Notice of Entering Into a Compact With the Government of Georgia, 58900-58939 [05-20008]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 70, Number 194 (Friday, October 7, 2005)]
[Notices]
[Pages 58900-58939]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-20008]



[[Page 58899]]

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

Part VI





Millennium Challenge Corporation





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



Notice of Entering Into a Compact With the Government of Georgia; 
Notice

Federal Register / Vol. 70, No. 194 / Friday, October 7, 2005 / 
Notices

[[Page 58900]]


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

MILLENNIUM CHALLENGE CORPORATION

[MCC FR 05-17]


Notice of Entering Into a Compact With the Government of Georgia

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 is publishing a detailed summary and text of the 
Millennium Challenge Compact between the United States of America, 
acting through the Millennium Challenge Corporation, and the Government 
of Georgia. Representatives of the United States Government and the 
Government of Georgia executed the Compact documents on September 12, 
2005.

    Dated: September 29, 2005.
John C. Mantini,
Acting General Counsel, Millennium Challenge Corporation.

Summary of Millennium Challenge Compact With the Government of Georgia

I. Introduction

    Despite positive developments since the Rose Revolution, Georgia 
has had difficulty in building an integrated national economy, reducing 
poverty, and stimulating economic growth in the regions outside of the 
capital, Tbilisi. These regions, home to more than 40 percent of the 
country's total population, have been particularly affected by 
declining economic conditions, with poverty rising nearly 10 percent 
between 1996 and 2003. This makes them home to the poorest and most 
vulnerable segments of Georgia s population. In some regions, more than 
50 percent of rural households live below the official poverty line.
    Based on the results of an extensive consultative process and 
consideration of other donor programs, the Government of Georgia 
focused its Millennium Challenge Account (MCA) Program on two 
impediments to poverty reduction and economic development in the 
regions outside Tbilisi: a lack of reliable infrastructure and the slow 
development of enterprises, particularly in agribusiness. The Program 
will work to achieve two main objectives, as follows:
     Rehabilitate key regional infrastructure, thus improving 
transportation for regional trade, ensuring a reliable supply of 
energy, and regional and municipal service delivery.
     Develop regional enterprises by funding investment and 
technical assistance and by increasing productivity in farms, 
agribusinesses and other enterprises to increase jobs and rural income.

The five-year, $295.3 million MCA Compact will help Georgia achieve 
these objectives, as outlined below.

II. Program Activities, Costs and Performance

1. Regional Infrastructure Rehabilitation Project

    Dilapidated infrastructure, especially the poor condition of roads, 
unreliable gas and electricity supply, and deteriorating municipal 
services, was consistently indicated as a major impediment to economic 
growth during Georgia's consultative process. Georgia recognizes the 
importance of adequate and reliable infrastructure for manufacturing, 
commerce, improved health services and economic development in general.
    The Regional Infrastructure Rehabilitation Project is designed to 
address chronic infrastructure challenges, with a particular focus on 
rehabilitating key regional transport routes, natural gas transport and 
distribution, and regional and municipal services. Activities under 
this project include:
     Samtskhe-Javakheti Road Rehabilitation activity ($102.2 
million) for the rehabilitation and construction of approximately 245 
kilometers of a main road traversing the isolated Samtskhe-Javakheti 
region, including technical assistance for a road master plan, 
operations and maintenance planning and contracting.
     Energy Rehabilitation activity ($49. 5 million) for the 
rehabilitation of the North-South Gas Pipeline that fuels electric 
power generation and provides commercial and residential gas and 
heating services to the entire country, and for the provision of 
advisory services to support implementation of Georgia's energy sector 
strategy.
     Regional Infrastructure Development activity ($60.0 
million) to fund regional and municipal physical infrastructure for 
water supply, sanitation, irrigation, municipal gasification, roads and 
solid waste in the regions outside Tbilisi.

