Notice of Entering Into a Compact With the Government of Mongolia, 61381-61405 [E7-21306]

Agencies

• Millennium Challenge Corporation

[Federal Register Volume 72, Number 209 (Tuesday, October 30, 2007)]
[Notices]
[Pages 61381-61405]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-21306]


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MILLENNIUM CHALLENGE CORPORATION

[MCC FR 07-12]


Notice of Entering Into a Compact With the Government of Mongolia

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 Mongolia. The President of the United States of America 
and the President of Mongolia executed the Compact documents on October 
22, 2007.

    Dated: October 24, 2007.
William G. Anderson Jr.,
Vice President & General Counsel, Millennium Challenge Corporation.

Summary of Millennium Challenge Compact With the Government of Mongolia

A. Introduction

    Mongolia is a landlocked country with a population of approximately 
2.6 million, located between Russia and China. Nearly half of the 
population is concentrated in Ulaanbaatar, its capital, about 60% lives 
along the rail corridor between Russia and China, and the remainder is 
largely dispersed throughout the country. Mongolia's aging transport 
infrastructure and weak institutions are a significant constraint to 
economic growth and development, particularly given the pressures of 
the country's abrupt transition to a market economy, the collapse of 
financial support from Russia, and the rapid urbanization of what 
traditionally has been a highly dispersed rural herding society. The 
Government of Mongolia (``GoM'') has proposed a $285 million, five-year 
MCA program (``Program'') comprising the Rail Project, the Property 
Rights Project, the Vocational Education Project, and the Health 
Project, as further described below (each, a ``Project''). The proposed 
Program is intended to release the potential of certain critical 
interlocking human, institutional, and physical resources that factor 
centrally in Mongolia's efforts to broaden and deepen economic 
development. The Program is expected to have a significant direct 
impact on individuals living in poverty, and significant indirect and 
ancillary benefits by creating new economic opportunities and 
increasing the capacity of individuals and groups to participate fully 
in and benefit from economic growth.

B. Program Overview and Budget

----------------------------------------------------------------------------------------------------------------
                                                             Timeline
                             ------------------------------------------------------------------------ Total ($US
         Description           CIF ($US    CY1 ($US    CY2 ($US    CY3 ($US    CY4 ($US    CY5 ($US      Mil)
                                 Mil)        Mil)        Mil)        Mil)        Mil)        Mil)
----------------------------------------------------------------------------------------------------------------
Rail Project................           0       26.06       44.50       52.68       61.94        3.20      188.38
Property Rights Project.....        0.17        2.99        8.18        7.08        3.51        1.13       23.06
Vocational Education Project        0.23        2.09        8.29        8.40        5.41        1.10       25.51
Health Project..............        0.19        2.24        4.40        4.56        2.92        2.72       17.03
Program Administration &            4.40        5.17        4.61        4.32        3.85        3.89       26.23
 Audits.....................
Monitoring & Evaluation.....        0.04        0.56        0.47        0.47        0.39        2.77        4.70
                             -----------------------------------------------------------------------------------
    Total...................        5.02       39.12       70.44       77.50       78.01       14.82      284.91
----------------------------------------------------------------------------------------------------------------

    The Program's goal is to reduce poverty through economic growth. 
Specifically, by 2028, the Program is expected to benefit directly 
approximately 3.1 million Mongolians, roughly 95% of the country's 
projected population in that year. As a result of the Program, we 
expect per capita incomes for all Mongolians to be 3.5% higher five 
years after the start of the Program, and to increase by a total of 
4.5% within 20 years after the start of

[[Page 61382]]

