Notice of Entering Into a Compact With the Republic of Moldova, 4849-4875 [2010-1944]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 75, Number 19 (Friday, January 29, 2010)]
[Notices]
[Pages 4849-4875]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-1944]


=======================================================================
-----------------------------------------------------------------------

MILLENNIUM CHALLENGE CORPORATION

[MCC FR 10-04]


Notice of Entering Into a Compact With the Republic of Moldova

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

-----------------------------------------------------------------------

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 
Republic of Moldova. Representatives of the United States Government 
and the Republic of Moldova executed the Compact documents on January 
22, 2010.

    Dated: January 26, 2010.
Henry Pitney,
Acting General Counsel, Millennium Challenge Corporation.

Summary of Millennium Challenge Compact With the Republic of Moldova

    The five-year Millennium Challenge Compact with the Republic of 
Moldova (``Compact'') will provide up to $262 million to reduce poverty 
and accelerate economic growth. The Compact is intended to improve 
agricultural productivity and to expand access to markets and services 
through investments in critical infrastructure in the irrigation and 
road sectors, and through capacity-building in the high value 
agriculture sector (``Program'').

Transition to High Value Agriculture Project ($101.77 Million)

    The Transition to High Value Agriculture Project (``THVA Project'') 
seeks to (i) increase rural incomes by stimulating growth in high value 
agriculture (``HVA'') and (ii) act as a catalyst for future investment 
in HVA production by establishing a successful model that contributes 
to a conducive institutional and policy environment for irrigated 
agriculture. Agriculture has been the backbone of the Moldovan economy, 
though, following the collapse

[[Page 4850]]

of the Soviet Union, Moldova lost its position as a key exporter of 
fresh produce, and its extensive irrigation systems and post-harvest 
cold chain fell into disrepair. Today, the country's agricultural 
sector suffers from poor water service, production of low-value crops, 
low water-tariff revenue, and underinvestment in maintenance of the 
irrigation system, all of which contribute to high rates of rural 
poverty. However, with its fertile soils, relatively long growing 
season, and proximity to both European Union and former Soviet markets, 
Moldova has many of the necessary conditions to regain competitiveness 
in HVA. The THVA Project supports the government of Moldova's national 
strategy to increase land under irrigation and to upgrade the cold 
chain to facilitate the transition to HVA. The set of four reinforcing 
and integrated activities include:
     Centralized Irrigation System Rehabilitation: 
Rehabilitation of up to 11 large irrigation systems servicing an area 
of approximately 15,500 hectares located along the Prut and Nistru 
rivers that will provide reliable water needed for HVA crops, as well 
as improve food security through enhanced grain production.
     Irrigation Sector Reform: Provision of technical 
assistance and capacity-building to: (i) Support the establishment of 
water user associations able to manage and operate the rehabilitated 
irrigation systems and the legal transfer of responsibilities for 
operations and maintenance of repaired irrigation systems to water user 
associations; (ii) improve water resource management by the government, 
including the establishment of a modem water-rights system; and (iii) 
ensure the legal and institutional framework needed for irrigation 
sector sustainability and further private and donor investment.
     Access to Agricultural Finance: Establishment of financing 
facilities that will support HVA-related investment by farmers and 
rural entrepreneurs.
     Growing HVA Sales: Provision of technical assistance to 
farmers and rural entrepreneurs to better access HVA markets and 
support the shift to HVA at the production and post-harvest level, in 
an activity undertaken jointly with, and administered by, the United 
States Agency for International Development.

Road Rehabilitation Project ($132.84 Million)

    The Road Rehabilitation Project seeks to (i) increase the income of 
the local population through reduced cost of transport and reduced 
costs of goods and services; (ii) reduce losses to the national economy 
resulting from the deteriorated road conditions; and (iii) reduce the 
number of road accidents through improved traffic conditions. 
Specifically, the project will support the rehabilitation of the M2 
road, which is part of an arterial highway connecting Chisinau, the 
Moldovan capital, to the Ukrainian border and beyond to Kyiv, the 
Ukrainian capital. This route serves as a significant link between 
Moldova and Ukraine for private, passenger, and commercial traffic, and 
has been prioritized by the government of Moldova in its National 
Development Strategy and Land Transport Infrastructure Strategy with 
the long-term goal to provide an efficient transport system that 
facilitates opportunities for trade in domestic and international 
markets and the mobility of its citizens. The existing M2 segment is a 
paved two-lane road that is extremely deteriorated. Compact funding 
will support the rehabilitation of 93 kilometers, beginning at the city 
of Sarateni at the southern end, passing near the city of Soroca, and 
ending at the junction with the R7 road west to Drochia at the northern 
end; construction (or reconstruction) or associated structures such as 
bridges and culverts; and improvement in road safety along the 
rehabilitated corridor. In addition, the Compact will fund a 
feasibility study, environmental and social impact assessment, detailed 
design work, and a resettlement action plan for the road segment 
continuing on to the Ukrainian border at the town of Otaci. These 
studies can be used by the government of Moldova to seek funding from 
other donors, or to plan investments with its own resources.

Administration

    The Compact also includes program management and oversight costs 
estimated at $23.85 million over a five-year time frame, including the 
costs of administration, management, auditing, fiscal and procurement 
agent services and environmental and social oversight. In addition, the 
cost of monitoring and evaluation of the Compact is budgeted at 
approximately $3.54 million.

Intended Beneficiaries and Expected Results

    The THVA Project is expected to benefit approximately 32,000 
households (or approximately 124,000 individuals), with an average 
total benefit over 20 years equal to 170 percent of the beneficiaries' 
current annual income. Beneficiaries include owners or shareholders of 
farming enterprises; farmers or owners of land; and laborers employed 
in the operation of enterprise farms within the command areas where MCC 
will rehabilitate the irrigation systems, as well as producers and 
intermediaries investing in and working in the HVA sector. The economic 
analyses indicate an economic rate of return of approximately 12.7 
percent.
    The Road Rehabilitation Project is expected to benefit 
approximately 78,000 households (or approximately 302,000 
beneficiaries) over the next 20 years, with an economic rate of return 
of approximately 19 percent. Beneficiaries include users and owners of 
motorized vehicles utilizing the road including local agricultural and 
other producers and buyers, providers and users of passenger transport 
services, and noncommercial owners of private motorized transport.