2. Enterprise Development Project

    Although Georgia has witnessed a significant economic expansion in 
recent years, growth has been concentrated in and around the capital 
city, Tbilisi, while economic conditions in the regions remain 
stagnant. Small and medium enterprises (SMEs) could be a powerful 
driver for economic growth in these areas. However, the performance of 
SMEs has been disappointing. Of particular concern is the agriculture 
sector, which accounts for 16 percent of Georgia's economic output and 
an even larger share of employment. Georgia's diverse climactic zones 
and rich natural resources provide the potential for future development 
of the agriculture and agribusiness sectors, particularly in the 
regions. With increased quantity and quality, Georgian agricultural 
products could better compete with imported food products, thereby 
improving the living standards of the rural poor. Yet businesses face 
problems with poor technology, processing, marketing, management 
skills, and credit access.
    The Enterprise Development Project is designed to address two of 
the key constraints faced by SMEs in agribusiness and other sectors in 
the regions, namely the need for additional long-term risk capital and 
the need for improved skills and capacity in enterprises to recognize 
and take advantage of market opportunities. Activities under this 
project include:
     Georgia Regional Development Fund activity ($32.5 million) 
for a professionally and independently managed investment fund to 
provide long-term risk capital and technical assistance to SMEs, 
primarily in the regions outside Tbilisi, and for activities to 
identify and encourage legal and policy reforms needed to improve the 
investment environment.
     Agribusiness Development activity ($15.0 million) for 
technical assistance and grants to farmers and agribusinesses that 
supply products to the domestic market and the provision of services 
for disseminating information on regional market prices and volumes.

3. Measuring Outcome and Impact

    The Monitoring and Evaluation (M&E) Plan provides the 
methodological approach, management structures, tasks and timelines, 
and performance indicators for monitoring progress toward achieving the 
Compact goal, project objectives, activity outcomes and sub-activity 
outputs. It also provides the framework for evaluating the impact of 
the program on beneficiaries, disaggregated by gender and age, where 
appropriate. The M&E Plan will be complemented by an Activity 
Monitoring Plan to track activity and sub-activity outputs and process 
benchmarks.

[[Page 58901]]

    The overall objective of Georgia's MCA Program is to increase 
economic growth and reduce poverty in the regions of Georgia, with a 
particular emphasis on the Samtskhe-Javakheti region. The Program's 
success will be measured by the incremental increase in financial 
benefits from each activity, as well as reductions in both the poverty 
incidence and the poverty gap in the Samtske-Javakheti region.
    Within five years, it is estimated that the Program will benefit 
nearly half a million Georgians and could indirectly impact the lives 
of a quarter of the population. The Program is also expected to reduce 
the incidence of poverty in the Samtskhe-Javakheti region by 12 
percent. Other benefits include an expected increase of about $37 
million in annual income to households and $27 million in business 
revenue nationwide through the Enterprise Development Project, as well 
as a reduction in technical losses from the gas pipeline from five 
percent to approximately two percent, with a significantly reduced risk 
that a major pipeline accident could cut off critical winter heat to 
hundreds of thousands of households.