the Program. These increases correspond to increments of $158 million 
to annual GDP after five years, and $404 million after 20 years.
1. Rail Project
    Mongolia's rail system is the transportation backbone of the 
economy, contributing more to GDP than in any other country.\1\ The 
rail system moves 97% of the ton-kilometers of freight transport in 
Mongolia. The existing railway company (``MTZ''), in which the GoM and 
Government of the Russian Federation each own a 50% interest, operates 
Mongolia's railway system. This system, with its antiquated 
infrastructure, equipment and practices, cannot meet current demand for 
rail services and poses a serious economic bottleneck by limiting 
growth in domestic and foreign trade and associated investment, and 
contributing to inflation. The proposed Rail Project addresses this 
bottleneck through improvements in the efficiency and capacity of the 
rail system, thereby creating new jobs in industries and businesses 
related to or served by the rail system. To ensure these improvements 
are sustainable, the Project promotes international-standard rail 
operations and management practices, transparency of rail finances, and 
commercialization of the rail system--all part of the foundation for 
greater private sector involvement and competition in rail transport.
    The Rail Project includes (a) the acquisition of certain key rail 
assets (e.g., locomotives, wagons, signaling equipment and track 
maintenance equipment) needed to improve efficiency and capacity on the 
country's single track rail line, (b) the establishment of a new, 
initially government-owned, contractor-operated leasing company 
(``LeaseCo'') to lease rail assets on commercial terms to MTZ and 
independent shippers, (c) substantial operational training and 
financial management technical assistance to MTZ, and (d) technical 
assistance to the Mongolia Railway Authority (``MRA''), the recently 
established regulator of the rail sector. The use of LeaseCo allows the 
Program to avoid the risks inherent in making equipment available 
directly to MTZ prior to its achieving commercialization and an 
acceptable level of transparency. Success will be measured by the 
increase in Mongolian traffic on the rail system, enhanced revenues for 
both shippers and the rail system, positive changes in the efficiency 
of MTZ's operations, and increased economic growth associated with rail 
traffic capacity and efficiency improvements.
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    \1\ With 4.93 traffic units (TUs) per $ of GDP, compared to the 
world average of 0.42 TUs/$ of GDP, Mongolia ranks first among world 
railways (https://www.adb.org/documents/reports/consultant/best-
practices-railways/study-report.pdf).
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2. Property Rights Project
    The inability of Mongolians to easily register and obtain clear 
title to their land poses a serious obstacle to the GoM's promotion, 
through policy and legal reforms, of private real property ownership. 
Implementation problems have limited access to credit for small 
landholders and small business people, discouraged investment, and 
slowed the deepening of local financial markets. The proposed Property 
Rights Project will help Mongolian citizens obtain secure, long-term 
rights to the suburban and peri-urban land they occupy, and promote 
investments in home improvement, business activities, and agricultural 
productivity. In a banking sector marked by high interest spreads, the 
Project will encourage financial institutions to reduce the risk 
premium on credit by providing their customers with a more secure 
source of collateral and encourage the emergence of new mortgage-
related and other asset-dependent financial products.
    This Project will improve the accuracy, accessibility and 
efficiency of the formal system for recognizing and transferring land 
rights and will facilitate issuance of up to 75,000 privatized and 
registered land titles to suburban landholders. The Project also will 
introduce a long-term leasing system on peri-urban rangeland and other 
incentives (e.g., technical assistance, wells, animal shelters and 
fences) that will enable leaseholders to significantly increase income 
from this land by improving range and livestock management. For the 
urban component, success will be measured by increases in the number of 
registered property owners, greater access to credit among project 
beneficiaries, and higher land values in project areas. For the peri-
urban component, success will be measured by improved herd 
productivity, and a significant rise in leaseholder household incomes.
3. Vocational Education Project
    Mongolia's vocational education system has not evolved to serve the 
demands of a modern, private-sector led economy. The capacity of this 
system to teach core technical skills and provide critical labor 
information is weak, training equipment is limited and outdated, and 
instructors ill-prepared to teach. Essential public-private 
partnerships to ensure that students receive high quality, demand-
driven training are largely absent, and credentialing systems are 
substandard. As a result, Mongolia imports skilled labor from other 
markets, leaving high rates of unemployment among unskilled Mongolians, 
especially youth. The Vocational Education Project will address these 
problems by building on and significantly extending the work of other 
donors, especially the Asian Development Bank (``ADB'') and 
Gesellschaft f[uuml]r Technische Zusammenarbeit (``GTZ''), and by 
supporting the newly adopted Mongolian National Vocational Education 
Program.
    Specifically, the Project will (a) strengthen the institutional 
framework needed to support a demand-driven vocational education 
system, (b) define industry-led skills training standards for 
occupations and translate these standards into a modern vocational 
education curricula supported by new instructional materials and 
equipment, (c) develop 30 new career preparation tracks, and (d) 
improve teacher training and professional development. To complete the 
linkage between the public training and private sector employers, the 
Project also will develop a career guidance and labor market 
information system.
    Success will be measured by (a) increased numbers of trainees 
passing rigorous skills evaluations, (b) adoption of effective public-
private partnerships demonstrated by increased private funding of 
vocational education institutions, (c) significant increases in the 
rate of employment in the target population, and (d) more rapid 
movement from training to employment.
4. Health Project
    Mongolia has rapidly increasing rates of non-communicable diseases 
and injuries (``NCDIs''), including cardiovascular disease (``CVD''), 
diabetes, cancers and injury-induced trauma. Mongolia's mortality and 
morbidity rates from CVD and cancers greatly exceed those of Western 
countries and now represent the major cause of death and disability, 
particularly in younger age groups (i.e., 35 to 55 years of age). 
Trauma response and emergency medicine are under-developed. At the same 
time, current NCDI programs in Mongolia are treatment based, with 
inadequate attention to cost-effective NCDI prevention, early 
detection, where relevant, and disease management. This has a negative 
impact on the productivity of the labor force, which is 
disproportionately affected by NCDIs, and is a significant drain on 
scarce public health investments. The

[[Page 61383]]

