Notice of Entering Into a Compact With the Government of the Kingdom of Lesotho, 43380-43410 [E7-14812]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 72, Number 149 (Friday, August 3, 2007)]
[Notices]
[Pages 43380-43410]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-14812]



[[Page 43379]]

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

Part III





Millennium Challenge Corporation





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



 Notice of Entering Into a Compact With the Government of the Kingdom 
of Lesotho; Notice

Federal Register / Vol. 72, No. 149 / Friday, August 3, 2007 / 
Notices

[[Page 43380]]


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

MILLENNIUM CHALLENGE CORPORATION

[MCC FR 07-07]


Notice of Entering Into a Compact With the Government of the 
Kingdom of Lesotho

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 Kingdom of Lesotho. Representatives of the United 
States Government and the Government of the Kingdom of Lesotho executed 
the Compact documents on July 23, 2007.

    Dated: July 26, 2007.
William G. Anderson Jr.,
Vice President & General Counsel, Millennium Challenge Corporation.

Summary of Millennium Challenge Compact With the Government of the 
Kingdom of Lesotho

A. Introduction

    Lesotho is strategically located within the rapidly growing 
Southern African Development Community which will become a common 
market in 2008. It could benefit greatly from the expected economic 
upsurge in the region led by the private sector, but it will miss this 
opportunity if it is unable to unlock the potential of its two greatest 
resources--its water and its people. Without immediate and sustainable 
interventions to harness its abundant water resources and to improve 
the health of the productive workforce, Lesotho has limited prospects 
of achieving economic growth. Another critical element to Lesotho's 
future economic growth is a dynamic private sector. In recent years, 
the Government of Lesotho (``GoL'') has embarked on a major reform 
program developed jointly with the World Bank and other bilateral 
donors, to remove legal and regulatory impediments to private sector 
growth, improve access to credit and increase the participation of 
women in the economy.

B. Program

1. Goal and Objectives
    The $362.6 million Compact focuses on water, health and private 
sector development (the ``Program''), as summarized in the table below. 
The Program is focused on improving the provision of water supplies for 
industrial and domestic use, improving health outcomes and productivity 
through strengthening the health infrastructure, and removing barriers 
to foreign and local private sector investment. The Compact is designed 
to have a high economic growth impact, and its potential impact on 
poverty reduction is significant and widespread due to its broad 
geographical scope.

----------------------------------------------------------------------------------------------------------------
                                                   Totals including contingencies (in millions USD)
   Multi-year financial plan (by    ----------------------------------------------------------------------------
              project)                  CIF       Year 1     Year 2     Year 3     Year 4     Year 5     Total
----------------------------------------------------------------------------------------------------------------
1. Water Sector Project............      4.913     21.092     24.233     49.074     47.878     16.838    164.028
2. Health Sector Project...........      4.436     17.961     27.927     37.616     24.846      9.612    122.398
3. Private Sector Development            0.710      7.142     10.906      8.525       5.47      3.352     36.105
 Project...........................
4. Monitoring & Evaluation.........        0.5      2.605      0.684      0.755      0.664        2.6      7.808
5. Program Management and Oversight      5.109      4.173      5.395      6.196      6.926      4.413     32.212
                                    ----------------------------------------------------------------------------
    Total MCC Contribution.........     15.668     52.973     69.145    102.166     85.784     36.815    362.551
----------------------------------------------------------------------------------------------------------------

C. Program Description

1. Water Sector Project ($164 million)
    The Water Sector Project is aimed at improving water supply for 
industrial and domestic needs. With respect to the industrial sector, 
the Project will provide infrastructure to deliver water to garment and 
textile operations. Domestic users in selected urban and rural areas 
will benefit from water system upgrades and expansion to achieve better 
sanitation and a reliable supply of water. Finally, the Project is 
designed to enhance rural livelihoods through improved watershed 
management.
    The Water Sector Project activities include: (a) Construction of a 
bulk water conveyance system and establishment of a program management 
unit for the Metolong Dam construction activity; (b) extension and 
rehabilitation of the urban and peri-urban water network; (c) provision 
of improved sanitation services to rural households through 
construction of ventilated improved pit latrines and water systems; and 
(d) restoration of degraded wetlands at three areas in the highland 
pastures and preparation of a strategic environmental assessment to 
support development of a national watershed management and wetlands 
conservation plan.
2. Health Sector Project ($122 million)
    Approximately 24 percent of adults ages 15-49 in Lesotho are Human 
Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (``HIV/
AIDS'') positive, the third highest prevalence rate in the world. The 
Health Sector Project is designed to mitigate the negative economic 
impacts of poor maternal health, HIV/AIDS, tuberculosis (``TB'') and 
other diseases by substantially strengthening the country's health care 
infrastructure. MCC funding will support the GoL's efforts to 
significantly increase access to life-extending anti-retroviral therapy 
(``ART'') by providing a sustainable platform to deliver this and other 
essential health services throughout the country. This has the 
potential to result in a measurable extension of productive life-years 
for people living with HIV/AIDS, TB and other debilitating diseases.
    A major issue in Lesotho, as in the rest of southern Africa, is the 
crisis in human health resources. The country has difficulty retaining 
nurses and clinicians due to opportunities outside the country and poor 
working conditions in Lesotho. Extensive studies have been conducted on 
improving the retention of health care workers. Top concerns are salary 
levels, physical working conditions and supervision and career 
management structures. Together with the GoL, the President's Emergency 
Plan for AIDS Relief (``PEPFAR''), and other donor efforts, the Health 
Sector Project is designed to address these issues. Currently the GoL 
is proposing salary reforms and PEPFAR is providing assistance to 
improve training curricula and programs, reduce red tape in hiring new 
graduates, and rationalize Ministry of Health and Social Welfare

[[Page 43381]]

