Notice of Entering Into a Compact With the Government of the Kingdom of Morocco, 52914-52942 [E7-18265]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 72, Number 179 (Monday, September 17, 2007)]
[Notices]
[Pages 52914-52942]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-18265]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 07-10]


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

AGENCY: Millennium Challenge Corporation.

ACTION: Notice.

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SUMMARY: In accordance with Section 610(b)(2) of the Millennium 
Challenge Act of 2003 (Pub. L. 108-199, Division D), the Millennium 
Challenge Corporation (MCC) is publishing a summary and the complete 
text of the Millennium Challenge Compact between the United States of 
America, acting through the Millennium Challenge Corporation, and the 
Government of the Kingdom of Morocco. Representatives of the United 
States Government and the Government of the Kingdom of Morocco executed 
the Compact documents on August 31, 2007.

    Dated: September 12, 2007.
William G. Anderson, Jr.,
Vice President & General Counsel, Millennium Challenge Corporation.

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

A. Introduction

    Over the past three decades, the Moroccan economy has grown 
slowly--from 1980 to 2006, per capita incomes only grew 1.5% annually. 
Despite recent macroeconomic stability, slow growth has left 
unemployment consistently high and extreme poverty remains around 11%.
    In this context, the Government (the ``GoM'') of the Kingdom of 
Morocco (``Morocco'') launched a national growth strategy, the Plan 
Emergence, in 2005, which aims to ``modernize and strengthen existing 
industrial sectors, and target investments in sectors such as textiles, 
agribusiness, fishing and the crafts industries, where the country has 
domestic and international competitive advantage.'' As a complement to 
this strategy and to ensure that the poor benefit from growth in high 
potential sectors, the GoM has proposed a Millennium Challenge Account 
investment program (the ``Program''), the funding of which will be 
memorialized in a Millennium Challenge Compact (the ``Compact''), that 
seeks to stimulate economic growth by increasing productivity and 
improving employment in high potential sectors.

B. Program Overview and Budget

1. Goal and Objectives
    The goal of Morocco's proposed $697.5 million Compact is to reduce 
poverty through economic growth. The Program's objective is to 
stimulate economic growth by increasing productivity and improving 
employment in high potential sectors. The Program focuses on 
investments in fruit tree productivity, small-scale fisheries, and 
artisan crafts in order to modernize and unlock opportunities in these 
sectors. Small business creation and growth will be supported by 
investments in financial services and enterprise support. The Program 
budget is summarized in the table below:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Project USD millions                         CIF\1\        Yr 1         Yr 2         Yr 3         Yr 4         Yr 5        Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fruit Tree Productivity......................................         6.96        25.86        84.32        93.86        60.80        29.10       300.90
 Small-Scale Fisheries.......................................         7.01        35.45        35.80        33.43         2.25         2.23       116.17
Artisan & Fez Medina.........................................         6.14        15.88        32.88        24.57        19.07        13.34       111.87
Financial Services...........................................         0.50        19.30        14.10         6.70         4.30         1.30        46.20
Enterprise Support...........................................         0.00         2.18         1.08        10.29        15.28         5.02        33.85
Monitoring and Evaluation....................................         1.84         3.67         4.04         3.64         3.03         4.52        20.74
Program Admin/Oversight......................................         9.95        13.13        11.79        12.18        10.73         9.98        67.77
Total MCC Contribution.......................................        32.40       115.46       184.01       184.67       115.45        65.50       697.50
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\1\ Compact Implementation Funding (CIF) provided pursuant to Section 609(g) of the Millennium Challenge Act of 2003. CIF will be used prior to entry
  into force of the Compact for feasibility and design studies, environmental assessments and plans, monitoring and evaluation activities and certain
  other administrative expenses and start-up costs.


[[Page 52915]]