Mongolian medical system is undertaking a slow and difficult transition 
from expensive specialist and tertiary services to a system with equal 
emphasis on public health, client information, and prevention efforts. 
To date, donor funded programs to reorient the medical system have 
largely focused on communicable diseases and child health. The evolving 
epidemiological profile calls for extension of these public health and 
medical practice changes to emphasize NCDI prevention and adult health 
maintenance. The Health Project focuses on extending the productive 
years and productivity of the labor force by reducing the incidence and 
severity of NCDIs such as cancer, CVD, diabetes and preventable 
accidents and trauma, and reducing and refocusing total health 
expenditure.
    Specifically, the Health Project will support (a) research on NCDI 
related behaviors and practices in Mongolia, (b) site visits to 
successful NCDI programs in other countries, (c) communications and 
education interventions to promote risk behavior changes, (d) new 
treatment and disease management protocols, (e) a limited amount of 
equipment and intensive in-service training for early detection of 
cervical and breast cancers, and (f) training of physicians and general 
medical personnel in NCDI disease management. The Project funds NCDI 
outreach, screening, and disease management for a significant 
proportion of the Mongolian population (up to 60%, as estimated by 
population linked to the proposed intervention sites) over the five 
year term of the Compact, with extensive monitoring, evaluation and 
feedback to ensure successful interventions and the transmission of 
best practices to all participants.
    Success will be measured by the Project's impact on (a) risk 
behavior knowledge and practices, (b) medical services provider 
attitudes and practices, (c) early detection of targeted cancers, (d) 
the number of clients screened for hypertension and diabetes and 
management of these conditions, and (e) reduction in the incidence of 
targeted accidents and trauma. Ultimately, the economic impact of the 
Project will occur through reductions both in (a) the productivity 
costs to individual Mongolians and the Mongolian economy and (b) health 
system expenditures for management and treatment of NCDIs.

C. Program Management

    The GoM will establish MCA-Mongolia with a Board of Directors to 
oversee overall Program management and a Technical Secretariat to 
oversee implementation. Four project implementation units (each, a 
``PIU'') embedded in related GoM agencies will provide day-to-day 
project management for all Projects, except the Rail Project, which 
will utilize the services of an external firm. MCA-Mongolia will hire 
an environmental and social oversight consultant to support the 
environmental and social aspects of Program implementation.
    The GoM is in the process of selecting, through competitive 
processes, third party, non-government entities to provide procurement 
and fiscal agent services to MCA-Mongolia, which selection is expected 
to be made in October 2007.

D. Assessment

1. Economic Analysis
    The economic rate of return (``ERR'') for the overall Program over 
a 20-year time horizon is estimated to be 28.6% in the base case. The 
table below summarizes the ERR and estimated numbers of beneficiaries 
for each project.

----------------------------------------------------------------------------------------------------------------
                                                   ERR Summary
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                                                                                     Expected range of ERR
                 Project                   MCC investment     Base case ERR  -----------------------------------
                                                cost         (hurdle = 15%)     Low (percent)    High (percent)
----------------------------------------------------------------------------------------------------------------
Rail Project............................      $188,380,000                30                19                41
Property Rights Project: Registration...        16,250,000                38                13                64
Property Rights Project: Peri-Urban.....         6,810,000                27                16                33
Vocational education Project............        25,510,000                20                 8                26
Health Project..........................        17,030,000                21                 2                37
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------------------------------------------------------------------------
 
------------------------------------------------------------------------
                   Estimated Beneficiaries (Year 2028)
------------------------------------------------------------------------
Rail Project...............................................    2,395,000
Property Rights Project: Registration......................      470,000
Property Rights Project: Peri-Urban........................        4,000
Vocational education Project...............................      822,000
Health Project: Patients and their dependents..............      219,000
Health Project: System beneficiaries.......................    3,371,000
Estimated Total Unique Beneficiaries (minus System             3,131,000
 Beneficiaries from Health Project)........................
------------------------------------------------------------------------


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                          Estimated Number of Beneficiaries by Income Group (Year 2028)
-----------------------------------------------------------------------------------------------------------------
                                                                  USD per person per day (PPP)
                         Project                          --------------------------------------------   Total
                                                              <$1       $1-$2      $2-$4       >$4
----------------------------------------------------------------------------------------------------------------
Rail Project.............................................    345,000    682,000    787,000    581,000  2,395,000
Property Rights Project: Registration....................     70,000    137,000    153,000    110,000    470,000
Property Rights Project: Peri-Urban......................        500        800      1,000      1,800      4,100
Vocational education Project.............................    102,000    156,000    202,000    361,000    821,000
Health Project: Patients and their dependents............     21,000     36,000     48,000    113,000    218,000
Health Project: System beneficiaries.....................    640,000    809,000    775,000  1,146,000  3,370,000

[[Page 61384]]

 
Estimated Unique Beneficiaries by Income Group (minus        431,000    810,000    954,000    934,000  3,129,000
 System Beneficiaries from Health Project)...............
----------------------------------------------------------------------------------------------------------------
(Minor differences in total beneficiary numbers between above tables due to rounding.)