(``MoHSW'') staff positions. The Project is designed to improve health 
sector infrastructure, including residences for rural health staff, 
improve supervision and management of staff, increase the number of 
nurses and allied health professionals trained, and provide 
opportunities for staff to build skills and competencies through 
continuing education. These efforts are designed to increase production 
and retention of health workers for delivery of essential health 
services.
    The Health Sector Project activities include: (a) Renovation of up 
to 150 health centers in order to establish a national stock of health 
centers that achieve a common standard; (b) establishment of ART 
clinics in and improved management of up to 14 hospital out-patient 
departments (``OPDs''); (c) construction and equipping of a new central 
laboratory and training laboratory staff; (d) construction of a 
dedicated, central facility for collecting and processing blood and 
provision of mobile blood collection and storage equipment; (e) an 
increase in the number of dormitories and staff residences at Lesotho's 
National Health Training College (``NHTC''); (f) strengthened health 
systems through increased capacity for pre-service and in-service nurse 
training and improved district-level public human health care resources 
management; and (g) improved occupational health and safety and medical 
waste management practices.
3. Private Sector Development (``PSD'') Project ($36 million)
    The PSD Project is designed to increase private sector economic 
activity in Lesotho by improving access to credit, reducing transaction 
costs and increasing the participation of women in the economy. The 
activities within the PSD Project represent an essential component of 
the GoL's major policy reform program and are designed to contribute to 
the broader efforts to attract foreign investment and stimulate growth 
of Basotho-owned companies.
    The PSD Project activities include: (a) Reform of the civil legal 
system through the development of the Commercial Court, including 
creation of case management systems for courts, and promotion of 
alternative dispute resolution; (b) support for the production and 
issuance costs of national identification cards as well as 
establishment of the necessary legal and regulatory reforms for data 
privacy and establishment and operations of a cross-border credit 
bureau; (c) support for implementation of a new payments and settlement 
system in Lesotho; (d) technical assistance to the GoL in the 
development of land policy in Lesotho, and funding for the 
implementation of a systematic land regularization program for urban 
and peri-urban areas and development of a new land administration 
authority; and (e) implementation of a training and public awareness 
program dedicated to implementing gender equality in economic rights 
and building of local capacity to continue advocacy.

D. Impacts

    The Program, if successfully implemented, could nearly double GDP 
growth by the end of the Compact implementation period (using a 
baseline of 2.6 percent). The acceleration of GDP growth is expected to 
continue beyond Compact completion, propelling growth towards seven 
percent per annum within five years after Compact completion. This 
acceleration is required to reduce poverty significantly in line with 
the objectives of the GoL's Poverty Reduction Strategy Papers 
(``PRSP'').
    The Water Sector Project is expected to benefit urban and rural 
communities through each of the four activities: (1) The Metolong Dam--
Bulk Water Conveyance System activity is expected to preserve existing 
industrial production and 28,000 jobs and create an additional 6,000 
jobs by the end of the Compact; (2) The Urban and Peri-Urban Water 
Network activity has the potential to benefit approximately 304,000 
people or 50,700 households by Compact end; (3) The Rural Water Supply 
and Sanitation activity has the potential to directly benefit 
approximately 150,000 people or 25,000 households; and (4) The Wetlands 
Restoration and Conservation activity has the potential to improve 
rangeland productivity and benefit rural livelihoods for an estimated 
55,000 people who live within a 16 kilometer radius of the three target 
wetland sites.
    The Health Sector Project is designed to directly improve delivery 
of health care services to the entire population. The health center 
activity is designed to improve service quality and availability for 
health center clients, including: Most of the 90 percent of pregnant 
women who seek prenatal care; the more than 90 percent of infants and 
young children who are immunized against childhood infectious diseases; 
the approximately 9,000 TB patients treated at the health center level 
each year; and the 34,000 persons expected to have ART services follow 
up at the health center during the life of the Project. The ART clinic 
activity is designed to reduce waiting times and TB co-infection of 
clients seeking care at an OPD, particularly the predicted additional 
17,000 new clients seeking ART services during the Compact, the 80 
percent of those clients expected to be co-infected with TB, and the 
clients of other OPD services in these 14 hospitals. This activity is 
designed to complete national coverage of ART services at the hospital 
level. The central laboratory and blood transfusion activities are 
designed to benefit all Basotho by expanding the capacity of the MoHSW 
to conduct needed laboratory tests and assuring access to safe blood. 
The NHTC activity is designed to expand the number of graduates in the 
health field, filling some of the numerous vacancies in rural areas for 
community nurses and allied health professionals. As a result, more 
than 1.3 million individuals in the rural areas are more likely to have 
an adequate level of service provision at the local health center 
level. The health systems strengthening and medical waste management 
activities are designed to impact the quality and level of services 
provided, particularly at the health center level and improve 
environmental health and safety conditions throughout the health 
sector. All activities focus on improving physical working conditions 
and safety for health workers and on human resources management.
    The Private Sector Development Project has the potential to benefit 
approximately 2,000 persons and companies operating in the formal 
sector through more efficient commercial court procedures. Through the 
Land Administration Reform activity, potentially up to 55,000 urban 
households may benefit from having formally recognized titles. The 
National ID activity has the potential to directly benefit the entire 
national population by providing an identification card and/or unique 
identification number to every citizen within the country, improving 
the availability of credit and other financial services to a wider 
cross-section of the population. Finally, the Payments and Settlements 
system has the potential to directly benefit more than 86,000 
government pensioners and more than 98,000 employed outside Lesotho by 
lowering the costs of receiving and sending money.

E. Program Management

1. Governance Structure
    The GoL will establish an autonomous body within the Ministry of 
Finance and Development Planning known as MCA-Lesotho that will serve 
as the accountable entity responsible for

[[Page 43382]]

the implementation of the Program. The MCA-Lesotho board of directors 
will be made up of government officials representing each of the GoL 
ministries associated with the Program as well as private sector and 
civil society members representing constituencies impacted by the 
Program. This board will have independent decision making authority and 
will be the final authority with respect to implementation of the 
Compact. It will provide oversight and be responsible for the success 
or failure of the Program.
    A management unit will support the board of directors in 
implementing the Program and will be responsible for the day-to-day 
management and operations of MCA-Lesotho. A stakeholders committee will 
inform the various constituent groups about Program implementation, 
provide advice and input to MCA-Lesotho concerning the Program, and 
select the private sector members of the board of directors.
    External procurement and fiscal agents will be used during Compact 
implementation. A procurement process is currently underway with a 
target date of August 2007 to sign contracts for these services.
2. Implementation Arrangements
    Line ministries, project implementation units and the Central Bank 
of Lesotho will serve as implementing entities (``IEs'') and service 
providers for the various projects related to the Compact under 
contractual relationships with MCA-Lesotho. IEs will be responsible for 
developing the operational requirements for the Projects and 
performance monitoring of contractors. Teams will be located within the 
IEs to ensure institutional strengthening and close collaboration and 
communication. To help ensure Program success, the Compact has budgeted 
nearly $75 million for technical assistance, capacity building, and 
institutional strengthening. In addition, competitively selected 
external service providers will perform the Procurement and Fiscal 
Agent functions. MCA-Lesotho will remain ultimately responsible for the 
successful implementation of the Program.

