources will be committed by the Government to cover routine
maintenance on the additional roads. Moreover, the Government will
establish a plan for financing periodic maintenance so as to ensure the
long term sustainability of the entire road network. In addition, the
Government agrees to fund any environmental mitigation costs associated
with the Rural Road Rehabilitation Project in excess of MCC Funding
allocated to cover such costs.
(c) Environmental and Social Sustainability
The key to ensuring environmental and social sustainability of the
Project is ongoing public consultation. The Environment and Social
Impact Officer (``ESI Officer'') within the Management Unit will ensure
that environmental and social mitigation measures are followed for all
Project Activities in accordance with the provisions set forth in this
Compact and in relevant Supplemental Agreements. The ESI Officer will
serve as the point of contact for comments and concerns of parties
affected by the implementation of all Project Activities under the
Compact and will lead the effort to find feasible resolutions to those
problems. The ESI Officer will convene periodic public meetings to
provide implementation updates and to identify and address public
concerns. The Stakeholders' Committee will also appoint representatives
of civil society to the Governing Council and provide a link between
local NGOs and program managers. Environmental and social analyses of
the roads will be conducted as part of the technical survey and design
to determine the environmental impacts and existence of economic and
physical displacement. In addition to the analyses, environmental
management plans (``EMPs'') satisfactory to MCC will be developed,
implemented and monitored during project implementation. Disbursement
of MCC Funding will be contingent upon issuance of environmental
licenses, as needed, or any other required permits.
6. Policy, Legal and Regulatory Reforms
The Parties have identified the following policy, legal and
regulatory reforms and actions that the Government will pursue in
support of the Rural Road Rehabilitation Project to reach its full
benefits. Satisfactory implementation of these reforms may be
conditions precedent to certain MCC Disbursements as provided in the
Disbursement Agreement:
(a) The Government will define and adopt into legislation the
concept of a LLN of no less than 2,703 km of roads. LLN roads are to be
defined as those which ensure road access from each community to the
main road network. LLN roads should be classified as republican roads
so that the maintenance of the LLN falls under the jurisdiction of the
ARD.
(b) The Government will present an annual plan for the repair and
routine maintenance of the entire LLN, acceptable to MCC, including the
roads to be rehabilitated with MCC Funding.
(c) The Government will allocate sufficient funds in the budget for
continued rehabilitation of a minimum of 532 km of the LLN over the
Compact Term, with the following minimum annual km and threshold
expenditure amounts (actual budgeted in Armenian Drams (``AMD'')):
(i) Fiscal year 2006: 32 km; 1.01 billion AMD;
(ii) Fiscal year 2007: 100 km; 3.15 billion AMD;
(iii) Fiscal year 2008: 100 km; 3.31 billion AMD;
(iv) Fiscal year 2009: 120 km; 3.97 billion AMD; and
[[Page 19418]]
(v) Fiscal year 2010: 180 km; 5.95 billion AMD.
(d) The Government will allocate funds in the budget for routine
maintenance of the entire Armenian road network in amounts at least
equal to the amounts set out below for the following fiscal years, will
expend such amounts for their intended purpose, and will make up any
budget shortfall from the prior year's road maintenance budget:
(i) Fiscal year 2006: 5.02 billion AMD;
(ii) Fiscal year 2007: 5.99 billion AMD;
(iii) Fiscal year 2008: 6.29 billion AMD;
(iv) Fiscal year 2009: 6.90 billion AMD; and
(v) Fiscal year 2010: 7.36 billion AMD.
(e) The Government will submit a long-term routine and periodic
maintenance plan for the entire road network by the end of the third
year of the Compact Term.
Schedule 2 to Annex I--Irrigated Agriculture Project
This Schedule 2 describes and summarizes the key elements of the
irrigated agriculture project that the Parties intend to implement in
furtherance of the Irrigated Agriculture Objective (the ``Irrigated
Agriculture Project''). Additional details regarding the implementation
of the Irrigated Agriculture Project will be included in the
Implementation Plan and in relevant Supplemental Agreements.
1. Background
Armenian agricultural productivity and profitability are
constrained by dilapidated irrigated infrastructure and an outdated
system characterized by water losses, inefficient operations and high
costs of electric pumping. Farmers operate on small plots of land and
are limited by an underdeveloped market economy. In addition,
agriculture lending in Armenia is at a very low level. Despite this, a
reformed institutional environment for modern irrigation management and
agribusiness development is emerging at a critical juncture in the
post-Soviet era. The Irrigated Agriculture Project will address the
conditions necessary to achieve higher rural incomes based on irrigated
agriculture. It includes infrastructure improvements on targeted
irrigation schemes, as well as technical support and training for key
actors in the irrigation sector, namely: The national Water Supply
Agency (the ``WSA''), the Water User Associations (the ``WUAs''),
federations of WUAs and their member farmers. In addition, the Project
will provide medium and long-term lending to farmers and enterprises
participating in the Project through registered credit organizations.