Millennium Challenge Compact Between the United States of America 
Acting Through the Millennium Challenge Corporation and the Republic of 
Moldova

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal
    Section 1.2 Program Objective
    Section 1.3 Project Objectives
Article 2. Funding and Resources
    Section 2.1 Program Funding
    Section 2.2 Compact Implementation Funding
    Section 2.3 MCC Funding
    Section 2.4 Disbursement
    Section 2.5 Interest
    Section 2.6 Government Resources; Budget
    Section 2.7 Limitations of the Use of MCC Funding
    Section 2.8 Taxes
Article 3. Implementation
    Section 3.1 Program Implementation Agreement
    Section 3.2 Government Responsibilities
    Section 3.3 Policy Performance
    Section 3.4 Government Assurances
    Section 3.5 Implementation Letters
    Section 3.6 Procurement
    Section 3.7 Records; Accounting; Covered Providers; Access
    Section 3.8 Audits; Reviews
Article 4. Communications
    Section 4.1 Communications
    Section 4.2 Representatives
    Section 4.3 Signatures
Article 5. Termination; Suspension; Refunds
    Section 5.1 Termination; Suspension
    Section 5.2 Refunds; Violation
    Section 5.3 Survival
Article 6. Compact Annexes; Amendments; Governing Law
    Section 6.1 Annexes
    Section 6.2 Amendments
    Section 6.3 Inconsistencies
    Section 6.4 Governing Law
    Section 6.5 Additional Instruments
    Section 6.6 References to MCC Web Site
    Section 6.7 References to Laws, Regulations, Policies and 
Guidelines

[[Page 4851]]

    Section 6.8 MCC Status
    Section 6.9 Counterparts; Electronic Delivery
    Section 6.10 Counterparts; Electronic Delivery
Article 7. Entry Into Force
    Section 7.1 Domestic Requirements
    Section 7.2 Conditions Precedent to Entry into Force
    Section 7.3 Date of Entry into Force
    Section 7.4 Compact Term
    Section 7.5 Provisional Application
Annex I: Program Description
Annex II: Multi-Year Financial Plan Summary
Annex III: Description of the Monitoring and Evaluation Plan
Annex IV: Conditions to Disbursement of Compact Implementation 
Funding
Annex V: Definitions
Annex VI: Specific Tax Exemption Mechanisms
    Schedule A--Value Added Tax (VAT)
    Schedule B--Customs Duties
    Schedule C--Corporate Income Tax
    Schedule D--Individual Income Tax
    Schedule E--Taxation of Petroleum Products
    Schedule F--Temporary Admission of Equipment, Vehicles, and 
Household Goods
    Schedule G--Excise Duty
    Schedule H--Customs Procedure Tax
    Schedule I--Other Taxes

Millennium Challenge Compact

Preamble

    This Millennium Challenge Compact (this ``Compact'') is between the 
United States of America, acting through the Millennium Challenge 
Corporation, a United States government corporation (``MCC''), and the 
Republic of Moldova (``Moldova''), acting through its government (the 
``Government'').
    MCC and the Government are individually referred to in this Compact 
as a ``Party'' and together, as the ``Parties.'' Capitalized terms used 
in this Compact will have the meanings specified in Annex V hereto.
    Recalling that the Government consulted with the private sector and 
civil society of Moldova to determine the priorities for the use of 
Millennium Challenge Account assistance and developed and submitted to 
MCC a proposal for such assistance to achieve lasting economic growth 
and poverty reduction; and
    Recognizing that MCC wishes to help Moldova implement a program to 
achieve the goal and objectives described herein (the ``Program'').
    The Parties agree as follows:

Article 1. Goal and Objectives

Section 1.1 Compact Goal

    The goal of this Compact is to reduce poverty through economic 
growth in Moldova (the ``Compact Goal'').

Section 1.2 Program Objective

    The objective of the Program is to increase incomes through 
increased agricultural productivity and expanded access to markets and 
services through improved roads (as further described in Annex I, the 
``Program Objective'').

Section 1.3 Project Objectives

    The objectives of the Projects (as further described in Annex I) 
(each a ``Project Objective'' and collectively, the ``Project 
Objectives'') are as follows:
    (a) The objectives of the Transition to High Value Agriculture 
Project (as defined in Annex I) are to: (i) Increase rural incomes by 
stimulating growth in irrigated high value agriculture; and (ii) 
catalyze future investments in high value agriculture by establishing a 
successful and sustainable model of irrigation system and water 
resource management and a conducive institutional and policy 
environment for irrigated agriculture.
    (b) The objectives of the Road Rehabilitation Project (as defined 
in Annex I) are to: (i) Increase incomes of the local population by 
reducing the cost of transport, goods and services; (ii) reduce losses 
to the national economy resulting from deteriorated road conditions; 
and (iii) reduce the number of road accidents through improved traffic 
conditions.

Article 2. Funding and Resources

Section 2.1 Program Funding

    Upon entry into force of this Compact, MCC will grant to the 
Government, under the terms of this Compact, an amount not to exceed 
Two Hundred and Fifty-Four Million United States Dollars 
(US$254,000,000) to support the Program (``Program Funding''). The 
allocation of Program Funding is generally described in Annex II to 
this Compact.

Section 2.2 Compact Implementation Funding

    (a) Upon signature of this Compact, MCC hereby grants to the 
Government, under the terms of this Compact, in addition to the Program 
Funding described in Section 2.1, an amount not to exceed Eight Million 
United States Dollars (US$8,000,000) (``Compact Implementation 
Funding'') under Section 609(g) of the Millennium Challenge Act of 
2003, as amended (the ``MCA Act''), for use by the Government as agreed 
by the Parties, which may include use for the following purposes:
    (i) Financial management and procurement activities; and
    (ii) Start-up activities, including staff salaries and 
administrative support expenses, such as office equipment, computers 
and other information technology or capital equipment; and other 
Compact implementation activities approved by MCC.
    The allocation of Compact Implementation Funding is generally 
described in Annex II to this Compact.
    (b) In accordance with Section 7.5 of this Compact, this Section 
2.2 and other provisions of this Compact necessary to make use of 
Compact Implementation Funding for the purposes set forth herein, will 
be effective, for purposes of Compact Implementation Funding only, as 
of the date this Compact is signed by MCC and the Government.
    (c) Each Disbursement of Compact Implementation Funding is subject 
to satisfaction of the conditions to such disbursement as set forth in 
Annex IV.
    (d) If, after the first anniversary of this Compact entering into 
force, MCC determines that the full amount of Compact Implementation 
Funding under Section 2.2(a) of this Compact exceeds the amount which 
reasonably can be utilized for the purposes and uses set forth in 
Section 2.2(a) of this Compact, MCC, by written notice to the 
Government, may withdraw the excess amount, thereby reducing the amount 
of the Compact Implementation Funding as set forth in Section 2.2(a) 
(such excess, the ``Excess CIF Amount''). In such event, the amount of 
Compact Implementation Funding granted to the Government under Section 
2.2(a) will be reduced by the Excess CIF Amount, and MCC will have no 
further obligations with respect to such Excess CIF Amount.
    (e) MCC, at its option by written notice to the Government, may 
elect to grant to the Government an amount equal to all or a portion of 
such Excess CIF Amount as an increase in the Program Funding, and such 
additional Program Funding will be subject to the terms and conditions 
of this Compact and any relevant supplemental agreement applicable to 
Program Funding.