4. Program Administration and Control

    The MCA program will be administered by MCG, an independent legal 
entity ultimately accountable for the success of the Program. A 
Supervisory Board consisting of members of Government, parliament, the 
private sector, and civil society will oversee MCG's professional 
management unit. The management unit will also be advised by a 
Stakeholders' Committee consisting of representatives from municipal 
government, the private sector and civil society. MCC will retain 
approval rights at a number of key decision points during 
implementation, including key procurements, project budgets, major re-
disbursements and key personnel decisions, in addition to its observer 
status on the MCG Supervisory Board.
    For the Road Rehabilitation activity, an international project 
management firm will work in conjunction with the Road Department of 
the Ministry of Economic Development in Georgia. For the Energy 
Rehabilitation activity, a project management consultant with 
experience in rehabilitating pipelines will manage the pipeline 
rehabilitation work, in conjunction with the Georgia Gas International 
Company (GGIC). The Municipal Development Fund, the project 
implementation unit for an existing World Bank project, will implement 
the Regional Infrastructure Development activity, with support from the 
World Bank. Independent project managers selected through open and 
transparent international tenders will manage each of the remaining 
projects. A professional firm with substantial prior experience 
conducting non-asset based financing and investment in transitional 
economies or similar business environments will manage the Georgia 
Regional Development Fund activity. The Agribusiness Development 
activity will be managed by a development organization selected 
according to detailed selection criteria developed by MCG, with MCC 
support.
    Fiscal and procurement management will be managed by an 
internationally recognized, private sector accounting firm chosen in a 
competitive process. The Fiscal/Procurement Agent will provide 
professional services for (1) funds control, disbursement documentation 
and management, cash management and accounting; and (2) the planning, 
management and supervision of the procurement processes contemplated 
under the MCA Program. World Bank procurement guidelines, as modified 
by MCC, will serve as the basis of a procurement agreement that will 
govern all procurements under the Compact.

III. Assessment

1. Economic Analysis

    Georgia's MCA Program has an overall economic rate of return (ERR) 
of 17 percent, calculated as a weighted average of each component. The 
base case return on the Samtskhe-Javakheti Road activity is estimated 
to be 20 percent, based on enhanced agricultural surplus and reduced 
vehicle operating costs. The base case return on the Energy 
Rehabilitation activity is estimated to be 11 percent. By 
rehabilitating the North-South Gas Pipeline, it was assumed that 
Georgia could avoid additional expenditures on gas purchases and reap 
returns from selling carbon credits for the reduction of greenhouse gas 
emissions under the United Nations Framework Convention on Climate 
Change. The base case return on the Regional Infrastructure Development 
activity is estimated to be 12 percent, on the assumption that 
improvements in regional and municipal services resulting from improved 
infrastructure would ease bottlenecks that constrain economic activity, 
perpetuate market fragmentation, impose numerous transaction costs on 
business, and lower productivity. The base case return on the Georgia 
Regional Development Fund activity was calculated to be 24 percent. 
This ERR captures economic benefits that include anticipated net 
profit, wages, taxes and payments to local suppliers from the 
enterprises in which the Fund is expected to invest. The base case 
return on the Agribusiness Development activity is estimated to be 12 
percent. The activity's efforts to identify, introduce, and anchor 
appropriate innovations in primary agriculture and agribusiness is 
expected to (1) mitigate problems of incomplete information, credit 
constraints, and risk perceptions and management, leading in turn to 
increased productivity, profitability, and incomes, and (2) facilitate 
and increase meaningful coordination among stakeholders in key 
agricultural value chains, permitting them to take advantage of larger, 
more integrated vertical economies.

2. Consultative Process

    In developing the MCA Program, Georgia engaged in a broad, 
meaningful and participatory consultative process that was unique in 
its recent history. When Georgia was notified of MCA eligibility in May 
2004, the government formed a Millennium Challenge working group, 
representing key Government ministries, parliament, civil society, NGOs 
and private business, to discuss and agree on the priority areas for 
MCA support. This working group identified infrastructure 
rehabilitation and investment in selected industry sectors as priority 
areas, initiated a broad outreach program, and solicited feedback from 
the general public. The working group conducted five regional forums, 
initiated extensive media coverage, and conducted roundtables as part 
of the consultative process. Its outreach effort resulted in more than 
500 specific proposals being submitted to the government, many of them 
reiterating the need for infrastructure rehabilitation and promotion of 
agriculture development.
    More recently, MCG has hired a public outreach officer and has 
begun holding weekly outreach events to keep stakeholders and citizens 
informed. Regular updates of meetings and events are placed on the MCG 
website. Prior to initiating formal negotiations with MCC in June 2005, 
MCG held several all-day forums for stakeholders, NGOs, civil society 
and donor organizations to review and elicit additional feedback on 
each of the proposed activities.