2. Summary of the Project and Project Activities
The Irrigated Agriculture Project addresses the physical,
managerial and financial investments needed to generate sustainable
increases in rural incomes through irrigated agriculture. These
investments will be implemented through two critical activities:
Improving dilapidated infrastructure to expand the land
area under irrigated production and improvements to the overall
efficiency of sourcing and delivering water to member farmers (the
``Infrastructure Activity''); and
Building the management capacities of the WSA and WUAs and
providing training and access to credit for member farmers to
transition to more profitable, market-oriented agriculture (the
``Water-to-Market Activity'').
The M&E Plan (described in Annex III) will set forth anticipated
results and, where appropriate, regular benchmarks that may be used to
monitor implementation progress. Performance against these benchmarks
and the overall impact of the Irrigated Agriculture Project will be
assessed and reported at the intervals to be specified in the M&E Plan
or as otherwise agreed by the Parties from time to time. The Parties
expect that additional benchmarks may be identified during the
implementation of each Project Activity. Estimated amounts of MCC
Funding for each Project Activity for this Irrigated Agriculture
Project are identified in Annex II of this Compact. Conditions
precedent to each Irrigated Agriculture Project Activity and sequencing
of these Project Activities shall be set forth in the Disbursement
Agreement or other relevant Supplemental Agreements.
(a) Infrastructure Activity.
(i) MCC Funding will be used to increase the land area under
irrigated production and improve the overall efficiency of sourcing and
water delivery to member farmers. This will be done by selectively:
(1) Rehabilitating infrastructure and equipment for up to 21
regional irrigation schemes, including:
(A) Conversion of part or all of 15 schemes from pump to gravity
systems;
(B) Construction or rehabilitation of 7 reservoirs;
(C) Rehabilitation of 200 km of main canals;
(D) Renovation and resizing of 68 pumping stations; and
(E) Rehabilitation of tertiary canals utilizing a 15 percent
beneficiary co-investment;
(2) Rehabilitating additional tertiary canal systems in up to nine
WUAs utilizing a 15 percent beneficiary co-investment and not included
in clause (i)(1)(E) above; and
(3) Renovating the drainage system serving the Ararat Valley
production systems, including renovating open and closed drains, tube
wells and artesian wells within 3 sub-regions.MCA-Armenia will select
individual components or groups of components from among the foregoing
irrigation schemes for rehabilitation. MCC Funding will be provided to
rehabilitate such components, subject to the condition that each
individual component or group of components must:
Have an economic rate of return at least equal to 12.5
percent, calculated in a manner acceptable to MCC and based on a
feasibility study and final design;
Conform to Government regulations and MCC's Environmental
Guidelines; and
Conform to the World Bank policy on Involuntary
Resettlement, where relevant.
(ii) The Infrastructure Activity will be implemented through the
Water Sector Development and Institutional Project Implementation Unit
under the authority of the State Water Committee (the ``Irrigation
PIU''). Originally established for the World Bank's irrigation
projects, the Irrigation PIU has a trained staff and the basic
technical capacity to implement the Infrastructure Activity. MCC
Funding will be used to recruit an outside project management advisor
to assist the Irrigation PIU. MCA-Armenia will enter into an
Implementing Entity Agreement with the Irrigation PIU that will set out
the terms and conditions for the use of MCC Funding in implementing the
Infrastructure Activity.
(b) Water-to-Market Activity.
(i) The Water-to-Market Activity will ensure that MCC Funding of
the Infrastructure Activity is sustained through a combination of
training, technical assistance, access to credit and essential
equipment. Under the Water-to-Market Activity, MCC Funding will be used
to build management capacities within the WSA and 53 WUAs and improve
the ability of member farmers to convert the improved water supply to
profitable production and pay for water charges through two sub-
activities:
(1) Strengthening Irrigation System Entities. MCC Funding will be
used to:
[[Page 19419]]
(A) Support organizational reforms and institutional strengthening
of the WSA;
(B) Build administrative and operational capacity of the WUAs and
the developing federations of WUAs; and
(C) Support the establishment of a professional irrigation
association.
(2) Improving the Profitability of WUA Member Farmers. MCC Funding
will be used to:
(A) Provide member farmers with access to technology and training
in on-farm water management and higher value agricultural production;
(B) Provide training and consulting to individual member farmers,
farmer groups and small and medium enterprises on post-harvest,
processing and marketing investments; and
(C) Build capacity within credit organizations and provide funding
to such credit organizations which will on-lend to member farmers and
related enterprises.
(ii) The sub-activity to strengthen irrigation system entities will
be managed in the Irrigation PIU. The sub-activity to improve
profitability of WUA member farmers will be managed by an Outside
Project Manager to be selected through a competitive international
tender process.
3. Beneficiaries
The beneficiaries of the Irrigated Agriculture Project will be the
53 WUAs and their approximately 250,000 member farmers who will benefit
from more efficient and reliable irrigation water and intensive
institutional strengthening. Among these member farmers, an estimated
60,000 will be reached with on-farm water management techniques. At
least 30,000 member farmers will be reached with transition to higher
value agriculture technology. A further subset of an estimated 15,000
member farmers will be reached with modern post-harvest, processing and
marketing techniques. Some 300 enterprises involved with post-harvest,
processing and marketing are expected to benefit leading to significant
additional job creation.
4. Donor Coordination
The Irrigated Agriculture Project builds upon and complements an
extensive body of work by several donors in irrigation and agriculture.