Section 2.3 MCC Funding

    Program Funding and Compact Implementation Funding are collectively 
referred to in this Compact as ``MCC Funding.''

Section 2.4 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement, MCC will disburse MCC Funding for expenditures incurred in 
furtherance of the Program (each instance, a ``Disbursement''). Subject 
to the satisfaction of all applicable conditions, the proceeds of such

[[Page 4852]]

Disbursements will be made available to the Government, at MCC's sole 
election, by (a) deposit to one or more bank accounts established by 
the Government through MCA-Moldova and acceptable to MCC (each, a 
``Permitted Account'') or (b) direct payment to the relevant provider 
of goods, works or services for the implementation of the Program. MCC 
Funding may be expended only to fund Program expenditures as provided 
in this Compact and the Program Implementation Agreement.

Section 2.5 Interest

    Except as otherwise agreed by MCC, the Government will transfer to 
MCC any interest or other earnings that accrue on MCC Funding (whether 
by directing such payments to a bank account outside Moldova that MCC 
may from time to time indicate or as otherwise directed by MCC).

Section 2.6 Government Resources; Budget

    (a) The Government will provide all funds and other resources, and 
will take all actions, that are necessary to carry out the Government's 
responsibilities and obligations under this Compact.
    (b) The Government will provide suitable and adequate office space 
for MCA-Moldova and the MCC resident country mission.
    (c) The Government will use its best efforts to ensure that all MCC 
Funding it receives or is projected to receive in each of its fiscal 
years is fully accounted for in its annual budget on a multi-year 
basis.
    (d) The Government will not reduce the normal and expected 
resources that it would otherwise receive or budget from sources other 
than MCC for the activities contemplated under this Compact and the 
Program.
    (e) Unless the Government discloses otherwise to MCC in writing, 
MCC Funding will be in addition to the resources that the Government 
would otherwise receive or budget for the activities contemplated under 
this Compact and the Program.

Section 2.7 Limitations on the Use of MCC Funding

    The Government will ensure that MCC Funding (or any refunds or 
reimbursements of MCC Funding paid by the Government in accordance with 
this Compact that MCC permits to be used in connection with the 
Program) will not be used for any purpose that would violate United 
States law or policy, as specified in this Compact or as further 
notified to the Government in writing or by posting from time to time 
on the MCC Web site at https://www.mcc.gov (the ``MCC Web site''), 
including, but not limited to, the following purposes:
    (a) For assistance to, or training of, the military, police, 
militia, national guard or other quasi-military organization or unit;
    (b) For any activity that is likely to cause a substantial loss of 
United States jobs or a substantial displacement of United States 
production;
    (c) To undertake, fund or otherwise support any activity that is 
likely to cause a significant environmental, health, or safety hazard, 
as further described in MCC's environmental and social guidelines 
posted from time to time on the MCC Web site or otherwise made 
available to the Government by MCC (the ``MCC Environmental 
Guidelines''); or
    (d) To pay for the performance of abortions as a method of family 
planning or to motivate or coerce any person to practice abortions, to 
pay for the performance of involuntary sterilizations as a method of 
family planning or to coerce or provide any financial incentive to any 
person to undergo sterilizations or to pay for any biomedical research 
which relates, in whole or in part, to methods of, or the performance 
of, abortions or involuntary sterilization as a means of family 
planning.

Section 2.8 Taxes

    (a) Unless the Parties otherwise specifically agree in writing, and 
subject to the provisions of Sections 2.8(b) and 2.8(c), the Government 
will ensure that each of the following is free from the payment or 
imposition of any existing or future taxes, duties, levies, 
contributions, or other similar charges (``Taxes'') of or in Moldova 
(including any such Taxes imposed by a national, regional, local, or 
other governmental or taxing authority of or in Moldova) (i) The 
Program; (ii) MCC Funding; (iii) interest or earnings on MCC Funding; 
(iv) any Project or activity implemented under or in connection with 
the Program; (v) MCA-Moldova; (vi) goods and other property, works, 
services, technology, and other assets and activities, whether 
acquired, used or performed at any level or stage, under or in 
connection with the Program or any Project; (vii) persons and entities 
that provide such goods and other property, works, services, 
technology, and assets, or perform such activities; and (viii) income, 
profits, and payments with respect thereto. The Parties acknowledge and 
agree that ``Taxes'' include, among other things, value added and other 
transfer taxes (including exemption therefrom with credit), profit and 
income taxes, property and ad valorem taxes, import and export duties 
and taxes (including for goods imported and re-exported for personal 
use), withholding taxes, payroll taxes, social security and mandatory 
medical insurance contributions, road taxes and various applicable 
local taxes (such as, but not limited to, taxes on real estate 
property, taxes on territorial improvement, and taxes on placement of 
advertisements in public places).
    (b) Without limiting the generality of the definition of Taxes as 
set forth in Section 2.8(a), the Parties hereby agree that the 
following taxes, duties, levies, contributions, and similar charges are 
specifically included in the definition of ``Taxes'' requiring 
exemptions in accordance with this Compact: (i) Customs duties and 
associated fees; (ii) value added taxes (``VAT''); (iii) registration 
and stamp taxes; (iv) taxes on the corporate incomes of professional, 
accounting or consulting firms derived from Compact-related work; (v) 
taxes on the corporate income of companies or other legal persons 
derived from Compact-related work; (vi) taxes on the personal income of 
individuals working under the Compact; (vii) taxes on temporary 
admissions of Compact-related goods and personal household goods; 
(viii) excise duties; (ix) customs procedure taxes; (x) road taxes; and 
(xi) real estate taxes and other local taxes. With respect to VAT and 
excise taxes on petroleum products, these will be addressed by way of a 
reimbursement, as set forth in Schedule E of Annex VI.
    (c) Unless otherwise agreed by MCC in writing, set forth in Annex 
VI are procedures that the Government will implement to effectuate the 
exemption from Taxes required by Section 2.8(a) and Section 2.8(b) 
above with respect to each of the Taxes addressed therein. To the 
extent that there are Taxes not addressed in Annex VI, whether 
currently in force or established in the future, that MCC determines, 
in its sole discretion, are not being exempted by the Government in 
accordance with this Section 2.8, the Government hereby agrees that it 
will implement appropriate procedures (approved in writing by MCC) to 
ensure that such additional Taxes are exempted in accordance with this 
Section 2.8. For the avoidance of doubt, the identification (or lack of 
identification) of Taxes in Annex VI, or the description (or lack of 
description) of procedures to implement the required exemption from 
such Taxes in Annex VI, will in no way limit the scope of the tax 
exemption required by Section 2.8.

