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