(a) World Bank and IFAD. The World Bank has contributed to the
irrigation sector through three operations: the Irrigation Dam Safety
Projects I and II; the Irrigation Development Project (the ``IDP'');
and the Irrigation Rehabilitation Project. The International Fund for
Agricultural Development (``IFAD'') has also contributed to the sector
under the latter two World Bank projects, as well as its own
Agriculture Research Project. Regarding improvements in WUA members'
capacity to pay for water services, the World Bank is initiating a loan
package to support the agricultural sector called the Rural Enterprise
and Small-Scale Commercial Agriculture Development Project. IFAD is
also extending a loan focusing on providing credit, grants and training
to rural enterprises in communities of mountainous regions.
Coordination with the World Bank and IFAD programs is advantageous in
the following areas: (i) The phase-out of the Government's subsidy
policies and establishment of effective cost recovery mechanisms; (ii)
the co-financing contributions by the WUAs to capital investments in
the tertiary canal system; (iii) institutional strengthening; and (iv)
technical and marketing support programs for member farmers.
(b) USAID and USDA. USAID is currently funding a Water Management
Program that focuses on national water policy (including drinking
water) and the institutional framework for that policy. The Government
and MCA-Armenia will align policy reform and support to the WSA and
WUAs through this program's progress and insights. The USAID-supported
Armenia SME Market Development Project will continue to support
agribusiness, textiles and stone-work enterprises until September 2006,
and the Micro Enterprise Development Initiative provides management
consulting services to financial institutions and business service
providers also until September, 2006. United States Department of
Agriculture (``USDA'') funding supports the Center for Agribusiness and
Rural Development to develop value-adding enterprises producing high
quality product to meet market demand. The USAID and USDA programs
represent economic development approaches that will be complemented by
MCA-Armenia's support to WUA member farmers and related enterprises.
5. Sustainability
(a) Institutional Sustainability
The Government has taken substantial steps to strengthen the
institutional framework for rural development. The management of
Armenia's irrigation system has recently been decentralized to 53
regional WUAs. The Government has enhanced water management efficiency
by merging responsibilities for irrigation and drainage. The Irrigated
Agriculture Project will benefit from an extensive Water-to-Market
Activity which will provide organizational support for the WSA reforms,
management capacity building of the WUAs and developing regional
federations of WUAs, and guidance for the formation of a professional
irrigation association. Technical assistance will be targeted to ensure
that the WSA, WUAs and federations of WUAs have systems to effectively
manage and finance their operations. In addition, credit organizations
will receive training and capital to expand financial services targeted
at WUA member farmers.
(b) Financial Sustainability
Armenia's irrigation system has suffered from a lack of resources
for maintenance. The Irrigated Agriculture Project aims to address this
problem, which has led to the degradation of the system over time.
First, the Irrigated Agriculture Project is designed to rely less
on pumping systems and more on gravity-based irrigation, which should
decrease energy costs. However, to the extent pumping systems will be
rehabilitated, the Government will present an adequate plan for
coverage of operations and maintenance costs, including depreciation,
before MCC Funding will be disbursed for civil works on these systems.
Second, the institutional strengthening of the WUAs under the
Water-to-Market Activity will also increase the capacity of WUAs to
finance themselves through member contributions and water charges.
Investing in human capacities (farmers' technical and management skills
and approach toward the market) to transform their enterprises to be
profitable by competing in commercial markets significantly contributes
to the financial sustainability of the irrigation system. Improved
capacity of credit organizations to on-lend to rural borrowers will be
sustained and expanded as new profit opportunities in the value chain
emerge.
Third, the Government will continue its policy of WUA co-financing
of tertiary canals consistent with the World Bank IDP and will
implement such co-financing in a manner satisfactory to MCC. In
addition, the Government agrees to fund any environmental mitigation
costs associated with the Irrigated Agriculture Project in excess of
MCC Funding allocated to cover such costs.
[[Page 19420]]
(c) Environmental and Social Sustainability
The key to ensuring environmental and social sustainability of the
Project is ongoing public consultation. The ESI Officer within the
Management Unit will ensure that environmental and social mitigation
measures are followed for all Project Activities in accordance with the
provisions set forth in this Compact and in relevant Supplemental
Agreements. The ESI Officer will serve as the point of contact for
comments and concerns of parties affected by the implementation of all
Project Activities and will lead the effort to find feasible
resolutions to those problems. The ESI Officer will convene periodic
public meetings to provide implementation updates and to identify and
address public concerns. The Stakeholders' Committee will also appoint
representatives of civil society to the Governing Council and provide a
link between local NGOs and program managers.
ESIAs of the Irrigated Agriculture Project will be conducted as
part of the technical survey and design. EMPs satisfactory to MCC will
be developed, implemented and monitored during project implementation.
Should the issue of involuntary resettlement arise, the Irrigated
Agriculture Project will be conducted in compliance with the World Bank
Policy on Involuntary Resettlement. To maximize the positive social
impacts of the Project, the Implementing Entities for the Water-to-
Market Activity will ensure that women are adequately represented in
the groups targeted for assistance.