2. Consultative Process
    To develop a proposal for MCC funding, the GoM conducted extensive 
consultations with the private sector and civil society involving broad 
public participation across the country. Members of the public, 
including women's and environmental groups, were asked to identify the 
primary constraints to economic growth in Mongolia, as well as 
potential uses of MCC funding to remove such constraints. Thereafter, 
Mongolia's MCA-National Council, formed by the GoM with broad 
stakeholder representation, incorporated the results of these 
consultations into a proposal for MCC funding. The proposed Program 
consists of Projects identified by Mongolians to address some of the 
primary constraints to economic growth in Mongolia and to reflect their 
expressed view that poverty reduction can follow only from a systematic 
effort to broaden the economic base and to increase the productive 
capacity of Mongolians, both individuals and enterprises, to 
participate effectively in opportunities for growth in the domestic and 
regional economies.
    During implementation of the Program, MCA-Mongolia will continue 
public consultations with a range of stakeholders, including women and 
other vulnerable groups, to ensure participation during development and 
implementation of all the Projects.
3. GoM Commitment and Effectiveness
    The GoM has demonstrated commitment to the Compact development 
process by (a) assembling a 23-member MCA-National Council, (b) 
conducting extensive public consultations on various proposals over a 
two-year period throughout the country, (c) forming a technical working 
group for each project composed of highly talented volunteers from the 
public and private sector, and (d) hiring a number of highly competent 
experts to work with each technical working group to develop the 
Projects. Senior GoM officials, including the President, have expressed 
publicly strong support for the Compact and made themselves available 
to meet with MCC staff and advisers. President Enkhbayar has written to 
President Bush to express his personal commitment to and belief in the 
importance of the Program. The GoM is committed to assembling a capable 
team to staff MCA-Mongolia. The Prime Minister will be the Chairman of 
MCA-Mongolia's Board of Directors, and relevant line ministries will be 
represented on the Board at the minister level.
    With respect to policy reform and related matters, the following 
describes Mongolia's proposed measures to ensure the effectiveness of 
MCC's proposed investments.
    (a) Rail Project. The GoM is undertaking legal reforms to 
reorganize the rail sector, including separating infrastructure from 
railway operations and increasing the competitiveness of the railway in 
the regional rail transport market. In 2004, the GoM created MRA, an 
independent government entity, to oversee and regulate railway safety 
and implement railway policy relating to both safety and economic 
issues. Additionally, the GoM has committed to improving MTZ's 
operations, maintenance, financial management and capital asset 
development.
    (b) Property Rights Project. The GoM already has adopted key 
legislation to enable private ownership of urban real property and the 
development of a market for such property. In a 2003 land law, the GoM 
committed to the sustainable use of rangeland, which by encouraging 
efficient land use and range recovery, should give farmers and herders 
a better land base for profitable economic activity.
    (c) Vocational Education Project. The GoM has committed to 
modernizing the vocational education system and involving the private 
sector in its management and operation. The GoM has ratified the Master 
Plan to Develop Education, 2006-2015. In 2006, the GoM modified the 
Employment Promotion Fund to support private sector development and 
employment. Finally, amendments to the Vocational Education and 
Training Law and Employment Promotion Fund that would help students 
cover tuition fees and help cover key administration costs of the 
vocational education system have been proposed.
    (d) Health Project. In 2001, the GoM adopted a State Public Health 
Plan that declared public health a health sector priority and 
encouraged inter-sectoral (i.e., GoM, NGO, family and community) 
support for health promoting behavior, as well as equal focus on health 
promotion, disease prevention and curative care. The GoM approved a 
Health Sector Strategic Master Plan in 2005 that (i) emphasizes 
behavioral change and information, education and communication 
activities to promote healthy lifestyles and (ii) focuses on preventing 
the most common communicable and non-communicable diseases. Also in 
2005, the GoM adopted a national program on the prevention and control 
of NCDIs based on WHO recommendations and worldwide experience, and 
many related policy changes (e.g., anti-smoking legislation) have been 
effected.
4. Sustainability
    (a) Rail Project. The Rail Project has been designed specifically 
to address issues of institutional and financial sustainability 
through: (i) The provision of extensive training and technical 
assistance to all critical parties--MTZ, LeaseCo and MRA--in 
management, finance, and operations to ensure that they can function 
effectively as key components of a modern, commercialized rail system 
in a market economy, (ii) the organization of institutional relations 
among the parties to reinforce the commercialization and efficiency of 
rail operations, (iii) the inclusion of planning for operational 
sustainability as the heart of the work programs for MTZ and LeaseCo, 
and (iv) the focus on commercial terms for LeaseCo's operations, to 
attaining a level of revenue that will sustain its operations beyond 
the term of the Compact.
    (b) Property Rights Project. The Property Rights Project will 
provide technical assistance in the development and implementation of a 
Registry sustainability plan, including pricing of services to ensure 
sufficient revenue to improve operations and attract more registrants. 
Management, operations, and financial training will be provided to 
registry personnel to institutionalize

[[Page 61385]]