F. Other Highlights

1. Transformational Change
    The Program has the potential for significant transformational 
change to help unlock the economic potential of the country by 
providing additional water supplies for industrial and domestic use, 
improving health outcomes and productivity and by removing barriers to 
foreign and domestic investment. Overall the Program is expected to 
impact a broad cross-section of the country through its various 
activities. In additional, the Compact is designed to have a 
substantive impact on extending full economic rights to women in 
Lesotho.
2. Consultative Process
    The Program builds upon the GoL's PRSP and the Lesotho Vision 2020. 
The consultative processes associated with these two initiatives 
identified the following as top priorities for poverty reduction and 
economic growth: (a) Private sector development; (b) provision of 
infrastructure; (c) natural resource management; and (d) improved 
access to health care.
    Shortly after Lesotho was selected as an MCC-eligible country in 
2004, the GoL established a consultative proposal development process 
that included the private sector, non-governmental organizations 
(``NGOs'') and civil society organizations. Recognizing that 
consultations are ongoing and must be meaningful, timely and 
participatory, the MCA-Lesotho Core Team within the Ministry of Finance 
and Development Planning was proactive in developing an outreach and 
consultative process strategy in early 2007 to plan for consultations 
and outreach activities beyond Compact signing and into implementation.
3. Government Commitment and Effectiveness
    The 2006 enactment of the Legal Capacity of Married Persons Act was 
a strong signal of the GoL's commitment to remove barriers to married 
women's full participation in the economy, thereby enhancing the 
Program's prospects of successful implementation and sustainability. 
This significant commitment to gender equality was recently 
acknowledged by resolutions adopted by both the U.S. Senate and the 
U.S. House of Representatives. Prior to first disbursement of Compact 
funds, the GoL will submit to its Parliament legal reforms designed to 
assure that economic rights achieved in the Legal Capacity of Married 
Persons Act are not contradicted in other laws.
    The GoL has agreed with the World Bank on a comprehensive water 
sector reform program. In the rural water and sanitation sub-sectors, 
the GoL--consistent with its policy on decentralization--is divesting 
financial management, project planning, supervisory services and asset 
ownership to locally elected water committees.
    In 2000, the GoL embarked on a ten year plan to improve health 
service delivery. The GoL has successfully piloted decentralized health 
services in three districts and is expanding decentralized management 
to the remaining seven districts. New financial management and 
procurement systems have been put in place, and a new human resources 
system is being developed. The Health Sector Project is designed to 
complement other donor funded activities. Despite the HIV/AIDS 
epidemic, Lesotho has met both MCC eligibility indicators on 
immunization and health expenditure which signals the GoL's commitment 
to good performance in the health sector.
    The GoL, as chair of the Southern Africa Development Community, has 
committed to regional integration of financial systems. They also have 
initiated the process of implementing policy reforms to improve the 
business and investment climate with the support of donors such as the 
World Bank. In order to realize the maximum economic benefits for the 
PSD Project activities, the GoL must continue this policy reform 
momentum and harmonize its legislation with other Common Monetary Area 
countries, especially South Africa.

G. Sustainability

    The Program is designed to enhance the sustainability of its 
benefits by: (a) Supporting policy reforms in relevant sectors; (b) 
ensuring adequate funding will be allocated to fully cover additional 
recurrent costs; (c) requiring adherence to environmental and social 
standards; (d) building capacity within the GoL to facilitate 
implementation of the Program and to develop long-term management 
capabilities of GoL institutions; (e) assuring improved maintenance 
programs to maintain the economic life of assets; and (f) promoting 
participation of a large cross section of Basotho, especially women and 
the poor.
1. Water Sector
    The sustainability of the Water Sector Project activities depends 
on the GoL's pace of implementation of sector policy reforms and its 
commitment to ensure that tariff levels provide for cost recovery of 
operations and maintenance costs. Disbursements of Compact funding will 
be tied to agreed progress on implementing water sector reforms.
2. Health Sector
    The sustainability of health services is a critical issue, 
particularly given the increase of donor-supported provision of ART. In 
partnership with donors, the

[[Page 43383]]

GoL is developing a national health financing strategy to identify the 
costs of the essential health services package, including ART, and gaps 
and potential sources of funds. This strategy will be jointly monitored 
by MCC and other health donors.
3. Private Sector Development
    The sustainability of several PSD Project activities is expected to 
be enhanced because they will be carried out with the assistance of 
established private sector entities with a successful track record in 
the Southern African region. Compact funding also is designed to help 
establish sustainable improvements in land administration through an 
active capacity building, training, and public education effort.
4. Environmental and Social Impacts
    The assessment, management, and monitoring of potential 
environmental and social impacts is an integral part of the Compact. 
The Compact will fund several measures to: (a) Mitigate the adverse 
effects of infrastructure construction or rehabilitation; (b) promote 
natural resource management and environmental conservation consistent 
with the priorities of the GoL's PRSP; (c) assure women's participation 
in the economy and as beneficiaries in the Compact; and (d) integrate 
HIV/AIDS awareness programs into all construction contracts. The 
Compact will also support measures to strengthen the regulatory 
framework and build institutional capacity required to improve 
occupational health and safety and waste management practices in the 
health sector.
    The Metolong Dam activity is a Category A project under MCC's 
Environmental Guidelines due primarily to the potential environmental 
and social risks associated with the project, which include loss of 
communal resources, loss of traditional access routes across the river, 
inundation of cultural resources and alteration of downstream surface 
water hydrology. The entities funding the dam have agreed that the 
entire project, including advanced infrastructure, the dam and 
reservoir and downstream bulk water conveyance system, will be designed 
and constructed according to common standards that meet MCC's 
Environmental Guidelines, the MCC Gender Policy, GoL law, and World 
Bank Operational Policy 4.12 on Involuntary Resettlement. Compact 
funding for the bulk water conveyance system will be conditioned on 
strict adherence with the larger project's environmental management 
plan (``EMP'') and resettlement action plan (``RAP''), completed 
earlier this year with World Bank funding. The urban, peri-urban and 
rural water activities are considered Category B and Category C 
projects under MCC's Environmental Guidelines and do not pose 
significant adverse environmental and social impacts. Standard EMPs 
will be developed for each activity to assure compliance with MCC's 
Environmental Guidelines and GoL laws. The wetlands restoration and 
conservation activity is expected to result in mostly positive 
environmental and socioeconomic impacts by rehabilitating three 
severely degraded wetland areas which support livestock grazing and 
other rural livelihood benefits.
    The Health Sector Project consists of both Category A and Category 
B projects under MCC's Environmental Guidelines due to greenfield 
construction and concerns regarding current medical waste management 
practices in Lesotho. To make long-term improvements to the current 
situation and assure that MCC-funded facilities comply with MCC's 
Environmental Guidelines, Compact funds will be used to update 
Lesotho's 2005 National Health Care Waste Management Plan, develop 
medical waste management regulations and standards, prepare a financial 
plan and provide technical assistance to the relevant GoL agencies. 
Additionally, all proposed health infrastructure activities must comply 
with MCC's Environmental Guidelines and applicable GoL environmental 
permitting requirements.
    The PSD Project, a Category C project, is not likely to have 
adverse environmental or social impacts. The MCA-Lesotho social-gender 
specialist will work to ensure that social safeguards are integrated 
into project design, implementation and monitoring to ensure that the 
activities do not, unnecessarily or unlawfully, infringe upon rights or 
privacy.