6. Policy Actions; Legislative and Regulatory Reform
The Parties have identified the following policy actions and
legislative and regulatory reforms that the Government will pursue in
support of the Irrigated Agriculture Project to reach its full
benefits. Satisfactory implementation of these reforms may be
conditions precedent to certain MCC Disbursements as provided in the
Disbursement Agreement:
(a) The Government will arrange for 15 percent WUA co-financing of
investments in tertiary canal systems consistent with the World Bank
IDP and will implement such co-financing in a manner satisfactory to
MCC.
(b) Before the end of the second quarter of the second year of the
Compact Term, the Government will adopt and implement a plan acceptable
to MCC for the restructuring of the WSA.
(c) Before the end of the second year of the Compact Term, the
Government will adopt appropriate legislation and/or regulations
required by the Water Code of 2002 to establish a national policy on
irrigation that will govern the relationships among the State Committee
of Water Economy, the WSA, WUAs and the federations of WUAs.
(d) The Government will use its best efforts to ensure that water
charges collected from WUAs continue towards the goal of full recovery
of operations and maintenance costs. During the Compact Term, at least
the following percentages of annual operations and maintenance costs
will be covered:
(i) 2006: 46 percent;
(ii) 2007: 55 percent;
(iii) 2008: 60 percent;
(iv) 2009: 66 percent; and
(v) 2010: 70 percent.
These percentages will be calculated in a manner acceptable to MCC
according to the following formula: WC/SC.
WC = Actual water charges collected during the most recently
completed fiscal year as reported by the Board of WUAs and federations
of WUAs pursuant to the Law on Water User Associations and Federations
of Water User Associations.
SC = Operations and maintenance costs for the most recently
completed fiscal year of the WSA and the WUAs as reported by the Board
of WUAs and federations of WUAs pursuant to the Law on Water User
Associations and Federations of Water User Associations.
(e) The Government will allocate funds to cover rehabilitation of
the irrigation system in at least the amounts specified in the
recommendation of the Technical Commission on Water System Operation
and Maintenance, excluding any amounts provided for rehabilitation by
MCC Funding.
(f) The Technical Commission on Water System Operation and
Maintenance will make a recommendation with respect to the overall
costs to cover depreciation of the irrigation system. The Government
will ensure that such depreciation costs are reflected in its annual
budgets throughout the life of the Program Assets.
(g) Before the end of the 18th month of the Compact Term, the
Government will develop and adopt legislation and/or regulations, or
amend existing legislation and regulations, to facilitate the
establishment of agricultural cooperatives.
(h) By the end of the first year of the Compact Term, the
Government will develop and adopt legislation and/or regulations to
improve statistics on agriculture, including an accounting of the
sector and data collection procedures.
(i) The Central Banking Authority will modify the regulatory
framework for the licensing of MFIs as credit organizations.
(j) In an effort to ensure that the councils of the Water User
Associations are more representative of their constituencies, the
Government will adopt the amendment of Article 16 of the Law on Water
User Associations and Federations of Water User Associations proposed
by the Government on September 13, 2005.
(k) The Government will allocate in its budget and expend amounts
satisfactory to MCC to fund the activities of the National Statistical
Service, including conducting the Integrated Survey of Living Standards
and the Community Survey. These surveys will be used by MCC as a key
monitoring indicator and for impact evaluations. Funding by the
Government should increase year-to-year to ensure sustainability post-
Compact.
Annex II--Financial Plan Summary
This Annex II to the Compact (the ``Financial Plan Annex'')
summarizes the Multi-Year Financial Plan for the Program. Except as
defined in this Financial Plan Annex, each capitalized term in this
Financial Plan Annex shall have the same meaning given such term
elsewhere in this Compact.
1. General
A multi-year financial plan summary (``Multi-Year Financial Plan
Summary'') is attached hereto as Exhibit A. By such time as specified
in the Disbursement Agreement, MCA-Armenia will adopt, subject to MCC
approval, a Multi-Year Financial Plan that includes, in addition to the
multi-year summary of anticipated estimated MCC Funding and the
Government's contribution of funds and resources, an estimated draw-
down rate for the first year of the Compact based on the achievement of
performance milestones, as appropriate, and the satisfaction or waiver
of conditions precedent. Each year, at least 30 days prior to the
anniversary of the Entry into Force, the Parties shall mutually agree
in writing to a Detailed Financial Plan for the upcoming year of the
Program, which shall include a more detailed plan for such year, taking
into account the status of the Program at such time and making any
necessary adjustments to the Multi-Year Financial Plan.
[[Page 19421]]
2. Implementation and Oversight
The Multi-Year Financial Plan and each Detailed Financial Plan
shall be implemented by MCA-Armenia, consistent with the approval and
oversight rights of MCC and the Government as provided in this Compact,
the Governance Agreement and the Disbursement Agreement.
3. Estimated Contributions of the Parties
The Multi-Year Financial Plan Summary identifies the estimated
annual contribution of MCC Funding for Program administration,
monitoring and evaluation, and each Project. The Government's
contribution of resources to Program administration, monitoring and
evaluation, and each Project shall consist of (i) ``in-kind''
contributions in the form of Government Responsibilities and any other
obligations and responsibilities of the Government identified in this
Compact, including contributions identified in the notes to the Multi-
Year Financial Plan Summary and (ii) such other contributions or
amounts as may be identified in relevant Supplemental Agreements
between the Parties or as may otherwise be agreed by the Parties;
provided, in no event shall the Government's contribution of resources
be less than the amount, level, type and quality of resources required
to effectively carry out the Government Responsibilities or any other
responsibilities or obligations of the Government under or in
furtherance of this Compact.