``best practices'' for public entities. With respect to the peri-urban 
land leasing component, leaseholders will make payments for 
infrastructure and land leasing to district-level governments, which in 
turn will use these remittances for land management, extension 
services, well testing, and other services needed by the herder groups. 
In addition, better rangeland management will increase land 
productivity capable of supporting increased economic activity in 
perpetuity.
    (c) Vocational Education Project. The fundamental objective of the 
Vocational Education Project is to put Mongolian vocational education 
and training on a sound and sustainable footing, based on an active 
partnership between the public and private sectors. This means changing 
the legal and regulatory environment in the first instance to enable 
vocational education institutions to operate more efficiently and in 
better synchronization with the needs of both public and private sector 
employers. To ensure sustainability, the Project will focus on 
establishing linkages between and among institutions in the educational 
sector to ensure that better practices are grounded in working 
relationships. Finally, it also emphasizes retraining educators and 
providing revised and re-focused educational and training materials so 
that the changes become institutionalized. One of the most important 
elements of the Vocational Education Project is targeted improvement in 
the income-generating capacity of the Technical and Vocational 
Education and Training institutes, since enhanced revenues will be 
critical to sustainability beyond the term of the Compact.
    (d) Health Project. To enhance sustainability, the Health Project 
includes capacity building from its start-up phase. A major element of 
capacity building activities is changing the attitudes and practices of 
health providers and clients toward cost-effective but ``low-tech'' 
interventions for prevention and treatment of NCDIs. In addition, as 
physical health is of particular economic importance to lower income, 
remote, and vulnerable groups, the GoM will be required to maintain 
core programs beyond the term of the Compact to ensure access of these 
groups to prevention, early detection, and health management services 
on an on-going basis.
5. Environment and Social Impact
    MCC will require that all Projects comply with national laws and 
regulations, MCC's environmental guidelines and gender policy, and 
World Bank's Operational Policy 4.12 on Involuntary Resettlement. None 
of the Projects is likely to generate significant adverse 
environmental, health, or safety impacts, and all expected impacts can 
be mitigated. However, the Rail Project (``Category A'' according to 
MCC's environmental guidelines) has the potential to encourage an 
increase in mineral extraction, which might put unsustainable pressure 
on the environmental control system, transit trade of timber extracted 
illegally in Siberia, and trafficking in persons. Potential impacts of 
the Property Rights Project (``Category B'') include health and safety 
risks associated with installation of equipment and building 
rehabilitation in the urban component as well as the potential for 
depletion of the water table and degradation of pasture land associated 
with the peri-urban land leasing component due to poor planning. 
Similarly, potential negative environmental and social impacts of the 
Vocational Education Project (``Category C'') and the Health Project 
(``Category C'') include health and safety risks. For the Health 
Project, these will specifically encompass medical waste management as 
well as health and safety risks associated with diagnostic equipment. 
The full scope of the impacts of each of the Projects will be further 
examined through various environmental and social assessments that the 
GoM will conduct during the first year of the implementation of the 
Program. Negative impacts and risks identified through these 
assessments would be mitigated or managed.
    In addition, requirements to ensure Project compliance with MCC's 
environmental and social standards will include:
    (a) Rail Project. In light of possible negative direct, induced, 
trans-boundary and cumulative impacts, a Category A Environmental 
Impact Assessment and an Environmental Management Plan (EMP) will be 
completed for the complete rail system, identifying necessary 
mitigation measures. Funding is included for mitigation and enhancement 
of the capacity of the Mongolian Customs General Administration to 
enforce and implement environmental laws and regulations applicable to 
the transport of natural resources.
    (b) Property Rights Project. The completion of a framework 
environmental and social assessment and EMPs for all components of the 
Project will be required.
    (c) Vocational Education Project. MCA-Mongolia will develop EMPs, 
including health and safety guidelines for use in the technical and 
vocational education training institutes in the Project.
    (d) Health Project. A plan for the safe and proper use of 
diagnostic equipment will be developed and used, as well as EMPs to 
address health and safety issues and compliance with existing waste 
management regulations for all project related services and facilities. 
The EMP will also include procedures and funding for support of 
remedial actions to ensure compliance with MCC's environmental 
guidelines, Mongolian regulations, and access needs for potential 
beneficiaries.
    Positive environmental and social impacts stemming from compact 
activities include: (i) Increases in fuel efficiency, a reduction in 
air emissions and improved air quality, increases in employment for 
disadvantaged groups, and a reduction in the inflationary pressures on 
such items as fuel (which impact disproportionately on the poor) caused 
by bottlenecks in the transportation system from the Rail Project, (ii) 
increases in income from ability to capitalize land assets, reductions 
in peri-urban land degradation and increases in income for vulnerable 
groups from livestock productivity gains from the Property Rights 
Project, (iii) increases in educational and employment opportunities 
for women, the poor, and other disadvantaged groups from the Vocational 
Education Project, and (iv) improved health for vulnerable groups 
(including women), as well as associated improvements in labor 
productivity from the Health Project.
6. Donor Coordination
    MCC has consulted extensively on each of the proposed projects with 
the major donors in Mongolia, including the World Bank, Asian 
Development Bank (``ADB''), Gesellschaft f[uuml]r Technische 
Zusammenarbeit (``GTZ'') and U.S.-Agency for International Development 
(``USAID''). In the case of the rail project, both the World Bank and 
ADB have been providing the GoM with support for developing a 
comprehensive transport strategy, including the promotion of greater 
financial transparency, regulatory reform, and private sector 
involvement. The International Finance Corporation recently completed a 
two-year project to strengthen the regulatory structure for leasing in 
Mongolia, culminating in the adoption in June 2006 of a new Law on 
Financial Leasing. These donors, as well as the European Bank for 
Reconstruction and Development, have expressed an interest in 
supporting the