[[Page 4853]]

    (d) Unless otherwise agreed in writing by the Parties, the 
exemption from Taxes set forth in Section 2.8(a) and 2.8(b) will not 
apply to income Taxes on, and contributions to, social insurance 
contributions and mandatory insurance charges for medical assistance, 
with respect to legal persons or natural persons who are nationals of 
Moldova, provided that such Taxes and contributions are not 
discriminatory and are generally applicable to all nationals in 
Moldova.
    (e) In complying with the tax exemption obligations set forth 
herein, the Government will exempt MCA-Moldova, the Fiscal Agent, the 
Procurement Agent, and/or any other provider of goods, services, or 
works in connection with the Program from any obligation imposed by the 
laws of Moldova to withhold any Taxes from any payments made to any 
natural persons or legal persons working under the Program to the 
extent that such legal persons or natural persons are not nationals of 
Moldova.
    (f) For the purposes of Section 2.8(d), Section 2.8(e) and Annex 
VI, the term ``national'' means natural persons who are citizens of 
Moldova or natural persons who hold a Moldovan permanent residence 
certificate and legal persons formed under the laws of Moldova 
(excluding (i) MCA-Moldova, and (ii) any foreign legal person, 
including any Moldovan-registered subsidiary, branch, representative 
office or other permanent establishment of a foreign legal person, with 
respect to income earned for providing services, goods or works in 
connection with this Compact); provided that in determining if a legal 
person has been formed under the laws of Moldova, the taxable status of 
such legal person will be based on its status at the time it is awarded 
or signs a Compact-related agreement or contract, and such initial 
determination will not change regardless of: (1) The type of agreement 
or contract used to employ or engage such company or other legal 
person; (2) any laws of Moldova that purport to change such status 
based on period of contract performance or period of time residing and/
or working in Moldova; and/or (3) any requirement under the laws of 
Moldova that a company or other legal person must establish a branch 
office in Moldova, or otherwise register or organize itself under the 
laws of Moldova, in order to provide goods, services, or works in 
Moldova.
    (g) The Government will from time to time sign and deliver, or 
cause to be signed and delivered, such other instructions, instruments 
or documents, and to take or cause to be taken such other actions as 
may be necessary or appropriate in the determination of MCC in order to 
implement this Section 2.8.
    (h) If a Tax has been levied and paid contrary to the requirements 
of this Section 2.8, or any supplemental agreement entered into 
pursuant to this Section 2.8, the Government will refund promptly to 
MCC (or to another party as designated by MCC) the amount of such Tax 
in United States Dollars or the currency of Moldova within thirty (30) 
days (or such other period as may be agreed in writing by the Parties) 
after the Government is notified in writing (whether by MCC or MCA-
Moldova) that such Tax has been paid.
    (i) No MCC Funding, proceeds thereof, or Program Assets may be 
applied by the Government in satisfaction of its obligations under this 
Section 2.8.
    (j) The mechanism for application of the tax exemption described in 
this Section 2.8 and Annex VI will be provided in a Government decision 
to be enacted after ratification of this Compact.
    (k) Notwithstanding the provisions of this Section 2.8 and Annex 
VI, with respect to all funding associated with the Activities which 
USAID intends to administer, the treatment of Taxes, other fees and any 
other fiscal obligations to the Government will be in compliance with 
the terms and conditions as stipulated and agreed to in the ``Agreement 
between the Government of the United States of America and the 
Government of Moldova Regarding Cooperation to Facilitate the Provision 
of Assistance,'' which entered into force on March 21, 1994, as may be 
amended from time to time.

Article 3. Implementation

Section 3.1 Program Implementation Agreement

    Prior to entry into force of this Compact, the Government and MCC 
will enter into an agreement relating to, among other matters, 
implementation arrangements, fiscal accountability and disbursement, 
and use of MCC Funding (the ``Program Implementation Agreement'' or 
``PIA''). The Government will implement the Program in accordance with 
the Compact and the PIA.

Section 3.2 Government Responsibilities

    (a) The Government has principal responsibility for overseeing and 
managing the implementation of the Program.
    (b) The Government hereby designates MCA-Moldova, an entity to be 
established through passage of a decree (the ``Establishment Decree''), 
as the accountable entity to implement the Program and to exercise and 
perform the Government's rights and responsibilities with respect to 
the oversight, management, and implementation of the Program, 
including, without limitation, managing the implementation of Projects 
and their Activities, allocating resources, and managing procurements. 
Such entity will be referred to herein as ``MCA-Moldova,'' and will 
have the authority to bind the Government with regard to all Program 
Activities. The Establishment Decree will be in form and substance 
satisfactory to MCC. For the avoidance of doubt, the designation of 
MCA-Moldova as set forth in this Section 3.2(b) will not relieve the 
Government of any of its obligations or responsibilities as set forth 
hereunder, under any related agreement (including, upon execution 
thereof, the PIA), or under the Program Guidelines, for which the 
Government remains fully responsible. MCC hereby acknowledges and 
consents to the designation in this Section 3.2(b).
    (c) The Government will ensure that no law or regulation in Moldova 
now or hereinafter in effect makes or will make unlawful or otherwise 
prevent or hinder the performance of any of the Government's 
obligations under this Compact, the PIA, or any other related agreement 
or any transaction contemplated hereby or thereby.
    (d) The Government will ensure that any assets or services funded 
in whole or in part (directly or indirectly) by MCC Funding are used 
solely in furtherance of this Compact and the Program unless otherwise 
agreed by MCC in writing.
    (e) The Government will take all necessary or appropriate steps to 
achieve the Program Objective and the Project Objectives during the 
Compact Term.
    (f) The Government will fully comply with the Program Guidelines, 
as applicable, in its implementation of the Program.

Section 3.3 Policy Performance

    In addition to undertaking the specific policy, legal, and 
regulatory reform commitments identified in Annex I (if any), the 
Government will seek to maintain and to improve its level of 
performance under the policy criteria identified in Section 607 of the 
MCA Act, and the selection criteria and methodology used by MCC.

Section 3.4 Government Assurances

    The Government assures MCC that, as of the date this Compact is 
signed by the

[[Page 4854]]

Government, the information provided to MCC by or on behalf of the 
Government in the course of reaching agreement with MCC on this Compact 
is true, correct and complete in all material respects.