C. Program Description

1. Fruit Tree Productivity Project ($300.90 million)
    The objective of the Fruit Tree Productivity Project is to 
stimulate growth in the agricultural sector and reduce volatility of 
agricultural production. This project aims to (1) reduce water needs in 
agriculture by moving from high water-use, low-value cereal grains to 
low water-use, high-value commercial fruit tree species; (2) reduce 
volatility in agricultural production and farm revenues by expanding 
the area of commercial tree species that produce more stable yields and 
can better handle moisture stress; (3) protect the natural resource 
base by eliminating wheat production from hillsides, replacing it with 
trees that reduce erosion and conserve the soil; (4) replace wheat, 
where Morocco is not competitive on the international market, with 
commercial tree crops, where it has a natural competitive advantage; 
and (5) organize and link small-holders to high-value markets.
    This project's investments target the length of the value chain, 
with the majority of the proposed project's activities supporting the 
growth of the olive oil and table olive sectors. This project will fund 
the intensification and rehabilitation of approximately 55,000 hectares 
(ha) of olive, fig and almond trees and the expansion of the same crops 
on approximately 120,000 ha in rain-fed areas. It will support the 
intensification and rehabilitation of existing olive tree production in 
small- and medium-sized irrigated perimeters. In Morocco's oases, this 
project will support the upgrading of existing small-scale irrigation 
infrastructure, as well as intensification and rehabilitation of 
existing date trees. A variety of critical value chain support services 
have been designed to ensure the success and integration of the various 
activities, and include training, scientific support, agribusiness 
organization development, marketing support and gender integration and 
support for women's projects. MCC funding will help determine this 
project's potential to qualify for carbon offset credits, recommend 
actions that stakeholders should take to link into the carbon finance 
market, and develop guidelines for the selected approach and procedures 
that must be instituted.
2. Small-Scale Fisheries Project ($116.17 million)
    Total annual value-at-landing of Morocco's fish catch is about $832 
million, making fishing one of the most important industries in the 
country. Despite this volume, Morocco is unable to satisfy current 
domestic demand for quality fish. Demand is expected to increase, 
driven by an expanding tourist sector and expected growth in domestic 
fish consumption, which is currently well below Morocco's neighbors. 
Due to inadequate coastal landing sites and port infrastructure, lack 
of unbroken cold chain from sea to consumer, weak integrity of the 
value chain, limited access to open markets, and insufficient training 
for fishers and their cooperatives, small-scale fisheries remains the 
most undeveloped segment of Morocco's fishing sector.
    The Small-Scale Fisheries Project targets the transformation of the 
small-scale fisheries sector by modernizing the means of catching, 
storing, and marketing fish, thereby improving the quality of the 
catch, maintaining the value chain, and increasing fishers' access to 
both local and export markets. MCC funding will be used to construct up 
to 20 fish landing sites (``PDAs'') along both coasts, and to construct 
or upgrade fishers' facilities in up to 13 major ports; build or 
rebuild up to 6 modern wholesale markets in selected cities and provide 
technical assistance and training required to ensure proper management; 
and to partially fund the acquisition of fresh-fish transportation 
equipment by mobile fish vendors, together with associated technical 
assistance and training.
3. Artisan and Fez Medina Project ($111.87 million)
    The Artisan and Fez Medina Project seeks to stimulate economic 
growth by leveraging the links between the craft sector, tourism, and 
the Fez Medina's rich cultural, historic and architectural resources. 
Despite potentially rich offerings, tourist spending on artisan 
products is currently substantially lower than in comparable markets 
such as Turkey and Tunisia. Artisans lack the training and skills 
necessary to modernize their production and capitalize on the growing 
tourist industry and export market. MCC funding will strengthen the 
national system for literacy and vocational education to benefit 
artisans and the general population, in particular women and girls. MCC 
funding will be used to enable artisans to increase the quality of 
their goods by supporting access to training in modern production 
techniques and business management, as well as access to bank or 
microcredit loans to invest in modern kilns and workshops. MCC funding 
will support the renovation of historic sites within the Fez Medina, 
including feasibility and market studies, a design competition, and 
supporting infrastructure, with the goal of creating sites of 
architectural significance to better serve local residents, attract 
tourists and increase artisan sales in Fez.
4. Financial Services Project ($46.20 million)
    The Financial Services Project seeks to increase financial services 
for micro-enterprises in Morocco by addressing the key constraints to 
the development of a broader, deeper, and market-based financial 
sector. To address the constraints in access to funding for microcredit 
associations, MCC funding will support an investment in the 
subordinated debt tranche of Jaida, a non-bank financial institution 
launched in late 2006 to provide debt to the Moroccan microcredit 
sector. MCC funding will also be used to analyze the regulatory and 
operational requirements to allow microcredit associations to change 
their legal structure (i.e., undergo ``transformation'') in order to 
offer savings and other non-credit financial services, as well as to 
mobilize shareholder equity. A detailed action plan will be developed 
and agreed to by the GoM, MCC and the accountable entity that will be 
established (``MCA-Morocco''), including the appropriate legal 
structure for transformation, next steps and timeline for implementing 
the necessary reforms. MCC funding will support technical assistance to 
financial institutions to implement the recommendations from this 
action plan. MCC funding will support investments and technical 
assistance to improve efficiency and transparency in the financial 
sector and lower borrowing costs on a sustainable basis for micro-
enterprises.
5. Enterprise Support Project ($33.85 million)
    The Enterprise Support Project addresses two economic priorities: 
To reduce high unemployment among young graduates and to encourage a 
more entrepreneurial culture. According to a recent World Bank report, 
urban unemployment ranges upwards of 26% for highly educated people, 
with unemployment rates of 65% among female university graduates under 
24 years of age. High unemployment is associated with high job 
destruction rates, modest formal sector employment generation, and 
growing labor supply.
    The objective of this project is to improve the outcomes of two 
existing high-priority Government initiatives, Moukawalati (which 
translates as ``My Small Business''), a relatively new national program 
initiated to drive

[[Page 52916]]

Morocco's businesses to be more competitive in the face of 
globalization and to address high youth unemployment rates, and the 
National Initiative for Human Development (``INDH''), a multi-year 
Government initiative aimed at creating opportunities for the poor, 
vulnerable, and socially excluded. A pilot approach is being pursued at 
the initiative of the GoM because of a dearth of quality evidence on 
the impact of current initiatives on the sustainability of small 
businesses. This project is structured in two phases. First, a set of 
three pilots will measure the impact of several training initiatives 
offered to current beneficiaries of these Government programs who would 
receive further training and technical assistance designed to increase 
their rate of survival. Second, if results reported by an independently 
conducted evaluation are promising, training initiatives will be 
expanded beginning in Year 3 of the Compact. In addition, the 
Government agency sponsors of the programs would receive support to 
help them better manage the selection and training processes for these 
entrepreneurs.