[[Page 61386]]

proposed project and areas of potential synergies are being explored.
    Similarly, with the Property Rights Project, MCC's support will 
interact with and build upon a variety of efforts made by other donors. 
Most notably, the ADB's ``Cadastral Survey and Land Registration 
Project'' has mapped many land parcels slated for privatization and 
currently is developing a land information system that will serve as an 
integrated one-stop resource for government and the private sector. The 
design of the privatization component has drawn heavily from the 
experience of USAID's ``Ger Initiative,'' which is implementing a 
variety of economic development efforts in the ger-areas of Mongolia's 
cities. The design of the peri-urban land leasing component stems from 
experience gained in several prior foreign donor efforts, namely those 
by the UNDP, the World Bank, a joint project among the GoM, Japan 
International Cooperation Agency and Food and Agriculture Organization 
focused on improving efficiencies of the dairy system, and USAID's 
``Gobi Initiative.''
    For the health and vocational education projects, MCC-funded 
efforts will complement other donor work supporting Mongolia's social 
sectors. The proposed Vocational Education Project builds on, and will 
support the implementation of, the ADB-funded Third Education 
Development Project, the ADB/Volunteer Service Organization program on 
non-formal construction worker skills training for vunerable youth and 
poor adults, the GTZ project for Urban Development, Construction Sector 
and TVET Promotion Program, and the ADB/Nordic Development Fund's 
Social Security Sector Development Project (2002-2005). The Health 
Project will build upon and co-finance well-designed and on-going 
activities like World Health Organization's laboratory specimen 
transport system, ADB's physician training in five districts, and the 
University of Toronto's research on cervical cancer diagnosis. It will 
also link up with Luxembourg's successful telemedicine project, which 
is working at the tertiary and secondary level with cardiologists, to 
see that patients identified with heart problems at the primary care 
level are referred and treated. With the exception of Luxembourg, none 
of the other donors are directly targeting the major NCDIs for 
screening and control or investing in behavior change.

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

Table of Contents

Article 1. Goal and Objectives
    Section 1.1 Compact Goal
    Section 1.2 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
    Section 6.1 Annexes
    Section 6.2 Inconsistencies
    Section 6.3 Amendments
    Section 6.5 Additional Instruments
    Section 6.6 References to MCC Website
    Section 6.7 Indemnification
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
Annex I: Summary of Program
Annex II: Summary of Multi-Year Financial Plan
Annex III: Summary of Monitoring and Evaluation Plan
Annex IV: Definitions

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 Mongolia (the ``Government'').
    Recalling that the Government consulted with the private sector and 
civil society of Mongolia to determine the priorities for the use of 
Millennium Challenge Account assistance and developed and submitted to 
MCC a proposal for such assistance; and
    Recognizing that MCC wishes to help Mongolia implement a program to 
achieve the Compact Goal and Project Objectives described herein (the 
``Program'');
    The Government and MCC (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 Mongolia through 
economic growth (the ``Compact Goal'').

Section 1.2 Project Objectives

    The objectives of the Projects (each, a ``Project Objective'') are:
    (a) To increase rail traffic and shipping efficiency through the 
Rail Project;
    (b) To increase the security and capitalization of land assets held 
by lower-income Mongolians, and to increase peri-urban herder 
productivity and incomes, through the Property Rights Project;
    (c) To increase employment and income among unemployed and 
marginally employed Mongolians through the Vocational Education 
Project; and
    (d) To increase the adoption of behaviors that reduce non-
communicable diseases and injuries that have the greatest impact on 
mortality (``NCDIs'') among target populations and improve medical 
treatment and control of NCDIs through the Health Project.
    The Government shall take all necessary steps to achieve the 
Compact Goal and Project Objectives during the Compact Term.

Article 2. Funding and Resources

Section 2.1 MCC Funding

    MCC hereby grants to the Government, under the terms of this 
Compact, an amount not to exceed Two Hundred Eighty-Four Million Nine 
Hundred Eleven Thousand Three Hundred and Sixty-Three United States 
Dollars (US$284,911,363) (the ``MCC Funding'') for use by the 
Government in the implementation of the Program as more specifically 
described in Annex II of this Compact.