3. Demonstration of Government Commitment

    The MCA Program has received a high degree of financial and other 
support from Georgia's President and Prime

[[Page 58902]]

Minister, the Ministers of Economy, Energy, and Agriculture, and 
members of Parliament. Continued high-level Government involvement is 
assured with the governance structure of the Supervisory Board of MCG, 
chaired by the Prime Minister, and composed of high-level cabinet and 
parliament members and a representative from the President's 
administration.

4. Sustainability

    In the Regional Infrastructure Rehabilitation Project, the key 
issue for sustainability across all the Project Activities will be the 
ability of national and local authorities to provide long term 
maintenance on capital investments. These concerns have been addressed 
in the design of each Project activity through the provision of 
technical assistance, where necessary, to aid local institutions in 
planning and budgeting for the maintenance of roads and municipal 
infrastructure and to enhance their ability to sustain a supportive 
policy environment in the energy sector.
    For the Road, Georgia committed to funding road maintenance in an 
amount appropriate for the existing road network. For the Energy 
Rehabilitation activity, Georgia committed to certain measures to 
address past liabilities and current collection problems of the GGIC, 
the pipeline owner and operator, to help ensure improved cash flow for 
pipeline maintenance once rehabilitation is complete. It has also 
committed not to sell, transfer or pledge the Pipeline and/or a 
controlling interest in GGIC during the Compact's five-year term 
without prior consent from MCC. For the Regional Infrastructure 
Development activity, the operations manual requires that all proposals 
for investment be submitted with a plan for funding operations and 
maintenance (based on a combination of user charges and local and 
national Government budget support). The Government of Georgia will, in 
certain cases, provide a commitment letter evidencing financial support 
in whole or in part for certain projects in certain cities.
    In the Enterprise Development Project, neither the Georgia Regional 
Development Fund (GRDF) activity nor the Agribusiness Development 
activity (ADA) is intended to be fully sustainable beyond Compact 
completion. When the Compact ends, the GRDF will enter a five-year 
``wind down'' phase of asset management and liquidation, with its 
distributions used to support approved charitable, educational or 
social development programs in Georgia. The ADA will cease direct 
operations when the Compact ends. Nonetheless, both Activities are 
expected to enhance business expertise and build successful companies. 
This contributes to sustainability at the individual enterprise level 
and strengthens market mechanisms that will remain long after the 
Compact concludes. In addition, the Activities are expected to increase 
the level of financial investment in the regions, thereby perpetuating 
competitive economic growth.

5. Environmental and Social Impacts

    The Road Rehabilitation activity is a ``Category A'' project. One 
section consists of a significant rehabilitation that will upgrade a 
lightly traveled seasonal road for inter-regional cargo traffic and 
other transport, which may introduce potentially significant negative 
impacts following construction. In addition, there are two new road 
sections, including one that will pass an environmentally-sensitive 
wetland area. MCC has provided 609(g) funding for the development of a 
full Environmental and Social Impact Assessment.
    The Energy Rehabilitation activity is a ``Category B'' project. It 
is expected to impact the environment positively through a significant 
reduction in greenhouse gas emissions and an increase in energy 
reliability that should reduce use of less clean and less safe 
alternative fuels, such as biomass and kerosene. Nevertheless, the 
works would present both an occupational and a public health risk if 
safety precautions are not followed, and some resettlement may be 
required for public safety and rehabilitation needs where encroachment 
onto the pipeline right-of-way has occurred. The Compact requires an 
environmental audit of GGIC, a focused project Environmental Assessment 
to include a resettlement plan framework, and an Environmental 
Management Plan that incorporates health and safety procedures.
    The Regional Infrastructure Development activity is a ``Category 
B'' project although it may fund ``Category A'' activities, In addition 
to the requirement that all funding from the activity be consistent 
with World Bank safeguards and MCC environmental guidelines, the 
Compact requires that the Municipal Development Fund, which will be the 
implementing entity and currently implements a similar World Bank 
project, include an environmental and social impact assessment expert 
on staff.
    Due to the nature of the GRDF, it is not possible to assess 
potential environmental and social impacts at this point. The Compact 
requires that GRDF investments comply with MCC environmental 
guidelines. To help compliance the GRDF manager will be required to 
develop investment guidelines and an environmental review process and 
monitoring check-list. The ADA is a ``Category C'' project. It is not 
likely to have adverse environmental or social impacts. The Compact 
will specify the environmental review criteria for the ADA and describe 
the environmental sustainability principles to be used for agricultural 
and agribusiness technical assistance.