D. Impacts

    The Program is expected to increase Morocco's GDP by approximately 
$118 million annually and to benefit approximately 600,000 people 
directly and 3 million people indirectly over the Compact term.
    The Fruit Tree Productivity Project is expected to improve the 
livelihoods of approximately 136,000 farm households in rural areas of 
the northern, central and southern regions of Morocco. As production 
and crop values increase, this project will indirectly benefit the 
network of input suppliers, transporters, processors, and traders along 
the olive, almond, fig and date value chains. In addition, terrace 
construction is expected to create benefits for approximately 11,000 
agricultural laborers.
    The Small-Scale Fisheries Project is expected to benefit 
approximately 25,000 small-scale fishers, boat owners, wholesale fish 
merchants, mobile fish vendors and their household members. The 
construction of boat landing sites complete with basic, commercial and 
social infrastructure is expected to create the enabling environment 
for higher fish quality and value, increased income for fishers, and 
better management of the fish resources. Similar facilities will be 
built at selected ports where fishers land their catch. The 
construction and modernization of 6 wholesale markets, mostly in the 
interior of the country, will strengthen market integration and 
facilitate an increase in the number of buyers and sellers, and result 
in increased market-clearing quantities and a more efficient market 
price. It is anticipated that these improvements to the Moroccan fish 
market will result in increased domestic consumption of fish, rather 
than its use as low-value fish meal. Further, it is anticipated that 
investments to improve standards of hygiene, handling and preservation 
of fish in the cold chain will contribute to the maintenance of the 
value of fish and greater sales. Finally, a more efficient and 
transparent network of wholesale fish markets will contribute to the 
distribution of a more affordable protein source to the interior of the 
country where a high level of poverty exists. Approximately 2,000 
mobile fish vendors, earning on average $2,250 per year, will benefit 
from this project. Mobile fish vendors will be able to increase the 
value and volume of fish sold as well as their marketing range. As a 
result, it is estimated that mobile fish vendor net incomes (once their 
loans are repaid) will increase approximately 62%, enabling the vendors 
to exit subsistence-level poverty.
    The Artisan and Fez Medina Project seeks to stimulate economic 
growth by leveraging the links between the craft sector, tourism, and 
the Fez Medina's rich cultural, historic and architectural assets. It 
is expected that 50,000 master artisans will be trained in new design 
and production methods by the end of the Compact term. Thirty new 
career tracks will be created and installed in OFPPT schools that will 
diversify, expand and deepen competencies of students for better 
employment and incomes. Innovative mobile training programs are 
expected to reach at least 15,000 people during the Compact term. 
Approximately 3,250 artisan workers and 550 master artisans are 
expected to receive production assistance. This project's activities 
are expected to reduce poverty by stimulating the Medina's main 
industries, tourism and artisan production, and are estimated to 
directly benefit approximately 20,000 low-income workers in the Fez 
Medina.
    The key beneficiaries of the Financial Services Project will be 
individuals or micro-enterprises that borrow from microcredit 
associations operating in Morocco. The intended impact of this project 
is to increase the supply of financial services for these clients. 
Furthermore, to the extent that this project causes investments that 
lead to service upgrades and helps microcredit associations improve 
efficiency, clients should benefit from better services, and either 
some additional increase in lending or reduction in borrowing costs. 
Today, the microcredit sector serves approximately 1.2 million clients. 
Assuming this project facilitates a net increase in the client growth 
rate of a quarter of one percent per year, and assuming that without 
this project the client growth rate is 30% per year, then there would 
be 43,000 additional clients by the end of the Compact term. If the net 
increase in growth is one percent per year, there would be 174,000 
additional clients by the end of the Compact term.
    During the pilot phases of the Enterprise Support Project, 
approximately 600 enterprises will receive training. The project will 
also analyze the regulatory and operational requirements to allow 
micro-credit associations to change their legal structure in order to 
offer savings and other non-credit financial services to their 
customers. MCC assistance will also support investments and technical 
assistance to improve efficiency and transparency in the financial 
sector in an effort to lower borrowing costs on a sustainable basis for 
micro-enterprises.

E. Program Management

1. Governance Structure
    The implementation and management arrangements are designed to 
ensure strong governance, oversight, management, monitoring and 
evaluation, and fiscal accountability in the use of MCC funds. The 
Government, through passage of a law, will create an independent agency 
(an ``[eacute]tablissement public'') (``MCA-Morocco''), which will be 
authorized to act on behalf of the Government to manage and oversee the 
Program's implementation. MCA-Morocco will be composed of: (1) A 
strategic steering committee to oversee implementation, make strategic 
decisions, and ensure the execution of agreed policy reforms; (2) a 
management unit to manage the day-to-day operations. The strategic 
steering committee will be composed of representatives from the 
Government, the private sector and civil society. The management unit 
will be composed of professional staff hired through an open and 
competitive recruitment, and MCC will have approval rights for all key 
personnel.
    Stakeholder participation will be built into the Program through a 
series of project-level stakeholders' committees structured to allow 
the private sector, civil society, and local/regional governments to 
provide advice and input for implementation.