4. Modifications
The Parties recognize that the anticipated distribution of MCC
Funding between and among the various Program activities and Project
and Project Activities will likely require adjustment from time to time
during the Compact Term. In order to preserve flexibility in the
administration of the Program, the Parties may, upon agreement of the
Parties in writing and without amending the Compact, change the
designations and allocations of funds between Program administration
and a Project, between one Project and another Project, between
different activities within a Project, or between a Project identified
as of the Entry into Force of this Compact and a new Project, without
amending the Compact; provided, however, that such reallocation (i) is
consistent with the Objectives, (ii) does not cause the amount of MCC
Funding to exceed the aggregate amount specified in Section 2.1(a) of
this Compact, and (iii) does not cause the Government's obligations or
responsibilities or overall contribution of resources to be less than
specified in Section 2.2(a) of this Compact, this Annex II or elsewhere
in the Compact.
5. Conditions Precedent; Sequencing
MCC Funding will be disbursed in tranches. The obligation of MCC to
approve MCC Disbursements and Material Re-Disbursements for the Program
and each Project is subject to satisfactory progress in achieving the
Objectives and on the fulfillment or waiver of any conditions precedent
specified in the Disbursement Agreement for the relevant Program
activity or Project or Project Activity. The sequencing of Projects or
Project Activities and other aspects of how the Parties intend the
Projects to be implemented will be set forth in the Implementation
Plan, including Work Plans for the applicable Project, and MCC
Disbursements and Re-Disbursements will be disbursed consistent with
that sequencing.
Exhibit A.--Multi-Year Financial Plan Summary
----------------------------------------------------------------------------------------------------------------
Component Year 1 Year 2 Year 3 Year 4 Year 5 Total
----------------------------------------------------------------------------------------------------------------
1. Rural Road Rehabilitation Project:
A. Infrastructure Improvements...... $0.49 $17.92 $22.62 $13.46 $10.00 $64.50
B. Technical Audit of Performance .......... .......... 0.30 .......... .......... 0.30
Based Maintenance Contracts........
C. Road Maintenance Strategic Plan.. .......... .......... .......... 0.30 .......... 0.30
D. Project Administration........... 0.40 0.40 0.40 0.40 0.40 2.00
-----------------------------------------------------------------------
Sub-Total........................... 0.89 18.32 23.32 14.16 10.40 67.10
-----------------------------------------------------------------------
2. Irrigated Agriculture Project:
A. Infrastructure Activity
Infrastructure*................. 5.31 30.16 32.07 25.17 15.87 108.59
Project Administration.......... 0.93 0.93 0.93 0.93 0.93 4.67
B. Water-to-Market Activity
Institutional Strengthening..... 0.53 0.98 1.45 0.69 0.51 4.16
Improved Profitability of WUA 0.74 4.55 6.14 6.99 7.07 25.50
Members........................
Project Administration.......... 0.72 0.61 0.64 0.41 0.39 2.76
-----------------------------------------------------------------------
Sub-Total........................... 8.24 37.24 41.23 34.20 24.77 145.67
-----------------------------------------------------------------------
3. Monitoring and Evaluation............ 1.44 0.92 0.95 0.97 0.81 5.08
4. Program Administration and Control:
A. Program Administration........... 1.41 0.99 1.06 1.06 1.09 5.60
B. Audit............................ 0.17 0.80 0.93 0.71 0.52 3.13
C. Fiscal Management................ 0.49 2.33 2.70 2.04 1.50 9.06
-----------------------------------------------------------------------
Sub-Total........................... 2.06 4.12 4.69 3.81 3.11 17.79
-----------------------------------------------------------------------
MCC Contribution.................... 12.63 60.61 70.20 53.13 39.09 235.65
----------------------------------------------------------------------------------------------------------------
*Tertiary canals will be subject to a 15% farmer co-financing requirement.
Annex III--Description of the M&E Plan
This Annex III to the Compact (the ``M&E Annex'') generally
describes the components of the M&E Plan for the Program. Except as
defined in this M&E Annex, each capitalized term in this M&E Annex
shall have the same meaning given such term elsewhere in this Compact.
[[Page 19422]]
1. Overview
MCC and the Government (or a mutually acceptable Government
Affiliate or Permitted Designee) shall formulate, agree to and the
Government shall implement, or cause to be implemented, an M&E Plan
that specifies (1) how progress toward the Objectives and the
intermediate results of each Project and Project Activity set forth in
this M&E Annex (the ``Outcomes'') will be monitored (the ``Monitoring
Component''), (2) a methodology, process and timeline for the
evaluation of planned, ongoing, or completed Projects and Project
Activities to determine their efficiency, effectiveness, impact and
sustainability (the ``Evaluation Component''), and (3) other components
of the M&E Plan described below. Information regarding the Program's
performance, including the M&E Plan, and any amendments or
modifications thereto, as well as periodically generated reports, will
be made publicly available on the MCA-Armenia Web site and elsewhere.