6. Donor Coordination

    The MCA Program complements efforts by other donors currently 
active in Georgia, The MCA Program envisions direct collaboration with 
the World Bank's Municipal Development Fund for the implementation of 
the Infrastructure Facility. Its proposed infrastructure rehabilitation 
activities will complement efforts by the World Bank, EBRD, USAID, KfW 
and other donors that are currently active in road transport, energy, 
and municipal services.
    The Compact's proposed Enterprise Development activities would 
complement the efforts of the World Bank, EBRD, UNDP, USAID, USDA, FAO, 
IFAD DFID, KfW and other donors that are currently active in 
agriculture, financing and business development.

IV. Summary and Conclusion

    The Georgia Program focuses on the rehabilitation of critical 
regional infrastructure and the provision of grants, long-term capital 
and technical assistance to spur the development of enterprises, 
particularly in agribusiness. The Program enjoys broad support from 
civil society and is well coordinated with the goals of the Government 
of Georgia and of other donors.
    The Regional Infrastructure Rehabilitation Project has the 
potential to improve living conditions and the business environment by 
dramatically improving basic services in the regions outside Tbilisi. 
In addition, the Samtskhe-Javakheti Road is intended to integrate more 
fully an isolated ethnic minority population into the greater Georgian 
economy and society. The Enterprise Development Project complements 
these efforts by significantly expanding the reach of advanced training 
in agricultural production, processing, and agribusiness and increasing 
the availability of longer term risk capital to entrepreneurs.
    This Program will have a positive impact on economic growth and 
will

[[Page 58903]]

contribute to the reduction of poverty in Georgia.

Millennium Challenge Compact Between the United States of America 
Acting Through the Millennium Challenge Corporation and the Government 
of Georgia

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
Annex I: Program Description
Schedule 1: Regional Infrastructure Rehabilitation Project
Schedule 2: Enterprise Development 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 United States of America, acting through the Millennium Challenge 
Corporation, a United States Government corporation (``MCC''), and the 
Government of Georgia (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 
Georgia as eligible to present to MCC a proposal for the use of 2004 
and 2005 Millennium Challenge Account (``MCA'') assistance to help 
facilitate poverty reduction through economic growth in Georgia;
    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 September 24, 2004 (the ``Proposal'');
    Whereas, the Proposal focused on, among other things, 
rehabilitation of key regional infrastructure and development of 
enterprises in the regions of Georgia;
    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 Georgia 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 Georgia's progress 
towards economic growth and poverty reduction (the ``Program''); and
    Whereas, the Government has established Millennium Challenge 
Georgia Fund, established pursuant to Presidential Decree No 561, dated 
December 3, 2004, and Ministry of Finance Order No. 796, dated December 
8, 2004 (``MCA-Georgia''), to continue the consultative process and 
implement the Program;
    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 
increased economic growth and poverty reduction in the regions of 
Georgia outside of Tbilisi (``Program Objective''), which is key to 
economic growth and poverty reduction in Georgia (``Compact Goal''). 
The Parties have identified the following project-level objectives 
(each a ``Project Objective'' and together the ``Project Objectives'') 
to advance the Program Objective, each of which is described in more 
detail in the Annexes attached hereto:
    (a) Rehabilitation of key regional infrastructure (the ``Key 
Regional Infrastructure Rehabilitated Objective''); and
    (b) Development of enterprises in regions (the ``Enterprises in 
Regions Developed Objective'').
    (The Program Objective and the individual Project Objectives are 
referred to herein collectively as the ``Objectives'' and each 
individually as an ``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 date of 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 Ninety-Five Million Three Hundred Thousand United 
States Dollars (USD $295,300,000) (``MCC Funding'') during the Compact 
Term to enable the Government to implement the Program and achieve the 
Objectives.