[[Page 52917]]

2. Implementation Arrangements
    The GoM and MCC have identified the principal ministries and public 
institutions that will serve as implementing entities. The current 
number of personnel in the implementing entities is insufficient to 
meet the demands of implementation of the Program. Implementation of 
the Fruit Tree Productivity, Small-Scale Fisheries, and Artisan and Fez 
Medina Projects will require the services of dedicated implementation 
teams to be established within the implementing entities for each 
project, with additional personnel to be contracted by MCA-Morocco 
dedicated to Compact-funded projects. The teams will be responsible for 
coordination of the activities of contractors, to achieve project 
objectives and timelines; development of Compact-related requirements 
(work plans, detailed financial plans, and quarterly reports), 
procurement (drafting terms of reference), and performance monitoring 
of contractors. The teams will be located within the implementing 
ministries or public institutions to ensure local capacity development 
and to guarantee close collaboration and communications.
    It is expected that MCA-Morocco will engage up to five procurement 
agents from within the GoM, assisted by an MCC-funded procurement 
advisor that will provide support, oversight and technical assistance. 
The procurement advisor will act as procurement agent in areas where 
such services are required. The Ministry of Finance will serve as the 
fiscal agent for the Program, assisted by a ``fiscal coordination 
unit'' within the Ministry of Finance, charged with all financial 
issues, including regular reporting to MCA-Morocco on global and 
activity-specific budget concerns, and the maintenance and security of 
the financial management system. Reporting will be coordinated by the 
chief financial officer and procurement officer within MCA-Morocco.
    Implementation schedules were developed in conjunction with the 
GoM, covering the start-up of the MCA-Morocco and execution of each 
project over the entire Compact period. This will facilitate 
communication and Program oversight by allowing MCA-Morocco and MCC to 
work off of one common timetable. Approximately five percent of the 
total Compact amount will be available for disbursements before entry 
into force to facilitate start-up and ensure successful execution of 
the Compact within the five-year timeframe.

F. Assessment

1. Economic Analysis
    The economic rate of return (``ERR'') for the Program is 17.1%. 
Project-level ERRs are presented in the table below:

------------------------------------------------------------------------
                                                             Project ERR
                          Project                                 %
------------------------------------------------------------------------
Fruit Tree Productivity...................................          13
Small-Scale Fisheries.....................................          37
Artisan and Fez Medina....................................          21
Financial Services........................................          18
Enterprise Support........................................          14
Program Economic Rate of Return...........................          17.1
------------------------------------------------------------------------

2. Consultative Process
    The Program is based on development priorities determined in 
national consultations that began in 2003 and included 56 provincial, 
16 regional, one national and one international workshop. The GoM 
integrated this input with the opportunities identified through the 
Plan Emergence. To determine priorities for MCC financing, an inter-
ministerial committee, presided by the Prime Minister, consulted with 
stakeholders at both the central and local levels. The August 2005 
concept paper submitted to MCC was based on these consultations.
    At MCC's request during subsequent stages of proposal development, 
sector-level and national meetings refined the focus of the Program and 
identified additional proposal components. Sector-level meetings in 
fishing, agriculture, and the artisan sector followed in six key 
regions of the country and consultation meetings were held with the 
country's twelve microcredit associations. The Enterprise Support 
Project was shaped in the September 2005 conference on employment and 
the 2006 national conference on training, both of which featured 
ministerial and local government consultations with key actors.
    Morocco continues to develop a culture of consultation and 
transparency. The significant participatory workshops and public 
outreach efforts that will be required by MCC during environmental and 
social impact assessments and detailed project design and 
implementation will reinforce this culture and contribute to further 
expansion of dialogue among an array of national and local 
stakeholders.

G. Donor Coordination

    Much of the Program draws on lessons learned from smaller donor-
funded projects in the targeted sectors. The Fruit Tree Productivity 
Project builds on experiences of the United States Agency for 
International Development in supporting conversion to higher value crop 
production as well as the European Union (``EU'') and the World Bank in 
supporting small-scale irrigation. Similarly, the Japanese and Italian 
governments have supported GoM efforts to increase returns to the 
small-scale fisheries sector by supporting PDAs. In addition, the 
Enterprise Support Project was based in part on lessons learned from EU 
and GTZ projects aimed at supporting the small business sector in 
Morocco.
    MCC's funding will complement on-going efforts by Morocco's other 
development partners across several projects. The Artisan and Fez 
Medina Project will support efforts by UNESCO and the World Bank to 
preserve and stimulate economic activity in the Medina and leverage the 
funding provided by FODEP, an environmental fund financed with German 
assistance. The Financial Services Project seeks to support an 
investment in Jaida alongside KfW, AFD and the IFC.
    Continued coordination will be a priority throughout 
implementation.