H. Donor Coordination

    The design and technical aspects of many of the Compact Program 
activities have benefited significantly from the experiences of other 
donors working in Lesotho. The MCA-Lesotho Core Team has engaged the 
donor community frequently in all phases of the consultative process 
and has coordinated with donors to refine Compact activities, 
collaborate on shared objectives to prevent duplication of efforts, and 
ensure complementary activities throughout Compact implementation.
    In the various Health Sector Project activities, including those 
associated with HIV/AIDS, MCC has maintained regular communications and 
participated in joint donor reviews. These donors include: PEPFAR; 
Irish Aid; World Bank; African Development Bank; United Nations 
agencies; and the Global Fund for AIDS, Tuberculosis and Malaria. These 
and other donors provided design support to the MoHSW and assisted MCC 
in the due diligence process. The Compact's Health Sector Project is 
designed to support the GoL's reform efforts and fits within the 
combined donor strategy for the health sector. In particular, the MCC 
Health Sector Project and planned PEPFAR activities are mutually 
reinforcing. As MCC has moved forward with the proposed Health Sector 
Project, PEPFAR has provided encouragement and support at central and 
country level. In-country PEPFAR staff has grown from one person in 
2006 to a staff of seven professionals by end of 2007, with an expected 
concomitant increase in resources. Together, MCC and PEPFAR inputs are 
expected to result in a major increase in the quality and quantity of 
ART services and in the production and retention of human resources for 
health.
    The Metolong Dam activity is being developed in coordination with 
several donors, including the OPEC Fund for International Development, 
the Kuwait Fund for Arab Economic Development, the Arab Bank for 
Economic Development in Africa and the Saudi Fund for Development. The 
European Union also has a sustained presence in Lesotho's water sector 
and is currently funding detailed designs for components of the 
Metolong Dam bulk water conveyance system, as well as components of the 
larger lowlands water supply system. Irish Aid is also a significant 
donor in the water sector.
    MCC has also been actively collaborating with other donors on the 
PSD Project. These donors include: the World Bank with respect to the 
national identification card; the United Kingdom's Department for 
International Development on matters concerning civil legal reform and 
land administration reform; the German development agency Deutsche 
Gesellschaft fu Technische Zusammenarbeit (GTZ) on land administration 
reform; and USAID through its Women's Legal Rights Initiative project.

Millennium Challenge Compact Between The United States of America 
Acting Through the Millennium Challenge Corporation And The Government 
of The Kingdom of Lesotho

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal

[[Page 43384]]

    Section 1.2 Program Objectives
Article 2. Funding and Resources
    Section 2.1 MCC Funding
    Section 2.2 Compact Implementation Funding
    Section 2.3 Disbursement
    Section 2.4 Interest
    Section 2.5 Government Resources; Budget
    Section 2.6 Limitations on the Use of MCC Funding
    Section 2.7 Taxes
Article 3. Implementation
    Section 3.1 Program Implementation Agreement
    Section 3.2 Government Responsibilities
    Section 3.3 Policy Performance
    Section 3.4 Government Assurances
    Section 3.5 Implementation Letters
    Section 3.6 Procurement
    Section 3.7 Records; Accounting; Covered Providers; Access
    Section 3.8 Audits; Reviews
Article 4. Communications
    Section 4.1 Communications
    Section 4.2 Representatives
    Section 4.3 Signatures
Article 5. Termination; Suspension; Refunds
    Section 5.1 Termination; Suspension
    Section 5.2 Refunds; Violation
    Section 5.3 Survival
Article 6. Compact Annexes; Amendments; Governing Law
    Section 6.1 Annexes
    Section 6.2 Inconsistencies
    Section 6.3 Amendments
    Section 6.4 Governing Law
    Section 6.5 Additional Instruments
    Section 6.6 References to MCC Web site
    Section 6.7 References to Law, Regulations, Policies and 
Guidelines
Article 7. Entry Into Force
    Section 7.1 Domestic Requirements
    Section 7.2 Conditions Precedent
    Section 7.3 Date of Entry into Force
    Section 7.4 Compact Term
    Annex I: Program Description
    Annex II: Summary of Multi-Year Financial Plan
    Annex III: Description of the Monitoring and Evaluation Plan

Millennium Challenge Compact

Preamble

    This Millennium Challenge Compact (this ``Compact'') is between the 
United States of America, acting through the Millennium Challenge 
Corporation, a United States government corporation (``MCC''), and the 
Government of the Kingdom of Lesotho (the ``Government'') (individually 
a ``Party'' and collectively, the ``Parties'').
    Recalling that the Government consulted with the private sector and 
civil society of the Kingdom of Lesotho (``Lesotho'') to determine the 
priorities for the use of Millennium Challenge Account assistance and 
developed and submitted to MCC a proposal focused on providing water 
supplies for industrial and domestic use and improving watershed 
management, improving health outcomes and productivity through 
strengthening the health system, and removing barriers to foreign and 
local private sector investment; and
    Recognizing that MCC wishes to help Lesotho implement a program to 
achieve the goal and objectives described herein (the ``Program'');
    The Parties hereby agree as follows:

Article 1. Goal and Objectives

Section 1.1 Compact Goal.