[[Page 58904]]

    (i) Subject to Sections 2.1(a)(ii), 2.2.(b) and 5.4, the allocation 
of the 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 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).
    (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 or earn 
(collectively, ``Accrued Interest'') shall be held in a Permitted 
Account and accrue or be earned in accordance with the requirements for 
the earning 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 in the Permitted Account(s) into which MCC Disbursements 
are made is held 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 Georgia 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 Georgia 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 Georgian 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 Georgia 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, find 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

[[Page 58905]]

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 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 or funded 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 website 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. As required by applicable United States law and 
consistent with the applicable requirement of Georgian law that 
international cooperation assistance shall be exempt from taxes, all 
Program Assets, MCC Funding and Accrued Interest shall be free from any 
taxes imposed under laws currently or hereafter in effect in Georgia 
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 Georgia, 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 Georgia, 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 Georgia, other 
than MCA-Georgia 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 Georgia;
    (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 Georgia and who are present 
in Georgia 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 Georgia, 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 (A) any 
transaction, service, activity, contract, grant or other implementing 
agreement funded in whole or in part by MCC Funding; (B) 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, Georgia by MCC, 
or by any person or entity (including contractors and grantees) as part 
of, or in conjunction with, MCC Funding or the Program; (C) any 
contractor, grantee, or other organization carrying out activities 
funded in whole or in part by MCC Funding; and (D) any employee of such 
organizations (the uses set forth in clauses (A) through (D) 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 Georgia, 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 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)

[[Page 58906]]

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 Government shall ensure that the tax exemptions provided by 
this Section 2.3(e) shall apply throughout the Compact Term.
    (f) Alteration. The Government shall ensure that neither MCC 
Funding nor Accrued Interest or Program Assets shall be subject to any 
impoundment, rescission, sequestration or any provision of law now or 
hereafter in effect in Georgia 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, nor Program Assets shall be subject to any 
lien (each a ``Lien,'' attachment, enforcement of judgment, pledge, or 
encumbrance of any kind, 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 and shall promptly pay any amounts owed 
to obtain such release; provided, however, the Government shall apply 
national funds to satisfy its obligations under this Section 2.3(g) and 
no MCC Funding, Accrued Interest, nor 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 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-Georgia 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-Georgia) 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, nor 
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.

[[Page 58907]]

    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 Supplemental Agreements, (ii) in accordance with all 
applicable laws then in effect in Georgia, 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 agreed 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-Georgia 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-Georgia 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-Georgia 
is modified, supplemented, unduly influenced or rescinded by any 
governmental authority, except by a non-appealable judicial decision or 
any judicial decision which MCA-Georgia, with the agreement of MCC, 
decides not to appeal, and (ii) the authority of MCA-Georgia shall not 
be expanded, restricted, or otherwise modified, except in accordance 
with this Compact, the Governance Agreement, the Governing Documents or 
any other Supplemental Agreement of 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

[[Page 58908]]

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 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.
    (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 Georgia 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 of this Compact (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 Parties (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) No goods, services or works may be funded in whole or in part 
(directly or indirectly) by MCC Funding which 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-Georgia 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-Georgia 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.
    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 Millennium Challenge Act of 2003, as amended (the 
``Act''), and the MCA selection criteria and methodology published by 
MCC pursuant to Section 607 of the Act