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

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal
    Section 1.2 Program Objective
    Section 1.3 Project Objectives
Article 2. Funding and Resources
    Section 2.1 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

[[Page 52918]]

    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 Laws, Regulations, Policies and 
Guidelines
Article 7. Entry Into Force
    Section 7.1 Domestic Requirements
    Section 7.2 Conditions Precedent to Entry Into Force
    Section 7.3 Date of Entry Into Force
    Section 7.4 Compact Term
    Section 7.5 Provisional Application
Annex I: Program Description
Annex II: Summary of the Multi-Year Financial Plan
Annex III: Description of the Monitoring and Evalutaion 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 (the ``Government'') of the Kingdom of Morocco (``Morocco'') 
(individually a ``Party'' and collectively, the ``Parties'').
    Recalling that the Government submitted to MCC a proposal based on 
development priorities determined in national and regional 
consultations and integrated with the national growth strategy 
(including, inter alia, the Plan Emergence), which seeks to stimulate 
economic growth by increasing productivity and improving employment in 
high potential sectors; and
    Recognizing that MCC wishes to help Morocco 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 Morocco through 
economic growth (the ``Compact Goal'').
Section 1.2 Program Objective
    The objective of the Program is to stimulate economic growth by 
increasing productivity and improving employment in high potential 
sectors (the ``Program Objective'').
Section 1.3 Project Objectives
    The objectives of the Projects (each, a ``Project Objective'' and 
collectively, the ``Project Objectives'') are:
    (a) To stimulate growth in the agricultural sector and reduce 
volatility of agricultural production by accelerating the 
transformation from annual crops, notably cereals, to more productive 
perennial tree crops, such as olives, almonds, figs and dates;
    (b) to transform the small-scale fishing sector by modernizing the 
means of catching, storing, and marketing fish to improve the quality 
of the catch, maintain the value chain and increase access to local and 
export markets, and to assure the sustainable use of fish resources;
    (c) to increase value to the tourism and artisan sectors through 
leveraging the links between the craft sector and tourism; to expand 
the quality of and improve access to artisan, literacy and vocational 
training; and to increase the value of the cultural, historic and 
architectural resources of the Fez Medina;
    (d) to increase financial services for micro-enterprises in Morocco 
by addressing the key constraints to the development of a broader, 
deeper, market-based financial sector; and
    (e) to improve the outcomes of existing high priority government 
initiatives, Moukalawati and the National Initiative for Human 
Development (Initiative National pour le D[eacute]veloppement Humain, 
or ``INDH'') increasing the sustainability of young businesses created 
with their assistance.
    The Government will take all the steps necessary or appropriate to 
achieve the Program Objective and Project Objectives during the Compact 
Term (as defined in Section 7.4).

Article 2. Funding and Resources

Section 2.1 MCC Funding
    MCC grants to the Government, under the terms of this Compact, an 
amount not to exceed Six Hundred Ninety-Seven Million, Five Hundred 
Thousand United States Dollars (US$697,500,000) (``MCC Funding'') to 
help the Government implement the Program as more specifically set 
forth in Annex II of this Compact.
Section 2.2 Compact Implementation Funding
    (a) Of the total amount of MCC Funding, MCC will make available to 
the Government up to Thirty-Two Million, Four Hundred Thousand United 
States Dollars (US$32,400,000) (``Compact Implementation Funding'') 
under Section 609(g) of the Millennium Challenge Act of 2003 for:
    (i) feasibility and design studies, strategic environmental (and 
social) assessments, environmental impact assessments, environmental 
assessments, environmental management plans and resettlement action 
plans for projects and activities included in the Program;
    (ii) financial management and procurement activities;
    (iii) monitoring and evaluation activities;
    (iv) administration activities, including salaries and 
administrative support expenses such as rent, information technology, 
and other capital expenditures; and
    (v) other Program implementation activities approved by MCC.
    (b) 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 and (ii) any other requirements and limitations as 
may be notified to the Government by MCC in writing.
Section 2.3 Disbursement
    In accordance with this Compact and the Program Implementation 
Agreement (as defined in Section 3.1), MCC will disburse MCC Funding 
for expenditures incurred pursuant to the Program (each, a 
``Disbursement''). The Disbursements will be made available to the 
Government, at MCC's sole election, by (a) deposit to one or more bank 
accounts established by the Government and acceptable to MCC (each, a 
``Permitted Account'') or (b) direct payment to a provider of goods, 
works or services required to implement the Program.
Section 2.4 Interest
    The Government will pay to MCC interest and other earnings that 
accrue on MCC Funding on deposits in the Permitted Accounts in 
accordance with the Program Implementation Agreement (including by 
directing such payments to a bank account that MCC may from time to 
time indicate).
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 to ensure that all MCC 
Funding it receives or is projected to receive in each fiscal year is 
fully accounted for in its annual budget 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 and the 
Program or for activities comparable to those contemplated under this 
Compact or the Program.
    (d) Unless the Government discloses otherwise to MCC in writing, 
MCC Funding will be in addition to the