2. Monitoring Component
To monitor progress toward the achievement of the Objectives and
Outcomes, the Monitoring Component of the M&E Plan shall identify (a)
the Indicators, (b) the party or parties responsible, the timeline, and
the instrument for collecting data and reporting on each Indicator to
MCA-Armenia, and (c) the method by which the reported data will be
validated.
(a) Indicators. The M&E Plan shall measure the results of the
Program using quantitative, objective and reliable data
(``Indicators''). Each Indicator will have one or more expected results
that specify the expected value and the expected time by which that
result will be achieved (each, a ``Target''). The M&E Plan will measure
and report on Indicators at four levels. First, the Indicators for the
Compact Goal (each, a ``Compact Goal Indicator'') will measure the
results for the overall Program. Second, the Indicators for each
Objective (each, an ``Objective Indicator'') will measure the final
results of the Projects to monitor their success in meeting each of the
Objectives, including results for the intended beneficiaries identified
in accordance with Annex I (collectively, the ``Beneficiaries'').
Third, intermediate Indicators (each, an ``Outcome Indicator'') will
measure the intermediate results achieved under each of the Project
Activities to provide an early measure of the likely impact of the
Project Activities. A fourth level of Indicators (each, an ``Output
Indicator'') will be included in the M&E Plan to measure the direct
outputs of the Project Activities. All Indicators will be disaggregated
by gender, income level and age, to the extent practicable. Subject to
prior written approval from MCC, MCA-Armenia may add Indicators or
refine the Targets of existing Indicators.
(i) Compact Goal Indicators. The M&E Plan shall contain the Compact
Goal Indicators listed in the table below with their definitions. The
corresponding Targets to be achieved are in the following tables.
Compact Goal Indicators
------------------------------------------------------------------------
Definition of
Purpose Indicator indicator
------------------------------------------------------------------------
Reduced rural poverty......... Poverty rate in Poverty rate in rural
rural areas. areas as measured by
the National
Statistical Service
of Armenia.
Increased economic performance Change in real Change in real income
of the agricultural sector. income from from sale of
agriculture in agricultural produce
rural areas. per household member
measured as an
index.
------------------------------------------------------------------------
Compact Goal Targets
----------------------------------------------------------------------------------------------------------------
Year 4 Year 5 Year 6 Year 7 Year 8
Indicators Baseline 2009 2010 2011 2012 2013
----------------------------------------------------------------------------------------------------------------
Poverty rate in rural areas 32 31 30 29 28 26
(percentage).....................
Baseline: 2004....................
Change in real income from 100 102 105 109 115 123
agriculture in rural areas
(Index)..........................
Baseline: 2005 = 100..............
----------------------------------------------------------------------------------------------------------------
(ii) Objective and Outcome Indicators. The M&E Plan shall contain
the Objective and Outcome Indicators listed in the tables below, with
their definitions. The corresponding Targets to be achieved are in the
tables following the definitions.
Rural Road Rehabilitation Project Indicators
------------------------------------------------------------------------
Definition of
Purpose Indicator indicator
------------------------------------------------------------------------
Objective:
Better access to economic Satisfaction with Percentage
and social infrastructure. public satisfied.
transportation in
rural areas.
Outcomes:
Reduced transportation costs International Weighted index to
Roughness Index measure road
(IRI) for roads roughness
in Project area. (correlated with
transportation
costs).
Increased vehicular activity Average daily Average daily
traffic in number of
Project area. vehicles on road
sections in
Project area
weighted by
length of
corresponding
road sections.
[[Page 19423]]
Sustained maintenance of Government State budget
road network. budgetary expenditure on
allocations for rehabilitation of
rehabilitation of road sections in
road sections in the road lifeline
the road lifeline network (AMD in
network. millions).
Government State budget
budgetary expenditures on
allocations for routine
routine maintenance of
maintenance of the entire road
the entire road network (AMD in
network. millions).
------------------------------------------------------------------------
Rural Road Rehabilitation Project Targets
--------------------------------------------------------------------------------------------------------------------------------------------------------
Objective level indicators (metric of project success
observable by end of compact) Baseline Year 1 Year 2 Year 3 Year 4 Year 5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Satisfaction with public transportation in rural areas TBD TBD TBD TBD TBD TBD
(percentage) \1\.......................................
Outcome Level Indicators
(early Indicators of Project Activities impact on
Objectives)
International Roughness Index (IRI) for roads in Project 9.3 9.9 10.2 7.7 5.7 5.0
area (m/km)............................................
Average daily traffic in Project area (vehicles)........ 380 390 400 410 440 460
Government budgetary allocations for rehabilitation of n/a 1,010 3,150 3,310 3,970 5,950
road sections in the road lifeline network (AMD in
millions)..............................................
Government budgetary allocations for routine maintenance n/a 5,020 5,990 6,290 6,900 7,360
of the entire road network (AMD in millions)...........
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The Targets for this Indicator will be calculated using baseline information from the 2007 Integrated Survey of Living Standards (ISLS) to be
conducted by the National Statistical Service of the Republic of Armenia.