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

Section 1.2 Program Objectives.

    The objectives of this Program (as further described in Annex I) 
(the ``Objectives'') are to:
    (a) Improve the water supply for industrial and domestic needs and 
enhance urban and rural livelihoods through improved watershed 
management;
    (b) Increase access to life-extending anti-retroviral therapy and 
essential health services by providing a sustainable delivery platform; 
and
    (c) Stimulate investment by improving access to credit, reducing 
transaction costs and increasing the participation of women in the 
economy.
    The Government will take all the steps necessary or appropriate to 
achieve the Objectives during the term of this Compact.

Article 2. Funding and Resources

Section 2.1 MCC Funding.

    (a) MCC grants to the Government, under the terms of this Compact, 
an amount not to exceed Three Hundred Sixty-Two Million, Five Hundred 
Fifty-One Thousand United States dollars (US$362,551,000) (``MCC 
Funding'') to help the Government implement the Program.
    (b) Annex II of this Compact describes the use of MCC Funding.

Section 2.2 Compact Implementation Funding

    (a) Of the total amount of MCC Funding, MCC will make up to Fifteen 
Million Six Hundred and Sixty-Nine Thousand United States dollars 
(US$15,669,000) (``Compact Implementation Funding'') available to the 
Government under Section 609(g) of the Millennium Challenge Act of 
2003, as amended, to support:
    (i) provision of fiscal and procurement agent services;
    (ii) start-up costs including staff salaries and administrative 
support and related goods and services;
    (iii) baseline surveys for monitoring and evaluation and 
administrative support for the surveys as appropriate;
    (iv) initiation of environmental and social assessments and design 
work in conjunction with certain water and health sector activities;
    (v) additional gender assessment and input for project design;
    (vi) additional work with respect to activities to remove forms of 
discrimination, in laws or policies, affecting the economic rights of 
women;
    (vii) additional work with respect to clarifying roles and 
responsibilities for decentralized health services at the central and 
district levels, and in developing a training plan for health sector 
project activities;
    (viii) technical assistance to support development of terms of 
reference for consultants, including, without limitation, health system 
strengthening, capacity building, and medical waste management;
    (ix) procurement of field monitoring equipment and initiation of 
environmental baseline studies for the wetlands conservation project;
    (x) a study of land administration services in Lesotho and 
recommendations for modernization and improvement of those services;
    (xi) a review of existing payments and settlements and cross-border 
financial transactions legislation and related regulations;
    (xii) a review of existing legislation authorizing credit bureaus 
and a national identification card and any related regulations;
    (xiii) a review of data privacy legislation and regulations;
    (xiv) establishment of Project Implementation Units (as defined in 
Annex I) and related start-up costs including recruitment of key 
personnel, staff salaries and administrative support and related goods 
and services; and
    (xv) other Compact implementation expenses approved by MCC.
    (b) Notwithstanding anything to the contrary in this Compact, this 
Section 2.2 will provisionally apply, after MCC and the Government sign 
this Compact, without regard to whether this Compact has entered into 
force under Section 7.3.
    (c) Compact Implementation Funding is subject to: (i) The 
limitations on the use or treatment of MCC Funding set forth in 
Sections 2.6 and 2.7 as if such provisions were in full force and 
effect, and (ii) any other requirements and limitations as may be 
required by MCC in writing.

Section 2.3 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement

[[Page 43385]]

(as defined in Section 3.1), MCC will disburse MCC Funding for 
expenditures incurred in furtherance of the Program (each instance, a 
``Disbursement''). The proceeds of such Disbursements will be made 
available to the Government, at MCC's sole election, (a) by deposit to 
a bank account established by the Government and acceptable to MCC (a 
``Permitted Account'') or (b) through direct payment to a provider of 
goods, works or services under this Compact. MCC Funding may be 
expended only to cover Program expenditures as provided in this Compact 
and the Program Implementation Agreement.

Section 2.4 Interest

    The Government will pay to MCC any interest or other earnings that 
accrue on MCC Funding in accordance with the Program Implementation 
Agreement.

Section 2.5 Government Resources; Budget

    (a) The Government will provide all funds and other resources, and 
will take all actions, that are necessary to carry out the Government's 
responsibilities and obligations under this Compact.
    (b) The Government will use its best efforts during each year it 
receives MCC Funding to ensure that all MCC Funding it receives or is 
projected to receive in such year is fully accounted for in the annual 
budget of Lesotho. To the extent feasible under the budgeting processes 
of Lesotho, MCC Funding will be accounted for on a multi-year basis.
    (c) The Government will not reduce the normal and expected 
resources that it would otherwise receive or budget from sources other 
than MCC for the activities contemplated under this Compact.
    (d) Unless the Government discloses otherwise to MCC in writing, 
MCC Funding will be in addition to the resources that the Government 
would otherwise receive or budget for the activities contemplated for 
the Program.

Section 2.6 Limitations on the Use of MCC Funding

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

Section 2.7 Taxes

    (a) Unless the Parties otherwise specifically agree in writing, the 
Government will not impose, and will not permit any other governmental 
or taxing authority to impose any taxes, duties, levies, contributions 
or other charges (``Taxes'') in Lesotho on the Program, MCC Funding, 
interest or earnings on MCC Funding, any Project or activity 
implemented under the Program, goods, works, services and other assets 
and activities related to the Program or any Project, persons and 
entities that provide such goods, works, services and assets or perform 
such activities, and income, profits and payments with respect thereto. 
The Government will exempt from Taxes, inter alia, value added and 
other transfers (including exemption therefrom with credit), property 
and ad valorem items, import and export of goods (including exemptions 
for goods imported and re-exported for personal use of expatriate 
employees and their family members) and income and profit.
    (b) Before the initial Disbursement is made, the Government and MCC 
may, at MCC's discretion, enter into one or more agreements setting 
forth the mechanisms for implementing this Section 2.7, including 
exemptions from filing and compliance requirements relating to Taxes. 
If entered into, it is expected that such agreement(s) will provide 
that the Government may impose: (i) Taxes on certain individuals who 
are nationals or permanent residents of Lesotho; (ii) Taxes other than 
transfer Taxes and import and export Taxes on certain entities that are 
organized in Lesotho; and (iii) fees or charges for services that are 
generally applicable in Lesotho, reasonable in amount and imposed on a 
non-discriminatory basis.