[[Page 52919]]

resources that the Government would otherwise receive or budget for the 
activities contemplated under this Compact and the Program or for 
activities comparable to those contemplated under this Compact or 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 by MCC to the 
Government in writing or posted on the MCC Web site at www.mcc.gov 
(``MCC Web site''), including but not limited to the following 
purposes:
    (a) for assistance to, or training of, the military, police, 
militia, national guard or other quasi-military organization or unit;
    (b) for any activity that is likely to cause a substantial loss of 
United States jobs or a substantial displacement of United States 
production;
    (c) to undertake, fund or otherwise support any activity that is 
likely to cause a significant environmental, health, or safety hazard 
as further described in environmental guidelines delivered by MCC to 
the Government or posted on the MCC Web site (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 ensure that each of the following is free from the 
payment of any existing or future taxes, duties, levies, contributions 
or other similar charges (``Taxes'') of or in Morocco (including any 
such Taxes of a national, regional, local or other governmental or 
taxing authority): (i) The Program; (ii) MCC Funding; (iii) interest or 
earnings on MCC Funding; (iv) any Project or activity implemented under 
the Program; (v) goods, works, services, technology and other assets 
and activities under the Program or any Project; (vi) persons and 
entities that provide such goods, works, services, technology and 
assets or perform such activities; and (vii) income, profits and 
payments with respect thereto. The Parties acknowledge and agree that 
the foregoing includes, inter alia, value added and other transfer 
taxes, profit and income taxes, property and ad valorem taxes, and 
import and export duties and taxes (including for goods imported and 
re-exported for personal use), withholding taxes and payroll taxes.
    (b) Before any Disbursement, 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 (i) waivers of 
certain filing and compliance requirements relating to Taxes, and (ii) 
an agreement on exceptions to paragraph (a) above for (1) Taxes on and 
contributions for certain individuals who are nationals or permanent 
residents of Morocco, (2) Taxes (other than transfer Taxes and import 
and export Taxes) on certain entities that are organized under the laws 
of Morocco, and (3) fees or charges for services that are generally 
applicable in Morocco, reasonable in amount and imposed on a non-
discriminatory basis.
    (c) If a Tax has been levied and paid contrary to the requirements 
of this Section 2.7 or any agreement entered into pursuant to this 
Section 2.7, whether inadvertently, due to the impracticality of 
implementation of this Section 2.7 with respect to certain types or 
amounts of taxes, or otherwise, the Government will refund promptly to 
MCC the amount of such Tax in United States Dollars (``US$'') or 
Moroccan Dirham (``MAD'') within thirty (30) days (or such other period 
as may be agreed in writing by the Parties) after the Government is 
notified in writing of such levy and tax payment, whether by MCC or 
otherwise; provided, however, that no MCC Funding, proceeds thereof or 
Program assets may be applied by the Government in satisfaction of its 
obligations under this paragraph.

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 relating to, among other matters, implementation 
arrangements, fiscal accountability, disbursement and use of MCC 
Funding, procurement and applicable tax exemptions (the ``Program 
Implementation Agreement'' or ``PIA'').
Section 3.2 Government Responsibilities
    (a) The Government has the 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 PIA. 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 Morocco 
now or hereinafter in effect makes or will make unlawful or otherwise 
prevent or hinder the performance of any obligation under this Compact, 
the PIA or any other related agreement or any transaction contemplated 
hereby or thereby.
    (d) The Government will ensure that any assets or services funded 
in whole or in part (directly or indirectly) by MCC Funding will be 
used solely to implement the Program unless otherwise agreed by MCC in 
writing.
Section 3.3 Policy Performance
    In addition to undertaking the specific policy and legal reform 
commitments identified in Annex I of this Compact, 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 and the selection criteria and methodology used by MCC.
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 
legislation of Morocco; 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
    As necessary, MCC may provide guidance consistent with the terms 
and conditions of this Compact to the Government in writing on any 
matter relating to this Compact, MCC Funding or the implementation of 
the Program (each, an ``Implementation Letter''). The

[[Page 52920]]

Government will apply such guidance in implementing the Program.
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)) to implement the Program will be consistent with the 
procurement guidelines notified by MCC to the Government in writing or 
by posting on the MCC Web site, or otherwise made publicly available 
(the ``MCC Program Procurement Guidelines''), which will include, among 
others, the following requirements:
    (a) Open, fair, and competitive procedures must be used in a 
transparent manner to solicit, award and administer contracts and to 
procure goods, works and services;
    (b) solicitations for goods, works, and services must be based upon 
a clear and accurate description of the goods, works and services to be 
acquired;
    (c) contracts must be awarded only to qualified contractors that 
have the capability and willingness to perform the contracts in 
accordance with their terms on a cost effective and timely basis; and
    (d) no more than a commercially reasonable price, as determined, 
for example, by a comparison of price quotations and market prices, 
will be paid to procure goods, works and services.
Section 3.7 Records; Accounting; Covered Providers; Access
    (a) Government Books and Records. The Government will maintain, and 
will use its best efforts to ensure that all Covered Providers (as 
defined in subsection (c) below) maintain, accounting books, records, 
documents and other evidence relating to the Program adequate to show 
to MCC's satisfaction the use of all MCC Funding (``Compact Records''). 
In addition, the Government will furnish or cause to be furnished to 
MCC upon its request all such Compact Records.
    (b) Accounting. The Government will maintain, and will use its best 
efforts to ensure that all Covered Providers maintain, Compact Records 
in accordance with generally accepted accounting principles prevailing 
in the United States, or at the Government's option and with MCC's 
prior written approval, other accounting principles, such as those (i) 
prescribed by the International Accounting Standards Committee (an 
affiliate of the International Federation of Accountants) or (ii) then 
prevailing in Morocco. Compact Records must be maintained for at least 
five (5) years after the end of the Compact Term or for such longer 
period, if any, required to resolve any litigation, claims or audit 
findings or any statutory requirements.
    (c) Providers and Covered Providers. Unless the Parties agree 
otherwise in writing, a ``Provider'' is (i) any entity of the 
Government that receives or uses MCC Funding or any other Program asset 
in carrying out activities to implement the Program 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 (i) 
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 (ii) 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 
pursuant to 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 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 MCC (the ``Inspector 
General'') or a United States-based certified public accounting firm 
selected in accordance with the ``Guidelines for Financial Audits 
Contracted by MCA'' (the ``Audit Guidelines'') issued and revised from 
time to time by the Inspector General, which are posted on the MCC Web 
site. Audits will be performed in accordance with the Audit Guidelines 
and be subject to quality assurance oversight by the Inspector General. 
An audit must be completed and the audit report delivered to MCC no 
later than 90 days after the first period to be audited and no later 
than 90 days after each June 30 and December 31 thereafter, or such 
other period as the Parties may otherwise agree in writing.
    (b) Audits of United States Entities. The Government will ensure 
that agreements between the Government or any Provider, on the one 
hand, and a United States nonprofit organization, on the other hand, 
that are financed with MCC Funding state that the United States 
nonprofit organization is subject to the applicable audit requirements 
contained in the United States Office of Management and Budget 
(``OMB'') Circular A-133. The Government will ensure that agreements 
between the Government or any Provider, on the one hand, and a United 
States for-profit Covered Provider, on the other hand, that are 
financed with MCC Funding state that the United States for-profit 
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.