Section 3.5 Implementation Letters

    From time to time, MCC may provide guidance to the Government in 
writing on any matters relating to this Compact, MCC Funding, or 
implementation of the Program (each, an ``Implementation Letter''). The 
Government will apply such guidance in implementing the Program. 
Without limiting the foregoing, either Party may, through its Principal 
Representative or any Additional Representative, as the case may be, 
initiate discussions that may result in a jointly agreed-upon 
Implementation Letter to confirm and record their mutual understanding 
on aspects related to the implementation of this Compact, the PIA, or 
other related agreements.

Section 3.6 Procurement

    The Government will ensure that the procurement of all goods, 
works, and services by the Government, or any applicable provider 
providing goods, works, and services, to implement the Program will be 
consistent with the program procurement guidelines posted from time to 
time on the MCC Web site (the ``MCC Program Procurement Guidelines''). 
The MCC Program Procurement Guidelines include, among others, the 
following requirements:
    (a) Open, fair, and competitive procedures must be used in a 
transparent manner to solicit, award and administer contracts and to 
procure goods, works, and services;
    (b) Solicitations for goods, works, and services must be based upon 
a clear and accurate description of the goods, works, and services to 
be acquired;
    (c) Contracts must be awarded only to qualified contractors that 
have the capability and willingness to perform the contracts in 
accordance with their terms on a cost effective and timely basis; and
    (d) No more than a commercially reasonable price, as determined, 
for example, by a comparison of price quotations and market prices, 
will be paid to procure goods, works, and services.

Section 3.7 Records; Accounting; Covered Providers; Access

    (a) Government Books and Records. The Government will maintain, and 
will use its best efforts to ensure that all Covered Providers 
maintain, accounting books, records, documents, and other evidence 
relating to the Program adequate to show, to MCC's satisfaction, the 
use of all MCC Funding (``Compact Records''). In addition, the 
Government will furnish or cause to be furnished to MCC, upon its 
request, all such Compact Records.
    (b) Accounting. The Government will maintain, and will 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 MCC's 
prior written approval, other accounting principles, such as those (i) 
prescribed by the International Accounting Standards Board, or (ii) 
then prevailing in Moldova. Compact Records must 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) Providers and Covered Providers. Unless the Parties agree 
otherwise in writing, a ``Provider'' is (i) any entity of the 
Government that receives or uses MCC Funding or any other Program Asset 
in carrying out activities in furtherance of this Compact, or (ii) any 
third party that receives at least Fifty Thousand United Stated Dollars 
(US$50,000) in the aggregate of MCC Funding (other than as salary or 
compensation as an employee of an entity of the Government) during the 
Compact Term. A ``Covered Provider'' is (1) a non-United States 
Provider that receives (other than pursuant to a direct contract or 
agreement with MCC) Three Hundred Thousand United States Dollars 
(US$300,000) or more of MCC Funding in any Government fiscal year or 
any other non-United States person or entity that receives, directly or 
indirectly, Three Hundred Thousand United States Dollars (US$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) Five Hundred Thousand United 
States Dollars (US$500,000) or more of MCC Funding in any Government 
fiscal year or any other United States person or entity that receives, 
directly or indirectly, Five Hundred Thousand United States Dollars 
(US$500,000) or more of MCC Funding from any Provider in such fiscal 
year.
    (d) Access. Upon MCC's request, the Government, at all reasonable 
times, will permit, or cause to be permitted, authorized 
representatives of MCC, an authorized 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 the 
Government to conduct any assessment, review, or evaluation of the 
Program, the opportunity to audit, review, evaluate, or inspect 
facilities and activities funded in whole or in part by MCC Funding.

Section 3.8 Audits; Reviews

    (a) Government Audits. Except as the Parties may otherwise agree in 
writing, the Government will, on at least a semi-annual basis, conduct, 
or cause to be conducted, financial audits of all disbursements of MCC 
Funding covering the period from signing of this Compact until the 
earlier of the following December 31 or June 30 and covering each six-
month period thereafter ending December 31 and June 30, through the end 
of the Compact Term. In addition, upon MCC's request, the Government 
will ensure that such audits are conducted by an independent auditor 
approved by MCC and named on the list of local auditors approved by the 
Inspector General of MCC (the ``Inspector General'') or a United 
States-based certified public accounting firm selected in accordance 
with the ``Guidelines for Financial Audits Contracted by MCA'' (the 
``Audit Guidelines'') issued and revised from time to time by the 
Inspector General, which are posted on the MCC Web site. Audits will be 
performed in accordance with the Audit Guidelines and be subject to 
quality assurance oversight by the Inspector General. Each audit must 
be completed and the audit report delivered to MCC no later than ninety 
(90) days after the first period to be audited and no later than ninety 
(90) days after each June 30 and December 31 thereafter, or such other 
period as the Parties may otherwise agree in writing.
    (b) Audits of United States Entities. The Government will ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States nonprofit organization, on the other hand, 
that are financed with MCC Funding state that the United States 
nonprofit organization is subject to the applicable audit requirements 
contained in OMB Circular A-133 issued by the United States Government 
Office of Management and Budget (``OMB''). The Government will ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States for-profit Covered Provider, on the other 
hand, that are financed with MCC Funding state that the United States 
for-profit

[[Page 4855]]

organization is subject to audit by the applicable United States 
Government agency, unless the Government and MCC agree otherwise in 
writing.
    (c) Corrective Actions. The Government will (i) use its best 
efforts to ensure that Covered Providers take, where necessary, 
appropriate and timely corrective actions in response to audits, (ii) 
consider whether the results of a Covered Provider's audit necessitates 
adjustment of the Government's records, and (iii) require each such 
Covered Provider to permit independent auditors to have access to its 
records and financial statements as necessary.
    (d) Audit by MCC. MCC will have the right to arrange for audits of 
the Government's use of MCC Funding.
    (e) 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.

Article 4. Communications

Section 4.1 Communications

    Any document or communication required or submitted by either Party 
to the other under this Compact must be in writing and, except as 
otherwise agreed with MCC, in English. For this purpose, the address of 
each Party is set forth below.
To MCC
    Millennium Challenge Corporation, Attention: Vice President, 
Compact Implementation, (in each case, 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, 
Telephone: (202) 521-3600, E-mail: VPImplementation@mcc.gov (Vice 
President, Compact Implementation), VPGeneralCounsel@mcc.gov (Vice 
President and General Counsel)
To the Government
    State Chancellery, Attention: Minister of State, 1, Piata Marii 
Adunari Nationale, Chisinau MD-2033, Republic of Moldova, Facsimile: 
(373) 22 242 696, Telephone: (373) 22 250 104, E-mail: 
victor.bodiu@gov.md.
With a Copy to MCA-Moldova
    Upon establishment of MCA-Moldova, MCA-Moldova will notify the 
Parties of its contact details.