Article 3. Implementation

Section 3.1 Program Implementation Agreement

    The Government will implement the Program in accordance with this 
Compact and as further specified in an agreement to be entered into by 
MCC and the Government and dealing with, among other matters, 
implementation arrangements, fiscal accountability, disbursement and 
use of MCC Funding, procurement and applicable tax exemptions (the 
``Program Implementation Agreement'').

Section 3.2 Government Responsibilities

    (a) The Government has principal responsibility to oversee and 
manage the implementation of the Program.
    (b) With the prior written consent of MCC, the Government may 
designate an entity to implement some or all of the Government's 
obligations or to exercise any rights of the Government under this 
Compact or the Program Implementation Agreement. Such a designation 
will not relieve the Government of any designated obligations and 
rights, for which the Government will retain full responsibility.
    (c) The Government will ensure that no law or regulation in Lesotho 
now or hereinafter in effect makes or will make unlawful or otherwise 
prevent or hinder the performance of any obligation under this Compact, 
the Program Implementation Agreement or any other agreement related 
thereto or any transaction contemplated thereunder.
    (d) The Government will ensure that any assets or services funded 
in whole or in part (directly or indirectly) by MCC Funding will be 
used solely in furtherance of this Compact and the Program unless 
otherwise agreed by MCC in writing.

Section 3.3 Policy Performance

    In addition to the specific policy and legal reform commitments 
identified in Annex I, the Government will seek to maintain and to 
improve its level of performance under the policy criteria identified 
in Section 607 of the Millennium Challenge Act of 2003, as amended, and 
the selection criteria and methodology used by MCC.

[[Page 43386]]

Section 3.4 Government Assurances

    The Government assures MCC that:
    (a) As of the date this Compact is signed by the Government, the 
information provided to MCC by or on behalf of the Government in the 
course of reaching agreement with MCC on this Compact is true, correct 
and complete in all material respects;
    (b) This Compact does not, and will not, conflict with any other 
international agreement or obligation of the Government or any of the 
laws of Lesotho; and
    (c) The Government will not invoke any of the provisions of its 
internal law to justify or excuse a failure to perform its duties or 
responsibilities under this Compact.

Section 3.5 Implementation Letters

    From time to time, MCC may provide guidance to the Government 
through implementation letters on the frequency, form or content of 
requests for Disbursements or on any other matter relating to MCC 
Funding, this Compact or implementation of the Program (each, an 
``Implementation Letter''). The Government will apply such guidance in 
implementing this Compact.

Section 3.6 Procurement

    The Government will ensure that the procurement of all goods, works 
and services by the Government or any Provider (as defined in Section 
3.7(c)) in furtherance of this Compact will be consistent with the 
program procurement guidelines of which MCC will inform the Government 
in writing or by posting on the MCC Web site or otherwise make publicly 
available, as the guidelines may be amended from time to time (the 
``MCC Program Procurement Guidelines''), which MCC Program Procurement 
Guidelines will include but will not be limited to the following 
requirements:
    (a) open, fair and competitive procedures must be used in a 
transparent manner to solicit, award and administer contracts and to 
procure goods, works and services;
    (b) solicitations for goods, works and services must be based upon 
a clear and accurate description of the goods, works and services to be 
acquired;
    (c) contracts must be awarded only to qualified contractors that 
have the capability to perform the contracts in accordance with their 
terms on a cost effective and timely basis; and
    (d) no more than a commercially reasonable price, as determined, 
for example, by a comparison of price quotations and market prices, 
will be paid to procure goods, works and services.

Section 3.7 Records; Accounting; Covered Providers; Access.

    (a) Government Books and Records. The Government will maintain, and 
will use its best efforts to ensure that all Covered Providers (as 
defined in clause (c) below) maintain, accounting books, records, 
documents and other evidence relating to this Compact adequate to show 
to MCC's satisfaction the use of all MCC Funding (``Compact Records''). 
In addition, the Government will furnish or cause to be furnished to 
MCC upon its request all Compact Records.
    (b) Accounting. The Government will maintain, and will use its best 
efforts to ensure that all Covered Providers maintain, Compact Records 
in accordance with generally accepted accounting principles prevailing 
in the United States, or at the Government's option and with MCC's 
prior written approval, other accounting principles, such as those (i) 
prescribed by the International Accounting Standards Committee (an 
affiliate of the International Federation of Accountants) or (ii) then 
prevailing in Lesotho. Compact Records must be maintained for at least 
five (5) years after the end of the Compact Term (as defined in Section 
7.4) or for such longer period, if any, required to resolve any 
litigation, claims or audit findings or any statutory requirements.
    (c) Covered Provider. Unless the Parties agree otherwise in 
writing, a ``Provider'' is (i) any entity of the Government that 
receives or uses MCC Funding or any other Program asset in carrying out 
activities in furtherance of this Compact or (ii) any third party that 
receives at least US$50,000 in the aggregate of MCC Funding (other than 
as salary or compensation as an employee of an entity of the 
Government) during the Compact Term. A ``Covered Provider'' is (1) a 
non-United States Provider that receives (other than pursuant to a 
direct contract or agreement with MCC) US$300,000 or more of MCC 
Funding in any Government fiscal year or any other non-United States 
person or entity that receives, directly or indirectly, US$300,000 or 
more of MCC Funding from any Provider in such fiscal year or (2) any 
United States Provider that receives (other than pursuant to a direct 
contract or agreement with MCC) US$500,000 or more of MCC Funding in 
any Government fiscal year or any other United States person or entity 
that receives, directly or indirectly, US$500,000 or more of MCC 
Funding from any Provider in such fiscal year.
    (d) Access. Upon MCC's request, the Government, at all reasonable 
times, will permit, or cause to be permitted, authorized 
representatives of MCC, an authorized United States inspector general, 
the United States Government Accountability Office, any auditor 
responsible for an audit contemplated herein or otherwise conducted in 
furtherance of this Compact, and any agents or representatives engaged 
by MCC or the Government to conduct any assessment, review or 
evaluation of the Program, the opportunity to audit, review, evaluate 
or inspect facilities and activities funded in whole or in part by MCC 
Funding.

Section 3.8 Audits; Reviews.