Irrigated Agriculture Project Indicators
------------------------------------------------------------------------
Definition of
Purpose Indicator indicators
------------------------------------------------------------------------
Objectives:
Increased agricultural Increase in area Increase in
productivity. covered by high hectares covered
value added by HVA crops
(``HVA'') crops. (i.e.,
vegetables,
potato, fruits,
grapes).
Improved quality of Share of Percentage of
irrigation. respondents respondents
satisfied with satisfied with
irrigation irrigation
services. services.
------------------------------------------------------------------------
Infrastructure Activity Indicators
------------------------------------------------------------------------
Definition of
Purpose Indicator indicators
------------------------------------------------------------------------
Outcomes:
Increased irrigated land.... Additional land Annual increase in
irrigated under irrigated land in
Project. Project area
(hectares).
Maintenance of irrigation Government State budget
system. budgetary expenditures on
allocations for maintenance of
maintenance of irrigation system
irrigation system. (AMD in
millions).
Reduced energy costs........ Annual energy Reduction in
savings under Kilowatt hours
Project. used (thousand
KWh).
Reduced water losses........ Water losses in Share of water
primary canals losses compared
under Project. to total water
intake
(percentage).
Water losses in Share of water
tertiary canals losses compared
under Project. to total water
intake
(percentage).
------------------------------------------------------------------------
Water-to-Market Activity Indicators
------------------------------------------------------------------------
Definition of
Purpose Indicator indicators
------------------------------------------------------------------------
Outcomes:
Improved WUA cost recovery.. Recovery of WUA Share of WUA water
operations and charges compared
maintenance cost WUA annual
by water charges. operations and
maintenance cost
(percentage).
Farmers using improved on- Number of farmers Number of farmers
farm water management. using better on- using better on-
farm water farm water
management. management: Drip
irrigation; ET
Gage, and soil
moisture
monitoring.
[[Page 19424]]
Access to credit to improve Loans provided.... Loans provided
agricultural activities. under the Project
(USD in
thousands).
------------------------------------------------------------------------
Irrigated Agriculture Project Targets
--------------------------------------------------------------------------------------------------------------------------------------------------------
Objective level indicators
(metric of project success Baseline Year 1 Year 2 Year 3 Year 4 Year 5
observable by end of compact)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Increase in area covered by 0.................. 0................. 110............... 1,100............. 4,020............. 2,540.
high value added (HVA) crops
(hectares).
Share of respondents satisfied TBD................ TBD............... TBD............... TBD............... TBD............... TBD.
with irrigation services
(percentage) \1\.
Infrastructure Activity: Baseline........... Year 1............ Year 2............ Year 3............ Year 4............ Year 5.
Outcome Level Indicators.
(Early Indicators of Project
Activities impact on
Objectives).
Additional land irrigated under 0.................. 0................. 0................. 2,400............. 10,900............ 20,340.
Project (hectares).
Government budgetary TBD................ TBD............... TBD............... TBD............... TBD............... TBD.
allocations for maintenance of
irrigation system (AMD in
millions) \2\.
Annual energy savings under 0.................. 0................. 0................. 0................. 2,800............. 25,520.
Project (thousand KWh).
Water losses in primary canals 28%................ 30%............... 31%............... 28%............... 23%............... 17%
under Project (percentage).
Water losses in tertiary canals TBD................ TBD............... TBD............... TBD............... TBD............... TBD.
under Project (percentage) \3\.
Water-to-Market Activity: Baseline........... Year 1............ Year 2............ Year 3............ Year 4............ Year 5.
Outcome Level Indicators.
(Early Indicators of Project
Activities impact on
objectives).
Recovery of WUA operations and n/a................ 46%............... 55%............... 60%............... 66%............... 70%.
maintenance cost by water
charges (percentage).
Number of farmers using 0.................. 0................. 5,390............. 14,300............ 24,900............ 35,420.
improved on-farm water
management (number;
cumulative).
Loans provided (USD in 0.................. 0................. 1,600............. 2,400............. 2,500............. 2,000.
thousands).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ The Targets for this Indicator will be calculated using baseline information from the 2007 Integrated Survey of Living Standards (ISLS) to be
conducted by the National Statistical Service of the Republic of Armenia.
\2\ The Targets for this Indicator will be available at the end of the second quarter of 2006, when the recommendations of the Technical Commission on
Water System Operation and Maintenance are due for Government confirmation.
\3\ The Targets for this Indicator will be incorporated once individual WUAs agree to the 15% co-financing required to proceed with the investments in
tertiary canals.
(b) Data Collection and Reporting. The M&E Plan shall establish
guidelines for data collection and a reporting framework, including a
schedule of Program reporting and responsible parties. The Management
Unit shall conduct regular assessments of program performance to inform
MCA-Armenia and MCC of progress under the Program and to alert these
parties to any problems. These assessments will report the actual
results compared to the Targets on the Indicators referenced in the
Monitoring Component, explain deviations between these actual results
and Targets, and in general, serve as a management tool for
implementation of the Program. With respect to any data or reports
received by MCA-Armenia, MCA-Armenia shall promptly deliver such
reports to MCC along with any other related documents, as specified in
the M&E Plan or as may be requested from time to time by MCC.
(c) Data Quality Reviews. From time to time, as determined in the
M&E Plan or as otherwise requested by MCC, the quality of the data
gathered through the M&E Plan shall be reviewed to ensure that data
reported are as valid, reliable, and timely as resources will allow.