Section 4.2 Representatives

    For all purposes of this Compact, the Government will be 
represented by the individual holding the position of, or acting as, 
the State Minister of Moldova, and MCC will be represented by the 
individual holding the position of, or acting as, Vice President, 
Compact Implementation (each of the foregoing, a ``Principal 
Representative''). Each Party, by written notice to the other Party, 
may designate one or more additional representatives (each, an 
``Additional Representative'') for all purposes other than signing 
amendments to this Compact. The Government hereby irrevocably 
designates the Executive Director of MCA-Moldova as an Additional 
Representative. A Party may change its Principal Representative to a 
new representative that holds a position of equal or higher rank upon 
written notice to the other Party.

Section 4.3 Signatures

    With respect to all documents other than this Compact or an 
amendment to this Compact, a signature delivered by facsimile or 
electronic mail will be binding on the Party delivering such signature 
to the same extent as an original signature would be.

Article 5. Termination; Suspension; Refunds

Section 5.1 Termination; Suspension

    (a) Either Party may terminate this Compact without cause in whole 
by giving the other Party thirty (30) days written notice. MCC may also 
terminate this Compact without cause in part by giving the Government 
thirty (30) days written notice.
    (b) MCC may, immediately, upon written notice to the Government, 
suspend or terminate this Compact or MCC Funding, in whole or in part, 
and any obligation related thereto, if MCC determines that any 
circumstance identified by MCC as a basis for suspension or termination 
(whether in writing to the Government or by posting on the MCC Web 
site) has occurred, which circumstances include, but are not limited, 
to the following:
    (i) The Government fails to comply with its obligations under this 
Compact, the PIA, or any other agreement or arrangement entered into by 
the Government in connection with this Compact or the Program;
    (ii) An event or series of events has occurred that MCC determines 
makes it probable that the Program Objective or any of the Project 
Objectives will not be achieved during the Compact Term or that the 
Government will not be able to perform its obligations under this 
Compact;
    (iii) A use of MCC Funding or continued implementation of this 
Compact or the Program violates applicable law or United States 
Government policy, whether now or hereafter in effect;
    (iv) The Government or any other person or entity receiving MCC 
Funding or using assets acquired in whole or in part with MCC Funding 
is engaged in activities that are contrary to the national security 
interests of the United States;
    (v) An act has been committed or an omission or an event has 
occurred that would render Moldova 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;
    (vi) Moldova is classified as a Tier 3 country in the United States 
Department of State's annual Trafficking in Persons Report;
    (vii) The Government has engaged in a pattern of actions 
inconsistent with the criteria used to determine the eligibility of 
Moldova for assistance under the MCA Act; or
    (viii) The Government or another person or entity receiving MCC 
Funding or using assets acquired in whole or in part with MCC Funding 
is found to have been convicted of a narcotics offense or to have been 
engaged in drug trafficking.
    (c) All Disbursements will cease upon expiration, suspension, or 
termination of this Compact; provided, however, MCC may permit MCC 
Funding to be used, in compliance with this Compact and the PIA, to pay 
for (i) expenditures for goods, works, or services that are properly 
incurred under or in furtherance of the Program before expiration, 
suspension, or termination of this Compact, and (ii) reasonable 
expenditures (including administrative expenses) properly incurred in 
connection with the winding up of the Program within one hundred twenty 
(120) days after the expiration, suspension, or termination of this 
Compact, so long as, with respect to (i) and (ii) herein, the request 
for such expenditures is submitted within ninety (90) days after such 
expiration, suspension, or termination.
    (d) Subject to Section 5.1(c), upon the expiration, suspension, or 
termination of this Compact, (i) any amounts of MCC Funding not 
disbursed by MCC in accordance with the Compact and the PIA will be 
automatically released from any obligation in connection with this 
Compact, and (ii) any amounts of MCC Funding disbursed to the Permitted 
Account by MCC but not expended before the expiration, suspension or 
termination of this Compact, plus accrued interest thereon will be 
returned to MCC within thirty (30) days after the Government receives 
MCC's

[[Page 4856]]

request for such return; provided, however, that if this Compact is 
suspended or terminated in part, MCC may request a refund for only the 
amount of MCC Funding allocated to the suspended or terminated portion. 
For the avoidance of doubt, interest will accrue from the date of the 
violation and will be calculated at the 10-year U.S. Treasury Note rate 
prevailing as of the close of business in Washington, DC as of the date 
of MCC's request for payment.
    (e) MCC may reinstate any suspended or terminated MCC Funding under 
this Compact if MCC determines that the Government or other relevant 
person or entity has committed to correct each condition for which MCC 
Funding was suspended or terminated.

Section 5.2 Refunds; Violation

    (a) If any MCC Funding, any interest or earnings thereon, or any 
asset acquired in whole or in part with MCC Funding is used for any 
purpose in violation of the terms of this Compact or the PIA, 
including, but not limited to, any violation of the Program Guidelines, 
then MCC may require the Government to repay to MCC in United States 
Dollars the value of the misused MCC Funding, interest, earnings, or 
assets, plus interest within thirty (30) days after the Government's 
receipt of MCC's request for repayment. For the avoidance of doubt, 
interest will accrue from the date of the violation and will be 
calculated at the 10-year U.S. Treasury Note rate prevailing as of the 
close of business in Washington, DC as of the date of MCC's request for 
payment. The Government will not use MCC Funding, proceeds thereof or 
Program Assets to make such payment.
    (b) Notwithstanding any other provision in this Compact or any 
other agreement to the contrary, MCC's right under this Section 5.2 for 
a refund will 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.

Section 5.3 Survival

    The Government's responsibilities under Sections 2.4, 2.5, 2.6, 
2.7, 2.8, 3.7, 3.8, 5.1(c), 5.1(d), 5.2, 5.3, 6.2, and 6.4 of this 
Compact will survive the expiration, suspension or termination of this 
Compact.

Article 6. Compact Annexes; Amendments; Governing Law

Section 6.1 Annexes

    Each annex to this Compact constitutes an integral part hereof, and 
references to ``Annex'' mean an annex to this Compact unless otherwise 
expressly stated.