Section 2.2 Compact Implementation Funding

    (a) Of the total amount of MCC Funding, MCC shall make up to (i) 
Four Million One Hundred Eighty-Nine Thousand Three Hundred and Fifty 
United States Dollars (US$4,189,350),

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and (ii) an additional Eight Hundred Thirty Three Thousand Three 
Hundred and Thirty Three United States Dollars (US$833,333) subject to 
availability of funds and notification to the Government by MCC 
(together, the ``Compact Implementation Funding'') available to the 
Government under section 609(g) of the Millennium Challenge Act of 
2003, as amended, for:
    (i) Administrative activities (including start-up costs for MCA-
Mongolia such as Technical Secretariat salaries, rent, cost of 
purchasing computers and other information technology or capital 
equipment and other similar expenses);
    (ii) Procurement and start-up activities for key contractors, 
including but not limited to (1) the outside project management firm 
for the Rail Project, (2) consultants for each of the Health, Property 
Rights and Vocational Education Projects, and (3) hiring certain staff 
for the implementing entities;
    (iii) Procurement and initial performance of Fiscal Agent, 
Procurement Agent and Bank services;
    (iv) Procurement and initial performance of financial management 
services necessary to perform an assessment of UBTZ's books and 
records;
    (v) Training to be provided by the monitoring and evaluation 
officer of MCA-Mongolia's Technical Secretariat, with input from MCC's 
expert(s), for the implementing entities and Rail Project outside 
project management firm to prepare them for their monitoring and 
evaluation responsibilities; and
    (vi) Any other activities relating to the implementation of the 
Compact, approved by MCC.
    (b) Compact Implementation Funding shall be subject to such 
limitations as MCC may require from time to time.
    (c) This section 2.2, and sections 2.6 and 2.7 below, shall be in 
effect from the date of execution of this Compact by the Parties 
without regard to the requirements for entry into force provided in 
section 7.3.

Section 2.3 Disbursement

    In accordance with this Compact and the Program Implementation 
Agreement, MCC shall disburse MCC Funding for expenditures incurred in 
connection with the implementation of the Program (each, a 
``Disbursement''). The proceeds of such Disbursements shall 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 the relevant 
provider of goods, works or services in furtherance of this Compact. 
MCC Funding shall be expended solely to cover expenditures in 
connection with the implementation of the Program as provided in this 
Compact and the Program Implementation Agreement.

Section 2.4 Interest

    The Government shall pay to MCC any bank interest or other earnings 
that accrue on MCC Funding in accordance with the Program 
Implementation Agreement (whether by directing such payments to a bank 
account outside Mongolia designated by MCC or otherwise).

Section 2.5 Government Resources; Budget

    (a) The Government shall provide all funds and other resources, and 
shall take all actions, that are necessary to carry out the 
Government's responsibilities and obligations under this Compact.
    (b) The Government shall use its best efforts to ensure that all 
MCC Funding it receives, or is projected to receive, in each of its 
fiscal years is fully accounted for in its annual budget on a multi-
year basis.
    (c) The Government shall 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.

Section 2.6 Limitations on the Use of MCC Funding

    The Government shall ensure that MCC Funding shall 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 by MCC, or by posting on https://www.mcc.gov (the ``MCC Web 
site''), including but not limited to the following purposes:
    (a) For assistance to, or training of, the military, police, 
militia, national guard or other quasi-military organization or unit;
    (b) For any activity that is likely to cause a substantial loss of 
United States jobs or a substantial displacement of United States 
production;
    (c) To undertake, fund or otherwise support any activity that is 
likely to cause a significant environmental, health, or safety hazard 
as further described in MCC's Environmental Guidelines posted on MCC 
Web site (as they 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) The Government shall ensure that the assistance provided by MCC 
to the Government under this Compact is exempt from any existing or 
future taxes, duties, levies, contributions or other similar charges 
(``Taxes'') by the Government (including any such Taxes of a national, 
regional, local or other governmental or taxing authority) in 
accordance with the terms of the ``Agreement Between the Government of 
the United States of America and the Government of Mongolia Concerning 
Economic, Technical, and Related Assistance,'' which entered into force 
on September 8, 1992.
    (b) If any Tax has been levied and paid to the Government contrary 
to the requirements of section 2.7(a) above, the Government shall 
refund promptly to MCC the amount of such Tax out of its national 
funds. No MCC Funding, proceeds thereof, nor any Program asset may be 
applied by the Government in satisfaction of its obligations under this 
section 2.7.

Article 3. Implementation

Section 3.1 Program Implementation Agreement

    The Government shall 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 shall have principal responsibility for 
overseeing and managing the implementation of the Program.
    (b) The Government shall ensure that no law or regulation in 
Mongolia now or hereinafter in effect makes, or will make, unlawful, or 
otherwise prevents, hinders or jeopardizes, the performance of any of 
the Government's obligations

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under this Compact, the Program Implementation Agreement or any other 
agreement related thereto or any transaction contemplated thereunder.
    (c) The Government shall 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.

Section 3.3 Policy Performance

    In addition to the specific policy, legal and regulatory reform 
commitments identified in Annex I to this Compact, the Government shall 
commit to maintain and improve its level of performance under the 
policy criteria identified in section 607 of the Millennium Challenge 
Act of 2003, as amended, 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 of the 
laws of Mongolia; and
    (c) The Government shall 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 in 
writing on any matters relating to MCC Funding, this Compact or 
implementation of the Program (each, an ``Implementation Letter''). The 
Government shall apply such guidance in implementing the Program.