    (a) Government Audits. Except as the Parties may otherwise agree in 
writing, the Government will, on at least a semi-annual basis, conduct, 
or cause to be conducted, financial audits of all disbursements of MCC 
Funding covering the period from signing of this Compact until the 
earlier of the following December 31 or June 30 and covering each six-
month period thereafter ending December 31 and June 30, through the end 
of the Compact Term, in accordance with the terms of the Program 
Implementation Agreement. As requested by MCC in writing, the 
Government will use, or cause to be used, to conduct such audits an 
auditor approved by MCC and named on the list of local auditors 
approved by the Inspector General of the Millennium Challenge 
Corporation (the ``Inspector General'') or a United States-based 
Certified Public Accounting firm selected in accordance with the 
``Guidelines for Financial Audits Contracted by MCA'' (the ``Audit 
Guidelines'') issued and revised from time to time by the Inspector 
General. Audits will be performed in accordance with the Audit 
Guidelines and be subject to quality assurance oversight by the 
Inspector General. An audit must be completed and the audit report 
delivered to MCC no later than ninety (90) days after the first period 
to be audited and no later than ninety (90) days after each June 30 and 
December 31 thereafter, or such other period as the Parties may 
otherwise agree in writing.
    (b) Audits of United States Entities. The Government will ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States nonprofit organization, on the other hand, 
that are financed with MCC Funding state that the United States 
organization is subject to the applicable audit requirements contained 
in OMB Circular A-133. The Government will ensure that agreements

[[Page 43387]]

between the Government or any Provider, on the one hand, and a United 
States for-profit Covered Provider, on the other hand, that are 
financed with MCC Funding state that the United States organization is 
subject to audit by the cognizant United States Government agency, 
unless the Government and MCC agree otherwise in writing.
    (c) Corrective Actions. The Government will 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 the Government's 
records, and require each such Covered Provider to permit independent 
auditors to have access to its records and financial statements as 
necessary.
    (d) Audit by MCC. MCC will have the right to arrange for audits of 
the Government's use of MCC Funding.
    (e) Cost of Audits, Reviews or Evaluations. MCC Funding may be used 
to fund the costs of any audits, reviews or evaluations required under 
this Compact, including as reflected on Annex II.

Article 4. Communications

Section 4.1 Communications.

    Any document or communication required or submitted by either Party 
to the other under this Compact must be in writing and, except as 
otherwise agreed with MCC, in English. For this purpose, the address of 
each Party is set forth below.
To MCC
    Millennium Challenge Corporation, Attention: Vice President for 
Operations (with a copy to the Vice President and General Counsel), 875 
Fifteenth Street, N.W., Washington, D.C. 20005, United States of 
America, Facsimile: +1 (202) 521-3700, Phone:+1 (202) 521-3600, E-mail: 
VPOperations@mcc.gov (Vice President for Operations), 
VPGeneralCounsel@mcc.gov (Vice President and General Counsel)
To the Government
    Government of the Kingdom of Lesotho, Attention: Minister of 
Finance and Development Planning, (with a copy to the Principal 
Secretary), Address: P.O. Box 395, Maseru--100, The Kingdom of Lesotho, 
Facsimile: +266 223 10622/223 10157, Phone: +266 223 23703/223 16304/
223 11101, E-mail: ps@finance.gov.ls.

Section 4.2 Representatives

    For all purposes of this Compact, the Government will be 
represented by the individual holding the position of, or acting as, 
the Minister of Finance and Development Planning of the Kingdom of 
Lesotho, and MCC will be represented by the individual holding the 
position of, or acting as, Vice President for Operations (each, a 
``Principal Representative''), each of whom, by written notice to the 
other Party, may designate one or more additional representatives for 
all purposes other than signing amendments to this Compact. A Party may 
change its Principal Representative to a new representative that holds 
a position of equal or higher rank upon written notice to the other 
Party.

Section 4.3 Signatures

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

Article 5. Termination; Suspension; Refunds

Section 5.1 Termination; Suspension

    (a) Subject to Section 5.2, either Party may terminate this Compact 
in its entirety by giving the other Party thirty (30) days written 
notice.
    (b) MCC may, upon written notice to the Government, suspend or 
terminate this Compact or MCC Funding, in whole or in part, and any 
obligation related thereto, if MCC determines that any circumstance 
identified by MCC as a basis for suspension or termination (whether 
such circumstance is notified in writing to the Government or by 
posting on the MCC Web site) has occurred, which circumstances include 
but are not limited to the following:
    (i) The Government fails to comply with its obligations under this 
Compact, the Program Implementation Agreement or any other agreement or 
arrangement entered into by the Government in connection with this 
Compact or the Program;
    (ii) An event has occurred that MCC determines makes it improbable 
that the Objectives will be achieved during the term of this Compact or 
that the Government will be able to perform its obligations under this 
Compact;
    (iii) A use of MCC Funding or continued implementation of this 
Compact would violate applicable law or United States Government 
policy, whether now or hereafter in effect;
    (iv) The Government or any other person or entity receiving MCC 
Funding or using assets acquired in whole or in part with MCC Funding 
is engaged in activities that are contrary to the national security 
interests of the United States;
    (v) An act has been committed or an omission or an event has 
occurred that would render Lesotho ineligible to receive United States 
economic assistance under Part I of the Foreign Assistance Act of 1961, 
as amended (22 U.S.C. 2151 et seq.), by reason of the application of 
any provision of the Foreign Assistance Act of 1961 or any other 
provision of law;
    (vi) The Government has engaged in a pattern of actions 
inconsistent with the criteria used to determine the eligibility of 
Lesotho for assistance under the Millennium Challenge Act of 2003, as 
amended; and
    (vii) The Government or another person or entity receiving MCC 
Funding or using assets acquired in whole or in part with MCC Funding 
is found to have been convicted of a narcotics offense or to have been 
engaged in drug trafficking.
    (c) All Disbursements will cease upon expiration, suspension, or 
termination of this Compact; provided, however, that MCC Funding may be 
used, in compliance with the Program Implementation Agreement, to pay 
for (i) reasonable expenditures for goods, works and services that are 
properly incurred under or in furtherance of this Compact before 
expiration, suspension or termination of this Compact, and (ii) 
reasonable expenditures (including administrative expenses) properly 
incurred in connection with the winding up of the Program within 120 
days after the expiration, suspension or termination of this Compact.
    (d) Subject to clause (c) of this Section 5.1, upon the expiration, 
suspension or termination of this Compact, (i) any amounts of MCC 
Funding not disbursed by MCC to the Government will be automatically 
released from any obligation in connection with this Compact, and (ii) 
any amounts of MCC Funding disbursed by MCC but not expended under 
Section 2.3 before the expiration, suspension or termination of this 
Compact, plus accrued interest thereon will be returned to MCC within 
thirty (30) days after the Government receives MCC's request for such 
return; provided, however, that if this Compact is suspended or 
terminated in part, MCC may request a refund for only the amount of MCC 
Funding allocated to the suspended or terminated portion.
    (e) MCC may reinstate any suspended or terminated MCC Funding under 
this Compact if MCC determines that the Government or other relevant 
person or entity has committed to correct each condition for which MCC 
Funding was suspended or terminated.