Section 6.2 Amendments

    (a) The Parties may amend this Compact only by a written agreement 
signed by the Principal Representatives.
    (b) Without formally amending this Compact, the Government hereby 
acknowledges and agrees that the Parties may, through the Principal 
Representative, in the case of Moldova, or Principal Representative, or 
any Additional Representative, in the case of MCC, as the case may be, 
in writing, agree to modify any Annex to this Compact to (i) suspend, 
terminate, or modify any project described in Annex I (each, a 
``Project'' and collectively, the ``Projects'') or to create a new 
project, (ii) change the allocations of funds among the Projects, the 
Project Activities, or any Activity under Program administration or 
monitoring and evaluation, or between a Project identified as of the 
signature of this Compact and a new project, (iii) modify the terms of 
Section B.3 of Annex I, or (iv) add, delete, or waive any condition 
precedent described in Annex IV, provided that any such modification 
(1) is consistent in all material respects with the Program Objective, 
(2) does not cause the amount of Program Funding to exceed the 
aggregate amount specified in Section 2.1 of this Compact (as may be 
modified by operation of Section 2.2(e) of this Compact), (3) does not 
cause the amount of Compact Implementation Funding to exceed the 
aggregate amount specified in Section 2.2(a) of this Compact, (4) does 
not cause the Government's responsibilities or contribution of 
resources to be less than specified in this Compact, (5) does not 
extend the Compact Term, and (6) in the case of a modification to 
change allocations of funds among Projects or the creation of a new 
Project, does not materially adversely affect any Activity under 
Program administration or monitoring and evaluation.
    (c) Any modification of any Annex to this Compact signed in 
accordance with Section 6.2(b), or any modification of any other 
provision of this Compact pursuant to Section 6.2(a), will be binding 
on the Government without the need for further action by the 
Government, any further Parliamentary action, or satisfaction of any 
additional domestic requirements of Moldova.

Section 6.3 Inconsistencies

    In the event of any conflict or inconsistency between:
    (a) Any Annex to this Compact and any of Articles 1 through 7, such 
Articles 1 through 7 will prevail; or
    (b) This Compact and any other agreement between the Parties 
regarding the Program, this Compact will prevail.

Section 6.4 Governing Law

    This Compact is an international agreement and as such will be 
governed by the principles of international law.

Section 6.5 Additional Instruments

    Any reference to activities, obligations, or rights undertaken or 
existing under or in furtherance of this Compact or similar language 
will include activities, obligations, and rights undertaken by or 
existing under or in furtherance of any agreement, document, or 
instrument related to this Compact and the Program.

Section 6.6 References to MCC Web Site

    Any reference in this Compact, the PIA, or any other agreement 
entered into in connection with this Compact, to a document or 
information available on, or notified by posting on the MCC Web site 
will be deemed a reference to such document or information as updated 
or substituted on the MCC Web site from time to time.

Section 6.7 References to Laws, Regulations, Policies, and Guidelines

    Each reference in this Compact, the PIA, or any other agreement 
entered into in connection with this Compact, to a law, regulation, 
policy, guideline, or similar document (including, but not limited to, 
the Program Guidelines) will be construed as a reference to such law, 
regulation, policy, guideline, or similar document as it may, from time 
to time, be amended, revised, replaced, or extended and will include 
any law, regulation, policy, guideline, or similar document issued 
under or otherwise applicable or related to such law, regulation, 
policy, guideline, or similar document.

Section 6.8 MCC Status

    MCC is a United States government corporation acting on behalf of 
the United States government in the implementation of this Compact. MCC 
and the United States government have no liability under this Compact, 
the Program Implementation Agreement, or any related agreement, are 
immune from any action or proceeding arising under or relating to any 
of the foregoing documents, and the Government hereby waives and 
releases all claims related to any such liability. In matters arising 
under or relating to this Compact, the

[[Page 4857]]

Program Implementation Agreement, or any related agreement, neither MCC 
nor the United States government will be subject to the jurisdiction of 
the courts of Moldova or of any other jurisdiction or of any other 
body.

Section 6.9 Counterparts; Electronic Delivery

    (a) Counterparts. Signatures to this Compact, the Program 
Implementation Agreement, and any amendments to such agreements that 
are done as instruments to be signed by both Parties will be signed on 
the same page. Any other documents arising out of this Compact, may be 
signed in one or more counterparts. Such counterparts when delivered 
and taken together will constitute a single document.
    (b) Electronic Delivery. A signature to this Compact, the Program 
Implementation Agreement, and any amendments to such agreements, will 
be an original signature. With respect to any other documents arising 
out of this Compact, a signature delivered by facsimile or electronic 
mail in accordance with Section 4.1 of this Compact will be deemed an 
original signature and will be binding on the Party delivering such 
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.

Article 7. Entry Into Force

Section 7.1 Domestic Requirements

    Before this Compact enters into force, the Government will proceed 
in a timely manner to obtain ratification of this Compact by the 
Moldovan Parliament. The Parties understand that, upon its entry into 
force this Compact will prevail over the domestic laws of Moldova.

Section 7.2 Conditions Precedent to Entry Into Force

    Before this Compact enters into force:
    (a) The PIA must have been signed by the parties thereto;
    (b) The Government must have delivered to MCC:
    (i) A legal opinion from the Minister of Justice of Moldova (or 
such other legal representative of the Government acceptable to MCC), 
in form and substance satisfactory to MCC; and
    (ii) Complete, certified copies of all decrees, legislation, 
regulations, or other governmental documents relating to the 
Government's domestic requirements for this Compact to enter into force 
and the satisfaction of Section 7.1, which MCC may post on the MCC Web 
site or otherwise make publicly available; and
    (c) MCC must determine that, after signature of this Compact, the 
Government has not engaged in any action or omission that is 
inconsistent with the eligibility criteria for MCC Funding.

Section 7.3 Date of Entry into Force

    This Compact will enter into force on the date of the last letter 
in an exchange of letters between the Principal Representatives 
confirming that each Party has completed its domestic requirements for 
entry into force of this Compact and that the conditions precedent to 
entry into force of Section 7.2 have been met.

Section 7.4 Compact Term

    This Compact will remain in force for five (5) years after its 
entry into force, unless terminated earlier under Section 5.1 (the 
``Compact Term'').

Section 7.5 Provisional Application

    Upon signature of this Compact and until this Compact has entered 
into force in accordance with Section 7.3, the Parties will 
provisionally apply the terms of this Compact and the PIA; provided 
that, no Program Funding will be made available or disbursed before 
this Compact enters into force.
    In Witness Whereof, the undersigned, duly authorized by their 
respective governments, have signed this Compact.
    Done at Washington, DC, this 22nd day of January, 2010, in the 
English language only.
    For Millennium Challenge Corporation, on behalf of the United 
States of America, Name: Daniel W. Yohannes, Title: Chief Executive 
Officer.
    For the Republic of Moldova, Name: Iurie Leanc[abreve], Title: 
Deputy Prime Minister, Minister of Foreign Affairs and European 
Integration.

Annex I--Program Description

    This Annex I describes the Program that MCC Funding will support in 
Moldova during the Compact Term.