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

[[Page 52921]]

by the Parties, 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, NW., Washington, DC 20005, United States of America, 
Facsimile: +1(202) 521-3700, Telephone: +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 Morocco, Attention: Prime Minister 
(with a copy to the Minister of Finance), Primature, Palais Royal, 
Touarga, Rabat, Royaume du Maroc, Facsimile: +(212) 037 768 656, 
Telephone : +(212) 037 219 400, E-mail: pm@pm.gov.ma.

With a copy to:

    Ministry of Finance & Privatization, Attn: Minister of Finance, Bd. 
Med V. Quartier AdministratifRabat--Chellah, Royaume du Maroc, 
Facsimile: +(212) 037.76.40.81, Telephone: +(212) 037.76.06.61/
037.76.55.04, E-mail: ministre@finances.gov.ma.
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 of the Government, and MCC will be represented 
by the individual holding the position of, or acting as, Vice President 
for Operations of MCC (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) Either Party may terminate this Compact in its entirety by 
giving the other Party thirty (30) days' written notice.
    (b) MCC may, immediately upon written notice to the Government, 
suspend or terminate this Compact or MCC Funding, in whole or in part, 
and any obligation related thereto, if MCC determines that any 
circumstance identified by MCC as a basis for suspension or termination 
(whether in writing to the Government or by posting on the MCC Web 
site) has occurred, which circumstances include but are not limited to 
the following:
    (i) The Government fails to comply with its obligations under this 
Compact, the PIA or any other agreement or arrangement entered into by 
the Government in connection with this Compact or the Program;
    (ii) an event or series of events has occurred that MCC determines 
makes it improbable that the Program Objective or any of the Project 
Objectives will be achieved during the Compact Term or that the 
Government will be able to perform its obligations under this Compact;
    (iii) a use of MCC Funding or continued implementation of the 
Program violates or 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 financed 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 Morocco ineligible to receive United States 
economic assistance under Part I of the Foreign Assistance Act of 1961 
(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 
Morocco for assistance under the Millennium Challenge Act of 2003; and
    (vii) the Government or another person or entity receiving MCC 
Funding or using assets financed in whole or in part with MCC Funding 
is found to have been convicted of a narcotics offense or to have been 
engaged in drug trafficking.
    (c) All Disbursements will cease upon expiration, suspension, or 
termination of this Compact; provided, however, MCC Funding may be 
used, in compliance with this Compact and the PIA, to pay for (i) 
reasonable expenditures for goods, works or services that are properly 
incurred under or in furtherance of the Program before expiration, 
suspension or termination of this Compact, and (ii) reasonable 
expenditures (including administrative expenses) properly incurred in 
connection with the winding up of the Program within 120 days after the 
expiration, suspension or termination of this Compact, as long as the 
request for such expenditures is submitted within ninety (90) days 
after such expiration, suspension or termination.
    (d) Subject to subsection (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 will be released from any 
obligation in connection with this Compact, and (ii) any amounts of MCC 
Funding disbursed by MCC but not committed 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.
    (e) MCC may reinstate any suspended or terminated MCC Funding under 
this Compact if MCC determines that the Government or other relevant 
person or entity has committed to correct each condition for which MCC 
Funding was suspended or terminated.
Section 5.2 Refunds; Violation
    (a) If any MCC Funding, any interest or earnings thereon, or any 
asset financed 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 will not use MCC Funding, proceeds 
thereon or Program assets to make such payment.
    (b) Notwithstanding any other provision in this Compact or any 
other agreement to the contrary, MCC's right under this Section 5.2 for 
a refund will continue during the Compact Term and for a period of (i) 
five 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, 2.6, 2.7, 
3.7, 3.8, 4.1, 5.1(c), 5.1(d), 5.2, 5.3 and 6.4 of this Compact will 
survive the expiration, suspension or termination of this Compact.