The objective of any data quality review will be to verify the quality
and the consistency of performance data, across different
implementation units and reporting institutions. Such data quality
reviews also will serve to identify where those levels of quality are
not possible, given the realities of data collection. The data quality
reviewer shall enter into an Auditor / Reviewer Agreement with MCA-
Armenia in accordance with Annex I.
3. Evaluation Component
The Program shall be evaluated on the extent to which the
interventions contribute to the Compact Goal. The Evaluation Component
shall contain a methodology, process and timeline for analyzing data in
order to assess planned, ongoing, or completed Project Activities to
determine their efficiency, effectiveness, impact and sustainability.
This component should use state-of-the-art methods for addressing
selection bias and should make provisions for collecting data from both
treatment and control groups, where practicable. The Evaluation
Component shall contain two types of reports: Final Evaluations and Ad
Hoc Evaluations, and shall be finalized before any MCC Disbursement or
Re-Disbursement for specific Program activities or Project Activities.
(a) Final Evaluation. MCA-Armenia, with the prior written approval
of MCC, may engage an independent evaluator to conduct an evaluation at
the expiration or termination of the Compact Term (``Final
Evaluation'') or at MCC's election, MCC may engage such independent
evaluator. The Final Evaluation must at a minimum (i) evaluate the
efficiency and effectiveness of the Program; (ii) estimate,
quantitatively and in a statistically valid way, the causal
relationship between
[[Page 19425]]
the Compact Goal (to the extent possible), the Objectives and Outcomes;
(iii) determine if, and analyze the reasons why, the Compact Goal,
Objectives and Outcomes were or were not achieved; (iv) identify
positive and negative unintended results of the Program; (v) provide
lessons learned that may be applied to similar projects; (vi) assess
the likelihood that results will be sustained over time; and (vii) any
other guidance and direction that will be provided in the M&E Plan. To
the extent engaged by MCA-Armenia, such independent evaluator shall
enter into an Auditor/Reviewer Agreement with MCA-Armenia in accordance
with Annex I.
(b) Ad Hoc Evaluations. Either MCC or MCA-Armenia may request ad
hoc or interim evaluations or special studies of Projects, Project
Activities, or the Program as a whole prior to the expiration of the
Compact Term (``Ad Hoc Evaluations''). If MCA-Armenia engages an
evaluator, the evaluator will be an externally contracted independent
source selected by MCA-Armenia, subject to the prior written approval
of MCC, following a tender in accordance with the Procurement
Guidelines, and otherwise in accordance with any relevant
Implementation Letter or Supplemental Agreement. The cost of an
independent evaluation or special study may be paid from MCC Funding.
If MCA-Armenia requires an ad hoc independent evaluation or special
study at the request of the Government for any reason, including for
the purpose of contesting an MCC determination with respect to a
Project or Project Activity or to seek funding from other donors, no
MCC Funding or MCA-Armenia resources may be applied to such evaluation
or special study without MCC's prior written approval.
4. Other Components of the M&E Plan
In addition to the Monitoring and Evaluation Components, the M&E
Plan shall include the following components for the Program, Projects
and Project Activities, including, where appropriate, roles and
responsibilities of the relevant parties and Providers:
(a) Costs. A detailed cost estimate for all components of the M&E
Plan.
(b) Assumptions and Risks. Any assumptions and risks external to
the Program that underlie the accomplishment of the Objectives and
Outcomes; provided, such assumptions and risks shall not excuse
performance of the Parties, unless otherwise expressly agreed to in
writing by the Parties.
5. Implementation of the M&E Plan
(a) Approval and Implementation. The approval and implementation of
the M&E Plan, as amended from time to time, shall be in accordance with
the Program Annex, this M&E Annex, the Governance Agreement, and any
other relevant Supplemental Agreement.
(b) Stakeholders' Committee. The completed portions of the M&E Plan
will be presented to the Stakeholders' Committee at the Stakeholders'
Committee's initial meetings, and any amendments or modifications
thereto or any additional components of the M&E Plan will be presented
to the Stakeholders' Committee at appropriate subsequent meetings of
the Stakeholders' Committee. The Stakeholders' Committee will have
opportunity to present its suggestions to the M&E Plan, which the
Governing Council will take into consideration in its review of any
amendments to the M&E Plan during the Compact Term.
(c) MCC Disbursement and Re-Disbursement for a Project Activity. As
a condition to each MCC Disbursement or Re-Disbursement there shall be
satisfactory progress on the M&E Plan for the relevant Project or
Project Activity, and substantial compliance with the M&E Plan,
including any reporting requirements.
(d) Modifications. Notwithstanding anything to the contrary in the
Compact, including the requirements of this M&E Annex, MCC and the
Government (or a mutually acceptable Government Affiliate or Permitted
Designee) may modify or amend the M&E Plan or any component thereof,
including those elements described herein, without amending the
Compact; provided, any such modification or amendment of the M&E Plan
has been approved by MCC in writing and is otherwise consistent with
the requirements of this Compact and any relevant Supplemental
Agreement between the Parties.
[FR Doc. 06-3459 Filed 4-12-06; 8:45 am]
BILLING CODE 9210-01-P