A. Program Overview

1. Background and Consultative Process
    With a population of approximately 3.8 million inhabitants, Moldova 
was originally declared eligible for MCC Compact assistance in 2006. 
The Government mobilized a team of consultants to conduct an empirical 
analysis of the key constraints to growth. This constraints analysis 
served as the basis for two rounds of national consultations through 
regional town-hall meetings, as well as numerous meetings with smaller 
groups of stakeholders. Following these consultations, the Government 
submitted a Compact proposal in February 2008. In addition to the 
national consultations, project-specific consultations were conducted 
as part of the environmental and social impact assessment, both by the 
Government and by MCC-contracted entities. These public fora involved 
consultations with key stakeholders including: local government 
officials, regional and national staff from government agencies, civil 
society representatives, environmental and social non-governmental 
organizations, and interested local people to evaluate the proposed 
projects, to raise concerns, and to make recommendations on the design 
requirements to enhance benefits and reduce negative impacts from 
project implementation. These recommendations are to be incorporated 
into the detailed design to better address community needs. In 
addition, the Government and MCC worked with a consultative group of 
public and private sector representatives in the agricultural sector.
    Agriculture has been the backbone of the Moldovan economy, with 
Moldova formerly serving as an important exporter of high value 
agriculture to the rest of the Soviet Union. Following the collapse of 
the Soviet Union, Moldova lost its position as a key exporter of fresh 
produce, and its extensive irrigation systems and post-harvest cold 
chain fell into disrepair.
    Reforms necessary to attract private and donor investment in 
agriculture have been slow. As a result, Moldovan agriculture suffers 
from low productivity, contributing to high rates of rural poverty. 
However, with its fertile soils, relatively long growing season, and 
proximity to both European Union and former Soviet markets, Moldova has 
many of the necessary conditions to regain competitiveness in high 
value agriculture. The key constraints facing Moldovan producers are: 
lack of reliable water, lack of financing, lack of access to markets 
and technologies and lack of know-how. The Transition to High Value 
Agriculture Project will address these constraints.
    The quality of the road network in Moldova is seriously 
deteriorated and has been cited repeatedly as a binding constraint to 
economic growth which impacts the entire country, as the country's 
economy is highly dependent on road transport. The Road Rehabilitation 
Project will address this constraint.

[[Page 4858]]

2. Program Objective
    The Program Objective is to increase incomes through increased 
agricultural productivity and expanded access to markets and services 
through improved roads. The Program consists of the Transition to High 
Value Agriculture Project and the Road Rehabilitation Project as 
further described in this Annex I.
3. Environmental and Social Safeguards
    The Transition to High Value Agriculture Project and the Road 
Rehabilitation Project will be implemented in compliance with the MCC 
Environmental Guidelines and MCC's environmental and social guidelines 
posted from time to time on the MCC Web site or otherwise made 
available to the Government by MCC (``MCC Gender Policy'') and any 
resettlement will be carried out in accordance with best international 
resettlement standards based on the World Bank's Operational Policy on 
Involuntary Resettlement in effect as of July 2007 (``OP 4.12'') and in 
accordance with procedures approved by MCC. The Government will also 
ensure that the Projects comply with all national environmental laws 
and regulations, licenses and permits, except to the extent such 
compliance would be inconsistent with this Compact. The Government 
will: (a) Cooperate with any ongoing environmental review, or if 
necessary undertake and complete any additional environmental reviews, 
required by MCC or under the laws of Moldova; (b) implement to MCC's 
satisfaction environmental and social mitigation measures identified in 
such environmental review; and (c) commit to fund environmental 
mitigation, (including costs of resettlement) in excess of MCC Funding 
not specifically provided for in the budget for any Project.
    To maximize the positive social impacts of the Projects, address 
cross-cutting social and gender issues such as human trafficking, child 
and forced labor, and HIV/AIDS, and ensure compliance with the MCC 
Gender Policy, MCA-Moldova will: (i) Develop a comprehensive social and 
gender integration plan which, at a minimum, identifies approaches for 
regular, meaningful and inclusive consultations with women and other 
vulnerable/underrepresented groups, consolidates the findings and 
recommendations of Project-specific social and gender analyses and sets 
forth strategies for incorporating findings of the social and gender 
analyses into final Project designs as appropriate; and (ii) ensure, 
through monitoring and coordination during implementation, that final 
Project Activity designs, construction tender documents and 
implementation plans are consistent with and incorporate the outcomes 
of the social and gender analysis and social and gender integration 
plan.

B. Description of the Projects

    Set forth below is a description of each of the Projects that the 
Government will implement, or cause to be implemented, using MCC 
Funding to advance the applicable Project Objective. In addition, 
specific activities that will be undertaken within each Project (each, 
an ``Activity''), including sub-activities, are described.
1. Transition to High Value Agriculture Project
    (a) Summary of Project and Activities.
    The objectives of the Transition to High Value Agriculture Project 
are to: (i) Increase rural incomes by stimulating growth in irrigated 
high value agriculture; and (ii) catalyze future investments in high 
value agriculture by establishing a successful and sustainable model of 
irrigation system and water resource management and a conducive 
institutional and policy environment for irrigated agriculture.
    The Transition to High Value Agriculture Project consists of four 
reinforcing and integrated activities that, when implemented together, 
address the key constraints facing Moldovan producers: lack of reliable 
water, lack of financing, lack of access to markets and technologies, 
and lack of know-how (the ``Transition to High Value Agriculture 
Project''). The Transition to High Value Agriculture Project will 
increase the ability and willingness of farmers to make the transition 
to higher value fruit and vegetable production. By addressing 
infrastructure and institutional/market constraints, the Transition to 
High Value Agriculture Project will break the vicious cycle of poor 
water service, low water tariff revenue, underinvestment in irrigation 
system maintenance, and low investment by farmers in high value 
agriculture (resulting in low agricultural incomes). The Transition to 
High Value Agriculture Project provides the first opportunity to pilot 
a set of institutional and management reforms, together with much 
needed infrastructure rehabilitation that will set the stage for future 
investment and enable Moldova to benefit from its natural comparative 
advantage in agriculture.
    The Transition to High Value Agriculture Project will: (i) 
Rehabilitate up to 11 irrigation systems covering a command area of up 
to approximately 15,500 hectares (the ``Centralized Irrigation System 
Rehabilitation Activity''); (ii) provide technical assistance and 
capacity building to (1) support legal transfer of management and 
operations of MCC-rehabilitated systems from the Government to Water 
User Associations (``WUAs''), (2) improve water resource management, 
including establishment of a modern water rights system, and (3) ensure 
the legal and institutional fram