[[Page 43388]]

Section 5.2 Refunds; Violation

    (a) If any MCC Funding, any interest or earnings thereon, or any 
asset acquired in whole or in part with MCC Funding is used for any 
purpose in violation of the terms of this Compact, then MCC may require 
the Government to repay to MCC in United States Dollars the value of 
the misused MCC Funding, interest, earnings or asset, plus interest 
within thirty (30) days after the Government's receipt of MCC's request 
for repayment. The Government must use national funds (and no assets of 
the Program) to make such payment.
    (b) Notwithstanding any other provision in this Compact or any 
other agreement to the contrary, MCC's right under this Section 5.2 for 
a refund will continue during the term of this Compact and for a period 
of (i) five years thereafter or (ii) one year after MCC receives actual 
knowledge of such violation, whichever is later.

Section 5.3 Survival

    The Government's responsibilities under Sections 2.4, 2.5, 2.6, 
2.7, 3.2, 3.4(a), 3.5, 3.7, 3.8, 4.1, 4.2, 4.3, 5.1, 5.2, 5.3, 6.1, 
6.2, 6.3, 6.4 and 6.5 of this Compact will survive the expiration, 
suspension or termination of this Compact.

Article 6. Compact Annexes; Amendments; Governing Law

Section 6.1 Annexes

    Each annex attached hereto constitutes an integral part of this 
Compact.

Section 6.2 Inconsistencies

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

Section 6.3 Amendments

    The Parties may amend this Compact only by a written agreement 
signed by the Principal Representatives and subject to the respective 
domestic approval requirements to which this Compact was subject.

Section 6.4 Governing Law

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

Section 6.5 Additional Instruments

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

Section 6.6 References to MCC Web site

    Each reference in this Compact, the Program Implementation 
Agreement, or any other agreement entered into in connection with this 
Compact, to a document or information available on, or notified by 
posting on, the MCC Web site will be deemed a reference to such 
document or information as updated or substituted on the MCC Web site 
by MCC from time to time, and will be deemed to be incorporated by 
reference into, and to constitute an integral part of, this Compact, 
the Program Implementation Agreement or such other agreement entered 
into in connection with this Compact.

Section 6.7 References to Laws, Regulations, Policies and Guidelines

    Each reference in this Compact, the Program Implementation 
Agreement, or any other agreement entered into in connection with this 
Compact, to a law, regulation, policy, guidelines or similar document 
shall be construed as a reference to such law, regulation, policy, 
guidelines or similar document as it may, from time to time, be 
amended, revised, replaced or extended and shall include any law, 
regulation, policy, guidelines or similar document issued under or 
otherwise applicable or related to such law, regulation, policy, 
guidelines or similar document.

Article 7. Entry Into Force

Section 7.1 Domestic Requirements

    The Government will take all steps necessary to ensure that: (a) 
This Compact and the Program Implementation Agreement and all of the 
provisions of this Compact and the Program Implementation Agreement are 
valid and binding and are in full force and effect under the laws of 
Lesotho; (b) this Compact, the Program Implementation Agreement and any 
other agreement entered into in connection with this Compact to which 
the Government and MCC are parties will be given the status of an 
international agreement; and (c) no laws of Lesotho, other than the 
Constitution of Lesotho, whether now or hereafter in effect, will take 
precedence or prevail over the terms of this Compact or the Program 
Implementation Agreement.

Section 7.2 Conditions Precedent

    Before this Compact enters into force:
    (a) The Government and MCC must have executed the Program 
Implementation Agreement and it must be effective;
    (b) The Government will have delivered to MCC:
    (i) A certificate signed and dated by the Principal Representative 
of the Government, or such other duly authorized representative of the 
Government acceptable to MCC, certifying that the Government has 
completed all of its domestic requirements in order that the 
requirements of Section 7.1 have been satisfied;
    (ii) A legal opinion from the Attorney General of Lesotho (or other 
legal opinion acceptable to MCC), in form and substance satisfactory to 
MCC; and
    (iii) Complete, certified copies of all decrees, legislation, 
regulations or other governmental documents relating to its domestic 
requirements for this Compact to enter into force and the satisfaction 
of Section 7.1, which MCC may post on its Web site or otherwise make 
publicly available; and
    (c) MCC must determine that after signature of this Compact, the 
Government has not engaged in any action or omission that is 
inconsistent with the eligibility criteria for MCC Funding.

Section 7.3 Date of Entry into Force

    This Compact will enter into force on the later of (a) the date of 
the last letter in an exchange of letters between the Principal 
Representatives confirming that each Party has completed its domestic 
requirements for entry into force of this Compact and (b) the date that 
all conditions set forth in Section 7.2 have been satisfied.

Section 7.4 Compact Term

    This Compact will remain in force for five years after its entry 
into force, unless terminated earlier under Section 5.1 (the ``Compact 
Term'').
    In Witness Whereof, the undersigned, duly authorized by their 
respective governments, have signed this Compact this 23rd day of July, 
2007.
    Done at Washington, D.C.
    For Millennium Challenge Corporation, on behalf of the United 
States of America,
    Name: John J. Danilovich,
    Title: Chief Executive Officer.
    For the Government of the Kingdom of Lesotho,
    Name: Mohlabi Kenneth Tsekoa,
    Title: Minister of Foreign Affairs and International Relations.

[[Page 43389]]

Annex I Program Description

A. Overview

    This Annex I describes the Program that MCC Funding will support in 
Lesotho during the term of this Compact and the results to be achieved 
using MCC Funding. In all cases, an activity described herein will be 
carried out subject to any relevant approvals on the part of MCC and to 
the extent funds are made a