Section 3.6 Procurement

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

Section 3.7 Records; Accounting; Covered Providers; Access

    (a) Government Books and Records. The Government shall maintain, 
and shall use its best efforts to ensure that all Covered Providers 
maintain, accounting books, records, documents and other evidence 
relating to this Compact (``Compact Records'') adequate to show, to 
MCC's satisfaction, the use of all MCC Funding. In addition, the 
Government shall furnish or cause to be furnished all Compact Records 
to MCC and its auditors when MCC so requests.
    (b) Accounting. The Government shall maintain, and shall use its 
best efforts to ensure that all Covered Providers maintain, Compact 
Records in a manner generally consistent with the standards for the 
private and public sector issued by the International Federation of 
Accountants (as well as its boards and committees). 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) Provider; 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 (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, shall 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 shall, 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. In addition, upon MCC's 
request, the Government shall use, or cause to be used, to conduct such 
audits an independent 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 shall be performed in accordance with the Audit 
Guidelines and be subject to quality assurance oversight by the 
Inspector General. Each audit shall 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, unless the Parties agree otherwise in writing.
    (b) Audits of United States Entities. The Government shall ensure 
that agreements between the Government or

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any Provider, on the one hand, and a United States non-profit 
organization, on the other hand, that are financed with MCC Funding 
state that the United States non-profit organization is subject to the 
applicable audit requirements contained in OMB Circular A-133 issued by 
the United States Government Office of Management and Budget. The 
Government shall 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 organization is subject to audit by the 
applicable United States Government agency, unless the Government and 
MCC agree otherwise in writing.
    (c) Corrective Actions. The Government shall use its best efforts 
to ensure that Covered Providers take, where necessary, appropriate and 
timely corrective actions in response to audits, consider whether a 
Covered Provider's audit necessitates adjustment of 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 shall 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 in 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 shall be in writing and, except as 
otherwise agreed between the Parties, in English. Notice is deemed duly 
given: (a) Upon personal delivery to the Party notified, (b) when sent 
by confirmed fax or email, if sent during normal business hours of the 
recipient Party, if not, then on the next business day, or (c) two 
business days after deposit with an internationally recognized 
overnight courier, specifying next day delivery. 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: (202) 521-3700, Telephone: (202) 521-3600, E-mail: 
VPOperations@mcc.gov (Vice President for Operations), 
VPGeneralCounsel@mcc.gov (Vice President and General Counsel).
    To the Government: 
    Ministry of Finance, Attention: Hon. Nadmid Bayartsaikhan, Minister 
of Finance, Government Building 2, United Nation's Street 5/1, 
Chingeltei District, Ulaanbaatar-210646, Mongolia, Facsimile: 976-11-
322866, Telephone: 976-51-262155, E-mail: 
bayartsaikhan@mof.pmis.gov.mn.
    With a copy to MCA-Mongolia:
    At an address, and to the attention of the person, to be designated 
in writing to MCC by the Government.

Section 4.2 Representatives

    For all purposes of this Compact, the Government shall be 
represented by the individual holding the position of, or acting as, 
the Minister of Finance of Mongolia, and MCC shall 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 shall 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 under this Compact, in 
whole or in part, if MCC determines that any circumstance identified by 
MCC as a basis for suspension or termination 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 or MCA-Mongolia in 
connection with this Compact or the Program;
    (ii) An event has occurred that, in MCC's determination, makes it 
probable that one or more of the Project Objectives will not be 
achieved during the term of this Compact or that the Government will 
not be able to perform its obligations under this Compact;
    (iii) A use of MCC Funding or continued implementation of this 
Compact has 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 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 Mongolia 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 
Mongolia 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 shall cease upon the expiration, suspension, 
or termination of this Compact; provided, however, that MCC Funding may 
be used, in compliance with this Compact and the Program Implementation 
Agreement, to pay for (i) reasonable expenditures for goods, works or 
services that are properly incurred under or in furtherance of this 
Compact before such expiration, suspension or termination of this 
Compact, and (ii) reasonable expenditures (including administrative 
expenses) properly incurred in connection with the winding up of the 
Program within one hundred and twenty (120) days after the expiration, 
suspension or termination of this Compact, so 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

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Compact, (i) any amounts of MCC Funding not disbursed by MCC to the 
Government shall be released from any obligation in connection with 
this Compact without any action from the Government or MCC, and (ii) 
any amounts of MCC Funding disbursed by MCC but not expended under 
section 2.3 before such expiration, suspension or termination, plus 
accrued interest thereon, shall 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 acquired in whole or in part with MCC Funding is used for any 
purpose in violation of the terms of this Compact, MCC shall have the 
right to require that the Government repay to MCC, in United States 
Dollars, the value of such 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 shall use 
national funds (and no MCC Funding 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 shall 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, 2.6, 2.7, 
3.7, 3.8, 5.1(c), 5.1(d), 5.2, 5.3, 6.4 and 6.7 of this Compact shall 
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 shall prevail; or
    (b) This Compact and any other agreement between the Parties 
regarding the Program, this Compact shall prevail.

Section 6.3 Amendments

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

Section 6.4 Governing Law; Status

    This Compact is an international agreement and as such will be 
governed by the principles of international law and shall prevail over 
the laws of Mongolia. In the event of any conflict between the Compact 
and another international agreement to which the Government is or 
becomes a party, the Compact shall prevail.

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