[[Page 52922]]

Article 6. Compact Annexes; Amendments; Governing Law

Section 6.1 Annexes
    Each annex to this Compact 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 completion 
of the respective domestic requirements of the Parties.
Section 6.4 Governing Law
    This Compact is an international agreement and is 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, existing 
under or in furtherance of any agreement, document or instrument 
related to this Compact and the Program.
Section 6.6 References to MCC Web site
    Any reference in this Compact, the PIA or any other agreement 
entered into in connection with this Compact, to a document or 
information available on, or notified by posting on the MCC Web site 
will be deemed a reference to such document or information as updated 
or substituted on the MCC Web site from time to time.
Section 6.7 References to Laws, Regulations, Policies and Guidelines
    Each reference in this Compact, the PIA or any other agreement 
entered into in connection with this Compact, to a law, regulation, 
policy, guideline or similar document will, unless expressly set forth 
herein or therein, 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 will 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
    Before this Compact enters into force, the Government will take all 
steps necessary to ensure that once in force (a) this Compact and the 
PIA and all of the provisions of this Compact and the PIA are valid and 
binding and are in full force and effect in Morocco, (b) this Compact 
and the PIA will be international agreements and (c) no internal law of 
Morocco may be invoked as justification for the Government's failure to 
perform any of its obligations under this Compact.
Section 7.2 Conditions Precedent to Entry into Force
    Before this Compact enters into force:
    (a) The Government and MCC will have executed the PIA, and it must 
be effective; and
    (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, that the Government has satisfied the 
requirements of Section 7.1;
    (ii) a legal opinion from the Secretariat General du Gouvernement 
of Morocco (or other entity 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 the 
Government's 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.
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'').
Section 7.5 Provisional Application
    Upon signature of this Compact, the Parties will provisionally 
apply this Compact until it has entered into force in accordance with 
Section 7.3; provided that no MCC Funding, other than Compact 
Implementation Funding, will be made available or disbursed to the 
Government before this Compact enters into force.

    In Witness Whereof, the undersigned, duly authorized by their 
respective governments, have signed this Compact this 31st day of 
August, 2007.
    Done at Tetouan, Morocco
    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 Morocco, Name: Fathallah 
Oualalou, Title: Minister of Finance.

Annex I Program Description

A. Overview

    This Annex I to this Compact describes the Program that MCC Funding 
will support in Morocco during the Compact Term.
1. Background and Consultative Process
    Over the past three decades the Moroccan economy has grown slowly: 
From 1980 to 2006, per capita incomes grew 1.5 percent annually. While 
the macroeconomic environment in Morocco has improved in recent years, 
unemployment remains consistently high and extreme poverty remains near 
11 percent.
    The Program is based on development priorities determined in 
national consultations that began in 2003 and included 56 provincial, 
16 regional, one national and one international workshop. The 
Government integrated this input with the opportunities identified 
through the Plan Emergence--a national growth strategy launched in 2005 
to ``modernize and strengthen existing industrial sectors, and target 
investments in sectors such as textiles, agribusiness, fishing and the 
crafts industries, where the country has domestic and international 
competitive advantages.'' Priorities were determined through an inter-
ministerial committee presided by the Prime Minister in consultation 
with stakeholders at both the national and local levels. Based on this 
consultative process, the Government submitted its initial proposal to 
MCC in August 2005.
    At MCC's request, sector level and national consultations refined 
the focus of the Program and identified additional components. Sector 
level consultations in fishing, agriculture, and the artisan sector 
followed in six key regions of the country. The Government also 
consulted with the country's microcredit associations, followed by 
conferences on employment and

[[Page 52923]]

training, both of which featured ministerial and local government 
consultations with key actors.
2. Program Description
    The Program Objective is to stimulate economic growth by increasing 
productivity and improving employment in high potential sectors. The 
Program includes the Fruit Tree Productivity Project, the Small-Scale 
Fisheries Project, the Artisan and Fez Medina Project, the Financial 
Services Project and the Enterprise Support Project (each, a 
``Project'') and the activities related to the Projects (each, a 
``Project Activity'') as described in this Annex I.
    The Program is expected to increase Morocco's GDP by approximately 
US$118,000,000 annually and to benefit approximately 600,000 people 
directly and three million people indirectly over the Compact Term.
    The Parties may agree to modify or eliminate any Project or Project 
Activity or to create a new Project or Project Activity by written 
agreement signed by the Principal Representative of each Party without 
amending this Compact; provided, however, any such modification or 
elimination of a Project or Project Activity or creation of a new 
Project or Project Activity does not (a) cause the amount of MCC 
Funding to exceed the aggregate amount specified in Section 2.1 of this 
Compact, (b) cause the Government's responsibilities or contribution of 
resources to be less than specified in this Compact, or (c) extend the 
Compact Term.
3. Environmental and Social Accountability
    All of the Projects will be implemented in compliance with the MCC 
Environmental Guidelines, MCC's guidance on the integration of gender 
in Program implementation delivered by MCC to the Government or posted 
on the MCC Web site (the ``MCC Gender Policy'') and the World Bank's 
Operational Policy on Involuntary Resettlement in effect as of July 
2007 (``OP 4.12''). The Government will also ensure that the Projects 
comply with all national environmental laws and regulations, licenses 
and permits, except to the extent such compl